As filed with the Securities and Exchange Commission on May 6, 1996
Registration No. ____________________
==============================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ Post-Effective Amendment No. __
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
THE WOODWARD FUNDS
Area Code and Telephone Number:
(313) 259-0729
Address of Principal Executive Offices:
c/o NBD Bank
900 Tower Drive
P. O. Box 7058
Troy, Michigan 48007-7058
Name and Address of Agent for Service:
W. Bruce McConnel, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing
fee is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 33-13990, 811-5148) pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Registrant is filing
as an exhibit to this Registration Statement a copy of its earlier declaration
under Rule 24f-2. Pursuant to Rule 429, this Registration Statement relates to
the aforesaid Registration Statement on Form N-1A.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
THE WOODWARD FUNDS
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
Item No. Heading
- -------- -------
Part A
1. Beginning of Registration Statement
and Outside Front Cover Page.................. Cover Page
2. Beginning and Outside Back Cover Page......... Table of Contents
3. Fee Table, Synopsis Information
and Risk Factors.............................. Summary; Comparative
Fee Table; Risk
Factors; Comparison of
Investment Policies
and Risk Factors
4. Information About the Transaction............. Summary; Risk Factors;
Information Relating
to the Proposed Reor-
ganization; Comparison
of Investment Policies
and Risk Factors
5. Information About the Registrant.............. Summary; Risk Factors;
Comparison of Invest-
ment Policies and Risk
Factors; Additional
Information About the
Funds
5A. Management's Discussion of Fund
Performance................................... Inapplicable
6. Information About the Company Being
Acquired...................................... Summary; Risk Factors;
Comparison of Invest-
ment Policies and Risk
Factors; Additional
Information about the
Funds
7. Voting Information............................ Summary; Information
Relating to Voting
Matters
8. Interest of Certain Persons
and Experts................................... Additional Informa-
tion About the Funds
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters............................ Inapplicable
<PAGE>
Part B
10. Cover Page.................................... Statement of Addi-
tional Information
Cover Page
11. Table of Contents............................. Table of Contents
12. Additional Information About the
Registrant.................................... Statement of Addi-
tional Information of
The Woodward Funds
dated April 15, 1996*
13. Additional Information About the Company
Being Acquired................................ Statement of
Additional Information
of The Woodward Funds
dated April 15, 1996*
14. Financial Statements.......................... Pro Forma Financial
Statements
Part C
Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
* Incorporated herein by reference thereto.
<PAGE>
THE WOODWARD FUNDS
c/o NBD Bank
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007-7058
May __, 1996
Dear Woodward Government Fund Shareholder:
The Board of Trustees of the Woodward Government Fund ("Government
Fund") has called a Special Meeting of Shareholders on June 25, 1996
concerning matters that are important to you.
As you may be aware, First Chicago Corporation recently completed a
merger with NBD Bancorp, Inc. ("NBD") on November 30, 1995. As a result, the
new organization has since taken steps to consolidate the mutual fund
investment advisory activities of both bank holding companies.
As the next step in the consolidation process, you are asked to
consider and approve a proposed Plan of Reorganization (the "Reorganization
Plan"). The Reorganization Plan provides that the Woodward Government Fund
transfer substantially all its assets and liabilities to the Woodward Treasury
Money Market Fund ("Treasury Fund"). The transaction is expected to occur on
or after _______, 1996.
What do these changes mean to you?
o The value of the shares you hold at the time of the Reorganization
will not change as a result of the transaction, and will be the same
immediately after the Reorganization.
o The Reorganization will be tax-free and will not involve any sales
loads, commissions or transaction charges.
o The investment objective and policies of the Treasury Fund are
substantially similar to your Government Fund's current investment
objective and policies, except as stated in the enclosures.
o Shareholders will benefit from improved shareholder servicing and the
elimination of redundant administration costs to the Funds.
<PAGE>
AS A RESULT, THE WOODWARD FUNDS BOARD OF TRUSTEES HAS VOTED IN FAVOR
OF THE PROPOSED REORGANIZATION PLAN AND STRONGLY ENCOURAGES THAT YOU VOTE
"FOR" THE PROPOSAL AS WELL.
The Reorganization Plan and other related matters are discussed in
detail in the enclosed materials, which you should read carefully.
Voting Instructions
Enclosed is a proxy card for the meeting. We urge you to read the
enclosed proxy statement and to vote by completing, signing and returning the
enclosed proxy ballot form in the prepaid envelope. Please vote and return
EACH proxy card you receive. EVERY VOTE COUNTS.
First Chicago NBD Corporation is pleased with the opportunities the
Reorganization will provide to better serve its mutual fund investors. If you
have any questions, your account manager will be happy to assist you. Thank
you for your cooperation.
Sincerely,
Earl I. Heenan, Jr.
President
The Woodward Funds
<PAGE>
THE WOODWARD FUNDS
c/o NBD Bank
900 Tower Drive
P.O. Box 7058
Troy, MI 48007-7058
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE WOODWARD GOVERNMENT FUND
To be held on June 25, 1996
To the Shareholders of the Woodward Government Fund:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the
Shareholders of the WOODWARD GOVERNMENT FUND (the "Government Fund"), an
investment portfolio offered by The Woodward Funds (the "Trust" or
"Woodward"), will be held in the Family Dining Room of the Detroit Club, 712
Cass Avenue, Detroit, Michigan on June 25, 1996 at 10:30 a.m. (Eastern
Time) for the following purposes:
ITEM 1. To consider and act upon a proposal to approve a
Plan of Reorganization and the transactions
contemplated thereby, including the transfer of
substantially all of the assets and liabilities of
the Trust's Government Fund to the Trust's
Treasury Money Market Fund (the "Treasury Fund"),
in exchange for Class A or Class I shares, as
applicable, of the Treasury Fund, and a
liquidating distribution of such shares to
shareholders of the Government Fund according to
their respective interests.
ITEM 2. To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF
ITEM 1.
The proposed reorganization and related matters are described
in the attached Combined Proxy Statement/Prospectus. Appendix A to the
Combined Proxy Statement/Prospectus is a copy of the Plan of Reorganization.
Shareholders of record as of the close of business on April 11,
1996 are entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY
THE BOARD OF TRUSTEES OF THE TRUST.
-i-
<PAGE>
THIS IS IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES MAY BE
REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE TRUST A
WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON.
--------------------------------
W. Bruce McConnel, III
Secretary
_____ __, 1996
-ii-
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated ________ __, 1996
THE WOODWARD FUNDS
c/o NBD Bank
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007-7058
(800) 688-3350
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of The Woodward
Funds (the "Trust" or "Woodward") in connection with a Special Meeting (the
"Meeting") of Shareholders ("Shareholders") of the Trust's Government Fund
(the "Government Fund") to be held on June 25, 1996, at 10:30 a.m. (Eastern
Time) in the Family Dining Room of the Detroit Club, 712 Cass Avenue,
Detroit, Michigan, at which Shareholders of the Government Fund will be
asked to consider and approve a proposed Plan of Reorganization dated
May __, 1996 and the matters contemplated therein. A copy of the Plan of
Reorganization is attached as Appendix A.
The Trust is an open-end, management investment company currently
offering seventeen investment portfolios. The Government Fund and the Treasury
Money Market Fund (the "Treasury Fund") (together, the "Funds") are separate
investment portfolios of the Trust which have similar investment objectives
and policies. In addition, the purchase and redemption policies of the Funds
are the same and the service providers for the Funds are the same.
The Plan of Reorganization provides that substantially all the assets
and liabilities of the Government Fund will be transferred to the Treasury
Fund in exchange for Class A or Class I shares, as applicable, of the Treasury
Fund, and that the Government Fund will make a liquidating distribution of
such shares so that each Shareholder of the Government Fund will hold,
immediately after the effective time of the Reorganization, full and
fractional Class A or Class I shares of the Treasury Fund having the same
aggregate net asset value as the Shareholder had in the Government Fund
immediately before the transaction.
This Combined Proxy Statement/Prospectus sets forth the information
that a Shareholder of the Government Fund should know before voting on the
Plan of Reorganization and should be retained for future reference. The
Prospectus dated April 15, 1996 relating to the Funds, which describes their
operations, accompanies this Combined Proxy Statement/Prospectus. Additional
information is set forth in the Statement of Additional Information relating
to the Funds, also dated April 15, 1996. Each of these documents is on file
with the Securities and
<PAGE>
Exchange Commission (the "SEC"), and is available without charge upon oral or
written request by writing or calling the Trust at the address or telephone
number indicated above.
This Combined Proxy Statement/Prospectus constitutes the Proxy
Statement of the Government Fund for the meeting of its Shareholders, and the
Prospectus for the shares of the Treasury Fund that have been registered with
the SEC and are to be issued in connection with the Reorganization.
This Combined Proxy Statement/Prospectus is expected to be sent to
Shareholders of the Government Fund on or about _____ __, 1996.
THE SECURITIES OF THE WOODWARD FUNDS 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 COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE WOODWARD FUNDS.
SHARES OF THE WOODWARD FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, NBD BANK, FIRST NATIONAL BANK OF CHICAGO, OR ANY OF THEIR
AFFILIATES. SHARES OF THE WOODWARD FUNDS ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE WOODWARD FUNDS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THERE
IS NO ASSURANCE THAT THE WOODWARD GOVERNMENT FUND OR TREASURY MONEY MARKET
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
-2-
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY ................................................................. 1
Reasons for the Reorganization................................... 1
Federal Income Tax Consequences.................................. 1
Overview of the Funds............................................ 2
Certain Arrangements with Service Providers...................... 2
Comparative Fee Table............................................ 5
Expense Ratios................................................... 7
Purchase and Redemption Information, Dividends,
Exchange Privileges, Distribution and Pricing............. 7
Voting Information............................................... 7
Risk Factors..................................................... 8
INFORMATION RELATING TO THE PROPOSED REORGANIZATION...................... 8
Description of the Plan of Reorganization........................ 8
Board Consideration............................................. 10
Capitalization................................................... 10
Federal Income Tax Consequences.................................. 11
COMPARISON OF THE FUNDS.................................................. 12
Investment Policies and Risk Factors. ........................... 12
Investment Limitations........................................... 13
Other Information................................................ 14
INFORMATION RELATING TO VOTING MATTERS................................... 14
General Information.............................................. 14
Shareholder and Board Approval................................... 15
Appraisal Rights................................................. 16
Quorum .......................................................... 16
Annual Meetings.................................................. 16
ADDITIONAL INFORMATION ABOUT THE TRUST................................... 16
FINANCIAL STATEMENTS..................................................... 17
OTHER BUSINESS........................................................... 17
SHAREHOLDER INQUIRIES.................................................... 18
APPENDIX A - Plan of Reorganization......................................A-1
<PAGE>
SUMMARY
The following is a summary of certain information relating to the
Reorganization, and the parties thereto, and is qualified by reference to the
more complete information contained elsewhere in this Combined Proxy
Statement/Prospectus, the Prospectus and Statement of Additional
Information of the Funds, and the Plan of Reorganization attached to this
Combined Proxy Statement/ Prospectus as Appendix A. The Trust's Annual Report
to Shareholders may be obtained free of charge by calling 1-800-688-3350 or
writing P.O. Box 7058, Troy, Michigan 48007-7058.
Reasons for the Reorganization. NBD Bank ("NBD") currently provides
investment advisory and certain other services to the Trust, including both
the Government and Treasury Funds. First Chicago Investment Management Company
("FCIMCO") currently provides investment advisory services to Prairie Funds,
Prairie Municipal Bond Fund, Inc., Prairie Intermediate Bond Fund and Prairie
Institutional Funds, each an open-end management investment company
(collectively, "Prairie"). The primary impetus behind the Reorganization is
the recently completed merger between NBD Bancorp, Inc., the parent of NBD
Bank ("NBD"), and First Chicago Corporation, the parent of FCIMCO. This
Reorganization is part of a Plan proposed by NBD and FCIMCO the principal
purpose of which is to combine the separate Prairie and Woodward mutual fund
families into a single, larger consolidated group by September 1, 1996
("Woodward/Prairie Combination"). NBD has recommended that the Government Fund
be reorganized as described in this Combined Proxy Statement/Prospectus. In
light of this recommendation, the Board of Trustees of the Trust considered
the reasons therefor and the proposed operations of the combined funds after
the Reorganization, and that the Reorganization will be tax-free and will not
dilute the interests of the Shareholders. Based upon its evaluation of the
relevant information presented to it, and in light of its fiduciary duties
under federal and state law, the Board of Trustees of the Trust, including its
members who are not "interested persons" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act"), has unanimously determined
that the proposed Reorganization is in the best interests of Shareholders and
has authorized the Plan of Reorganization and recommended approval of the
Reorganization by Shareholders.
Federal Income Tax Consequences. Drinker Biddle & Reath, independent
outside counsel to Woodward and to its Board of Trustees, will issue an
opinion (based on certain assumptions) as of the effective time of the
Reorganization that the transaction will not give rise to the recognition of
income, gain or loss for federal income tax purposes to the Government or
Treasury Fund or their respective Shareholders. See "Information Relating to
the Proposed Reorganization - Federal Income Tax Consequences."
-1-
<PAGE>
Overview of the Funds. The investment objectives of the Funds are
identical. The Government Fund's investment objective is to seek to provide a
high level of current income consistent with the preservation of capital and
liquidity. The Treasury Fund's investment objective also is to seek to provide
a high level of current income consistent with the preservation of capital and
liquidity. The Government Fund pursues its investment objective by investing
in obligations issued or guaranteed as to payment of principal and interest by
the U.S. Government, its agencies or instrumentalities ("U.S. Government
Obligations") and repurchase agreements relating to U.S. Government
Obligations. The Treasury Fund pursues its investment objective by investing
in U.S. Treasury bills, notes, and direct U.S. Treasury obligations having
remaining maturities of 13 months or less and repurchase agreements relating
to U.S. Treasury obligations. See "Comparison of Investment Policies and Risk
Factors" below and in the Prospectus, which is incorporated by reference
herein, for further information on the investment objectives and policies of
the Funds.
Certain Arrangements with Service Providers. NBD currently serves as
investment adviser to both Funds. Under the existing Advisory Agreement, NBD
is entitled to receive an advisory fee from each Fund, computed daily and
payable monthly, at an annual rate of: .45% of the first $1 billion of each
Fund's net assets, plus .425% of the next $1 billion of the Fund's net assets,
plus .40% of the Fund's net assets in excess of $2 billion.
As investment adviser, NBD presently manages the investments of each
Fund, makes decisions with respect to and places orders for all purchases and
sales of the Fund's securities, and maintains certain records relating to such
purchases and sales.
In connection with the Woodward/Prairie Combination, subject to the
approval of its shareholders, the Trust expects to terminate its existing
Advisory Agreement with NBD and enter into an agreement with NBD and FCIMCO
under which they would jointly provide investment advisory services to
Woodward, including the Treasury Fund. NBD and FCIMCO have advised Woodward's
Board that investment management for The Woodward Funds will be provided by
NBD's investment management staff. For their services, NBD and FCIMCO would be
entitled to receive an advisory fee from each Fund, computed daily and payable
monthly, at the annual rate of .30% of the first $1.0 billion, .275% of the
next $1 billion, and .25% of the Fund's average daily net assets in excess of
$2 billion.
Under the current Advisory Agreement, NBD also provides each Fund with
various administrative services without additional compensation. In connection
with the Woodward/Prairie Combination, it is expected that Woodward will enter
into a new administration agreement with NBD, FCIMCO and BISYS Fund Services
-2-
<PAGE>
("BISYS"), under which these parties will jointly agree to provide
administrative services to Woodward as co-administrators, subject to the
overall authority of Woodward's Board in accordance with Massachusetts law.
BISYS is a wholly-owned subsidiary of The BISYS Group, Inc. and is affiliated
with Concord, the current sub-administrator of Prairie. This new
administration arrangement is expected to be in place at the time of the
Woodward/Prairie Combination. For their services as co-administrators, NBD,
FCIMCO and BISYS would be jointly entitled to receive a fee from the Treasury
Fund, computed daily and paid monthly, at the annual rate of .15% of the
average daily net assets of the Treasury Fund. Thus, the amount of the
advisory and administration fees payable by the Treasury Fund following the
Woodward/Prairie Combination would equal the fee payable to NBD by the
Government Fund under the current Advisory Agreement for advisory and other
services.
NBD receives compensation as the Funds' Custodian and Transfer Agent
under separate agreements. As Custodian and as Transfer Agent, NBD (i)
maintains separate accounts in the name of each Fund, (ii) collects and makes
disbursements of money on behalf of each Fund, (iii) issues and redeems shares
of each Fund, (iv) collects and receives all income and other payments and
distributions on account of the portfolio securities of each Fund, (v)
addresses and mails all communications by Woodward to its shareholders,
including reports to shareholders, dividend and distribution notices and proxy
materials for any meeting of shareholders, (vi) maintains shareholder
accounts, (vii) makes periodic reports to the Board of Trustees concerning
Woodward's operations, and (viii) maintains on-line computer capability for
determining the status of shareholder accounts.
For its services as Custodian, NBD is entitled to receive $11.00 for
each clearing and settlement transaction and $23.00 for each accounting and
safekeeping service with respect to investments, in addition to activity
charges for master control and master settlement accounts.
For its services as Transfer Agent, NBD is currently entitled to
receive a minimum annual fee from each Fund of $11,000, $15 annually per
account from each Fund for the preparation of statements of account, and $1.00
for each confirmation of purchase and redemption transactions. Charges for
providing computer equipment and maintaining a computerized investment system
are expected to approximate $350 per month for each Fund.
In connection with the Woodward/Prairie Combination, the Trust expects
to terminate the current Transfer Agency Agreement and to enter into a new
transfer agency agreement with First Data Investor Services Group, Inc.
("First Data").
-3-
<PAGE>
The Trust currently has a Distribution Plan under which the Trust may
incur expenses primarily intended to result in the sale of shares issued by
the Trust in an amount not to exceed .35% per annum of the average daily net
assets of the Trust. Fees are payable by each Fund to First of Michigan
Corporation ("FoM") and Essex National Securities, Inc. ("Essex") for their
distribution services.
Pursuant to the current Shareholder Servicing Plan the Trust may enter
into agreements with banks and financial institutions ("Shareholder Servicing
Agents") under which they will render shareholder administrative support
services for their customers who beneficially own Class A Shares. Such
services may include processing purchase and redemption requests from
customers, placing net purchase and redemption orders and providing
information to customers showing their positions in Fund shares. The Trust
will pay fees to Shareholder Servicing Agents at an annual rate of up to .25%
of the average daily net asset value of the Class A Shares held by such
Shareholder Servicing Agents for the benefit of their customers. At the
Trust's option, it may also reimburse such agents for their out-of-pocket
expense.
In connection with the Woodward/Prairie Combination, it is expected
that the Distribution Agreement with FoM and Essex will be terminated, and the
current Woodward Distribution Plan and Shareholder Servicing Plan will be
cancelled. At such time, BISYS is expected to enter into a Distribution
Agreement to act as sponsor and principal underwriter of the Trust. No fees
would be payable by the Treasury Fund under this agreement.
Additionally, in connection with the Woodward/Prairie Combination, the
Trust is expected to adopt a Shareholder Administrative Services Plan
("Services Plan"). Under the Services Plan, the Class A Shares of the Treasury
Fund would bear the expense of service fees payable to BISYS at an annual rate
of up to .25% of the average daily net asset value of the Fund's outstanding
Class A Shares held by financial institutions, securities dealers and other
institutions ("Servicing Agents") on behalf of their clients, or held by
clients of such Servicing Agents. The services provided may include personal
services related to shareholders' accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. Under the
Services Plan, BISYS may make payments to Servicing Agents in respect of those
services. NBD, FCIMCO and their affiliates may act as Servicing Agents and
receive fees under the Services Plan.
See "Management--Investment Adviser, Custodian and Transfer Agent" in
the Funds' Prospectus accompanying this Combined Proxy Statement/Prospectus
for additional information.
-4-
<PAGE>
Comparative Fee Table. The table below shows (i) information regarding
the fees and expenses paid by each class of shares of the Government Fund and
the Treasury Fund, as well as the Prairie U.S. Government Money Market Fund
which is expected to merge into the Treasury Fund in connection with the
Woodward/Prairie Combination, as of their most recent fiscal years, restated
as of April 15, 1996 for the Funds and April 11, 1996 for the Prairie
portfolio to reflect expenses the Funds and the Prairie U.S. Government Money
Market Fund expect to incur during their current fiscal years and (ii)
estimated fees and expenses on a pro forma basis giving effect to the
Reorganization and the merger of the Prairie U.S. Government Money Market Fund
into the Treasury Fund.
<TABLE>
<CAPTION>
=============================================================================================================================
Prairie U.S.
Government Woodward Government Woodward Treasury
Money Fund Money Market Fund Pro Forma Combined
Market+
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class A Class I Class A Class I Class A Class I
Shares Shares Shares Shares Shares Shares Shares
- -----------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATION EXPENSES
(as a percentage of average
net assets)
<S> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .40% .45% .45% .45% .45% .30% .30%
12b-1 Fees N/A .007% .007% .024% .024% N/A N/A
Other Expenses
(after fee waivers and/or
expense reimbursements) .40%(1)(4) .293%(2)(5) .083% .276%(2)(5) .076% .43%(1) .18%(3)
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .80%(4) .75%(5) .54% .75%(5) .55%(5) .73% .48%
<FN>
=============================================================================
- --------------------------
+ The Prairie U.S. Government Money Market Fund is expected to merge
into the Woodward Treasury Fund in connection with the
Woodward/Prairie Combination which is expected to take place at
approximately the same time as the Reorganization. The merger of the
Prairie U.S. Government Money Market Fund into the Woodward Treasury
Fund and the Reorganization of the Woodward Government and Treasury
Funds will occur only if the shareholders of the appropriate funds
approve each transaction.
(1) Includes administration fees of 0.15% and shareholder servicing fees
of 0.25%.
(2) Includes shareholder servicing fees of 0.25%.
(3) Includes administration fees of 0.15%.
(4) Absent voluntary waivers and expense reimbursements, which can be
terminated at any time, the other expenses and total operating
expenses for the Class A Shares of the Prairie U.S. Government Money
Market Fund would have been 0.67% and 1.07%, respectively.
-5-
<PAGE>
(5) Absent voluntary waivers and expense reimbursements, which can be
terminated at any time, the other expenses and total operating
expenses for the Class A Shares of the Government Fund would have been
.30% and .757%, respectively, and for the Treasury Fund, such expenses
would have been .312% and .786%, respectively.
</TABLE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prairie U.S. Government
Money Market Fund
Class A Shares $8 $26 $44 $99
Woodward Government Fund
Class A Shares $8 $24 $42 $93
Class I Shares $6 $17 $30 $68
Woodward Treasury Money Market Fund
Class A Shares $8 $24 $42 $93
Class I Shares $6 $18 $31 $69
Pro Forma Combined
Class A Shares $7 $23 $41 $91
Class I Shares $5 $15 $27 $61
</TABLE>
-6-
<PAGE>
Expense Ratios. The following table sets forth the ratios of operating
expenses to average net assets of the Funds and the Prairie U.S. Government
Money Market Fund for the fiscal year ended December 31, 1995:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1995
========================================================================================================
Ratio of Operating Ratio of Operating
Expenses to Average Expenses to Average
Net Assets After Fee Net Assets Absent Fee
Waivers and Expense Waivers and Expense
Reimbursements Reimbursements
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Woodward Government Fund N/A 0.51%
Woodward Treasury Money N/A 0.53%
Market Fund
Prairie U.S. Government 0.78% 1.07%
Money Market Fund
</TABLE>
==============================================================================
Expense Caps. Although under no contractual obligation, NBD, FCIMCO
and BISYS have informed Woodward that they expect to waive fees and reimburse
expenses for the current fiscal year ending December 31, 1996 to the extent
the total operating expenses of each class of the Treasury Fund exceed the
following amounts: .75% for Class A Shares and .50% for Class I Shares.
Purchase and Redemption Information, Dividends, Exchange Privileges,
Distribution and Pricing. The purchase, redemption, exchange privileges and
distribution policies of the Government Fund and Treasury Fund are identical.
For further information, see "Purchase of Shares" and "Redemption of
Shares" in the Funds' Prospectus accompanying this Combined Proxy
Statement/Prospectus.
Voting Information. This Combined Proxy Statement/ Prospectus is being
furnished in connection with the solicitation of proxies in connection with
the Special Meeting of Shareholders to be held in the Family Dining Room of
the Detroit Club, 712 Cass Avenue, Detroit, Michigan, on June 25, 1996
at 10:30 a.m. (Eastern Time) (such meeting and any adjournments thereof
hereinafter referred to as the "Meeting") for use at the Meeting. Only
shareholders of record of the Government Fund at the close of business on
April 11, 1996 will be entitled to notice of and to vote at the Meeting. Each
share or fraction thereof is entitled to one vote or fraction thereof. Shares
represented by a properly executed proxy will be voted in accordance with the
-7-
<PAGE>
instructions thereon, or if no specification is made, the persons named as
proxies will vote in favor of the proposal set forth in the Notice of Special
Meeting of Shareholders. Proxies may be revoked at any time before they are
exercised by written notice of revocation or a subsequently executed proxy or
by attending the Meeting and voting in person at the Meeting. For additional
information, including a description of the Shareholder vote required for
approval of the Plan of Reorganization and related transactions contemplated
thereby, see "Information Relating to Voting Matters."
Risk Factors. The following discussion highlights the principal risk
factors associated with an investment in the Government Fund and the Treasury
Fund and is qualified in its entirety by the more extensive discussion of
risk factors under "Comparison of the Funds' Investment Policies and Risk
Factors" below and in the Funds' Prospectus and Statement of Additional
Information which are incorporated herein by reference.
Because of the similarities of the investment objectives and policies
of the Funds, management believes that an investment in the Treasury Fund
involves investment risks that are substantially the same as those of the
Government Fund. These investment risks, in general, are those typically
associated with investing in a portfolio of U.S. Treasury bills, notes and
direct U.S. Treasury obligations having remaining maturities of 13 months or
less; U.S. Government obligations; and repurchase agreements relating to such
obligations.
Although both Funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance they will be able to do so. There is no
assurance that a Fund will achieve its investment objective.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Plan of Reorganization. Significant
provisions of this Plan of Reorganization are summarized below; however, this
summary is qualified in its entirety by reference to the Plan of
Reorganization, a copy of which is attached as Appendix A to this Combined
Proxy Statement/Prospectus.
Description of the Plan of Reorganization. The Plan of Reorganization
provides that at the Effective Time of the Reorganization, substantially all
of the assets and liabilities of the Government Fund will be transferred to
the Treasury Fund, so that at and after the Effective Time of the
Reorganization, the assets and liabilities of the Government Fund will become
and
-8-
<PAGE>
be the assets and liabilities of the Treasury Fund. In exchange for such
transfer, the Trust will issue to the Government Fund that number of full and
fractional Class A and Class I Shares of the Treasury Fund that is equal to
the number of full and fractional Class A and Class I Shares of the Government
Fund then outstanding, respectively. The Government Fund will make a
liquidating distribution of such Class A and Class I Shares to its
shareholders. At and after the Effective Time of the Reorganization, all
debts, liabilities, obligations and duties of the Government Fund will attach
to the Treasury Fund and may thereafter be enforced against the Treasury Fund
to the same extent as if they had been incurred by it. If the difference
between the per share net asset values of the Government Fund and the Treasury
Fund equals or exceeds $.0025 at the Effective Time of the Reorganization, as
computed by using such market values in accordance with the policies and
procedures established by the Board of Trustees of the Trust, the Board shall
have the right to postpone the Effective Time of the Reorganization until such
time as the per share difference is less than $.0025.
To facilitate the foregoing, the Trust will establish open accounts in
the name of each Shareholder of the Government Fund representing the number of
Class A and Class I Shares of the Treasury Fund owned by the Shareholder as a
result of the Reorganization. The stock transfer books of the Trust for the
Government Fund will be permanently closed as of the close of business on the
day immediately preceding the Effective Time of the Reorganization. Redemption
requests received thereafter by the Trust with respect to the Government Fund
will be deemed to be redemption requests for Class A and Class I shares of the
Treasury Fund issued in the Reorganization.
The Reorganization is subject to a number of conditions, including
approval of the Plan of Reorganization and the transactions contemplated
therein by the Shareholders of the Government Fund.
Each Shareholder of the Government Fund will have the right to receive
any unpaid dividends or other distributions that were declared before the
Effective Time of the Reorganization with respect to the shares representing
interests in the Government Fund held by the Shareholder immediately prior to
the Effective Time of the Reorganization. Assuming satisfaction of the
conditions in the Plan of Reorganization, the Effective Time of the
Reorganization will be on ______ __, 1996, or such other date as is scheduled
by the Trust.
The Plan of Reorganization and the proposed Reorganization described
therein may be abandoned at any time for any reason prior to the Effective
Time of the Reorganization upon the vote of a majority of the Board of
Trustees of the Trust. The Plan of Reorganization provides further that at any
time prior to or (to
-9-
<PAGE>
the fullest extent permitted by law) after approval of the Plan of
Reorganization by the Shareholders of the Government Fund, the Trust may, upon
authorization by the Board of Trustees of the Trust, and with or without the
approval of the Shareholders, amend any of the provisions of the Plan of
Reorganization.
Board Consideration. The Board of Trustees of the Trust considered the
proposed Reorganization at a meeting held on February 20, 1996. The Board was
advised that because of its greater size, the investment and other operations
of the Treasury Fund were more efficient than those of the Government Fund,
and that management believed that the proposed Reorganization would benefit
the Government Fund and its shareholders. These benefits included: greater
portfolio trading efficiencies (such as quantity discounts), better securities
execution and reduced portfolio volatility resulting from shareholder purchase
and redemption activity, and potentially broader portfolio diversification.
For these reasons, and those described above under "Summary - Reasons
for the Reorganization," the Plan of Reorganization in the form attached
hereto as Appendix A was unanimously approved by the Board of Trustees at the
meeting held on February 20, 1996.
THE TRUST'S BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE PLAN OF REORGANIZATION.
Capitalization. Because the Treasury Fund will be combined with the
Government Fund in the Reorganization and with the Prairie U.S. Government
Money Market Fund in connection with the Woodward/Prairie Combination, the
total capitalization of the Treasury Fund after these transactions is expected
to be greater than the current capitalization of the Government Fund. The
following table sets forth as of December 31, 1995 (i) the capitalization of
the Prairie U.S. Government Money Market Fund; (ii) the capitalization of the
Treasury Fund; (iii) the capitalization of the Government Money Market Fund;
and (iv) the pro forma capitalization of the Treasury Fund as adjusted to give
effect to the proposed reorganizations of the Government Fund, Treasury Fund
and Prairie U.S. Government Money Market Fund. There is, of course, no
assurance that these transactions will be consummated. Moreover, if
consummated, the capitalization of the Treasury Fund is likely to be
different at the Effective Time of the Reorganization as a result of daily
share purchase and redemption activity in the Funds.
-10-
<PAGE>
<TABLE>
<CAPTION>
Prairie U.S. Woodward Woodward
Government Money Treasury Money Government Pro Forma
Market Fund Market Fund Fund Combined
---------------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Total Net Assets $57,264,060 $927,695,502 $474,376,855 $1,459,336,417
Class A Shares $57,264,060 N/A N/A $142,846,537
Class I Shares N/A N/A N/A $1,316,489,880
Single Class Shares N/A $927,695,502 $474,376,855 N/A
Shares Outstanding 57,280,045 927,695,502 474,376,855 1,459,352,402
Class A Shares 57,280,045 N/A N/A 142,862,522
Class I Shares N/A N/A N/A 1,316,489,880
Single Class Shares N/A 927,695,502 474,376,855 N/A
Net Asset Value
Per Share
Class A Shares $1.00 N/A N/A $1.00
Class I Shares N/A N/A N/A $1.00
Single Class Shares N/A $1.00 $1.00 N/A
</TABLE>
Federal Income Tax Consequences. Consummation of the Reorganization is
subject to the condition that the Trust receive an opinion from Drinker Biddle
& Reath, independent outside counsel to the Trust and to its Board of
Trustees, to the effect that for federal income tax purposes: (i) the transfer
of all of the assets and liabilities of the Government Fund (except for a cash
reserve in an amount necessary for the discharge of all known and reasonably
anticipated liabilities of the Government Fund in exchange for shares of the
Treasury Fund and liquidating distributions to shareholders of the Government
Fund so received, as described in the Plan of Reorganization, will constitute
a reorganization within the meaning of Section 368(a)(1)(C) or Section
368(a)(1)(D) of the Internal Revenue Code of 1986, as amended, and with
respect to the Reorganization, the Government Fund will be considered "a party
to a reorganization" within the meaning of Section 368(b) of the Code; (ii) no
gain or loss will be recognized by the Government Fund as a result of such
transactions; (iii) no gain or loss will be recognized by the Treasury Fund as
a result of such transactions; (iv) no gain or loss will be recognized by the
shareholders of the Government Fund on the distribution to them by the Trust
of shares of any Class of the Treasury Fund in exchange for their shares of
any class of the Government Fund; (v) the aggregate basis of the Treasury Fund
shares received by a shareholder of the Government Fund will be the same as
the aggregate basis of the shareholder's Government Fund shares immediately
prior to the Reorganization; (vi) the basis of the Treasury Fund in the assets
of the Government Fund received pursuant to the Reorganization will be the
same as the basis of the assets in the hands of the Government Fund
immediately before the Reorganization; (vii) a shareholder's holding period
for the Treasury Fund shares will be determined by including the period for
which the shareholder held the Government Fund shares exchanged therefor,
provided that the shareholder held such shares as a capital asset; and (viii)
the Treasury Fund's holding period with respect to the assets received in the
Reorganization will include the period for which such assets were held by the
Government Fund.
-11-
<PAGE>
The Trust has not sought a tax ruling from the Internal Revenue
Service ("IRS"). The discussion of the federal tax consequences in the
preceding paragraph is not binding on the IRS and does not preclude the IRS
from adopting a contrary position. Shareholders should consult their own
advisors concerning the potential tax consequences to them, including state
and local income tax consequences.
COMPARISON OF THE FUNDS
Investment Policies and Risk Factors. Both of the Funds are classified
as "diversified" portfolios under the 1940 Act. The investment objective and
policies of the Government Fund are substantially the same as those of the
Treasury Fund. The following discussion summarizes some of the investment
policies and risk factors of the Funds and is qualified in its entirety by the
discussion elsewhere herein, and in the Prospectus and Statement of Additional
Information of the Funds incorporated herein by reference.
Both of these Funds are money market funds that seek to maintain a net
asset value of $1.00 per share, although there is no assurance either will be
able to do so.
The Government Fund seeks to achieve its investment objective by
investing only in U.S. Government Obligations and related repurchase
agreements, and the Treasury Fund invests only in U.S. Treasury bills, notes
and direct U.S. Treasury obligations having remaining maturities of 13 months
or less and related repurchase agreements.
Each Fund is managed so that the average maturity of all instruments
in the Fund (on a dollar-weighted basis) will not exceed 90 days. In no event
will the Funds purchase any securities which are deemed to mature more than 13
months from the date of purchase (except for certain variable and floating
rate instruments and securities underlying repurchase agreements and
collateral underlying loans of portfolio securities).
Both Funds may agree to purchase portfolio securities which they may
otherwise purchase from financial institutions subject to the seller's
agreement to repurchase them at a mutually agreed-upon date and price
("repurchase agreements"). Neither Fund will enter into repurchase agreements
with NBD, FCIMCO, FoM, Essex, BISYS or any of their affiliates. Although the
securities subject to repurchase agreements may bear maturities exceeding 13
-12-
<PAGE>
months provided the repurchase agreement itself matures in one year or less,
the Funds generally intend to enter into repurchase agreements which terminate
within seven days after notice by the Funds.
The Funds may also borrow funds for temporary purposes by entering
into reverse repurchase agreements. Pursuant to such agreements the Funds will
sell portfolio securities to financial institutions such as banks and
broker-dealers and agree to repurchase them at a particular date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Fund may decline below the price of the securities it is
obligated to repurchase.
To increase income or offset expenses, both Funds may lend portfolio
securities to financial institutions such as banks and broker-dealers in
accordance with their investment limitations. Agreements would require that the
loans be continuously secured by collateral equal at all times in value to at
least the market value of the securities loaned plus accrued interest.
The Funds may purchase portfolio securities on a "when-issued" basis
and may purchase or sell such securities on a "forward commitment" basis. They
do not intend to purchase when-issued securities for speculative purposes but
only for the purposes of acquiring portfolio securities. Each Fund's when-
issued purchases and forward commitments are not expected to exceed 25% of the
value of its total assets absent unusual market conditions.
Investment Limitations. Both Funds are subject to a number of
investment limitations which are matters of fundamental policy and may not be
changed with respect to the particular Fund without the affirmative vote of
the holders of a majority of the Fund's outstanding shares. Investment
limitations that are not fundamental may be changed by the Trust's Board of
Trustees.
Neither Fund may borrow money, except from banks or through reverse
repurchase agreements, and except for temporary or emergency purposes and then
only in amounts not exceeding at any one time 20% of the value of its net
assets at the time of the borrowing. A Fund will not purchase securities while
its borrowings (including reverse repurchase agreements) in excess of 5% of
its net assets are outstanding. Borrowings will only be effected in conformity
with the requirements of the 1940 Act. In connection with the Woodward/Prairie
Combination, it is expected that the Treasury Fund will submit to its
shareholders for approval a proposal that would amend the Fund's limitation
regarding borrowing such that it could borrow money to the extent permitted
under the 1940 Act.
Neither will either Fund make loans, except (i) through the purchase
of debt obligations in accordance with its investment objective and policies,
(ii) through repurchase agreements and (iii) through the lending of investment
securities.
-13-
<PAGE>
Each Fund currently has a fundamental policy limiting its investments
in illiquid securities to 10% of its total assets. In connection with the
Woodward/Prairie Combination, it is expected that the Treasury Fund will
propose to its shareholders that the Fund be permitted to change this
limitation to a non-fundamental policy.
In addition, as a matter of fundamental policy, neither Fund may
purchase securities on margin, make short sales of securities or maintain a
short position in any security. In connection with the Woodward/Prairie
Combination, the Treasury Fund intends to propose to its shareholders that
this limitation become a non-fundamental one. The Treasury Fund expects to
make similar proposals to its shareholders with respect to its limitations
regarding investments in other investment companies and for the purpose of
exercising management or control.
Other Information. The Trust is registered as an open-end management
investment company under the 1940 Act. Currently, the Trust has seventeen
separate investment portfolios that have commenced operations.
The Trust is organized as a Massachusetts business trust and, as such,
is subject to the provisions of its Declaration of Trust and By-Laws. Shares
of the Funds: (i) have a per share par value of $.10; (ii) are entitled to one
vote for each full share held and a proportionate fractional vote for each
fractional share held; (iii) will vote in the aggregate and not by class
except as otherwise expressly required by law or the Trust's governing
instruments or when class voting is permitted by the Board of Trustees; and
(iv) are entitled to participate equally (except for payments to shareholder
organizations that are borne by each Fund's Class A and Class I shares) in the
dividends and distributions that are declared with respect to each Fund and in
the net distributable assets of each Fund on liquidation. In addition, shares
of the Funds have no preemptive rights and only such conversion and exchange
rights as the Board of Trustees may grant at its discretion. When issued for
payment as described in their Prospectus, shares of the Funds are fully paid
and non-assessable by the Trust except as required under Massachusetts law.
The Trust is not required under Massachusetts law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. Shareholders
have the right to remove trustees. To the extent required by law, the Trust
will assist in shareholder communications in such matters.
The foregoing is only a summary of certain material attributes of the
Funds and their shares. Shareholders may obtain copies of the Trust's
Declaration of Trust and By-Laws from the Trust upon written request at its
principal office.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Board of
Trustees of the Trust in connection with the Meeting. It is expected that the
solicitation of proxies will be primarily by mail. The Trust's officers may
also solicit proxies by telephone, telegraph, facsimile or personal interview.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to the Trust a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and electing to vote
in person. In addition, the Trust may retain the services of one or more
outside organizations to aid in the solicitation of
-14-
<PAGE>
proxies. Such organizations normally charge a fee plus out-of-pocket charges.
Only shareholders of record at the close of business on April 11, 1996
will be entitled to vote at the Meeting. On that date, there were outstanding
and entitled to be voted ______ shares of the Government Fund. Each share or
fraction thereof is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting. For information on
adjournment of the Meeting, see "Quorum" below.
Shareholder and Board Approval. The Plan of Reorganization and the
transactions contemplated thereby are being submitted for approval at the
Meeting by the holders of two-thirds of the outstanding shares of the
Government Fund in accordance with the provisions of the Trust's Declaration
of Trust and By-Laws and the requirements of the 1940 Act.
In tallying shareholder votes, abstentions and broker non-votes
(i.e., proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum is
present for purposes of convening the Meeting. As to the Reorganization
proposal, abstentions and broker non-votes will be considered to be a vote
against the Reorganization proposal.
The approval of the shareholders of the Treasury Fund is not being
solicited because their approval or consent is not legally required for the
Reorganization to be consummated.
At April 11, 1996, the name, address and percentage of share ownership
of the persons who owned beneficially or of record more than 5% of the
outstanding Class A and Class I shares of the Government Fund are listed
below.
<TABLE>
<CAPTION>
[TO BE PROVIDED BY NBD]
========================================================================================================
Percentage of Percentage of
Percentage of Government Fund Class of Treasury
Class of Class Owned on Shares Owned on Fund Owned on
Name and Address Shares Owned Record Date Record Date Consummation
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
==============================================================================
At April 11, 1996, the name, address and share ownership of the
persons who owned beneficially or of record more than 5% of
-15-
<PAGE>
the outstanding Class A and Class I shares of the Treasury Fund are listed
below:
<TABLE>
<CAPTION>
[TO BE PROVIDED BY NBD]
=========================================================================================
Percentage of Percentage of
Percentage of Treasury Fund Class of Treasury
Class of Class Owned on Shares Owned on Fund Owned on
Name and Address Shares Owned Record Date Record Date Consummation
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
=============================================================================
At December 31, 1995, the directors and officers of the Trust as a
group owned beneficially less than 1% of the outstanding shares of the
Government Fund and the Treasury Fund.
Appraisal Rights. Shareholders are not entitled to any rights of share
appraisal under the Trust's Declaration of Trust, as applicable, or under the
laws of the Commonwealth of Massachusetts in connection with the proposed
Reorganization. Shareholders have, however, the right to redeem from the
Government Fund their shares at net asset value until the Effective Time of
the Reorganization, and thereafter shareholders may redeem from the Trust the
shares acquired by them in the Reorganization at net asset value.
Quorum. In the event that a quorum is not present at the Meeting, or
in the event that a quorum is present at the Meeting but sufficient votes to
approve the Plan of Reorganization are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares affected by the adjournment that are
represented at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies which they are entitled to
vote FOR the Plan of Reorganization, in favor of such adjournments, and will
vote those proxies required to be voted AGAINST such proposals against any
adjournment. A quorum is constituted with respect to the Government Fund by
the presence in person or by proxy of the holders of two-thirds of the
outstanding shares of the Government Fund entitled to vote at the Meeting.
Annual Meetings. The Trust does not presently intend to hold annual
meetings of shareholders for the election of trustees and other business
unless and until such time as less than a majority of the trustees holding
office have been elected by the shareholders, at which time the trustees then
in office will call a shareholders' meeting for the election of trustees.
Shareholders have the right to call a meeting of shareholders to consider the
removal of one or more trustees or for other matters and such meetings will be
called when requested in writing by the
-16-
<PAGE>
holders of record of 10% or more of the Trust's outstanding shares of
beneficial interest. To the extent required by law, the Trust will assist in
shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT THE TRUST
Information about the Treasury Fund and Government Fund is included in
the Prospectus accompanying this Combined Proxy Statement/Prospectus, which is
incorporated by reference herein. Additional information about the Funds is
included in their Statement of Additional Information dated April 15, 1996,
which has been filed with the SEC. Copies of the Funds' Prospectus and
Statement of Additional Information may be obtained without charge by writing
to Woodward, c/o NBD, P.O. Box 7058, Troy, Michigan 48007, or by calling the
Trust at 1-800-688-3350. The Trust is subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act, as
applicable, and, in accordance with such requirements, files proxy materials,
reports and other information with the SEC. These materials can be inspected
and copied at the Public Reference Facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices
at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may also be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
LITIGATION
This Trust is not involved in any litigation or proceeding that is
believed likely to have any material adverse financial effect upon the ability
of the adviser to provide investment advisory services or any material adverse
effect upon the Funds.
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Treasury and
Government Funds for the fiscal year ended December 31, 1995 are contained in
the Trust's Annual Report to Shareholders and in the Trust's Prospectus and
Statement of Additional Information dated April 15, 1996, each of which is
incorporated by reference into this Combined Proxy Statement/Prospectus.
The audited financial statements of the Funds for the fiscal year
ended December 31, 1995 contained in the Trust's annual report and
incorporated by reference in this Combined Proxy/Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are incorporated herein in reliance upon the
authority of said firm as experts in accounting and auditing.
-17-
<PAGE>
OTHER BUSINESS
The Trust's Board of Trustees knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it
is the intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment of
the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-688-3350.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-18-
<PAGE>
APPENDIX A
PLAN OF REORGANIZATION
This PLAN OF REORGANIZATION (the "Plan") is dated as of the ____ day
of ____________, 1996, and has been adopted by the Board of Trustees of The
Woodward Funds (the "Trust") to provide for the reorganization of its
Government Fund (the "Government Fund") into its Treasury Money Market Fund
(the "Treasury Fund").
A. Background
Each of the Government Fund and the Treasury Fund (individually, a
"Fund," collectively, the "Funds") is a separate, diversified taxable money
market portfolio of the Trust. The Trust is organized as a Massachusetts
business trust and is an open-end management investment company registered
with the Securities and Exchange Commission (the "SEC") under the Investment
Company Act of 1940 (the "1940 Act"). The Board of Trustees of the Trust has
determined that it is in the best interests of the Government Fund and its
shareholders for such Fund to be reorganized through the transfer of all of
its assets and liabilities to the Treasury Fund upon the terms set forth in
this Plan (the "Reorganization").
B. Reorganization
1. At the Effective Time of the Reorganization as defined below in
Section 4 of this Article B, all property of every description, and all
interests, rights, privileges and powers of the Government Fund, subject to
all liabilities of such Government Fund, whether accrued, absolute, contingent
or otherwise (such assets subject to such liabilities are herein referred to
as the "Assets") will be transferred and conveyed by such Government Fund to
the Treasury Fund and will be assumed by such Treasury Fund, such that at and
after the Effective Time of the Reorganization the Assets (including
liabilities) of the Government Fund will become and be the Assets (including
liabilities) of the Treasury Fund. In exchange for the transfer of the Assets
of the Government Fund, the Treasury Fund will contemporaneously issue to the
Government Fund full and fractional Class I and Class A shares of the Treasury
Fund. The number of Class I and Class A shares of the Treasury Fund so issued
will be equal in number to the number of full and fractional Class I and Class
A shares representing interests in the Government Fund outstanding immediately
prior to the Effective Time of the Reorganization, provided that at the
Effective Time of the Reorganization the price per Class I and Class A Share
of the Government Fund and the price per Class I and Class A share of the
Treasury Fund for purposes of sales and redemptions is $1.00 based on the
amortized cost valuation procedures that have been adopted by the Trust. If
the
A-1
<PAGE>
difference between the per share net asset values of the Government Fund and
the Treasury Fund equals or exceeds $.0025 at the Effective Time of the
Reorganization, as computed by using such market values in accordance with the
policies and procedures established by the Board of Trustees of Woodward, the
Board of Trustees of Woodward shall have the right to postpone the Effective
Time of the Reorganization until such time as the per share difference is less
than $.0025. At and after the Effective Time of the Reorganization, all debts,
liabilities, obligations and duties of the Government Fund will attach to the
Treasury Fund as aforesaid and may thenceforth be enforced against the
Treasury Fund to the same extent as if the same had been incurred by it.
2. At the Effective Time of the Reorganization, the Government Fund
will make a liquidating distribution to the holders of its Class I and Class A
shares of the Treasury Fund, such that the number of Class I and Class A
shares of the Treasury Fund that are distributed to a shareholder of the
Government Fund will, as indicated above in Section 1 of this Article B, be
equal in number to the number of full and fractional Class I and Class A
shares representing the interests in the Government Fund held by each such
shareholder immediately prior to the Effective Time of the Reorganization. In
addition, each such shareholder will have the right to receive any unpaid
dividends or other distributions that were declared before the Effective Time
of the Reorganization with respect to the Class I and Class A shares
representing interests in the Government Fund held by the shareholder
immediately prior to the Effective Time of the Reorganization. To facilitate
the foregoing issuance, the Trust will establish open accounts in the name of
each holder of Class I and Class A shares of the Government Fund representing
the number of Class I and Class A shares of the Treasury Fund owned by each
such shareholder as a result of the Reorganization.
3. The stock transfer books of the Trust with respect to the
Government Fund will be permanently closed as of the close of business on the
day immediately preceding the Effective Time of the Reorganization. Redemption
requests received thereafter by the Trust with respect to the Government Fund
will be deemed to be redemption requests for Class I and Class A shares of the
Treasury Fund issued in the Reorganization. If any Government Fund shares held
by a Government Fund shareholder are represented by a share certificate, the
certificate must be surrendered to the Trust's transfer agent for cancellation
before the Treasury Fund shares issued to the shareholder in the
Reorganization will be redeemed.
4. The Effective Time of the Reorganization for purposes of this
Agreement shall be _____ ____, Eastern time, on _______, 1996, or at such
other time as may be determined by the Board of Trustees or an authorized
officer of the Trust.
A-2
<PAGE>
C. Action by Shareholders of Government Fund
Prior to the Effective Time of the Reorganization and as a condition
thereto, the Board of Trustees of the Trust will call, and the Trust will
hold, a meeting of the shareholders of the Government Fund to consider and
vote upon:
(1) Approval of this Plan and the transactions contemplated
hereby.
(2) Such other matters as may be determined by the Board of
Trustees of the Trust.
D. Conditions to the Reorganization
Consummation of this Plan and the Effective Time of the Reorganization
will be subject to:
(1) the approval of the matters referred to in Article C of this
Plan by the shareholders of the Government Fund in the manner
required by law and otherwise deemed necessary or advisable by
the Board of Trustees of the Trust; and
(2) the following additional conditions:
a. The Funds will have received an opinion of Drinker
Biddle & Reath to the effect that:
(i) the Class I and Class A shares of the Treasury Fund
issued pursuant to this Plan will, when issued in accordance
with the provisions hereof, be legally issued, fully paid and
non-assessable; and
(ii) for federal income tax purposes (a) the transfer of
all of the Government Fund's assets hereunder, and the
assumption by the Treasury Fund of the Government Fund's
liabilities, in exchange for shares of each class of such
Treasury Fund, and the distribution of said shares to the
shareholders of such Government Fund, as provided in this
Agreement, will constitute a reorganization within the meaning
of Section 368(a)(1)(C) or 368(a)(1)(D) of the Code and with
respect to the reorganization, the Government Fund and the
Treasury Fund will each be considered "a party to a
reorganization" within the meaning of Section 368(b) of the
Code; (b) in accordance with Sections 361(a), 361(c)(1) and
357(a) of the Code, no gain or loss will be recognized by such
Government Fund as a result of such transactions; (c) in
accordance with Section 1032(a) of the Code, no gain or loss
will be recognized by the Treasury Fund as a result of such
A-3
<PAGE>
transactions; (d) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by the shareholders of
such Government Fund on the distribution to them by such
Government Fund of shares of any class of the Treasury Fund in
exchange for their shares of the corresponding class of the
Government Fund; (e) in accordance with Section 358(a)(1) of
the Code, the aggregate basis of Treasury Fund shares received
by each shareholder of any class of the Government Fund will be
the same as the aggregate basis of the shareholder's Government
Fund shares immediately prior to the transactions; (f) in
accordance with Section 362(b) of the Code, the basis of the
Government Fund Assets to the Treasury Fund will be the same as
the basis of such Government Fund Assets in the hands of the
Government Fund immediately prior to the exchange; (g) in
accordance with Section 1223(1) of the Code, a shareholder's
holding period for Treasury Fund shares will be determined by
including the period for which the shareholder held the shares
of the Government Fund exchanged therefor, provided that the
shareholder held such shares of the Government Fund as a
capital asset; and (h) in accordance with Section 1223(2) of
the Code, the holding period of the Treasury Fund with respect
to the Government Fund Assets will include the period for which
such Government Fund Assets were held by the Government Fund.
b. All necessary approvals, registrations and
exemptions required under federal and state laws
will have been obtained.
E. Miscellaneous
1. This Plan and the transactions contemplated hereby will
be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts.
2. This Plan and the Reorganization contemplated hereby may be
abandoned at any time for any reason prior to the Effective Time of the
Reorganization upon the vote of a majority of the Board of Trustees of the
Trust.
3. At any time prior to or (to the fullest extent permitted by law)
after approval of this Plan by the shareholders of the Government Fund, the
Trust may, upon authorization by the Board of Trustees and with or without the
approval of shareholders of the Government Fund, amend any of the provisions
of this Plan.
A-4
<PAGE>
PART B
<PAGE>
THE WOODWARD FUNDS
c/o NBD BANK
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007-7058
STATEMENT OF ADDITIONAL INFORMATION
(1996 Special Meeting of
Shareholders of the Government Fund)
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Combined Proxy Statement/Prospectus
dated _____ __, 1996 for the Special Meeting of Shareholders of the Government
Fund ("Combined Proxy Statement/Prospectus"), an investment portfolio offered
by The Woodward Funds (the "Trust"), to be held on June 25, 1996. Copies of
the Combined Proxy Statement/Prospectus may be obtained at no charge by
writing to the Trust, c/o NBD, P.O. Box 7058, Troy, Michigan 48007, or by
calling Woodward at 1-800-688-3350.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about Class A and Class I shares of the Treasury
Fund and the Class A and Class I shares of the Government Fund is contained in
and incorporated by reference to the Funds' Statement of Additional
Information dated April 15, 1996, a copy of which is included herewith.
The date of this Statement of Additional Information is _____ __,
1996.
<PAGE>
TABLE OF CONTENTS
Page
----
General Information.................................................. B-1
-i-
<PAGE>
GENERAL INFORMATION
The shareholders of the Government Fund are being asked to approve or
disapprove a Plan of Reorganization dated as of ___________, 1996 by the Board
of Trustees by Trust and the transactions contemplated thereby. The Plan
contemplates the transfer of all of the assets and liabilities of the Trust's
Government Fund to the Trust's Treasury Fund in exchange for Class A and Class
I shares of the Treasury Fund, and a liquidating distribution of Class A and
Class I shares of the Treasury Fund to shareholders of the Government Fund, so
that each holder of Class A and Class I shares in the Government Fund at the
Effective Time of the Reorganization will receive a like number of full and
fractional Class A and Class I shares in the Treasury Fund.
A Special Meeting of Shareholders of the Government Fund to consider
the Plan of Reorganization and the related transactions will be held in the
Family Dining Room of the Detroit Club, 712 Cass Avenue, Detroit, Michigan,
on June 25, 1996 at 10:30 a.m. (Eastern Time). For further information
about the transaction, see the Combined Proxy Statement/Prospectus.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Trust, but do not prohibit such a bank holding company or its
affiliates or banks generally from acting as investment adviser, transfer
agent, or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of customers. NBD and financial
intermediaries which agree to provide shareholder support services that are
banks or bank affiliates are subject to such banking laws and regulations.
Should legislative, judicial, or administrative action prohibit or restrict
the activities of such companies in connection with their services to the
Trust, the Trust might be required to alter materially or discontinue its
arrangement with such companies and change its method of operation. It is
anticipated, however, that any resulting change in the Trust's method of
operation would not affect the Funds' net asset value per share or result in
financial loss to any shareholder.
B-1
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
These pro forma financial statements are presented in accordance with the
rules prescribed by the Securities and Exchange Commission (SEC) to reflect
for the benefit of the shareholders of the Woodward and Prairie Funds the
effect of the merger of these Funds had the merger taken place effective for
the year presented in the accompanying pro forma statements.
In accordance with SEC rules, Woodward and Prairie must present a pro forma
balance sheet as of December 31, 1995, and a pro forma statement of income for
the year ended December 31, 1995. The amounts presented for the
Woodward and Prairie Funds reflect the amounts shown on both Woodward's and
Prairie's financial reports filed with the SEC for the year reflected.
The pro forma adjustments are explained in more detail in the footnotes to the
pro forma statements. Under SEC regulations, pro forma adjustments may only be
reflected for the effects which are directly related to the merger, expected
to have a continuing impact and are factually supportable. As such, pro forma
adjustments have been reflected only for those expense items of the funds
which are subject to contractual terms. Increased interest income or other
expense efficiencies resulting from the merger have not been reflected as such
adjustments are not permitted under the current SEC regulations. The pro forma
statements may not be indicative of the results that would have occurred if
the merger had taken place during the year presented, nor may they be
reflective of the results that may be obtained in the future.
These pro forma financial statements only reflect the scenario whereby all
three portfolios will reorganize (combine) since this proposed reorganization
is structured such that all three portfolios must combine or none are to
reorganize.
PFS-1
<PAGE>
<TABLE>
<CAPTION>
Prairie/Woodward Funds
Treasury Money Market Fund
Pro Forma Combining Statement of Assets and Liabilites
December 31, 1995
(Unaudited)
Woodward Prairie Pro Forma
Treasury Woodward U.S. Government Combined
Money Market Government Money Market Adjustments (Note 1)
------------ ------------ ---------------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At Amortized Cost $921,643,450 $469,643,055 $57,441,060 $ -- $ 1,448,727,565
============ ============ =========== ================ ================
At Value $921,643,450 $469,643,055 $57,441,060 $ -- $ 1,448,727,565
Cash 104 320 -- (424)(c) --
Receivable from adviser -- -- -- 57,957 (d) 57,957
Interest receivable 6,544,562 5,112,013 3,973 -- 11,660,548
Deferred organization expenses 6,063 -- 57,957 (57,957)(d) 6,063
Prepaids and other assets 295,486 41,286 60,156 -- 396,928
------------ ----------- ----------- ---------------- ----------------
TOTAL ASSETS 928,489,665 474,796,674 57,563,146 (424) 1,460,849,061
------------ ----------- ----------- ---------------- ----------------
LIABILITIES:
Accrued investment advisory fee 340,328 195,644 13,690 -- 549,662
Accrued distribution fees 5,377 3,417 -- -- 8,794
Accrued custodial fees 869 685 -- -- 1,554
Administration fees payable -- -- 19,610 -- 19,610
Bank overdraft -- -- 111,239 (424)(c) 110,815
Dividends payable 413,557 210,856 20,092 -- 644,505
Other accrued expenses and payables 34,032 9,217 134,455 -- 177,704
----------- ------------ ----------- ----------------- ----------------
TOTAL LIABILITIES 794,163 419,819 299,086 (424) 1,512,644
------------ ------------ ----------- ----------------- ----------------
NET ASSETS $927,695,502 $474,376,855 $57,264,060 $ -- $1,459,336,417
============ ============ =========== ================= ================
Net assets consist of:
Capital shares, at par $ 92,769,550 $ 47,437,686 $ 57,280 $ 5,670,724 (a) $ 145,935,240
Additional paid-in capital 834,925,952 426,939,169 57,222,765 (5,670,724)(a) 1,313,417,162
Accumulated undistributed
net realized (losses) -- -- (15,985) -- (15,985)
----------- ------------ ----------- ----------------- ----------------
TOTAL NET ASSETS $927,695,502 $474,376,855 $57,264,060 $ -- $ 1,459,336,417
============ ============ =========== ================ ================
Class A shares:
Net assets $ -- $ -- $57,264,060 $ 85,582,477 (b) $ 142,846,537
Shares outstanding -- -- 57,280,045 85,582,477 (b) 142,862,522
Net asset value per class A share $ -- $ -- $ 1.00 $ 1.00 $ 1.00
Class I shares:
Net assets $ -- $ -- $ -- $ 1,316,489,880 (b) $ 1,316,489,880
Shares outstanding -- -- -- 1,316,489,880 (b) 1,316,489,880
Net asset value per class I share $ -- $ -- $ -- $ 1.00 $ 1.00
Single class shares:
Net assets $927,695,502 $474,376,855 $ -- $ (1,402,072,357)(b) $ --
Shares outstanding 927,695,502 474,376,855 -- (1,402,072,357)(b) --
Net asset value per single class share $ 1.00 $ 1.00 $ -- $ 1.00 $ --
<FN>
(a) Adjustment to reflect the issuance of Woodward Treasury Money Market
shares in exchange for shares of the Woodward Government and Prairie
U.S. Government Money Market Funds in connection with the proposed
reorganization.
(b) Adjustment reclassifies Woodward Government and Woodward Treasury
Money Market shares to reflect the multi-class environment of the
proposed reorganized entity.
(c) Adjustment to net cash of the Woodward Treasury Money Market and
Woodward Government Funds with overdrafts of the Prairie U.S. Government
Money Market Fund.
(d) Remaining unamortized organizational costs of the Prairie U.S. Government
Money Market Fund will be assumed by the investment advisor prior to
merger date.
See Notes to Pro Forma Financial Statements.
</TABLE>
PFS-2
<PAGE>
<TABLE>
<CAPTION>
Prairie/Woodward Funds
Treasury Money Market Fund
Pro Forma Combining Statement of Operations
For the Year Ended December 31, 1995
(Unaudited)
Woodward Prairie Pro Forma
Treasury Woodward U.S. Government Combined
Money Market Government Money Market Adjustments (Note 1)
------------ ---------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $42,755,302 $26,262,034 $ 3,925,073 $ -- $72,942,409
----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME 42,755,302 26,262,034 3,925,073 -- 72,942,409
----------- ----------- ----------- ----------- -----------
EXPENSES:
Advisory fees 3,248,535 1,987,590 297,377 $(1,838,383) (a) 3,695,119
Distribution fees 53,755 34,919 -- (88,674) (b) --
Administration fees -- -- 94,631 1,752,929 (a) 1,847,560
Shareholder servicing fees 298,599 60,644 170,762 (196,642) (a) 333,363
Custodian fees and expenses 12,919 8,370 47,037 -- 68,326
Professional fees 48,970 48,970 22,236 (45,176) (c) 75,000
Amortization of organization expenses 8,021 -- 8,303 (8,303) (d) 8,021
Transfer agent fees and expenses 11,445 24,255 37,804 73,504
Marketing expenses 41,925 36,670 -- (78,595) (b) --
Registration, filing fees and other expenses 117,097 58,072 53,977 229,146
----------- ----------- ----------- ---------- -----------
TOTAL EXPENSES 3,841,266 2,259,490 732,127 (502,844) 6,330,039
Expense reimbursements -- -- (198,986) 198,986 (e) --
----------- ----------- ----------- ---------- -----------
NET EXPENSES 3,841,266 2,259,490 533,141 (303,858) 6,330,039
----------- ----------- ----------- ---------- -----------
NET OPERATING INCOME 38,914,036 24,002,544 3,391,932 (303,858) 66,612,370
----------- ----------- ----------- ---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS:
Net realized gains (losses) on investments -- -- 32,485 -- 32,485
Net change in unrealized appreciation on
investments -- -- -- -- --
----------- ----------- ----------- ---------- -----------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS -- -- 32,485 -- 32,485
----------- ----------- ----------- ---------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $38,914,036 $24,002,544 $ 3,424,417 $ 303,858 $66,644,855
=========== =========== =========== ========== ===========
<FN>
(a) Adjustment to reflect the proposed contractual fee structure of Woodward
Treasury Money Market Fund after the reorganization.
(b) Adjustment eliminates expense as these costs will be included in the
administration expense of the Woodward Treasury Money Market Fund after
reorganization.
(c) Reduction reflects expected savings when the three funds become one.
(d) Remaining unamortized organizational costs of the Prairie U.S. Government
Money Market Fund will be assumed by the investment advisor prior to
merger date.
(e) Adjustment to reduce reimbursements from the advisor to reflect the
new fee structure of the Woodward Treasury Money Market Fund after
reorganization.
See Notes to Pro Forma Financial Statements.
</TABLE>
PFS-3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PRAIRIE/WOODWARD FUNDS
Pro Forma Combining
Treasury Money Market Fund
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
[Unaudited]
- ------------------------------------------------------------------------------
Pro Forma
Woodward Woodward Prairie Combined
Treasury MM Gov't US Gov't MM Face Amount
Face Amount Face Amount Face Amount (Note 1) Description
- ----------- ----------- ------------ ----------- -----------
<C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT OBLIGATIONS- 32.1%
U.S. Treasury Bills
-- -- 10,000,000 10,000,000 U.S. Treasury Bill
-- -- 5,000,000 5,000,000 U.S. Treasury Bill
-- -- 10,000,000 10,000,000 U.S. Treasury Bill
-- -- 7,500,000 7,500,000 U.S. Treasury Bill
-- -- 7,500,000 7,500,000 U.S. Treasury Bill
3,000,000 -- -- 3,000,000 U.S. Treasury Bill
-- -- 7,500,000 7,500,000 U.S. Treasury Bill
U.S. Treasury Notes
8,000,000 -- -- 8,000,000 U.S.Treasury Note
5,000,000 -- -- 5,000,000 U.S.Treasury Note
14,000,000 5,000,000 -- 19,000,000 U.S.Treasury Note
10,000,000 -- -- 10,000,000 U.S.Treasury Note
20,000,000 -- -- 20,000,000 U.S.Treasury Note
10,000,000 -- -- 10,000,000 U.S.Treasury Note
7,000,000 -- -- 7,000,000 U.S.Treasury Note
-- 15,000,000 -- 15,000,000 U.S.Treasury Note
6,000,000 -- -- 6,000,000 U.S.Treasury Note
15,000,000 -- -- 15,000,000 U.S.Treasury Note
35,000,000 -- -- 35,000,000 U.S.Treasury Note
2,000,000 -- -- 2,000,000 U.S.Treasury Note
4,000,000 -- -- 4,000,000 U.S.Treasury Note
15,000,000 -- -- 15,000,000 U.S.Treasury Note
5,000,000 -- -- 5,000,000 Principal Strip from US Treasury Bond
Agency Obligations
-- 10,000,000 -- 10,000,000 Federal Farm Credit Bank
-- 10,000,000 -- 10,000,000 Federal Farm Credit Bank
-- 4,000,000 -- 4,000,000 Federal Farm Credit Bank
-- 25,000,000 -- 25,000,000 Federal Farm Credit Bank
-- 10,000,000 -- 10,000,000 Federal Farm Credit Bank
-- 10,000,000 -- 10,000,000 Federal Home Loan Bank
-- 19,000,000 -- 19,000,000 Federal Home Loan Bank
-- 24,000,000 -- 24,000,000 Federal Home Loan Bank
-- 2,500,000 -- 2,500,000 Federal Home Loan Bank
-- 5,000,000 -- 5,000,000 Federal Home Loan Bank
-- 2,000,000 -- 2,000,000 Federal Home Loan Bank
-- 5,000,000 -- 5,000,000 Federal Home Loan Bank
-- 6,000,000 -- 6,000,000 Federal Home Loan Bank
-- 15,000,000 -- 15,000,000 Federal Home Loan Mortgage Corp.
-- 8,400,000 -- 8,400,000 Federal National Mortgage Association
-- 5,000,000 -- 5,000,000 FNMA Medium Term Note
-- 18,000,000 -- 18,000,000 FNMA Medium Term Note
-- 25,000,000 -- 25,000,000 FNMA Medium Term Note -- A/R
-- 11,700,000 -- 11,700,000 Studen Loan Mortgage Association -- A/R
-- 10,000,000 -- 10,000,000 Studen Loan Mortgage Association -- A/R
-- 12,500,000 -- 12,500,000 Studen Loan Mortgage Association -- A/R
- ----------- ----------- ---------- -----------
159,000,000 258,100,000 47,500,000 464,600,000 TOTAL U.S. GOVERNMENT AND GOVERNMENT OBLIGATIONS
=========== =========== ========== ===========
PFS-4
<PAGE>
TEMPORARY CASH INVESTMENTS-- 67.9%
Revolving Repurchase Agreements
-- -- 10,200,000 10,200,000 NATIONAL WESTMINSTER
Dated 12/29/95, with a maturity value of $10,206.403
AUBREY LANGSTON, Revolving Repurchase Agreement,
(secured by various U.S. Treasury obligations with maturities
ranging from 8/31/97 through 11/15/05 at various interest
rates ranging from 4.75% to 13.75%, all held at Chemical
43,000,000 -- -- 43,000,000 Bank)
BEAR STEARNS & Co., INC., Revolving Repurchase Agreement,
(secured by various U.S. Treasury obligations with maturities
ranging from 5/15/96 through 8/15/23 at various interest
rates ranging from 0.00% to 8.875% all held at the Custodial
215,000,000 -- -- 215,000,000 Trust Co.)
DAIWA SECURITIES AMERICA, INC., Revolving Repurchase Agreement,
(secured by various U.S. Treasury obligations with maturities
ranging from 4/30/96 through 11/15/01 at various interest rates
ranging from 0.00% to 15.75%, all held at
43,000,000 -- -- 43,000,000 Bank of New York)
FIRST BOSTON , INC., Revolving Repurchase Agreement,
(secured by various U.S. Treasury Notes with maturities ranging
from 11/15/96 through 2/15/03 at various interest rates ranging
36,000,000 -- -- 36,000,000 from 4.375% to 6.25%, all held at Chemical Bank)
LEHMAN BROTHERS, INC., Revolving Repurchase Agreement,
(secured by U.S. Treasury Note, 5.875%, 7/31/97, held at Chemical
43,000,000 -- -- 43,000,000 Bank)
MORGAN STANLEY & CO. INC., Revolving Repurchase Agreement,
(secured by U.S. Treasury Note, 6.125%, 5/31/97, held at the Bank
43,000,000 -- -- 43,000,000 of New York)
NATIONSBANK CAPITAL MARKETS, INC., Revolving Repurchase Agreement,
(secured by various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various interest rates
ranging from 0.00% to 12.375%, all held at
216,533,000 73,569,000 -- 290,102,000 Chemical Bank)
NIKKO SECURITIES CO. INTERNATIONAL, INC., Revolving Repurchase
Agreement, (secured by various U.S. Treasury obligations with
maturities ranging from 7/31/96 through 8/15/00 at various
interest rates ranging from 0.00% to 8.75%, all
40,000,000 -- -- 40,000,000 held at the Bank of New York)
NOMURA SECURITIES INTERNATIONAL, INC., Revolving Repurchase
Agreement, (secured by various U.S. Treasury obligations with
maturities ranging from 1/18/96 through 9/10/02 at various
interest rates ranging from 0.00% to 8.26%, all
-- 23,000,000 -- 23,000,000 held at the Bank of New York)
NOMURA SECURITIES INTERNATIONAL, INC., Revolving Repurchase
Agreement, (secured by various U.S. Treasury obligations with
maturities ranging from 8/31/97 through 5/15/01 at various
interest rates ranging from 0.00% to 6.00%, all
40,000,000 -- -- 40,000,000 held at the Bank of New York)
SANWA BGK SECURITIES CO., L.P., Revolving Repurchase Agreement,
(secured by U.S. Treasury Note, 5.50%, 11/15/98, held at the Bank
43,000,000 -- -- 43,000,000 of New York)
YAMAICHI, Revolving Repurchase Agreement,(secured by various
U.S. Treasury obligations with maturities ranging from 12/31/95
through 8/15/05 at various interest rates ranging from 0.00% to
-- 115,000,000 -- 115,000,000 11.625%, all held at Chemical Bank)
- ----------- ----------- ---------- -------------
762,533,000 211,569,000 10,200,000 984,302,000 TOTAL TEMPORARY CASH INVESTMENTS
=========== =========== ========== =============
921,533,000 469,669,000 57,700,000 1,448,902,000 TOTAL INVESTMENTS
=========== =========== ========== =============
PFS-5
<PAGE>
<CAPTION>
Pro Forma
Woodward Woodward Combined
Treasury MM Gov't MM Prairie Amortized
Maturity Amortized Amortized Amortized Cost
Description Rate Date Cost Cost Cost (Note 1)
----------- ---- -------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND GOVERNMENT
OBLIGATIONS-- 32.1%
U.S. Treasury Bills
U.S. Treasury Bill 5.350% * 1/11/96 -- -- 9,985,194 9,985,194
U.S. Treasury Bill 5.320% * 1/18/96 -- -- 4,987,451 4,987,451
U.S. Treasury Bill 5.340% * 1/25/96 -- -- 9,964,400 9,964,400
U.S. Treasury Bill 5.320% * 2/15/96 -- -- 7,450,125 7,450,125
U.S. Treasury Bill 5.300% * 3/7/96 -- -- 7,427,194 7,427,194
U.S. Treasury Bill 6.260% 3/7/96 2,965,955 -- -- 2,965,955
U.S. Treasury Bill 4.820% * 3/14/96 -- -- 7,426,696 7,426,696
U.S. Treasury Notes
U.S.Treasury Note 4.000% 1/31/96 7,988,924 -- -- 7,988,924
U.S.Treasury Note 4.375% 11/15/96 4,943,974 -- -- 4,943,974
U.S.Treasury Note 4.375% 8/15/96 13,873,585 4,957,174 -- 18,830,759
U.S.Treasury Note 4.625% 2/15/96 9,976,935 -- -- 9,976,935
U.S.Treasury Note 5.500% 4/30/96 19,970,088 -- -- 19,970,088
U.S.Treasury Note 5.875% 5/31/96 10,001,983 -- -- 10,001,983
U.S.Treasury Note 6.125% 7/31/96 7,013,918 -- -- 7,013,918
U.S.Treasury Note 7.000% 9/30/96 -- 15,150,150 -- 15,150,150
U.S.Treasury Note 7.250% 11/15/96 6,086,851 -- -- 6,086,851
U.S.Treasury Note 7.500% 2/29/96 15,016,012 -- -- 15,016,012
U.S.Treasury Note 7.875% 2/15/96 35,049,857 -- -- 35,049,857
U.S.Treasury Note 7.875% 7/15/96 2,021,778 -- -- 2,021,778
U.S.Treasury Note 7.875% 7/31/96 4,046,593 -- -- 4,046,593
U.S.Treasury Note 8.000% 10/15/96 15,256,312 -- -- 15,256,312
Principal Strip from
US Treasury Bond 0.000% 5/15/96 4,897,685 -- -- 4,897,685
Agency Obligations
Federal Farm Credit Bank 5.600% 11/1/96 -- 10,002,747 -- 10,002,747
Federal Farm Credit Bank 6.390% 4/17/96 -- 10,022,719 -- 10,022,719
Federal Farm Credit Bank 6.610% 4/12/96 -- 4,006,934 -- 4,006,934
Federal Farm Credit Bank 5.780% 2/9/96 -- 24,998,664 -- 24,998,664
Federal Farm Credit Bank 5.590% 6/7/96 -- 9,998,338 -- 9,998,338
Federal Home Loan Bank 5.770% 11/20/96 -- 9,998,229 -- 9,998,230
Federal Home Loan Bank 5.980% 8/14/96 -- 19,000,000 -- 19,000,000
Federal Home Loan Bank 6.850% 2/28/96 -- 24,012,415 -- 24,012,415
Federal Home Loan Bank 6.300% 3/1/96 -- 2,474,042 -- 2,474,042
Federal Home Loan Bank 5.900% 7/25/96 -- 5,000,000 -- 5,000,000
Federal Home Loan Bank 6.000% 8/16/96 -- 2,000,411 -- 2,000,411
Federal Home Loan Bank 4.840% 8/26/96 -- 4,976,737 -- 4,976,737
Federal Home Loan Bank 5.050% 6/7/96 -- 5,983,328 -- 5,983,328
Federal Home Loan
Mortgage Corp. 6.790% 2/20/96 -- 14,999,678 -- 14,999,678
Federal National Mortgage
Association 5.580% 2/21/96 -- 8,334,074 -- 8,334,074
FNMA Medium Term Note 5.710% 6/10/96 -- 4,998,939 -- 4,998,939
FNMA Medium Term Note 5.500% 6/12/96 -- 17,969,843 -- 17,969,843
FNMA Medium Term
Note -- A/R 5.500% 1/26/96 -- 24,998,973 -- 24,998,973
Studen Loan Mortgage
Association -- A/R 6.060% 7/1/96 -- 11,700,000 -- 11,700,000
Studen Loan Mortgage
Association -- A/R 6.050% 10/4/96 -- 10,000,000 -- 10,000,000
Studen Loan Mortgage
Association -- A/R 6.130% 6/30/96 -- 12,490,660 -- 12,490,661
TOTAL U.S. GOVERNMENT AND ----------- ----------- ---------- -----------
GOVERNMENT OBLIGATIONS 159,110,450 258,074,055 47,241,060 464,425,565
=========== =========== ========== ===========
PFS-6
<PAGE>
TEMPORARY CASH INVESTMENTS-- 67.9%
Revolving Repurchase Agreements
NATIONAL WESTMINSTER 5.650% 1/2/96 -- -- 10,200,000 10,200,000
Dated 12/29/95, with a maturity
value of $10,206.403
AUBREY LANGSTON, Revolving
Repurchase Agreement, (secured
by various U.S. Treasury
obligations with maturities
ranging from 8/31/97 through
11/15/05 at various interest
rates ranging from 4.75% to
13.75%, all held at Chemical
Bank) 5.920% 1/2/96 43,000,000 -- -- 43,000,000
BEAR STEARNS & Co., INC.,
Revolving Repurchase Agreement,
(secured by various U.S. Treasury
obligations with maturities
ranging from 5/15/96 through
8/15/23 at various interest
rates ranging from 0.00% to
8.875% all held at the Custodial
Trust Co.) 5.820% 1/2/96 215,000,000 -- -- 215,000,000
DAIWA SECURITIES AMERICA, INC.,
Revolving Repurchase Agreement,
(secured by various U.S. Treasury
obligations with maturities
ranging from 4/30/96 through
11/15/01 at various interest
rates ranging from 0.00% to
15.75%, all held at
Bank of New York) 5.900% 1/2/96 43,000,000 -- -- 43,000,000
FIRST BOSTON , INC., Revolving
Repurchase Agreement, (secured
by various U.S. Treasury Notes
with maturities ranging from
11/15/96 through 2/15/03 at
various interest rates ranging
from 4.375% to 6.25%, all held
at Chemical Bank) 5.850% 1/2/96 36,000,000 -- -- 36,000,000
LEHMAN BROTHERS, INC.,
Revolving Repurchase Agreement,
(secured by U.S. Treasury Note,
5.875%, 7/31/97, held at
Chemical Bank) 5.920% 1/2/96 43,000,000 -- -- 43,000,000
MORGAN STANLEY & CO. INC.,
Revolving Repurchase Agreement,
(secured by U.S. Treasury Note,
6.125%, 5/31/97, held at the Bank
of New York) 5.870% 1/2/96 43,000,000 -- -- 43,000,000
NATIONSBANK CAPITAL MARKETS,
INC., Revolving Repurchase
Agreement, (secured by various
U.S. Treasury obligations with
maturities ranging from 2/15/96
through 11/15/05 at various
interest rates ranging from
0.00% to 12.375%, all held at
Chemical Bank) 6.000% 1/2/96 216,533,000 73,569,000 -- 290,102,000
NIKKO SECURITIES CO.
INTERNATIONAL, INC.,
Revolving Repurchase Agreement,
(secured by various U.S.
Treasury obligations with
maturities ranging from
7/31/96 through 8/15/00 at
various interest rates
ranging from 0.00% to 8.75%, all
held at the Bank of New York) 5.900% 1/2/96 40,000,000 -- -- 40,000,000
NOMURA SECURITIES INTERNATIONAL,
INC., Revolving Repurchase
Agreement, (secured by various
U.S. Treasury obligations with
maturities ranging from 1/18/96
through 9/10/02 at various
interest rates ranging from
0.00% to 8.26%, all
held at the Bank of New York) 6.000% 1/2/96 -- 23,000,000 -- 23,000,000
PFS-7
<PAGE>
NOMURA SECURITIES INTERNATIONAL,
INC., Revolving Repurchase
Agreement, (secured by various
U.S. Treasury obligations with
maturities ranging from 8/31/97
through 5/15/01 at various
interest rates ranging from
0.00% to 6.00%, all
held at the Bank of New York) 5.960% 1/2/96 40,000,000 -- -- 40,000,000
SANWA BGK SECURITIES CO., L.P.,
Revolving Repurchase Agreement,
(secured by U.S. Treasury Note,
5.50%, 11/15/98, held at the
Bank of New York) 5.900% 1/2/96 43,000,000 -- -- 43,000,000
YAMAICHI, Revolving Repurchase
Agreement,(secured by various
U.S. Treasury obligations with
maturities ranging from 12/31/95
through 8/15/05 at various
interest rates ranging from
0.00% to 11.625%, all held
at Chemical Bank) 6.000% 1/2/96 -- 115,000,000 -- 115,000,000
----------- ----------- ---------- -------------
TOTAL TEMPORARY CASH INVESTMENTS -- 762,533,000 211,569,000 10,200,000 984,302,000
=========== =========== ========== =============
TOTAL INVESTMENTS -- 921,643,450 469,643,055 57,441,060 1,448,727,565
=========== =========== ========== =============
<FN>
* Yield at purchase.
A/R Adjustable Rate
</TABLE>
PFS-8
<PAGE>
PRAIRIE/WOODWARD FUNDS
Notes to Pro Forma Financial Statements
(Unaudited)
(1) Basis of Combination-
The unaudited Pro Forma Combining Schedule of Investments, Pro Forma
Combining Statements of Assets and Liabilities and Pro Forma Combining
Statements of Operations reflect the accounts of the Woodward Treasury
Money Market Fund, Woodward Government Fund and Prairie U.S.
Government Money Market Fund at and for the year ended December 31,
1995. These statements have been derived from the funds' books and
records utilized in calculating daily net asset value at
December 31, 1995.
The pro forma statements give effect to the proposed transfer of the
assets and stated liabilities of the Woodward Government Fund and
Prairie U.S. Government Money Market Fund, in exchange for shares of
the Woodward Treasury Money Market Fund.
In accordance with generally accepted accounting principles, the
historical cost of investment securities will be carried forward to
the Woodward Treasury Money Market Fund and the results of operations
for pre-combination periods for the Woodward Treasury Money Market
Fund will not be restated. The pro forma statements do not reflect the
expenses of any fund in carrying out their obligation under the
Agreement and Plan of Reorganization. Under the terms of the Plan of
Reorganization, the combination of the funds will be taxed as a tax
free business combination and accordingly will be accounted for by a
method of accounting for tax free mergers of investment companies
(sometimes referred to as the pooling without restatement method).
The Pro Forma Combining Schedule of Investments, Statement of Assets
and Liabilities and Statement of Operations should be read in
conjunction with the historical financial statements of the funds
included or incorporated by reference in the Statement of Additional
Information.
(2) Portfolio Valuation-
The Woodward Treasury Money Market Fund, Woodward Government Fund
and Prairie U.S. Government Money Market Fund are stated at amortized
cost which approximates market.
(3) Capital Shares-
The pro forma net asset value per share assumes the issuance of
additional shares of the Woodward Treasury Money Market Fund which
would have been issued at December 31, 1995, in connection with
the proposed reorganization. Because the fund attempts to maintain
a constant net asset value of $1.00 per share, the number of additional
shares assumed to be issued is equal to the number of Woodward
Government and Prairie U.S. Government Money Market shares outstanding.
The pro forma number of shares outstanding of 1,459,352,402 consists
of 531,656,900 additional shares assumed issued in the reorganization
plus 927,695,502 shares of the Woodward Treasury Money Market Fund
outstanding at December 31, 1995.
PFS-9
<PAGE>
(4) Investments-
At December 31, 1995, the Prairie U.S. Government Money Market Fund
had a net capital loss carryforward of approximately $16,000 available
to offset future capital gains. To the extent that this carryforward
loss is used to offset capital gains, it is probable that any gains so
offset will not be distributed.
PFS-10
<PAGE>
FORM N-14
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification of Registrant's principal underwriter against
certain losses is provided for in Section 11 of the Distribution Agreement
incorporated herein by reference as Exhibit (7)(b). Indemnification of
Registrant's Custodian is provided for in Article XII of the Amended and
Restated Custodian Agreement incorporated herein by reference as Exhibit
(9)(a). Indemnification of Registrant's Transfer Agent and Dividend Disbursing
Agent is provided for in Article III of the Amended and Restated Transfer
Agency and Dividend Disbursing Agreement incorporated herein by reference as
Exhibit (13)(c). Registrant has obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain types of errors and
omissions. In addition, Section 5.4 of the Registrant's Amended and Restated
Declaration of Trust incorporated herein by reference as Exhibit (1)(b),
provides as follows:
5.4 Mandatory Indemnification.
(a) Subject only to the provisions hereof, every person
who is or has been a Trustee, officer, employee or agent of the Trust
and every person who serves at the Trust's request as director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Trust
to the fullest extent permitted by law against all liabilities and
against all expenses reasonably incurred or paid by him in connection
with any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind in which he becomes
involved as a party or otherwise or is threatened by virtue of his
being or having been a Trustee, officer, employee or agent of the
Trust or of another corporation, partnership, joint venture, trust or
other enterprise at the request of the Trust and against amounts paid
or incurred by him in the compromise or settlement thereof.
(b) The words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative, legislative, investigative or other,
including appeals), actual or threatened, and the words "liabilities"
and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
<PAGE>
(c) No indemnification shall be provided here-
under to a Trustee or officer:
(i) against any liability to the Trust or the
Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling
conduct");
(ii) with respect to any matter as to which he
shall, by the court or other body by or before which the
proceeding was brought or engaged, have been finally
adjudicated to be liable by reason of disabling conduct;
(iii) in the absence of a final adjudication on
the merits that such Trustee or officer did not engage
in disabling conduct, unless a reasonable determination,
based upon a review of the facts that the person to be
indemnified is not liable by reason of such conduct, is
made:
(A) by vote of a majority of a quorum
of the Trustees who are neither Interested
Persons nor parties to the proceedings; or
(B) by independent legal counsel, in a
written opinion.
(d) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee,
officer, employee or agent may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee, officer,
employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person; provided, however, that
no person may satisfy any right of indemnity or reimbursement granted
herein except out of the property of the Trust, and no other person
shall be personally liable to provide indemnity or reimbursement
hereunder (except an insurer or surety or person otherwise bound by
contract).
(e) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of
the character described in paragraph (a) of this Section 5.4 may be
paid by the Trust prior to final disposition thereof upon receipt of a
written undertaking by or on behalf of the Trustee, officer, employee
or agent to reimburse the Trust if it is ultimately determined under
this Section 5.4 that he is not entitled to indemnification. Such
undertaking shall be secured by a surety bond or other
-2-
<PAGE>
suitable insurance or such security as the Trustees shall require
unless a majority of a quorum of the Trustees who are neither
Interested Persons nor parties to the proceeding, or independent legal
counsel in a written opinion, shall have determined, based on readily
available facts, that there is reason to believe that the indemnitee
ultimately will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Section 5.1 of the Registrant's Declaration of Trust,
incorporated herein by reference as Exhibit (1), also provided
indemnification of shareholders of the Registrant.
Section 5.1 states as follows:
5.1 Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Trust
shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment
whatsoever, other than such as the Shareholder may at any time agree
to pay by way of subscription to any Shares or otherwise.
No Shareholder or former Shareholder of the Trust shall
be liable solely by reason of his being or having been a Shareholder
for any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind, against, or with respect
to, the Trust arising out of any action taken or omitted for or on
behalf of the Trust, and the Trust shall be solely liable therefor and
resort shall be had solely to the Trust Property for the payment or
performance thereof.
-3-
<PAGE>
Each Shareholder or former Shareholder of the Trust (or
their heirs, executors, administrators or other legal representatives
or, in case of a corporate entity, its corporate or general successor)
shall be entitled to indemnity and reimbursement out of the Trust
Property to the full extent of such liability and the costs of any
litigation or other proceedings in which such liability shall have
been determined, including, without limitation, the fees and
disbursements of counsel if, contrary to the provisions hereof, such
Shareholder or former Shareholder of the Trust shall be held to
personal liability.
Item 16. Exhibits
(1) (a) Amended and Restated Declaration of Trust dated as
of May 1, 1992 is incorporated herein by reference to
exhibit (1)(b) of Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on September 8, 1992.
(2) Bylaws of Registrant is incorporated herein by
reference to exhibit (2) of Pre-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on July 24, 1987.
(3) None.
(4) Plan of Reorganization filed herewith as Appendix
A to the Combined Proxy Statement/Prospectus.
(5) (a) None.
(6) (a) Form of Co-Advisory Agreement between Registrant,
NBD Bank and First Chicago Investment Management Company
is incorporated herein by reference to exhibit 5(a) of
Post-Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 5, 1996.
(b) Advisory Agreement between Registrant and NBD dated
November 28, 1995 is incorporated herein by reference to
exhibit 5(b) of Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A filed
with the Commission
on April 5, 1996.
(c) Form of Sub-Advisory Agreement among NBD, FCIMCO and ANB
Investment Management and Trust Company ("ANB-IMC") is
incorporated herein by reference to
-4-
<PAGE>
exhibit 5(c) of Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 15, 1996.
(7) (a) Form of Distribution Agreement among Registrant
and BISYS Fund Services Limited Partnership, d/b/a
BISYS Fund Services ("BISYS") is incorporated
herein by reference to exhibit 6(a) of Post-
Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 5, 1996.
(b) Distribution Agreement dated March 15, 1994 among
Registrant, FoM and Essex relating to Series A, B, C, M,
N, O, P, Q, R, S, T, U and V is incorporated herein by
reference to exhibit (6)(a) of Post-Effective Amendment
No. 25 to the Registrant's Registration Statement on
Form N-1A filed with the Commission on July 28, 1995.
(8) Deferred Compensation Plan is incorporated herein
by reference to exhibit 7 of Post-Effective
Amendment No. 30 to Registrant's Registration
Statement on Form N-1A filed with the commission
on April 15, 1996.
(9) (a) Amended and Restated Custodian Agreement dated
May 16, 1989 between Registrant and National Bank
of Detroit for Series A, B, C, D, E, F, G, H, I,
J, K and L of the Registrant is incorporated
herein by reference to exhibit (8)(b) of Post-
Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 30, 1990.
(b) Addendum No. 1 dated January 23, 1991 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Michigan Tax-Exempt Money Market Fund (Series M)
is incorporated herein by reference to exhibit
(8)(c) of Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on February 28, 1991.
(c) Addendum No. 2 dated April 28, 1992 to the Amended
and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward Equity
Index Fund (Series N) is incorporated herein by
reference to exhibit (8)(d) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
-5-
<PAGE>
(d) Addendum No. 3 dated January 1, 1993 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Treasury Money Market Fund (Series O) is
incorporated herein by reference to exhibit (8)(e)
of Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 29, 1993.
(e) Addendum No. 4 dated February 1, 1993 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Municipal Bond Fund (Series P) and the Woodward
Michigan Municipal Bond Fund (Series Q) is
incorporated herein by reference to exhibit (8)(f)
of Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 29, 1993.
(f) Addendum No. 5 dated January 1, 1994 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Balanced Fund (Series R) is incorporated herein by
reference to exhibit (8)(g) of Post-Effective
Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on July 29, 1994.
(g) Addendum No. 6 dated July 1, 1994 to the Amended
and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Capital Growth and Short Bond Funds (Series S and
U) is incorporated herein by reference to exhibit
(8)(h) of Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on January 27, 1995.
(h) Addendum No. 7 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward International Equity Fund
(Series T) is incorporated herein by reference to
exhibit (8)(i) of Post-Effective Amendment No. 25
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on July 28, 1995.
(i) Form of Addendum No. 8 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward Cash Management Fund,
Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund is
incorporated herein by reference to exhibit 8(i)
of Post-Effective Amendment No. 28 to Registrant's
-6-
<PAGE>
Registration Statement on Form N-1A filed with the
Commission on April 5, 1996.
(j) Form of Addendum No. 9 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward U.S. Government Income
Fund (Series V) is incorporated herein by
reference to exhibit (8)(k) of Post-Effective
Amendment No. 17 to Registrant's Registration
Statement on Form N-1A filed with the Commission
on November 31, 1993.
(k) Global Custody Agreement dated November 21, 1994 between
Barclays Bank, PLC and NBD relating to Series A, B, C,
M, N, O, P, Q, R, S, T, U and V is incorporated herein
by reference to exhibit (8)(k) of Post-Effective
Amendment No. 25 to Registrant's Registration Statement
on Form N-1A filed with the Commission on July 28, 1995.
(10) (a) Revised Service and Distribution Plan relating to
Registrant's distribution expenses pursuant to
Rule 12b-1, effective April 20, 1994, is
incorporated herein by reference to exhibit
(15)(l) of Post-Effective Amendment No. 22 of the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(b) Distribution Plan for Class B Shares is incorporated
herein by reference to exhibit (15)(b) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(11) Opinion of Drinker Biddle & Reath that shares are
validly issued, fully paid and non-assessable.<F1>1
(12) Opinion of Drinker Biddle & Reath as to tax
matters and consequences (including consent of
such firm).
(13) (a) Form of Co-Administration Agreement among the
Registrant, NBD, FCIMCO and BISYS is incorporated herein
by reference to exhibit (9)(a) of Post-Effective
Amendment No. 28 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 5, 1996.
<F1>
- --------
1 Filed pursuant to Rule 24f-2 as part of Registrant's
Rule 24f-2 Notice.
-7-
<PAGE>
(b) Form of Transfer Agency Agreement between The
Woodward Funds and First Data Investor Services
Group, Inc.
(c) Amended and Restated Transfer Agency and Dividend
Disbursement Agreement dated May 16, 1989 between
Registrant and National Bank of Detroit for Series
A, B, C, D, E, F, G, H, I, J, K and L of the
Registrant is incorporated herein by reference to
exhibit (9)(b) of Post-Effective Amendment No. 3
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on April 30, 1990.
(d) Addendum No. 1 dated January 23, 1991 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Michigan Tax-Exempt Money
Market Fund (Series M) is incorporated herein by
reference to exhibit (9)(c) of Post-Effective
Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on February 28, 1991.
(e) Addendum No. 2 dated April 28, 1992 to the Amended
and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Equity Index Fund (Series
N) is incorporated herein by reference to exhibit
(9)(d) of Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on September 8, 1992.
(f) Addendum No. 3 dated January 1, 1993 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Treasury Money Market
Fund (Series O) is incorporated herein by
reference to exhibit (9)(e) of Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 29, 1993.
(g) Addendum No. 4 dated February 1, 1993 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Municipal Bond Fund
(Series P) and the Woodward Michigan Municipal
Bond Fund (Series Q) is incorporated herein by
reference to exhibit (9)(f) of Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 29, 1993.
-8-
<PAGE>
(h) Addendum No. 5 dated January 1, 1994 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Balanced Fund (Series R)
is incorporated herein by reference to exhibit
(9)(g) of Post-Effective Amendment No. 22 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(i) Addendum No. 6 dated July 1, 1994 to the Amended
and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Capital Growth,
International Equity and Short Bond Funds (Series
S, T and U) is incorporated herein by reference to
exhibit (9)(h) of Post-Effective Amendment No. 23
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on January 27,
1995.
(j) Form of Addendum No. 7 to the Amended and Restated
Transfer Agency and Dividend Disbursement
Agreement between Registrant and NBD relating to
the Woodward Cash Management, U.S. Government
Securities Cash Management and Treasury Prime Cash
Management Funds incorporated by reference to
exhibit 9(i) of Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A filed with
the Commission on April 5, 1996.
(k) Form of Addendum No. 8 to the Amended and Restated
Transfer Agency and Dividend Disbursement
Agreement between Registrant and NBD relating to
the Woodward Managed Assets Conservative Fund,
Managed Assets Growth Fund, Equity Income Fund,
Small-Cap Opportunity Fund, Major Markets Fund,
Income Fund, International Bond Fund and
Intermediate Municipal Bond Fund is incorporated
herein by reference to exhibit (9)(j) of Post-
Effective Amendment No. 29 of the Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 10, 1996.
(l) Form of Broker-Dealer Agreement between FoM and
Broker-Dealers is incorporated herein by reference to
exhibit (9)(c) of Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A filed
with the Commission on March 2, 1989.
(m) Bank Agreement between FoM and BHC Securities,
Inc. dated June 15, 1992 is incorporated herein by
-9-
<PAGE>
reference to exhibit (9)(h) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
(n) Bank Agreement between FoM and NBD Securities,
Inc. dated June 8, 1992 is incorporated herein by
reference to exhibit (9)(i) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
(o) Revised Shareholder Services Plan including form of
Service Agreement adopted by the Board of Trustees on
November 16, 1993 is incorporated herein by reference to
exhibit (9)(t) of Post-Effective Amendment No. 22 to
the Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(p) Form of Distribution and Services Plan, including Form
of Servicing Agreement is incorporated herein by
reference to exhibit 9(n) of Post-Effective Amendment
No. 28 to the Registrant's Registration Statement on
Form N-1A filed with the Commission
on April 5, 1996.
(q) Shareholder Services Plan including form of Service
Agreement with respect to Class A Shares is incorporated
herein by reference to exhibit (9)(p) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(r) Shareholder Administrative Services Plan including form
of Service Agreement is incorporated herein by reference
to exhibit (9)(q) of Post-Effective Amendment No. 30 of
the Registrant's Registration Statement on Form N-1A
filed with the Commission
on April 15, 1996.
(14) (a) Consent of Arthur Andersen LLP.
(b) Consent of Drinker Biddle & Reath.
(15) Not Applicable.
(16) Not Applicable.
(17) (a) Rule 18f-3 Plan is incorporated herein by
reference to exhibit (18)(a) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 15, 1996.
(b) Amended Rule 18f-3 Plan is incorporated herein by
reference to exhibit (18)(b) of Post-Effective
Amendment No. 30 of the Registrant's Registration
-10-
<PAGE>
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(c) Declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 of the Registrant.
(d) Form of Proxy.
(e) Prospectus dated April 15, 1996 for Class A Shares of
The Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-Exempt
Money Market Funds.
(f) Prospectus dated April 15, 1996 for Class I Shares of
The Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-Exempt
Money Market Funds.
(g) Statement of Additional Information dated April
15, 1996 for Class A and Class I Shares of The
Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-
Exempt Money Market Funds.
(h) Annual Report to Shareholders for The Woodward Money
Market, Government, Treasury Money Market, Tax-Exempt
Money Market and Michigan Tax-Exempt Money Market Funds
dated December 31, 1995.
Item 17.Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the
securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide
offering of them.
-11-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the Registrant, in the
City of Detroit, State of Michigan, on the 3rd day of May, 1996.
THE WOODWARD FUNDS
Registrant
/s/*Earl I. Heenan, Jr.
-----------------------
Earl I. Heenan, Jr.
Chairman of the Board and President
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/*Earl I. Heenan, Jr.
- -------------------------
Earl I. Heenan, Jr. Trustee May 3, 1996
/s/*Eugene C. Yehle
- -------------------------
Eugene C. Yehle Trustee May 3, 1996
/s/*Will M. Caldwell
- -------------------------
Will M. Caldwell Trustee May 3, 1996
/s/*Julius L. Pallone
- -------------------------
Julius L. Pallone Trustee May 3, 1996
/s/*Nicholas J. De Grazia
- -------------------------
Nicholas J. De Grazia Trustee May 3, 1996
/s/*Donald G. Sutherland
- -------------------------
Donald G. Sutherland Trustee May 3, 1996
/s/*Donald L. Tuttle
- -------------------------
Donald L. Tuttle Trustee May 3, 1996
/s/*John P. Gould
- -------------------------
John P. Gould Trustee May 3, 1996
/s/*Marilyn McCoy
- -------------------------
Marilyn McCoy Trustee May 3, 1996
*By: /s/W. Bruce McConnel
W. Bruce McConnel, III
Attorney-in-Fact
-12-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Eugene C. Yehle, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/Eugene C. Yehle
Date: March 7, 1996
-13-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Will M. Caldwell, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Will M. Caldwell
Date: February 29, 1996
-14-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Julius L. Pallone, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Julius L. Pallone
Date: February 28, 1996
-15-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Nicholas J. De Grazia, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Nicholas J. De Grazia
Date: February 20, 1996
-16-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Donald G. Sutherland, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Donald G. Sutherland
Date: February 28, 1996
-17-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Donald L. Tuttle, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Donald L. Tuttle
Date: February 28, 1996
-18-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
John P. Gould, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/John P. Gould
Date: February 28, 1996
-19-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Marilyn McCoy, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, her true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/Marilyn McCoy
Date: February 18, 1996
-20-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Earl I. Heenan, Jr., whose signature appears below, hereby
constitutes and appoints W. Bruce McConnel, III his true and lawful attorney
and agent, with power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments which said attorney and
agent may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
/s/Earl I. Heenan, Jr.
Date: March 4, 1996
-21-
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- ----------- ------- --------
(12) Opinion of Drinker Biddle & Reath as to tax
matters and consequences (including consent of
such firm).
(13) (b) Form of Transfer Agency Agreement between The
Woodward Funds and First Data Investor Services
Group, Inc.
(14) (a) Consent of Arthur Andersen LLP.
(b) Consent of Drinker Biddle & Reath.
(17) (c) Declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 of the Registrant.
(d) Form of Proxy.
(e) Prospectus dated April 15, 1996 for Class A Shares of
The Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-Exempt
Money Market Funds.
(f) Prospectus dated April 15, 1996 for Class I Shares of
The Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-Exempt
Money Market Funds.
(g) Statement of Additional Information dated April
15, 1996 for Class A and Class I Shares of The
Woodward Money Market, Government, Treasury Money
Market, Tax-Exempt Money Market and Michigan Tax-
Exempt Money Market Funds.
(h) Annual Report to Shareholders for The Woodward Money
Market, Government, Treasury Money Market, Tax-Exempt
Money Market and Michigan Tax-Exempt Money Market Funds
dated December 31, 1995.
Exhibit 12
May 6, 1996
The Woodward Funds
900 Tower Drive
Troy, Michigan 87007-7058
Re: Plan of Reorganization of The Woodward Funds
--------------------------------------------
Dear Sirs and Mesdames:
We have been asked to give our opinion, in accordance with the
above Plan of Reorganization (the "Plan"), as to certain Federal income tax
consequences of the transactions contemplated therein.
Background
The Woodward Funds ("Woodward") is a Massachusetts business
trust consisting of multiple investment portfolios, including Government Fund
(the "Acquiring Fund") and the Treasury Money Market Fund (the "Acquired
Fund"). Woodward is an open-end management investment company registered with
the Securities and Exchange Commission (the "SEC") under the Investment
Company Act of 1940, as amended (the "1940 Act").
At the Effective Time of the Reorganization (as defined in the
Plan), it is contemplated that the Acquired Fund will transfer all of its
assets and liabilities to the Acquiring Fund in exchange for shares of the
Acquiring Fund. Woodward will then distribute the shares of the Acquiring Fund
to the shareholders of the Acquired Fund in cancellation of all outstanding
shares of the Acquired Fund. All of the above steps constitute the
"Reorganization." After the Reorganization, the Acquiring Fund will continue
the investment operations of the Acquired Fund.
Assumptions
For purposes of this opinion, we have made certain assumptions.
Please advise us if you are aware of any facts inconsistent with any of these
assumptions:
First, the Acquired Fund and the Acquiring Fund both qualified
as "regulated investment companies" under Part I of
<PAGE>
The Woodward Funds
May 6, 1996
Page 2
Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue Code of 1986,
as amended (the "Code"), for their most recently ended fiscal years and will
continue to so qualify for their current fiscal year.
Second, the Acquired Fund will tender for acquisition by the
Acquiring Fund assets consisting of at least 90% of the fair market value of
the net assets of the Acquired Fund and at least 70% of the fair market value
of its gross assets immediately prior to the Reorganization. For purposes of
this assumption, all of the following shall be considered as assets of the
Acquired Fund held immediately prior to the Reorganization: (a) amounts used
by the Acquired Fund to pay its expenses in connection with the transactions
contemplated hereby and (b) all amounts used to make redemptions of or
distributions on the Acquired Fund's shares (except for redemptions in the
ordinary course of its business, as required by section 22(e) of the 1940 Act
pursuant to a demand for redemption by a shareholder of the Acquired Fund, and
distributions of net investment income and net capital gains, other than net
capital gains resulting from sales of assets for the purpose of satisfying
investment objectives of the Acquiring Fund, if any, that differ from the
existing investment objectives of the Acquired Fund).
Third, the Acquired Fund will distribute to its shareholders,
in complete liquidation of the Acquired Fund, the Acquiring Fund shares that
it will receive in the Reorganization as promptly as practicable and having
made such distributions will take all necessary steps to terminate its
existence.
Fourth, prior to the Reorganization, the Acquired Fund will
continue its historic business within the meaning of Treasury Regulations
section 1.368-1(d) and will not dispose of more than fifty percent (50%) of
the fair market value of its assets for the purpose of satisfying investment
objectives of the Acquiring Fund, if any, that differ from the existing
investment objectives of the Acquired Fund.
Fifth, following the Reorganization, the Acquiring Fund will
continue the historic business of the Acquired Fund or will use a significant
portion of the Acquired Fund's historic business assets in a business.
Sixth, at the time of the Reorganization, the adjusted
income tax basis and the fair market value of the assets to be
<PAGE>
The Woodward Funds
May 6, 1996
Page 3
transferred by the Acquired Fund to the Acquiring Fund will each equal or
exceed the sum of the liabilities to be assumed by the Acquiring Fund or to
which such transferred assets are subject.
Seventh, at the time of the Reorganization, there will be no
plan or intention by the shareholders of the Acquired Fund who own five
percent (5%) or more of the Acquired Fund's stock and, to the best of the
knowledge of the management of Woodward, no current plan or intention on the
part of the remaining shareholders of the Acquired Fund, to sell, exchange or
otherwise dispose of a number of shares of the Acquiring Fund's stock to be
received in the Reorganization that would reduce the Acquired Fund
shareholders' ownership of the Acquiring Fund stock to a number of shares
having a value, as of the time of the Reorganization, of less than fifty
percent (50%) of the value of all of the formerly outstanding stock of the
Acquired Fund immediately prior to the Reorganization. For purposes of this
assumption, (a) shares of the Acquired Fund surrendered by dissenters will be
treated as outstanding Acquired Fund stock immediately prior to the
Reorganization, and (b) shares of the Acquired Fund and the Acquiring Fund
held by Acquired Fund shareholders and otherwise sold, redeemed or disposed of
in anticipation of the Reorganization, or subsequent to the Reorganization
pursuant to a plan or intention that existed at the time of the
Reorganization, also will be taken into account.
Eighth, at the time of the Reorganization, the Acquiring Fund
will have no plan or intention to reacquire any of its shares issued in the
Reorganization, except in the ordinary course of business.
Ninth, at the time of the Reorganization, the Acquiring Fund
will have no plan or intention to sell or otherwise to dispose of any of the
assets of the Acquired Fund acquired in the Reorganization, except for
dispositions made in the ordinary course of business.
Tenth, there is and will be no intercorporate indebtedness
between the Acquiring Fund and the Acquired Fund that was issued, acquired or
will be settled at a discount.
Eleventh, the Acquiring Fund does not and will not own,
directly or indirectly, nor has it owned during the past five years, directly
or indirectly, any stock of the Acquired Fund.
<PAGE>
The Woodward Funds
May 6, 1996
Page 4
Twelfth, the Acquired Fund is not and will not be under the
jurisdiction of a court in a case under Title 11 of the United States Code or
a receivership, foreclosure or similar proceeding in any Federal or State
court.
Thirteenth, the liabilities of the Acquired Fund that will be
assumed by the Acquiring Fund and the liabilities, if any, to which the
transferred assets will be subject were incurred by the Acquired Fund in the
ordinary course of its business.
Fourteenth, the Reorganization will be accomplished for the
purposes set forth in the Combined Proxy Statement/Prospectus (the "Proxy
Statement"), a draft of which is part of the Registration Statement (the
"Registration Statement") being filed
this day with the SEC.
Fifteenth, the Plan substantially in the form included as an
exhibit in the Proxy Statement will be duly authorized by the parties and
approved by the shareholders of the Acquired Fund, and the appropriate
documents will be filed with the appropriate government agencies.
Conclusions
Based upon the Code, applicable Treasury Department regulations
in effect as of the date hereof, current published administrative positions of
the Internal Revenue Service contained in revenue rulings and procedures, and
judicial decisions, and upon the information, representations and assumptions
contained herein and in the documents provided to us by you (including the
Proxy Statement and the Plan), it is our opinion for Federal income tax
purposes that:
(i) the transfer by the Acquired Fund of all of its assets and
liabilities to the Acquiring Fund in exchange for shares of the Acquiring
Fund, and the distribution of said shares to the shareholders of the Acquired
Fund, as provided in the Plan, will constitute a reorganization within the
meaning of section 368(a)(1)(C) or 368(a)(1)(D) of the Code and the Acquiring
Funds and the Acquired Funds each will be "a party to the reorganization"
within the meaning of section 368(b) of the Code;
<PAGE>
The Woodward Funds
May 6, 1996
Page 5
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Acquired Fund as a
result of the Reorganization;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Acquiring Fund as a result of the
Reorganization;
(iv) in accordance with section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of the Acquired Fund on the
distribution to them by the Acquired Fund of shares of the Acquiring Fund in
exchange for their shares of the Acquired Fund;
(v) in accordance with section 358(a)(1) of the Code, the
aggregate basis of the Acquiring Fund shares received by each shareholder of
the Acquired Fund will be the same as the aggregate basis of the shareholder's
Acquired Fund shares exchanged therefor in the Reorganization;
(vi) in accordance with section 362(b) of the Code, the basis
of the assets received by the Acquiring Fund in the Reorganization will be the
same as the basis of such assets in the hands of the Acquired Fund immediately
before the Reorganization;
(vii) in accordance with section 1223(1) of the Code, a
shareholder's holding period for the Acquiring Fund shares will be determined
by including the period for which the shareholder held the shares of the
Acquired Fund exchanged therefor, provided that the shareholder held such
shares of the Acquired Fund as a capital asset;
(viii) in accordance with section 1223(2) of the Code, the
holding period of the Acquiring Fund with respect to the assets acquired in
the Reorganization will include the period for which such assets were held by
the Acquired Fund; and
(ix) in accordance with section 381(a) of the Code, the
Acquiring Fund will succeed to the tax attributes of the Acquired Fund
described in section 381(c) of the Code.
We express no opinion relating to any Federal income tax matter
except on the basis of the documents and assumptions described above. In
issuing our opinion, we have relied solely
<PAGE>
The Woodward Funds
May 6, 1996
Page 6
upon existing provisions of the Code, existing and proposed regulations
thereunder, and current administrative positions and judicial decisions. Such
laws, regulations, administrative positions and judicial decisions are subject
to change at any time. Any such change could affect the validity of the
opinion set forth above.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the references to our firm under the
caption "Information Relating to the Proposed Reorganization -- Federal Income
Tax Consequences" in the Proxy Statement. This does not constitute a consent
under section 7 of the Securities Act of 1933, and in consenting to such
references to our firm we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under section 7 or under the rules and regulations of the
SEC issued thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
SDDH:EMM:FRB
Exhibit (13)(b)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this ____ day of __________, 1996 between
The Woodward Funds (the "Fund"), a Massachusetts business trust having its
principal place of business at ___________________________ and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts corporation with
principal offices at One Exchange Place, 53 State Street, Boston,
Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund initially intends to offer shares in those
Portfolios identified in the attached Exhibit 1, each such Portfolio, together
with all other Portfolios subsequently established by the Fund shall be
subject to this Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
FDISG as its transfer agent, dividend disbursing agent and agent in connection
with certain other activities and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar or
organizational document as the case may be, of the Fund as the same
may be amended from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not
such person is an officer or employee of the Fund, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Fund
as indicated in writing to FDISG from time to time.
<PAGE>
(c) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(g) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by FDISG from a person
reasonably believed by FDISG to be an Authorized Person;
(i) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interest in a portfolio of securities
and other assets;
(j) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(k) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(l) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FDISG to be an Authorized
Person and actually received by FDISG. Written Instructions shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original
or other process.
-2-
<PAGE>
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
FDISG as transfer agent and dividend disbursing agent for Shares of each
respective Portfolio of the Fund and as shareholder servicing agent for the
Fund and FDISG hereby accepts such appointments and agrees to perform the
duties hereinafter set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of FDISG annexed hereto as Schedule A and
incorporated herein, and in accordance with the terms of the
Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time
between FDISG and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. FDISG shall
provide the Fund on a regular basis with the total number of Shares of
each Portfolio which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, FDISG shall be under no duty or obligation to inquire into,
and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received
therefor; (ii) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Directors, or the legality
of the issuance of any Shares in payment of any dividend; or (iv) the
legality of any recapitalization or readjustment of the Shares.
-3-
<PAGE>
3.2 In addition, the Fund shall (i) identify to FDISG in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each
State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of FDISG for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG shall perform
such other duties and functions, and shall be paid such amounts therefor, as
may from time to time be agreed upon in writing between the Fund and FDISG.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule A in accordance
with all applicable laws, rules and regulations, including records required by
Section 31(a) of the 1940 Act. Where applicable, such records shall be
maintained by FDISG for the periods and in the places required by Rule 31a-2
under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG
agrees that all such records prepared or maintained by FDISG relating to the
services to be performed by FDISG hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with such
section, and will be surrendered promptly to the Fund on and in accordance
with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of
such request and secure Written Instructions as to the handling of such
request. FDISG reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from
the Fund. FDISG will also have no liability when processing Share certificates
which it reasonably believes to bear the proper manual or facsimile
-4-
<PAGE>
signatures of the officers of the Fund and the proper countersignature of
FDISG.
5.2 At any time, FDISG may request Written Instructions from the
Fund and may seek advice from legal counsel for the Fund, or its own legal
counsel, with respect to any matter arising in connection with this Agreement,
and it shall not be liable for any action taken or not taken or suffered by it
in good faith in accordance with such Written Instructions or in accordance
with the opinion of counsel for the Fund or for FDISG. Written Instructions
requested by FDISG will be provided by the Fund within a reasonable period of
time.
5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing
or acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within
one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect FDISG's right to rely on
Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
FDISG for the performance of its obligations hereunder in accordance with the
fees set forth in the written Fee Schedule annexed hereto as Schedule B and
incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the
Fund on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by FDISG in the performance of
its duties hereunder. Out-of-pocket expenses shall include, but shall not be
limited to, items specified in the written schedule of out-of-pocket charges
annexed hereto as Schedule C and incorporated herein. Schedule C may be
modified by written agreement between the parties. Unspecified out-of-pocket
expenses shall be limited to those out-of-pocket expenses reasonably incurred
by FDISG in the performance of its obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all
fees and out-of-pocket expenses within fifteen (15) days following the receipt
of the respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule B, a revised Fee Schedule executed and dated
by the parties hereto.
6.5 The Fund acknowledges that the fees that FDISG charges the Fund
under this Agreement reflect the allocation of risk between the parties,
including the disclaimer of warranties in
-5-
<PAGE>
Section 9.3 and the limitations on liability and exclusion of remedies in
Section 11.2 and Article 12. Modifying the allocation of risk from what is
stated here would affect the fees that FDISG charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall, on or
before the date this Agreement goes into effect, but in any case with a
reasonable period of time for FDISG to prepare to perform its duties
hereunder, deliver or caused to be delivered to FDISG the documents set forth
in the written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade
secrets, and other related legal rights utilized by FDISG in connection with
the services provided by FDISG to the Fund herein (the "FDISG System").
8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately
terminate with the termination of this Agreement.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and
in good standing under the laws of the Commonwealth of
Massachusetts;
(b) it is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(c) all requisite corporate proceedings have been
taken to authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
-6-
<PAGE>
(e) it has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized, existing and in good
standing under the laws of the jurisdiction in which it is
organized;
(b) it is empowered under applicable laws and by its
Article of Incorporation and By-Laws to enter into this
Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to
authorize it to enter into this Agreement;
(d) a registration statement under the Securities Act of
1933, as amended, and the 1940 Act on behalf of each of the Portfolios
is currently effective and will remain effective, and all appropriate
state securities law filings have been made, and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid
and non-assessable and when Shares are hereafter issued in accordance
with the terms of the Fund's Articles of Incorporation and its
Prospectus with respect to each Portfolio, such Shares shall be
validly issued, fully paid and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF
DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY
WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
Article 10 Indemnification.
10.1 FDISG shall not be responsible for and the Fund on behalf of
each Portfolio shall indemnify and hold FDISG harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind which
may be asserted against FDISG or for which FDISG may be held to be liable (a
"Claim") arising out of or attributable to any of the following:
-7-
<PAGE>
(a) any actions of FDISG required to be taken pursuant to this
Agreement unless such Claim resulted from a negligent act or omission
to act or bad faith by FDISG in the performance of its duties
hereunder;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting
on behalf of the Fund, including but not limited to the prior transfer
agent for the Fund, in the performance of FDISG's duties and
obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to
the offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
FDISG harmless, FDISG will notify the Fund promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Fund although the failure to do so shall not
prevent recovery by FDISG and shall keep the Fund advised with respect to all
developments concerning such situation. The Fund shall have the option to
defend FDISG against any Claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by the Fund and satisfactory to FDISG, and thereupon the Fund
shall take over complete defense of the Claim and FDISG shall sustain no
further legal or other expenses in respect of such Claim. FDISG will not
confess any Claim or make any compromise in any case in which the Fund will be
asked to provide indemnification, except with the Fund's prior written
consent. The obligations of the parties hereto under this Article 10 shall
survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
-8-
<PAGE>
(a) one year after the Fund becomes aware of the event for
which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law
(and injunctive or provisional relief), the provisions of this Article 10
shall be FDISG's sole and exclusive remedy for claims or other actions or
proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of
all services performed under this Agreement, but assumes no responsibility for
loss or damage to the Fund unless said errors are caused by FDISG's own
negligence, bad faith or willful misconduct or that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
FDISG's cumulative liability (to the fund) for all losses, claims, suits,
controversies, breaches, or damages for any cause whatsoever (including but
not limited to those arising out of or related to this Agreement) and
regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by FDISG for services provided under
this Agreement during the twelve months immediately prior to the date of such
loss or damage. Fund understands the limitation on FDISG's damages to be a
reasonable allocation of risk and Fund expressly consents with respect to such
allocation of risk. In allocating risk under the Agreement, the parties agree
that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
IN NO EVENT SHALL FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR
-9-
<PAGE>
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER
PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or FDISG provides written notice to the other of its
intent not to renew. Such notice must be received not less than ninety (90)
days and not more than one-hundred eighty (180) days prior to the expiration
of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting
Party, and if such material breach shall not have been remedied within thirty
(30) days after such written notice is given, then the Non-Defaulting Party
may terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If FDISG is the Non-Defaulting Party, its
termination of this Agreement shall not constitute a waiver of any other
rights or remedies of FDISG with respect to services performed prior to such
termination or rights of FDISG to be reimbursed for out-of-pocket expenses. In
all cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have under
this Agreement or otherwise against the Defaulting Party.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have FDISG render services as transfer agent under the terms
hereof, the Fund shall so notify FDISG in writing, and if FDISG agrees in
writing to
-10-
<PAGE>
provide such services, Exhibit 1 shall be amended to include such additional
Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Fund and FDISG shall exercise at least the same degree of care,
but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and FDISG may use the
Confidential Information only to exercise its rights under this Agreement. The
Fund and FDISG shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the prior
written permission of the other party. The Fund and FDISG may, however,
disclose Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that each
shall use reasonable efforts to ensure that the Confidential Information is
not duplicated or disclosed by its employees in breach of this Agreement. The
Fund and FDISG may also disclose the Confidential Information to independent
contractors, auditors, and professional advisors, provided they first agree in
writing to be bound by the confidentiality obligations substantially similar
to this Section 15.1. Notwithstanding the previous sentence, in no event shall
either the Fund or FDISG disclose the Confidential Information to any
competitor of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating
to the past, present or future business activities of the Fund or
FDISG, their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or FDISG
a competitive advantage over its competitors; and
-11-
<PAGE>
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the other.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by (i) fire, flood, elements of
nature or other acts of God; (ii) any outbreak or escalation of hostilities,
war, riots or civil disorders in any country, (iii) any act or omission of the
other party or any governmental authority; (iv) any labor disputes (whether or
not the employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause beyond
the reasonable control of such party, including without limitation, failures
or fluctuations in telecommunications or other equipment. In any such event,
the nonconforming party shall be excused from any further performance and
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
FDISG may, in its sole discretion, assign all its right, title and interest in
this Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement
to be performed by FDISG.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to
this Agreement, or breach hereof, shall be settled by arbitration
-12-
<PAGE>
administered by the American Arbitration Association in Boston, Massachusetts
in accordance with its applicable rules, except that the Federal Rules of
Evidence and the Federal Rules of Civil Procedure with respect to the
discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law
provisions in this Agreement, the parties agree that the Federal Arbitration
Act shall govern and control with respect to the provisions of this Article
18.
Article 19 Notice.
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or FDISG, shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Attention:__________________
To FDISG:
First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to FDISG's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement
of this agreement. All actions arising from or related to this Agreement shall
be brought in the state and federal courts sitting in the City of Boston, and
FDISG and Client hereby submit themselves to the exclusive jurisdiction of
those courts.
-13-
<PAGE>
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this
Agreement or to the transactions contemplated by it without the prior review
and written approval of the other party; provided, however, that either party
may make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult
in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
FDISG's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits
hereto, constitutes the entire Agreement between the parties with respect to
the subject matter hereof and supersedes all prior and contemporaneous
proposals, agreements, contracts, representations, and understandings, whether
written or oral, between the parties with respect to the subject matter
hereof. No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by each
party. No such writing shall be effective as against FDISG unless said writing
is executed by a Senior Vice President, Executive Vice President, or President
of FDISG. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
-14-
<PAGE>
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions
of this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, as of the day and year first
above written.
THE WOODWARD FUNDS
By:___________________________
Title:________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:___________________________
Title:________________________
-15-
<PAGE>
Exhibit 1
<PAGE>
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a record of the
number of Shares held by each Shareholder of record which shall include name,
address, taxpayer identification and which shall indicate whether such Shares
are held in certificates or uncertificated form.
2. Shareholder Services. FDISG shall respond as appropriate to all
inquiries and communications from Shareholders relating to Shareholder
accounts with respect to its duties hereunder and as may be from time to time
mutually agreed upon between FDISG and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply FDISG
with an adequate supply of blank share certificates to meet FDISG requirements
therefor. Such Share certificates shall be properly signed by facsimile. The
Fund agrees that, notwithstanding the death, resignation, or removal of any
officer of the Fund whose signature appears on such certificates, FDISG or its
agent may continue to countersign certificates which bear such signatures
until otherwise directed by Written Instructions.
(b) FDISG shall issue replacement Share certificates in lieu of
certificates which have been lost, stolen or destroyed, upon receipt by FDISG
of properly executed affidavits and lost certificate bonds, in form
satisfactory to FDISG, with the Fund and FDISG as obligees under the bond.
(c) FDISG shall also maintain a record of each certificate
issued, the number of Shares represented thereby and the Shareholder of
record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) FDISG shall maintain
comparable records of the Shareholders thereof, including their names,
addresses and taxpayer identification. FDISG shall further maintain a stop
transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. FDISG
will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
FDISG will prepare Shareholder lists, mail and certify as to the mailing of
proxy materials, process and tabulate returned proxy cards, report on proxies
voted prior to meetings, act as
<PAGE>
inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) FDISG shall not be required to issue any Shares of the Fund
where it has received a Written Instruction from the Fund or official notice
from any appropriate authority that the sale of the Shares of the Fund has
been suspended or discontinued. The existence of such Written Instructions or
such official notice shall be conclusive evidence of the right of FDISG to
rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment
of money is returned unpaid for any reason, FDISG will endeavor to: (i) give
prompt notice of such return to the Fund or its designee; (ii) place a stop
transfer order against all Shares issued as a result of such check or order;
and (iii) take such actions as FDISG may from time to time deem appropriate.
6. Transfer and Purchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and Share
certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as FDISG reasonably may deem necessary.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. FDISG also reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the requested
transfer or repurchase is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or repurchases which FDISG,
in its good judgement, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase.
(d) When Shares are redeemed, FDISG shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the
Fund or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate
accounts maintained by FDISG reflecting outstanding Shares of the Fund and
Shares attributed to individual accounts.
-2-
<PAGE>
(e) FDISG, upon receipt of the monies paid to it by the
Custodian for the repurchase of Shares, pay such monies as are received from
the Custodian, all in accordance with the procedures described in the written
instruction received by FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by FDISG or its agent of
notification of the suspension of the determination of the net asset value of
the Fund.
7. Dividends
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund with respect to
Shares of the Fund, the Fund shall furnish or cause to be furnished to FDISG
Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment shall be
determined, the amount payable per Share to the Shareholders of record as of
that date, the total amount payable on the payment date, and whether such
dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution
of the Board of Directors, the Fund will pay to FDISG sufficient cash to make
payment to the Shareholders of record as of such payment date.
(c) If FDISG does not receive sufficient cash from the Fund to
make total dividend and/or distribution payments to all Shareholders of the
Fund as of the record date, FDISG will, upon notifying the Fund, withhold
payment to all Shareholders of record as of the record date until sufficient
cash is provided to FDISG.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall: (i) perform all the customary services
of a transfer agent, registrar, dividend disbursing agent and agent of the
dividend reinvestment and cash purchase plan as described herein consistent
with those requirements in effect as at the date of this Agreement. The
detailed definition, frequency, limitations and associated costs (if any) set
out in the attached fee schedule, include but are not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts where applicable, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to
-3-
<PAGE>
dividends and distributions by federal authorities for all Shareholders.
-4-
<PAGE>
Schedule B
Fee Schedule
<PAGE>
Schedule C
OUT-Of-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket
expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes,
checks and stationery
- Postage (bulk, pre-sort, ZIP+ 4, barcoding, first
class) direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all
lease, maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other
equipment and any expenses incurred in connection with
such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs,
including, but not limited to exit fees charged by
third party record keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- All Systems enhancements after the conversion at the
rate of $100.00 per hour
- Insurance
- Such other miscellaneous expenses reasonably incurred
by FDISG in performing its duties and responsibilities
under this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FDISG. In addition, the Fund will
promptly reimburse FDISG for any other unscheduled expenses incurred by FDISG
whenever the Fund and FDISG mutually agree that such expense are not otherwise
properly borne by FDISG as part of its duties and obligations under the
Agreement.
<PAGE>
Schedule D
Fund Documents
- Certified copy of the Articles of Incorporation of the
Fund, as amended;
- Certified copy of the By-laws of the Fund, as amended;
- Copy of the resolution of the Board of Directors
authorizing the execution and delivery of this
Agreement;
- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as to
such approval;
- All account application forms and other documents
relating to Shareholder accounts or to any plan,
program or service offered by the Fund;
- Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of the Shareholder,
and the number of Shares of the Fund held by each, certificate
numbers and denominations (if any certificates have been
issued), lists of any accounts against which stop transfer
orders have been placed, together with the reasons therefore,
and the number of Shares redeemed by the Fund; and
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
Exhibit (14)(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form N-14 of our report dated
February 19, 1996 included in The Woodward Funds' Annual Reports to
Shareholders for the year ended December 31, 1995, and to all references to
our Firm included in this registration statement on Form N-14.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
May 6, 1996
Exhibit (14)(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to
our Firm included in the Registration Statement on Form N-14 under the
Securities Act of 1933 and the Investment Company Act of 1940, respectively.
However, this action does not constitute a consent under Section 7 of the
Securities Act of 1933, because we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or under the rules and
regulations of the Securities and Exchange Commission thereunder.
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
May 6, 1996
Exhibit (17)(c)
As filed with the Securities and Exchange Commission on May 11, 1987
Registration No. 33-13990
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. __ [ ]
(Check appropriate box or boxes)
THE WOODWARD FUNDS
(Exact Name of Registrant as Specified in Charter)
100 Wall Street/27th Floor
New York, New York 10005
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (313) 259-0729
Earl I. Heenan, Jr.
333 West Fort Street
Detroit, Michigan 48226
(Name and Address of Agent for Service)
Copies to:
John Martin, President George G. Martin, Esq.
First of Michigan Corporation Miller, Canfield, Paddock and Stone
100 Renaissance Center/26th Floor 2500 Comerica Building
Detroit, Michigan 48243 Detroit, Michigan 48226
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
===================================================================================================
Proposed
Maximum
Amount Offering Amount of
Being Price Per Registration
Title of Securities Being Registered Registered Unit Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Series A Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series B Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series C Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series D Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series E Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series F Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series G Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
<FN>
- ------------------------------------------------------------------------------
* Pursuant to the provisions of Rule 24f-2 under the Investment
Company Act of 1940, registrant hereby elects to register an indefinite number
of shares of beneficial interest of series class designation. The $500 filing
fee required by said Rule has been paid.
- ------------------------------------------------------------------------------
<PAGE>
The registrant hereby amends this registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that his Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1996
Registration No. 33-13990/811-5148
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 30
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 30
THE WOODWARD FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o NBD Bank
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007-7058
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(313) 259-0729
W. Bruce McConnel, III
DRINKER BIDDLE & REATH
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 15, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
Registrant has previously registered an indefinite number of its shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for
the fiscal year ended December 31, 1995 was filed on February 27, 1996.
</TABLE>
EXHIBIT 17(d)
PROXY
THE WOODWARD FUNDS
WOODWARD GOVERNMENT FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of THE WOODWARD FUNDS
(the "Trust") for use at a Meeting of Shareholders to be held in the Family
Dining Room of the Detroit Club, 712 Cass Avenue, Detroit, Michigan, on
June 25, 1996 at 10:30 a.m. (Eastern Time).
The undersigned hereby appoints _____________ and ____________, and
each of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Meeting, and at all adjournments or postponements
thereof, all shares of beneficial interest, evidencing interests in the
Government Fund (the "Fund"), held of record by the undersigned on April 11,
1996, the record date for the meeting, upon the following matters and upon any
other matter which may come before the meeting, in their discretion:
FOR AGAINST ABSTAIN
1. Proposal to approve a Plan of
Reorganization and the
transactions contemplated thereby,
including the transfer of
substantially all of the assets
and liabilities of the Trust's
Government Fund to the Trust's
Treasury Money Market Fund (the
"Treasury Fund"), in exchange for
Class A or Class I shares, as
applicable, of the Treasury Fund,
and a liquidating distribution of
such shares so received to
shareholders of the Government
Fund according to their respective
interests.
2. In their discretion, the
proxies are authorized to vote
upon such other business as may
properly come before the
meeting.
<PAGE>
Every properly signed proxy will be voted in the manner specified
hereon and, in the absence of specification, will be treated as GRANTING
authority to vote FOR Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When
signing as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated: ------------------------------
X
-------------------------------------
Signature
X
-------------------------------------
Signature, if held jointly
Exhibit (17)(e)
- ------------------------------------------------------------------------------
PROSPECTUS April 15, 1996
- ------------------------------------------------------------------------------
THE WOODWARD FUNDS
c/o NBD Bank, Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
24 Hour yield and performance information
Purchase and Redemption orders:
(800) 688-3350
- ------------------------------------------------------------------------------
The Woodward Funds (the "Trust") is offering in this Prospectus shares
in the following five investment portfolios (the "Portfolios"), each having
its own investment objective and policies as described in this Prospectus:
Class A shares of the:
Woodward Money Market Fund
Woodward Government Fund
Woodward Treasury Money Market Fund
Woodward Tax-Exempt Money Market Fund
Woodward Michigan Tax-Exempt Money Market Fund
Each of the Portfolios is advised by NBD Bank ("NBD" or the "Adviser")
and is sponsored and distributed by First of Michigan Corporation ("FoM" or
"Co-Distributor") and Essex National Securities, Inc. ("Essex" or
"Co-Distributor").
This Prospectus sets forth concisely information that a prospective
investor should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Trust, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge by writing to The Woodward Funds at the above
address. The Statement of Additional Information bears the same date as this
Prospectus and is incorporated by reference into this Prospectus in its
entirety.
- ------------------------------------------------------------------------------
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NBD BANK, ITS PARENT COMPANY
OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT THE PORTFOLIOS WILL BE ABLE TO MAINTAIN A CONSTANT
NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
INVESTMENT ADVISER:
NBD Bank
<PAGE>
EXPENSE SUMMARY
The Trust currently offers Class I shares (formerly known as
"Institutional Shares") and Class A shares (formerly known as "Retail Shares")
in each of the Woodward Money Market Fund ("Money Market Portfolio"), Woodward
Government Fund ("Government Portfolio"), Woodward Treasury Money Market Fund
("Treasury Portfolio"), Woodward Tax-Exempt Money Market Fund ("Tax-Exempt
Portfolio") and Woodward Michigan Tax-Exempt Money Market Fund ("Michigan
Portfolio"). Class I shares are sold primarily to NBD and its affiliated and
correspondent banks acting on behalf of their respective customers. Class A
shares are sold to the general public primarily through financial institutions
such as banks, brokers and dealers. Class I shares are offered in a separate
Prospectus. Investors should call (800) 688-3350, a Co-Distributor or their
financial institutions if they would like to obtain more information
concerning the Class I shares and/or Class A shares of the Portfolios. The
following table is provided to assist in understanding the various costs and
expenses that an investor will indirectly incur as a beneficial owner of Class
A shares in each of the Portfolios.
<TABLE>
<CAPTION>
Michigan
Money Govern- Tax- Tax-
Market ment Treasury Exempt Exempt
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price)............. None None None None None
Sales Load Imposed on
Reinvested Dividends....... None None None None None
Deferred Sales Load........ None None None None None
Redemption Fee............. None None None None None
Exchange Fee............... None None None None None
Annual Operating Expenses
(as a percentage of average
net assets)
Management Fees............... .44% .45% .45% .45% .50%
12b-1 Fees.................... .025% .007% .024% .017% .079%
Shareholder Servicing
Fees(2)..................... .25% .25% .25% .25% .25%
Other Expenses(3)
(before fee waivers
and/or expense
reimbursements)............. .043% .05% .062% .057% .176%
(after fee waivers
and/or expense
reimbursements)............. .035% .043% .026% .033% (.079)%
Total Operating Expenses
(before fee waivers
and/or expense
reimbursements)............ .758% .757% .786% .774% 1.005%
(after fee waivers
and/or expense
reimbursements)............ .75% .75% .75% .75% .75%
<FN>
- --------------------
1. The expenses for each Portfolio have been restated to reflect
current expenses.
2. The Trust has adopted a Shareholder Servicing Plan pursuant to
which the Trust may enter into agreements with institutions under which they
will render shareholder administrative support services for their customers
who beneficially own Class A shares in return for a fee of up to .25% per
annum of the value of such shares ("Servicing Fees"). For further information,
-2-
<PAGE>
see "Shareholder Servicing Plan" and "Investment Adviser, Custodian
and Transfer Agent" under the heading "Management" in this Prospectus.
3. Credits or charges not reflected in the expense table may be
incurred directly by customers of financial institutions in connection with an
investment in the Portfolios.
- -------------------------
</TABLE>
<TABLE>
<CAPTION>
Michigan
Money Govern- Tax- Tax-
Market ment Treasury Exempt Exempt
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
Example
You would pay the following
expenses on a $1,000 investment
assuming:
(1) a 5% annual return and
(2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C>
One Year:................ $ 7.68 $ 7.68 $ 7.68 $ 7.68 $ 7.68
Three Years:............. $24.05 $24.05 $24.05 $24.05 $24.05
Five Years:.............. $41.83 $41.83 $41.83 $41.83 $41.83
Ten Years:............... $93.29 $93.29 $93.29 $93.29 $93.29
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATE OF RETURN MAY BE GREATER
OR LESSER THAN THOSE SHOWN.
The example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in Class A shares in each of the Portfolios,
based upon payment of operating expenses at the respective levels set forth
in the expense table. For more complete descriptions of Portfolio expenses,
see "Investment Adviser, Custodian and Transfer Agent," "Sponsors and
Co-Distributors," "Shareholder Servicing Plan," "Service and Distribution
Plan" and "Trust Expenses" under the heading "Management" in this Prospectus
and the financial statements and related notes contained in the Statement
of Additional Information.
-3-
<PAGE>
BACKGROUND
Shares of each Portfolio have been classified into two separate
classes of shares -- Class I shares and Class A shares. Only the Class A
shares are offered pursuant to this Prospectus. Until April 15, 1996, Class I
shares and Class A shares represented equal pro rata interests in a Portfolio.
As of such date, the Trust implemented its Shareholder Servicing Plan with
respect to Class A shares only and began to allocate Servicing Fees
attributable to such shares exclusively to them. See "Shareholder Servicing
Plan" and "Investment Adviser, Custodian and Transfer Agent" under
"Management," and see "Dividends and Distributions" and "Other Information"
for a description of the impact that this may have on holders of Class A
shares.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide supplementary information to the Portfolios'
financial statements contained in their Statement of Additional Information
and set forth certain information concerning the historic investment results
of Portfolio shares. They present a per share analysis of net investment
income and distributions from net investment income for each of the
Portfolios. The tables have been derived from the Portfolios' financial
statements which have been audited by Arthur Andersen, LLP, the Trust's
independent public accountants, whose report thereon is contained in the
Statement of Additional Information along with the financial statements. The
financial data included in these tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Portfolios is
available in annual reports to shareholders. The Statement of Additional
Information and annual reports to shareholders may be obtained from the Trust
free of charge by calling 1 (800) 688-3350.
<TABLE>
<CAPTION>
Money Market Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income .. $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579 $ 0.0784 $ 0.0877 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ............ $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579 $ 0.0784 $ 0.0877 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income ... $(0.0549) $(0.0378) $(0.0281) $(0.0347) $(0.0579) $(0.0784) $(0.0877) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions ... $(0.0549) $(0.0378) $(0.0281) $(0.0347) $(0.0579) $(0.0784) $(0.0877) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return ............ 5.63% 3.86% 2.85% 3.58% 5.95% 8.14% 9.19% 7.55%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) .... $1,639,695 $1,323,040 $1,326,693 $1,095,354 $775,521 $717,516 $446,466 $250,182
Ratio of Expenses to
Average Net Assets ... 0.51% 0.47% 0.49% 0.52% 0.50% 0.50% 0.51% 0.49%(a)
Ratio of Net Investment
Income to Average Net
Assets ............... 5.49% 3.78% 2.81% 3.47% 5.79% 7.84% 8.77% 7.30%(a)
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Government Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income ... $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564 $ 0.0769 $ 0.0862 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ............ $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564 $ 0.0769 $ 0.0862 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income ...... $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564) $(0.0769) $(0.0862) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions ..... $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564) $(0.0769) $(0.0862) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return ............. 5.57% 3.77% 2.81% 3.63% 5.79% 7.97% 8.98% 7.55%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ...... $474,377 $421,208 $346,665 $261,614 $288,369 $235,858 $196,095 $106,194
Ratio of Expenses to
Average Net Assets ..... 0.51% 0.51% 0.51% 0.51% 0.50% 0.49% 0.50% 0.50%(a)
Ratio of Net Investment
Income to Average Net
Assets ................ 5.44% 3.72% 2.77% 3.57% 5.64% 7.69% 8.62% 7.30%(a)
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Treasury Portfolio
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period ......................... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Income from Investment
Operations:
Net Investment Income .......... $ 0.0539 $ 0.0370 $ 0.0273
-------- -------- --------
Total From Investment Operations $ 0.0539 $ 0.0370 $ 0.0273
-------- -------- --------
Less Distributions:
Dividends From Net Investment
Income ....................... $(0.0539) $(0.0370) $(0.0273)
-------- -------- --------
Total Distributions ............ $(0.0539) $(0.0370) $(0.0273)
-------- -------- --------
Net Asset Value, End of Period ... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total Return ..................... 5.53% 3.77% 2.77%
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ............ $927,696 $785,694 $854,873
Ratio of Expenses to Average
Net Assets ................... 0.53% 0.50% 0.50%
Ratio of Net Investment
Income to Average Net Assets . 5.39% 3.70% 2.73%
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income ... $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422 $ 0.0553 $ 0.0595 $ 0.0498
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ............. $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422 $ 0.0553 $ 0.0595 $ 0.0498
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income ..... $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422) $(0.0553) $(0.0595) $(0.0498)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions .... $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422) $(0.0553) $(0.0595) $(0.0498)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return ............. 3.41% 2.45% 1.98% 2.70% 4.30% 5.67% 6.11% 5.10%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ..... $564,413 $550,736 $498,706 $379,431 $227,808 $235,451 $210,028 $177,645
Ratio of Expenses to
Average Net Assets .... 0.53% 0.51% 0.51% 0.53% 0.52% 0.52% 0.51% 0.49%(a)
Ratio of Net Investment
Income to Average Net
Assets ................ 3.35% 2.42% 1.96% 2.64% 4.22% 5.53% 5.95% 4.98%(a)
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Michigan Portfolio
January 23,
1991
(Commencement
of
Year Year Year Year Operations)
Ended Ended Ended Ended to
Decem- Decem- Decem- Decem- Decem-
ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991
------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income From Investment
Operations:
Net Investment Income ... $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
--------- --------- --------- --------- ---------
Total From Investment
Operations ............. $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
--------- --------- --------- --------- ---------
Less Distributions:
Dividends From Net
Investment Income ...... $ (0.0329) $ (0.0235) $ (0.0181) $ (0.0237) $ (0.0353)
--------- --------- --------- --------- ---------
Total Distributions ..... $ (0.0329) $ (0.0235) $ (0.0181) $ (0.0237) $ (0.0353)
--------- --------- --------- --------- ---------
Net Asset Value, End of
Period .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return ............. 3.32% 2.38% 1.83% 2.40% 3.83%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ..... $ 122,057 $ 78,640 $ 52,557 $ 52,960 $ 38,885
Ratio of Expenses to
Average Net Assets .... 0.69% 0.67% 0.65% 0.64% 0.65%(a)
Ratio of Net Investment
Income to Average Net
Assets ................ 3.30% 2.35% 1.81% 2.37% 3.77%(a)
Ratio of Expenses to
Average Net Assets
Without Fee Waiver .... 0.76% 0.75% -- -- --
Ratio of Net Investment
Income to Average
Net Assets Without
Fee Waiver ............ 3.23% 2.28% -- -- --
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-9-
<PAGE>
INTRODUCTION
The Trust is an open-end, management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Trust currently consists of seventeen investment portfolios, each of which
consists of a separate pool of assets with separate investment objective and
policies. However, only the Class A shares of the Money Market, Government,
Treasury, Tax-Exempt and Michigan Portfolios are offered pursuant to this
Prospectus. Under the 1940 Act, the Michigan Portfolio is classified as a
non-diversified investment portfolio and the other Portfolios are classified
as diversified investment portfolios.
PROPOSED REORGANIZATION
On December 1, 1995, NBD's parent, NBD Bancorp, Inc., merged with
First Chicago Corporation and the combined company was renamed First Chicago
NBD Corporation ("FCNBD"). An affiliate of FCNBD serves as the investment
adviser to Prairie Funds, Prairie Institutional Funds, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund, Inc. (collectively, "Prairie").
FCNBD has recommended to both the Board of Trustees of the Trust and the Board
of Trustees/Directors of Prairie that the portfolios of the Trust and Prairie
be reorganized as described below. In light of this recommendation and after
considering various matters, the Trust's Board and Prairie's Board have
authorized certain Agreements and Plans of Reorganization (the
"Reorganization").
A Special Meeting of the Shareholders of each Prairie portfolio is
expected to be held in June 1996 to consider the approval or disapproval of
the Reorganization. The Reorganization generally provides for the transfer of
substantially all of each Prairie portfolio's assets and liabilities to a
corresponding portfolio of the Trust in exchange for such portfolio's shares.
In connection with the proposed Reorganization, a Special Meeting of
the Shareholders of the Trust is expected to be held in June 1996 to consider
proposals relating to investment policies, service agreements, the election of
two new trustees, and other matters. Proxy materials describing these matters
will be mailed to the Trust's shareholders of record for the meeting.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The investment objective of a Portfolio may not be changed without
approval of the holders of at least a majority of the outstanding shares of
such Portfolio. See "Other Information." Except as noted below under
"Investment Limitations," a Portfolio's investment policies may be changed
without a vote of shareholders. There can be no assurance that a Portfolio
will achieve its objective.
Money Market Portfolio, Government Portfolio and Treasury Portfolio
The investment objective of the Money Market Portfolio, Government
Portfolio and Treasury Portfolio is to provide a high level of current income
consistent with the preservation of capital and liquidity.
In seeking to achieve its investment objective, the Money Market
Portfolio invests in the following high quality "money market" instruments:
(1) Obligations issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations");
-10-
<PAGE>
(2) U.S. dollar denominated obligations issued or guaranteed
by the government of Canada, a Province of Canada, or an
instrumentality or political subdivision thereof;
(3) Certificates of deposit, bankers' acceptances and time
deposits of U.S. banks or other U.S. financial institutions (including
foreign branches of such banks and institutions) having total assets
in excess of $1 billion and which are members of the Federal Reserve
System or the Federal Deposit Insurance Corporation ("FDIC");
(4) Certificates of deposit, bankers' acceptances and time
deposits of foreign banks and U.S. branches of foreign banks having
assets in excess of the equivalent of $1 billion;
(5) Commercial paper, other short term obligations and
variable rate master demand notes, bonds, debentures and notes; and
(6) Repurchase agreements relating to the above instruments.
In seeking to achieve its investment objective, the Government
Portfolio invests in:
(1) U.S. Government Obligations; and
(2) Repurchase agreements relating to the above obligations.
In seeking to achieve its investment objective, the Treasury Portfolio
invests in:
(1) U.S. Treasury bills, notes, and direct U.S. Treasury
obligations having remaining maturities of 13 months or less; and
(2) Repurchase agreements relating to direct U.S. Treasury
obligations.
In accordance with current SEC regulations, the Money Market,
Government and Treasury Portfolios will limit their respective purchases of
the securities of any one issuer (other than U.S. Government Obligations and
repurchase agreements collateralized by such obligations) to 5% of their
respective total assets, except that each Portfolio may invest more than 5%
but no more than 25% of its total assets in "First Tier Securities" of one
issuer for a period of up to three business days. First Tier Securities
include "eligible securities" (defined below under "Policies Applicable to all
Portfolios") that (i) if rated by more than one nationally recognized
statistical rating organization ("Rating Agency"), are rated (at the time of
purchase) by two or more Rating Agencies in the highest rating category for
such securities, (ii) if rated by only one Rating Agency, are rated by such
Rating Agency in its highest rating category for such securities, (iii) have
no short term rating but have been issued by an issuer that has other
outstanding short term obligations that have been rated in accordance with (i)
or (ii) above and are comparable in priority and security to such securities,
and (iv) are certain unrated securities that have been determined by NBD to be
of comparable quality to such securities pursuant to guidelines established by
the Trust's Board of Trustees. In addition, the Money Market and Government
Portfolios will limit their investments in "Second Tier Securities" (which are
eligible securities other than First Tier Securities) to 5% of their
respective total assets, with investments in any one issuer of such securities
being limited to no more than 1% of their respective total assets or $1
million, whichever is greater. Because of these limitations, the Money Market,
Government and Treasury Portfolios will not be able to purchase lower rated or
longer term securities from which a higher income, although a greater degree
of risk, might be derived.
-11-
<PAGE>
Tax-Exempt Portfolio and Michigan Portfolio
The investment objective of the Tax-Exempt Portfolio is to provide a
high level of current interest income that is exempt from federal income taxes
consistent with the preservation of capital and liquidity. In seeking to
achieve its investment objective, the Portfolio invests in high quality debt
obligations issued by states, territories and possessions of the United
States, by the District of Columbia, and by their respective political
subdivisions, agencies, instrumentalities and authorities, the interest on
which is, in the opinion of bond counsel for the issuers, exempt from regular
federal income tax ("Municipal Securities").
The investment objective of the Michigan Portfolio is to provide a
high level of current interest income that is exempt from federal and State of
Michigan income taxes, consistent with the preservation of capital and
liquidity. In seeking to achieve its investment objective, the Portfolio
invests in high quality debt obligations issued by the State of Michigan, its
political subdivisions, municipalities, corporations and authorities, the
interest on which, in the opinion of bond counsel to the issuers, is exempt
from federal and State of Michigan income taxes ("Michigan Municipal
Securities") and in related repurchase agreements. Income earned by the
Portfolio with respect to repurchase agreements is not exempt from federal
income tax. To the extent acceptable Michigan Municipal Securities are at any
time unavailable for investment by the Portfolio, the Portfolio invests
primarily in other Municipal Securities the interest on which is, in the
opinion of bond counsel, exempt from federal, but not State of Michigan,
income tax.
Municipal Securities acquired by the Tax-Exempt Portfolio or Michigan
Portfolio include:
(1) Municipal bonds;
(2) Municipal notes;
(3) Variable rate demand notes;
(4) Tax-exempt commercial paper and floating rate
instruments; and
(5) Unrated notes, paper or other instruments that are of
comparable quality as determined by the Adviser under guidelines
established by the Trust's Board of Trustees. Where necessary to
assure that an instrument is of high quality, the Portfolios may only
purchase the instrument if the issuer's obligation to pay the
principal is backed by an unconditional bank letter of credit, line of
credit, guaranty or commitment to lend.
At least 80% of each of the Tax-Exempt Portfolio's and Michigan
Portfolio's total assets will be invested in Municipal Securities except in
extraordinary circumstances, such as when the Adviser believes that market
conditions indicate that a Portfolio should adopt a temporary defensive
position by holding uninvested cash or investing in taxable short term
securities ("Taxable Investments"), such as those in which the Money Market
Portfolio may invest. This policy is fundamental with respect to the
Tax-Exempt Portfolio and Michigan Portfolio and may not be changed without the
approval of the holders of a majority of a Portfolio's outstanding shares. In
addition, with respect to the Michigan Portfolio, at least 65% of its total
assets will be invested under normal market conditions in Michigan Municipal
Securities and the remainder may be invested in securities that are not
Michigan Municipal Securities and therefore may be subject to Michigan income
taxes. See "Taxes."
-12-
<PAGE>
Policies Applicable To All Portfolios
Each Portfolio will only purchase "eligible securities" that present
minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities include (i)
U.S. Government Obligations, (ii) securities that are rated (at the time of
purchase) by Rating Agencies in the two highest rating categories for such
securities, and (iii) certain securities that are not so rated but are of
comparable quality to rated eligible securities as determined by the Adviser.
See "Investment Objectives, Policies and Risk Factors" in the Statement of
Additional Information for a more complete description of eligible securities.
A description of ratings is contained in the Statement of Additional
Information.
Each Portfolio is managed so that the average maturity of all
instruments in the Portfolio (on a dollar-weighted basis) will not exceed 90
days. In no event will the Portfolios purchase any securities which are deemed
to mature more than 13 months from the date of purchase (except for certain
variable and floating rate instruments and securities underlying repurchase
agreements and collateral underlying loans of portfolio securities).
OTHER INVESTMENT POLICIES
Bank Obligations
Domestic and foreign bank obligations in which the Money Market
Portfolio may invest include certificates of deposit, bankers' acceptances and
fixed time deposits. Total assets of a bank are determined on the basis of the
bank's most recent annual financial statements.
Obligations issued or guaranteed by foreign branches of U.S. banks
(commonly known as "Eurodollar" obligations) or U.S. branches of foreign banks
(commonly known as "Yankee dollar" obligations) may be general obligations of
the parent bank or obligations only of the issuing branch. Where the
obligation is only that of the issuing branch, the parent bank has no legal
duty to pay such obligation. Such obligations would thus be subject to risks
comparable to those which would be present if the issuing branch were a
separate bank. The Money Market Portfolio will not invest in a Eurodollar
obligation if upon making such investment the total of Eurodollar obligations
which are not general obligations of domestic parent banks would thereby
exceed 25% of the total assets of the Money Market Portfolio.
Obligations of foreign issuers may involve risks that are different
than those of obligations of domestic issuers. These risks include unfavorable
political and economic developments, possible imposition of withholding taxes
on interest income, possible seizure or naturalization of foreign deposits,
possible establishment of exchange controls, or adoption of other foreign
governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. In addition, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks and, generally, there may be less publicly available information
regarding such issuers. The Trust could also encounter difficulties in
obtaining or enforcing a judgment against a foreign issuer (including a
foreign branch of a U.S. bank).
Commercial Paper
Commercial paper issued by corporations and other institutions,
including variable rate notes and other short term corporate obligations, must
be rated in one of the two highest categories by at least two Rating Agencies,
or if not
-13-
<PAGE>
rated, must have been independently determined by the Adviser to be of
comparable quality.
Government Obligations
The Money Market, Government and Treasury Portfolios may invest in
direct obligations of the U.S. Treasury consisting of bills, notes and bonds.
The Money Market and Government Portfolios may also invest in other
obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. Obligations of certain agencies and instrumentalities, such
as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law. Some of these
investments may be variable or floating rate instruments.
Variable and Floating Rate Obligations
Each Portfolio may purchase rated and unrated variable and floating
rate obligations which may have stated maturities in excess of 13 months but
will, in any event, permit a Portfolio to demand payment of the principal of
the instrument at least once every 13 months on not more than thirty days'
notice (unless the instrument is a U.S. Government Obligation), provided that
the demand feature may be sold, transferred, or assigned only with the
underlying instrument involved. Such instruments may include variable rate
demand notes which are unsecured instruments that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. The absence of an active secondary market with respect to
particular variable and floating rate instruments could make it difficult for
a Portfolio to dispose of instruments if the issuer defaulted on its payment
obligation or during periods that the Portfolio is not entitled to exercise
its demand rights, and the Portfolio could, for these or other reasons, suffer
a loss with respect to such instruments. Variable and floating rate
instruments held by a Portfolio will be subject to the Portfolio's 10%
limitation on illiquid investments when the Portfolio may not demand payment
of the principal amount within seven days and a reliable trading market is
absent.
Repurchase and Reverse Repurchase Agreements
Each Portfolio may agree to purchase portfolio securities which it may
otherwise purchase from financial institutions subject to the seller's
agreement to repurchase them at a mutually agreed-upon date and price
("repurchase agreements"). No Portfolio will enter into repurchase agreements
with the Adviser, Co-Distributors, or any of their affiliates. Although the
securities subject to repurchase agreements may bear maturities exceeding 13
months provided the repurchase agreement itself matures in one year or less,
the Portfolios generally intend to enter into repurchase agreements which
terminate within seven days after notice by the Portfolios. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price, marked to
market daily. Default by the seller would, however, expose a Portfolio to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
-14-
<PAGE>
Each Portfolio may also borrow funds for temporary purposes by
entering into reverse repurchase agreements. Pursuant to such agreements the
Portfolios will sell portfolio securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at a particular date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Portfolio may decline below the price of the
securities it is obligated to repurchase. Whenever a Portfolio enters into a
reverse repurchase agreement, it will place in a segregated custodial account
liquid assets equal to the repurchase price marked to market daily (including
accrued interest) and will subsequently monitor the account to ensure such
equivalent value is maintained.
Lending Portfolio Securities
To increase income or offset expenses, each Portfolio may lend its
portfolio securities to financial institutions such as banks and
broker-dealers in accordance with the investment limitations described below.
Agreements would require that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may include cash or
securities of the U.S. Government, its agencies or instrumentalities, some of
which may bear maturities exceeding 13 months. Such loans will not be made if,
as a result, the aggregate of all outstanding loans of a particular Portfolio
exceeds one-third of the value of its total assets. Loans of securities
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or possibly loss of rights in the collateral should the
borrower of the securities become insolvent. In the event a Portfolio is
unable to recover the securities loaned in a particular transaction, it will
promptly sell any collateral which bears a maturity exceeding 13 months. Loans
will be made only to borrowers that provide the requisite collateral comprised
of liquid assets and when, in the Adviser's judgment, the income to be earned
from the loan justifies the attendant risks.
When-Issued Securities
Each Portfolio may purchase portfolio securities on a "when-issued"
basis and may purchase or sell such securities on a "forward commitment"
basis. These transactions involve commitment by a Portfolio to purchase or
sell particular securities with payment and delivery taking place in the
future, beyond the normal settlement date, at a stated price and yield.
Securities purchased on a when-issued basis or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, or if the value of the security to be sold
increases prior to the settlement date. When a Portfolio enters into such
transactions, the Custodian will maintain in a segregated account cash or
liquid portfolio securities equal to the amount of the commitment. The
Portfolios do not earn income with respect to these transactions until the
subject securities are delivered to the Portfolios. The Portfolios do not
intend to purchase when-issued securities for speculative purposes but only
for the purposes of acquiring portfolio securities. Each Portfolio's
when-issued purchases and forward commitments are not expected to exceed 25%
of the value of its total assets absent unusual market conditions.
Municipal and Related Securities
Municipal Securities may include general obligations, revenue
obligations, notes, and moral obligation bonds. General obligations are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue obligations are payable only
from the revenues derived from a particular facility, class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source such as the
-15-
<PAGE>
user of the facility being financed. Private activity bonds (i.e. bonds issued
by industrial development authorities) are in most cases revenue securities
and are not payable from the unrestricted revenues of the issuer. Private
activity bonds are included within the term "Municipal Securities" only if the
interest paid thereon is exempt from regular federal income tax and not
treated as a specific tax preference item under the federal alternative
minimum tax. See "Taxes." Consequently, the credit quality of a private
activity bond is usually directly related to the credit standing of the
private user of the facility involved. Notes are short-term instruments which
are obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other revenues.
Moral obligation bonds are normally issued by special purpose public
authorities. If the issuer of a moral obligation bond is unable to meet its
debt service obligations from current revenues, it may draw on a reserve fund,
the restoration of which is a moral commitment but not a legal obligation of
the state or municipality which created the issuer. Municipal Securities also
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities.
Municipal lease/purchase agreements may be subject to the Portfolio's 10%
limitation on illiquid investments. See "Restricted Securities."
The Michigan Portfolio may purchase from financial institutions
participation interests in Municipal Securities. A participation interest
gives the Portfolio an undivided interest in the Municipal Security in the
proportion that the Portfolio's participation interest bears to the total
principal amount of the Municipal Security. These instruments may have fixed,
floating or variable rates of interest, with remaining maturities of 13 months
or less as determined in accordance with SEC regulations (although the
securities held by the financial institution may have longer maturities). If
the participation interest is unrated, or has been given a raving below that
which otherwise is permissible for purchase by the Portfolio, the
participation interest will be backed by an irrevocable letter of credit or
guarantee of a bank that the Trust's Board of Trustees has determined meets
the prescribed quality standards for banks set forth below, or the payment
obligation otherwise will be collateralized by U.S. Government securities. For
certain participation interests, the Portfolio will have the right to demand
payment, on not more than seven days' notice, for all or any part of the
Portfolio's participation interest in the Municipal Security, plus accrued
interest. As to these instruments, the Portfolio intends to exercise its right
to demand payment only upon a default under the terms of the Municipal
Security, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio. Participation interests
that do not have this demand feature will be considered illiquid investments
subject to the 10% limitation.
The Tax-Exempt and Michigan Portfolios may acquire "stand-by
commitments" with respect to Municipal Securities they hold. Under a stand-by
commitment, a dealer agrees to purchase at the Portfolio's option specified
Municipal Securities at a specified price. The acquisition of a stand-by
commitment may increase the cost, and thereby reduce the yield of the
Municipal Securities to which the commitment relates. The Portfolios will
acquire stand-by commitments solely to facilitate portfolio liquidity and do
not intend to exercise their rights thereunder for trading purposes.
The Tax-Exempt Portfolio has no policy of seeking particularly to
invest in Municipal Securities issued by or within any single state or select
group of states. However, certain states traditionally are sources of large
amounts of Municipal Securities, e.g., California, Colorado, Florida,
Michigan, New York and Texas. The Portfolio may from time to time have more
than 25% of its assets invested in securities issued by or from any of the
above states. To the extent that the Portfolio's assets are invested in
Municipal Securities issued by or from a single state or a few states, the
Portfolio will be subject to the peculiar risks presented by the laws and
economic conditions relating to such
-16-
<PAGE>
state or states to a greater extent than would be the case if its assets were
not so concentrated. If any state or political subdivision thereof were to
suffer serious financial difficulties jeopardizing its ability to pay its
obligations, the marketability of such obligations held by the Portfolio, and
consequently its net asset value, could be adversely affected.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax (and, with respect to
Michigan Municipal Securities, Michigan income taxes) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Trust
nor its Adviser will review the proceedings relating to the issuance of
Municipal Securities or the bases for such opinions.
Special Risk Considerations Applicable to the Michigan Portfolio
The Michigan Portfolio will under normal market conditions consist of
Michigan Municipal Securities to the extent of 65% or more of its total
assets. This concentration in securities issued by governmental units of only
one state exposes the Portfolio to risk of loss greater than that of a more
diversified portfolio holding securities issued by governmental units of
different states and different regions of the country.
Moreover, the economy of the State of Michigan is heavily dependent
upon the automobile manufacturing industry. This industry is highly cyclical.
This factor affects the revenue streams of the State of Michigan and its
political subdivisions because it impacts tax sources, particularly sales
taxes, income taxes, and Michigan single business taxes.
A state economy during a recessionary cycle would also, as a separate
matter, adversely affect the capacity of users of facilities constructed or
acquired through the proceeds of private activity bonds or other "revenue"
securities to make periodic payments for the use of those facilities.
The heavy concentration of the Michigan Portfolio in Michigan
Municipal Securities and the cyclical nature of the economy of the State of
Michigan may adversely affect the liquidity of the Portfolio.
In 1993 and 1994, Michigan adopted complex statutory and
constitutional changes which, among several other changes in tax methods and
rates, have the effect of imposing limits on annual assessment increases and
of transferring a significant part of the operating cost of public education
from locally based property tax sources to state based sources, including
increased sales tax. These changes will affect state and local revenues of
Michigan governmental units in future years in differing ways, not all of
which can be presently known with certainty.
Guaranteed Investment Contracts
The Money Market Portfolio may make limited investments in guaranteed
investment contracts ("GICs") issued by highly rated U.S. insurance companies.
Pursuant to such contracts, the Portfolio makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Portfolio on a monthly basis guaranteed interest which is
based on an index (in most cases this index will be the Salomon Brothers CD
Index). The GICs provide that this guaranteed interest will not be less than a
certain minimum rate. Generally, a GIC allows a purchaser to buy an annuity
with the monies accumulated under contract; however, the Portfolio will not
purchase any such annuity. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a
GIC becomes a part of the general assets of the issuer, and the contract is
paid from the general assets
-17-
<PAGE>
of the issuer. The Portfolio will only purchase GICs from issuers which meet
quality and credit standards established by the Adviser. Generally, GICs are
not assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Therefore, GICs are considered by the Portfolio to be illiquid investments
subject to the limitation on illiquid investments set forth below.
Restricted Securities
In accordance with its fundamental investment limitation described
below, each Portfolio will not invest more than 10% of the value of its total
assets in securities that are illiquid. Illiquid investments may include
securities having legal or contractual restrictions on resale or no readily
available market, GICs (in the case of the Money Market Portfolio), municipal
lease/purchase agreements (in the case of the Tax-Exempt and Michigan
Portfolios) and instruments (including repurchase agreements, variable and
floating rate instruments and time deposits) that do not provide for payment
to a Portfolio within seven days after notice. Securities that have legal or
contractual restrictions on resale but have a readily available market are not
deemed to be illiquid for purposes of this limitation.
Each Portfolio may purchase securities which are not registered under
the Securities Act of 1933, as amended (the "1933 Act"), but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. Any such security will not be considered to be illiquid so long as
it is determined by the Board of Trustees or the Adviser, acting under
guidelines approved and monitored by the Board, that an adequate trading
market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional buyers
under Rule 144A is a recent development, and it is not possible to predict how
this market will develop. The Board of Trustees will carefully monitor any
investments by the Portfolios in these securities.
Securities of Other Investment Companies
Within the limits prescribed by the 1940 Act, each Portfolio may
invest in securities issued by other investment companies which invest in high
quality, short term debt securities and which determine their net asset value
per share based on the amortized cost or penny-rounding method. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that a Portfolio bears directly in connection with
its own operations.
Miscellaneous
The Trust will give 30 days notice to investors of any material change
in any Portfolio's investment policies.
Investment Limitations
Each Portfolio is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to a particular Portfolio without the affirmative vote
of the holders of a majority of the Portfolio's outstanding shares. Other
-18-
<PAGE>
investment limitations that cannot be changed without a vote of shareholders
are contained in the Statement of Additional Information under "Investment
Objectives, Policies and Risk Factors."
No Portfolio may:
1. Purchase the securities of issuers conducting their principal
business activity in the same industry if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value of its
total assets, provided that (a) utilities will be divided according to their
services, wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of their parents, the personal credit and business
credit businesses will be considered separate industries and (b) there is no
limitation with respect to or arising out of investments in Municipal
Securities in the case of the Tax-Exempt Portfolio and Michigan Portfolio,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, domestic bank obligations, or repurchase agreements by any
of the foregoing.
2. Borrow money, except from banks or through reverse repurchase
agreements, and except for temporary or emergency purposes and then only in
amounts not exceeding at any one time 20% of the value of its net assets at
the time of the borrowing. A Portfolio will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
net assets are outstanding. Borrowings will only be effected in conformity
with the requirements of the 1940 Act.
3. Make loans, except (i) through the purchase of debt obligations in
accordance with its investment objective and policies, (ii) through repurchase
agreements and (iii) through the lending of investment securities.
Each of the Money Market, Government and Tax-Exempt Portfolios may not
invest more than 10% of its total assets in illiquid investments, including
restricted securities, securities having no readily available market
quotations, non-negotiable time deposits maturing in more than seven days, and
repurchase agreements with maturities of more than seven days.
Each of the Treasury and Michigan Portfolios may not invest more than
10% of its total assets in illiquid investments. See "Restricted Securities"
above.
With respect to 75% of its assets, the Tax-Exempt Portfolio may not
invest more than 5% of its assets in the securities of any one issuer, except
U.S. Government obligations. In addition, the Tax-Exempt Portfolio may not
invest less than 80% of its net assets in securities the interest on which is
exempt from federal income tax, except during temporary defensive periods.
The Michigan Portfolio may not:
1. Invest less than 80% of its net assets in securities the interest
on which is exempt from federal income tax, except during temporary defensive
periods or periods of unusual market conditions. For purposes of this
investment limitation, securities the interest on which is treated as a
specific tax preference item under the federal alternative minimum tax are
considered taxable.
2. With respect to 50% of its total assets, invest more than 5% of
its assets in the securities of any one issuer, except U.S. Government
Obligations or securities of other regulated investment companies.
For purposes of the Investment Limitation above applicable to the
Money Market, Government, Treasury and Tax-Exempt Portfolios and No. 2 above
applicable to the Michigan Portfolio: (i) a security is considered to be
issued by the government entity (or entities) whose assets and revenues back
the security, or,
-19-
<PAGE>
with respect to a private activity bond that is backed only by the assets and
revenues of a nongovernmental user, a security is considered to be issued by
such non-governmental user; (ii) in certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee; and (iii) U.S. Government Obligations (including securities
backed by the full faith and credit of the United States) are deemed to be
U.S. Government obligations for purposes of the 1940 Act.
Generally, a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in value of a Portfolio's securities will not constitute a violation of
the limitation for purposes of the 1940 Act.
PURCHASE OF SHARES
In General
Each Portfolio's shares are offered and sold on a continuous basis by
FoM and Essex, as the Trust's Co-Distributors. FoM is a registered
broker/dealer with offices at 100 Renaissance Center, 26th Floor, Detroit,
Michigan 48243. Essex is a registered broker/dealer with offices at 215
Gateway Road West, Napa, California 94558.
Class A shares are sold to the public primarily through financial
institutions such as banks, brokers and dealers. Investors may purchase Class
A shares directly in accordance with the procedures set forth below or through
procedures established by their financial institutions in connection with the
requirements of their accounts.
Financial institutions may impose different minimum investment and
other requirements on their customers and may charge additional fees in
connection with the establishment of accounts with the institutions and
purchase and redemption of Class A shares. Persons wishing to purchase Class A
shares through their accounts at an institution or a Co-Distributor should
contact the institution or Co-Distributor directly for appropriate
instructions and fee information. In addition, certain financial institutions
may enter into shareholder servicing agreements with the Trust whereby they
would perform various administrative support services for their customers who
are the beneficial owners of Class A shares in return for fees from the
Portfolio. See "Shareholder Servicing Plan" under the heading "Management" in
this Prospectus.
All shareholders of record will receive confirmations of share
purchases and redemptions. Class A shares purchased by institutions on behalf
of their customers will normally be held of record by them. Institutions will
record their customers' beneficial ownership of such shares and provide
regular account statements reflecting such beneficial ownership.
Institutions will be responsible for transmitting purchase and
redemption orders to FoM, Essex or NBD acting as transfer agent (the "Transfer
Agent") on a timely basis in accordance with the procedures stated below.
Purchase Procedures
The minimum initial investment is $500 for each Portfolio, except for
purchases through an institution whose clients have invested an aggregate
minimum of $500 or for investments made through a Co-Distributor's or an
institution's sweep privilege, the Trust's Automatic Investment Plan described
below or the Trust's IRA program described below. There is no minimum for
subsequent investments other than those made pursuant to the Automatic
Investment Plan. The Trust reserves the right to reject any purchase order.
-20-
<PAGE>
Orders for Class A shares may be placed by telephone (by calling
(800) 688-3350 (provided an investor has made the appropriate election in his
account application)) or by mail (by completing the account application which
accompanies this Prospectus and mailing the completed form and the payment for
shares to FoM, Essex or the Transfer Agent). Orders received by FoM, Essex or
the Transfer Agent for purchase accompanied by a check or other negotiable
draft will be accepted and executed at the time the net asset value is next
determined after conversion to federal funds, normally two Business Days after
receipt. All checks must be drawn on a bank located within the United States
and must be payable in U.S. dollars. Subsequent investments in an existing
account in a Portfolio may be made at any time by sending a check or money
order along with either (a) the detachable form that regularly accompanies the
Trust's confirmation of a prior transaction, (b) a subsequent order form which
may be obtained from the Trust, or (c) a letter stating the amount of the
investment, the name of the Portfolio and the account number in which the
investment is to be made. If any check used for investment in an account does
not clear, the order will be cancelled and notice thereof will be given; in
such event the account will be responsible for any loss to the Trust as well
as a $15 fee imposed by the Transfer Agent.
In order to afford the Trust a reasonable opportunity to invest funds
that are received on the same day, purchase orders received by a
Co-Distributor or the Transfer Agent with respect to the Tax-Exempt and
Michigan Portfolios by noon, Eastern time, and with respect to the Money
Market, Government and Treasury Portfolios, by 3:00 p.m., Eastern time, will
be executed the same day if NBD, acting as the Portfolios' custodian (the
"Custodian"), has received confirmation of receipt of a wire transfer of
federal funds prior to noon and 3:00 p.m., Eastern time, respectively, and the
shares purchased will thus be eligible for that day's dividend; and otherwise
such purchase will be effected, and dividends will begin to accrue, on the
following Business Day (as defined below). With the exception of the customers
of FoM, Class A shares may also be paid for by wiring federal funds to the
Transfer Agent, NBD Bank, ABA 072000326, for the account of The Woodward
Funds, Account Number GL 325612, and identifying the customer name and account
number. Before wiring payment, customers should notify the Transfer Agent by
calling (800) 688-3350.
If customers of FoM wire payment in federal funds, they should direct
payment to NBD Bank, ABA 072000326, for the Account of First of Michigan
Corporation re: The Woodward Funds, Account Number 059-41, and should identify
the customer name and account number. Before wiring payment, customers of FoM
should call FoM at (800) 544-8275 (outside Michigan) or (800) 852-7730 (within
Michigan).
The Trust will not accept payment in cash or third party checks for
the purchase of shares. Federal regulations require that each shareholder
provide a certified taxpayer identification number upon opening or reopening
an account. Applications without a taxpayer identification number will not be
accepted. See the account application for further information about this
requirement.
Net Asset Value and Pricing of Shares
The net asset value of each Portfolio for purposes of pricing purchase
and redemption orders is determined by the Adviser as of noon and as of 3:00
p.m., Eastern Time, on each day the New York Stock Exchange ("Exchange"), NBD
Bank or its bank affiliates are open for business ("Business Day") except:
(i) those holidays which the Exchange, NBD Bank or its bank affiliates
observe (currently New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day);
and (ii) those Business Days on which the Exchange closes prior to the
close of its regular trading hours ("Early Closing Time"), in which event
the net asset value of
-21-
<PAGE>
each Portfolio will be determined and its shares will be Priced as of such
Early Closing Time. Net asset value per Class A share of a Portfolio is
calculated by dividing the value of all securities and other assets belonging
to the Portfolio allocable to that Class A, less the liabilities charged to
that Class A, by the number of the outstanding shares of such Class A.
The assets in each Portfolio are valued based upon the amortized cost
method. Although the Trust seeks to maintain the net asset value per share of
the Portfolios at $1.00, there can be no assurance that the net asset value
will not vary.
REDEMPTION OF SHARES
In General
Redemption orders are effected at the net asset value next determined
after receipt by the Transfer Agent of a proper notice of redemption in
accordance with the procedures set forth below.
Redemption orders must be placed with or through the same financial
institution that placed the original purchase order. It is the responsibility
of the financial institutions to transmit redemption orders to the Transfer
Agent. Redemption proceeds are paid by check or credited to the investor's
account with his financial institution. Investors who purchased shares
directly from the Trust should follow the redemption procedures set forth
below.
Redemption Procedures
Written and telephone redemption requests will be effected on the same
Business Day if the request is received by the Transfer Agent with respect to
the Tax-Exempt and Michigan Portfolios before noon, Eastern time, and with
respect to the Money Market, Government and Treasury Portfolios, before 3:00
p.m. Eastern time. Redemption requests received after noon and 3:00 p.m.,
Eastern time, respectively, will normally be effected on the next Business Day
(and in any event within seven calendar days).
Shareholders of record may redeem shares in any amount by calling
(800) 688-3350 (provided they have made the appropriate election on the account
application) or by sending a written request to The Woodward Funds, c/o NBD
Bank, P.O. Box 7058, Troy, Michigan 48007-7058. Written requests to redeem
shares having a net asset value of more than $50,000 must have all signatures
of the registered owner(s) or their authorized legal representative guaranteed
by a commercial bank or trust company which is a member of the Federal Reserve
System or FDIC, a member firm of a national securities exchange or a savings
and loan association. A signature guaranteed by a savings bank or notarized by
a notary public is not acceptable. A signature guarantee will also be required
for redemption requests (in any amount) if the address of record for the
account has been changed within the previous 15 days or which requests that
the proceeds be paid to an account other than the one preauthorized on the
application, a payee or payees other than the registered owners of the
account, or an address other than the address of record. The Trust may require
additional supporting documents for redemptions made by corporations,
fiduciaries, executors, administrators, trustees, guardians and institutional
investors.
Redemption orders for Class A shares may be placed through an
institution or directly by telephone by calling (800) 688-3350. During periods
of unusual economic or market changes, telephone redemptions may be difficult
to implement. In such event, shareholders should mail their redemption
requests to their financial institutions or The Woodward Funds, c/o NBD Bank
at the address shown above. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed
-22-
<PAGE>
to be genuine. In attempting to confirm that telephone instructions are
genuine, the Trust and its Transfer Agent will use such procedures as are
considered reasonable, including recording those instructions and requesting
information as to account registration (including, but not limited to, the
name in which an account is registered, the account number, or recent
transactions in the account). To the extent that the Trust and its Transfer
Agent fail to use reasonable procedures to verify the genuineness of telephone
instructions, they may be liable for such instructions that prove to be
fraudulent and unauthorized. In all other cases, shareholders will bear the
risk of loss for fraudulent telephone transactions.
Shareholders will not be credited with dividends on shares being
redeemed on the date of redemption. If a shareholder redeems all of his shares
in a Portfolio (which must be effected through a written redemption request),
he will receive, in addition to the net asset value of the shares, all
declared but unpaid dividends thereon.
Other Redemption Information
The Trust will make payment for redeemed shares within the time period
prescribed by the settlement requirements of the Securities Exchange Act of
1934. After receipt by the Transfer Agent of a request in proper form, except
as provided by the rules of the SEC. If shares to be redeemed were purchased
by check, the Trust will transmit the redemption proceeds promptly upon
clearance of such check, which could take up to fifteen days from the purchase
date. A shareholder having purchased shares by wire must have filed an account
application before any redemption requests can be honored.
Currently, the Trust imposes no charge when shares are redeemed.
However, institutions may charge a fee for providing services in connection
with investments in Portfolio shares; NBD currently charges $16 for wire
transactions. The Trust reserves the right to redeem accounts involuntarily,
after sixty days' notice, if redemptions cause the account's value to remain
at $400 or less. The Trust may also redeem shares of the Portfolio
involuntarily or make payment for redemption in securities or other property
if it is appropriate to do so in light of the Trust's responsibilities under
the 1940 Act.
Questions concerning the proper form for redemption requests should be
directed to the Transfer Agent at (800) 688-3350 or an investor's institution.
Redemption Draft Privilege
The Trust will provide each shareholder, upon request with drafts
("Redemption Drafts") which may be drawn on a Portfolio. Redemption Drafts may
be made payable to the order of any person in any amount not less than $500.
This privilege does not constitute a banking function and owning shares in a
Portfolio is not equivalent to a bank checking account. When a shareholder
presents a Redemption Draft for payment, a sufficient number of whole and
fractional shares in his Portfolio account will be redeemed to cover the
amount of the Redemption Draft. To use this method of redemption, a
shareholder must complete and file an authorization form contained in the
account application; an initial supply of Redemption Drafts will be mailed
within two or three weeks thereafter. At the date of this Prospectus there is
no charge for this service.
SHAREHOLDER SERVICES
The shareholder services and privileges under this heading may not be
available to certain clients of particular financial institutions, and some
may impose conditions on their clients that are different from those described
below.
-23-
<PAGE>
Investors should consult their own financial institutions in this regard.
Other investors should direct any questions to the Transfer Agent. The Trust
may modify or terminate any of the following services and privileges at any
time.
Exchange Privilege
Investors may exchange Class A shares which have been owned for at
least thirty days of the Money Market, Government, Treasury, Tax-Exempt and
Michigan Portfolios, of the Woodward Equity Index Fund and of other investment
portfolios of the Trust which may be offered in the future and sold without a
sales charge (each a "no load portfolio") and Class A shares which have been
owned for at least thirty days of the Woodward Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced, International Equity, Intermediate
Bond, Bond, Short Bond, Municipal Bond or Michigan Municipal Bond Funds and of
other investment portfolios of the Trust which may be offered in the future
and sold with a sales charge (each a "load portfolio"). The cost of the
acquired Class A shares will be their net asset value plus the applicable
sales load, if any. Class A shares of a no load portfolio may be exchanged for
Class A shares of another no load portfolio without payment of any sales load.
Any exchange of Class A shares of a no load portfolio for Class A shares of a
load portfolio will be subject to the payment of the applicable sales load,
unless the investor is exchanging shares of a no load portfolio which were
received in a previous exchange transaction involving Class A shares of a load
portfolio. In such case, the investor will receive the appropriate credit for
the sales load previously paid. Shareholders contemplating an exchange should
carefully review the Prospectus of the portfolio into which the exchange is
being considered which may be obtained from an investor's financial
institution or from the Transfer Agent by calling (800) 688-3350.
Exchanges will be effected by a redemption of Class A shares of the
portfolio held and the purchase of Class A shares of the portfolio acquired.
Investors should make their exchange requests in writing or by telephone to
the financial institutions through which they purchased their original Class A
shares. It is the responsibility of financial institutions to transmit
exchange requests to the Transfer Agent. Other investors should transmit
exchange requests directly to the Transfer Agent. The total value of shares
being exchanged must at least equal the minimum investment requirement of the
portfolio whose shares are being acquired in the exchange. Only one exchange
in any thirty-day period is permitted and only Class A shares that may be
legally sold in the state of the investor's residence may be acquired in an
exchange. The Trust reserves the right to reject any exchange request.
Investors wishing to make an exchange should contact their financial
institutions or the Transfer Agent (as appropriate). Exchange requests in the
required form which are received by the Transfer Agent with respect to the
Tax-Exempt and Michigan Portfolios prior to noon, Eastern time, and with
respect to the Money Market, Government and Treasury Portfolios, prior to
3:00 p.m., Eastern time, will be effected on the same Business Day after such
request is received. Requests received after noon and 3:00 p.m., Eastern time,
respectively, will be effected on the next Business Day after such request is
received. During periods of significant economic or market change, telephone
exchanges may be difficult to complete. In such event, an investor should mail
the exchange request to his financial institution or the Transfer Agent.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of instructions received by telephone that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions
are genuine, the Trust and its Transfer Agent will use such procedures as are
considered reasonable, including recording those instructions and requesting
information as to account registration (including, but not limited to, the
name in which an account is registered, the account number, or recent
transactions in the account). To the extent that the Trust and its Transfer
Agent fail to use reasonable procedures to verify the genuineness
-24-
<PAGE>
of telephone instructions, they may be liable for such instructions that prove
to be fraudulent and unauthorized. In all other cases, shareholders will bear
the risk of loss for fraudulent telephone transactions. The Trust reserves the
right to modify or terminate its exchange procedures upon sixty days' notice
to shareholders.
Option to Make Systematic Withdrawals
The Trust has available to shareholders a Systematic Withdrawal Plan
pursuant to which a shareholder who owns Class A shares of any investment
portfolio having a minimum value of $5,000 at the time he elects under the
Plan may have a fixed sum distributed in redemption at regular intervals. An
application form and additional information regarding this service may be
obtained from an investor's financial institution or the Transfer Agent (by
calling (800) 688-3350).
Automatic Investment
The Trust offers an Automatic Investment Plan (the "Plan") whereby a
shareholder may automatically purchase Class A shares on a regular basis in
accordance with an election in his account application. An application may be
obtained from the Transfer Agent by calling (800) 688-3350. Under the Plan, a
shareholder's financial institution debits a pre-authorized amount from his
account and applies the amount to the purchase of Class A shares. The minimum
per transaction is $25. The minimum initial investment in a Portfolio is also
$25 for the following shareholders who elect the Plan: (1) current and retired
directors, officers and employees of NBD or any of its affiliates; (2) the
trustees, former trustees and officers of the Trust; (3) broker/dealers which
have entered into an agreement with a Co-Distributor or the Trust pursuant to
the Trust's Distribution Plan or Shareholder Servicing Plan and their
representatives purchasing for their own accounts; and (4) spouses, children,
grandchildren, siblings, parents, grandparents and in-laws of individuals
referred to in paragraphs (1), (2) and (3) above. An NAV Account Application
may be obtained from the Transfer Agent by calling (800) 688-3350. The Plan
can be implemented with any financial institution that is a member of the
Automated Clearing House. No service fee is currently charged by the Trust for
participating in the Plan. Death or legal incapacity will terminate a
shareholder's participation in the Plan. Deposits, withdrawals and adjustments
will be made electronically under the rules of the Automated Clearing House
Association.
Cross Reinvestment of Dividend Plan
The Trust makes available to shareholders a Cross Reinvestment of
Dividend Plan (the "Plan") pursuant to which a shareholder who owns Class A
shares of any portfolio with a minimum value of $10,000 at the time he elects
under the Plan may have dividends paid by such portfolio automatically
reinvested into Class A shares of another portfolio in which he has invested a
minimum of $500. Shareholders may obtain an application and additional
information from an investor's financial institution or the Transfer Agent by
calling (800) 688-3350.
The Woodward Funds Individual Retirement Custodial Account
Class A shares may be purchased in conjunction with the Trust's
Individual Retirement Custodial Account program ("IRA") where NBD acts as
custodian. Investors should consult their institutions or a Co-Distributor for
information as to applications and annual fees. The minimum investment for an
IRA is $250 for investors who are not employees of NBD and $25 for investors
who are
-25-
<PAGE>
employees of NBD. Investors should also consult their tax advisers to
determine whether the benefits of an IRA are available or appropriate.
Other Retirement Plans
NBD and its affiliates offer a variety of pension and profit sharing
plans including IRAs, defined contribution plans, 401(k) Plans, 403(b)(7)
Plans and 451 Plans through which shareholders may purchase Class A shares.
The minimum investment for these Plans may differ from the minimum discussed
above in "Purchase of Shares." For details concerning any of the retirement
plans, please call the Transfer Agent or a Co-Distributor.
Direct Deposit Program
If an investor receives federal salary, social security, or certain
veteran's, military or other payments from the federal government or elects to
use his employer's payroll deposit program, he is eligible for the Direct
Deposit Program. With this Program, an investor may purchase Class A shares
(minimum of $25) by having these payments automatically deposited into his
Portfolio account. For instructions on how to enroll in the Direct Deposit
Program, an investor should call his institution or the Transfer Agent. Death
or legal incapacity will terminate an investor's participation in the Program.
An investor may elect at any time to terminate his participation by notifying
in writing the appropriate federal agency. Further, the Trust may terminate an
investor's participation upon thirty days' notice to him.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders the
performance and yields of each class of shares of the Portfolios may be quoted
and compared to those of other mutual funds with similar investment objectives
and to stock or other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the yields of the Money Market,
Government and Treasury Portfolios may be compared to the Donoghue's Money
Fund Average, Donoghue's Government Money Fund Average and Donoghue's Treasury
Money Fund Average, respectively, which are averages compiled by
IBC/Donoghue's Money Fund Report, a widely recognized independent publication
that monitors the performance of money market funds, or to the average yields
reported by the Bank Rate Monitor for money market deposit accounts offered by
the 50 leading banks and thrift institutions in the top five standard
metropolitan statistical areas. The yields of the Tax-Exempt Portfolio and
Michigan Portfolio may be compared to the Donoghue's Tax-Free Money Fund
Average. Performance and yield data as reported in national financial
publications including, but not limited to, Money Magazine, Forbes, Barron's,
The Wall Street Journal and The New York Times, or in publications of a local
or regional nature, may also be used in comparing the performance and yields
of the Portfolios.
"Yield" refers to the income generated in a class of shares of a
Portfolio over a seven-day period identified in the advertisement. This income
is annualized, i.e., the income during a particular week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. Each Portfolio may also advertise its "effective yield" which is
calculated similarly but, when annualized, income is assumed to be reinvested,
thereby making the "effective yield" slightly higher because of the
compounding effect of the assumed reinvestment. The Tax-Exempt Portfolio and
Michigan Portfolio may from time to time advertise a "tax-equivalent yield" to
demonstrate the level of taxable yield necessary to produce an after-tax yield
equivalent to that achieved by the Portfolios. The "tax-equivalent yield" will
be computed by dividing the
-26-
<PAGE>
tax-exempt portion of a Portfolio's yield by a denominator consisting of one
minus a stated federal (and/or Michigan) income tax rate and adding the
product to that portion, if any, of the Portfolio's yield which is not
tax-exempt.
Performance of each class of shares is based on historical earnings
and will fluctuate and is not intended to indicate future performance. Since
yields fluctuate, yield data cannot necessarily be used to compare an
investment in a class' shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed
yield for a stated period of time. Performance and yield are generally
functions of kind and quality of the instruments held in a portfolio,
portfolio maturity, operating expenses, and market conditions. Any fees
charged by financial institutions directly to their customer accounts in
connection with investments in shares will not be reflected in performance
calculations.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's net investment income will be declared daily as a
dividend to shareholders of record at the close of business on the day of
declaration. Shareholders will receive dividends in additional Class A shares
of the applicable Portfolio unless they elect to receive cash. Shareholders
must make such election, or any revocation thereof, in writing to their
financial institutions or the Transfer Agent. If an account is established
with telephone privileges, the registered owner or his preauthorized legal
representative may change the election to receive dividends in cash to an
election to receive dividends in shares by telephoning the Transfer Agent
at (800) 688-3350. The election will become effective with respect to
dividends paid after its receipt. Reinvestment or payment of dividends will
be effected monthly at the net asset value per Class A share of the applicable
Portfolio on the date effected, and will include fractional shares if
necessary. If cash payment is requested, checks will be mailed within five
Business Days after the last day of each month.
TAXES
Federal Taxes
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for federal income taxes to
the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company for a taxable year
requires, among other things, that each Portfolio distribute to its
shareholders an amount equal to at least the sum of 90% of its tax-exempt
interest income net of certain deductions and 90% of its investment company
taxable income for each taxable year. In general, a Portfolio's investment
company taxable income will be its taxable income, including interest, subject
to certain adjustments and excluding the excess of any net long term capital
gain for the taxable year over the net short term capital loss, if any, for
such year. Each Portfolio's policy is to distribute as dividends substantially
all of its investment company taxable income each year. Such dividends will be
taxable as ordinary income to the Portfolio's shareholders who are not
currently exempt from federal income taxes, whether such income or gain is
received in cash or reinvested in additional shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) In the case of the
Tax-Exempt Portfolio and Michigan Portfolio, dividends derived from tax-exempt
interest income ("exempt-interest dividends") may be treated by shareholders
as items of interest excludable from their gross income under Section 103(a)
of the Code unless under the circumstances applicable to the particular
shareholder the exclusion would be disallowed. (See Statement of
-27-
<PAGE>
Additional Information under "Additional Information Concerning Taxes.") An
exempt-interest dividend is any dividend or part thereof (other than a capital
gain dividend) paid by the Tax-Exempt Portfolio or Michigan Portfolio and
designated as an exempt-interest dividend in a written notice mailed to
shareholders not later than sixty days after the close of the Portfolio's
taxable year which does not exceed in its aggregate the net Municipal
Securities interest received by the Portfolio for the taxable year. It is
anticipated that no part of any distribution by the Portfolios will be
eligible for the dividends received deduction for corporations. In addition,
none of the Portfolios expects to pay capital gain dividends within the
meaning of the Code.
If the Tax-Exempt Portfolio or Michigan Portfolio should hold certain
private activity bonds issued after August 7, 1986, shareholders must include,
as an item of tax preference, the portion of dividends paid by the Portfolio
that is attributable to interest on such bonds in their federal alternative
minimum taxable income for purposes of determining liability (if any) for the
alternative minimum tax applicable to individuals and corporations and the
environmental tax applicable to corporations. Corporate shareholders must also
take all exempt-interest dividends into account in determining certain
adjustments for alternative minimum and environmental tax purposes.
Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Portfolio on
December 31 of such year if such dividends are actually paid during January of
the following year.
Shareholders will be advised at least annually as to the federal
income tax consequences of distributions made each year.
State and Local Taxes
Dividends paid by the Tax-Exempt Portfolio and Michigan Portfolio that
are derived from interest attributable to tax-exempt Michigan Municipal
Securities will be exempt from Michigan income tax, Michigan intangibles tax
and Michigan single business tax. Conversely, to the extent that the
Portfolios' dividends are derived from interest on obligations other than
Michigan Municipal Securities or certain U.S. Government Obligations (or are
derived from short term or long term gains), such dividends will be subject to
Michigan income tax, Michigan intangibles tax and Michigan single business
tax, even though the dividends may be exempt for federal income tax purposes.
The Portfolios are unable to predict in advance the portion of their dividends
that will be derived from interest on Michigan Municipal Securities, but will
mail to their respective shareholders not later than sixty days after the
close of the Portfolios' taxable year a written notice containing information
as to the interest derived from Michigan obligations and exempt from Michigan
income tax, Michigan intangibles tax and Michigan single business tax.
Except as noted above with respect to Michigan income taxation,
distributions of net income may be taxable to investors as dividend income
under other state or local laws even though a substantial portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes.
The Trust may be subject to state or local taxes in jurisdictions in
which the Trust may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of the Trust
and its shareholders under such laws may differ from treatment under federal
income tax laws. In certain states, review with a shareholder's tax adviser of
the effect of portfolio investments in repurchase agreements and U.S.
Government Obligations
-28-
<PAGE>
upon state income taxation may be appropriate. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes, which may have different tax consequences from those of the federal
income tax laws.
MANAGEMENT
Trustees and Officers of the Trust
The Board of Trustees of the Trust is responsible for the management
of the business and affairs of the Trust. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each Trustee has an address at The Woodward Funds c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226.
*Earl I. Heenan, Jr., Chairman and President
Director (since 1995), Vice Chairman (1988-1995) and President
(1955-1988), Detroit Mortgage & Realty Company; President (1989-1992) and
Trustee (since 1966), Cottage Hospital of Grosse Pointe (affiliate of Henry
Ford Health System); Trustee, Henry Ford Health Sciences Center (since 1987);
Trustee, Henry Ford Continuing Care Corporation (since 1980); Trustee,
Earhart Foundation (since 1980). He is 77 years old and his address is
333 West Fort Street, Detroit, Michigan 48226.
*Eugene C. Yehle, Trustee and Treasurer
Retired; Director of Investor Relations and Pension Investments, Dow
Chemical Company (1972-1985); Trustee, Alma College (since 1978); Trustee
(since 1977) and Chairman (since 1983), Charles J. Strosacker Foundation;
Trustee (1989-1993), Higgins Lake Foundation. He is 75 years old and his
address is 4501 Linden Drive, Midland, Michigan 48640.
Will M. Caldwell, Trustee
Retired; Executive Vice President, Chief Financial Officer and
Director, Ford Motor Company (1979-1985); Director, First Nationwide Bank
(1986-1991); Director, Air Products & Chemicals, Inc. (since 1985); Director,
Zurich Holding Company of America (since 1990); Director, The Batts Group,
Ltd. (since 1986); Trustee and Vice Chairman, Detroit Medical Center
(1986-1991); Trustee Emeritus and Chairman of the Pension Investment
Sub-Committee, Detroit Medical Center (since 1991). He is 70 years old and his
address is 2733 Glenbrook Court, Bloomfield Hills, Michigan 48302.
Nicholas J. De Grazia, Trustee
Consultant, Lionel L.L.C. (since 1995); President, Chief Operating
Officer and Director, Lionel Trains, Inc. (1990-1995); Vice President-Finance
and Treasurer, University of Detroit (1981-1990); President (1986-1990) and
Director (1986-1995), Polymer Technologies, Inc.; President, Florence
Development Company (1987-1990); Chairman (since 1994) and Director
(1992-1995), Central Macomb County Chamber of Commerce; Vice Chairman, Michigan
Higher Education Facilities Authority (since 1991). He is 53 years old and his
address is 3650 Shorewood Drive, North Lakeport, Michigan 48059.
- --------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
-29-
<PAGE>
John P. Gould, Trustee
Steven G. Rothmeier Professor (since January, 1996); Distinguished
Service Professor of Economics of the University of Chicago Graduate School
of Business (since 1984); Dean of the University of Chicago Graduate School
of Business (1983-1993); Member of Economic Club of Chicago and Commercial
Club of Chicago; Director of Harbor Capital Advisors and Dimensional Fund
Advisors; Trustee, Prairie Family of Funds. He is 57 years old and his address
is University of Chicago Graduate School of Business, 1101 East 58th Street,
Chicago, Illinois 60637.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University (since 1985); Director of Planning and Policy Development for the
University of Colorado (1981-1985); Member of the Board of Directors of
Evanston Hospital, Chicago Metropolitan YMCA, Chicago Network and United
Charities; Member of the Chicago Economics Club; Trustee, Prairie Family of
Funds. She is 48 years old and her address is 1100 North Lake Shore Drive,
Chicago, Illinois 60611.
Julius L. Pallone, Trustee
President, J.L. Pallone Associates, Consultants (since 1994); Chairman
of the Board (1974-1993), Maccabees Life Insurance Company; President and
Chief Executive Officer, Royal Financial Services (1991-1993); Director,
American Council of Life Insurance of Washington, D.C. (life insurance
industry association) (1988-1993); Director, Crowley, Milner and Company
(department store) (since 1988); Trustee, Lawrence Institute of Technology
(since 1982); Director, Detroit Symphony Orchestra (since 1985); Director,
Oakland Commerce Bank (since 1984) and Michigan Opera Theater (since 1981). He
is 65 years old, and his address is 26957 Northwestern Highway, Suite 288,
Southfield, Michigan 48034.
*Donald G. Sutherland, Trustee
Partner of the law firm Ice, Miller, Donadio & Ryan, Indianapolis,
Indiana. He is 67 years old, and his address is One American Square, 34th
Floor, Indianapolis, Indiana 46204.
Donald L. Tuttle, Trustee
Vice President (since 1995), Senior Vice President (1992-1995),
Association for Investment Management and Research; Senior Professor of
Finance, Indiana University (1970-1991); Vice President, Trust &
Investment Advisers, Inc. (1990-1991); Director, Federal Home Loan Bank
of Indianapolis (1981 to 1985). He is 61 years old, and his address is
5 Boar's Head Lane, Charlottesville, Virginia 22903.
W. Bruce McConnel, III, Secretary
Partner of the law firm Drinker Biddle & Reath, Philadelphia,
Pennsylvania. He is 53 years old, and his address is 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. Additional
information on the compensation paid by the Trust to its Trustees and officers
is included in the Statement of Additional Information.
- -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
-30-
<PAGE>
Investment Adviser; Custodian and Transfer Agent
The investment adviser of the Trust is NBD, a wholly owned subsidiary
of First Chicago NBD Corporation, a bank holding company. As of December 31,
1995, NBD was providing investment management and advisory services for
accounts aggregating approximately $37.9 billion of which in excess of $3.7
billion were money market instruments. NBD has been in the business of
providing such services since 1933. Included among NBD's accounts are pension
and profit sharing funds for major corporations and state and local
governments, as well as commingled trust funds and a variety of institutional
and personal advisory accounts, estates and trusts, all of which are potential
customers for shares of the Trust. NBD also acts as investment adviser for
other registered investment company portfolios.
Under the Advisory Agreement, NBD is subject to the general
supervision of the Trust's Board of Trustees and manages each Portfolio in
conformance with the stated policies of the Trust. In this regard, it is the
responsibility of NBD to make investment decisions for the Trust and to place
all purchase and sale orders for its portfolio transactions. Under the
Advisory Agreement, NBD also provides the Trust with certain administrative
services, such as maintaining the Trust's general ledger and assisting in the
preparation of various regulatory reports.
NBD is entitled to receive fees for advisory and administrative
services provided to the Portfolios, computed daily and payable monthly, at
annual rates of: (i) .45% of the first $1.0 billion of each of the Money
Market, Government, Treasury and Tax-Exempt Portfolio's average daily net
assets, .425% of the next $1.0 billion, and .40% of each such Portfolio's
average daily net assets in excess of $2.0 billion; and (ii) .50% of the
average daily net assets of the Michigan Portfolio. In addition, NBD is
entitled to 4/10ths of the gross income earned by a Portfolio on each loan of
securities (excluding capital gains and losses, if any). NBD may, however,
waive its fees in whole or in part. (The Trust will give 30 days notice to
investors of the discontinuance of advisory fee waivers.)
NBD also receives compensation as the Trust's Custodian and Transfer
Agent under separate agreements. The fees payable by the Portfolios for these
services are described in the Statement of Additional Information.
NBD is reimbursed for postage and other out-of-pocket expenses in
connection with the above duties and also receives compensation from the Trust
for costs associated with clearing redemption drafts through NBD, and for its
standard bank charges for processing lock box deposits, processing redemption
drafts, and performing other services.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling, or distributing the shares of a
registered, open-end investment company continuously engaged in the issuance
of its shares, and prohibit banks generally from underwriting securities, but
do not prohibit such a bank holding company or affiliate from acting as
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of a
customer. NBD and the Trust believe that NBD may perform the advisory,
custodial and transfer agency services for the Trust described in this
Prospectus, and that NBD, subject to such banking laws and regulations, may
perform the shareholder services contemplated by this Prospectus, without
violation of such banking laws or regulations. However, future changes in
legal requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent NBD from continuing to perform investment advisory, custodial or
transfer agency services for the Trust or require NBD to alter or discontinue
the services it provides to shareholders.
-31-
<PAGE>
If NBD were prohibited from performing investment advisory, custodial
or transfer agency services for the Trust, it is expected that the Board of
Trustees of the Trust would recommend that shareholders approve new agreements
with another entity or entities qualified to perform such services and
selected by the Board. If NBD or its affiliates were required to discontinue
all or part of its shareholder servicing activities, their customers would be
permitted to remain the beneficial owners of Trust shares and alternative
means for continuing the servicing of such customers would be sought. The
Trust does not anticipate that investors would suffer any adverse financial
consequences as a result of these occurrences.
Sponsors and Co-Distributors
FoM, a Delaware corporation and a wholly owned subsidiary of First of
Michigan Capital Corporation, is a sponsor and Co-Distributor of the Trust's
shares. It is engaged in the securities underwriting and securities and
commodities brokerage business and is a member of the New York Stock Exchange,
Inc., other major securities and commodities exchanges, and the National
Association of Securities Dealers, Inc. FoM participates as a member of
various selling groups or as agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of their
securities and sells securities to such companies as a broker or dealer in
securities. On December 31, 1995, FoM had a net worth of $37,231,000.
Essex, a New York corporation, is a wholly owned subsidiary of CUC
International, Inc. Essex is engaged in the business of securities brokerage
through financial institutions and is a member of the National Association of
Securities Dealers, Inc. Essex has entered into dealer agreements with the
distributors of various investment companies and executes orders on behalf of
such companies for the purchase and sale of their securities. As of December
31, 1995, Essex had a net worth of $1,945,000.
FoM and Essex act as sponsors and Co-Distributors of the Trust's
shares pursuant to the Distribution Agreement with the Trust which has been
entered into pursuant to the Distribution Plan described below. Neither FoM
nor Essex receives a sales load in connection with the sale of the Portfolios'
shares.
Service and Distribution Plan
The Trust has adopted its Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"). Under the Plan, the Trust incurs expenses
primarily intended to result in the sale of the Trust's shares in an amount
not to exceed .35 of 1% of the value of each portfolio's average daily net
assets calculated as follows in the case of the Portfolios: (i) fees payable
to the Co-Distributors pursuant to the Distribution Agreement; (ii) the
actual costs and expenses in connection with advertising and marketing the
Portfolios' shares; and (iii) fees pursuant to agreements with securities
dealers, financial institutions, and other professionals ("Service Agents")
for administration or servicing of Portfolio shareholders ("Servicing").
Servicing may include, among other things: answering client inquiries
regarding the Trust and the Portfolios; assisting clients in changing dividend
options, account designations and addresses; performing sub-accounting;
establishing and maintaining shareholder accounts and records; processing
purchase and redemption transactions; investing client cash account balances
automatically in Portfolio shares; providing periodic statements showing a
client's account balance and integrating such statements with those of other
transactions and balances in the client's other accounts serviced by the
Service Agent; arranging for bank wires; and such other services as the Trust
may request, to the extent the Service Agent is permitted by applicable
statute, rule or regulation. Under the Plan, the Trust also bears the cost of
preparing and printing Prospectuses for use in selling shares of the
-32-
<PAGE>
Trust and costs associated with implementing and operating the Plan. These
costs are included in computing the .35 of 1% limitation set forth above.
Pursuant to the Distribution Agreement, FoM is entitled to receive a
fee at the annual rate of .025% of the aggregate average net assets invested
in the Portfolios up to $400,000,000 and .005% of such assets in excess of
$400,000,000, and Essex is entitled to receive a fee at the annual rate of
.10% of the aggregate average net assets of the Trust's investment portfolios
attributable to investments by clients of Essex. The payments to be made to
the Co-Distributors which are based on a percentage of the net assets of the
Portfolios are designed to compensate the Co-Distributors for their
participation in the distribution of the Portfolios' shares and to reimburse
the Co-Distributors for certain distribution costs. Nonreimbursable expenses
of the Co-Distributors include salaries of executives, sales and clerical
personnel performing services for the Trust and overhead expenses. Such costs
are by their nature not subject to precise quantification and the Trustees
have determined that the fees to be paid to the Co-Distributors are reasonable
under the circumstances.
If current restrictions under the Glass-Steagall Act were relaxed, the
Trust expects that NBD would consider the possibility of offering to perform
some or all of the services now provided by the Co-Distributors. Legislation
modifying such restrictions has been proposed in past Sessions of Congress
which, if enacted, would permit a bank holding company to establish a non-bank
subsidiary having the authority to organize, sponsor and distribute shares of
an investment company. If such legislation were enacted, the Trust expects
that NBD's parent bank holding company would consider the possibility of one
of its non-bank subsidiaries offering to perform some or all of the services
now provided by the Co-Distributors. It is not possible, of course, to predict
whether or in what form legislation might be enacted or the terms upon which
NBD or such a non-bank affiliate might offer to provide such services.
Shareholder Servicing Plan
Pursuant to a Shareholder Servicing Plan ("Servicing Plan") adopted by
its Board of Trustees, the Trust may enter into agreements with banks and
financial institutions, which may include the Adviser and its affiliates
("Shareholder Servicing Agents"), under which they will render shareholder
administrative support services for their customers who beneficially own Class
A shares of the Portfolios. Such services, which are described more fully in
the Statement of Additional Information, may include processing purchase and
redemption requests from customers, placing net purchase and redemption orders
with the Co- Distributors; processing, among other things, distribution
payments from the Trust, providing necessary personnel and facilities to
establish and maintain customer accounts and records, and providing
information periodically to customers showing their positions in Class A
shares.
For these services, the Trust will pay fees to Shareholder Servicing
Agents at an annual rate of up to .25% of the average daily net asset value of
Class A shares held by such Shareholder Servicing Agents for the benefit of
their customers and, at the Trust's option, it may reimburse the Shareholder
Servicing Agents' out-of-pocket expenses. Shareholder Servicing Agents are
required to provide their customers with a schedule of any credits, fees or
other conditions that may be applicable to the investment of customer assets
in Class A shares. The fees payable under such servicing agreements will be
allocated exclusively to the Class A shares in each Portfolio.
Conflict of interest restrictions may apply to the receipt of
compensation paid by the Trust to a Shareholder Servicing Agent in connection
with the investment of fiduciary funds in Portfolio shares. Banks and other
institutions regulated by the Comptroller of the Currency or other federal or
state regulatory agencies, and investment advisers and other money managers
subject to the
-33-
<PAGE>
jurisdiction of the SEC, the Department of Labor or state securities
commissions, are urged to consult legal counsel before entering into servicing
agreements.
Trust Expenses
The Trust is responsible for the payment of its expenses. These
include, for example, fees payable to NBD as Adviser, or expenses otherwise
incurred by the Trust in connection with the management of the investment of
the Trust's assets, the fees and expenses of NBD as the Trust's Custodian and
as its Transfer Agent, the fees payable to the Co-Distributors under the
Distribution Agreement, the fees and expenses of Trustees, expenses associated
with the Trust's Distribution Plan and Shareholder Servicing Plan, outside
auditing and legal expenses, all taxes and corporate fees payable by the
Trust, SEC fees, state securities qualification fees, costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders, costs to shareholder reports and shareholder meetings, and any
extraordinary expenses. Each Portfolio also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular portfolio of the Trust will
be charged to that portfolio, and expenses not readily identifiable as
belonging to a particular portfolio will be allocated by the Board of Trustees
among one or more portfolios in such a manner as it deems fair and equitable.
For the fiscal year ended December 31, 1995, the Money Market, Government,
Treasury, Tax-Exempt and Michigan Portfolios' total expenses were .51%, .51%,
.53%, .53% and .69% (after fee waivers), if any of their average net assets,
respectively. The Statement of Additional Information describes in more detail
the fees and expenses borne by the Trust.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on April 21,
1987 under a Declaration of Trust, which was amended and restated as of May 1,
1992. The Trust is a series fund having seventeen series of shares of
beneficial interest, each of which evidences an interest in a separate
investment portfolio. The Declaration of Trust permits the Board of Trustees
to issue an unlimited number of full and fractional shares and to create an
unlimited number of series of shares ("Series") representing interests in a
portfolio and an unlimited number of classes of shares within a Series. In
addition to the Portfolios described herein, the Trust offers the following
investment portfolios: the Woodward Intermediate Bond Fund, Bond Fund, Short
Bond Fund, Municipal Bond Fund, Michigan Municipal Bond Fund, Growth/Value
Fund, Opportunity Fund, Intrinsic Value Fund, Capital Growth Fund, Balanced
Fund, International Equity Fund and Equity Index Fund. The Trust has
established the following two distinct classes of shares within each
Portfolio described herein: Class I shares (Special Class 1) and
Class A shares (Original Class). A sales person and any other person or
institution entitled to receive compensation for selling or servicing shares
may receive different compensation with respect to different classes of shares
in the Series.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and each Series
entitled to vote on a matter will vote thereon in the aggregate and not by
Series, except as otherwise expressly required by law or when the Board of
Trustees determine that the matter to be voted on affects only the interests
of shareholders of a particular Series. In addition, shareholders of each of
the Series have equal voting rights except that only shares of a particular
class within a Series are entitled to vote on matters affecting only that
class. Voting rights are not cumulative, and accordingly, the holders of more
than 50% of the aggregate number of shares of all Trust portfolios may elect
all of the Trustees.
-34-
<PAGE>
As of March 29, 1996, NBD held beneficially or of record
approximately 30.70%, 15.67%, 7.64%, 41.45% and 16.85% of the outstanding
shares of the Money Market, Government, Treasury, Tax-Exempt and Michigan
Portfolios, respectively, and therefore may be considered to be a controlling
person of the Portfolios for purposes of the 1940 Act.
Because NBD serves the Trust as both Custodian and as Adviser, the
Trustees have established a procedure requiring three annual verifications,
two of which are unannounced, of all investments held pursuant to the
Custodian Agreement, to be conducted by the Trust's independent accountants.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's By-laws provide that special meetings of shareholders of any Series
shall be called at the written request of shareholders entitled to cast at
least 10% of the votes of a Series entitled to be cast at such meeting. The
Trust also stands ready to assist shareholder communications in connection
with any meeting of shareholders as prescribed in Section 16(c) of the 1940
Act.
-35-
<PAGE>
[ BACK COVER, COLUMN 1 ]
No person has been authorized to give any information or to
make any representations not contained in this Prospectus, or in the
Portfolios' Statement of Additional Information incorporated herein by
reference, in connection with the offering made by this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Trust, Adviser or Sponsors and Co- Distributors.
This Prospectus does not constitute an offering by the Portfolios or by their
Co-Distributors in any jurisdiction in which such offering may not lawfully
be made.
TABLE OF CONTENTS Page
EXPENSE SUMMARY................................. 2
BACKGROUND...................................... 4
FINANCIAL HIGHLIGHTS............................ 5
INTRODUCTION.................................... 10
PROPOSED REORGANIZATION......................... 10
INVESTMENT OBJECTIVES,
POLICIES AND RISK
FACTORS................................. 10
OTHER INVESTMENT POLICIES....................... 12
PURCHASE OF SHARES.............................. 19
REDEMPTION OF SHARES............................ 21
SHAREHOLDER SERVICES............................ 23
PERFORMANCE AND YIELD
INFORMATION............................. 25
DIVIDENDS AND DISTRIBUTIONS..................... 26
TAXES ........................................ 27
MANAGEMENT...................................... 28
OTHER INFORMATION............................... 34
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities, Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, PA 19107
<PAGE>
[ BACK COVER, COLUMN 2 ]
CLASS A SHARES IN THE:
WOODWARD MONEY MARKET FUND
WOODWARD GOVERNMENT FUND
WOODWARD TREASURY MONEY MARKET FUND
WOODWARD TAX-EXEMPT MONEY
MARKET FUND
WOODWARD MICHIGAN TAX-EXEMPT
MONEY MARKET FUND
THE WOODWARD FUNDS(R)
Prospectus
April 15, 1996
-36-
Exhibit (17(f)
- ------------------------------------------------------------------------------
PROSPECTUS April 15, 1996
- ------------------------------------------------------------------------------
THE WOODWARD FUNDS
c/o NBD Bank, Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
24 Hour yield and performance information
Purchase and Redemption orders:
(800) 688-3350
- ------------------------------------------------------------------------------
The Woodward Funds (the "Trust") is offering in this Prospectus shares
in the following five investment portfolios (the "Portfolios"), each having
its own investment objective and policies as described in this Prospectus:
Class I shares of the:
Woodward Money Market Fund
Woodward Government Fund
Woodward Treasury Money Market Fund
Woodward Tax-Exempt Money Market Fund
Woodward Michigan Tax-Exempt Money Market Fund
Each of the Portfolios is advised by NBD Bank ("NBD" or the "Adviser")
and is sponsored and distributed by First of Michigan Corporation ("FoM" or
"Co-Distributor") and Essex National Securities, Inc. ("Essex" or
"Co-Distributor").
This Prospectus sets forth concisely information that a prospective
investor should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Trust, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge by writing to The Woodward Funds at the above
address. The Statement of Additional Information bears the same date as this
Prospectus and is incorporated by reference into this Prospectus in its
entirety.
- ------------------------------------------------------------------------------
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NBD BANK, ITS PARENT COMPANY
OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT THE PORTFOLIOS WILL BE ABLE TO MAINTAIN A CONSTANT
NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
INVESTMENT ADVISER:
NBD Bank
<PAGE>
EXPENSE SUMMARY
The Trust currently offers Class I shares (formerly known as
"Institutional Shares") and Class A shares (formerly known as "Retail Shares")
in each of the Woodward Money Market Fund ("Money Market Portfolio"), Woodward
Government Fund ("Government Portfolio"), Woodward Treasury Money Market Fund
("Treasury Portfolio"), Woodward Tax-Exempt Money Market Fund ("Tax-Exempt
Portfolio") and Woodward Michigan Tax-Exempt Fund ("Michigan Portfolio").
Class I shares are sold primarily to NBD and its affiliated and correspondent
banks acting on behalf of their respective customers. Class A shares are sold
to the general public primarily through financial institutions such as banks,
brokers and dealers. Class A shares are offered in a separate Prospectus.
Investors should call (800) 688-3350, a Co-Distributor or their financial
institutions if they would like to obtain more information concerning the
Class I shares and/or Class A shares of the Portfolios. The following table is
provided to assist in understanding the various costs and expenses that an
investor will indirectly incur as a beneficial owner of Class I shares in each
of the Portfolios.
<TABLE>
<CAPTION>
Money Govern- Tax-
Market ment Treasury Exempt Michigan
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases........................ None None None None None
(as a percentage of
offering price)
Sales Load
Imposed on Reinvested
Dividends....................... None None None None None
Deferred Sales Load................ None None None None None
Redemption Fee..................... None None None None None
Exchange Fee....................... None None None None None
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average
net assets)
Management Fees.................... .44% .45% .45% .45% 0.50%
12b-1 Fees......................... .025% .003% .024% .017% 0.079%
Other Expenses(2).................. .055% .083% .076% .053% .121%
Total Operating Expenses........... .52% .54% .55% .52% 0.70%
<FN>
- --------------------
1. The expenses for each of the Portfolios have been restated to
reflect current expenses.
2. Credits or charges not reflected in the expense table may be
incurred directly by customers of financial institutions in connection with an
investment in the Portfolios.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Money Govern- Tax-
Market ment Treasury Exempt Michigan
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Example
You would pay the following
expenses on a $1,000 investment
assuming:
(1) a 5% annual return and
(2) redemption at the end of
each time period:
One Year:..................... $ 5.33 $ 5.53 $ 5.64 $ 5.33 $ 7.17
Three Years:.................. 16.71 17.35 17.67 16.71 22.46
Five Years:................... 29.14 30.24 30.80 29.14 39.08
Ten Years:.................... 65.40 67.84 69.07 65.40 87.28
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATE OF RETURN MAY BE GREATER
OR LESSER THAN THOSE SHOWN.
The example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in Class I shares in each of the Portfolios,
based upon payment of operating expenses at the respective levels set forth in
the expense table. For more complete descriptions of Portfolio expenses, see
"Investment Adviser, Custodian and Transfer Agent," "Sponsors and Co-
Distributors," "Service and Distribution Plan" and "Trust Expenses" under the
heading "Management" in this Prospectus and the financial statements and
related notes contained in the Statement of Additional Information.
-3-
<PAGE>
BACKGROUND
Shares of each Portfolio have been classified into two separate
classes of shares -- Class I shares and Class A shares. Only the Class I
shares are offered pursuant to this Prospectus. Until April 15, 1996, Class I
shares and Class A shares represented equal pro rata interests in a Portfolio.
As of such date, the Trust implemented its Shareholder Servicing Plan with
respect to Class A shares only and began to allocate servicing fees payable
under the plan exclusively to such shares.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide supplementary information to the Portfolios'
financial statements contained in their Statement of Additional Information
and set forth certain information concerning the historic investment results
of Portfolio shares. They present a per share analysis of net investment
income and distributions from net investment income for each of the
Portfolios. The tables have been derived from the Portfolios' financial
statements which have been audited by Arthur Andersen LLP, the Trust's
independent public accountants, whose report thereon is contained in the
Statement of Additional Information along with the financial statements. The
financial data included in these tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Portfolios is
available in annual reports to shareholders. The Statement of Additional
Information and annual reports to shareholders may be obtained from the Trust
free of charge by calling (800) 688-3350.
<TABLE>
<CAPTION>
Money Market Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income ... $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579 $ 0.0784 $ 0.0877 $ 0.0730
---------- ---------- ---------- ---------- -------- -------- -------- --------
Total From Investment
Operations ............. $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579 $ 0.0784 $ 0.0877 $ 0.0730
---------- ---------- ---------- ---------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income...... $ (0.0549) $ (0.0378) $ (0.0281) $ (0.0347) $(0.0579) $(0.0784) $(0.0877) $(0.0730)
---------- ---------- ---------- ---------- -------- -------- -------- --------
Total Distributions..... $ (0.0549) $ (0.0378) $ (0.0281) $ (0.0347) $(0.0579) $(0.0784) $(0.0877) $(0.0730)
---------- ---------- ---------- ---------- -------- -------- -------- --------
Net Asset Value, End of
Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ======== ======== ======== ========
Total Return ............. 5.63% 3.86% 2.85% 3.58% 5.95% 8.14% 9.19% 7.55%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ..... $1,639,695 $1,323,040 $1,326,693 $1,095,354 $775,521 $717,516 $446,466 $250,182
Ratio of Expenses to
Average Net Assets .... 0.51% 0.47% 0.49% 0.52% 0.50% 0.50% 0.51% 0.49%(a)
Ratio of Net Investment
Income to Average Net
Assets ............... 5.49% 3.78% 2.81% 3.47% 5.79% 7.84% 8.77% 7.30%(a)
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Government Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
of Period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income .. $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564 $ 0.0769 $ 0.0862 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ........... $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564 $ 0.0769 $ 0.0862 $ 0.0730
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income ..... $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564) $(0.0769) $(0.0862) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions .... $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564) $(0.0769) $(0.0862) $(0.0730)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return ............ 5.57% 3.77% 2.81% 3.63% 5.79% 7.97% 8.98% 7.55%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ..... $474,377 $421,208 $346,665 $261,614 $288,369 $235,858 $196,095 $106,194
Ratio of Expenses to
Average Net Assets .... 0.51% 0.51% 0.51% 0.51% 0.50% 0.49% 0.50% 0.50%(a)
Ratio of Net Investment
Income to Average Net
Assets ............... 5.44% 3.72% 2.77% 3.57% 5.64% 7.69% 8.62% 7.30%(a)
<FN>
- ---------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Treasury Portfolio
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1995 1994 1993
-------------- -------------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period................... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from Investment
Operations:
Net Investment Income.... $0.0539 $0.0370 $0.0273
------- ------- -------
Total From Investment Operations $0.0539 $0.0370 $0.0273
------- ------- -------
Less Distributions:
Dividends From Net Investment
Income................. $ (0.0539) $(0.0370) $(0.0273)
--------- --------- ---------
Total Distributions...... $ (0.0539) $(0.0370) $(0.0273)
--------- --------- ---------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
========= ========= =========
Total Return............... 5.53% 3.77% 2.77%
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's)...... $ 927,696 $ 785,694 $ 854,873
Ratio of Expenses to Average
Net Assets............. 0.53% 0.50% 0.50%
Ratio of Net Investment
Income to Average Net Assets 5.39% 3.70% 2.73%
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Tax-Exempt Portfolio
January 4,
1988
(Commence-
Year Year Year Year Year Year Year ment of
Ended Ended Ended Ended Ended Ended Ended Operations)
Decem- Decem- Decem- Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
Net Investment Income ... $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422 $ 0.0553 $ 0.0595 $ 0.0498
-------- -------- -------- -------- -------- -------- -------- --------
Total From Investment
Operations ............. $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422 $ 0.0553 $ 0.0595 $ 0.0498
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends From Net
Investment Income ..... $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422) $(0.0553) $(0.0595) $(0.0498)
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions .... $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422) $(0.0553) $(0.0595) $(0.0498)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return ............. 3.41% 2.45% 1.98% 2.70% 4.30% 5.67% 6.11% 5.10%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's) ..... $564,413 $550,736 $498,706 $379,431 $227,808 $235,451 $210,028 $177,645
Ratio of Expenses to
Average Net Assets .... 0.53% 0.51% 0.51% 0.53% 0.52% 0.52% 0.51% 0.49%(a)
Ratio of Net Investment
Income to Average
Net Assets ............ 3.35% 2.42% 1.96% 2.64% 4.22% 5.53% 5.95% 4.98%(a)
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Michigan Portfolio
January 23, 1991
Year Year Year Year (Commencement
Ended Ended Ended Ended of Operations)
Decem- Decem- Decem- Decem- to Decem-
ber 31, ber 31, ber 31, ber 31, ber 31,
1995 1994 1993 1992 1991
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income From Investment
Operations:
Net Investment Income..... $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
--------- --------- --------- --------- ---------
Total From Investment
Operations............... $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
--------- --------- --------- --------- ---------
Less Distributions:
Dividends From Net
Investment Income........ $ (0.0329) $ (0.0235) $ (0.0181) $ (0.0237) $ (0.0353)
--------- --------- --------- --------- ---------
Total Distributions....... $ (0.0329) $ (0.0235) $ (0.0181) $ (0.0237) $ (0.0353)
--------- --------- --------- --------- ---------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return............... 3.32% 2.38% 1.83% 2.40% 3.83%(a)
Ratios/Supplemental Data
Net Assets, End of
Period (in 000's)....... $ 122,057 $ 78,640 $ 52,557 $ 52,960 $ 38,885
Ratio of Expenses to
Average Net Assets...... 0.69% 0.67% 0.65% 0.64% 0.65%(a)
Ratio of Net Investment
Income to Average Net
Assets.................. 3.30% 2.35% 1.81% 2.37% 3.77%(a)
Ratio of Expenses to
Average Net Assets
Without Fee Waiver...... 0.76% 0.75% 0.00% 0.00% 0.00%
Ratio of Net Investment
Income to Average
Net Assets
Without Fee Waiver...... 3.23% 2.28% 0.00% 0.00% 0.00%
<FN>
- ---------------------
(a) Total returns and ratios are annualized for periods less than one
year for comparability purposes. Actual annual returns and ratios may be less
than or greater than those shown.
</TABLE>
-9-
<PAGE>
INTRODUCTION
The Trust is an open-end, management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Trust currently consists of seventeen investment portfolios, each of which
consists of a separate pool of assets with separate investment objectives and
policies. However, only the Class I shares of the Money Market, Government,
Treasury, Tax-Exempt and Michigan Portfolios are offered pursuant to this
Prospectus. Under the 1940 Act, the Michigan Portfolio is classified as a
non-diversified investment portfolio and the other Portfolios are classified
as diversified investment portfolios.
PROPOSED REORGANIZATION
On December 1, 1995, NBD's parent, NBD Bancorp, Inc., merged with
First Chicago Corporation and the combined company was renamed First Chicago
NBD Corporation ("FCNBD"). An affiliate of FCNBD serves as the investment
adviser to Prairie Funds, Prairie Institutional Funds, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund, Inc. (collectively, "Prairie").
FCNBD has recommended to both the Board of Trustees of the Trust and the Board
of Trustees/Directors of Prairie that the portfolios of the Trust and Prairie
be reorganized as described below. In light of this recommendation and after
considering various matters, the Trust's Board and Prairie's Board have
authorized certain Agreements and Plans of Reorganization (the
"Reorganization").
A Special Meeting of the Shareholders of each Prairie portfolio is
expected to be held in June 1996 to consider the approval or disapproval of
the Reorganization. The Reorganization generally provides for the transfer of
substantially all of each Prairie portfolio's assets and liabilities to a
corresponding portfolio of the Trust in exchange for such portfolio's shares.
In connection with the proposed Reorganization, a Special Meeting of
the Shareholders of the Trust is expected to be held in June 1996 to consider
proposals relating to investment policies, service agreements, the election of
two new trustees, and other matters. Proxy materials describing these matters
will be mailed to the Trust's shareholders of record for the meeting.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The investment objective of a Portfolio may not be changed without
approval of the holders of at least a majority of the outstanding shares of
such Portfolio. See "Other Information." Except as noted below under
"Investment Limitations," a Portfolio's investment policies may be changed
without a vote of shareholders. There can be no assurance that a Portfolio
will achieve its objective.
Money Market Portfolio, Government Portfolio and Treasury Portfolio
The investment objective of the Money Market Portfolio, Government
Portfolio and Treasury Portfolio is to provide a high level of current income
consistent with the preservation of capital and liquidity.
In seeking to achieve its investment objective, the Money Market
Portfolio invests in the following high quality "money market" instruments:
(1) Obligations issued or guaranteed as to payment of
principal and interest by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations");
(2) U.S. dollar denominated obligations issued or guaranteed
by the government of Canada, a Province of Canada, or an
instrumentality or political subdivision thereof;
-10-
<PAGE>
(3) Certificates of deposit, bankers' acceptances and time
deposits of U.S. banks or other U.S. financial institutions (including
foreign branches of such banks and institutions) having total assets
in excess of $1 billion and which are members of the Federal Reserve
System or the Federal Deposit Insurance Corporation ("FDIC");
(4) Certificates of deposit, bankers' acceptances and time
deposits of foreign banks and U.S. branches of foreign banks having
assets in excess of the equivalent of $1 billion;
(5) Commercial paper, other short term obligations and
variable rate master demand notes, bonds, debentures and notes; and
(6) Repurchase agreements relating to the above instruments.
In seeking to achieve its investment objective, the Government
Portfolio invests in:
(1) U.S. Government Obligations; and
(2) Repurchase agreements relating to the above obligations.
In seeking to achieve its investment objective, the Treasury Portfolio
invests in:
(1) U.S. Treasury bills, notes, and direct U.S. Treasury
obligations having remaining maturities of 13 months or less; and
(2) Repurchase agreements relating to direct U.S. Treasury
obligations.
In accordance with current SEC regulations, the Money Market,
Government and Treasury Portfolios will limit their respective purchases of
the securities of any one issuer (other than U.S. Government Obligations and
repurchase agreements collateralized by such obligations) to 5% of their
respective total assets, except that each Portfolio may invest more than 5%
but no more than 25% of its total assets in "First Tier Securities" of one
issuer for a period of up to three business days. First Tier Securities
include "eligible securities" (defined below under "Policies Applicable to all
Portfolios") that (i) if rated by more than one nationally recognized
statistical rating organization ("Rating Agency"), are rated (at the time of
purchase) by two or more Rating Agencies in the highest rating category for
such securities, (ii) if rated by only one Rating Agency, are rated by such
Rating Agency in its highest rating category for such securities, (iii) have
no short term rating but have been issued by an issuer that has other
outstanding short term obligations that have been rated in accordance with (i)
or (ii) above and are comparable in priority and security to such securities,
and (iv) are certain unrated securities that have been determined by NBD to be
of comparable quality to such securities pursuant to guidelines established by
the Trust's Board of Trustees. In addition, the Money Market and Government
Portfolios will limit their investments in "Second Tier Securities" (which are
eligible securities other than First Tier Securities) to 5% of their
respective total assets, with investments in any one issuer of such securities
being limited to no more than 1% of their respective total assets or $1
million, whichever is greater. Because of these limitations, the Money Market,
Government and Treasury Portfolios will not be able to purchase lower rated or
longer term securities from which a higher income, although a greater degree
of risk, might be derived.
Tax-Exempt Portfolio and Michigan Portfolio
The investment objective of the Tax-Exempt Portfolio is to provide a
high level of current interest income that is exempt from federal income taxes
consistent with the preservation of capital and liquidity. In seeking to
achieve its investment objective, the Portfolio invests in high quality debt
obligations issued by states, territories and possessions of the United
States, by the District of Columbia, and by their respective political
-11-
<PAGE>
subdivisions, agencies, instrumentalities and authorities, the interest on
which is, in the opinion of bond counsel for the issuers, exempt from regular
federal income tax ("Municipal Securities").
The investment objective of the Michigan Portfolio is to provide a
high level of current interest income that is exempt from federal and State of
Michigan income taxes, consistent with the preservation of capital and
liquidity. In seeking to achieve its investment objective, the Portfolio
invests in high quality debt obligations issued by the State of Michigan, its
political subdivisions, municipalities, corporations and authorities, the
interest on which, in the opinion of bond counsel to the issuers, is exempt
from federal and State of Michigan income taxes ("Michigan Municipal
Securities") and in related repurchase agreements. Income earned by the
Portfolio with respect to repurchase agreements and securities lending
transactions is not exempt from federal income tax. To the extent acceptable
Michigan Municipal Securities are at any time unavailable for investment by
the Portfolio, the Portfolio invests primarily in other Municipal Securities
the interest on which is, in the opinion of bond counsel, exempt from federal,
but not State of Michigan, income tax.
Municipal Securities acquired by the Tax-Exempt Portfolio or Michigan
Portfolio include:
(1) Municipal bonds;
(2) Municipal notes;
(3) Variable rate demand notes;
(4) Tax-exempt commercial paper and floating rate
instruments; and
(5) Unrated notes, paper or other instruments that are of
comparable quality as determined by the Adviser under guidelines
established by the Trust's Board of Trustees. Where necessary to
assure that an instrument is of high quality, the Portfolios may only
purchase the instrument if the issuer's obligation to pay the
principal is backed by an unconditional bank letter of credit, line of
credit, guaranty or commitment to lend.
At least 80% of each of the Tax-Exempt Portfolio's and Michigan
Portfolio's total assets will be invested in Municipal Securities, except in
extraordinary circumstances, such as when the Adviser believes that market
conditions indicate that a Portfolio should adopt a temporary defensive
position by holding uninvested cash or investing in taxable short term
securities ("Taxable Investments"), such as those in which the Money Market
Portfolio may invest. This policy is fundamental with respect to the Tax-
Exempt Portfolio and Michigan Portfolio and may not be changed without the
approval of the holders of a majority of a Portfolio's outstanding shares. In
addition, with respect to the Michigan Portfolio, at least 65% of its total
assets will be invested under normal market conditions in Michigan Municipal
Securities and the remainder may be invested in securities that are not
Michigan Municipal Securities and therefore may be subject to Michigan income
taxes. A security is included within the term "Municipal Securities" only if
the interest paid thereon is exempt from regular federal income tax and not
treated as a specific tax preference item under the federal alternative
minimum tax. See "Taxes."
Policies Applicable To All Portfolios
Each Portfolio will only purchase "eligible securities" that present
minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities include (i)
U.S. Government Obligations, (ii) securities that are rated (at the time of
purchase) by Rating Agencies in the two highest rating categories for such
securities, and (iii) certain securities that are not so rated but are of
comparable quality to rated eligible securities as determined by the Adviser.
-12-
<PAGE>
See "Investment Objectives, Policies and Risk Factors" in the Statement of
Additional Information for a more complete description of eligible securities.
A description of ratings is contained in the Statement of Additional
Information.
Each Portfolio is managed so that the average maturity of all
instruments in the Portfolio (on a dollar-weighted basis) will not exceed 90
days. In no event will the Portfolios purchase any securities which are deemed
to mature more than 13 months from the date of purchase (except for certain
variable and floating rate instruments and securities underlying repurchase
agreements and collateral underlying loans of portfolio securities).
OTHER INVESTMENT POLICIES
Bank Obligations
Domestic and foreign bank obligations in which the Money Market
Portfolio may invest include certificates of deposit, bankers' acceptances and
fixed time deposits. Total assets of a bank are determined on the basis of the
bank's most recent annual financial statements.
Obligations issued or guaranteed by foreign branches of U.S. banks
(commonly known as "Eurodollar" obligations) or U.S. branches of foreign banks
(commonly known as "Yankee dollar" obligations) may be general obligations of
the parent bank or obligations only of the issuing branch. Where the
obligation is only that of the issuing branch, the parent bank has no legal
duty to pay such obligation. Such obligations would thus be subject to risks
comparable to those which would be present if the issuing branch were a
separate bank. The Money Market Portfolio will not invest in a Eurodollar
obligation if upon making such investment the total of Eurodollar obligations
which are not general obligations of domestic parent banks would thereby
exceed 25% of the total assets of the Money Market Portfolio.
Obligations of foreign issuers may involve risks that are different
than those of obligations of domestic issuers. These risks include unfavorable
political and economic developments, possible imposition of withholding taxes
on interest income, possible seizure or naturalization of foreign deposits,
possible establishment of exchange controls, or adoption of other foreign
governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. In addition, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks and, generally, there may be less publicly available information
regarding such issuers. The Trust could also encounter difficulties in
obtaining or enforcing a judgment against a foreign issuer (including a
foreign branch of a U.S. bank).
Commercial Paper
Commercial paper issued by corporations and other institutions,
including variable rate notes and other short term corporate obligations, must
be rated in one of the two highest categories by at least two Rating Agencies,
or if not rated, must have been independently determined by the Adviser to be
of comparable quality.
Government Obligations
The Money Market, Government and Treasury Portfolios may invest in
direct obligations of the U.S. Treasury consisting of bills, notes and bonds.
The Money Market and Government Portfolios may also invest in other
obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. Obligations of certain agencies and instrumentalities, such
as the Government National Mortgage Association, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
-13-
<PAGE>
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law. Some of these
investments may be variable or floating rate instruments.
Variable and Floating Rate Obligations
Each Portfolio may purchase rated and unrated variable and floating
rate obligations which may have stated maturities in excess of 13 months but
will, in any event, permit a Portfolio to demand payment of the principal of
the instrument at least once every 13 months on not more than thirty days'
notice (unless the instrument is a U.S. Government Obligation), provided that
the demand feature may be sold, transferred, or assigned only with the
underlying instrument involved. Such instruments may include variable rate
demand notes which are unsecured instruments that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. The absence of an active secondary market with respect to
particular variable and floating rate instruments could make it difficult for
a Portfolio to dispose of instruments if the issuer defaulted on its payment
obligation or during periods that the Portfolio is not entitled to exercise
its demand rights, and the Portfolio could, for these or other reasons, suffer
a loss with respect to such instruments. Variable and floating rate
instruments held by a Portfolio will be subject to the Portfolio's 10%
limitation on illiquid investments when the Portfolio may not demand payment
of the principal amount within seven days and a reliable trading market is
absent.
Repurchase and Reverse Repurchase Agreements
Each Portfolio may agree to purchase portfolio securities which it may
otherwise purchase from financial institutions subject to the seller's
agreement to repurchase them at a mutually agreed-upon date and price
("repurchase agreements"). No Portfolio will enter into repurchase agreements
with the Adviser, Co-Distributors, or any of their affiliates. Although the
securities subject to repurchase agreements may bear maturities exceeding 13
months provided the repurchase agreement itself matures in one year or less,
the Portfolios generally intend to enter into repurchase agreements which
terminate within seven days after notice by the Portfolios. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price, marked to
market daily. Default by the seller would, however, expose a Portfolio to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
Each Portfolio may also borrow funds for temporary purposes by
entering into reverse repurchase agreements. Pursuant to such agreements the
Portfolios will sell portfolio securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at a particular date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Portfolio may decline below the price of the
securities it is obligated to repurchase. Whenever a Portfolio enters into a
reverse repurchase agreement, it will place in a segregated custodial account
liquid assets equal to the repurchase price marked to market daily (including
accrued interest) and will subsequently monitor the account to ensure such
equivalent value is maintained.
Lending Portfolio Securities
To increase income or offset expenses, each Portfolio may lend its
portfolio securities to financial institutions such as banks and
broker-dealers in accordance with the investment limitations described below.
Agreements would require that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans may include cash or
-14-
<PAGE>
securities of the U.S. Government, its agencies or instrumentalities, some of
which may bear maturities exceeding 13 months. Such loans will not be made if,
as a result, the aggregate of all outstanding loans of a particular Portfolio
exceeds one-third of the value of its total assets. Loans of securities
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or possibly loss of rights in the collateral should the
borrower of the securities become insolvent. In the event a Portfolio is
unable to recover the securities loaned in a particular transaction, it will
promptly sell any collateral which bears a maturity exceeding 13 months. Loans
will be made only to borrowers that provide the requisite collateral comprised
of liquid assets and when, in the Adviser's judgment, the income to be earned
from the loan justifies the attendant risks.
When-Issued Securities
Each Portfolio may purchase portfolio securities on a "when-issued"
basis and may purchase or sell such securities on a "forward commitment"
basis. These transactions involve commitment by a Portfolio to purchase or
sell particular securities with payment and delivery taking place in the
future, beyond the normal settlement date, at a stated price and yield.
Securities purchased on a when-issued basis or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, or if the value of the security to be sold
increases prior to the settlement date. When a Portfolio enters into such
transactions, the Custodian will maintain in a segregated account cash or
liquid portfolio securities equal to the amount of the commitment. The
Portfolios do not earn income with respect to these transactions until the
subject securities are delivered to the Portfolios. The Portfolios do not
intend to purchase when-issued securities for speculative purposes but only
for the purposes of acquiring portfolio securities. Each Portfolio's when-
issued purchases and forward commitments are not expected to exceed 25% of the
value of its total assets absent unusual market conditions.
Municipal and Related Securities
Municipal Securities may include general obligations, revenue
obligations, notes, and moral obligation bonds. General obligations are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue obligations are payable only
from the revenues derived from a particular facility, class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source such as the user of the facility being financed. Private activity bonds
(i.e. bonds issued by industrial development authorities) are in most cases
revenue securities and are not payable from the unrestricted revenues of the
issuer. Consequently, the credit quality of a private activity bond is usually
directly related to the credit standing of the private user of the facility
involved. Notes are short-term instruments which are obligations of the
issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues. Moral obligation bonds
are normally issued by special purpose public authorities. If the issuer of a
moral obligation bond is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer. Municipal Securities also include municipal lease/purchase
agreements which are similar to installment purchase contracts for property or
equipment issued by municipalities. Municipal lease/purchase agreements may be
considered illiquid investments.
See "Restricted Securities."
The Michigan Portfolio may purchase from financial institutions
participation interests in Municipal Securities. A participation interest
gives the Portfolio an undivided interest in the Municipal Security in the
proportion that the Portfolio's participation interest bears to the total
principal amount of the Municipal Security. These instruments may have fixed,
floating or variable rates of interest, with remaining maturities of 13 months
or less as determined in accordance with SEC regulations (although the
securities held by the financial institution may have longer maturities). If
-15-
<PAGE>
the participation interest is unrated, or has been given a rating below that
which otherwise is permissible for purchase by the Portfolio, the
participation interest will be backed by an irrevocable letter of credit or
guarantee of a bank that the Trust's Board of Trustees has determined meets
the prescribed quality standards for banks set forth below, or the payment
obligation otherwise will be collateralized by U.S. Government securities. For
certain participation interests, the Portfolio will have the right to demand
payment, on not more than seven days' notice, for all or any part of the
Portfolio's participation interest in the Municipal Security, plus accrued
interest. As to these instruments, the Portfolio intends to exercise its right
to demand payment only upon a default under the terms of the Municipal
Security, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio. Participation interests
that do not have this demand feature will be considered illiquid investments.
The Tax-Exempt and Michigan Portfolios may acquire "stand-by
commitments" with respect to Municipal Securities they hold. Under a stand-by
commitment, a dealer agrees to purchase at the Portfolio's option specified
Municipal Securities at a specified price. The acquisition of a stand-by
commitment may increase the cost, and thereby reduce the yield of the
Municipal Securities to which the commitment relates. The Portfolios will
acquire stand-by commitments solely to facilitate portfolio liquidity and do
not intend to exercise their rights thereunder for trading purposes.
The Tax-Exempt Portfolio has no policy of seeking particularly to
invest in Municipal Securities issued by or within any single state or select
group of states. However, certain states traditionally are sources of large
amounts of Municipal Securities, e.g., California, Colorado, Florida,
Michigan, New York and Texas. The Portfolio may from time to time have more
than 25% of its assets invested in securities issued by or from any of the
above states. To the extent that the Portfolio's assets are invested in
Municipal Securities issued by or from a single state or a few states, the
Portfolio will be subject to the peculiar risks presented by the laws and
economic conditions relating to such state or states to a greater extent than
would be the case if its assets were not so concentrated. If any state or
political subdivision thereof were to suffer serious financial difficulties
jeopardizing its ability to pay its obligations, the marketability of such
obligations held by the Portfolio, and consequently its net asset value, could
be adversely affected.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal income tax (and, with respect to
Michigan Municipal Securities, Michigan income taxes) are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Trust
nor its Adviser will review the proceedings relating to the issuance of
Municipal Securities or the bases for such opinions.
Special Risk Considerations Applicable to the Michigan Portfolio
The Michigan Portfolio will under normal market conditions consist of
Michigan Municipal Securities to the extent of 65% or more of its total
assets. This concentration in securities issued by governmental units of only
one state exposes the Portfolio to risk of loss greater than that of a more
diversified portfolio holding securities issued by governmental units of
different states and different regions of the country.
Moreover, the economy of the State of Michigan is heavily dependent
upon the automobile manufacturing industry. This industry is highly cyclical.
This factor affects the revenue streams of the State of Michigan and its
political subdivisions because it impacts tax sources, particularly sales
taxes, income taxes, and Michigan single business taxes.
A state economy during a recessionary cycle would also, as a separate
matter, adversely affect the capacity of users of facilities constructed or
acquired through the proceeds of private activity bonds or other "revenue"
securities to make periodic payments for the use of those facilities.
-16-
<PAGE>
The heavy concentration of the Michigan Portfolio in Michigan
Municipal Securities and the cyclical nature of the economy of the State of
Michigan may adversely affect the liquidity of the Portfolio.
In 1993 and 1994, Michigan adopted complex statutory and
constitutional changes which, among several other changes in tax methods and
rates, have the effect of imposing limits on annual assessment increases and
of transferring a significant part of the operating cost of public education
from locally based property tax sources to state based sources, including
increased sales tax. These changes will affect state and local revenues of
Michigan governmental units in future years in differing ways, not all of
which can be presently known with certainty.
Guaranteed Investment Contracts
The Money Market Portfolio may make limited investments in guaranteed
investment contracts ("GICs") issued by highly rated U.S. insurance companies.
Pursuant to such contracts, the Portfolio makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Portfolio on a monthly basis guaranteed interest which is
based on an index (in most cases this index will be the Salomon Brothers CD
Index). The GICs provide that this guaranteed interest will not be less than a
certain minimum rate. Generally, a GIC allows a purchaser to buy an annuity
with the monies accumulated under contract; however, the Portfolio will not
purchase any such annuity. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a
GIC becomes a part of the general assets of the issuer, and the contract is
paid from the general assets of the issuer. The Portfolio will only purchase
GICs from issuers which meet quality and credit standards established by the
Adviser. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market
in GICs does not currently exist. Therefore, GICs are considered by the
Portfolio to be illiquid investments and subject to the limitation on illiquid
investments set forth below.
Restricted Securities
In accordance with its fundamental investment limitation described
below, each Portfolio will not invest more than 10% of the value of its total
assets in securities that are illiquid. Illiquid investments may include
securities having legal or contractual restrictions on resale or no readily
available market, GICs (in the case of the Money Market Portfolio), municipal
lease/purchase agreements (in the case of the Tax-Exempt and Michigan
Portfolios) and instruments (including repurchase agreements, variable and
floating rate instruments and time deposits) that do not provide for payment
to a Portfolio within seven days after notice. Securities that have legal or
contractual restrictions on resale but have a readily available market are not
deemed to be illiquid for purposes of this limitation.
Each Portfolio may purchase securities which are not registered under
the Securities Act of 1933, as amended (the "1933 Act"), but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. Any such security will not be considered to be illiquid so long as
it is determined by the Board of Trustees or the Adviser, acting under
guidelines approved and monitored by the Board, that an adequate trading
market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional buyers
under Rule 144A is a recent development, and it is not possible to predict how
this market will develop. The Board of Trustees will carefully monitor any
investments by the Portfolios in these securities.
Securities of Other Investment Companies
Within the limits prescribed by the 1940 Act, each Portfolio may
invest in securities issued by other investment companies which invest in high
-17-
<PAGE>
quality, short term debt securities and which determine their net asset value
per share based on the amortized cost or penny-rounding method. As a
shareholder of another investment company, a Portfolio would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that a Portfolio bears directly in connection with
its own operations.
Miscellaneous
The Trust will give 30 days notice to investors of any material change
in any Portfolio's investment policies.
Investment Limitations
Each Portfolio is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to a particular Portfolio without the affirmative vote
of the holders of a majority of the Portfolio's outstanding shares. Other
investment limitations that cannot be changed without a vote of shareholders
are contained in the Statement of Additional Information under "Investment
Objectives, Policies and Risk Factors."
No Portfolio may:
1. Purchase the securities of issuers conducting their principal
business activity in the same industry if immediately after such purchase the
value of its investments in such industry would exceed 25% of the value of its
total assets, provided that (a) utilities will be divided according to their
services, wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of their parents, the personal credit and business
credit businesses will be considered separate industries and (b) there is no
limitation with respect to or arising out of investments in Municipal
Securities in the case of the Tax-Exempt Portfolio and Michigan Portfolio,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, domestic bank obligations, or repurchase agreements by any
of the foregoing.
2. Borrow money, except from banks or through reverse repurchase
agreements, and except for temporary or emergency purposes and then only in
amounts not exceeding at any one time 20% of the value of its net assets at
the time of the borrowing. A Portfolio will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
net assets are outstanding. Borrowings will only be effected in conformity
with the requirements of the 1940 Act.
3. Make loans, except (i) through the purchase of debt obligations in
accordance with its investment objective and policies, (ii) through repurchase
agreements and (iii) through the lending of investment securities.
Each of the Money Market, Government and Tax-Exempt Portfolios may not
invest more than 10% of its total assets in illiquid investments, including
restricted securities, securities having no readily available market
quotations, non-negotiable time deposits maturing in more than seven days, and
repurchase agreements with maturities of more than seven days.
Each of the Treasury and Michigan Portfolios may not invest more than
10% of its total assets in illiquid investments. See "Restricted Securities"
above.
With respect to 75% of its assets, the Tax-Exempt Portfolio may not
invest more than 5% of its assets in the securities of any one issuer, except
U.S. Government Obligations.
-18-
<PAGE>
In addition, the Tax-Exempt Portfolio may not invest less than 80% of
its net assets in securities the interest on which is exempt from federal
income tax, except during temporary defensive periods.
The Michigan Portfolio may not:
1. Invest less than 80% of its net assets in securities the interest
on which is exempt from federal income tax, except during temporary defensive
periods or periods of unusual market conditions. For purposes of this
investment limitation, securities the interest on which is treated as a
specific tax preference item under the federal alternative minimum tax are
considered taxable.
2. With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer, except U.S. Government Obligations
or securities of other regulated investment companies.
For purposes of the Investment Limitation above applicable to the
Money Market, Government, Treasury and Tax-Exempt Portfolios and No. 2 above
applicable to the Michigan Portfolio: (i) a security is considered to be
issued by the government entity (or entities) whose assets and revenues back
the security, or, with respect to a private activity bond that is backed only
by the assets and revenues of a nongovernmental user, a security is considered
to be issued by such nongovernmental user; (ii) in certain circumstances, the
guarantor of a guaranteed security may also be considered to be an issuer in
connection with such guarantee; and (iii) U.S. Government Obligations
(including securities backed by the full faith and credit of the United
States) are deemed to be U.S. Government obligations for purposes of the 1940
Act.
Generally, if a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in value of a Portfolio's securities will not constitute a violation of
the limitation for purposes of the 1940 Act.
PURCHASE OF SHARES
In General
Each Portfolio's shares are offered and sold on a continuous basis by
FoM and Essex, as the Trust's Co-Distributors. FoM is a registered
broker/dealer with offices at 100 Renaissance Center, 26th Floor, Detroit,
Michigan 48243. Essex is a registered broker/dealer with offices at 215
Gateway Road West, Napa, California 94558.
Class I shares are sold primarily to NBD and its affiliated and
correspondent banks (the "Banks") acting on behalf of their respective
customers. The Banks may impose different minimum investment and other
requirements, as well as account charges, on their customers and may establish
separate operational arrangements by which shares may be purchased and
redeemed. Customers should contact their Banks for further information.
It is the responsibility of the Banks to transmit their customers'
purchase orders to NBD acting as transfer agent (the "Transfer Agent") and to
deliver required funds on a timely basis. Class I shares will normally be held
of record by the Banks. Confirmations of share purchases and redemptions will
be sent to the Banks. Beneficial ownership of Class I shares will be recorded
by the Banks and reflected in the account statements provided by them to their
customers.
In order to afford the Trust a reasonable opportunity to invest funds
that are received on the same day, purchase orders received by a Co-
Distributor or the Transfer Agent with respect to the Tax-Exempt and Michigan
Portfolios by noon, Eastern time, and with respect to the Money Market,
Government and Treasury Portfolios by 3:00 p.m., Eastern time, will be
executed the same day if NBD acting as the Portfolios' custodian (the
"Custodian") has received confirmation of receipt of a wire transfer of
-19-
<PAGE>
federal funds prior to noon and 3:00 p.m., Eastern time, respectively, and the
shares purchased will thus be eligible for that day's dividend, and otherwise
such purchase will be effected, and dividends will begin to accrue, on the
following business day.
Questions concerning the purchase of shares should be directed to
the Transfer Agent at (800) 688-3350.
Net Asset Value and Pricing of Shares
The net asset value of each Portfolio for purposes of pricing purchase
and redemption orders is determined by the Adviser as of noon and as of 3:00
p.m., Eastern Time, on each day the New York Stock Exchange ("Exchange"), NBD
Bank or its bank affiliates are open for business ("Business Day") except:
(i) those holidays which the Exchange observes (currently New Year's Day,
Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day); and (ii) those Business Days on
which the Exchange closes prior to the close of its regular trading
hours ("Early Closing Time"), in which event the net asset value of
each Portfolio will be determined and its shares will be priced as of
such Early Closing Time. Net asset value per Class I share of a Portfolio
is calculated by dividing the value of all securities and other assets
belonging to the Portfolio allocable to that Class I, less the liabilities
charged to that Class I, by the number of the outstanding shares of such
Class I.
The assets in each Portfolio are valued based upon the amortized cost
method. Although the Trust seeks to maintain the net asset value per share of
the Portfolios at $1.00, there can be no assurance that the net asset value
will not vary.
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value next determined
after receipt by the Transfer Agent of a proper notice of redemption. It is
the responsibility of the Banks to transmit redemption orders to the Transfer
Agent and credit their customers' accounts with the redemption proceeds on a
timely basis.
Written and telephone redemption requests will be effected on the same
Business Day if the request is received by the Transfer Agent with respect to
the Tax-Exempt and Michigan Portfolios before noon, Eastern time, and with
respect to the Money Market, Government and Treasury Portfolios, before 3:00
p.m., Eastern time. Redemption requests received after noon and 3:00 p.m.,
Eastern time, respectively, will normally be effected on the next Business Day
(and in any event within seven calendar days).
The Trust will make payment for redeemed shares within the time period
prescribed by the settlement requirements of the Securities Exchange Act of
1934 after receipt by the Transfer Agent of a request in proper form. If
shares to be redeemed were purchased by check, the Trust will transmit the
redemption proceeds promptly upon clearance of such check, which could take up
to fifteen days from the purchase date. A shareholder of record having
purchased shares by wire must have filed an account application before any
redemption requests can be honored.
Written requests to redeem shares having a net asset value of more
than $50,000 must have all signatures of the registered owner(s) or their
authorized legal representative guaranteed by a commercial bank or trust
company which is a member of the Federal Reserve System or FDIC, a member firm
of a national securities exchange or a savings and loan association. A
signature guaranteed by a savings bank or notarized by a notary public is not
acceptable. A signature guarantee will also be required for a redemption
request (in any amount) if the address of record for the account has been
changed within the previous 15 days or which requests that the proceeds be
paid to an account other than the one preauthorized on the application, a
payee or payees other than the registered owners of the account, or an address
other than the address of record. The Trust may require additional supporting
-20-
<PAGE>
documents for redemptions made by corporations, fiduciaries, executors,
administrators, trustees, guardians and institutional investors.
Currently, the Trust imposes no charge when shares are redeemed.
However, Banks may charge a fee for providing services in connection with
investments in shares. The Trust reserves the right to redeem accounts
involuntarily, after sixty days' notice, if redemptions cause the account's
value to remain at $400 or less. Under certain circumstances, the
Trust may make payment for redemptions in securities or other property.
Questions concerning the proper form for redemption requests should be
directed to the Transfer Agent at (800) 688-3350.
PERFORMANCE AND YIELD INFORMATION
From time to time, in advertisements or in reports to shareholders the
performance and yields of each class of shares of the Portfolios may be quoted
and compared to the performance and yields of other mutual funds with similar
investment objectives and to stock or other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, yields of the Money
Market, Government and Treasury Portfolios may be compared to the Donoghue's
Money Fund Average, Donoghue's Government Money Fund Average and Donoghue's
Treasury Money Fund Average, respectively, which are averages compiled by
IBC/Donoghue's Money Fund Report, a widely recognized independent publication
that monitors the performance of money market funds, or to the average yields
reported by the Bank Rate Monitor for money market deposit accounts offered by
the 50 leading banks and thrift institutions in the top five standard
metropolitan statistical areas. The yields of the Tax-Exempt Portfolio and
Michigan Portfolio may be compared to the Donoghue's Tax-Free Money Fund
Average. Performance and yield data as reported in national financial
publications including, but not limited to, Money Magazine, Forbes, Barron's,
The Wall Street Journal and The New York Times, or in publications of a local
or regional nature, may also be used in comparing the performance and yields
of the Portfolios.
"Yield" refers to the income generated in a class of shares of a
Portfolio over a seven-day period identified in the advertisement. This income
is annualized, i.e., the income during a particular week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. Each Portfolio may also advertise its "effective yield" which is
calculated similarly but, when annualized, income is assumed to be reinvested,
thereby making the "effective yield" slightly higher because of the
compounding effect of the assumed reinvestment. The Tax-Exempt Portfolio and
Michigan Portfolio may from time to time advertise a "tax-equivalent yield" to
demonstrate the level of taxable yield necessary to produce an after-tax yield
equivalent to that achieved by the Portfolios. The "tax- equivalent yield"
will be computed by dividing the tax-exempt portion of a Portfolio's yield by
a denominator consisting of one minus a stated federal (and/or Michigan)
income tax rate and adding the product to that portion, if any, of the
Portfolio's yield which is not tax-exempt.
Performance of each class of shares is based on historical earnings
and will fluctuate and is not intended to indicate future performance. Since
yields fluctuate, yield data cannot necessarily be used to compare an
investment in a class' shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed
yield for a stated period of time. Performance and yield are generally
functions of kind and quality of the instruments held in a portfolio,
portfolio maturity, operating expenses and market conditions. Any fees charged
by financial institutions directly to their customer accounts in connection
with investments in shares will not be reflected in performance calculations.
-21-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's net investment income will be declared daily as a
dividend to shareholders of record at the close of business on the day of
declaration. Shareholders will receive dividends in additional Class I shares
of the applicable Portfolio unless they elect to receive cash. Shareholders
must make such election, or any revocation thereof, in writing to their Banks.
If an account is established with telephone privileges, the registered owner
or his preauthorized legal representative may change the election to receive
dividends in cash to an election to receive dividends in shares by telephoning
the Transfer Agent at (800) 688-3350. The election will become effective
with respect to dividends paid after its receipt. Reinvestment or
payment of dividends will be effected monthly at the net asset value per Class
I share of the applicable Portfolio on the date effected, and will include
fractional shares if necessary. If cash payment is requested, checks will be
mailed within five Business Days after the last day of each month.
TAXES
Federal Taxes
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Portfolio of liability for federal income taxes to
the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company for a taxable year
requires, among other things, that each Portfolio distribute to its
shareholders an amount equal to at least the sum of 90% of 23 its tax-exempt
interest income net of certain deductions and 90% of its investment company
taxable income for each taxable year. In general, a Portfolio's investment
company taxable income will be its taxable income, including interest, subject
to certain adjustments and excluding the excess of any net long term capital
gain for the taxable year over the net short term capital loss, if any, for
such year. Each Portfolio's policy is to distribute as dividends substantially
all of its investment company taxable income each year. Such dividends will be
taxable as ordinary income to the Portfolio's shareholders who are not
currently exempt from federal income taxes, whether such income or gain is
received in cash or reinvested in additional shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) In the case of the
Tax-Exempt Portfolio and Michigan Portfolio, dividends derived from tax-exempt
interest income ("exempt-interest dividends") may be treated by shareholders
as items of interest excludable from their gross income under Section 103(a)
of the Code unless under the circumstances applicable to the particular
shareholder the exclusion would be disallowed. (See Statement of Additional
Information under "Additional Information Concerning Taxes.") An
exempt-interest dividend is any dividend or part thereof (other than a capital
gain dividend) paid by the Tax-Exempt Portfolio or Michigan Portfolio and
designated as an exempt-interest dividend in a written notice mailed to
shareholders not later than sixty days after the close of the Portfolio's
taxable year which does not exceed in its aggregate the net Municipal
Securities interest received by the Portfolio for the taxable year. It is
anticipated that no part of any distribution by the Portfolios will be
eligible for the dividends received deduction for corporations. In addition,
none of the Portfolios expects to pay capital gain dividends within the
meaning of the Code.
If the Tax-Exempt Portfolio or Michigan Portfolio should hold certain
private activity bonds issued after August 7, 1986, shareholders must include,
as an item of tax preference, the portion of dividends paid by the Portfolio
that is attributable to interest on such bonds in their federal alternative
minimum taxable income for purposes of determining liability (if any) for the
alternative minimum tax applicable to individuals and corporations and the
environmental tax applicable to corporations. Corporate shareholders must also
take all exempt-interest dividends into account in determining certain
adjustments for alternative minimum and environmental tax purposes.
Shareholders receiving Social Security benefits should note that all exempt-
-22-
<PAGE>
interest dividends will be taken into account in determining the taxability of
such benefits.
Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Portfolio on
December 31 of such year if such dividends are actually paid during January of
the following year.
Shareholders will be advised at least annually as to the federal
income tax consequences of distributions made each year.
State and Local Taxes
Dividends paid by the Tax-Exempt Portfolio and Michigan Portfolio that
are derived from interest attributable to tax-exempt Michigan Municipal
Securities will be exempt from Michigan income tax, Michigan intangibles tax
and Michigan single business tax. Conversely, to the extent that the
Portfolios' dividends are derived from interest on obligations other than
Michigan Municipal Securities or certain U.S. Government Obligations (or are
derived from short term or long term gains), such dividends will be subject to
Michigan income tax, Michigan intangibles tax and Michigan single business
tax, even though the dividends may be exempt for federal income tax purposes.
The Portfolios are unable to predict in advance the portion of their dividends
that will be derived from interest on Michigan Municipal Securities, but will
mail to their respective shareholders not later than sixty days after the
close of the Portfolios' taxable year a written notice containing information
as to the interest derived from Michigan obligations and exempt from Michigan
income tax, Michigan intangibles tax and Michigan single business tax.
Except as noted above with respect to Michigan income taxation,
distributions of net income may be taxable to investors as dividend income
under other state or local laws even though a substantial portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes.
The Trust may be subject to state or local taxes in jurisdictions in
which the Trust may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of the Trust
and its shareholders under such laws may differ from treatment under federal
income tax laws. In certain states, review with a shareholder's tax adviser of
the effect of portfolio investments in repurchase agreements and U.S.
Government Obligations upon state income taxation may be appropriate.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes, which may have different consequences
from those of the federal income tax laws.
MANAGEMENT
Trustees and Officers of the Trust
The Board of Trustees of the Trust is responsible for the management
of the business and affairs of the Trust. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each Trustee has an address at The Woodward Funds c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226.
*Earl I. Heenan, Jr., Chairman and President
Director (since 1995), Vice Chairman (1988-1995) and President
(1955-1988), Detroit Mortgage & Realty Company; President (1989-1992) and
Trustee (since 1966), Cottage Hospital of Grosse Pointe (affiliate of Henry
Ford Health System); Trustee, Henry Ford Health Sciences Center (since 1987);
Trustee, Henry Ford Continuing Care Corporation (since 1980); Trustee,
Earhart Foundation (since 1980). He is 77 years old and his address is
333 West Fort Street, Detroit, Michigan 48226.
- -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the
1940 Act.
-23-
<PAGE>
*Eugene C. Yehle, Trustee and Treasurer
Retired; Director of Investor Relations and Pension Investments, Dow
Chemical Company (1972-1985); Trustee, Alma College (since 1978); Trustee
(since 1977) and Chairman (since 1983), Charles J. Strosacker Foundation;
Trustee (1989-1993), Higgins Lake Foundation. He is 76 years old and his
address is 4501 Linden Drive, Midland, Michigan 48640.
Will M. Caldwell, Trustee
Retired; Executive Vice President, Chief Financial Officer and
Director, Ford Motor Company (1979-1985); Director, First Nationwide Bank
(1986-1991); Director, Air Products & Chemicals, Inc. (since 1985); Director,
Zurich Holding Company of America (since 1990); Director, The Batts Group,
Ltd. (since 1986); Trustee and Vice Chairman, Detroit Medical Center
(1986-1991); Trustee Emeritus and Chairman of the Pension Investment
Sub-Committee, Detroit Medical Center (since 1991). He is 70 years old and his
address is 2733 Glenbrook Court, Bloomfield Hills, Michigan 48302.
Nicholas J. De Grazia, Trustee
Consultant, Lionel L.L.C. (since 1995); President, Chief Operating
Officer and Director, Lionel Trains, Inc. (1990-1995); Vice President-Finance
and Treasurer, University of Detroit (1981-1990); President (1986-1990) and
Director (1986-1995), Polymer Technologies, Inc.; President, Florence
Development Company (1987-1990); Chairman (since 1994) and Director
(1992-1995), Central Macomb County Chamber of Commerce; Vice Chairman, Michigan
Higher Education Facilities Authority (since 1991). He is 53 years old and his
address is 3650 Shorewood Drive, North Lakeport, Michigan 48059.
John P. Gould, Trustee
Steven G. Rothmeier Professor (since January, 1996); Distinguished
Service Professor of Economics of the University of Chicago Graduate School
of Business (since 1984); Dean of the University of Chicago Graduate School
of Business (1983-1993); Member of Economic Club of Chicago and Commercial
Club of Chicago, Director of Harbor Capital Advisors and Dimensional Fund
Advisors; Trustee, Prairie Family of Funds. He is 57 years old and his address
is University of Chicago School of Business, 1101 East 58th Street, Chicago,
Illinois 60637.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University (since 1985); Director of Planning and Policy Development for the
University of Colorado (1981-1985); Member of the Board of Directors of
Evanston Hospital, Chicago Metropolitan YMCA, Chicago Network and United
Charities; Member of the Chicago Economics Club; Trustee, Prairie Family of
Funds. She is 48 years old and her address is 1100 North Lake Shore Drive,
Chicago, Illinois 60611.
Julius L. Pallone, Trustee
President, J.L. Pallone Associates, Consultants (since 1994); Chairman
of the Board (1974-1993), Maccabees Life Insurance Company; President and
Chief Executive Officer, Royal Financial Services (1991-1993); Director,
American Council of Life Insurance of Washington, D.C. (life insurance
industry association) (1988-1993); Director, Crowley, Milner and Company
(department store) (since 1988); Trustee, Lawrence Institute of Technology
(since 1982); Director, Detroit Symphony Orchestra (since 1985); Director,
Oakland Commerce Bank (since 1984) and Michigan Opera Theater (since 1981). He
is 65 years old, and his address is 26957 Northwestern Highway, Suite 288,
Southfield, Michigan 48034.
- -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the
1940 Act.
-24-
<PAGE>
*Donald G. Sutherland, Trustee
Partner of the law firm Ice, Miller, Donadio & Ryan, Indianapolis,
Indiana. He is 67 years old, and his address is One American Square, 34th
Floor, Indianapolis, Indiana 46204.
Donald L. Tuttle, Trustee
Vice President (since 1995), Senior Vice President (1992-1995),
Association for Investment Management and Research; Senior Professor
of Finance, Indiana University (1970-1991); Vice President, Trust &
Investment Advisers, Inc. (1990-1991); Director, Federal Home Loan
Bank of Indianapolis (1981 to 1985). He is 61 years old, and his
address is 5 Boar's Head Lane, Charlottesville, Virginia 22903.
W. Bruce McConnel, III, Secretary
Partner of the law firm Drinker Biddle & Reath, Philadelphia,
Pennsylvania. He is 53 years old, and his address is 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. Additional
information on the compensation paid by the Trust to its Trustees and officers
is included in the Statement of Additional Information.
Investment Adviser, Custodian and Transfer Agent
The investment adviser of the Trust is NBD, a wholly owned subsidiary
of First Chicago NBD Corporation, a bank holding company. As of December 31,
1995, NBD was providing investment management and advisory services for
accounts aggregating approximately $37.9 billion of which in excess of $3.7
billion were money market instruments. NBD has been in the business of
providing such services since 1933. Included among NBD's accounts are pension
and profit sharing funds for major corporations and state and local
governments, as well as commingled trust funds and a variety of institutional
and personal advisory accounts, estates and trusts, all of which are potential
customers for shares of the Trust. NBD also acts as investment adviser for
other registered investment company portfolios.
Under the Advisory Agreement, NBD is subject to the general
supervision of the Trust's Board of Trustees and manages each Portfolio in
conformance with the stated policies of the Trust. In this regard, it is the
responsibility of NBD to make investment decisions for the Trust and to place
all purchase and sale orders for its portfolio transactions. Under the
Advisory Agreement, NBD also provides the Trust with certain administrative
services, such as maintaining the Trust's general ledger and assisting in the
preparation of various regulatory reports.
NBD is entitled to receive fees for advisory and administrative
services provided to the Portfolios, computed daily and payable monthly, at
annual rates of: (i) .45% of the first $1.0 billion of each of the Money
Market, Government, Treasury and Tax-Exempt Portfolio's average daily net
assets, .425% of the next $1.0 billion, and .40% of each such Portfolio's
average daily net assets in excess of $2.0 billion; and (ii) .50% of the
average daily net assets of the Michigan Portfolio. In addition, NBD is
entitled to 4/10ths of the gross income earned by a Portfolio on each loan of
securities (excluding capital gains and losses, if any). NBD may, however,
waive its fees in whole or in part. (The Trust will give 30 days notice to
investors of the discontinuance of advisory fee waivers.)
- -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the
1940 Act.
-25-
<PAGE>
NBD also receives compensation as the Trust's Custodian and Transfer
Agent under separate agreements. The fees payable by the Portfolios for these
services are described in the Statement of Additional Information.
NBD is reimbursed for postage and other out-of-pocket expenses in
connection with the above duties and also receives compensation from the Trust
for costs associated with clearing redemption drafts through NBD, and for its
standard bank charges for processing lock box deposits, processing redemption
drafts, and performing other services.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling, or distributing the shares of a
registered, open-end investment company continuously engaged in the issuance
of its shares, and prohibit banks generally from underwriting securities, but
do not prohibit such a bank holding company or affiliate from acting as
adviser, transfer agent, or custodian to such an investment company or from
purchasing shares of such a company as agent for and upon the order of a
customer. NBD and the Trust believe that NBD may perform the advisory,
custodial and transfer agency services for the Trust described in this
Prospectus, and that NBD, subject to such banking laws and regulations, may
perform the shareholder services contemplated by this Prospectus, without
violation of such banking laws or regulations. However, future changes in
legal requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent NBD from continuing to perform investment advisory, custodial or
transfer agency services for the Trust or require NBD to alter or discontinue
the services it provides to shareholders.
If NBD were prohibited from performing investment advisory, custodial
or transfer agency services for the Trust, it is expected that the Board of
Trustees would recommend that shareholders approve new agreements with another
entity or entities qualified to perform such services and selected by the
Board. If NBD or its affiliates were required to discontinue all or part of
its shareholder servicing activities, their customers would be permitted to
remain the beneficial owners of Trust shares and alternative means for
continuing the servicing of such customers would be sought. The Trust does not
anticipate that investors would suffer any adverse financial consequences as a
result of these occurrences.
Sponsors and Co-Distributors
FoM, a Delaware corporation and a wholly owned subsidiary of First of
Michigan Capital Corporation, is a sponsor and Co-Distributor of the Trust's
shares. It is engaged in the securities underwriting and securities and
commodities brokerage business and is a member of the New York Stock Exchange,
Inc., other major securities and commodities exchanges and the National
Association of Securities Dealers, Inc. FoM participates as a member of
various selling groups or as agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of their
securities and sells securities to such companies as a broker or dealer in
securities. On December 31, 1995, FoM had a net worth of $37,231,000.
Essex, a New York corporation, is a wholly owned subsidiary of CUC
International, Inc. Essex is engaged in the business of securities brokerage
through financial institutions and is a member of the National Association of
Securities Dealers, Inc. Essex has entered into dealer agreements with the
distributors of various investment companies and executes orders on behalf of
such companies for the purchase and sale of their securities. As of December
31, 1995, Essex had a net worth of $1,945,000.
FoM and Essex act as sponsors and Co-Distributors of the Trust's
shares pursuant to the Distribution Agreement with the Trust which has been
entered into pursuant to the Distribution Plan described below.
-26-
<PAGE>
Service and Distribution Plan
The Trust has adopted its Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"). Under the Plan, the Trust incurs expenses
primarily intended to result in the sale of the Trust's shares in an amount
not to exceed .35 of 1% of the value of each portfolio's average daily net
assets calculated as follows in the case of the Portfolios: (i) fees payable
to the Co-Distributors pursuant to the Distribution Agreement; (ii) the actual
costs and expenses in connection with advertising and marketing the
Portfolios' shares; and (iii) fees pursuant to agreements with securities
dealers, financial institutions, and other professionals ("Service Agents")
for administration or servicing of Portfolio shareholders ("Servicing").
Servicing may include, among other things: answering client inquiries
regarding the Trust and the Portfolios; assisting clients in changing dividend
options, account designations and addresses; performing sub-accounting;
establishing and maintaining shareholder accounts and records; processing
purchase and redemption transactions; investing client cash account balances
automatically in Portfolio shares; providing periodic statements showing a
client's account balance and integrating such statements with those of other
transactions and balances in the client's other accounts serviced by the
Service Agent; arranging for bank wires; and such other services as the Trust
may request, to the extent the Service Agent is permitted by applicable
statute, rule or regulation. Under the Plan, the Trust also bears the cost of
preparing and printing Prospectuses for use in selling shares of the Trust and
costs associated with implementing and operating the Plan. These costs are
included in computing the .35 of 1% limitation set forth above.
Pursuant to the Distribution Agreement, FoM is entitled to receive a
fee at the annual rate of .025% of the aggregate average net assets invested
in the Portfolios up to $400,000,000 and .005% of such assets in excess of
$400,000,000, and Essex is entitled to receive a fee at the annual rate of
.10% of the aggregate average net assets of the Trust's investment portfolios
attributable to investments by clients of Essex. The payments to be made to
the Co-Distributors which are based on a percentage of the net assets of the
Portfolios are designed to compensate the Co-Distributors for their
participation in the distribution of the Portfolios' shares and to reimburse
the Co-Distributors for certain distribution costs. Nonreimbursable expenses
of the Co-Distributors include salaries of executives, sales and clerical
personnel performing services for the Trust and overhead expenses. Such costs
are by their nature not subject to precise quantification and the Trustees
have determined that the fees to be paid to the Co-Distributors are reasonable
under the circumstances.
If current restrictions under the Glass-Steagall Act were relaxed, the
Trust expects that NBD would consider the possibility of offering to perform
some or all of the services now provided by the Co-Distributors. Legislation
modifying such restrictions has been proposed in past Sessions of Congress
which, if enacted, would permit a bank holding company to establish a non-bank
subsidiary having the authority to organize, sponsor and distribute shares of
an investment company. If such legislation were enacted, the Trust expects
that NBD's parent bank holding company would consider the possibility of one
of its non-bank subsidiaries offering to perform some or all of the services
now provided by the Co-Distributors. It is not possible, of course, to predict
whether or in what form legislation might be enacted or the terms upon which
NBD or such a non-bank affiliate might offer to provide such services.
Trust Expenses
The Trust is responsible for the payment of its expenses. These
include, for example, fees payable to NBD as Adviser, or expenses otherwise
incurred by the Trust in connection with the management of the investment of
the Trust's assets, the fees and expenses of NBD as the Trust's Custodian and
as its Transfer Agent, the fees payable to the Co-Distributors under the
Distribution Agreement, the fees and expenses of Trustees, expenses associated
with the Trust's Distribution Plan and Shareholder Servicing Plan, outside
auditing and legal expenses, all taxes and corporate fees payable by the
-27-
<PAGE>
Trust, SEC fees, state securities qualification fees, costs of preparing and
printing prospectuses for regulatory purposes and for distribution to
shareholders, costs to shareholder reports and shareholder meetings, and any
extraordinary expenses. Each Portfolio also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular portfolio of the Trust will
be charged to that portfolio and expenses not readily identifiable as
belonging to a particular portfolio will be allocated by the Board of Trustees
among one or more portfolios in such a manner as it deems fair and equitable.
For the fiscal year ended December 31, 1995, the Money Market, Government,
Treasury, Tax-Exempt and Michigan Portfolios' total expenses were .51%, .51%,
.53%, .53% and .69% (after fee waivers) of their average net assets,
respectively. The Statement of Additional Information describes in more detail
the fees and expenses borne by the Trust.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on April 21,
1987 under a Declaration of Trust, which was amended and restated as of May 1,
1992. The Trust is a series fund having seventeen series of shares of
beneficial interest, each of which evidences an interest in a separate
investment portfolio. The Declaration of Trust permits the Board of Trustees
to issue an unlimited number of full and fractional shares and to create an
unlimited number of series of shares ("Series") representing interests in a
portfolio and an unlimited number of classes of shares within a Series. In
addition to the Portfolios described herein, the Trust offers the following
investment portfolios: the Woodward Intermediate Bond Fund, Bond Fund, Short
Bond Fund, Municipal Bond Fund, Michigan Municipal Bond Fund, Growth/Value
Fund, Opportunity Fund, Intrinsic Value Fund, Capital Growth Fund, Balanced
Fund, International Equity Fund and Equity Index Fund. The Trust has
established the following two distinct classes of shares within each Portfolio:
described herein Class I shares (Special Class 1) and Class A shares
(Original Class). A sales person and any other person or institution
entitled to receive compensation for selling or servicing shares may receive
different compensation with respect to different classes of shares in the
Series.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and each Series
entitled to vote on a matter will vote thereon in the aggregate and not by
Series, except as otherwise expressly required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests
of shareholders of a particular Series. In addition, shareholders of each of
the Series have equal voting rights except that only shares of a particular
class within a Series are entitled to vote on matters affecting only that
class. Voting rights are not cumulative, and accordingly the holders of more
than 50% of the aggregate number of shares of all Trust portfolios may elect
all of the Trustees.
As of March 29, 1996, NBD held beneficially or of record
approximately 30.70%, 15.67%, 7.64%, 41.45% and 16.85% of the outstanding
shares of the Money Market, Government, Treasury, Tax-Exempt and Michigan
Portfolios, respectively, and therefore may be considered to be a controlling
person of the Portfolios for purposes of the 1940 Act.
Because NBD serves the Trust as both Custodian and as Adviser, the
Trustees have established a procedure requiring three annual verifications,
two of which are unannounced, of all investments held pursuant to the
Custodian Agreement, to be conducted by the Trust's independent accountants.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's By-laws provide that special meetings of shareholders of any Series
shall be called at the written request of shareholders entitled to cast at
least 10% of the votes of a Series entitled to be cast at such meeting. The
Trust also stands ready to assist shareholder communications in connection
with any meeting of shareholders as prescribed in Section 16(c) of the 1940
Act.
-28-
<PAGE>
[ BACK COVER, COLUMN 1 ]
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Portfolios'
Statement of Additional Information incorporated herein by reference, in
connection with the offering made by this Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust, Adviser or Sponsors and Co-Distributors. This
Prospectus does not constitute an offering by the Portfolios or by their
Co-Distributors in any jurisdiction in which such offering may not lawfully be
made.
TABLE OF CONTENTS Page
EXPENSE SUMMARY.............................. 2
BACKGROUND................................... 4
FINANCIAL HIGHLIGHTS......................... 5
INTRODUCTION................................. 9
PROPOSED REORGANIZATION...................... 9
INVESTMENT OBJECTIVES,
POLICIES AND RISK
FACTORS.............................. 9
OTHER INVESTMENT POLICIES.................... 12
PURCHASE OF SHARES........................... 18
REDEMPTION OF SHARES......................... 19
PERFORMANCE AND YIELD
INFORMATION.......................... 20
DIVIDENDS AND DISTRIBUTIONS.................. 21
TAXES ..................................... 21
MANAGEMENT................................... 22
OTHER INFORMATION............................ 27
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities,
Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, PA 19107
<PAGE>
[ BACK COVER, COLUMN 2 ]
CLASS I SHARES OF THE:
WOODWARD MONEY MARKET FUND
WOODWARD GOVERNMENT FUND
WOODWARD TREASURY MONEY MARKET FUND
WOODWARD TAX-EXEMPT MONEY MARKET
FUND
WOODWARD MICHIGAN TAX-EXEMPT MONEY
MARKET FUND
THE WOODWARD FUNDS(R)
Prospectus
April 15, 1996
-29-
Exhibit (17)(g)
STATEMENT OF ADDITIONAL INFORMATION
April 15, 1996
for
CLASS I AND CLASS A SHARES OF THE:
WOODWARD MONEY MARKET FUND
WOODWARD GOVERNMENT FUND
WOODWARD TREASURY MONEY MARKET FUND
WOODWARD TAX-EXEMPT MONEY MARKET FUND
WOODWARD MICHIGAN TAX-EXEMPT MONEY MARKET FUND
of
THE WOODWARD FUNDS
c/o NBD Bank
Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
(800) 688-3350
This Statement of Additional Information (the "Additional
Statement") is meant to be read in conjunction with The Woodward Funds'
Prospectuses dated April 15, 1996 pertaining to all classes of shares of the
Woodward Money Market Fund (the "Money Market Portfolio"), Woodward Government
Fund (the "Government Portfolio"), Woodward Treasury Money Market Fund (the
"Treasury Portfolio"), Woodward Tax-Exempt Money Market Fund (the "Tax-Exempt
Portfolio") and Woodward Michigan Tax-Exempt Money Market Fund (the "Michigan
Portfolio") (each, a "Portfolio" and collectively, the "Portfolios"), and is
incorporated by reference in its entirety into the Prospectuses. Because this
Additional Statement is not itself a prospectus, no investment in shares of
the Portfolios should be made solely upon the information contained herein.
Copies of the Portfolios' Prospectuses may be obtained from any office of the
Co-Distributors by writing or calling the Co-Distributors or the Trust.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectuses.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives, Policies and Risk Factors............... 1
Net Asset Value................................................ 9
Additional Purchase and Redemption Information................. 11
Description of Shares.......................................... 11
Additional Information Concerning Taxes........................ 14
Management..................................................... 18
Independent Public Accountants................................. 24
Counsel........................................................ 24
Additional Information on Performance.......................... 24
Appendix A..................................................... A-1
Report of Independent Public Accountants
and Financial Statements..................................... FS-1
-i-
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following policies supplement the Portfolios' respective
investment objectives and policies as set forth in their Prospectuses.
Additional Information on Portfolio Instruments
Attached to this Additional Statement is Appendix A which
contains descriptions of the rating symbols used by Rating Agencies for
securities in which the Portfolios may invest.
Portfolio Transactions
Subject to the general supervision of the Trust's Board of
Trustees, the Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for each
Portfolio.
The annualized portfolio turnover rate for each Portfolio is
calculated by dividing the lesser of purchases or sales of portfolio
securities for the reporting period by the monthly average value of the
portfolio securities owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration
dates at the time of acquisition are one year or less.
Purchases of money market instruments by the Portfolios are
made from dealers, underwriters and issuers. The Portfolios currently do not
expect to incur any brokerage commission expense on such transactions because
money market instruments are generally traded on a "net" basis acting as
principal for their own accounts without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities
purchased in underwritten offerings include a fixed amount of compensation to
the underwriter, generally referred to as the underwriter's concession or
discount. When securities are purchased directly from or sold directly to an
issuer, no commissions or discounts are paid.
For the fiscal years ended December 31, 1995, 1994, and 1993,
the Portfolios incurred no brokerage commissions.
The Portfolios may participate, if and when practicable, in
bidding for the purchase of portfolio securities directly from an issuer in
order to take advantage of the lower purchase price available to members of a
bidding group. A Portfolio will engage in this practice, however, only when
the Adviser, in its sole discretion, believes such practice to be otherwise in
the Portfolio's interests.
<PAGE>
The Advisory Agreement for the Portfolios provides that, in
executing portfolio transactions and selecting brokers or dealers, the Adviser
will seek to obtain the best overall terms available for each Portfolio. In
assessing the best overall terms available for any transaction, the Adviser
shall consider factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In addition, the Agreement authorizes the Adviser to cause a Portfolio
to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer
for effecting the same transaction, provided that the Adviser determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in
terms of either the particular transaction or the overall responsibilities of
the Adviser to the Portfolios. Such brokerage and research services might
consist of reports and statistics relating to specific companies or
industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy.
Supplementary research information so received is in addition
to, and not in lieu of, services required to be performed by the Adviser and
does not reduce the advisory fees payable by the Portfolios. The Trustees will
periodically review any commissions paid by the Portfolios to consider whether
the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Portfolios. It is
possible that certain of the supplementary research or other services received
will primarily benefit one or more other investment companies or other
accounts for which investment discretion is exercised by the Adviser.
Conversely, a Portfolio may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such
other account or investment company.
The Trust will not execute portfolio transactions through,
acquire portfolio securities issued by, make savings deposits in or enter into
repurchase or reverse repurchase agreements with the Adviser, the
Co-Distributors or an affiliated person of any of them (as such term is
defined in the 1940 Act) acting as principal, except to the extent permitted
by the SEC or its staff. In addition, a Portfolio will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which a Co-Distributor or the Adviser, or an affiliated person of either of
them, is a member, except to the extent permitted by the SEC or its staff.
Under certain circumstances, the Portfolios may be at a disadvantage because
of
-2-
<PAGE>
these limitations in comparison with other investment companies which have
similar investment objectives but are not subject to such limitations.
Investment decisions for each Portfolio are made independently
from those for the other Portfolios and for any other investment companies and
accounts advised or managed by the Adviser. Such other investment companies
and accounts may also invest in the same securities as the Portfolios. To the
extent permitted by law, the Adviser may aggregate the securities to be sold
or purchased for the Portfolios with those to be sold or purchased for other
investment companies or accounts in executing transactions. When a purchase or
sale of the same security is made at substantially the same time on behalf of
one or more of the Portfolios and another investment company or account, the
transaction will be averaged as to price and available investments allocated
as to amount, in a manner which the Adviser believes to be equitable to each
Portfolio and such other investment company or account. In some instances,
this investment procedure may adversely affect the price paid or received by a
Portfolio or the size of the position obtained or sold by the Portfolio.
Eligible Securities
Each Portfolio may purchase "eligible securities" that present
minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities generally
include: (1) securities that are rated by two or more Rating Agencies (or the
only Rating Agency which has issued a rating) in one of the two highest rating
categories for short term debt securities; (2) securities that have no short
term rating, if the issuer has other outstanding short term obligations that
are comparable in priority and security as determined by the Adviser
("Comparable Obligations") and that have been rated in accordance with (1)
above; (3) securities that have no short term rating, but are determined to be
of comparable quality to a security satisfying (1) or (2) above, and the
issuer does not have Comparable Obligations rated by a Rating Agency; and (4)
obligations that carry a demand feature that complies with (1), (2) or (3)
above, and are unconditional (i.e., readily exercisable in the event of
default) or, if conditional, either they or the long term obligations of the
issuer of the demand obligation are (a) rated by two or more Rating Agencies
(or the only Rating Agency which has issued a rating) in one of the two
highest categories for long term debt obligations, or (b) determined by the
Adviser to be of comparable quality to securities which are so rated. The
Board of Trustees will approve or ratify any purchases by each Portfolio of
securities that are rated by only one Rating Agency or that qualify under (3)
above.
-3-
<PAGE>
Government Obligations
As stated in the Prospectuses, pursuant to their
respective investment objectives, the Portfolios may invest in
U.S. Government Obligations.
Bank Obligations
In accordance with their respective investment objectives, the
Portfolios may purchase bank obligations, which include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits, including
U.S. dollar-denominated instruments issued or supported by the credit of U.S.
or foreign banks or savings institutions. Although the Portfolios invest in
obligations of foreign banks or foreign branches of U.S. banks only where the
Adviser deems the instrument to present minimal credit risks, such investments
may nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1.0
billion in total assets at the time of purchase.
Commercial Paper
Commercial paper, including variable and floating rate notes
and other short term corporate obligations, must be rated in one of the two
highest categories by at least two Rating Agencies, or if not rated, must have
been independently determined by the Adviser to be of comparable quality.
Variable and Floating Rate Instruments
With respect to variable and floating rate obligations that may
be acquired by the Portfolios, the Adviser will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
notes and will continuously monitor their financial status to meet payment on
demand. The absence of an active secondary market with respect to particular
variable and floating rate instruments could make it difficult for a Portfolio
to dispose of instruments if the issuer defaulted on its payment obligation or
during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss
with respect to such instruments.
Other Investment Companies
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, each Portfolio may invest from time to time in securities issued
by other investment companies which
-4-
<PAGE>
invest in high quality, short term debt securities. Each Portfolio intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of the Portfolio's total
assets will be invested in the securities of any one investment company; (b)
not more than 10% of the value of the Portfolio's total assets will be
invested in the aggregate in securities of investment companies as a group;
and (c) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Portfolio or the Trust as a whole.
Lending Securities
When a Portfolio lends its securities, it continues to receive
interest or dividends on the securities loaned and may simultaneously earn
interest on the investment of the cash collateral. Although voting rights, or
rights to consent, attendant to securities on loan pass to the borrower, such
loans will be called so that the securities may be voted by a Portfolio if a
material event affecting the investment is to occur.
Repurchase Agreements and Reverse Repurchase Agreements
The repurchase price under the repurchase agreements described
in the Prospectuses generally equals the price paid by a Portfolio plus
interest negotiated on the basis of current short term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements are held by the
Trust's Custodian, in the Federal Reserve/Treasury book-entry system or by
another authorized securities depository. Repurchase agreements are considered
to be loans under the 1940 Act.
Reverse repurchase agreements are considered to be borrowings
by the Portfolios under the 1940 Act. At the time a Portfolio enters into a
reverse repurchase agreement, it will place in a segregated custodial account
liquid assets such as U.S. Government securities or other liquid high-grade
debt securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently monitor the account to
ensure that such value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by the Portfolio may
decline below the price of the securities it is obligated to repurchase.
When-Issued Purchases and Forward Commitments
A Portfolio will purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
-5-
<PAGE>
Portfolio may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities
are delivered to the Portfolio on the settlement date. In these cases the
Portfolio may realize a capital gain or loss.
When a Portfolio engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Portfolio's incurring a loss or missing
an opportunity to obtain a price considered to be advantageous.
Municipal Securities
As stated in their Prospectuses, the Michigan and Tax- Exempt
Portfolios may invest in Municipal Securities including general obligation
securities, revenue securities, notes, and moral obligation bonds, which are
normally issued by special purpose authorities. There are, of course,
variations in the quality of Municipal Securities, both within a particular
classification and between classifications, and the yields on Municipal
Securities depend in part on a variety of factors, including general market
conditions, the financial condition of the issuer, general conditions of the
municipal bond market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Municipal Securities by
Rating Agencies represent their opinions as to the quality of Municipal
Securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and Municipal Securities with the same
maturity, interest rate and rating may have different yields while Municipal
Securities with the same maturity and interest rate with different ratings may
have the same yield. Subsequent to its purchase by a Portfolio, a Municipal
Security may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Portfolio. The Adviser will consider such
an event in determining whether the Portfolio should continue to hold the
obligation.
The payment of principal and interest on most Municipal
Securities purchased by the Portfolios will depend upon the ability of the
issuers to meet their obligations. The District of Columbia, each state, each
possession and territory of the United States, each of their political
subdivisions, agencies, instrumentalities and authorities and each state
agency of which a state is a member is a separate "issuer" as that term is
used in this Additional Statement and in the Prospectuses. The
non-governmental user of facilities financed by a private activity bond is
also considered to be an "issuer". An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights or remedies of creditors, such as the Federal
-6-
<PAGE>
Bankruptcy Code, and laws, if any, which may be enacted by Federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest or principal of its Municipal
Securities may be materially adversely affected by litigation or other
conditions.
Certain of the Municipal Securities held by the Portfolios may
be insured at the time of issuance as to the timely payment of principal and
interest. The insurance policies will usually be obtained by the issuer of the
Municipal Securities at the time of original issuance. In the event that the
issuer defaults with respect to interest or principal payments, the insurer
will be notified and will be required to make payment to the bondholders.
There is, however, no guarantee that the insurer will meet its obligations. In
addition, such insurance will not protect against market fluctuations caused
by changes in interest rates and other factors.
From time to time proposals have been introduced before
Congress for the purpose of restricting or eliminating the federal income tax
exemption for interest on Municipal Securities. For example, pursuant to
federal tax legislation passed in 1986 interest on certain private activity
bonds must be included in an investor's federal alternative minimum taxable
income, and corporate investors must include all tax-exempt interest in their
federal alternative minimum taxable income. The Trust cannot predict what
legislation, if any, may be proposed in Congress in the future as regards the
federal income tax status of interest on Municipal Securities in general, or
which proposals, if any, might be enacted. Such proposals, if enacted, might
materially adversely affect the availability of Municipal Securities for
investments by the Tax-Exempt and Michigan Portfolios and their liquidity and
value. In such event the Board of Trustees would reevaluate the Portfolios'
investment objectives and policies and consider changes in their structure or
possible dissolution.
Stand-By Commitments
The Tax-Exempt and Michigan Portfolios may acquire "stand-by
commitments" with respect to Municipal Securities they hold. Under a stand-by
commitment, a dealer agrees to purchase at the Portfolio's option specified
Municipal Securities at a specified price. Stand-by commitments may be
exercisable by the Portfolios at any time before the maturity of the
underlying Municipal Securities and may be sold, transferred or assigned only
with the instruments involved.
-7-
<PAGE>
The Portfolios expect that stand-by commitments will generally
be available without the payment of any direct or indirect consideration.
However, if necessary or advisable, the Portfolios may pay for a stand-by
commitment either separately in cash or by paying a higher price for Municipal
Securities which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). Neither the
Tax-Exempt Portfolio nor the Michigan Portfolio will acquire a stand-by
commitment unless immediately after the acquisition, with respect to 75% of
its assets not more than 5% of its total assets will be invested in
instruments subject to a demand feature, including stand-by commitments, with
the same institution.
The Portfolios intend to enter into stand-by commitments only
with dealers, banks and broker-dealers which, in the Adviser's opinion,
present minimal credit risks. The Portfolios' reliance upon the credit of
these dealers, banks and broker-dealers will be secured by the value of the
underlying Municipal Securities that are subject to the commitment. Thus, the
risk of loss to the Portfolios in connection with a "stand-by commitment" will
not be qualitatively different from the risk of loss faced by a person that is
holding securities pending settlement after having agreed to sell the
securities in the ordinary course of business.
The Portfolios will acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their rights
thereunder for trading purposes. The acquisition of a stand-by commitment will
not affect the valuation or assumed maturity of the underlying Municipal
Securities which will continue to be valued in accordance with the amortized
cost method. The actual stand-by commitment will be valued at zero in
determining net asset value. Where a Portfolio pays directly or indirectly for
a stand-by commitment, its cost will be reflected as an unrealized loss for
the period during which the commitment is held by the Portfolio and will be
reflected in realized gain or loss when the commitment is exercised or
expires.
Additional Investment Limitations
In addition to the investment limitations disclosed in the
Prospectuses, the Portfolios are subject to the following investment
limitations which may not be changed without approval of the holders of the
majority of the outstanding shares of the affected Portfolio (as defined under
"Description of Shares" below).
None of the Portfolios may:
1. Purchase or sell real estate, although they may
invest in securities which are secured by real estate and of
-8-
<PAGE>
issuers which invest or deal in real estate; purchase or sell securities
issued by real estate investment trusts; purchase or sell commodities,
commodity contracts or oil and gas interests; acquire securities of other
investment companies, except in connection with a merger, consolidation,
reorganization, or acquisition of assets, or where otherwise permitted by the
1940 Act; or invest in companies for the purpose of exercising control or
management.
2. Act as an underwriter of securities (except insofar as it
might be deemed to be an underwriter within the meaning of the Securities Act
of 1933 upon the acquisition or disposition of portfolio securities), purchase
securities on margin, make short sales with securities or maintain a short
position in any security.
3. Issue senior securities as defined in the 1940 Act except to
the extent that such issuance might be involved with respect to borrowings
pursuant to reverse repurchase transactions or as set forth in Investment
Limitation No. 2 in the Prospectuses.
In order to permit the sale of a Portfolio's shares in certain
states, the Trust may make commitments with respect to a Portfolio more
restrictive than the investment policies and limitations described above and
in its Prospectuses. As of the date of this Additional Statement, the Trust
has made commitments that the Money Market, Government and Tax-Exempt
Portfolios will not invest in oil, gas or other mineral leases, or in real
estate limited partnership interests that are not readily marketable. Should
the Trust determine that any such commitment is no longer in the best
interests of a particular Portfolio, it will revoke the commitment by
terminating sales of the Portfolio's shares in the state involved and, in the
case of investors in Texas, give notice of such action.
NET ASSET VALUE
Each of the Portfolios intends to value its portfolio
securities based upon their amortized cost in accordance with Rule 2a-7 under
the 1940 Act. Where it is not appropriate to value a security by the amortized
cost method, the security will be valued either by market quotations, or by
fair value as determined by the Board of Trustees. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the securities. The value of portfolio securities
held by the Portfolios will vary inversely to changes in prevailing interest
rates. Thus, if interest rates have increased from the time a security was
purchased, such security, if sold, might be sold at a price less
-9-
<PAGE>
than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price
greater than its purchase cost. In either instance, if the security is held to
maturity, no gain or loss will be realized.
Pursuant to Rule 2a-7, each Portfolio is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, to purchase
securities having remaining maturities of 13 months or less only, and to
invest only in securities determined by the Board of Trustees to be of high
quality with minimal credit risks. The Board of Trustees has established
procedures designed to stabilize, to the extent reasonably possible, each
Portfolio's price per share as computed for the purpose of sales and
redemptions at $1.00. These procedures include review of the investment
holdings by the Board of Trustees, at such intervals as it may deem
appropriate, to determine whether a Portfolio's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Trustees. If the deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the
Board of Trustees determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective actions as it deems
necessary and appropriate to eliminate or reduce, to the extent reasonably
practicable, any such dilution or unfair results. These actions may include
selling portfolio securities prior to maturity to realize capital gains or
losses or to shorten a Portfolio's average maturity, withholding or reducing
dividends, redeeming shares in kind, splitting, combining or otherwise
recapitalizing outstanding shares or establishing a net asset value per share
by using available market quotations.
The Portfolios calculate their dividends based on daily net
investment income. Daily net investment income consists of (1) accrued
interest and other income plus or minus amortized purchase discount or
premium, (2) plus or minus all realized gains and losses on portfolio
securities and (3) minus accrued expenses allocated to that Portfolio.
Expenses of each Portfolio are accrued daily. As each Portfolio's portfolio
securities are normally valued at amortized cost, unrealized gains or losses
on such securities based on their market values will not normally be
recognized. However, should the net asset value deviate significantly from
market value, the Trustees could decide to value the securities at market
value and then unrealized gains and losses would be included in net investment
income.
-10-
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Portfolios are offered and sold on a continuous
basis by the Trust's sponsors and Co-Distributors, FoM and Essex, acting as
agent. As described in their Prospectuses, Class I shares of the Portfolios
are sold primarily to NBD and its affiliated and correspondent banks acting on
behalf of their respective customers. Class A shares of the Portfolios are
sold to the public ("Investors") primarily through financial institutions such
as banks, brokers and dealers.
Under the 1940 Act, the Trust may suspend the right of
redemption or postpone the date of payment for shares during any period when
(a) trading on the New York Stock Exchange is restricted by applicable rules
and regulations of the SEC; (b) the Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as determined by the SEC. (The
Trust may also suspend or postpone the recordation of the transfer of shares
upon the occurrence of any of the foregoing conditions).
In addition to the situations described in the Prospectuses
under "Redemption of Shares," the Trust may redeem shares involuntarily to
reimburse the Portfolios for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Portfolio shares as provided in the
Prospectuses from time to time.
The Trust normally redeems shares for cash. However, the
Trustees can determine that conditions exist making cash payments undesirable.
If they should so determine, redemption payments could be made in securities
valued at the value used in determining net asset value. There may be
brokerage and other costs incurred by the redeeming shareholder in selling
such securities. The Trust has elected to be covered by Rule 18f-1 under the
1940 Act, pursuant to which the Trust is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of net asset value during any 90-day
period for any one shareholder.
DESCRIPTION OF SHARES
The Trust is an unincorporated business trust organized under
Massachusetts law on April 21, 1987. The Trust's Declaration of Trust, which
was amended and restated as of May 1, 1992, authorizes the Board of Trustees
to divide shares into two or more series, each series relating to a separate
portfolio of investments, and divide the shares of any series into two or more
classes. The number of shares of each series and/or of a class
-11-
<PAGE>
within each series shall be unlimited. The Trust does not intend to issue
share certificates. Pursuant to such authority, the Board of Trustees has
authorized the issuance of an unlimited number of shares of beneficial
interest in the Trust representing interests in the Portfolios. The shares of
each Portfolio are offered in two separate classes: Class I and Class A.
In the event of a liquidation or dissolution of the Trust or an
individual Portfolio, shareholders of a particular Portfolio would be entitled
to receive the assets available for distribution belonging to such Portfolio.
If there are any assets, income, earnings, proceeds, funds or payments, which
are not readily identifiable as belonging to any particular Portfolio, the
Trustees shall allocate them among any one or more of the Portfolios as they,
in their sole discretion, deem fair and equitable.
Rule 18f-2 under the 1940 Act provides that any matter required
to be submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Portfolio affected by the matter. A Portfolio is
affected by a matter unless it is clear that the interests of each Portfolio
in the matter are substantially identical or that the matter does not affect
any interest of the Portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Portfolio only if approved by a
majority of the outstanding shares of such Portfolio. However, the Rule also
provides that the ratification of the appointment of independent accountants,
the approval of principal underwriting contracts and the election of Trustees
may be effectively acted upon by shareholders of the Trust voting together in
the aggregate without regard to particular Portfolios.
When used in the Prospectuses or in this Additional Statement,
a "majority" of shareholders means, with respect to the approval of an
investment advisory agreement, a distribution plan or a change in a
fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of the Trust or the applicable Portfolio present at a meeting if the holders
of more than 50% of the outstanding shares are present in person or by proxy,
or (2) more than 50% of the outstanding shares of the Trust or the applicable
portfolio.
As of March 29, 1996, Trussal & Co., a nominee of NBD's Trust
Division, 900 Tower Drive, 10th Floor, Troy, Michigan 48098, held of record
58.32%, 58.10%, 79.85%, 77.83% and 31.52%, respectively, of the outstanding
shares of the Money Market Government, Treasury, Tax-Exempt and Michigan
Portfolios. As of the same date, First of Michigan Corporation, 100
Renaissance
-12-
<PAGE>
Center, 26th Floor, Detroit, Michigan 48243, held of record, but not
beneficially, 35.95% of the outstanding shares of the Michigan Portfolio. As
of the same date, Automated Cash Management Systems ("ACMS"), 900 Tower Drive,
10th Floor, Troy, Michigan 48098, held of record, but not beneficially,
16.54%, 7.86%, 14.92%, 11.96% and 6.42%, respectively, of the outstanding
shares of the Money Market, Government, Treasury, Tax-Exempt and Michigan
Portfolios. The Trustees and officers of the Trust, as a group, owned less
than 1% of the outstanding shares of each of these Portfolios. Furthermore, as
of March 29, 1996, with respect to the Government, Treasury, Tax-Exempt and
Michigan Portfolios, the following persons may have beneficially owned 5% or
more of the outstanding shares of such Portfolios:
<TABLE>
<CAPTION>
Percent of
Outstanding
Number of Shares Shares
---------------- -----------
<S> <C> <C>
Treasury Portfolio
Confederation Life-General 459,780,801 38.41%
260 Interstate North
Atlanta, GA 30339
Tax-Exempt Portfolio
Mrs. John E. Giles 30,564,579 5.05%
28 Doublet Hill Road
Weston, Massachusetts 02193
Michigan Portfolio
MI School Asbestos Trust 8,517,848 6.09%
Humphrey, Farmington, McClain PC
c/o Scott Manuel
221 W. Lexington, Suite 400
P.O. Box 900
Independence, Missouri 64051
</TABLE>
To the Trust's knowledge, there were no persons who
beneficially owned 5% or more of the outstanding shares of the Money Market
and Government Portfolios as of March 29, 1996.
When issued for payment as described in the Portfolio's
Prospectuses and this Additional Statement, shares of the Portfolios will be
fully paid and non-assessable by the Trust.
-13-
<PAGE>
The Declaration of Trust provides that the Trustees, officers,
employees and agents of the Trust will not be liable to the Trust or to a
shareholder, nor will any such person be liable to any third party in
connection with the affairs of the Trust, except as such liability may arise
from his or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of duties. It also provides that all third parties shall
look solely to the Trust property for satisfaction of claims arising in
connection with the affairs of the Trust. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
Taxes In General
The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolios or their shareholders, and
the discussion here and in the Prospectuses is not intended as a substitute
for careful tax planning and is based on tax laws and regulations which are in
effect on the date hereof; such laws and regulations may be changed by
legislative or administrative action. Investors are advised to consult their
tax advisers with specific reference to their own tax situations.
Each Portfolio is treated as a separate corporate entity under
the Code and intends to qualify as a regulated investment company. In order to
so qualify, each Portfolio must satisfy, in addition to the distribution
requirement described in the Prospectuses, certain requirements with respect
to the source of its income for a taxable year. At least 90% of the gross
income of each Portfolio must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stocks, securities or foreign currencies, and other income (including but not
limited to gains from options, futures, or forward contracts) derived with
respect to the Portfolio's business of investing in such stock, securities or
currencies. The Treasury Department may by regulation exclude from qualifying
income foreign currency gains which are not directly related to the
Portfolio's principal business of investing in stock or securities, or options
and futures with respect to stock or securities. Any income derived by a
Portfolio from a partnership or trust is treated as derived with respect to
the Portfolio's business of investing in stock, securities or currencies only
to the extent that such income is attributable to items of income which would
have been qualifying
-14-
<PAGE>
income if realized by the Portfolio in the same manner as by the
partnership or trust.
Another requirement for qualification as a regulated investment
company under the Code is that less than 30% of a Portfolio's gross income for
a taxable year must be derived from gains realized on the sale or other
disposition of the following investments held for less than three months: (1)
stock and securities (as defined in Section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Portfolio's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and accrued market discount) received by a Portfolio upon maturity or
disposition of a security held for less than three months will not be treated
as gross income derived from the sale or other disposition of such security
within the meaning of this requirement. However, any other income which is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
Each Portfolio will designate any distribution of long term
capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the Portfolio's taxable year.
Shareholders should note that, upon the sale or exchange of Portfolio shares,
if the shareholder has not held such shares for at least six months, any loss
on the sale or exchange of those shares will be treated as long term capital
loss to the extent of the capital gain dividends received with respect to the
shares.
Ordinary income of individuals is taxable at a maximum nominal
rate of 39.6%, however, because of limitations on itemized deductions
otherwise allowable and the phase-out of personal exemptions, the maximum
effective marginal rate of tax for some taxpayers may be higher. An
individual's long term capital gains are taxable at a maximum nominal rate of
28%. For corporations, long term capital gains and ordinary income are both
taxable at a maximum nominal rate of 35% (or at a maximum effective marginal
rate of 39% in the case of corporations having taxable income between $100,000
and $335,000).
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Portfolio intends
to make sufficient distributions or deemed distributions of its ordinary
taxable income and any
-15-
<PAGE>
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
If for any taxable year a Portfolio does not qualify for the
special federal income tax treatment afforded regulated investment companies,
all of its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions (whether or not derived from interest on
Municipal Securities) would be taxable as ordinary income to shareholders to
the extent of the Portfolio's current and accumulated earnings and profits and
would be eligible for the dividends received deduction for corporations.
Each Portfolio may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding
by the Internal Revenue Service for failure properly to include on their
return payments of taxable interest or dividends, or who have failed to
certify to the Portfolio that they are not subject to backup withholding when
required to do so or that they are "exempt recipients."
Depending upon the extent of the Portfolios' activities in
states and localities in which their offices are maintained, in which their
agents or independent contractors are located or in which they are otherwise
deemed to be conducting business, the Portfolios may be subject to the tax
laws of such states or localities. In addition, in those states and localities
which have income tax laws, the treatment of the Portfolios and their
shareholders under such laws may differ from their treatment under federal
income tax laws.
Tax-Exempt and Michigan Portfolios
As described above and in the Prospectuses, the Tax- Exempt and
Michigan Portfolios are designed to provide investors with current tax-exempt
interest income. The Portfolios are not intended to constitute a balanced
investment program and are not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Portfolios would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and IRAs since such plans and accounts
are generally tax-exempt and, therefore, would not only fail to gain any
additional benefit from the Portfolios' dividends being tax-exempt, but such
dividends would be ultimately taxable to the beneficiaries when distributed to
them. In addition, the Portfolios may not be appropriate investments for
entities which are "substantial
-16-
<PAGE>
users" of facilities financed by private activity bonds or "related persons"
thereof. "Substantial user" is defined under U.S. Treasury Regulations to
include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, or who occupies more than 5%
of the usable area of such facilities or for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations, a
partnership and its partners and an S Corporation and its shareholders.
Each Portfolio's policy is to pay each year as federal
exempt-interest dividends substantially all of its Municipal Securities
interest income net of certain deductions. In order for a Portfolio to pay
exempt-interest dividends with respect to any taxable year, at the close of
each quarter of its taxable year at least 50% of the aggregate value of the
Portfolio's assets must consist of exempt-interest obligations. After the
close of its taxable year, each Portfolio will notify its shareholders of the
portion of the dividends paid by it which constitutes an exempt-interest
dividend with respect to such taxable year. However, the aggregate amount of
dividends so designated by a Portfolio cannot exceed the excess of the amount
of interest exempt from tax under Section 103 of the Code received by the
Portfolio during the taxable year over any amounts disallowed as deductions
under Sections 265 and 171(a)(2) of the Code. The percentage of total
dividends paid by a Portfolio with respect to any taxable year which qualify
as federal exempt-interest dividends will be the same for all shareholders
receiving dividends for such year.
A percentage of the interest on indebtedness incurred by a
shareholder to purchase or carry the Portfolios' shares, equal to the
percentage of the total non-capital gain dividends distributed during the
shareholder's taxable year that are exempt-interest dividends, is not
deductible for federal income tax purposes.
Michigan Taxes
As stated in the Tax-Exempt and Michigan Portfolios'
Prospectuses, dividends paid by a Portfolio that are derived from interest
attributable to tax-exempt Michigan Municipal Securities will be exempt from
Michigan income tax, Michigan intangibles tax and Michigan single business
tax. Conversely, to the extent that a Portfolio's dividends are derived from
interest on obligations other than Michigan Municipal Securities or certain
U.S. Government obligations (or are derived from short-term or long-term
gains), such dividends will be subject to Michigan income tax, Michigan
intangibles tax and Michigan single business tax,
-17-
<PAGE>
even though the dividends may be exempt for federal income tax
purposes.
In particular, gross interest income and dividends derived from
obligations or securities of the State of Michigan and its political
subdivisions, exempt from federal income tax, are exempt from Michigan income
tax under Act No. 281, Public Acts of Michigan, 1967, as amended ("Michigan
Income Tax Act"), from Michigan intangibles tax under Act No. 301, Public Acts
of Michigan, 1939, as amended ("Michigan Intangibles Tax Act") and from
Michigan single business tax under Act. No. 228, Public Acts of Michigan,
1975, as amended ("Michigan Single Business Tax Act"). The Michigan Income Tax
Act levies a flat rate income tax on individuals, estates and trusts. The
Michigan Intangibles Tax Act levies a tax on the ownership of intangible
personal property of individuals, estates, trusts and certain corporations.
The Single Business Tax Act levies a tax of 2.30% upon the "adjusted tax base"
of most individuals, financial institutions, partnerships, joint ventures,
corporations, estates and trusts engaged in "business activity" as defined in
the Act.
The transfer of Portfolio shares by a shareholder is subject to
Michigan taxes measured by gain on the sale, payment or other disposition
thereof. In addition, the transfer of Portfolio shares by a shareholder may be
subject to Michigan estate or inheritance tax under Act No. 188, Public Acts
of Michigan, 1899, as amended ("Michigan Estate Tax").
The foregoing is only a summary of some of the important
Michigan state tax considerations generally affecting the Tax-Exempt and
Michigan Portfolios and their shareholders. No attempt has been made to
present a detailed explanation of the Michigan state tax treatment of the
Portfolios or their shareholders, and this discussion is not intended as a
substitute for careful planning. Accordingly, potential investors in the
Portfolios should consult their tax advisers with respect to the application
of such taxes to the receipt of Portfolio dividends and as to their own
Michigan state tax situation, in general.
MANAGEMENT
Trustees and Officers of the Trust
The Trustees and executive officers of the Trust and their
principal occupations for the last five years are set forth in the
Prospectuses. Each Trustee has an address at The Woodward Funds, c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226. Each Trustee also serves as a
trustee of The Woodward Variable Annuity Fund, a registered investment Company
advised by NBD Bank.
-18-
<PAGE>
Effective May 1, 1995, each Trustee receives from the Trust and
The Woodward Variable Annuity Fund a total annual fee of $17,000 and a fee of
$2,000 for each Board of Trustees meeting attended. The Chairman is entitled
to additional compensation of $4,250 per year for his services to the Trusts
in that capacity. These fees are allocated among the investment portfolios of
the Trust and The Woodward Variable Annuity Fund based on their relative net
assets. All Trustees are reimbursed for out of pocket expenses incorrect in
connection with attendance at meetings. Drinker Biddle & Reath, of which Mr.
McConnel is a partner, receives legal fees as counsel to the Trusts.
-19-
<PAGE>
The following table summarizes the compensation for each of the
Trustees for the Trust's fiscal year ending December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(3)
Total
Compensation
(2) From Fund and
Aggregate Fund Complex**
(1) Compensation Paid to Board
Name of Board Member from Fund* Member
-------------------- ------------ --------------
<S> <C> <C>
Will M. Caldwell, Trustee $21,250 $21,250(2)+
Nicholas J. DeGrazia, Trustee $21,250 $21,250(2)+
John P. Gould, Trustee *** $30,000(4)+
Earl I. Heenan, Jr., $24,437.50 $24,437.50(2)+
Chairman and President++
Marilyn McCoy, Trustee *** $30,000(4)+
Julius L. Pallone, Trustee++ $21,250 $21,250(2)+
Donald G. Sutherland, Trustee++ $21,250 $21,250(2)+
Donald L. Tuttle, Trustee++ $21,250 $21,250(2)+
Eugene C. Yehle, Trustee $21,250 $21,250(2)+
and Treasurer
<FN>
- ---------
* Amount does not include reimbursed expenses for attending Board meeting,
which are estimated to be approximately $350 for all Trustees as a group.
** The Fund Complex consists of the Trust, Woodward Variable Annuity Fund,
Prairie Funds, Prairie Institutional Funds, Prairie Intermediate Bond Fund and
Prairie Municipal Bond Fund, Inc.
*** Mr. Gould and Mrs. McCoy were not trustees of the Trust during the fiscal
year ended December 31, 1995.
+ Total number of other investment companies within the Fund Complex from
which the Trustee receives compensation for serving as a trustee.
++ Deferred compensation in the amounts of $24,437.50, $21,500, $21,500,
and $21,500 accrued during The Woodward Funds' fiscal year ended December 31,
1995 for Earl I. Heenan, Jr., Julius L. Pallone, Donald G. Sutherland and
Donald L. Tuttle, respectively.
</TABLE>
-20-
<PAGE>
Investment Adviser
Information about NBD and its duties and compensation as
Adviser is contained in the Prospectuses. For the fiscal years ended December
31, 1995, 1994, and 1993, the Trust paid NBD fees for advisory services as
follows: (i) $7,225,557, $5,926,507, and $6,731,880 with respect to the Money
Market Portfolio, (ii) $1,987,590, $1,882,124, and $1,697,363 with respect to
the Government Portfolio, (iii) $3,248,535, $2,576,661 and $2,995,099 with
respect to the Treasury Portfolio, (iv) $2,458,246, $2,391,633, and $2,373,107
with respect to the Tax-Exempt Portfolio and (v) $496,026, $344,733, and
$274,780, with respect to the Michigan Portfolio. For the fiscal year ended
December 31, 1995, NBD voluntarily waived its fees in the amount of $61,221
with respect to the Michigan Portfolio.
NBD's own investment portfolio may include bank certificates of
deposit, bankers' acceptances, and corporate debt obligations, any of which
may also be purchased by the Trust. Joint purchase of investments for the
Trust and for NBD's own investment portfolio will not be made. NBD's
Commercial Banking Department may have deposit, loan and other commercial
banking relationships with issuers of securities purchased by the Trust,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities purchased by the Trust.
Investment decisions for the Trust and other fiduciary accounts
are made by NBD's Trust Investment Division solely from the standpoint of the
independent interest of the Trust and such other fiduciary accounts. NBD's
Trust Investment Division performs independent analyses of publicly available
information, the results of which are not made publicly available. In making
investment decisions for the Trust, personnel of NBD's Trust Investment
Division do not obtain information from any other division or department of
NBD or otherwise, which is not publicly available. NBD's Trust Investment
Division executes transactions for the Trust only with unaffiliated dealers
but such dealers may be customers of other divisions of NBD. NBD may make bulk
purchases of securities for the Trust and for other customer accounts (but not
for its own investment portfolio), in which case the Trust will be charged a
pro rata share of the transaction costs incurred in making the bulk purchase.
See "Investment Objectives, Policies and Risk Factors - Portfolio
Transactions" above.
NBD has agreed as Adviser that it will reimburse the Trust such
portions of its fees as may be required to satisfy any expense limitations
imposed by state securities laws or other applicable laws. Restrictive
limitations may be imposed on the
-21-
<PAGE>
Trust as a result of changes in current state laws and regulations in those
states where the Trust has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. To the Trust's knowledge, of the expense limitations in effect on
the date of this Additional Statement none is more restrictive than two and
one-half percent (2-1/2%) of the first $30 million of a Portfolio's average
annual net assets, two percent (2%) of the next $70 million of the average
annual net assets and one and one-half percent (1-1/2%) of the remaining
average annual net assets.
Under the terms of the Advisory Agreement, NBD is obligated to
manage the investment of each Portfolio's assets in accordance with applicable
laws and regulations, including, to the extent applicable, the regulations and
rulings of the U.S. Comptroller of the Currency relating to fiduciary powers
of national banks. These regulations provide, in general, that assets managed
by a national bank as fiduciary may not be invested in stock or obligations
of, or property acquired from, the bank, its affiliates or their directors,
officers or employees, and further provide that fiduciary assets may not be
sold or transferred, by loan or otherwise, to the bank or persons connected
with the bank as described above.
NBD will not accept Trust shares as collateral for a loan which
is for the purpose of purchasing Trust shares, and will not make loans to the
Trust. Inadvertent overdrafts of the Trust's account with the Custodian
occasioned by clerical error or by failure of a shareholder to provide
available funds in connection with the purchase of shares will not be deemed
to be the making of a loan to the Trust by NBD.
Under the Advisory Agreement, NBD is not liable for any error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of such Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of NBD in the performance of its duties or from its
reckless disregard of its duties and obligations under the Agreement.
Shareholder Servicing Plan
As stated in the Prospectuses for the Class A shares of the
Portfolios, the Trust may enter into Servicing Agreements with Shareholder
Servicing Agents which may include NBD and its affiliates. The Servicing
Agreements provide that the Shareholder Servicing Agents will render
shareholder administrative support services to their customers who are the
beneficial owners of Class A shares in consideration for the
-22-
<PAGE>
Portfolios' payment of up to .25% (on an annualized basis) of the average
daily net asset value of the Class A shares beneficially owned by such
customers and held by the Shareholder Servicing Agents and, at the Trust's
option, it may reimburse the Shareholder Servicing Agents' out-of-pocket
expenses. Such services may include: (i) processing dividend and distribution
payments from a Portfolio; (ii) providing information periodically to
customers showing their share positions; (iii) arranging for bank wires; (iv)
responding to customer inquiries; (v) providing subaccounting with respect to
shares beneficially owned by customers or the information necessary for such
subaccounting; (vi) forwarding shareholder communications; (vii) processing
share exchange and redemption requests from customers; (viii) assisting
customers in changing dividend options, account designations and addresses;
and (ix) other similar services requested by the Trust. Banks acting as
Shareholder Servicing Agents are prohibited from engaging in any activity
primarily intended to result in the sale of Portfolio shares. However,
Shareholder Servicing Agents other than banks may be requested to provide
marketing assistance (e.g., forwarding sales literature and advertising to
their customers) in connection with the distribution of Class A shares.
The Board of Trustees reviews, at least quarterly, a written
report of the amounts expended in connection with the Trust's arrangements
with Shareholder Servicing Agents and the purposes for which the expenditures
were made. In addition, such arrangements are approved annually by a majority
of the Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act and have no direct or
indirect financial interest in such arrangements (the "Disinterested
Trustees").
Any material amendment to the Trust's arrangements with
Shareholder Servicing Agents under the Shareholder Servicing Agreements must
be approved by a majority of the Board of Trustees (including a majority of
the Disinterested Trustees).
Custodian and Transfer Agent
As Custodian and as Transfer Agent for the Trust, NBD (i)
maintains a separate account or accounts in the name of each Portfolio, (ii)
collects and makes disbursements of money on behalf of each Portfolio, (iii)
issues and redeems shares of each Portfolio, (iv) collects and receives all
income and other payments and distributions on account of the portfolio
securities of each Portfolio, (v) addresses and mails all communications by
the Trust to its shareholders, including reports to shareholders, dividend and
distribution notices and proxy materials for any meeting of shareholders, (vi)
maintains shareholder accounts, (vii) makes periodic reports to the Trust's
Board of Trustees concerning the Trust's operations, and (viii) maintains
on-line
-23-
<PAGE>
computer capability for determining the status of shareholder
accounts.
For its services as Custodian, NBD is entitled to receive from
the Portfolios $11.00 for each clearing and settlement transaction and $23.00
for each accounting and safekeeping service with respect to investments, in
addition to activity charges for master control and master settlement
accounts.
For its services as Transfer Agent, NBD is entitled to receive
a minimum annual fee from each Portfolio of $11,000, $15 annually per account
in the Portfolios for the preparation of statements of account, and $1.00 for
each confirmation of purchase and redemption transactions. Charges for
providing computer equipment and maintaining a computerized investment system
are expected to approximate $350 per month for each Portfolio.
Sponsors and Co-Distributors
The Trust's shares are offered on a continuous basis through
FoM and Essex, which act under the Distribution Agreement as sponsors and
Co-Distributors for the Trust. For the fiscal year ended December 31, 1995,
the Money Market, Government, Treasury, Tax-Exempt and Michigan Portfolios
paid FoM for its services a fee of $119,933, $32,310, $52,950, $40,084 and
$7,261, respectively. For the fiscal year ended December 31, 1994, the Money
Market, Government, Treasury, Tax-Exempt, and Michigan Portfolios paid FoM for
its services a fee of $90,197, $25,425, $39,127, $32,631 and $4,129,
respectively. For the fiscal year ended December 31, 1993, the Money Market,
Government, Treasury, Tax-Exempt and Michigan Portfolios paid FoM for its
services a fee of $230,601, $57,017, $100,651, $79,747 and $8,312,
respectively. For the fiscal years ended December 31, 1995, 1994, and 1993,
FoM incurred expenses of $0 with respect to each Portfolio for the printing
and mailing of prospectuses to other than current shareholders. For the fiscal
year ended December 31, 1995, the Money Market, Government, Treasury,
Tax-Exempt and Michigan Portfolios paid Essex for its services a fee of
$32,940, $2,609, $805, $4,142 and $3,205, respectively. For the fiscal period
from April 20, 1994 through December 31, 1994, the Money Market, Government,
Treasury, Tax-Exempt and Michigan Portfolios paid Essex for its services a fee
of $25,515, $7,167, $7,935, $7,950 and $1,656, respectively. For the fiscal
year ended December 31, 1995, Essex incurred expenses of $0 with respect to
each Portfolio for the printing and mailing of prospectuses to other than
current shareholders. Additional information concerning fees for services
performed by FoM and Essex, the review of such fees under the Trust's plan for
the payment of distribution expenses and the services provided by FoM and
Essex are described in the Prospectuses.
-24-
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, 500
Woodward Avenue, Detroit, Michigan 48226-3424, serve as auditors for the
Trust. The financial statements included in this Statement of Additional
Information and the financial highlights included in the Prospectuses have
been audited by Arthur Andersen LLP, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Trust, is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania
19107-3496, are counsel to the Trust.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, yield and total return of each class of
shares of each Portfolio for various periods may be quoted in advertisements,
shareholder reports or other communications to shareholders. Performance
information is generally available by calling (800)688-3350.
The "yield" and "effective yield" of each class, as described
in the Portfolios' Prospectuses, are calculated according to formulas
prescribed by the SEC. The standardized seven-day yield is computed separately
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account in a class having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by (365/7). The net
change in the value of an account includes the value of additional shares
purchased with dividends from the original share, and dividends declared on
both the original share and any such additional shares and all fees, other
than nonrecurring account sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period and the Portfolio's
average account size. The capital changes to be excluded from the calculation
of the net change in account value are realized gains and losses from the sale
of securities and unrealized appreciation and depreciation. The effective
annualized yield for a class is computed by compounding the unannualized base
period return (calculated as above) by adding 1 to the base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting one from
the result. The fees which may be imposed by financial intermediaries on their
customers for cash management and other services are not reflected in the
Portfolios' calculations of
-25-
<PAGE>
yields. In addition, the Tax-Exempt and Michigan Portfolios may advertise
their standardized "tax-equivalent yields," which are computed by: (a)
dividing the portion of the yield (as calculated above) that is exempt from
income tax by one minus a stated income tax rate; and (b) adding the figure
resulting from (a) above to that portion, if any, of the yield that is not
tax-exempt.
Because each Portfolio values its portfolio on an amortized
cost basis, it does not believe that there is likely to be any material
difference between net income for dividend and standardized yield quotation
purposes.
For the seven day period ended December 31, 1995, the
annualized yields and effective yields for the shares of the Money Market,
Government, Treasury, Tax-Exempt and Michigan Portfolios were 5.37% and 5.48%,
5.32% and 5.41%, 5.23% and 5.42%, 3.90% and 4.10%, and 3.81% and 3.97%,
respectively. The tax-equivalent yields of the shares of the Tax-Exempt and
Michigan Portfolios (assuming a 39.6% federal income tax rate for both
Portfolios and a 4.4% Michigan income tax rate for the Michigan Portfolio) for
the seven-day period ended December 31, 1995 were 6.46% (annualized yield) and
6.79% (effective yield), and 6.85% (annualized yield) and 7.14% (effective
yield), respectively.
The Portfolios may also from time to time include in
advertisements, sales literature, communications to shareholders and other
materials ("Literature") total return figures that are not calculated
according to the formulas set forth above in order to compare more accurately
a Portfolio's performance with other measures of investment return. For
example, in comparing the Portfolios' total returns with data published by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or
Weisenberger Investment Company Service, or with the performance of an index,
the Portfolios may calculate their returns for the period of time specified in
the advertisement or communication by assuming the investment of $10,000 in
shares and assuming the reinvestment date. Percentage increases are determined
by subtracting the initial value of the investment from the ending value and
by dividing the remainder by the beginning value. The Portfolios do not, for
these purposes, deduct from the initial value invested any amount representing
sales charges. If applicable, the Portfolios will, however, disclose the
maximum sales charge (currently there is no sales charge) and will also
disclose that the performance data does not reflect sales charges and that
inclusion of sales charges would reduce the performance quoted.
The Portfolios may also from time to time include
discussions or illustrations of the effects of compounding in
advertisements. "Compounding" refers to the fact that, if
-26-
<PAGE>
dividends or other distributions on a Portfolio investment are reinvested by
being paid in additional Portfolio shares, any future income or capital
appreciation of a Portfolio would increase the value, not only of the original
Portfolio investment, but also of the additional Portfolio shares received
through reinvestment. As a result, the value of the Portfolio investment would
increase more quickly than if dividends or other distributions had been paid
in cash.
The Portfolios may also include discussions or illustrations of
the potential investment goals of a prospective investor, investment
management strategies, techniques, policies or investment suitability of a
Portfolio (such as value investing, market timing, dollar cost averaging,
asset allocation, constant ratio transfer, automatic accounting rebalancing,
the advantages and disadvantages of investing in tax-deferred and taxable
instruments), economic conditions, the relationship between sectors of the
economy and the economy as a whole, various securities markets, the effects of
inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to shareholders may summarize the substance
of information contained in shareholder reports (including the investment
composition of a Portfolio), as well as the view of the Trust as to current
market, economy, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to
be of relevance to a Portfolio. The Portfolios may also include in
advertisements charts, graphs or drawings which compare the investment
objective, return potential, relative stability and/or growth possibilities of
the Portfolio and/or other mutual funds, or illustrate the potential risks and
rewards of investment in various investment vehicles, including but not
limited to, stocks, bonds, treasury bills and shares of a Portfolio. In
addition, advertisements or shareholder communications may include a
discussion of certain attributes or benefits to be derived by an investment in
a Portfolio and/or other mutual funds, shareholder profiles and hypothetical
investor scenarios, timely information on financial management, tax and
retirement planning and investment alternatives to certificates of deposit and
other financial instruments. Such advertisements or communicators may include
symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
-27-
<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term
in the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely
payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to 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 earning coverage of fixed financial charges and
high internal cash generation; and well established access to a range of
financial markets and assured sources of alternate liquidity.
A-1
<PAGE>
"Prime-2" - Issuer or related supporting institutions are
considered to 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 alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D- 1+," "D-1" and "D-1-," within the
highest rating category. The following summarizes the rating categories used
by Duff & Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity, and
other protection factors qualify issue as investment grade. Risk
A-2
<PAGE>
factors are larger and subject to more variation. Nevertheless,
timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years.
The following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned
this rating have a satisfactory degree of assurance for timely payment, but
the margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned
this rating have characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes could cause
these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned
this rating have characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes in financial
and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings
to indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE>
year or less which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to
adverse developments (both internal and external) than obligations with higher
ratings, capacity to service principal and interest in a timely fashion is
considered adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity
for timely repayment.
"A1" - Obligations are supported by the highest
capacity for timely repayment.
"A2" - Obligations are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity for
timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.
A-4
<PAGE>
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which
are currently in default.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned
by Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit 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.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "BB" indicates
the lowest degree of speculation and "C" the highest degree of speculation.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and
A-5
<PAGE>
principal repayments. Adverse business, financial or economic conditions will
likely impair capacity or willingness to pay interest and repay principal. The
"B" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may
be modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest
return is indexed to equities, commodities, or currencies; certain swaps and
options; and interest only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality.
They carry the smallest degree of investment risk and are
A-6
<PAGE>
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing;
"Ca" represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
(P)... - When applied to forward delivery bonds,
indicates that the rating is provisional pending delivery of the
bonds. The rating may be revised prior to delivery if changes
A-7
<PAGE>
ooccur in the legal documents or the underlying credit quality of
the bonds.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent
investment. Considerable variability in risk is present during economic
cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred
dividends. Debt rated "DD" is a defaulted debt obligation, and the rating "DP"
represents preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by Fitch
for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future
A-8
<PAGE>
developments, short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
A-9
<PAGE>
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers. The
following summarizes the rating categories used by Thomson BankWatch for
long-term debt ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's
lowest investment grade category and indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB"
A-10
<PAGE>
are, however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term
debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus (+)
designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit
risk and long-term risk. The following summarizes the ratings by Moody's
Investors Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
A-11
<PAGE>
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be
less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly
regarded as required of an investment security and not distinctly or
predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-12
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
MONEY MARKET
FUND
------------
<S> <C>
ASSETS:
Investment in securities:
At cost $1,619,765,599
==============
At amortized cost (Note 2) $1,624,604,821
Cash 109
Interest receivable 16,341,428
Deferred organization costs, net (Note 2) --
Prepaids and other 298,771
--------------
TOTAL ASSETS 1,641,245,129
--------------
LIABILITIES:
Payable for securities purchased --
Accrued investment advisory fee 743,967
Accrued distribution fees 16,841
Accrued custodial fee 2,795
Dividends payable 738,061
Accounts payable and accrued expenses 48,651
--------------
TOTAL LIABILITIES 1,550,315
--------------
NET ASSETS $1,639,694,814
==============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 163,969,481
Additional paid-in capital 1,475,725,333
--------------
TOTAL NET ASSETS $1,639,694,814
==============
Net asset value and redemption price per share $ 1.00
==============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
December 31, 1995
MICHIGAN
TREASURY TAX-EXEMPT TAX-EXEMPT
GOVERNMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $469,488,613 $921,604,627 $566,354,408 $126,549,715
============ ============ ============ ============
At amortized cost (Note 2) $469,643,055 $921,643,450 $564,592,007 $126,237,472
Cash 320 104 52,509 1,897
Interest receivable 5,112,013 6,544,562 5,203,797 1,139,798
Deferred organization costs, net (Note 2) -- 6,063 -- --
Prepaids and other 41,286 295,486 13,394 61,485
------------ ------------ ------------ ------------
TOTAL ASSETS 474,796,674 928,489,665 569,861,707 127,440,652
------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased -- -- 5,000,000 5,273,510
Accrued investment advisory fee 195,644 340,328 225,584 51,173
Accrued distribution fees 3,417 5,377 3,880 1,222
Accrued custodial fee 685 869 3,312 690
Dividends payable 210,856 413,557 190,363 39,832
Accounts payable and accrued expenses 9,217 34,032 25,092 17,283
------------ ------------ ------------ ------------
TOTAL LIABILITIES 419,819 794,163 5,448,231 5,383,710
------------ ------------ ------------ ------------
NET ASSETS $474,376,855 $927,695,502 $564,413,476 $122,056,942
============ ============ ============ ============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 47,437,686 $ 92,769,550 $ 56,441,348 $ 12,205,694
426,939,169 834,925,952 507,972,128 109,851,248
Additional paid-in capital ------------ ------------ ------------ ------------
$474,376,855 $927,695,502 $564,413,476 $122,056,942
TOTAL NET ASSETS ============ ============ ============ ============
Net asset value and redemption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
MONEY MARKET
FUND
------------
<S> <C>
INVESTMENT INCOME (Note 2): $98,415,963
-----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 7,225,557
Distribution fees 152,873
Professional fees 48,970
Custodial fee 60,686
Shareholder servicing agent fees 450,637
Marketing expenses 102,871
Amortization of deferred organization expenses --
Registration, filing fees and other expenses 398,210
Less:
Waived investment advisory fee --
-----------
NET EXPENSES 8,439,804
-----------
NET INVESTMENT INCOME $89,976,159
===========
RATIO OF TOTAL EXPENSES TO TOTAL INVESTMENT INCOME 8.6%
===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS (Continued)
For the Year Ended December 31, 1995
MICHIGAN
TREASURY TAX-EXEMPT TAX-EXEMPT
GOVERNMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (Note 2): $26,262,034 $42,755,302 $21,196,396 $3,921,289
----------- ----------- ----------- ----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 1,987,590 3,248,535 2,458,246 496,026
Distribution fees 34,919 53,755 44,226 10,466
Professional fees 48,970 48,970 48,970 48,970
Custodial fee 8,370 12,919 41,886 11,132
Shareholder servicing agent fees 60,644 298,599 86,193 82,305
Marketing expenses 36,670 41,925 42,552 34,396
Amortization of deferred organization expenses -- 8,021 -- 8,277
Registration, filing fees and other expenses 82,327 128,542 173,183 54,166
Less:
Waived investment advisory fee -- -- -- (61,221)
----------- ----------- ----------- ----------
NET EXPENSES 2,259,490 3,841,266 2,895,256 684,517
----------- ----------- ----------- ----------
NET INVESTMENT INCOME $24,002,544 $38,914,036 $18,301,140 $3,236,772
=========== =========== =========== ==========
RATIO OF TOTAL EXPENSES TO TOTAL INVESTMENT INCOME 8.6% 9.0% 13.7% 17.5%
=========== =========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND GOVERNMENT FUND
----------------- ---------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 89,976,159 $ 54,437,913 $ 24,002,544 $ 15,570,185
Distributions to shareholders from net investment
income (89,976,159) (54,437,913) (24,002,544) (15,570,185)
---------------- ---------------- --------------- ---------------
Net increase in net assets from operations -- -- -- --
---------------- ---------------- --------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS (at $1.00 per share):
Proceeds from shares sold 15,430,620,141 11,950,595,231 7,866,220,550 4,177,408,097
Net asset value of shares issued in reinvestment of
distributions to shareholders 20,938,255 15,065,218 5,511,007 3,599,166
---------------- ---------------- --------------- ---------------
15,451,558,396 11,965,660,449 7,871,731,557 4,181,007,263
Less: payments for shares redeemed (15,134,903,898) (11,969,313,007) (7,818,562,738) (4,106,464,145)
---------------- ---------------- --------------- ---------------
Net increase (decrease) in net assets from capital
share transactions 316,654,498 (3,652,558) 53,168,819 74,543,118
---------------- ---------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 316,654,498 (3,652,558) 53,168,819 74,543,118
NET ASSETS:
Beginning of year 1,323,040,316 1,326,692,874 421,208,036 346,664,918
---------------- ---------------- --------------- ---------------
End of year $ 1,639,694,814 $ 1,323,040,316 $ 474,376,855 $ 421,208,036
================ ================ =============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
TREASURY TAX-EXEMPT MICHIGAN TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- ----------------- -----------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 38,914,036 $ 23,209,709 $ 18,301,140 $ 12,879,849 $ 3,236,772 $ 1,621,567
Distributions to
shareholders from net
investment income (38,914,036) (23,209,709) (18,301,140) (12,879,849) (3,236,772) (1,621,567)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase in net
assets from operations -- -- -- -- -- --
--------------- --------------- --------------- --------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS
(at $1.00 per share):
Proceeds from
shares sold 6,284,582,300 3,163,540,997 2,777,275,094 3,097,740,398 293,836,102 229,739,020
Net asset value of
shares issued in
reinvestment of
distributions to
shareholders 5,449,979 6,513,927 2,421,757 2,353,656 2,029,545 1,022,699
--------------- --------------- --------------- --------------- ------------- -------------
6,290,032,279 3,170,054,924 2,779,696,851 3,100,094,054 295,865,647 230,761,719
Less: payments for
shares redeemed (6,148,030,955) (3,239,233,694) (2,766,019,376) (3,048,064,052) (252,448,579) (204,679,038)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase (decrease)
in net assets from
capital share
transactions 142,001,324 (69,178,770) 13,677,475 52,030,002 43,417,068 26,082,681
--------------- --------------- --------------- --------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS 142,001,324 (69,178,770) 13,677,475 52,030,002 43,417,068 26,082,681
NET ASSETS:
Beginning of year 785,694,178 854,872,948 550,736,001 498,705,999 78,639,874 52,557,193
--------------- --------------- --------------- --------------- ------------- -------------
End of year $ 927,695,502 $ 785,694,178 $ 564,413,476 $ 550,736,001 $ 122,056,942 $ 78,639,874
=============== =============== =============== =============== ============= =============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Cost
Description Face Amount (Note 2)
----------- ----------- --------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 16.98%
Allstate Life Insurance Co. Master Note, 5.93%,
1/2/96 $ 5,000,000 $ 5,000,000
American General Finance, Inc. Master Note, 5.85%,
1/2/96 15,000,000 15,000,000
Commonwealth Life Insurance Co. Master Note, 6.03%,
1/2/96 5,000,000 5,000,000
Peoples Security Life Insurance Co. Master Note,
6.03%, 1/2/96 5,000,000 5,000,000
Sun Life Insurance Co. of America Master Note,
6.13%, 1/2/96 10,000,000 10,000,000
Transamerica Finance Group, Inc. Master Note,
5.85%, 1/2/96 25,000,000 25,000,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) 56,503,093 56,503,093
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 1/18/96 through 9/10/02 at various
interest rates ranging from 0.00% to 8.26%, all
held at the Bank of New York) 77,000,000 77,000,000
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05 and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) 73,407,000 73,407,000
Yamaichi, Revolving Repurchase Agreement, 6.00%,
1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 12/31/95
through 8/15/05 at various interest rates ranging
from 0.00% to 11.625%, all held at Chemical Bank) 4,000,000 4,000,000
--------------
275,910,093
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.52%
Federal Farm Credit Bank, 5.60%, 7/1/96 13,950,000 13,930,941
Federal Home Loan Bank:
5.63%, 6/26/96 12,000,000 11,992,746
5.98%, 8/14/96 5,000,000 5,000,000
Federal National Mortgage Assn. Deb., 8.75%,
6/10/96 2,000,000 2,025,084
Federal National Mortgage Assn. Medium Term Note:
5.97%, 5/16/96 4,000,000 4,002,877
5.71%, 6/10/96 9,000,000 8,994,375
Student Loan Marketing Assn., 6.05%, 6/30/96 27,500,000 27,528,471
--------------
73,474,494
--------------
COMMERCIAL PAPER -- 44.37%
Abbey National North America, 5.64%, 3/6/96 29,980,000 29,677,951
Accor, 5.74%, 2/15/96 8,000,000 7,943,000
AESOP Funding Corp., 5.82%, 1/22/96 15,000,000 14,949,250
Allomon Funding Corp.:
5.78%, 1/12/96 10,000,000 9,982,369
5.77%, 1/25/96 10,135,000 10,096,149
Alpine Securitization Corp., 5.76%, 2/13/96 8,000,000 7,945,342
American Express Credit Corp., 5.69%, 2/27/96 20,000,000 19,821,400
Avnet, Inc., 5.72%, 2/16/96 7,500,000 7,445,567
B.A.T. Capital Corp., 5.77%, 1/23/96 10,000,000 9,964,861
Barton Capital Corp., 5.80%, 1/26/96 17,000,000 16,931,764
Bass Finance (C.I.) Ltd., 5.71%, 2/14/96 10,815,000 10,740,052
BCI Funding Corp., 5.74%, 2/9/96 19,980,000 19,856,623
BEAL Cayman Ltd., 5.73%, 2/23/96 19,980,000 19,812,923
Clipper Receivables Corp., 5.76%, 1/17/96 20,000,000 19,948,889
Corporate Receivables Corp., 5.81%, 1/5/96 17,000,000 16,989,026
Echlin, Inc., 5.76%, 1/18/96 15,000,000 14,959,342
Eksportfinans A/S, 5.54%, 1/8/96 6,060,000 6,053,484
Electronic Data Systems Corp., 5.56%, 3/21/96 5,000,000 4,939,000
Engelhard Corp., 5.75%, 1/19/96 10,970,000 10,938,571
English China Clays PLC:
5.78%, 1/22/96 10,000,000 9,966,400
5.73%, 2/20/96 10,000,000 9,921,111
5.70%, 3/1/96 10,254,000 10,157,442
Enterprise Funding Corp.:
5.76%, 1/12/96 6,451,000 6,439,666
5.76%, 1/16/96 13,072,000 13,040,652
5.76%, 2/9/96 9,000,000 8,944,230
Explorer Pipeline Co.:
5.76%, 1/24/96 7,775,000 7,746,487
5.78%, 1/30/96 10,500,000 10,451,365
5.72%, 2/16/96 10,000,000 9,927,422
Franklin Resources, Inc., 5.73%, 2/20/96 8,000,000 7,936,889
Greenwich Funding Corp.:
5.76%, 1/8/96 10,000,000 9,988,819
5.78%, 1/11/96 10,000,000 9,983,972
Halifax Building Society, 5.77%, 1/3/96 10,000,000 9,996,794
Hercules, Inc., 5.60%, 6/21/96 10,000,000 9,739,611
International Lease Finance Corp., 5.76%, 1/9/96 12,730,000 12,713,734
International Securitization Corp.:
5.78%, 2/2/96 17,000,000 16,913,111
5.52%, 6/10/96 9,530,000 9,300,277
New Center Asset Trust, 5.78%, 1/31/96 20,000,000 19,904,167
Pacific Dunlop Holdings, Inc., 5.75%, 2/21/96 10,000,000 9,919,250
Pacific Dunlop Ltd., 5.67%, 1/23/96 5,000,000 4,982,736
Pooled Accounts Receivable Capital Corp.:
5.83%, 1/9/96 11,000,000 10,985,773
6.02%, 1/25/96 10,160,000 10,119,360
Preferred Receivables Funding Corp.:
5.73%, 2/2/96 15,975,000 15,894,060
5.75%, 2/21/96 8,050,000 7,984,996
Premium Funding, Inc.:
5.78%, 2/7/96 10,113,000 10,053,235
5.79%, 2/14/96 11,162,000 11,083,556
Ranger Funding Corp., 5.75%, 1/12/96 13,000,000 12,977,199
San Paolo U.S. Financial Co., 5.68%, 3/15/96 10,970,000 10,843,498
Sheffield Receivables Corp., 5.73%, 2/1/96 12,980,000 12,916,290
St. Michael Finance Ltd.:
5.75%, 2/20/96 9,272,000 9,198,597
5.64%, 3/5/96 5,694,000 5,637,516
5.64%, 3/8/96 10,000,000 9,896,150
Sunbelt-Dix, Inc.:
5.76%, 1/30/96 4,000,000 3,981,537
5.79%, 2/13/96 11,980,000 11,897,721
5.71%, 3/5/96 12,000,000 11,879,467
5.67%, 3/25/96 5,250,000 5,181,400
Sweden (Kingdom of):
5.71%, 2/16/96 15,000,000 14,891,325
5.72%, 3/1/96 6,980,000 6,914,039
5.73%, 3/12/96 10,000,000 9,888,175
TI Group, Inc., 5.70%, 3/4/96 17,000,000 16,832,210
U.S. Borax & Chemical Corp., 5.73%, 2/1/96 5,000,000 4,975,458
Windmill Funding Corp.:
6.02%, 1/16/96 10,000,000 9,975,000
5.82%, 1/24/96 15,000,000 14,944,417
WMX Technologies, Inc., 5.50%, 9/9/96 15,480,000 14,905,692
--------------
720,826,369
--------------
NOTES -- 17.27%
American Express Centurion Bank, 5.82%, A/R,
1/17/96 15,000,000 15,000,652
Associates Corp. of North America Debenture, 7.50%,
10/15/96 28,850,000 29,222,978
Associates Corp. of North America Euro Dollar
Debenture, 10.50%, 3/12/96 7,378,000 7,424,686
Boatmens National Bank of St. Louis, 6.00%, A/R,
6/12/96 20,000,000 20,000,000
Comerica Bank, 5.70%, 9/3/96 13,000,000 12,991,077
First Bank, NA, 5.96%, 3/4/96 27,500,000 27,499,558
First Union National Bank N. C., 5.76%, 2/2/96 5,000,000 5,000,000
Ford Motor Credit Co. Medium Term Notes:
6.25%, A/R, 5/10/96 12,000,000 12,013,087
14.00%, 7/5/96 5,000,000 5,198,163
9.10%, 7/18/96 5,000,000 5,083,739
Huntington National Bank, 5.67%, A/R, 8/29/96 30,000,000 29,988,082
J.P. Morgan, 5.75%, 8/7/96 29,980,000 29,986,992
PNC Bank, 5.65%, 9/18/96 20,000,000 19,996,215
Seattle First National Bank, 5.51%, 6/14/96 10,000,000 10,000,000
Smithkline Beecham Corp., 5.25%, 1/16/96 2,425,000 2,423,784
Society National Bank Cleveland Ohio Medium Term
Note, 6.875%, 10/15/96 23,500,000 23,683,821
Trust Company Bank, 6.50%, 3/21/96 25,000,000 24,994,577
-----------
280,507,411
-----------
CERTIFICATES OF DEPOSIT -- 15.44%
Bayerische Landesbank Girozentrale, 6.00%, 9/12/96 10,000,000 10,000,000
Bayerische Vereinsbank AG, 5.95%, 7/22/96 29,980,000 29,980,000
Canadian Imperial Bank of Commerce, 5.95%, 10/23/96 24,980,000 24,980,000
Dresdner Bank AG, 7.00%, 2/5/96 15,000,000 15,000,000
Harris Trust & Savings Bank, 5.72%, 2/29/96 14,975,000 14,975,000
National Westminster Bank PLC, 5.83%, 1/12/96 15,000,000 15,000,045
PNC Bank Corp., 5.74%, 9/30/96 20,000,000 19,985,384
Royal Bank of Canada:
6.60%, 4/3/96 2,980,000 2,980,399
6.55%, 4/9/96 8,000,000 8,000,000
Societe Generale:
7.05%, 2/14/96 20,000,000 20,000,000
6.80%, 3/1/96 5,000,000 5,000,000
Toronto-Dominion Bank, Euro:
6.80%, 3/11/96 24,980,000 24,987,939
5.84%, 11/7/96 30,000,000 30,000,000
Wachovia Bank of Georgia, NA, 5.85%, 1/10/96 10,000,000 10,000,000
Wachovia Bank of North Carolina, 7.13%, 1/26/96 20,000,000 19,997,687
--------------
250,886,454
--------------
TIME DEPOSIT -- 1.42%
Mitsubishi Bank, 12.00%, 1/2/96 23,000,000 23,000,000
--------------
23,000,000
--------------
TOTAL INVESTMENTS $1,624,604,821
==============
<FN>
A/R -- Adjustable Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized Cost
Description Face Amount (Note 2)
----------- ----------- --------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 45.05%
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) $73,569,000 $ 73,569,000
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 6.00% 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 1/18/96 through 9/10/02 at various
interest rates ranging from 0.00% to 8.26%, all
held at the Bank of New York) 23,000,000 23,000,000
Yamaichi, Revolving Repurchase Agreement, 6.00%,
1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 12/31/95
through 8/15/05 at various interest rates ranging
from 0.00% to 11.625%, all held at Chemical Bank) 115,000,000 115,000,000
------------
211,569,000
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 54.95%
U.S. Treasury Securities -- 4.28%
U.S. Treasury Notes:
4.375%, 8/15/96 5,000,000 4,957,174
7.000%, 9/30/96 15,000,000 15,150,150
------------
20,107,324
------------
Agency Obligations -- 50.67%
Federal Farm Credit Bank:
5.78%, A/R, 2/9/96 25,000,000 24,998,664
6.61%, 4/12/96 4,000,000 4,006,934
6.39%, 4/17/96 10,000,000 10,022,719
5.59%, A/R, 6/7/96 10,000,000 9,998,338
5.60%, 11/1/96 10,000,000 10,002,747
Federal Home Loan Bank:
6.85%, 2/28/96 24,000,000 24,012,415
6.30%, 3/1/96 2,500,000 2,474,042
5.05%, 6/7/96 6,000,000 5,983,328
5.90%, 7/25/96 5,000,000 5,000,000
5.98%, 8/14/96 19,000,000 19,000,000
6.00%, 8/16/96 2,000,000 2,000,411
4.84%, 8/26/96 5,000,000 4,976,737
5.77%, 11/20/96 10,000,000 9,998,229
Federal Home Loan Mortgage Corp., 6.79%, 2/20/96 15,000,000 14,999,678
Federal National Mortgage Assn., 5.58% 2/21/96 8,400,000 8,334,074
Federal National Mortgage Assn. Medium Term Note:
5.50%, A/R, 1/26/96 25,000,000 24,998,973
5.71%, 6/10/96 5,000,000 4,998,939
5.50%, 6/12/96 18,000,000 17,969,843
Student Loan Marketing Assn.:
6.13%, A/R, 6/30/96 12,500,000 12,490,660
6.06%, A/R, 7/1/96 11,700,000 11,700,000
6.05%, A/R, 10/4/96 10,000,000 10,000,000
------------
237,966,731
------------
TOTAL INVESTMENTS $469,643,055
============
<FN>
A/R -- Adjustable Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized Cost
Description Face Amount (Note 2)
----------- ----------- -------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 82.74%
Aubrey Langston, Revolving Repurchase Agreement,
5.92%, 1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 8/31/97
through 11/15/05 at various interest rates
ranging from 4.75% to 13.75%, all held at
Chemical Bank) $43,000,000 $ 43,000,000
Bear Stearns & Co., Inc., Revolving Repurchase
Agreement, 5.82%, 1/2/96 (secured by various U.S.
Treasury obligations with maturities ranging from
5/15/96 through 8/15/23 at various interest rates
ranging from 0.00% to 8.875%, all held at the
Custodial Trust Co.) 215,000,000 215,000,000
Daiwa Securities America, Inc., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 4/30/96 through 11/15/01 at various
interest rates ranging from 0.00% to 15.75%, all
held at the Bank of New York) 43,000,000 43,000,000
First Boston, Inc., Revolving Repurchase Agreement,
5.85%, 1/2/96 (secured by various U.S. Treasury
Notes with maturities ranging from 11/15/96
through 2/15/03 at various interest rates ranging
from 4.375% to 6.25%, all held at Chemical Bank) 36,000,000 36,000,000
Lehman Brothers, Inc., Revolving Repurchase
Agreement, 5.92%, 1/2/96 (secured by U.S.
Treasury Note, 5.875%, 7/31/97, held at Chemical
Bank) 43,000,000 43,000,000
Morgan Stanley & Co., Inc., Revolving Repurchase
Agreement, 5.87%, 1/2/96 (secured by U.S.
Treasury Note, 6.125%, 5/31/97, held at the Bank
of New York) 43,000,000 43,000,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) 216,533,000 216,533,000
Nikko Securities Co. International, Inc., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 7/31/96 through 8/15/00 at various
interest rates ranging from 0.00% to 8.75%, all
held at the Bank of New York) 40,000,000 40,000,000
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 5.96%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 8/31/97 through 5/15/01 at various
interest rates ranging from 0.00% to 6.00%, all
held at the Bank of New York) 40,000,000 40,000,000
Sanwa BGK Securities Co., L.P., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
U.S. Treasury Note, 5.50%, 11/15/98, held at the
Bank of New York) 43,000,000 43,000,000
------------
762,533,000
------------
U.S. GOVERNMENT OBLIGATIONS -- 17.26%
U.S. Treasury Securities -- 17.26%
Principal Strip from U.S. Treasury Bond due
5/15/96 5,000,000 4,897,685
U.S. Treasury Bill, 6.26%, 3/7/96 3,000,000 2,965,955
U.S. Treasury Notes:
4.000%, 1/31/96 8,000,000 7,988,924
4.625%, 2/15/96 10,000,000 9,976,935
7.875%, 2/15/96 35,000,000 35,049,857
7.500%, 2/29/96 15,000,000 15,016,012
5.500%, 4/30/96 20,000,000 19,970,088
5.875%, 5/31/96 10,000,000 10,001,983
7.875%, 7/15/96 2,000,000 2,021,778
6.125%, 7/31/96 7,000,000 7,013,918
7.875%, 7/31/96 4,000,000 4,046,593
4.375%, 8/15/96 14,000,000 13,873,585
8.000%, 10/15/96 15,000,000 15,256,312
4.375%, 11/15/96 5,000,000 4,943,974
7.250%, 11/15/96 6,000,000 6,086,851
------------
159,110,450
------------
TOTAL INVESTMENTS $921,643,450
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD TAX-EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Interest Cost
Description Rating* Rate*** Face Amount (Note 2)
----------- ------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Alabama -- 1.05%
Alabama HFA Mulit-Family CP:
12/1/13 VMIG 1 3.50% $ 3,200,000 $ 3,200,000
12/1/13 VMIG 1 3.60% 2,700,000 2,700,000
Alaska -- 7.97%
Anchorage Electric Utilities (MBIA Insured)
12/1/15 Aaa 7.63% 11,100,000 11,423,545
Valdez Marine Terminal--Arco Transportation:
CP, 5/1/31 VMIG 1 3.50% 8,000,000 8,000,000
CP, 5/1/31 VMIG 1 3.55% 3,900,000 3,900,000
CP, 5/1/31 VMIG 1 3.75% 1,700,000 1,700,000
VRDB, 5/1/31 VMIG 1 3.50% 8,000,000 8,000,000
Valdez Marine Terminal--Exxon Pipeline Co. VRDB,
10/1/25 P 1 5.95% 12,000,000 12,000,000
Arizona -- 1.00%
Chandler IDR VRDB--Parsons Municipal Services,
12/15/09 A 1+ 4.25% 3,600,000 3,600,000
Maricopa Co. School District GO Unlimited Tax Series
A, 7/1/96 Aa 3.75% 2,000,000 2,000,952
Colorado -- 2.87%
Adams Co. IDR VRDB--City View Park, 12/1/15 A 1+ 5.20% 3,000,000 3,000,000
Englewood HFA Multi-Family VRDN--Mark Project,
12/15/97 A 1+ 5.25% 2,000,000 2,000,000
Lakewood Multi-Family Housing (FGIC Insured)
VRDB--St. Moritz & Diamond Head, 10/1/07 VMIG 1 4.00% 8,250,000 8,250,000
Moffat Co. PCR VRDB, 7/1/10 VMIG 1 4.65% 3,000,000 3,000,000
Delaware -- 1.35%
Delaware EDC VRDB--Hospital Billing Series B, 12/1/15 VMIG 1 5.25% 7,600,000 7,600,000
Florida -- 1.58%
Florida GO Unlimited Tax, 7/1/08 Aaa 7.20% 3,270,000 3,355,215
Florida HFA Multi-Family (MBIA Insured) VRDB--Lake
Northdale, 6/1/07 Aaa 3.75% 5,595,000 5,595,000
Georgia -- 2.56%
Cobb Co. Housing Multi-Family VRDB--Pittco Frey
Associates Project, 6/1/23 VMIG 1 5.20% 5,900,000 5,900,000
College Park IDR VRDB-- Marriott Corp., 8/1/15 Aa 3 6.10% 1,200,000 1,200,000
Fulton Co. Development IDR VRDN--Palisades West Ltd.,
9/1/96 Aaa 5.15% 2,235,000 2,235,000
Georgia Municipal Gas Authority--Southern Portfolio I
Project, 4/1/96 VMIG 1 3.75% 5,100,000 5,100,000
Hawaii -- 2.41%
Hawaii Dept. of Budget & Finance Mortgage:
VRDN--Kuakini Medical Center, 7/1/04 VMIG 1 3.75% 4,000,000 4,000,000
VRDB--Wilcox Memorial Hospital, 7/1/18 VMIG 1 5.95% 2,100,000 2,100,000
Hawaii State Housing Finance & Development Corp.
VRDB--Rental Housing Systems, 7/1/24 VMIG 1 5.15% 7,500,000 7,500,000
Illinois -- 8.50%
Chicago GO Tender Notes, 10/31/96 VMIG 1 3.75% 6,100,000 6,100,000
Chicago O'Hare International Airport--American
Airlines VRDB:
Series C, 12/1/17 P 1 6.10% 15,000,000 15,000,000
Series D, 12/1/17 P 1 6.10% 15,000,000 15,000,000
Illinois GO, 4/1/06 AA- 7.13% 1,000,000 1,022,317
Illinois State Sales Tax, 6/15/15 Aaa 7.63% 6,950,000 7,132,216
Illinois State Toll Highway Authority, VRDB 1/1/10 VMIG 1 5.05% 300,000 300,000
Northwest Suburban Municipal Joint Account (MBIA
Insured)--Water Agency Supply System, 5/1/03 Aaa 7.20% 3,440,000 3,490,557
Indiana -- 3.40%
Jasper Co. PCR CP--Northern Indiana Public Services,
11/1/16 VMIG 1 3.70% 2,000,000 2,000,000
Mt. Vernon PCR CP--General Electric Project,
12/1/04 P 1 3.50% 6,900,000 6,900,000
12/1/04 P 1 3.70% 2,790,000 2,790,000
Rockport Pollution Control (AMBAC Insured)
VRDB--AEP Generating Co., 7/1/25 Aaa 5.95% 5,500,000 5,500,000
VRDB--Indiana Michigan Power Co., 6/1/25 Aaa 5.00% 2,000,000 2,000,000
Kansas -- 1.18%
Olathe GO Unlimited Tax, 5/1/96 MIG 1 4.50% 6,700,000 6,700,000
<PAGE>
Kentucky -- 0.53%
Mason Co. PCR E. Kentucky Power VRDB--CFC Power
National Rural Utilities B-1, 10/15/14 P 1 4.65% 3,000,000 3,000,000
Maryland -- 1.06%
Baltimore PCR VRDN-- SCM Plants, 2/1/00 A 1+ 5.10% 6,000,000 6,000,000
Michigan -- 12.87%
Clinton Township EDC (MBIA Insured) VRDB Sisters of
Charity St. Joseph, 5/1/13 VMIG 1 5.00% 300,000 300,000
Dearborn EDC VRDB--Oakbrook Common:
3/1/23 A 1 5.10% 2,300,000 2,300,000
3/1/25 A 1 5.10% 200,000 200,000
Delta Co. EDC--Mead Escanaba Paper:
Series D, 12/1/23 P 1 6.00% 4,200,000 4,200,000
Series F, 12/1/23 P 1 6.10% 4,300,000 4,300,000
Farmington Hills EDR VRDB--Brookfield Building
Associates, 11/1/10 A 1 5.20% 2,000,000 2,000,000
Grand Rapids EDC VRDB--Amway, 12/1/06 A 1 5.10% 3,600,000 3,600,000
Ingham Co. EDC VRDB--Martin Luther Memorial Home,
Inc., 4/1/22 A 1+ 5.20% 5,870,000 5,870,000
Kent Hospital VRDB--Butterworth Hospital, 1/15/20 VMIG 1 5.40% 2,600,000 2,600,000
Meridian Limited Obligation EDC VRDN--Service
Merchandise Co., 12/15/99 A 1+ 4.00% 500,000 500,000
Michigan State Building Authority, 10/1/96 AA- 3.75% 5,000,000 5,005,297
Michigan State Hospital VRDB--Hospital Equipment Loan
Program:
12/1/23 VMIG 1 5.20% 1,600,000 1,600,000
12/1/23 VMIG 1 5.20% 8,900,000 8,900,000
Michigan State Hospital VRDB--Mt. Clemens Hospital,
8/15/15 VMIG 1 5.00% 4,600,000 4,600,000
Michigan State HDA VRDB:
Laurel Valley, 12/1/07 VMIG 1 5.10% 400,000 400,000
Shoal Creek, 10/1/07 VMIG 1 5.10% 2,800,000 2,800,000
Michigan State Job Development Authority
VRDB--Gordon Food Service, 8/1/15 Aaa 5.00% 5,800,000 5,800,000
PCR VRDB--Mazda Motor Corp., 10/1/08 VMIG 1 5.25% 4,500,000 4,500,000
Michigan State Strategic Fund VRDB--Allen Group, Inc.
11/1/25 VMIG 1 5.00% 400,000 400,000
University of Michigan Hospital VRDB:
12/1/19 VMIG 1 5.90% 1,200,000 1,200,000
12/1/27 VMIG 1 5.90% 11,610,000 11,610,000
Minnesota -- 1.60%
Hennepin Co. GO, 12/1/06 VMIG 1 5.15% 5,000,000 5,000,000
Rochester GO Various Sales Tax, 11/1/99 **N/R 5.00% 100,000 100,000
St. Paul Housing & Redevelopment Authority VRDB,
12/1/12 A 1+ 3.80% 3,900,000 3,900,000
Mississippi -- 1.45%
Perry Co. PCR VRDB--Leaf River Forest, 10/1/12 P 1 5.30% 8,200,000 8,200,000
Missouri -- 1.44%
Independence Water Utility Improvements CP 11/1/16 VMIG 1 3.40% 2,400,000 2,400,000
Missouri State Environmental Improvement Energy
Research PCR--Union Electric Co.:
Series A, 6/1/14 P 1 4.00% 1,000,000 1,000,000
Series B, 6/1/14 P 1 4.00% 4,750,000 4,750,217
Nevada -- 2.64%
Clark Co. Airport Improvement (MBIA Insured) VRDB,
7/1/12 VMIG 1 5.15% 8,600,000 8,600,000
Clark Co. PCR VRDB--Nevada Power Co. 10/1/23 A 1+ 5.00% 6,300,000 6,300,000
New Hampshire -- 0.32%
New Hampshire IDR VRDB--Oerlikon-Burlhe USA, 7/1/13 A 1+ 3.75% 1,800,000 1,800,000
New Jersey -- 0.22%
Rutgers State University, 5/1/96 AA 4.25% 1,220,000 1,221,741
New York -- 1.95%
New York City GO (MBIA Insured) VRDB 8/15/22 VMIG 1 5.90% 11,000,000 11,000,000
North Carolina -- 2.67%
North Carolina Eastern Municipal Power Agency--Power
System, 1/1/15 Aaa 7.75% 15,000,000 15,000,000
Ohio -- 2.40%
Cincinnati/Hamilton Co. EDR, 8/1/15 **N/R 3.90% 3,150,000 3,150,000
Columbus Electric System VRDB, 9/1/09 A 1 3.90% 1,400,000 1,400,000
Franklin Co. IDR VRDN--Capital South Community
Redevelopment, 12/1/05 **N/R 4.10% 700,000 700,000
Ohio Environmental Improvements CP, U.S. Steel Corp.,
5/1/11 P 1 5.50% 8,300,000 8,300,000
Oregon -- 2.41%
Medford Hospital VRDB--Rogue Valley Manor, 12/1/15 VMIG 1 5.20% 4,000,000 4,000,000
Port Morrow VRDB--General Elecitric, 10/1/13 P 1 6.00% 5,700,000 5,700,000
Tualatin Hills Parks & Recreation TRAN, 6/28/96 SP 1+ 4.25% 3,875,000 3,882,320
Pennsylvania -- 5.01%
Allegheny Co. Industrial Development VRDB--United
Jewish Federation:
Series B, 10/1/25 VMIG 1 5.25% 10,000,000 10,000,000
Series C, 10/1/15 VMIG 1 5.25% 1,100,000 1,100,000
Delaware Co. IDR (FGIC Insured) CP--Philadelphia
Electric, 12/1/12 VMIG 1 3.40% 2,400,000 2,400,000
Montgomery Co. Higher Education Health Authority
VRDB--Philadelphia Presbytery 7/1/25 VMIG 1 5.25% 5,000,000 5,000,000
Schuylkill Co. IDR VRDB--Westwood Energy 11/1/09 P 1 6.25% 6,800,000 6,800,000
Upper Allegheny Joint Sanitary Authority, 9/1/26 MIG 1 4.50% 3,000,000 3,001,004
South Carolina -- 2.57%
Richland Co. Schoold District TAN GO Unlimited Tax,
4/15/96 MIG 1 4.00% 8,300,000 8,305,660
South Carolina GO State Capital Improvement, 2/1/96 Aaa 7.30% 3,500,000 3,509,443
South Dakota -- 0.48%
South Dakota HDA, 5/1/96 Aa 1 3.90% 2,715,000 2,715,000
Tennessee -- 2.13%
Knox Co. Board IDR VRDB--Service Merchandise Co.,
Inc., 12/15/08 A 1+ 4.00% 800,000 800,000
Metropolitan Government Nashville & Davidson Co.,
6/15/06 AA 6.50% 6,000,000 6,142,843
Metropolitan Government Nashville & Davidson Co.,
VRDB--Nashville Apartments 9/1/15 Aa 3 5.15% 5,100,000 5,100,000
Texas -- 10.02%
Austin Utilities System CP, 4/9/96 P 1 3.65% 5,400,000 5,400,000
Houston Water & Sewer System (MBIA Insured) 12/1/16 Aaa 7.13% 3,000,000 3,150,445
North Central HCFA VRDB--YMCA Dallas 6/1/21 VMIG 1 5.65% 5,600,000 5,600,000
Texas Hospital Equipment Finance Council (MBIA
Insured) VRDN, 4/7/05 VMIG 1 5.45% 8,045,000 8,045,000
Texas Small Business IDR VRDB--Texas Public
Facilities Capital Access, 7/1/26 VMIG 1 5.20% 2,300,000 2,300,000
Texas State Higher Education Authority (FGIC Insured)
VRDB--Educational Equipment & Improvements, 12/1/25 VMIG 1 5.15% 2,510,000 2,510,000
Texas State Public Finance Authority:
10/1/96 Aa 6.40% 3,000,000 3,061,190
CP, 8/20/96 P 1 3.75% 5,000,000 5,000,000
Texas TRAN, 8/30/96 MIG 1 4.75% 12,750,000 12,812,314
Texas Transportation CP, 8/20/96 P 1 3.65% 5,000,000 5,000,000
Tyler Health Facilities Development Corp. CP--East
Texas Medical Center Regional Health, 11/1/25 VMIG 1 3.65% 3,700,000 3,700,000
Utah -- 3.01%
Intermountain Power Agency, 7/1/17 Aaa 7.75% 4,700,000 4,889,980
Salt Lake Co. PCR--VRDB--Pacific Corp. 2/1/08 P 1 5.95% 12,100,000 12,100,000
Vermont -- 1.87%
Vermont Educational Health Agency, 11/1/27 A 1+ 3.80% 5,975,000 5,975,000
Vermont Student Assistance Corp. VRDN, 1/1/04 VMIG 1 3.75% 4,600,000 4,600,000
Virginia -- 0.48%
Loudoun Co. IDR VRDB, 11/1/24 A 1 6.45% 2,700,000 2,700,000
Washington -- 1.88%
Port Townsend IDR VRDB--Townsend Paper Corp., 3/1/09 VMIG 1 5.15% 5,100,000 5,100,000
Seattle Municipal Light & Power Co., 11/1/15 VMIG 1 3.50% 5,500,000 5,500,000
West Virginia -- 0.48%
Raleigh Co. Health Care System VRDB, 9/1/06 VMIG 1 5.25% 2,700,000 2,700,000
Wisconsin -- 5.70%
Milwaukee School Order Notes Series B, 8/22/96 MIG 1 4.50% 15,000,000 15,046,050
Waukesha School District TRAN, 8/23/96 SP 1 4.25% 14,000,000 14,020,236
Wisconsin State Transportation Transit Improvements,
7/1/02 AAA 7.90% 3,000,000 3,123,465
Wyoming -- 1.42%
Lincoln Co. PCR VRDB--Pacificorp Project, 1/1/16 VMIG 1 3.40% 8,000,000 8,000,000
------------
TOTAL INVESTMENTS $564,592,007
============
<FN>
Investment Abbreviations
AMBAC -- AMBAC Indemnity Corp.
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
EDC -- Economic Development Corporation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCF -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
Individual Development & Export
IDA -- Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
TAN -- Tax Anticipation Note
TRAN -- Tax Revenue Anticipation Note
Unit Priced Daily Adjustable Tax
UPDATE -- Exempt Securities
VRDB -- Variable Rate Demand Bond
VRDN -- Variable Rate Demand Note
* Moody's when rated, otherwise Standard & Poor's.
<PAGE>
** N/R investment is not rated, yet deemed by the Investment Advisor as an
acceptable credit and having characteristics equivalent to obligations
rated AA or MIG 1 by Moody's, AA or A-1+ by Standard & Poor's.
*** Interest rates on variable rate securities are adjusted periodically based
on appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD MICHIGAN TAX-EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Interest Cost
Description Rating* Rate*** Face Amount (Note 2)
----------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Michigan -- 99.24%
Ann Arbor EDC Ltd. Obligation VRDN--Webers
Industries, 5/1/00 **N/R 5.20% $ 930,000 $ 930,000
Bruce Township Hospital (MBIA Insured) VRDB--Sisters
of Charity St. Joseph:
Series A, 5/1/18 VMIG 1 3.70% 3,000,000 3,000,000
Series B, 5/1/18 VMIG 1 5.00% 800,000 800,000
Dearborn EDC Ltd. Obligation VRDB--Oakbrook Common,
3/1/25 A 1 5.10% 800,000 800,000
Delta Co. EDC--Mead Escanaba Paper Co.:
Series B, 12/1/23 P 1 3.60% 1,600,000 1,600,000
Series E, 12/1/23 P 1 6.10% 3,600,000 3,600,000
Detroit Downtown Development Authority
VRDB--Millender Center Project, 12/1/10 VMIG 1 5.30% 4,500,000 4,500,000
Detroit Sewage Disposal (MBIA Insured) Series B,
7/1/96 Aaa 5.00% 4,750,000 4,781,575
Detroit Tax Increment Revenue VRDB, 10/1/10 A 1 5.25% 4,200,000 4,200,000
Eaton Inter School District TAN, 4/4/96 **N/R 3.95% 1,245,000 1,245,299
Farmington Hills EDC Ltd. Obligation VRDB--Brookfield
Building Assn., L P, 11/1/10 A 1 5.20% 1,135,000 1,135,000
Ferndale Schools GO Unlimited Tax, 5/1/06 Aaa 7.00% 1,075,000 1,087,371
Flint Hospital Building Authority VRDB--Hurley
Medical Center, Series B, 7/1/15 VMIG 1 5.60% 5,000,000 5,000,000
Grand Traverse Hospital VRDB--Munson Medical Center
Series A, 12/1/15 Aaa 7.63% 1,000,000 1,050,748
Grosse Point Public Library TAN, 4/3/96 **N/R 3.60% 990,000 990,291
Holland EDC VRDB--Thrifty Holland, Inc., 3/1/13 A 1 3.90% 1,300,000 1,300,000
Ingham Co. EDC VRDB--Martin Luther Memorial Home,
Inc., 4/1/22 A 1+ 5.20% 500,000 500,000
Kalamazoo Co. EDC VRDB--Industrial & Economic
Development WBC Properties Ltd., 9/1/15 **N/R 5.60% 1,000,000 1,000,000
Kalamazoo Public Library TAN, 4/1/96 **N/R 3.60% 2,190,000 2,190,358
Kent Hospital VRDB--Butterworth Hospital Series A,
1/15/20 VMIG 1 5.40% 300,000 300,000
L'Anse Creuse Public Schools GO Unlimited Tax, 5/1/96 AA 5.75% 1,000,000 1,004,629
Leelanau Co. EDC Ltd. Obligation--American Community
Mutual Insurance Co., 6/15/06 **N/R 3.90% 1,060,000 1,060,000
Livonia EDC AMT VRDB--Foodland Distributors, 12/1/11 VMIG 1 5.20% 1,000,000 1,000,000
Macomb Township EDC Ltd. Obligation AMT VRDN--ACR
Industries, 1/1/03 VMIG 1 5.10% 1,050,000 1,050,000
Meridian EDC Ltd. Obligation VRDB--Hannah
Technologies, 11/15/14 A 1+ 4.25% 2,500,000 2,500,000
Michigan Municipal Bond Authority:
Series A, 5/3/96 SP 1+ 5.00% 2,000,000 2,004,832
Series B, 7/3/96 SP 1+ 4.50% 4,000,000 4,014,133
Michigan Public Power Agency (AMBAC Insured)--Belle
River Project, 1/1/96 Aaa 7.00% 3,000,000 3,000,000
Michigan State Building Authority:
Series I, 10/1/96 AA- 3.75% 2,000,000 2,000,000
University & College Improvements, 10/1/96 AA- 4.30% 5,235,000 5,253,942
University of Michigan Hospital, 12/1/96 Aaa 7.88% 665,000 702,565
Michigan State Comprehensive Transportation, 8/1/05 AA- 7.63% 1,940,000 1,951,707
Michigan State Hospital Henry Ford Health Series A,
11/15/96 Aa 4.00% 1,070,000 1,073,510
5/1/00 Aaa 7.35% 2,055,000 2,095,912
5/1/08 Aaa 8.00% 1,310,000 1,344,864
Michigan State Hospital VRDB--Hospital Equipment Loan
Program:
12/1/23 VMIG 1 5.20% 1,600,000 1,600,000
12/1/23 VMIG 1 5.20% 400,000 400,000
Michigan State HDA VRDB, 4/1/19 A+ 1 5.00% 1,000,000 1,000,000
Michigan State HDA Ltd. Obligation VRDB--
Laurel Valley, 12/1/07 VMIG 1 5.10% 800,000 800,000
Shoal Creek, 10/1/07 VMIG 1 5.10% 200,000 200,000
Michigan State Job Development Authority IDR:
VRDN--Sugar Sebewa, 9/1/00 Aa 3 5.15% 2,600,000 2,600,000
VRDN--Hitachi Metals, 1/1/04 Aa 3 4.00% 1,800,000 1,800,000
VRDB--Gordon Food Service, 8/1/15 Aaa 5.00% 2,200,000 2,200,000
Michigan State Job Development Authority PCR
VRDB--Mazda Motors Mfg. USA Corp., 10/1/08 VMIG 1 5.25% 1,500,000 1,500,000
Michigan State Strategic Fund IDR VRDB--Allen Group,
Inc., 11/1/25 VMIG 1 5.00% 600,000 600,000
Michigan State Strategic Fund PCR VRDN--Consumers
Power Co., 9/1/00 A 1+ 5.15% 3,000,000 3,000,000
Michigan State Strategic Fund Ltd. Obligation--
Environmental Research, Series B, 6/1/11 VMIG 1 4.35% 1,280,000 1,280,000
Michigan State Strategic Fund Ltd. Obligation AMT:
VRDN--Alpha Tech, Inc., 10/1/97 P 1 5.50% 6,000,000 6,000,000
VRDN--Michigan & Wayne Disposal Inc., 4/1/99 A 1 5.35% 1,500,000 1,500,000
VRDB--West Riverbank, 11/1/06 A 1 5.20% 1,100,000 1,100,000
VRDB--Dennenlease L C, 4/1/10 **N/R 5.15% 2,395,000 2,395,000
VRDB--Ironwood Plastics, Inc., 11/1/11 **N/R 5.15% 1,275,000 1,275,000
VRDB--Molmec Inc., 12/1/14 **N/R 5.35% 1,500,000 1,500,000
VRDB--CEC Products Co., 6/1/15 **N/R 5.35% 3,300,000 3,300,000
VRDB--Detroit Edison Co., 9/1/30 P 1 6.00% 5,000,000 5,000,000
Michigan State Strategic Fund Ltd. Obligation
VRDN--Freezer Services, 10/1/97 **N/R 5.30% 760,000 760,000
Michigan State Trunk Line Highway & Transit
Improvements:
7/1/96 AA- 7.00% 500,000 508,041
11/15/96 AA- 5.25% 500,000 506,136
Michigan State Underground Storage Tank VRDN, 12/1/04 VMIG 1 5.15% 2,900,000 2,900,000
Oakland Co. EDC--Corners Shopping Center, 8/1/15 A 1+ 4.10% 530,000 530,000
Oakland Co. EDC Ltd. Obligation AMT--Orchard Maple
Project, 11/15/16 **N/R 4.00% 615,000 615,000
Plymouth Township EDC VRDN--Key International
Manufacturing, Inc., 7/1/04 **N/R 4.00% 3,750,000 3,750,000
Van Buren Township EDC AMT VRDN--Daikin Clutch USA
Inc., 3/1/97 Aa 3 5.50% 3,000,000 3,000,000
University of Michigan Hospital VRDB:
12/1/19 VMIG 1 5.90% 2,800,000 2,800,000
12/1/27 VMIG 1 5.90% 790,000 790,000
------------
125,275,913
------------
PUERTO RICO -- 0.76%
Commonwealth of Puerto Rico (FGIC Insured) GO
Unlimited Tax, 7/1/96 Aaa 7.80% 500,000 521,705
Puerto Rico Public Buildings Authority--Public
Education & Health Facilities, 7/1/12 Aaa 8.00% 425,000 439,854
961,559
------------
TOTAL INVESTMENTS $126,237,472
============
<FN>
Investment Abbreviations
AMBAC -- AMBAC Indemnity Corp.
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
EDC -- Economic Development Corporation
EDR -- Economic Development Revenue
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCFA -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
IDA -- Industrial Development & Export Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
TAN -- Tax Anticipation Note
TRAN -- Tax Revenue Anticipation Note
UPDATE -- Unit Priced Daily Adjustable Tax-Exempt Securities
VRDB -- Variable Rate Demand Bond
VRDN -- Variable Rate Demand Note
* Moody's when rated, otherwise Standard & Poor's.
** N/R investment is not rated, yet deemed by the Investment Advisor as an
acceptable credit and having characteristics equivalent to obligations
rated AA or MIG 1 by Moody's, AA or A-1+ by Standard & Poor's.
*** Interest rates on variable rate securities are adjusted periodically based
on appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1995.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Woodward Funds (Woodward) was organized as a Massachusetts business
trust on April 21, 1987 and registered under the Investment Company Act of
1940, as amended, as an open-end investment company. As of December 31, 1995
Woodward consisted of seventeen separate series of which there were five money
market funds (Money Market Funds), as described below.
Woodward Money Market Fund
Woodward Government Fund
Woodward Treasury Money Market Fund
Woodward Tax-Exempt Money Market Fund
Woodward Michigan Tax-Exempt Money Market Fund
The Money Market Funds commenced operations on January 4, 1988, except
for the Michigan Tax-Exempt Money Market Fund and the Treasury Money Market
Fund, which commenced operations on January 23, 1991 and January 1, 1993,
respectively.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Money Market Funds in preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. Following generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Investments
Pursuant to Rule 2a-7 of the Investment Company Act of 1940, the Money
Market Funds utilize the amortized cost method to determine the carrying value
of investment securities. Under this method, investment securities are valued
for both financial reporting and federal tax purposes at amortized cost and
any discount or premium is amortized from the date of acquisition to maturity.
The use of this method results in a carrying value which approximates market
value. Market value is determined based upon quoted market prices or dealer
quotes.
Investment security purchases and sales are accounted for on the trade
date.
Woodward invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve open
market desk will do business. NBD Bank (NBD), acting under the supervision of
the Board of Trustees, has established the following additional policies and
procedures relating to Woodward's investments in securities subject to
repurchase agreements: 1) the value of the underlying collateral is required
to equal or exceed 102% of the funds advanced under the repurchase agreement
including accrued interest; 2) collateral is marked to market daily by NBD to
assure its value remains at least equal to 102% of the repurchase agreement
amount; and 3) funds are not disbursed by Woodward or its agent unless
collateral is presented or acknowledged by the collateral custodian.
The Tax-Exempt and Michigan Tax-Exempt Funds invest in a majority of
instruments whose stated maturity is greater than one year, but whose rate of
interest is readjusted no less frequently than annually, or which possess
demand features and may therefore be deemed to have a maturity equal to the
period remaining until the next interest adjustment date or the demand date,
whichever is longer.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount. Premiums and discounts are
amortized/accreted as required by the Internal Revenue Code.
Federal Income Taxes
It is Woodward's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to distribute net investment income and realized gains to its
shareholders. Therefore, no federal income tax provision is required in the
accompanying Financial Statements.
Shareholder Dividends
On each business day except those holidays the New York Stock Exchange
(Exchange), NBD or its bank affiliates observe, net investment income is
declared as a dividend, at the close of the Exchange, to shareholders of
record at such close. Such dividends are paid monthly.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five year period beginning with the commencement of operations of each series.
Expenses
Expenses are charged daily as a percentage of the respective Fund's net
assets. Woodward monitors the rate at which expenses are charged to ensure
that a proper amount of expense is charged to income each year. This
percentage is subject to revision if there is a change in the estimate of the
future net assets of the funds or a change in expectations as to the level of
actual expenses.
(3) Transactions with Affiliates
First of Michigan Corporation (FoM) and Essex National Securities, Inc.
(Essex) act as sponsors and co-distributors of Woodward's shares. Pursuant to
their Distribution Agreement with Woodward, FoM is entitled to receive a fee
at the annual rate of .025% of the aggregate average net assets invested in
the Money Market Funds' first $400 million and .005% of such assets in excess
of $400 million. Fees of FoM under the Distribution Agreement are allocated
among the Funds based on the relative net asset values. Essex is entitled to
receive a fee at the annual rate of .10% of the aggregate average net assets
of Woodward's investment portfolios, attributable to investments by clients of
Essex.
NBD is the investment advisor pursuant to the Advisory Agreement. For
its advisory services to Woodward, NBD is entitled to a fee, computed daily
and payable monthly. Under the Advisory Agreement, NBD also provides Woodward
with certain administrative services, such as maintaining Woodward's general
ledger and assisting in the preparation of various regulatory reports. NBD
receives no additional compensation for such services.
A reorganization of Woodward and The Prairie Funds is being considered
by the Board of Trustees of both funds. In connection with the proposed
reorganization, the Board of Trustees of Woodward and the Board of Trustees of
Prairie must approve certain reorganization agreements. The transaction is
intended to be effected as a tax-free reorganization under the Internal
Revenue Code, so that none of the Funds' shareholders will recognize taxable
gains or losses as a result of the reorganization. A proxy
statement/prospectus describing the reorganization and the reasons therefore
will be sent to shareholders.
NBD, FoM, and Essex have agreed that they may waive their fees in whole
or in part; and, if in part, may specify the particular fund to which such
waiver relates as may be required to satisfy any expense limitation imposed by
state securities laws or other applicable laws. At present, no restrictive
expense limitation is imposed on Woodward. Restrictive limitations could be
imposed as a result of changes in current state laws and regulations in those
states where Woodward has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. For the year ended December 31, 1995, NBD waived $61,221 of the
advisory fee for the Michigan Tax-Exempt Money Market Fund.
NBD is also compensated for its services as Woodward's Custodian,
Transfer Agent and Dividend Disbursing Agent, and is reimbursed for certain
out of pocket expenses incurred on behalf of Woodward.
On March 10, 1994, Woodward adopted The Woodward Funds Deferred
Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows an individual Trustee to elect to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
(4) Investment Securities Transactions
Information with respect to investment securities and security
transactions is as follows:
<TABLE>
<CAPTION>
Michigan
Treasury Tax-Exempt Tax-Exempt
Money Market Government Money Market Money Market Money Market
Fund Fund Fund Fund Fund
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Purchases $58,940,462,599 $5,440,529,005 $7,317,697,881 $2,744,829,205 $388,242,330
Sales & Maturities $58,634,036,261 $5,389,053,887 $7,177,784,932 $2,723,533,379 $337,049,476
</TABLE>
(5) Expenses
Following is a summary of total expense rates charged, advisory fee rates
payable to NBD, and amounts paid to NBD, FoM, and Essex pursuant to the
agreements described in Note 3 for the year ended December 31, 1995. The rates
shown are stated as a percentage of each Fund's average net assets.
<TABLE>
<CAPTION>
Michigan
Treasury Tax-Exempt Tax-Exempt
Money Market Government Money Market Money Market Money Market
Effective Date Fund Fund Fund Fund Fund
-------------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Expense Rates:
January 1 0.50% 0.51% 0.53% 0.53% 0.69%
May 11 0.52% 0.51% 0.53% 0.53% 0.69%
November 9 0.52% 0.52% 0.53% 0.53% 0.69%
December 1 0.52% 0.52% 0.55% 0.53% 0.69%
NBD Advisory Fee:
Net Assets--
Up to $1.0 billion 0.45% 0.45% 0.45% 0.45% 0.50%
$1.0 to $2.0 billion 0.425% 0.425% 0.425% 0.425% 0.50%
Over $2.0 billion 0.40% 0.40% 0.40% 0.40% 0.50%
Amounts Paid:
Advisory Fee to NBD $7,225,557 $1,987,590 $3,248,535 $2,458,246 $496,026
Distribution Fee to FoM and Essex $ 152,873 $ 34,919 $ 53,755 $ 44,226 $ 10,466
Other Fees & Out of Pocket Expenses to NBD $ 341,111 $ 55,012 $ 150,481 $ 92,713 $ 30,134
Expenses Waived:
Advisory Fee to NBD -- -- -- -- $(61,221)
</TABLE>
(6) Portfolio Composition
Although the Tax-Exempt Money Market Fund has a diversified investment
portfolio, the Fund has investments in excess of 10% of its total investments
in the states of Michigan and Texas. The Michigan Tax-Exempt Money Market Fund
does not have a diversified portfolio since 99% of its investments are within
the state of Michigan. Such concentrations within particular states may subject
the funds more significantly to economic changes occurring within those states.
<PAGE>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of net investment
income and distributions from net investment income for the Money Market Funds.
Additional quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
These financial highlights have been derived from the financial statements of
the Money Market Funds and other information for the periods presented.
<TABLE>
<CAPTION>
Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579
Distributions From Net Investment Income $ (0.0549) $ (0.0378) $ (0.0281) $ (0.0347) $(0.0579)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 5.63% 3.86% 2.85% 3.58% 5.95%
Ratios to Average Net Assets:
Expenses 0.51% 0.47% 0.49% 0.52% 0.50%
Net Investment Income 5.49% 3.78% 2.81% 3.47% 5.79%
Net Assets, End of Year
(in 000's) $1,639,695 $1,323,040 $1,326,693 $1,095,354 $775,521
<CAPTION>
Government Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564
Distributions From Net Investment Income $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 5.57% 3.77% 2.81% 3.63% 5.79%
Ratios to Average Net Assets:
Expenses 0.51% 0.51% 0.51% 0.51% 0.50%
Net Investment Income 5.44% 3.72% 2.77% 3.57% 5.64%
Net Assets, End of Year
(in 000's) $474,377 $421,208 $346,665 $261,614 $288,369
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Treasury
Money Market Fund
---------------------------------------------
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
------------- ------------- -------------
<S> <C> <C> <C>
Net Investment Income $ 0.0539 $ 0.0370 $ 0.0273
Distributions From Net Investment Income $(0.0539) $(0.0370) $(0.0273)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00
Total Return 5.53% 3.77% 2.77%
Ratios to Average Net Assets:
Expenses 0.53% 0.50% 0.50%
Net Investment Income 5.39% 3.70% 2.73%
Net Assets, End of Year
(in 000's) $927,696 $785,694 $854,873
<CAPTION>
Tax-Exempt Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422
Distributions From Net Investment Income $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 3.41% 2.45% 1.98% 2.70% 4.30%
Ratios to Average Net Assets:
Expenses 0.53% 0.51% 0.51% 0.53% 0.52%
Net Investment Income 3.35% 2.42% 1.96% 2.64% 4.22%
Net Assets, End of Year
(in 000's) $564,413 $550,736 $498,706 $379,431 $227,808
<CAPTION>
Michigan Tax-Exempt
Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
Distributions From Net Investment Income $(0.0329) $(0.0235) $(0.0181) $(0.0237) $(0.0353)
Net Asset Value at Beginning and End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 3.32% 2.38% 1.83% 2.40% 3.83%(a)
Ratios to Average Net Assets:
Expenses 0.69% 0.67% 0.65% 0.64% 0.65%(a)
Net Investment Income 3.30% 2.35% 1.81% 2.37% 3.77%(a)
Expenses without fee waiver 0.76% 0.75% -- -- --
Net Investment Income without fee waiver 3.23% 2.28% -- -- --
Net Assets, End of Period
(in 000's) $122,057 $ 78,640 $ 52,557 $ 52,960 $ 38,885
<FN>
- ----------------
(a) Annualized for periods less than one year for comparability purposes.
Actual annual values may be less than or greater than those shown.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
The Woodward Money Market Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Money Market Funds of THE
WOODWARD FUNDS (comprising, as indicated in Note 1, the Money Market,
Government, Treasury Money Market, Tax-Exempt Money Market and Michigan
Tax-Exempt Money Market Funds) as of December 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended or
from inception (as indicated in Note 1) through December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included physical counts and confirmation of
securities owned as of December 31, 1995, by inspection and correspondence with
custodians, banks and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective funds constituting the Money Market Funds of
The Woodward Funds as of December 31, 1995, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended and the financial highlights for each of the five
years in the period then ended or from inception (as indicated in Note 1)
through December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 19, 1996.
Exhibit (17)(h)
[ FRONT COVER ]
[ WOODWARD FUNDS LOGO ART AND LOGOTYPE ]
-----------------
Annual Report
December 31, 1995
-----------------
Woodward Money Market Fund
Woodward Government Fund
Woodward Treasury Money Market Fund
Woodward Tax-Exempt Money Market Fund
Woodward Michigan Tax-Exempt Money Market Fund
Investment Adviser
[ NBD BANK LOGOTYPE ]
24 Hour yield information:
Purchase and Redemption orders:
(800) 688-3350
<PAGE>
To Our Woodward Shareholders:
The fourth quarter of 1995 provided strong results in the equity and
bond markets with total returns of 6 percent for the Standard and Poor's (S&P)
and 4.3 percent for the Lehman Aggregate Bond Index. These results capped an
exceptional year which provided total returns of 37.5 percent for the S&P,
31.7 percent for the Russell 2500 (a proxy for smaller companies) and 18.5
percent for the Lehman Aggregate Bond Index. Foreign markets, as measured by
the EAFE Index, provided good absolute returns of 11.2 percent, but failed to
keep up with the exceptional U.S. market. In fact, S&P 500 results were the
third highest since 1948 and the highest since 1958; the overall bond results
were also the third highest, in this case since the mid 1970s.
The Woodward money market funds had an excellent year with all funds
finishing in the top quartile of their respective IBC/Donoghue's peer groups.
The funds maintained their exceptional credit quality throughout the year and
profited from a strategy of maintaining slightly longer-weighted average
maturities as compared to their peer groups.
The Woodward bond funds again exceeded their respective benchmarks in
the fourth quarter, providing exceptional 1995 results. The Bond Fund
generated a total return of 23.8 percent, while the Intermediate Bond Fund
provided results of 19.5 percent. The two funds ranked at the top of their
respective fund categories for the year. The Short Bond Fund provided a total
return of 10.1 percent, modestly below its benchmark but well above cash
alternatives.
The Woodward equity funds had a solid fourth quarter with a number of
the funds exceeding their peer groups. Generally, the results for the Woodward
equity funds for the year provided very high absolute results; they moderately
lagged peer managers and came up somewhat short of the broader indices. The
Woodward Growth/Value, Capital Growth and International Equity funds had good
fourth quarters. This helped the Growth/Value and Capital Growth Funds close
the gap with their peers for the year, while the International Equity Fund
provided good comparative returns on an annual basis. The Opportunity and
Intrinsic Value Funds lagged their respective benchmarks for the quarter and
the year. We look to 1996 to improve relative equity performance which,
coupled with our strong bond results, should provide our clients continued
success with their investments.
During the year, NBD Bancorp, Inc. merged with First Chicago
Corporation. We were pleased that the investment management effort of the
joint organization has been identified as a primary business of the Bank and
that substantial resources have been allocated to the business. We look
forward to melding the two organization's considerable strengths and providing
our clients with a measurably enhanced research and fund management group.
Thank you for your continued support and we hope you find this report
useful and informative.
Sincerely,
/s/ Earl I. Heenan, Jr.
-----------------------
Earl I. Heenan, Jr.
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
MONEY MARKET
FUND
------------
<S> <C>
ASSETS:
Investment in securities:
At cost $1,619,765,599
==============
At amortized cost (Note 2) $1,624,604,821
Cash 109
Interest receivable 16,341,428
Deferred organization costs, net (Note 2) --
Prepaids and other 298,771
--------------
TOTAL ASSETS 1,641,245,129
--------------
LIABILITIES:
Payable for securities purchased --
Accrued investment advisory fee 743,967
Accrued distribution fees 16,841
Accrued custodial fee 2,795
Dividends payable 738,061
Accounts payable and accrued expenses 48,651
--------------
TOTAL LIABILITIES 1,550,315
--------------
NET ASSETS $1,639,694,814
==============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 163,969,481
Additional paid-in capital 1,475,725,333
--------------
TOTAL NET ASSETS $1,639,694,814
==============
Net asset value and redemption price per share $ 1.00
==============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
December 31, 1995
MICHIGAN
TREASURY TAX-EXEMPT TAX-EXEMPT
GOVERNMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $469,488,613 $921,604,627 $566,354,408 $126,549,715
============ ============ ============ ============
At amortized cost (Note 2) $469,643,055 $921,643,450 $564,592,007 $126,237,472
Cash 320 104 52,509 1,897
Interest receivable 5,112,013 6,544,562 5,203,797 1,139,798
Deferred organization costs, net (Note 2) -- 6,063 -- --
Prepaids and other 41,286 295,486 13,394 61,485
------------ ------------ ------------ ------------
TOTAL ASSETS 474,796,674 928,489,665 569,861,707 127,440,652
------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased -- -- 5,000,000 5,273,510
Accrued investment advisory fee 195,644 340,328 225,584 51,173
Accrued distribution fees 3,417 5,377 3,880 1,222
Accrued custodial fee 685 869 3,312 690
Dividends payable 210,856 413,557 190,363 39,832
Accounts payable and accrued expenses 9,217 34,032 25,092 17,283
------------ ------------ ------------ ------------
TOTAL LIABILITIES 419,819 794,163 5,448,231 5,383,710
------------ ------------ ------------ ------------
NET ASSETS $474,376,855 $927,695,502 $564,413,476 $122,056,942
============ ============ ============ ============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 47,437,686 $ 92,769,550 $ 56,441,348 $ 12,205,694
426,939,169 834,925,952 507,972,128 109,851,248
Additional paid-in capital ------------ ------------ ------------ ------------
$474,376,855 $927,695,502 $564,413,476 $122,056,942
TOTAL NET ASSETS ============ ============ ============ ============
Net asset value and redemption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
MONEY MARKET
FUND
------------
<S> <C>
INVESTMENT INCOME (Note 2): $98,415,963
-----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 7,225,557
Distribution fees 152,873
Professional fees 48,970
Custodial fee 60,686
Shareholder servicing agent fees 450,637
Marketing expenses 102,871
Amortization of deferred organization expenses --
Registration, filing fees and other expenses 398,210
Less:
Waived investment advisory fee --
-----------
NET EXPENSES 8,439,804
-----------
NET INVESTMENT INCOME $89,976,159
===========
RATIO OF TOTAL EXPENSES TO TOTAL INVESTMENT INCOME 8.6%
===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS (Continued)
For the Year Ended December 31, 1995
MICHIGAN
TREASURY TAX-EXEMPT TAX-EXEMPT
GOVERNMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (Note 2): $26,262,034 $42,755,302 $21,196,396 $3,921,289
----------- ----------- ----------- ----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 1,987,590 3,248,535 2,458,246 496,026
Distribution fees 34,919 53,755 44,226 10,466
Professional fees 48,970 48,970 48,970 48,970
Custodial fee 8,370 12,919 41,886 11,132
Shareholder servicing agent fees 60,644 298,599 86,193 82,305
Marketing expenses 36,670 41,925 42,552 34,396
Amortization of deferred organization expenses -- 8,021 -- 8,277
Registration, filing fees and other expenses 82,327 128,542 173,183 54,166
Less:
Waived investment advisory fee -- -- -- (61,221)
----------- ----------- ----------- ----------
NET EXPENSES 2,259,490 3,841,266 2,895,256 684,517
----------- ----------- ----------- ----------
NET INVESTMENT INCOME $24,002,544 $38,914,036 $18,301,140 $3,236,772
=========== =========== =========== ==========
RATIO OF TOTAL EXPENSES TO TOTAL INVESTMENT INCOME 8.6% 9.0% 13.7% 17.5%
=========== =========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET FUND GOVERNMENT FUND
----------------- ---------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 89,976,159 $ 54,437,913 $ 24,002,544 $ 15,570,185
Distributions to shareholders from net investment
income (89,976,159) (54,437,913) (24,002,544) (15,570,185)
---------------- ---------------- --------------- ---------------
Net increase in net assets from operations -- -- -- --
---------------- ---------------- --------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS (at $1.00 per share):
Proceeds from shares sold 15,430,620,141 11,950,595,231 7,866,220,550 4,177,408,097
Net asset value of shares issued in reinvestment of
distributions to shareholders 20,938,255 15,065,218 5,511,007 3,599,166
---------------- ---------------- --------------- ---------------
15,451,558,396 11,965,660,449 7,871,731,557 4,181,007,263
Less: payments for shares redeemed (15,134,903,898) (11,969,313,007) (7,818,562,738) (4,106,464,145)
---------------- ---------------- --------------- ---------------
Net increase (decrease) in net assets from capital
share transactions 316,654,498 (3,652,558) 53,168,819 74,543,118
---------------- ---------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 316,654,498 (3,652,558) 53,168,819 74,543,118
NET ASSETS:
Beginning of year 1,323,040,316 1,326,692,874 421,208,036 346,664,918
---------------- ---------------- --------------- ---------------
End of year $ 1,639,694,814 $ 1,323,040,316 $ 474,376,855 $ 421,208,036
================ ================ =============== ===============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
TREASURY TAX-EXEMPT MICHIGAN TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND MONEY MARKET FUND
----------------- ----------------- -----------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income $ 38,914,036 $ 23,209,709 $ 18,301,140 $ 12,879,849 $ 3,236,772 $ 1,621,567
Distributions to
shareholders from net
investment income (38,914,036) (23,209,709) (18,301,140) (12,879,849) (3,236,772) (1,621,567)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase in net
assets from operations -- -- -- -- -- --
--------------- --------------- --------------- --------------- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS
(at $1.00 per share):
Proceeds from
shares sold 6,284,582,300 3,163,540,997 2,777,275,094 3,097,740,398 293,836,102 229,739,020
Net asset value of
shares issued in
reinvestment of
distributions to
shareholders 5,449,979 6,513,927 2,421,757 2,353,656 2,029,545 1,022,699
--------------- --------------- --------------- --------------- ------------- -------------
6,290,032,279 3,170,054,924 2,779,696,851 3,100,094,054 295,865,647 230,761,719
Less: payments for
shares redeemed (6,148,030,955) (3,239,233,694) (2,766,019,376) (3,048,064,052) (252,448,579) (204,679,038)
--------------- --------------- --------------- --------------- ------------- -------------
Net increase (decrease)
in net assets from
capital share
transactions 142,001,324 (69,178,770) 13,677,475 52,030,002 43,417,068 26,082,681
--------------- --------------- --------------- --------------- ------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS 142,001,324 (69,178,770) 13,677,475 52,030,002 43,417,068 26,082,681
NET ASSETS:
Beginning of year 785,694,178 854,872,948 550,736,001 498,705,999 78,639,874 52,557,193
--------------- --------------- --------------- --------------- ------------- -------------
End of year $ 927,695,502 $ 785,694,178 $ 564,413,476 $ 550,736,001 $ 122,056,942 $ 78,639,874
=============== =============== =============== =============== ============= =============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Cost
Description Face Amount (Note 2)
----------- ----------- --------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 16.98%
Allstate Life Insurance Co. Master Note, 5.93%,
1/2/96 $ 5,000,000 $ 5,000,000
American General Finance, Inc. Master Note, 5.85%,
1/2/96 15,000,000 15,000,000
Commonwealth Life Insurance Co. Master Note, 6.03%,
1/2/96 5,000,000 5,000,000
Peoples Security Life Insurance Co. Master Note,
6.03%, 1/2/96 5,000,000 5,000,000
Sun Life Insurance Co. of America Master Note,
6.13%, 1/2/96 10,000,000 10,000,000
Transamerica Finance Group, Inc. Master Note,
5.85%, 1/2/96 25,000,000 25,000,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) 56,503,093 56,503,093
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 1/18/96 through 9/10/02 at various
interest rates ranging from 0.00% to 8.26%, all
held at the Bank of New York) 77,000,000 77,000,000
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05 and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) 73,407,000 73,407,000
Yamaichi, Revolving Repurchase Agreement, 6.00%,
1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 12/31/95
through 8/15/05 at various interest rates ranging
from 0.00% to 11.625%, all held at Chemical Bank) 4,000,000 4,000,000
--------------
275,910,093
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.52%
Federal Farm Credit Bank, 5.60%, 7/1/96 13,950,000 13,930,941
Federal Home Loan Bank:
5.63%, 6/26/96 12,000,000 11,992,746
5.98%, 8/14/96 5,000,000 5,000,000
Federal National Mortgage Assn. Deb., 8.75%,
6/10/96 2,000,000 2,025,084
Federal National Mortgage Assn. Medium Term Note:
5.97%, 5/16/96 4,000,000 4,002,877
5.71%, 6/10/96 9,000,000 8,994,375
Student Loan Marketing Assn., 6.05%, 6/30/96 27,500,000 27,528,471
--------------
73,474,494
--------------
COMMERCIAL PAPER -- 44.37%
Abbey National North America, 5.64%, 3/6/96 29,980,000 29,677,951
Accor, 5.74%, 2/15/96 8,000,000 7,943,000
AESOP Funding Corp., 5.82%, 1/22/96 15,000,000 14,949,250
Allomon Funding Corp.:
5.78%, 1/12/96 10,000,000 9,982,369
5.77%, 1/25/96 10,135,000 10,096,149
Alpine Securitization Corp., 5.76%, 2/13/96 8,000,000 7,945,342
American Express Credit Corp., 5.69%, 2/27/96 20,000,000 19,821,400
Avnet, Inc., 5.72%, 2/16/96 7,500,000 7,445,567
B.A.T. Capital Corp., 5.77%, 1/23/96 10,000,000 9,964,861
Barton Capital Corp., 5.80%, 1/26/96 17,000,000 16,931,764
Bass Finance (C.I.) Ltd., 5.71%, 2/14/96 10,815,000 10,740,052
BCI Funding Corp., 5.74%, 2/9/96 19,980,000 19,856,623
BEAL Cayman Ltd., 5.73%, 2/23/96 19,980,000 19,812,923
Clipper Receivables Corp., 5.76%, 1/17/96 20,000,000 19,948,889
Corporate Receivables Corp., 5.81%, 1/5/96 17,000,000 16,989,026
Echlin, Inc., 5.76%, 1/18/96 15,000,000 14,959,342
Eksportfinans A/S, 5.54%, 1/8/96 6,060,000 6,053,484
Electronic Data Systems Corp., 5.56%, 3/21/96 5,000,000 4,939,000
Engelhard Corp., 5.75%, 1/19/96 10,970,000 10,938,571
English China Clays PLC:
5.78%, 1/22/96 10,000,000 9,966,400
5.73%, 2/20/96 10,000,000 9,921,111
5.70%, 3/1/96 10,254,000 10,157,442
Enterprise Funding Corp.:
5.76%, 1/12/96 6,451,000 6,439,666
5.76%, 1/16/96 13,072,000 13,040,652
5.76%, 2/9/96 9,000,000 8,944,230
Explorer Pipeline Co.:
5.76%, 1/24/96 7,775,000 7,746,487
5.78%, 1/30/96 10,500,000 10,451,365
5.72%, 2/16/96 10,000,000 9,927,422
Franklin Resources, Inc., 5.73%, 2/20/96 8,000,000 7,936,889
Greenwich Funding Corp.:
5.76%, 1/8/96 10,000,000 9,988,819
5.78%, 1/11/96 10,000,000 9,983,972
Halifax Building Society, 5.77%, 1/3/96 10,000,000 9,996,794
Hercules, Inc., 5.60%, 6/21/96 10,000,000 9,739,611
International Lease Finance Corp., 5.76%, 1/9/96 12,730,000 12,713,734
International Securitization Corp.:
5.78%, 2/2/96 17,000,000 16,913,111
5.52%, 6/10/96 9,530,000 9,300,277
New Center Asset Trust, 5.78%, 1/31/96 20,000,000 19,904,167
Pacific Dunlop Holdings, Inc., 5.75%, 2/21/96 10,000,000 9,919,250
Pacific Dunlop Ltd., 5.67%, 1/23/96 5,000,000 4,982,736
Pooled Accounts Receivable Capital Corp.:
5.83%, 1/9/96 11,000,000 10,985,773
6.02%, 1/25/96 10,160,000 10,119,360
Preferred Receivables Funding Corp.:
5.73%, 2/2/96 15,975,000 15,894,060
5.75%, 2/21/96 8,050,000 7,984,996
Premium Funding, Inc.:
5.78%, 2/7/96 10,113,000 10,053,235
5.79%, 2/14/96 11,162,000 11,083,556
Ranger Funding Corp., 5.75%, 1/12/96 13,000,000 12,977,199
San Paolo U.S. Financial Co., 5.68%, 3/15/96 10,970,000 10,843,498
Sheffield Receivables Corp., 5.73%, 2/1/96 12,980,000 12,916,290
St. Michael Finance Ltd.:
5.75%, 2/20/96 9,272,000 9,198,597
5.64%, 3/5/96 5,694,000 5,637,516
5.64%, 3/8/96 10,000,000 9,896,150
Sunbelt-Dix, Inc.:
5.76%, 1/30/96 4,000,000 3,981,537
5.79%, 2/13/96 11,980,000 11,897,721
5.71%, 3/5/96 12,000,000 11,879,467
5.67%, 3/25/96 5,250,000 5,181,400
Sweden (Kingdom of):
5.71%, 2/16/96 15,000,000 14,891,325
5.72%, 3/1/96 6,980,000 6,914,039
5.73%, 3/12/96 10,000,000 9,888,175
TI Group, Inc., 5.70%, 3/4/96 17,000,000 16,832,210
U.S. Borax & Chemical Corp., 5.73%, 2/1/96 5,000,000 4,975,458
Windmill Funding Corp.:
6.02%, 1/16/96 10,000,000 9,975,000
5.82%, 1/24/96 15,000,000 14,944,417
WMX Technologies, Inc., 5.50%, 9/9/96 15,480,000 14,905,692
--------------
720,826,369
--------------
NOTES -- 17.27%
American Express Centurion Bank, 5.82%, A/R,
1/17/96 15,000,000 15,000,652
Associates Corp. of North America Debenture, 7.50%,
10/15/96 28,850,000 29,222,978
Associates Corp. of North America Euro Dollar
Debenture, 10.50%, 3/12/96 7,378,000 7,424,686
Boatmens National Bank of St. Louis, 6.00%, A/R,
6/12/96 20,000,000 20,000,000
Comerica Bank, 5.70%, 9/3/96 13,000,000 12,991,077
First Bank, NA, 5.96%, 3/4/96 27,500,000 27,499,558
First Union National Bank N. C., 5.76%, 2/2/96 5,000,000 5,000,000
Ford Motor Credit Co. Medium Term Notes:
6.25%, A/R, 5/10/96 12,000,000 12,013,087
14.00%, 7/5/96 5,000,000 5,198,163
9.10%, 7/18/96 5,000,000 5,083,739
Huntington National Bank, 5.67%, A/R, 8/29/96 30,000,000 29,988,082
J.P. Morgan, 5.75%, 8/7/96 29,980,000 29,986,992
PNC Bank, 5.65%, 9/18/96 20,000,000 19,996,215
Seattle First National Bank, 5.51%, 6/14/96 10,000,000 10,000,000
Smithkline Beecham Corp., 5.25%, 1/16/96 2,425,000 2,423,784
Society National Bank Cleveland Ohio Medium Term
Note, 6.875%, 10/15/96 23,500,000 23,683,821
Trust Company Bank, 6.50%, 3/21/96 25,000,000 24,994,577
-----------
280,507,411
-----------
CERTIFICATES OF DEPOSIT -- 15.44%
Bayerische Landesbank Girozentrale, 6.00%, 9/12/96 10,000,000 10,000,000
Bayerische Vereinsbank AG, 5.95%, 7/22/96 29,980,000 29,980,000
Canadian Imperial Bank of Commerce, 5.95%, 10/23/96 24,980,000 24,980,000
Dresdner Bank AG, 7.00%, 2/5/96 15,000,000 15,000,000
Harris Trust & Savings Bank, 5.72%, 2/29/96 14,975,000 14,975,000
National Westminster Bank PLC, 5.83%, 1/12/96 15,000,000 15,000,045
PNC Bank Corp., 5.74%, 9/30/96 20,000,000 19,985,384
Royal Bank of Canada:
6.60%, 4/3/96 2,980,000 2,980,399
6.55%, 4/9/96 8,000,000 8,000,000
Societe Generale:
7.05%, 2/14/96 20,000,000 20,000,000
6.80%, 3/1/96 5,000,000 5,000,000
Toronto-Dominion Bank, Euro:
6.80%, 3/11/96 24,980,000 24,987,939
5.84%, 11/7/96 30,000,000 30,000,000
Wachovia Bank of Georgia, NA, 5.85%, 1/10/96 10,000,000 10,000,000
Wachovia Bank of North Carolina, 7.13%, 1/26/96 20,000,000 19,997,687
--------------
250,886,454
--------------
TIME DEPOSIT -- 1.42%
Mitsubishi Bank, 12.00%, 1/2/96 23,000,000 23,000,000
--------------
23,000,000
--------------
TOTAL INVESTMENTS $1,624,604,821
==============
<FN>
A/R -- Adjustable Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized Cost
Description Face Amount (Note 2)
----------- ----------- --------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 45.05%
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) $73,569,000 $ 73,569,000
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 6.00% 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 1/18/96 through 9/10/02 at various
interest rates ranging from 0.00% to 8.26%, all
held at the Bank of New York) 23,000,000 23,000,000
Yamaichi, Revolving Repurchase Agreement, 6.00%,
1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 12/31/95
through 8/15/05 at various interest rates ranging
from 0.00% to 11.625%, all held at Chemical Bank) 115,000,000 115,000,000
------------
211,569,000
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 54.95%
U.S. Treasury Securities -- 4.28%
U.S. Treasury Notes:
4.375%, 8/15/96 5,000,000 4,957,174
7.000%, 9/30/96 15,000,000 15,150,150
------------
20,107,324
------------
Agency Obligations -- 50.67%
Federal Farm Credit Bank:
5.78%, A/R, 2/9/96 25,000,000 24,998,664
6.61%, 4/12/96 4,000,000 4,006,934
6.39%, 4/17/96 10,000,000 10,022,719
5.59%, A/R, 6/7/96 10,000,000 9,998,338
5.60%, 11/1/96 10,000,000 10,002,747
Federal Home Loan Bank:
6.85%, 2/28/96 24,000,000 24,012,415
6.30%, 3/1/96 2,500,000 2,474,042
5.05%, 6/7/96 6,000,000 5,983,328
5.90%, 7/25/96 5,000,000 5,000,000
5.98%, 8/14/96 19,000,000 19,000,000
6.00%, 8/16/96 2,000,000 2,000,411
4.84%, 8/26/96 5,000,000 4,976,737
5.77%, 11/20/96 10,000,000 9,998,229
Federal Home Loan Mortgage Corp., 6.79%, 2/20/96 15,000,000 14,999,678
Federal National Mortgage Assn., 5.58% 2/21/96 8,400,000 8,334,074
Federal National Mortgage Assn. Medium Term Note:
5.50%, A/R, 1/26/96 25,000,000 24,998,973
5.71%, 6/10/96 5,000,000 4,998,939
5.50%, 6/12/96 18,000,000 17,969,843
Student Loan Marketing Assn.:
6.13%, A/R, 6/30/96 12,500,000 12,490,660
6.06%, A/R, 7/1/96 11,700,000 11,700,000
6.05%, A/R, 10/4/96 10,000,000 10,000,000
------------
237,966,731
------------
TOTAL INVESTMENTS $469,643,055
============
<FN>
A/R -- Adjustable Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized Cost
Description Face Amount (Note 2)
----------- ----------- -------------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 82.74%
Aubrey Langston, Revolving Repurchase Agreement,
5.92%, 1/2/96 (secured by various U.S. Treasury
obligations with maturities ranging from 8/31/97
through 11/15/05 at various interest rates
ranging from 4.75% to 13.75%, all held at
Chemical Bank) $43,000,000 $ 43,000,000
Bear Stearns & Co., Inc., Revolving Repurchase
Agreement, 5.82%, 1/2/96 (secured by various U.S.
Treasury obligations with maturities ranging from
5/15/96 through 8/15/23 at various interest rates
ranging from 0.00% to 8.875%, all held at the
Custodial Trust Co.) 215,000,000 215,000,000
Daiwa Securities America, Inc., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 4/30/96 through 11/15/01 at various
interest rates ranging from 0.00% to 15.75%, all
held at the Bank of New York) 43,000,000 43,000,000
First Boston, Inc., Revolving Repurchase Agreement,
5.85%, 1/2/96 (secured by various U.S. Treasury
Notes with maturities ranging from 11/15/96
through 2/15/03 at various interest rates ranging
from 4.375% to 6.25%, all held at Chemical Bank) 36,000,000 36,000,000
Lehman Brothers, Inc., Revolving Repurchase
Agreement, 5.92%, 1/2/96 (secured by U.S.
Treasury Note, 5.875%, 7/31/97, held at Chemical
Bank) 43,000,000 43,000,000
Morgan Stanley & Co., Inc., Revolving Repurchase
Agreement, 5.87%, 1/2/96 (secured by U.S.
Treasury Note, 6.125%, 5/31/97, held at the Bank
of New York) 43,000,000 43,000,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.00%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 2/15/96 through 11/15/05 at various
interest rates ranging from 0.00% to 12.375%, all
held at Chemical Bank) 216,533,000 216,533,000
Nikko Securities Co. International, Inc., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 7/31/96 through 8/15/00 at various
interest rates ranging from 0.00% to 8.75%, all
held at the Bank of New York) 40,000,000 40,000,000
Nomura Securities International, Inc., Revolving
Repurchase Agreement, 5.96%, 1/2/96 (secured by
various U.S. Treasury obligations with maturities
ranging from 8/31/97 through 5/15/01 at various
interest rates ranging from 0.00% to 6.00%, all
held at the Bank of New York) 40,000,000 40,000,000
Sanwa BGK Securities Co., L.P., Revolving
Repurchase Agreement, 5.90%, 1/2/96 (secured by
U.S. Treasury Note, 5.50%, 11/15/98, held at the
Bank of New York) 43,000,000 43,000,000
------------
762,533,000
------------
U.S. GOVERNMENT OBLIGATIONS -- 17.26%
U.S. Treasury Securities -- 17.26%
Principal Strip from U.S. Treasury Bond due
5/15/96 5,000,000 4,897,685
U.S. Treasury Bill, 6.26%, 3/7/96 3,000,000 2,965,955
U.S. Treasury Notes:
4.000%, 1/31/96 8,000,000 7,988,924
4.625%, 2/15/96 10,000,000 9,976,935
7.875%, 2/15/96 35,000,000 35,049,857
7.500%, 2/29/96 15,000,000 15,016,012
5.500%, 4/30/96 20,000,000 19,970,088
5.875%, 5/31/96 10,000,000 10,001,983
7.875%, 7/15/96 2,000,000 2,021,778
6.125%, 7/31/96 7,000,000 7,013,918
7.875%, 7/31/96 4,000,000 4,046,593
4.375%, 8/15/96 14,000,000 13,873,585
8.000%, 10/15/96 15,000,000 15,256,312
4.375%, 11/15/96 5,000,000 4,943,974
7.250%, 11/15/96 6,000,000 6,086,851
------------
159,110,450
------------
TOTAL INVESTMENTS $921,643,450
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD TAX-EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Interest Cost
Description Rating* Rate*** Face Amount (Note 2)
----------- ------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Alabama -- 1.05%
Alabama HFA Mulit-Family CP:
12/1/13 VMIG 1 3.50% $ 3,200,000 $ 3,200,000
12/1/13 VMIG 1 3.60% 2,700,000 2,700,000
Alaska -- 7.97%
Anchorage Electric Utilities (MBIA Insured)
12/1/15 Aaa 7.63% 11,100,000 11,423,545
Valdez Marine Terminal--Arco Transportation:
CP, 5/1/31 VMIG 1 3.50% 8,000,000 8,000,000
CP, 5/1/31 VMIG 1 3.55% 3,900,000 3,900,000
CP, 5/1/31 VMIG 1 3.75% 1,700,000 1,700,000
VRDB, 5/1/31 VMIG 1 3.50% 8,000,000 8,000,000
Valdez Marine Terminal--Exxon Pipeline Co. VRDB,
10/1/25 P 1 5.95% 12,000,000 12,000,000
Arizona -- 1.00%
Chandler IDR VRDB--Parsons Municipal Services,
12/15/09 A 1+ 4.25% 3,600,000 3,600,000
Maricopa Co. School District GO Unlimited Tax Series
A, 7/1/96 Aa 3.75% 2,000,000 2,000,952
Colorado -- 2.87%
Adams Co. IDR VRDB--City View Park, 12/1/15 A 1+ 5.20% 3,000,000 3,000,000
Englewood HFA Multi-Family VRDN--Mark Project,
12/15/97 A 1+ 5.25% 2,000,000 2,000,000
Lakewood Multi-Family Housing (FGIC Insured)
VRDB--St. Moritz & Diamond Head, 10/1/07 VMIG 1 4.00% 8,250,000 8,250,000
Moffat Co. PCR VRDB, 7/1/10 VMIG 1 4.65% 3,000,000 3,000,000
Delaware -- 1.35%
Delaware EDC VRDB--Hospital Billing Series B, 12/1/15 VMIG 1 5.25% 7,600,000 7,600,000
Florida -- 1.58%
Florida GO Unlimited Tax, 7/1/08 Aaa 7.20% 3,270,000 3,355,215
Florida HFA Multi-Family (MBIA Insured) VRDB--Lake
Northdale, 6/1/07 Aaa 3.75% 5,595,000 5,595,000
Georgia -- 2.56%
Cobb Co. Housing Multi-Family VRDB--Pittco Frey
Associates Project, 6/1/23 VMIG 1 5.20% 5,900,000 5,900,000
College Park IDR VRDB-- Marriott Corp., 8/1/15 Aa 3 6.10% 1,200,000 1,200,000
Fulton Co. Development IDR VRDN--Palisades West Ltd.,
9/1/96 Aaa 5.15% 2,235,000 2,235,000
Georgia Municipal Gas Authority--Southern Portfolio I
Project, 4/1/96 VMIG 1 3.75% 5,100,000 5,100,000
Hawaii -- 2.41%
Hawaii Dept. of Budget & Finance Mortgage:
VRDN--Kuakini Medical Center, 7/1/04 VMIG 1 3.75% 4,000,000 4,000,000
VRDB--Wilcox Memorial Hospital, 7/1/18 VMIG 1 5.95% 2,100,000 2,100,000
Hawaii State Housing Finance & Development Corp.
VRDB--Rental Housing Systems, 7/1/24 VMIG 1 5.15% 7,500,000 7,500,000
Illinois -- 8.50%
Chicago GO Tender Notes, 10/31/96 VMIG 1 3.75% 6,100,000 6,100,000
Chicago O'Hare International Airport--American
Airlines VRDB:
Series C, 12/1/17 P 1 6.10% 15,000,000 15,000,000
Series D, 12/1/17 P 1 6.10% 15,000,000 15,000,000
Illinois GO, 4/1/06 AA- 7.13% 1,000,000 1,022,317
Illinois State Sales Tax, 6/15/15 Aaa 7.63% 6,950,000 7,132,216
Illinois State Toll Highway Authority, VRDB 1/1/10 VMIG 1 5.05% 300,000 300,000
Northwest Suburban Municipal Joint Account (MBIA
Insured)--Water Agency Supply System, 5/1/03 Aaa 7.20% 3,440,000 3,490,557
Indiana -- 3.40%
Jasper Co. PCR CP--Northern Indiana Public Services,
11/1/16 VMIG 1 3.70% 2,000,000 2,000,000
Mt. Vernon PCR CP--General Electric Project,
12/1/04 P 1 3.50% 6,900,000 6,900,000
12/1/04 P 1 3.70% 2,790,000 2,790,000
Rockport Pollution Control (AMBAC Insured)
VRDB--AEP Generating Co., 7/1/25 Aaa 5.95% 5,500,000 5,500,000
VRDB--Indiana Michigan Power Co., 6/1/25 Aaa 5.00% 2,000,000 2,000,000
Kansas -- 1.18%
Olathe GO Unlimited Tax, 5/1/96 MIG 1 4.50% 6,700,000 6,700,000
<PAGE>
Kentucky -- 0.53%
Mason Co. PCR E. Kentucky Power VRDB--CFC Power
National Rural Utilities B-1, 10/15/14 P 1 4.65% 3,000,000 3,000,000
Maryland -- 1.06%
Baltimore PCR VRDN-- SCM Plants, 2/1/00 A 1+ 5.10% 6,000,000 6,000,000
Michigan -- 12.87%
Clinton Township EDC (MBIA Insured) VRDB Sisters of
Charity St. Joseph, 5/1/13 VMIG 1 5.00% 300,000 300,000
Dearborn EDC VRDB--Oakbrook Common:
3/1/23 A 1 5.10% 2,300,000 2,300,000
3/1/25 A 1 5.10% 200,000 200,000
Delta Co. EDC--Mead Escanaba Paper:
Series D, 12/1/23 P 1 6.00% 4,200,000 4,200,000
Series F, 12/1/23 P 1 6.10% 4,300,000 4,300,000
Farmington Hills EDR VRDB--Brookfield Building
Associates, 11/1/10 A 1 5.20% 2,000,000 2,000,000
Grand Rapids EDC VRDB--Amway, 12/1/06 A 1 5.10% 3,600,000 3,600,000
Ingham Co. EDC VRDB--Martin Luther Memorial Home,
Inc., 4/1/22 A 1+ 5.20% 5,870,000 5,870,000
Kent Hospital VRDB--Butterworth Hospital, 1/15/20 VMIG 1 5.40% 2,600,000 2,600,000
Meridian Limited Obligation EDC VRDN--Service
Merchandise Co., 12/15/99 A 1+ 4.00% 500,000 500,000
Michigan State Building Authority, 10/1/96 AA- 3.75% 5,000,000 5,005,297
Michigan State Hospital VRDB--Hospital Equipment Loan
Program:
12/1/23 VMIG 1 5.20% 1,600,000 1,600,000
12/1/23 VMIG 1 5.20% 8,900,000 8,900,000
Michigan State Hospital VRDB--Mt. Clemens Hospital,
8/15/15 VMIG 1 5.00% 4,600,000 4,600,000
Michigan State HDA VRDB:
Laurel Valley, 12/1/07 VMIG 1 5.10% 400,000 400,000
Shoal Creek, 10/1/07 VMIG 1 5.10% 2,800,000 2,800,000
Michigan State Job Development Authority
VRDB--Gordon Food Service, 8/1/15 Aaa 5.00% 5,800,000 5,800,000
PCR VRDB--Mazda Motor Corp., 10/1/08 VMIG 1 5.25% 4,500,000 4,500,000
Michigan State Strategic Fund VRDB--Allen Group, Inc.
11/1/25 VMIG 1 5.00% 400,000 400,000
University of Michigan Hospital VRDB:
12/1/19 VMIG 1 5.90% 1,200,000 1,200,000
12/1/27 VMIG 1 5.90% 11,610,000 11,610,000
Minnesota -- 1.60%
Hennepin Co. GO, 12/1/06 VMIG 1 5.15% 5,000,000 5,000,000
Rochester GO Various Sales Tax, 11/1/99 **N/R 5.00% 100,000 100,000
St. Paul Housing & Redevelopment Authority VRDB,
12/1/12 A 1+ 3.80% 3,900,000 3,900,000
Mississippi -- 1.45%
Perry Co. PCR VRDB--Leaf River Forest, 10/1/12 P 1 5.30% 8,200,000 8,200,000
Missouri -- 1.44%
Independence Water Utility Improvements CP 11/1/16 VMIG 1 3.40% 2,400,000 2,400,000
Missouri State Environmental Improvement Energy
Research PCR--Union Electric Co.:
Series A, 6/1/14 P 1 4.00% 1,000,000 1,000,000
Series B, 6/1/14 P 1 4.00% 4,750,000 4,750,217
Nevada -- 2.64%
Clark Co. Airport Improvement (MBIA Insured) VRDB,
7/1/12 VMIG 1 5.15% 8,600,000 8,600,000
Clark Co. PCR VRDB--Nevada Power Co. 10/1/23 A 1+ 5.00% 6,300,000 6,300,000
New Hampshire -- 0.32%
New Hampshire IDR VRDB--Oerlikon-Burlhe USA, 7/1/13 A 1+ 3.75% 1,800,000 1,800,000
New Jersey -- 0.22%
Rutgers State University, 5/1/96 AA 4.25% 1,220,000 1,221,741
New York -- 1.95%
New York City GO (MBIA Insured) VRDB 8/15/22 VMIG 1 5.90% 11,000,000 11,000,000
North Carolina -- 2.67%
North Carolina Eastern Municipal Power Agency--Power
System, 1/1/15 Aaa 7.75% 15,000,000 15,000,000
Ohio -- 2.40%
Cincinnati/Hamilton Co. EDR, 8/1/15 **N/R 3.90% 3,150,000 3,150,000
Columbus Electric System VRDB, 9/1/09 A 1 3.90% 1,400,000 1,400,000
Franklin Co. IDR VRDN--Capital South Community
Redevelopment, 12/1/05 **N/R 4.10% 700,000 700,000
Ohio Environmental Improvements CP, U.S. Steel Corp.,
5/1/11 P 1 5.50% 8,300,000 8,300,000
Oregon -- 2.41%
Medford Hospital VRDB--Rogue Valley Manor, 12/1/15 VMIG 1 5.20% 4,000,000 4,000,000
Port Morrow VRDB--General Elecitric, 10/1/13 P 1 6.00% 5,700,000 5,700,000
Tualatin Hills Parks & Recreation TRAN, 6/28/96 SP 1+ 4.25% 3,875,000 3,882,320
Pennsylvania -- 5.01%
Allegheny Co. Industrial Development VRDB--United
Jewish Federation:
Series B, 10/1/25 VMIG 1 5.25% 10,000,000 10,000,000
Series C, 10/1/15 VMIG 1 5.25% 1,100,000 1,100,000
Delaware Co. IDR (FGIC Insured) CP--Philadelphia
Electric, 12/1/12 VMIG 1 3.40% 2,400,000 2,400,000
Montgomery Co. Higher Education Health Authority
VRDB--Philadelphia Presbytery 7/1/25 VMIG 1 5.25% 5,000,000 5,000,000
Schuylkill Co. IDR VRDB--Westwood Energy 11/1/09 P 1 6.25% 6,800,000 6,800,000
Upper Allegheny Joint Sanitary Authority, 9/1/26 MIG 1 4.50% 3,000,000 3,001,004
South Carolina -- 2.57%
Richland Co. Schoold District TAN GO Unlimited Tax,
4/15/96 MIG 1 4.00% 8,300,000 8,305,660
South Carolina GO State Capital Improvement, 2/1/96 Aaa 7.30% 3,500,000 3,509,443
South Dakota -- 0.48%
South Dakota HDA, 5/1/96 Aa 1 3.90% 2,715,000 2,715,000
Tennessee -- 2.13%
Knox Co. Board IDR VRDB--Service Merchandise Co.,
Inc., 12/15/08 A 1+ 4.00% 800,000 800,000
Metropolitan Government Nashville & Davidson Co.,
6/15/06 AA 6.50% 6,000,000 6,142,843
Metropolitan Government Nashville & Davidson Co.,
VRDB--Nashville Apartments 9/1/15 Aa 3 5.15% 5,100,000 5,100,000
Texas -- 10.02%
Austin Utilities System CP, 4/9/96 P 1 3.65% 5,400,000 5,400,000
Houston Water & Sewer System (MBIA Insured) 12/1/16 Aaa 7.13% 3,000,000 3,150,445
North Central HCFA VRDB--YMCA Dallas 6/1/21 VMIG 1 5.65% 5,600,000 5,600,000
Texas Hospital Equipment Finance Council (MBIA
Insured) VRDN, 4/7/05 VMIG 1 5.45% 8,045,000 8,045,000
Texas Small Business IDR VRDB--Texas Public
Facilities Capital Access, 7/1/26 VMIG 1 5.20% 2,300,000 2,300,000
Texas State Higher Education Authority (FGIC Insured)
VRDB--Educational Equipment & Improvements, 12/1/25 VMIG 1 5.15% 2,510,000 2,510,000
Texas State Public Finance Authority:
10/1/96 Aa 6.40% 3,000,000 3,061,190
CP, 8/20/96 P 1 3.75% 5,000,000 5,000,000
Texas TRAN, 8/30/96 MIG 1 4.75% 12,750,000 12,812,314
Texas Transportation CP, 8/20/96 P 1 3.65% 5,000,000 5,000,000
Tyler Health Facilities Development Corp. CP--East
Texas Medical Center Regional Health, 11/1/25 VMIG 1 3.65% 3,700,000 3,700,000
Utah -- 3.01%
Intermountain Power Agency, 7/1/17 Aaa 7.75% 4,700,000 4,889,980
Salt Lake Co. PCR--VRDB--Pacific Corp. 2/1/08 P 1 5.95% 12,100,000 12,100,000
Vermont -- 1.87%
Vermont Educational Health Agency, 11/1/27 A 1+ 3.80% 5,975,000 5,975,000
Vermont Student Assistance Corp. VRDN, 1/1/04 VMIG 1 3.75% 4,600,000 4,600,000
Virginia -- 0.48%
Loudoun Co. IDR VRDB, 11/1/24 A 1 6.45% 2,700,000 2,700,000
Washington -- 1.88%
Port Townsend IDR VRDB--Townsend Paper Corp., 3/1/09 VMIG 1 5.15% 5,100,000 5,100,000
Seattle Municipal Light & Power Co., 11/1/15 VMIG 1 3.50% 5,500,000 5,500,000
West Virginia -- 0.48%
Raleigh Co. Health Care System VRDB, 9/1/06 VMIG 1 5.25% 2,700,000 2,700,000
Wisconsin -- 5.70%
Milwaukee School Order Notes Series B, 8/22/96 MIG 1 4.50% 15,000,000 15,046,050
Waukesha School District TRAN, 8/23/96 SP 1 4.25% 14,000,000 14,020,236
Wisconsin State Transportation Transit Improvements,
7/1/02 AAA 7.90% 3,000,000 3,123,465
Wyoming -- 1.42%
Lincoln Co. PCR VRDB--Pacificorp Project, 1/1/16 VMIG 1 3.40% 8,000,000 8,000,000
------------
TOTAL INVESTMENTS $564,592,007
============
<FN>
Investment Abbreviations
AMBAC -- AMBAC Indemnity Corp.
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
EDC -- Economic Development Corporation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCF -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
Individual Development & Export
IDA -- Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
TAN -- Tax Anticipation Note
TRAN -- Tax Revenue Anticipation Note
Unit Priced Daily Adjustable Tax
UPDATE -- Exempt Securities
VRDB -- Variable Rate Demand Bond
VRDN -- Variable Rate Demand Note
* Moody's when rated, otherwise Standard & Poor's.
<PAGE>
** N/R investment is not rated, yet deemed by the Investment Advisor as an
acceptable credit and having characteristics equivalent to obligations
rated AA or MIG 1 by Moody's, AA or A-1+ by Standard & Poor's.
*** Interest rates on variable rate securities are adjusted periodically based
on appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1995.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
WOODWARD MICHIGAN TAX-EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Amortized
Interest Cost
Description Rating* Rate*** Face Amount (Note 2)
----------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Michigan -- 99.24%
Ann Arbor EDC Ltd. Obligation VRDN--Webers
Industries, 5/1/00 **N/R 5.20% $ 930,000 $ 930,000
Bruce Township Hospital (MBIA Insured) VRDB--Sisters
of Charity St. Joseph:
Series A, 5/1/18 VMIG 1 3.70% 3,000,000 3,000,000
Series B, 5/1/18 VMIG 1 5.00% 800,000 800,000
Dearborn EDC Ltd. Obligation VRDB--Oakbrook Common,
3/1/25 A 1 5.10% 800,000 800,000
Delta Co. EDC--Mead Escanaba Paper Co.:
Series B, 12/1/23 P 1 3.60% 1,600,000 1,600,000
Series E, 12/1/23 P 1 6.10% 3,600,000 3,600,000
Detroit Downtown Development Authority
VRDB--Millender Center Project, 12/1/10 VMIG 1 5.30% 4,500,000 4,500,000
Detroit Sewage Disposal (MBIA Insured) Series B,
7/1/96 Aaa 5.00% 4,750,000 4,781,575
Detroit Tax Increment Revenue VRDB, 10/1/10 A 1 5.25% 4,200,000 4,200,000
Eaton Inter School District TAN, 4/4/96 **N/R 3.95% 1,245,000 1,245,299
Farmington Hills EDC Ltd. Obligation VRDB--Brookfield
Building Assn., L P, 11/1/10 A 1 5.20% 1,135,000 1,135,000
Ferndale Schools GO Unlimited Tax, 5/1/06 Aaa 7.00% 1,075,000 1,087,371
Flint Hospital Building Authority VRDB--Hurley
Medical Center, Series B, 7/1/15 VMIG 1 5.60% 5,000,000 5,000,000
Grand Traverse Hospital VRDB--Munson Medical Center
Series A, 12/1/15 Aaa 7.63% 1,000,000 1,050,748
Grosse Point Public Library TAN, 4/3/96 **N/R 3.60% 990,000 990,291
Holland EDC VRDB--Thrifty Holland, Inc., 3/1/13 A 1 3.90% 1,300,000 1,300,000
Ingham Co. EDC VRDB--Martin Luther Memorial Home,
Inc., 4/1/22 A 1+ 5.20% 500,000 500,000
Kalamazoo Co. EDC VRDB--Industrial & Economic
Development WBC Properties Ltd., 9/1/15 **N/R 5.60% 1,000,000 1,000,000
Kalamazoo Public Library TAN, 4/1/96 **N/R 3.60% 2,190,000 2,190,358
Kent Hospital VRDB--Butterworth Hospital Series A,
1/15/20 VMIG 1 5.40% 300,000 300,000
L'Anse Creuse Public Schools GO Unlimited Tax, 5/1/96 AA 5.75% 1,000,000 1,004,629
Leelanau Co. EDC Ltd. Obligation--American Community
Mutual Insurance Co., 6/15/06 **N/R 3.90% 1,060,000 1,060,000
Livonia EDC AMT VRDB--Foodland Distributors, 12/1/11 VMIG 1 5.20% 1,000,000 1,000,000
Macomb Township EDC Ltd. Obligation AMT VRDN--ACR
Industries, 1/1/03 VMIG 1 5.10% 1,050,000 1,050,000
Meridian EDC Ltd. Obligation VRDB--Hannah
Technologies, 11/15/14 A 1+ 4.25% 2,500,000 2,500,000
Michigan Municipal Bond Authority:
Series A, 5/3/96 SP 1+ 5.00% 2,000,000 2,004,832
Series B, 7/3/96 SP 1+ 4.50% 4,000,000 4,014,133
Michigan Public Power Agency (AMBAC Insured)--Belle
River Project, 1/1/96 Aaa 7.00% 3,000,000 3,000,000
Michigan State Building Authority:
Series I, 10/1/96 AA- 3.75% 2,000,000 2,000,000
University & College Improvements, 10/1/96 AA- 4.30% 5,235,000 5,253,942
University of Michigan Hospital, 12/1/96 Aaa 7.88% 665,000 702,565
Michigan State Comprehensive Transportation, 8/1/05 AA- 7.63% 1,940,000 1,951,707
Michigan State Hospital Henry Ford Health Series A,
11/15/96 Aa 4.00% 1,070,000 1,073,510
5/1/00 Aaa 7.35% 2,055,000 2,095,912
5/1/08 Aaa 8.00% 1,310,000 1,344,864
Michigan State Hospital VRDB--Hospital Equipment Loan
Program:
12/1/23 VMIG 1 5.20% 1,600,000 1,600,000
12/1/23 VMIG 1 5.20% 400,000 400,000
Michigan State HDA VRDB, 4/1/19 A+ 1 5.00% 1,000,000 1,000,000
Michigan State HDA Ltd. Obligation VRDB--
Laurel Valley, 12/1/07 VMIG 1 5.10% 800,000 800,000
Shoal Creek, 10/1/07 VMIG 1 5.10% 200,000 200,000
Michigan State Job Development Authority IDR:
VRDN--Sugar Sebewa, 9/1/00 Aa 3 5.15% 2,600,000 2,600,000
VRDN--Hitachi Metals, 1/1/04 Aa 3 4.00% 1,800,000 1,800,000
VRDB--Gordon Food Service, 8/1/15 Aaa 5.00% 2,200,000 2,200,000
Michigan State Job Development Authority PCR
VRDB--Mazda Motors Mfg. USA Corp., 10/1/08 VMIG 1 5.25% 1,500,000 1,500,000
Michigan State Strategic Fund IDR VRDB--Allen Group,
Inc., 11/1/25 VMIG 1 5.00% 600,000 600,000
Michigan State Strategic Fund PCR VRDN--Consumers
Power Co., 9/1/00 A 1+ 5.15% 3,000,000 3,000,000
Michigan State Strategic Fund Ltd. Obligation--
Environmental Research, Series B, 6/1/11 VMIG 1 4.35% 1,280,000 1,280,000
Michigan State Strategic Fund Ltd. Obligation AMT:
VRDN--Alpha Tech, Inc., 10/1/97 P 1 5.50% 6,000,000 6,000,000
VRDN--Michigan & Wayne Disposal Inc., 4/1/99 A 1 5.35% 1,500,000 1,500,000
VRDB--West Riverbank, 11/1/06 A 1 5.20% 1,100,000 1,100,000
VRDB--Dennenlease L C, 4/1/10 **N/R 5.15% 2,395,000 2,395,000
VRDB--Ironwood Plastics, Inc., 11/1/11 **N/R 5.15% 1,275,000 1,275,000
VRDB--Molmec Inc., 12/1/14 **N/R 5.35% 1,500,000 1,500,000
VRDB--CEC Products Co., 6/1/15 **N/R 5.35% 3,300,000 3,300,000
VRDB--Detroit Edison Co., 9/1/30 P 1 6.00% 5,000,000 5,000,000
Michigan State Strategic Fund Ltd. Obligation
VRDN--Freezer Services, 10/1/97 **N/R 5.30% 760,000 760,000
Michigan State Trunk Line Highway & Transit
Improvements:
7/1/96 AA- 7.00% 500,000 508,041
11/15/96 AA- 5.25% 500,000 506,136
Michigan State Underground Storage Tank VRDN, 12/1/04 VMIG 1 5.15% 2,900,000 2,900,000
Oakland Co. EDC--Corners Shopping Center, 8/1/15 A 1+ 4.10% 530,000 530,000
Oakland Co. EDC Ltd. Obligation AMT--Orchard Maple
Project, 11/15/16 **N/R 4.00% 615,000 615,000
Plymouth Township EDC VRDN--Key International
Manufacturing, Inc., 7/1/04 **N/R 4.00% 3,750,000 3,750,000
Van Buren Township EDC AMT VRDN--Daikin Clutch USA
Inc., 3/1/97 Aa 3 5.50% 3,000,000 3,000,000
University of Michigan Hospital VRDB:
12/1/19 VMIG 1 5.90% 2,800,000 2,800,000
12/1/27 VMIG 1 5.90% 790,000 790,000
------------
125,275,913
------------
PUERTO RICO -- 0.76%
Commonwealth of Puerto Rico (FGIC Insured) GO
Unlimited Tax, 7/1/96 Aaa 7.80% 500,000 521,705
Puerto Rico Public Buildings Authority--Public
Education & Health Facilities, 7/1/12 Aaa 8.00% 425,000 439,854
961,559
------------
TOTAL INVESTMENTS $126,237,472
============
<FN>
Investment Abbreviations
AMBAC -- AMBAC Indemnity Corp.
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
EDC -- Economic Development Corporation
EDR -- Economic Development Revenue
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCFA -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
IDA -- Industrial Development & Export Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
TAN -- Tax Anticipation Note
TRAN -- Tax Revenue Anticipation Note
UPDATE -- Unit Priced Daily Adjustable Tax-Exempt Securities
VRDB -- Variable Rate Demand Bond
VRDN -- Variable Rate Demand Note
* Moody's when rated, otherwise Standard & Poor's.
** N/R investment is not rated, yet deemed by the Investment Advisor as an
acceptable credit and having characteristics equivalent to obligations
rated AA or MIG 1 by Moody's, AA or A-1+ by Standard & Poor's.
*** Interest rates on variable rate securities are adjusted periodically based
on appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1995.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Woodward Funds (Woodward) was organized as a Massachusetts business
trust on April 21, 1987 and registered under the Investment Company Act of
1940, as amended, as an open-end investment company. As of December 31, 1995
Woodward consisted of seventeen separate series of which there were five money
market funds (Money Market Funds), as described below.
Woodward Money Market Fund
Woodward Government Fund
Woodward Treasury Money Market Fund
Woodward Tax-Exempt Money Market Fund
Woodward Michigan Tax-Exempt Money Market Fund
The Money Market Funds commenced operations on January 4, 1988, except
for the Michigan Tax-Exempt Money Market Fund and the Treasury Money Market
Fund, which commenced operations on January 23, 1991 and January 1, 1993,
respectively.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Money Market Funds in preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. Following generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Investments
Pursuant to Rule 2a-7 of the Investment Company Act of 1940, the Money
Market Funds utilize the amortized cost method to determine the carrying value
of investment securities. Under this method, investment securities are valued
for both financial reporting and federal tax purposes at amortized cost and
any discount or premium is amortized from the date of acquisition to maturity.
The use of this method results in a carrying value which approximates market
value. Market value is determined based upon quoted market prices or dealer
quotes.
Investment security purchases and sales are accounted for on the trade
date.
Woodward invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve open
market desk will do business. NBD Bank (NBD), acting under the supervision of
the Board of Trustees, has established the following additional policies and
procedures relating to Woodward's investments in securities subject to
repurchase agreements: 1) the value of the underlying collateral is required
to equal or exceed 102% of the funds advanced under the repurchase agreement
including accrued interest; 2) collateral is marked to market daily by NBD to
assure its value remains at least equal to 102% of the repurchase agreement
amount; and 3) funds are not disbursed by Woodward or its agent unless
collateral is presented or acknowledged by the collateral custodian.
The Tax-Exempt and Michigan Tax-Exempt Funds invest in a majority of
instruments whose stated maturity is greater than one year, but whose rate of
interest is readjusted no less frequently than annually, or which possess
demand features and may therefore be deemed to have a maturity equal to the
period remaining until the next interest adjustment date or the demand date,
whichever is longer.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount. Premiums and discounts are
amortized/accreted as required by the Internal Revenue Code.
Federal Income Taxes
It is Woodward's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to distribute net investment income and realized gains to its
shareholders. Therefore, no federal income tax provision is required in the
accompanying Financial Statements.
Shareholder Dividends
On each business day except those holidays the New York Stock Exchange
(Exchange), NBD or its bank affiliates observe, net investment income is
declared as a dividend, at the close of the Exchange, to shareholders of
record at such close. Such dividends are paid monthly.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five year period beginning with the commencement of operations of each series.
Expenses
Expenses are charged daily as a percentage of the respective Fund's net
assets. Woodward monitors the rate at which expenses are charged to ensure
that a proper amount of expense is charged to income each year. This
percentage is subject to revision if there is a change in the estimate of the
future net assets of the funds or a change in expectations as to the level of
actual expenses.
(3) Transactions with Affiliates
First of Michigan Corporation (FoM) and Essex National Securities, Inc.
(Essex) act as sponsors and co-distributors of Woodward's shares. Pursuant to
their Distribution Agreement with Woodward, FoM is entitled to receive a fee
at the annual rate of .025% of the aggregate average net assets invested in
the Money Market Funds' first $400 million and .005% of such assets in excess
of $400 million. Fees of FoM under the Distribution Agreement are allocated
among the Funds based on the relative net asset values. Essex is entitled to
receive a fee at the annual rate of .10% of the aggregate average net assets
of Woodward's investment portfolios, attributable to investments by clients of
Essex.
NBD is the investment advisor pursuant to the Advisory Agreement. For
its advisory services to Woodward, NBD is entitled to a fee, computed daily
and payable monthly. Under the Advisory Agreement, NBD also provides Woodward
with certain administrative services, such as maintaining Woodward's general
ledger and assisting in the preparation of various regulatory reports. NBD
receives no additional compensation for such services.
A reorganization of Woodward and The Prairie Funds is being considered
by the Board of Trustees of both funds. In connection with the proposed
reorganization, the Board of Trustees of Woodward and the Board of Trustees of
Prairie must approve certain reorganization agreements. The transaction is
intended to be effected as a tax-free reorganization under the Internal
Revenue Code, so that none of the Funds' shareholders will recognize taxable
gains or losses as a result of the reorganization. A proxy
statement/prospectus describing the reorganization and the reasons therefore
will be sent to shareholders.
NBD, FoM, and Essex have agreed that they may waive their fees in whole
or in part; and, if in part, may specify the particular fund to which such
waiver relates as may be required to satisfy any expense limitation imposed by
state securities laws or other applicable laws. At present, no restrictive
expense limitation is imposed on Woodward. Restrictive limitations could be
imposed as a result of changes in current state laws and regulations in those
states where Woodward has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. For the year ended December 31, 1995, NBD waived $61,221 of the
advisory fee for the Michigan Tax-Exempt Money Market Fund.
NBD is also compensated for its services as Woodward's Custodian,
Transfer Agent and Dividend Disbursing Agent, and is reimbursed for certain
out of pocket expenses incurred on behalf of Woodward.
On March 10, 1994, Woodward adopted The Woodward Funds Deferred
Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows an individual Trustee to elect to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
(4) Investment Securities Transactions
Information with respect to investment securities and security
transactions is as follows:
<TABLE>
<CAPTION>
Michigan
Treasury Tax-Exempt Tax-Exempt
Money Market Government Money Market Money Market Money Market
Fund Fund Fund Fund Fund
------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Purchases $58,940,462,599 $5,440,529,005 $7,317,697,881 $2,744,829,205 $388,242,330
Sales & Maturities $58,634,036,261 $5,389,053,887 $7,177,784,932 $2,723,533,379 $337,049,476
</TABLE>
(5) Expenses
Following is a summary of total expense rates charged, advisory fee rates
payable to NBD, and amounts paid to NBD, FoM, and Essex pursuant to the
agreements described in Note 3 for the year ended December 31, 1995. The rates
shown are stated as a percentage of each Fund's average net assets.
<TABLE>
<CAPTION>
Michigan
Treasury Tax-Exempt Tax-Exempt
Money Market Government Money Market Money Market Money Market
Effective Date Fund Fund Fund Fund Fund
-------------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Expense Rates:
January 1 0.50% 0.51% 0.53% 0.53% 0.69%
May 11 0.52% 0.51% 0.53% 0.53% 0.69%
November 9 0.52% 0.52% 0.53% 0.53% 0.69%
December 1 0.52% 0.52% 0.55% 0.53% 0.69%
NBD Advisory Fee:
Net Assets--
Up to $1.0 billion 0.45% 0.45% 0.45% 0.45% 0.50%
$1.0 to $2.0 billion 0.425% 0.425% 0.425% 0.425% 0.50%
Over $2.0 billion 0.40% 0.40% 0.40% 0.40% 0.50%
Amounts Paid:
Advisory Fee to NBD $7,225,557 $1,987,590 $3,248,535 $2,458,246 $496,026
Distribution Fee to FoM and Essex $ 152,873 $ 34,919 $ 53,755 $ 44,226 $ 10,466
Other Fees & Out of Pocket Expenses to NBD $ 341,111 $ 55,012 $ 150,481 $ 92,713 $ 30,134
Expenses Waived:
Advisory Fee to NBD -- -- -- -- $(61,221)
</TABLE>
(6) Portfolio Composition
Although the Tax-Exempt Money Market Fund has a diversified investment
portfolio, the Fund has investments in excess of 10% of its total investments
in the states of Michigan and Texas. The Michigan Tax-Exempt Money Market Fund
does not have a diversified portfolio since 99% of its investments are within
the state of Michigan. Such concentrations within particular states may subject
the funds more significantly to economic changes occurring within those states.
<PAGE>
THE WOODWARD FUNDS
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of net investment
income and distributions from net investment income for the Money Market Funds.
Additional quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
These financial highlights have been derived from the financial statements of
the Money Market Funds and other information for the periods presented.
<TABLE>
<CAPTION>
Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0549 $ 0.0378 $ 0.0281 $ 0.0347 $ 0.0579
Distributions From Net Investment Income $ (0.0549) $ (0.0378) $ (0.0281) $ (0.0347) $(0.0579)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 5.63% 3.86% 2.85% 3.58% 5.95%
Ratios to Average Net Assets:
Expenses 0.51% 0.47% 0.49% 0.52% 0.50%
Net Investment Income 5.49% 3.78% 2.81% 3.47% 5.79%
Net Assets, End of Year
(in 000's) $1,639,695 $1,323,040 $1,326,693 $1,095,354 $775,521
<CAPTION>
Government Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0544 $ 0.0372 $ 0.0277 $ 0.0357 $ 0.0564
Distributions From Net Investment Income $(0.0544) $(0.0372) $(0.0277) $(0.0357) $(0.0564)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 5.57% 3.77% 2.81% 3.63% 5.79%
Ratios to Average Net Assets:
Expenses 0.51% 0.51% 0.51% 0.51% 0.50%
Net Investment Income 5.44% 3.72% 2.77% 3.57% 5.64%
Net Assets, End of Year
(in 000's) $474,377 $421,208 $346,665 $261,614 $288,369
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Treasury
Money Market Fund
---------------------------------------------
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
------------- ------------- -------------
<S> <C> <C> <C>
Net Investment Income $ 0.0539 $ 0.0370 $ 0.0273
Distributions From Net Investment Income $(0.0539) $(0.0370) $(0.0273)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00
Total Return 5.53% 3.77% 2.77%
Ratios to Average Net Assets:
Expenses 0.53% 0.50% 0.50%
Net Investment Income 5.39% 3.70% 2.73%
Net Assets, End of Year
(in 000's) $927,696 $785,694 $854,873
<CAPTION>
Tax-Exempt Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0335 $ 0.0242 $ 0.0196 $ 0.0264 $ 0.0422
Distributions From Net Investment Income $(0.0335) $(0.0242) $(0.0196) $(0.0264) $(0.0422)
Net Asset Value at Beginning and End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 3.41% 2.45% 1.98% 2.70% 4.30%
Ratios to Average Net Assets:
Expenses 0.53% 0.51% 0.51% 0.53% 0.52%
Net Investment Income 3.35% 2.42% 1.96% 2.64% 4.22%
Net Assets, End of Year
(in 000's) $564,413 $550,736 $498,706 $379,431 $227,808
<CAPTION>
Michigan Tax-Exempt
Money Market Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 0.0329 $ 0.0235 $ 0.0181 $ 0.0237 $ 0.0353
Distributions From Net Investment Income $(0.0329) $(0.0235) $(0.0181) $(0.0237) $(0.0353)
Net Asset Value at Beginning and End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 3.32% 2.38% 1.83% 2.40% 3.83%(a)
Ratios to Average Net Assets:
Expenses 0.69% 0.67% 0.65% 0.64% 0.65%(a)
Net Investment Income 3.30% 2.35% 1.81% 2.37% 3.77%(a)
Expenses without fee waiver 0.76% 0.75% -- -- --
Net Investment Income without fee waiver 3.23% 2.28% -- -- --
Net Assets, End of Period
(in 000's) $122,057 $ 78,640 $ 52,557 $ 52,960 $ 38,885
<FN>
- ----------------
(a) Annualized for periods less than one year for comparability purposes.
Actual annual values may be less than or greater than those shown.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
The Woodward Money Market Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Money Market Funds of THE
WOODWARD FUNDS (comprising, as indicated in Note 1, the Money Market,
Government, Treasury Money Market, Tax-Exempt Money Market and Michigan
Tax-Exempt Money Market Funds) as of December 31, 1995, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended or
from inception (as indicated in Note 1) through December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included physical counts and confirmation of
securities owned as of December 31, 1995, by inspection and correspondence with
custodians, banks and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective funds constituting the Money Market Funds of
The Woodward Funds as of December 31, 1995, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended and the financial highlights for each of the five
years in the period then ended or from inception (as indicated in Note 1)
through December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 19, 1996.
<PAGE>
[ BACK COVER ]
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities, Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, Pennsylvania 19107-3496 [ WOODWARD FUNDS LOGO ]
- -------------------------------------------------------------------------------
The Woodward Funds ------------
P.O. Box 7058 BULK RATE
Troy, MI 48007-7058 U.S. POSTAGE
PAID
Detroit, MI
Permit No. 2
------------
