THE WOODWARD FUNDS
CASH MANAGEMENT FUND
TREASURY PRIME CASH MANAGEMENT FUND
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
P R O S P E C T U S
April 26, 1996
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED OR OTHERWISE SUPPORTED BY, FIRST CHICAGO NBD CORPORATION 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 POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE
NO ASSURANCE THAT EACH FUND WILL BE ABLE TO MAINTAIN A CONSTANT NET ASSET VALUE
OF $1.00 PER SHARE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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First Chicago Investment Management Company and NBD Bank
CO-INVESTMENT ADVISERS AND CO-ADMINISTRATORS
BISYS Fund Services
DISTRIBUTOR AND CO-ADMINISTRATOR
PROSPECTUS BEGINS ON PAGE ONE
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THE WOODWARD FUNDS
PROSPECTUS--April 26, 1996
The Woodward Funds (the "Trust") is an open-end management investment
company, known as a series fund. By this Prospectus, the Trust is offering
Institutional Shares and Service Shares of three separate, diversified money
market series (each, a "Fund"): Cash Management Fund, Treasury Prime Cash
Management Fund and U.S. Government Securities Cash Management Fund
(collectively, the "Funds"). Each Fund's goal is to provide investors with as
high a level of current income as is consistent with the preservation of capital
and the maintenance of liquidity.
Each Fund is designed for institutional investors, including banks, acting
for themselves or in a fiduciary, advisory, agency, custodial or similar
capacity, public agencies and municipalities. Fund shares may not be purchased
directly by individuals, although institutions may purchase shares for accounts
maintained by individuals.
Each Fund's shares are sold without a sales charge. Investors can invest or
reinvest in or redeem shares at any time without charge or penalty imposed by
the Fund.
Institutional Shares and Service Shares are identical, except as to the
services offered to and expenses borne by each Class. Service Shares bear
certain costs pursuant to a Distribution and Services Plan adopted by the Board
of Trustees.
First Chicago Investment Management Company ("FCIMCO") and NBD Bank ("NBD")
serve as each Fund's co-investment advisers (collectively, the "Co-Investment
Advisers") and FCIMCO,
NBD and BISYS Fund Services ("BISYS") serve as co-administrators (collectively,
the
"Co-Administrators").
BISYS serves as each Fund's distributor.
------------------------
This Prospectus sets forth concisely information about the Trust and Funds
that an investor should know before investing. It should be read and retained
for future reference.
The Statement of Additional Information, dated April 26, 1996, which may be
revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, write to the Trust at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, or call 1-800-688-3350.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING EXPENSES....................................................... 3
YIELD INFORMATION.................................................................... 5
DESCRIPTION OF THE FUNDS............................................................. 5
MANAGEMENT OF THE TRUST.............................................................. 9
HOW TO BUY FUND SHARES............................................................... 10
HOW TO REDEEM FUND SHARES............................................................ 12
DISTRIBUTION AND SERVICES PLAN....................................................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES................................................... 14
GENERAL INFORMATION.................................................................. 15
SUPPLEMENTAL INFORMATION............................................................. A-1
</TABLE>
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
The following table is provided to assist investors in understanding the
various estimated costs and expenses that an investor will indirectly incur as a
beneficial owner of shares in the Funds.
<TABLE>
<CAPTION>
TREASURY PRIME CASH U.S. GOVERNMENT
SECURITIES CASH
CASH MANAGEMENT MANAGEMENT FUND(1) MANAGEMENT FUND(1)
FUND(1)
----------------------- ----------------------- -----------------------
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers)......... .13% .13% .12% .12% .14% .14%
12b-1 (Distribution and Servicing) Fees..... None .25% None .25% None .25%
Other Fund Operating Expenses (after fee
waivers and reimbursements)................. .22% .22% .23% .23% .21% .21%
Total Fund Operating Expenses (after fee
waivers and expense reimbursements)....... .35% .60% .35% .60% .35% .60%
</TABLE>
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(1) As of the date of this Prospectus, the Fund had not commenced investment
operations and therefore the expenses for the Funds are estimates only.
Example:
An investor would pay the following estimated expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
SHARES SHARES SHARES SHARES SHARES SHARES
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Year...................................... $ 4 $ 6 $ 4 $ 6 $ 4 $ 6
3 Years..................................... $11 $19 $11 $19 $11 $19
</TABLE>
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The amounts listed in the examples should not be considered as
representative of past or future expenses and actual expenses may be greater or
less than those indicated. Moreover, while the example assumes a 5% annual
return, each Fund's actual performance will vary and may result in an actual
return greater or less than 5%.
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The purpose of the foregoing table is to assist investors in understanding
the various estimated costs and expenses borne by the Funds, and therefore
indirectly by investors, the payment of which will reduce investors' return on
an annual basis. The Co-Investment Advisers have undertaken, as to each Fund,
until such time as they give investors at least 90 days' notice to the contrary,
that if, in any fiscal year, aggregate expenses exclusive of taxes, brokerage,
interest on borrowings and (with the prior consent of the necessary state
securities commissions) extraordinary expenses, but including the investment
advisory and administration fees, exceed .35% and .60% of the value of the
average net assets of the Institutional Shares and the Service Shares,
respectively, for the fiscal year, the Trust may deduct from the payment
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to be made to the Co-Investment Advisers under the Investment Advisory or
Administration Agreements, or the Co-Investment Advisers will bear, such excess
expense. The expenses noted above, without fee waivers or expense reimbursement
arrangements, would have been: Management Fees, .20% for each Fund; Other Fund
Operating Expenses, .23% for the Institutional Shares and Service Shares of the
Cash Management Fund, .32% for the Institutional Shares and Service Shares of
the Treasury Prime Cash Management Fund, and .23% for the Institutional Shares
and Service Shares of the U.S. Government Securities Cash Management Fund; and
Total Fund Operating Expenses, .43% for the Institutional Shares and .68% for
the Service Shares of the Cash Management Fund, .52% of the Institutional Shares
and .77% for the Service Shares of the Treasury Prime Cash Management Fund, and
.43% for the Institutional Shares and .68% for the Service Shares of the U.S.
Government Securities Cash Management Fund. See "Management of the Trust," "How
to Buy Fund Shares" and "Distribution and Services Plan."
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YIELD INFORMATION
From time to time, each Fund will advertise its yield and effective yield.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. It can be expected that these yields will fluctuate
substantially. The yield of a Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then annualized. That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly, but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment. Each Fund's yield and effective yield may reflect
absorbed expenses pursuant to any undertaking that may be in effect. See
"Management of the Trust." Both yield figures also take into account any
applicable distribution and service fees. See "Distribution and Services Plan."
Yield information is useful in reviewing a Fund's performance, but because
yields will fluctuate, under certain conditions such information may not provide
a basis for comparison with domestic bank deposits, other investments which pay
a fixed yield for a stated period of time, or other investment companies which
may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Bank Rate MonitorTM, N. Palm Beach, Fla. 33408, IBC/Donoghue's
Money Fund Report(R) and other industry publications.
DESCRIPTION OF THE FUNDS
GENERAL
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios. Each portfolio is treated as a separate entity for certain matters
under the Investment Company Act of 1940, as amended (the "1940 Act"), and for
other purposes, and a shareholder of one portfolio is not deemed to be a
shareholder of any other portfolio. As described below, for certain matters
Trust shareholders vote together as a group; as to others they vote separately
by Fund.
By this Prospectus, two classes of shares of each Fund are being
offered--Institutional Shares and Service Shares (each such class being referred
to as a "Class"). Unlike Institutional Shares, Service Shares are subject to an
annual distribution and service fee at the rate of up to .25% of the value of
the average daily net assets of the Service Class. The fee is payable to the
Distributor for advertising, marketing and distributing Service Shares and for
ongoing personal services to the holders of Service Shares relating to
shareholder accounts and services related to the maintenance of such shareholder
accounts pursuant to a Distribution and Service Plan adopted in accordance with
Rule 12b-1 under the 1940 Act. The Distributor may make payments to certain
financial institutions, securities dealers and other industry professionals
(collectively, "Service Agents") in respect of these services. See "Distribution
and Services Plan."
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WHEN USED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION,
THE TERMS "INVESTOR" AND "SHAREHOLDER" REFER TO THE INSTITUTION PURCHASING FUND
SHARES AND DO NOT REFER TO ANY INDIVIDUAL OR ENTITY FOR WHOSE ACCOUNT THE
INSTITUTION MAY PURCHASE FUND SHARES.
INVESTMENT OBJECTIVE
Each Fund's goal is to provide investors with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity. Each Fund's investment objective cannot be changed without approval
by the holders of a majority (as defined in the 1940 Act) of such Fund's
outstanding voting shares. There can be no assurance that the Fund's investment
objective will be achieved. Securities in which the Funds invest may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity, greater market risk and more fluctuation of
market value.
MANAGEMENT POLICIES
Each Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Trust uses the amortized cost method of
valuing each Fund's securities pursuant to Rule 2a-7 under the 1940 Act, certain
requirements of which are summarized below.
In accordance with Rule 2a-7, each Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less and invest only in
U.S. dollar denominated securities determined in accordance with procedures
established by the Board of Trustees to present minimal credit risks and, in the
case of the Cash Management Fund, which are rated in one of the two highest
rating categories for debt obligations by at least two nationally recognized
statistical rating organizations (or one rating organization if the instrument
was rated by only one such organization) or, if unrated, are of comparable
quality as determined in accordance with procedures established by the Board of
Trustees. The nationally recognized statistical rating organizations currently
rating instruments of the type the Cash Management Fund may purchase are Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group, Division
of McGraw-Hill ("S&P"), Duff & Phelps Credit Rating Co., Fitch Investors
Service, L.P. ("Fitch"), IBCA Limited and IBCA Inc., and Thomson BankWatch, Inc.
and their rating criteria are described in the Appendix to the Statement of
Additional Information. For further information regarding the amortized cost
method of valuing securities, see "Determination of Net Asset Value" in the
Statement of Additional Information. There can be no assurance that each Fund
will be able to maintain a stable net asset value of $1.00 per share.
. CASH MANAGEMENT FUND invests in short-term money market obligations,
including securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, certificates of deposit, time deposits, bankers'
acceptances and other short-term obligations issued by domestic banks, foreign
branches of domestic banks, foreign subsidiaries of domestic banks, domestic and
foreign branches of foreign banks and thrift institutions, repurchase
agreements, and high quality domestic and foreign commercial paper and other
eligible short-term obligations, including those with floating or variable rates
of interest. See "Supplemental Information--Portfolio Securities." In addition,
the Fund is permitted to
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lend portfolio securities to the extent described under "Supplemental
Information--Investment Practices." During normal market conditions, at least
25% of the Fund's total assets will be invested in bank obligations or
instruments secured by such obligations.
. TREASURY PRIME CASH MANAGEMENT FUND invests only in securities issued and
guaranteed by the U.S. Government. These securities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. See "Supplemental Information--Portfolio Securities." The Fund does
not invest in repurchase agreements, securities issued by agencies or
instrumentalities of the Federal government or any other type of money market
instrument or security.
. U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND invests only in short-term
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, may enter into repurchase agreements and may invest in the
securities of other mutual funds that invest in the particular instruments in
which the Fund itself may invest, subject to the requirements of applicable
securities laws. See "Supplemental Information--Portfolio Securities." The Fund
also may lend securities from its portfolio as described under "Supplemental
Information--Investment Practices."
CERTAIN FUNDAMENTAL POLICIES
Each Fund may not (i) borrow money, issue senior securities, or mortgage,
pledge or hypothecate its assets except to the extent permitted under the 1940
Act; (ii) act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities; (iii) purchase or
sell (a) real estate or (b) commodities, except, in the case of clauses (a) and
(b), to the extent permitted under the 1940 Act; (iv) make loans to others
(other than through investment in debt obligations or other instruments referred
to in the Fund's Prospectus), except that the Fund may lend its portfolio
securities in an amount not to exceed 33 1/3% of the value of its total assets;
(v) purchase any securities which would cause 25% or more of the value of a
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to (1)
instruments issued or guaranteed by the U.S. Government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions, (2)
instruments issued by domestic branches of U.S. banks and (3) repurchase
agreements secured by instruments described in clauses (1) and (2), (b)
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 the parents and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry and (d) personal credit
and business credit businesses will be considered separate industries, and
further provided that the Cash Management Fund will invest at least 25% of its
total assets in obligations of issuers in the banking industry or instruments
secured by such obligations except during temporary defensive periods; and (vi)
purchase securities of any one issuer (except U.S. Government securities and
related repurchase agreements) if immediately after such purchase, more than 5%
of the value of the Fund's total assets would be invested in the obligations of
any one issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation. See "Investment Objective
and Management Policies--Investment Restrictions" in the Statement of Additional
Information.
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ADDITIONAL NON-FUNDAMENTAL POLICY
Each Fund may invest up to 10% of the value of its net assets in illiquid
securities. See "Supplemental Information--Investment Practices--Illiquid
Securities" and "Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
RISK FACTORS
See also the Supplemental Information beginning on page A-1.
FOREIGN SECURITIES--(CASH MANAGEMENT FUND) Since the Cash Management Fund's
portfolio may contain securities issued by foreign branches of domestic and
foreign banks, domestic and foreign branches of foreign banks and thrift
institutions, and commercial paper issued by foreign issuers, the Fund may be
subject to additional investment risks with respect to such securities that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers, although such obligations may be
higher yielding when compared to the securities of U.S. domestic issuers. Such
risks include possible future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities, the possible establishment of exchange controls or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on these securities and the possible seizure or
nationalization of foreign deposits.
OTHER INVESTMENT CONSIDERATIONS--Each Fund will attempt to increase yields
by trading to take advantage of short-term market variations. This policy is
expected to result in high portfolio turnover but should not adversely affect
the Funds since each Fund usually will not pay brokerage commissions on
purchases of short-term debt obligations, including U.S. Government securities.
The value of the securities held by each Fund 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
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.
Each Fund may purchase securities on a "when-issued" basis. These
transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Fund to lock-in a price or yield
on a security it owns or intends to purchase, regardless of future changes in
interest rates. When-issued transactions involve the risk, however, that the
yield obtained in a transaction may be less favorable than the yield available
in the market when the securities delivery takes place. The Funds do not earn
income with respect to these transactions until the subject securities are
delivered to the Funds. The Funds do not intend to engage in when-issued
purchases for speculative purposes but only in furtherance of their investment
objectives.
Investment decisions for each Fund are made independently from those of
other investment companies or investment advisory accounts that may be advised
by the Co-Investment Advisers. However, if such other investment companies or
managed accounts are prepared to invest in, or desire to dispose of, securities
of the type in which a Fund may invest at the same time as such Fund, available
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investments or opportunities for sales will be allocated equitably to each of
them. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or received
by the Fund.
MANAGEMENT OF THE TRUST
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 Statement of Additional Information
contains information about the Board of Trustees.
CO-INVESTMENT ADVISERS AND CO-ADMINISTRATORS
First Chicago Investment Management Company, located at Three First National
Plaza, Chicago, Illinois 60670, and NBD Bank, located at 611 Woodward Avenue,
Detroit, Michigan 48226, are each Fund's Co-Investment Advisers. FCIMCO is a
registered investment adviser and a wholly-owned subsidiary of The First
National Bank of Chicago ("FNBC"), which in turn is a wholly-owned subsidiary of
First Chicago NBD Corporation, a registered bank holding company. NBD is a
wholly-owned subsidiary of First Chicago NBD Corporation. 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, commingled trust funds and a variety of institutional and personal
advisory accounts, estates and trusts. FCIMCO and NBD also act as investment
adviser for other registered investment company portfolios.
FCIMCO and NBD serve as Co-Investment Advisers for the Trust pursuant to an
Investment Advisory Agreement dated as of April 12, 1996. Under the Investment
Advisory Agreement, FCIMCO and NBD provide the day-to-day management of each
Fund's investments, subject to the overall authority of the Trust's Board of
Trustees and in conformity with Massachusetts law and the stated policies of the
Trust. FCIMCO and NBD are responsible for making investment decisions for the
Trust, placing purchase and sale orders (which may be allocated to various
dealers based on their sales of Fund shares) and providing research, statistical
analysis and continuous supervision of each Fund's investment portfolio. Under
the Investment Advisory Agreement, FCIMCO and NBD are entitled jointly to a
monthly advisory fee at the annual rate of .20% of each Fund's average daily net
assets.
FCIMCO, NBD and BISYS serve as the Trust's Co-Administrators pursuant to an
Administration Agreement with the Trust. Under the Administration Agreement,
FCIMCO, NBD and BISYS generally assist in all aspects of the Trust's operations,
other than providing investment advice, subject to the overall authority of the
Trust's Board in accordance with Massachusetts law. Under the terms of the
Administration Agreement, FCIMCO, NBD and BISYS are entitled jointly to a
monthly administration fee at the annual rate of .15% of each Fund's average
daily net assets.
DISTRIBUTOR
BISYS Fund Services (the "Distributor"), located at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as the Trust's principal underwriter and
distributor of the Funds' shares.
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TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
First Data Investor Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109-2873, serves as the Trust's Transfer and Dividend Disbursing
Agent (the "Transfer Agent"). NBD serves as the Trust's custodian (the
"Custodian").
EXPENSES
All expenses incurred in the operation of the Trust are borne by the Trust,
except to the extent specifically assumed by the Co-Investment Advisers and
Co-Administrators. The expenses borne by the Trust include: organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees and
expenses of Trustees, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
outside auditing and legal expenses, costs of maintaining the Trust's existence,
costs of independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses. In
addition, Service Shares are subject to an annual distribution and service fee
pursuant to a plan adopted by the Board of Trustees. See "Distribution and
Services Plan." Expenses attributable to a particular Fund or Class are
generally charged against the assets of that Fund or Class, respectively, and
other expenses of the Trust are allocated among the Funds on the basis
determined by the Board of Trustees, including, but not limited to,
proportionately in relation to the net assets of each Fund.
The Co-Investment Advisers have undertaken, as to each Fund, until such time
as they give investors at least 90 days' notice to the contrary, that if, in any
fiscal year the aggregate expenses of the Fund, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of the necessary
state securities commissions) extraordinary expenses, but including the
investment advisory and administration fees, exceed .35% and .60% of the value
of the average net assets of the Institutional Class and the Service Class,
respectively, for the fiscal year, the Trust may deduct from the payment to be
made to the Co-Investment Advisers under the Investment Advisory or
Administration Agreements, or the Co-Investment Advisers will bear, such excess
expense.
HOW TO BUY FUND SHARES
Each Fund is designed for institutional investors, including banks (such as
FNBC and NBD), acting for themselves or in a fiduciary, advisory, agency,
custodial or similar capacity, public agencies and municipalities. Fund shares
may not be purchased directly by individuals, although institutions may purchase
shares for accounts maintained by individuals. Generally, each investor will be
required to open a single master account with the Fund for all purposes. In
certain cases, the Trust may request investors to maintain separate master
accounts for shares held by the investor (1) for its own account, for the
account of other institutions and for accounts for which the institution acts as
a fiduciary, and (ii) for accounts for which the investor acts in some other
capacity. An institution may arrange with the Transfer Agent for sub-accounting
services and will be charged directly for the cost of such services. Certain
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accounts may be eligible for an automatic investment privilege, commonly called
a "sweep," under which amounts in excess of a certain minimum held in those
accounts will be invested automatically in shares at pre-determined intervals.
Each investor desiring to use this privilege should consult its bank for
details.
The minimum initial investment is $1,000,000 or any lesser amount if, in the
Distributor's opinion, the investor has adequate intent and availability of
funds to reach a future level of investment of $1,000,000. There is no minimum
for subsequent purchases. The initial investment must be accompanied by the
Account Application. The Trust reserves the right to offer Fund shares without
regard to the minimum purchase requirements to qualified or non-qualified
employee benefit plans. The Trust does not impose any sales charges in
connection with purchases of Fund shares, although Service Agents and other
institutions may charge their clients fees in connection with purchases for the
accounts of their clients. These fees would be in addition to any amounts which
might be received under the Distribution and Services Plan. Service Agents may
receive different levels of compensation for selling different classes of
shares. The Fund does not issue share certificates. The Trust reserves the right
to reject any purchase order.
Fund shares may be purchased by wire, by telephone or through compatible
computer facilities. All payments should be made in U.S. dollars and, to avoid
fees and delays, should be drawn only on U.S. banks. Investors may telephone
orders for purchases of Fund shares by calling 1-800-668-3350. For instructions
concerning purchases and to determine whether their computer facilities are
compatible with the Trust's, investors should call 1-800-668-3350.
Fund shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form and Federal Funds (monies of
member banks in the Federal Reserve System which are held on deposit at a
Federal Reserve Bank) are received by the Transfer Agent. If an investor does
not remit Federal Funds, its payment must be converted into Federal Funds. This
usually occurs within one business day of receipt of a bank wire and within two
business days of receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal Funds. Prior
to receipt of Federal Funds, the investor's money will not be invested.
Net asset value per share is determined as of 12:00 noon, Central time, for
the Treasury Prime Cash Management Fund, and 2:00 p.m., Central time, for the
Cash Management Fund and U.S. Government Securities Cash Management Fund, on
each Fund business day (which, as used herein, shall be each day that the New
York Stock Exchange is open for business, except Martin Luther King, Jr. Day,
Columbus Day and Veterans Day). Net asset value per share of each Class is
computed by dividing the value of the Fund's net assets represented by such
Class (i.e., the value of its assets less liabilities) by the total number of
shares of such Class outstanding. See "Determination of Net Asset Value" in the
Statement of Additional Information.
Investors whose payments are received in or converted into Federal Funds by
12:00 noon, Central time, for the Treasury Prime Cash Management Fund or 2:00
p.m., Central time, for the Cash Management Fund and U.S. Government Securities
Cash Management Fund, by the Transfer Agent will receive the dividend declared
that day. Investors whose payments are received in or converted into Federal
Funds by the Transfer Agent after 12:00 noon, Central time, for the Treasury
Prime Cash
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Management Fund or 2:00 p.m., Central time, for the Cash Management Fund and
U.S. Government Securities Cash Management Fund, will begin to accrue dividends
on the following business day.
Federal Regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes" for further information concerning this
requirement. Failure to furnish a certified TIN to the Trust could subject an
investor to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
HOW TO REDEEM FUND SHARES
An investor may redeem all or any portion of the shares in the investor's
account on any Fund business day at the net asset value next determined after a
redemption request in proper form is received by the Transfer Agent. Therefore,
redemptions will be effected on the same day the redemption order is received
only if such order is received prior to 12:00 noon, Central time, for the
Treasury Prime Cash Management Fund or 2:00 p.m., Central time, for the Cash
Management Fund and U.S. Government Securities Cash Management Fund, on any Fund
business day. Shares that are redeemed earn dividends up to and including the
day prior to the day the redemption is effected. The proceeds of a redemption
will be paid in Federal Funds ordinarily on the Fund business day the redemption
is effected. Payment for redemption requests received before 12:00 noon, Central
time, for the Treasury Prime Cash Management Fund or 2:00 p.m., Central time,
for the Cash Management Fund and U.S. Government Securities Cash Management
Fund, ordinarily is made in Federal Funds wired to the redeeming shareholder on
the same Fund business day. Payment for redeemed shares for which a redemption
order is received after such time on a Fund business day is made in Federal
Funds wired to the redeeming shareholder on the next Fund business day following
redemption. To allow the Co-Investment Advisers to manage the Funds' portfolios
more effectively, investors are urged to make redemption requests as early in
the day as possible. In making redemption requests, the names of the registered
shareholders and their account numbers must be supplied. Although each Fund
generally retains the right to pay the redemption price of its shares in kind
with securities (instead of cash), the Trust has filed an election under Rule
18f-1 under the 1940 Act committing to pay in cash all redemptions by a
shareholder of record up to the amounts specified in such rule (in most cases
approximately $250,000).
For redemptions by telephone or wire, please call 1-800-688-3350.
An investor may redeem shares by telephone if the investor has checked the
appropriate box on the Account Application. By selecting a telephone redemption
privilege, an investor authorizes the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be an authorized
representative of the investor and reasonably believed by the Transfer Agent to
be genuine. The Trust will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Trust
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Trust nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
The Trust makes available to institutions the ability to redeem shares
through compatible computer facilities. Investors desiring to redeem shares in
this manner should call 1-800-688-3350 to determine
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<PAGE>
whether their computer facilities are compatible and to receive instructions for
redeeming shares in this manner.
The right of any investor to receive payments with respect to any redemption
may be suspended, or the payment of the redemption proceeds postponed, during
any period in which the New York Stock Exchange is closed (other than weekends
or holidays) or trading on such Exchange is restricted or, to the extent
otherwise permitted by the 1940 Act, if an emergency exists.
DISTRIBUTION AND SERVICES PLAN
(Service Shares Only)
Service Shares are subject to a Distribution and Services Plan adopted by
the Board of Trustees pursuant to Rule 12b-1 under the 1940 Act. Under the
Distribution and Services Plan, each Fund pays the Distributor for advertising,
marketing and distributing such shares and/or for the provision of shareholder
and administrative services for the beneficial owners of such shares, a fee at
the annual rate of up to .25% of the average daily net asset value of the
Service Class. The support services provided may include personal services
relating to shareholder accounts, providing reports and other information, and
services related to the maintenance of such shareholder accounts. Under the
Distribution and Services Plan, BISYS may make payments to Service Agents in
respect of these services. FCIMCO, FNBC, NBD and their affiliates may act as
Service Agents and receive fees under the Distribution and Services Plan. BISYS
determines the amounts to be paid to Service Agents. The distribution services
provided are activities primarily intended to result in the sale of Service
Shares.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund ordinarily declares dividends from net investment income on each
Fund business day. Fund shares begin earning income dividends on the day the
purchase order is effective. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional shares of the Fund
from which they were paid at net asset value or, at the investor's option, paid
in cash. Each Fund's earnings for Saturdays, Sundays and holidays are declared
as dividends on the preceding business day. If an investor redeems all shares in
its account at any time during the month, all proceeds and dividends to which
the investor is entitled will be paid. Distributions from net realized
securities gains, if any, generally are declared and paid once a year, but a
Fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), in all events in a manner consistent with the provisions of the 1940
Act. No Fund will make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. Investors
may choose whether to receive distributions in cash or to reinvest in additional
shares of the Fund from which they were paid at net asset value. All expenses
are accrued daily and deducted before declaration of dividends to investors.
Dividends paid by each Class will be calculated at the same time and in the same
manner and will be of the same amount, except that the expenses attributable
solely to the Institutional Class or the Service Class will generally be borne
exclusively by such Class. Service Shares will receive lower per share dividends
than Institutional Shares because of the higher expenses borne by the Service
Class. See "Annual Fund Operating Expenses."
Dividends paid by the Funds derived from net investment income, together
with distributions from any net realized short-term securities gains and all or
a portion of any gain realized from the sale or other disposition of certain
market discount bonds, will be taxable to U.S. investors as ordinary income
whether or not reinvested in additional Fund shares. Distributions from net
realized long-term securities gains, if any, will be taxable as long-term
capital gains for Federal income tax purposes if the beneficial holder of Fund
shares is a citizen or resident of the United States, regardless of how long
investors have held shares and whether such distributions are received in cash
or reinvested in additional shares.
Dividends and distributions attributable to interest from direct obligations
of the United States and paid by the Treasury Prime Cash Management Fund
generally are not subject to state personal income tax. The Trust intends to
provide shareholders of the Treasury Prime Cash Management Fund with a statement
which sets forth the percentage of dividends and distributions paid by the Fund
that is attributable to interest income from direct obligations of the United
States.
Dividends paid by a Fund derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds, paid by such Fund to a foreign investor who is the beneficial
owner of such Fund's shares generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the foreign investor claims the
benefit of a lower rate specified in a tax treaty. Distributions from net
realized long-term securities gains paid by the Fund to such foreign investor
generally will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below, unless
the foreign investor certifies his non-U.S. residency status.
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Federal regulations generally require the Trust to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and distributions
from net realized securities gains paid to a shareholder if such shareholder
fails to certify either that the TIN furnished in connection with opening an
account is correct, or that such shareholder has not received notice from the
IRS of being subject to backup withholding as a result of a failure to properly
report taxable dividend or interest income on a Federal income tax return.
Furthermore, the IRS may notify the Trust to institute backup withholding if the
IRS determines a shareholder's TIN is incorrect or if a shareholder has failed
to properly report taxable dividend and interest income on a Federal income tax
return.
A TIN is either the Social Security number or employer identification number
of the record owner of the account. Any tax withheld as a result of backup
withholding does not constitute an additional tax imposed on the record owner of
the account, and may be used to offset the record owner's tax liability on
his/her Federal income tax return.
Notice as to the tax status of dividends and distributions will be mailed to
investors annually. Each investor also will receive periodic summaries of its
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. No dividend will qualify for the
dividends received deduction allowable to certain U.S. corporations.
Each Fund intends to qualify as a "regulated investment company" under the
Code. Qualification as a regulated investment company relieves the Fund of any
liability for Federal income tax to the extent its earnings are distributed in
accordance with applicable provisions of the Code. Each Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable income and capital gains, if any.
Each investor and beneficial shareholder should consult its tax adviser
regarding questions as to Federal, state or local taxes.
GENERAL INFORMATION
The Trust was organized as a business trust on April 21, 1987 under a
Declaration of Trust. As of the date hereof, the Trust is a series fund having
twenty-eight 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 Funds described herein, the Trust currently 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, Equity Index Fund, Money Market Fund,
Government Fund, Treasury Money Market Fund, Tax-Exempt Money Market Fund and
Michigan Tax-Exempt Money Market Fund.
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
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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 the date of this Prospectus, the Distributor owned all the outstanding
shares of the Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund. It is contemplated that the public
offering of the shares of the Portfolio will reduce the Distributor's holdings
to less than 5% of the total shares outstanding of each such Fund.
Because NBD serves the Trust as both Custodian and as a Co-Investment
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.
The Transfer Agent maintains a record of each investor's ownership and sends
confirmations and statements of account.
Investor inquiries may be made by writing to the Trust at the address shown
on the front cover or by calling the telephone number shown on the front cover.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE TRUST'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS' SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
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SUPPLEMENTAL INFORMATION
PORTFOLIO SECURITIES
To the extent set forth in this Prospectus and except as noted below, each
Fund may invest in the following securities:
U.S. TREASURY SECURITIES--Each Fund may invest in U.S Treasury securities
which include Treasury Bills, Treasury Notes and Treasury Bonds that differ in
their interest rates, maturities and times of issuance. Treasury Bills have
initial maturities of one year or less; Treasury Notes have initial maturities
of one to ten years; and Treasury Bonds generally have initial maturities of
greater than ten years.
U.S. GOVERNMENT SECURITIES--In addition to U.S. Treasury securities, each
Fund, except the Treasury Prime Cash Management Fund, may invest in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Interest
may fluctuate based on generally recognized reference rates or the relationship
of rates. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. Each Fund will
invest in such securities only when the Trust is satisfied that the credit risk
with respect to the issuer is minimal.
STRIPPED U.S. TREASURY SECURITIES AND U.S. GOVERNMENT SECURITIES--The
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds may invest in stripped U.S. Treasury Securities and the U.S. Government
Securities Cash Management Fund may invest in stripped U.S. Government
Securities, where the principal and instrument components are traded
independently under the Separate Trading of Registered Interest and Principal
Securities program ("STRIPS"). Under STRIPS, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently. These obligations are usually issued at a
discount to their "face value," and because of the manner in which principal and
interest are returned, may exhibit greater volatility than more conventional
debt securities.
REPURCHASE AGREEMENTS--Each Fund, except the Treasury Prime Cash Management
Fund, may enter into repurchase agreements, which involve the acquisition by a
Fund of an underlying debt instrument, subject to an obligation of the seller to
repurchase, and such Fund to resell, the instrument at a fixed price usually not
more than one week after its purchase. Certain costs may be incurred by a Fund
in connection with the sale of the securities if the seller does not repurchase
them in accordance with the repurchase agreement. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the securities,
realization on the securities by the Fund may be delayed or limited. Pursuant to
an order obtained from the Securities and Exchange Commission, each Fund also is
permitted to enter into
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overnight repurchase agreements with FNBC or an affiliate of FNBC subject to the
terms and conditions of such order.
BANK OBLIGATIONS--The Cash Management Fund will invest in bank obligations,
including certificates of deposit, time deposits, bankers' acceptances and other
short-term obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and foreign branches of
foreign banks and thrift institutions. Certificates of deposit are negotiable
certificates evidencing the obligation of a bank to repay funds deposited with
it for a specified period of time. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS--The Cash
Management Fund may invest in commercial paper, which consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. The
commercial paper purchased by the Fund will consist only of direct obligations
issued by domestic and foreign entities. The other corporate obligations in
which the Fund may invest consist of high quality, U.S. dollar denominated
short-term bonds and notes (including variable amount master demand notes)
issued by domestic and foreign corporations bearing fixed, floating or variable
interest rates.
FLOATING AND VARIABLE RATE OBLIGATIONS--The Cash Management Fund may
purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more than 30
days' notice. Variable rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and, if not so rated, the Fund may invest in them only if the Co-Investment
Advisers determine that at the time of investment the obligations are of
comparable quality to the other obligations in which the Fund may invest. The
Co-Investment Advisers, on behalf of the Fund, will consider on an ongoing basis
the creditworthiness of the issuers of the floating and variable rate demand
obligations held by the
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Fund. The Fund will not invest more than 10% of the value of its net assets in
floating or variable rate demand obligations as to which it cannot exercise the
demand feature on not more than seven days' notice if there is no secondary
market available for these obligations, and in other securities that are
illiquid.
INVESTMENT COMPANY SECURITIES--Each of the Cash Management Fund and U.S.
Government Securities Cash Management Funds may invest in securities issued by
other investment companies which principally invest in securities of the type in
which the Fund invests. Under the 1940 Act, a Fund's investments in such
securities, subject to certain exceptions, currently are limited to (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Fund's
total assets with respect to any one investment company, and (iii) 10% of the
Fund's total assets in the aggregate. Investments in the securities of other
investment companies may involve duplication of advisory fees and certain other
expenses.
INVESTMENT PRACTICES
LENDING PORTFOLIO SECURITIES--From time to time, each of the Cash Management
Fund and U.S. Government Securities Cash Management Fund may lend securities
from its portfolio to brokers, dealers and other financial institutions needing
to borrow securities to complete certain transactions. Such loans may not exceed
33 1/3% of the value of the relevant Fund's total assets. In connection with
such loans, each of these Funds will receive collateral consisting of cash or
U.S. Government securities or, with respect to the Cash Management Fund only,
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Each of these Funds can increase
its income through the investment of such collateral. Each of these Funds
continues to be entitled to payments in amounts equal to the interest and other
distributions payable on the loaned security and receives interest on the amount
of the loan. Such loans will be terminable at any time upon specified notice. A
Fund might experience risk of loss if the institution with which it has engaged
in a portfolio loan transaction breaches its agreement with such Fund.
ILLIQUID SECURITIES--Each Fund may invest up to 10% of the value of its
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its investment objective. Such
securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, participation interests that are not subject to the demand feature
described above, floating and variable rate demand obligations as to which the
Fund cannot exercise the related demand feature described above on not more than
seven days' notice or as to which there is no secondary market and repurchase
agreements providing for settlement in more than seven days after notice. As to
these securities, a Fund is subject to a risk that should such Fund desire to
sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of such Fund's net assets could be
adversely affected.
BORROWING MONEY--As a fundamental policy, the Treasury Prime Cash Management
Fund is permitted to borrow money to the extent permitted under the 1940 Act.
However, the Fund currently intends to borrow money from banks for temporary or
emergency (not leveraging) purposes in an amount up to 15% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the Fund's total assets, the
Fund will not make any additional investments.
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THE WOODWARD FUNDS
Cash Management Funds
INSTITUTIONAL And SERVICE SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
April 26, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (each, a "Fund") of The Woodward
Funds (the "Trust"), dated April 26, 1996, as it may be revised from time
to time. To obtain a copy of the Funds' Prospectus, please write to the
Trust at 3435 Stelzer Road, Columbus, Ohio 43219-3035, or call toll free
1-800-370-9446.
First Chicago Investment Management Company ("FCIMCO") and NBD Bank
("NBD") serve as each Fund's co-investment advisers (collectively, the "Co-
Investment Advisers") and, FCIMCO, NBD and BISYS Fund Services serve as co-
administrators.
BISYS Fund Services is the distributor (the "Distributor") and BISYS,
FCIMCO and NBD serve as co-administrators of the Funds' shares.
TABLE OF CONTENTS
Page
----
Investment Objective and Management Policies . . . . . B-2
Management of the Trust . . . . . . . . . . . . . . . . B-7
Management Arrangements . . . . . . . . . . . . . . . . B-11
Distribution and Services Plan . . . . . . . . . . . . B-12
Purchase of Fund Shares . . . . . . . . . . . . . . . . B-13
Redemption of Fund Shares . . . . . . . . . . . . . . . B-13
Determination of Net Asset Value . . . . . . . . . . . B-14
Portfolio Transactions . . . . . . . . . . . . . . . . B-15
Dividends, Distributions and Taxes . . . . . . . . . . B-16
Yield Information . . . . . . . . . . . . . . . . . . . B-16
Information About the Trust . . . . . . . . . . . . . . B-17
Counsel and Independent Auditors . . . . . . . . . . . B-17
Appendix . . . . . . . . . . . . . . . . . . . . . . . B-18
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the sections in the Funds' Prospectus entitled
- ---------------------------------------------------------------
"Description of the Funds" and "Supplemental Information."
- --------------------------------------------------------
Portfolio Securities and Investment Practices
- ---------------------------------------------
Bank Obligations. (Cash Management Fund) Domestic commercial
----------------
banks organized under Federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of the Federal
Reserve System and to have their deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but are
members of the Federal Reserve System only if they elect to join. In
addition, state banks whose certificates of deposit ("Cds") may be
purchased by the Fund are insured by the FDIC (although such insurance may
not be of material benefit to the Fund, depending on the principal amount
of the Cds of each bank held by the Fund) and are subject to Federal
examination and to a substantial body of Federal law and regulation.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks, such as Cds and time deposits ("Tds"), may be general
obligations of the parent banks in addition to the issuing branch, or may
be limited by the terms of a specific obligation and governmental
regulation. Such obligations are subject to different risks than are those
of domestic banks. These risks include foreign economic and political
developments, foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. These
foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing
and financial recordkeeping requirements. In addition, less information
may be publicly available about a foreign branch of a domestic bank or
about a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be
general obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation or by Federal or
state regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state.
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The Fund may purchase Cds issued by banks, savings and loan
associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided the Fund purchases any such
Cd in a principal amount of not more than $100,000, which amount would be
fully insured by the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the FDIC. Interest payments on such a Cd
are not insured by the FDIC. The Fund will not own more than one such Cd
per such issuer.
Foreign Securities. (Cash Management Fund) Foreign securities
------------------
markets generally are not as developed or efficient as those in the United
States. Securities of some foreign issuers are less liquid and more
volatile than securities of comparable U.S. issuers. Similarly, volume and
liquidity in most foreign securities markets are less than in the United
States and, at times, volatility of price can be greater than in the United
States.
Furthermore, some of these securities are subject to brokerage
taxes levied by foreign governments, which have the effect of increasing
the cost of such investment and reducing the realized gain or increasing
the realized loss on such securities at the time of sale. Custodial
expenses for a portfolio of non-U.S. securities generally are higher than
for a portfolio of U.S. securities. Income earned or received by the Cash
Management Fund from sources within foreign countries may be reduced by
withholding and other taxes.
Repurchase Agreements. (Cash Management Fund and U.S. Government
---------------------
Securities Cash Management Fund) The Trust's custodian or subcustodian
will have custody of, and will hold in a segregated account, securities
acquired by a Fund under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be
loans by the Fund that enters into them. Each Fund will enter into
repurchase agreements only with registered or unregistered securities
dealers or banks with total assets in excess of one billion dollars, with
respect to securities of the type in which such Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below the resale price. The Co-
Investment Advisers will monitor on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the repurchase price.
Each of these Funds will consider on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.
Illiquid Securities. If a substantial market of qualified
-------------------
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain restricted securities held by a Fund,
the Trust intends to treat such securities as liquid securities in
accordance with procedures approved by the Trust's Board of Trustees.
Because
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it is not possible to predict with assurance how the market for restricted
securities pursuant to Rule 144A will develop, the Trust's Board of
Trustees has directed the Co-Investment Advisers to monitor carefully each
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, a Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Lending Portfolio Securities. (Cash Management Fund and U.S.
----------------------------
Government Securities Cash Management Fund) To a limited extent, each of
these Funds may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral which at all
times is maintained in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio
securities, the Fund can increase its income through the investment of the
cash collateral. For purposes of this policy, the Trust considers
collateral consisting of U.S. Government securities or, in the case of the
Cash Management Fund only, irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Fund to be the
equivalent of cash. Such loans may not exceed 33 1/3% of the Fund's total
assets. From time to time, the Fund may return to the borrower or a third
party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires that
the following conditions must be met whenever portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(3) the Fund must be able to terminate the loan at any time; (4) the Fund
must receive reasonable interest on the loan, as well as any interest or
other distributions payable on the loaned securities, and any increase in
market value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan. These conditions may be subject to future
modification.
Investment Restrictions
- -----------------------
Each Fund has adopted the following investment restrictions as
fundamental investment limitations which cannot be changed, as to a
particular Fund, without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")), of
that Fund's outstanding voting shares. Each Fund may not:
B-4
<PAGE>
1. Borrow money, issue senior securities, or mortgage, pledge
or hypothecate its assets except to the extent permitted under the 1940
Act.
2. Act as an underwriter of securities of other issuers, except
to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.
3. Purchase or sell (a) real estate or (b) commodities, except,
in the case of clauses (a) and (b), to the extent permitted under the 1940
Act.
4. Make loans to others (other than through investment in debt
obligations or other instruments referred to in the Fund's Prospectus),
except that the Fund may lend its portfolio securities in an amount not to
exceed 33 1/3% of the value of its total assets.
5. Purchase any securities which would cause 25% or more of the
value of a Fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the U.S.
Government, any state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, (ii) instruments issued by
domestic branches of U.S. banks and (iii) repurchase agreements secured by
instruments described in clauses (i) and (ii), (b) 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 the
parents and (c) utilities will be divided according to their services, for
example, gas, gas transmission, electric and gas, electric and telephone
will each be considered a separate industry and (d) personal credit and
business credit businesses will be considered separate industries, and
further provided that the Cash Management Fund will invest at least 25% of
its total assets in obligations of issuers in the banking industry or
instruments secured by such obligations except during temporary defensive
periods.
In construing number 5 in accordance with SEC policy, to the
extent permitted, U.S. branches of foreign banks will be considered to be
U.S. banks where they are subject to the same regulation as U.S. banks.
6. Purchase securities of any one issuer (except U.S.
Government securities and related repurchase agreements) if immediately
after such purchase, more than 5% of the value of the Fund's total assets
would be invested in the obligations of any one issuer, except that up to
25% of the value of the Fund's
B-5
<PAGE>
total assets may be invested without regard to this 5% limitation.
Each Fund has adopted the following investment restrictions as
non-fundamental limitations which may be changed, as to a particular Fund,
by the Board of Trustees without the approval of by the holders of a
majority, as defined in 1940 Act of that Fund's outstanding voting shares.
Each Fund may not:
1. Purchase securities on margin, except as described in the
Fund's Prospectus or this Statement of Additional Information.
2. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.
3. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus or this Statement of
Additional Information.
4. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid, if, in the aggregate, more than 10% of the value of the Fund's
net assets would be so invested.
5. Invest in securities of other investment companies, except to
the extent permitted under the 1940 Act.
6. Invest more than 5% of its assets in the obligations of any
one issuer, except if permitted under Rule 2a-7 under the 1940 Act.
The Cash Management and U.S. Government Securities Cash
Management Funds also may not sell securities short.
If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a
change in values or assets will not constitute a violation of such
restriction.
The Trust may make commitments more restrictive than the
restrictions listed above so as to permit the sale of a Fund's shares in
certain states. Should the Trust determine that a commitment is no longer
in the best interests of a Fund and its shareholders, the Trust reserves
the right to revoke the commitment by terminating the sale of a Fund's
shares in the state involved.
B-6
<PAGE>
MANAGEMENT OF THE TRUST
Trustees and officers of the Trust, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each of the Trustees has an address at 611
Woodward Avenue, Detroit, Michigan 48226.
Trustees and Officers of the Trust
- ----------------------------------
*EARL I. HEENAN, JR., CHAIRMAN AND PRESIDENT
Vice Chairman (since 1988) 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.
*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.
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.
NICHOLAS J. DE GRAZIA, TRUSTEE
President, Chief Operating Officer and Director, Lionel Trains,
Inc. (since 1990); Vice President-Finance and Treasurer, University of
Detroit (1981-1990); President (1981-1990) and Director (since 1986),
Polymer Technologies, Inc.; President, Florence Development Company (1987-
1990); Chairman (since 1994) and Director (since 1992), Central Macomb
County Chamber of Commerce; Vice Chairman, Michigan Higher Education
Facilities Authority (since 1991). He is 53 years old.
- --------------------
*
Trustees who are "interested persons" of the Trust, as defined in the
1940 Act.
B-7
<PAGE>
JOHN P. GOULD, TRUSTEE
Distinguished Service Professor of Economics of the University of
Chicago Graduate School of Business. From 1983 to 1993, Dean of the
University of Chicago Graduate School of Business. Dean Gould also serves
as Director of Harpor Capital Advisors. Mr. Gould is also a Board member
of The Woodward Funds and three other funds in the Prairie Family of Funds.
He is 55 years old.
MARILYN MCCOY, TRUSTEE
Vice President of Administration and Planning of Northwestern
University. From 1981 to 1985, she was the Director of Planning and Policy
Development for the University of Colorado. She also serves on the Board
of Directors of Evanston Hospital, the Chicago Metropolitan YMCA, the
Chicago Network and United Charities. Mrs. McCoy is a member of the
Chicago Economics Club. Mrs. McCoy is also a Board member of The Woodward
Funds and three other funds in the Prairie Family of Funds. She is 46
years old.
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.
*DONALD G. SUTHERLAND, TRUSTEE
Partner of the law firm Ice, Miller, Donadio & Ryan,
Indianapolis, Indiana. He is 67 years old.
DONALD L. TUTTLE, TRUSTEE
Senior Vice President, Association for Investment Management and
Research (since January 1992); 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 62
years old.
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.
B-8
<PAGE>
For so long as the plan described in the section captioned
"Distribution and Services Plan" remains in effect, the Trustees of the
Trust who are not "interested persons" of the Trust, as defined in the 1940
Act, will be selected and nominated by the Trustees who are not "interested
persons" of the Trust.
` 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 in connection with attendance at meetings. Drinker Biddle &
Reath, of which Mr. McConnel is a partner, receives legal fees as counsel
to the Trusts.
B-9
<PAGE>
The following table summarizes the compensation for each of the
Trustees for the Trust's fiscal year ended December 31, 1995 are as follows:
(3)
Total
Compensation
(2) From Fund and
Aggregate Fund Complex**
(1) Compensation Paid to Board
Name of Board Member from Fund* Member
- ------------------------------ ----------------- ------------------
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, ++ $21,250 $21,250(2)+
Trustee
Donald L. Tuttle, Trustee ++ $21,250 $21,250(2)+
Eugene C. Yehle, Trustee $21,250 $21,250(2)+
and Treasurer
______________________
* 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, The 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 investment companies in 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.
________________________________
Board members and officers of the Trust, as a group, owned less than
1% of any Fund's shares outstanding on March 28, 1996.
B-10
<PAGE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "Management
- --------------------------------------------------------------------------
of the Trust."
- ------------
Investment Advisory Agreement. FCIMCO and NBD provide investment
-----------------------------
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated as of April 12, 1996, with the Trust. As to each Fund,
the Agreement is subject to annual approval by (i) the Trust's Board of
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Fund, provided that in either event
the continuance also is approved by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, FCIMCO or
NBD, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Fund, the Agreement is terminable without
penalty, on 60 days' notice, by the Trust's Board of Trustees or by vote of
the holders of a majority of such Fund's shares, or, on not less than 90
days' notice, by FCIMCO or NBD. The Agreement will terminate
automatically, as to the relevant Fund, in the event of its assignment (as
defined in the 1940 Act).
FCIMCO and NBD are responsible for investment decisions for each
Fund in accordance with the stated policies of such Fund, subject to the
general supervision of the Trust's Board of Trustees.
Under the terms of the Investment Advisory Agreement with the
Trust, FCIMCO and NBD are entitled jointly to a monthly advisory fee at the
annual rate of .20% of each Fund's average daily net assets.
Administration Agreement. Pursuant to an Administration
------------------------
Agreement dated as of April 12, 1996 with the Trust, FCIMCO, NBD and BISYS
assist in all aspects of the Trust's operations, other than providing
investment advice, subject to the overall authority of the Trust's Board in
accordance with Massachusetts law. Under the terms of the Administration
Agreement, FCIMCO, NBD and BISYS are entitled jointly to a monthly
administration fee at the annual rate of .15% of each Fund's average daily
net assets.
The Trust has agreed that neither FCIMCO, NBD nor BISYS will be
liable for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with the matters to which the agreement with
FCIMCO, NBD or BISYS relates, except for a loss resulting from wilful
misfeasance, bad faith or gross negligence on the part of FCIMCO, NBD or
BISYS in the performance of their obligations or from reckless disregard by
any of them of their obligations and duties under the Administration
Agreement.
B-11
<PAGE>
In addition, the Administration Agreement provides that if, in
any fiscal year, the aggregate expenses of a Fund, exceed the expense
limitation of any state having jurisdiction over the Fund, FCIMCO, NBD and
BISYS will bear, such excess expense to the extent required by state law.
The aggregate of the fees payable to FCIMCO, NBD and BISYS is not
subject to reduction as the value of the Fund's net assets increases.
DISTRIBUTION AND SERVICES PLAN
(Service Shares Only)
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled
- --------------------------------------------------------------
"Distribution and Services Plan."
- -------------------------------
Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act provides, among other things, that an
investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Trust's Board
of Trustees has adopted such a plan (the "Plan") with respect to each
Fund's Service Shares, pursuant to which each Fund pays BISYS a fee of up
to .25% of the average daily net asset value attributable to such Service
Shares for advertising, marketing and distributing such Service Shares and
for the provision of certain services to the holders of such Service
Shares. Under the Plan, BISYS may make payments to certain financial
institutions, securities dealers and other financial industry professionals
(collectively, "Service Agents") in respect of these services. The Board
of Trustees believes that there is a reasonable likelihood that the Plan
will benefit each Fund and the holders of Service Shares.
The Board of Trustees reviews, at least quarterly, a written
report of the amounts expended under the Plan 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 Plan must be approved by a majority
of the Board of Trustees (including a majority of the Disinterested
Trustees).
B-12
<PAGE>
PURCHASE OF FUND SHARES
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "How to Buy
- --------------------------------------------------------------------------
Fund Shares."
- -----------
The Distributor. The Distributor serves on a best efforts basis
---------------
as the Trust's distributor pursuant to an agreement which is renewable
annually.
Using Federal Funds. First Data Investor Services Group, Inc.,
-------------------
the Trust's transfer and dividend disbursing agent (the "Transfer Agent"),
or the Trust may attempt to notify the investor upon receipt of checks
drawn on banks that are not members of the Federal Reserve System as to the
possible delay in conversion into Federal Funds and may attempt to arrange
for a better means of transmitting the money. If the investor is a
customer of a securities dealer, bank or other financial institution and
his order to purchase Fund shares is paid for other than in Federal Funds,
the securities dealer, bank or other financial institution, acting on
behalf of its customer, generally will complete the conversion into, or
itself advance, Federal Funds on the business day following receipt of the
customer order. The order is effective only when so converted and received
by the Transfer Agent. An order for the purchase of Fund shares placed by
an investor with a sufficient Federal Funds or cash balance in his
brokerage account with a securities dealer, bank or other financial
institution will become effective on the day that the order, including
Federal Funds, is received by the Transfer Agent. In some states, banks or
other institutions effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "How to
- ----------------------------------------------------------------------
Redeem Fund Shares."
- ------------------
Redemption Commitment. 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.
B-13
<PAGE>
Suspension of Redemptions. The right of redemption may be
-------------------------
suspended or the date of payment postponed (a) during any period when the
New York Stock Exchange is closed (other than customary weekend and holiday
closing), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "How to Buy
- --------------------------------------------------------------------------
Fund Shares."
- -----------
Amortized Cost Pricing. The valuation of each Fund's portfolio
----------------------
securities is based upon their amortized cost which does not take into
account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. 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 Fund would receive if it sold the instrument.
The Board of Trustees has established procedures, as a particular
responsibility within the overall duty of care owed to each Fund's
investors, reasonably designed to stabilize the Fund's price per share as
computed for purposes of purchases and redemptions at $1.00. Such
procedures include review of each Fund's portfolio holdings by the Board of
Trustees, at such intervals as it deems appropriate, to determine whether
the Fund's net asset value calculated by using available market quotations
or market equivalents deviates from $1.00 per share based on amortized
cost. In such review of the portfolio of the Fund, investments for which
market quotations are readily available will be valued at the most recent
bid price or yield equivalent for such securities or for securities of
comparable maturity, quality and type, as obtained from one or more of the
major market makers for the securities to be valued. Other investments and
assets of the Funds will be valued at fair value as determined in good
faith by the Board of Trustees.
The extent of any deviation between a Fund's net asset value
based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost will be examined by the Board of Trustees.
If such deviation exceeds 1/2 of 1%, the Board of Trustees will consider
what actions, if any, will be initiated. In the event the Board of
Trustees
B-14
<PAGE>
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 action as it regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per
share by using available market quotations or market equivalents.
New York Stock Exchange Closings. The holidays (as observed) on
--------------------------------
which the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities of each Fund ordinarily are purchased
directly from the issuer or from an underwriter or a market maker for the
securities. Ordinarily, no brokerage commissions are paid by the Fund for
such purchases. Purchases from underwriters of portfolio securities may
include a concession paid by the issuer to the underwriter and the purchase
price paid to, and sales price received from, market makers for the
securities may reflect the spread between the bid and asked price. No
brokerage commissions have been paid by any Fund to date.
Transactions are allocated to various dealers by the Trust's
investment personnel in their best judgment. The primary consideration is
prompt and effective execution of orders at the most favorable price.
Subject to that primary consideration, dealers may be selected for
research, statistical or other services to enable FCIMCO or NBD to
supplement its own research and analysis with the views and information of
other securities firms and may be selected based upon their sales of Fund
shares.
Research services furnished by brokers through which the Fund
effects securities transactions may be used by FCIMCO or NBD in advising
other funds or accounts it advises and, conversely, research services
furnished to FCIMCO or NBD by brokers in connection with other funds or
accounts FCIMCO or NBD advises may be used by FCIMCO or NBD in advising the
Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of FCIMCO and NBD that the receipt and study of
such services should not reduce FCIMCO's or NBD's overall research
expenses.
B-15
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in Funds' Prospectus entitled "Dividends,
- ----------------------------------------------------------------------
Distributions and Taxes."
- -----------------------
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of the
gain realized from the disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Internal Revenue Code
of 1986, as amended.
YIELD INFORMATION
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "Yield
- ---------------------------------------------------------------------
Information."
- -----------
Yield is computed in accordance with a standardized method which
involves determining the net change in the value of a hypothetical pre-
existing Fund account having a balance of one share at the beginning of a
seven calendar day period for which yield is to be quoted, dividing the net
change by the value of the account at the beginning of the period to obtain
the base period return, and annualizing the results (i.e., multiplying the
base period return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends declared
on the original share and any such additional shares and fees that may be
charged to the shareholder's account, in proportion to the length of the
base period and the Fund's average account size, but does not include
realized gains and losses or unrealized appreciation and depreciation.
Effective yield is computed by adding 1 to the base period return
(calculated as described above), raising that sum to a power equal to 365
divided by 7, and subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of
future results. Each investor should remember that yield is a function of
the type and quality of the instruments in the portfolio, portfolio
maturity and operating expenses. An investor's principal in the Fund is
not guaranteed. See "Determination of Net Asset Value" for a discussion of
the manner in which the Fund's price per share is determined.
The Cash Management Fund, Treasury Prime Cash Management Fund and
U.S. Government Securities Cash Management Fund are rated AAAm or AAAmG, as
the case may be, by Standard & Poor's Ratings Group, Division of McGraw
Hill and Aaa by Moody's Investors Service, Inc.
B-16
<PAGE>
From time to time, advertising materials for the Funds may refer
to FNBC's, NBD's or any of their affiliate's full line of investment
products for the corporate cash market, including sweep services, on-line
money market mutual fund purchases, customized portfolio management, and
OASIS, a same-day sweep product that sweeps funds to an overnight
Eurodollar time deposit.
INFORMATION ABOUT THE TRUST
The following information supplements and should be read in
-----------------------------------------------------------
conjunction with the section in the Funds' Prospectus entitled "General
- -----------------------------------------------------------------------
Information."
- -----------
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-
assessable. Fund shares have no preemptive, subscription or conversion
rights and are freely transferable.
The Trust will send annual and semi-annual financial statements
to all its shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia, PA
19107-3496, serves as the Trust's counsel.
Arthur Andersen LLP, One Detroit Center, 500 Woodward Avenue,
Detroit, Michigan 48226-3424, independent auditors, is auditor of the
Trust.
B-17
<PAGE>
APPENDIX
Description of the highest commercial paper, municipal bond and
note and other short- and long-term rating categories assigned by Standard
& Poor's Rating Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps Credit Rating Co.
("Duff"), IBCA Limited and IBCA Inc. ("IBCA") and Thomson BankWatch, Inc.
("BankWatch"):
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."
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.
"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.
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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.
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.
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
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<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."
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.
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
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<PAGE>
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.
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 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.
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<PAGE>
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 occur 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.
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
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<PAGE>
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 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.
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" - 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
B-23
<PAGE>
are more likely to lead to increased investment risk than for obligations
in other categories.
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" are, however, more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
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.
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<PAGE>
"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.
"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.
B-25
