<PAGE> 1
As Filed with the Securities and Exchange
Commission on February 4, 1997
1933 Act File No. 333-10237
1940 Act File No. 811-07775
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 2 / X /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 / X /
(Check appropriate box or boxes.)
FIVE ARROWS INVESTMENT TRUST
(Exact Name of Registrant)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices)
(614) 470-8000
(Registrant's Telephone Number)
George O. Martinez
Five Arrows Investment Trust
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service of Process)
With a copy to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place, Boston, MA 02109
Approximate date of proposed public offering:
It is proposed that this filing will become effective under Rule 485
(check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On ___, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On _____ pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On _____ pursuant to paragraph (a)(2).
If appropriate check the following box:
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/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Registrant, pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940, hereby elects to register an indefinite number of shares of
beneficial interest, par value $.0001 per share, of the U.S. Dollar Fund, the
Pound Sterling Fund, the Deutsche Mark Fund and the Canadian Dollar Fund series
of the Registrant.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
This Pre-Effective Amendment has been executed by the Trustees and
Officers of the International Currency Fund.
(ii)
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CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
Form N-1A Item No. Caption or Location
Part A in Prospectuses
------ ---------------
1. Cover Page Same
2. Synopsis Summary; Fund and Allocated Fees and
Expenses
3. Condensed Financial n/a
Information
4. General Description of Description of the Trust and
Registrant Portfolio Trust; Investment
Objectives; Investment Policies
and Restrictions; Special
Considerations and Risk Factors;
Information Concerning the Master-
Feeder Fund Structure.
5. Management of the Fund Management; General Information
5A. Management's Discussion of Fund [To be included in Annual Reports to
Performance Shareholders]
6. Capital Stock and Other General Information; Dividends and
Securities Distributions; Taxation; How to Buy
Shares
7. Purchase of Securities Being How to Buy Shares
Offered
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
Caption or Location in
Form N-1A Item No. Statement of
Part B Additional Information
------ ----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Information About the Trust and
Portfolio Trust.
(i)
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Caption or Location in
Form N-1A Item No. Statement of
Part B Additional Information
------ ----------------------
13. Investment Objectives and Additional Investment Policies and
Policies Restrictions; Money Market Instruments
Additional Information Concerning
Certain Investment Techniques for all
Portfolios
14. Management of the Fund Management of the Trust and Portfolio
Trust; Compensation of Trustees and
Officers
15. Control Persons and Principal Management of the Trust and
Holders of Securities Portfolio Trust
16. Investment Advisory and Other Investment Advisory Agreement and
Services Distribution and Administration
Agreements; Custodian, Transfer and
Dividend Distributing Agent, Counsel
and Independent Auditors.
17. Brokerage Allocation and Portfolio Transactions
Other Practices
18. Capital Stock and Other Information About the Trust and Port-
Securities folio Trust
19. Purchase, Redemption and Pricing Redemption of Shares; Calculation of
of Securities Being Offered Net Asset Value
20. Tax Status n/a
21. Underwriters Investment Advisory Agreement and
Distribution and Administration
Agreements.
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements and Independent
Accountants
(ii)
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FIVE ARROWS SHORT-TERM INVESTMENT TRUST
FIVE ARROWS SHARES
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3435 Stelzer Road
Columbus, Ohio 43219
For current performance, purchase and redemption
information, call (800) 499-3603.
- --------------------------------------------------------------------------------
Five Arrows Short-Term Investment Trust (the "Trust") is an open-end management
investment company designed to offer investors a selection of four separate
funds (the "Funds"): the U.S. Dollar Fund, the Pound Sterling Fund, the Deutsche
Mark Fund, and the Canadian Dollar Fund.
Each Fund seeks to maintain a high level of liquidity, to preserve capital and
stability of principal expressed in the Fund's designated currency ("Designated
Currency") and, consistent with those objectives, to earn current income. Unlike
other mutual funds which acquire and manage their own portfolios of securities,
each Fund seeks to achieve its investment objective by investing all of its
investable assets ("Investable Assets") in a portfolio which is a series of the
International Currency Fund (the "Portfolio Trust") which invests in high
quality, short-term instruments denominated in the Designated Currency of the
relevant Fund. See "Information Concerning the Master-Feeder Structure" on page
12. The Portfolio Trust is also an open-end management investment company which
currently consists of four separate portfolios (the "Portfolios"): the U.S.
Dollar Portfolio, the Pound Sterling Portfolio, the Deutsche Mark Portfolio, and
the Canadian Dollar Portfolio.
The Trust seeks to maintain a constant net asset value expressed in the
Designated Currency for each Fund. Accordingly, the Trust invests only in
securities with short remaining maturities and generally values its securities
at their amortized cost. ONLY THE U.S. DOLLAR FUND IS A "MONEY MARKET FUND"
UNDER REGULATIONS ADOPTED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC").
NONE OF THE OTHER FUNDS IS A "MONEY MARKET FUND" UNDER THOSE REGULATIONS. The
net asset value of a Fund's shares, when expressed in a currency other than the
Fund's Designated Currency, will fluctuate, primarily in response to changes in
currency exchange rates between the Fund's Designated Currency and other
currencies, including other Designated Currencies.
The Funds are designed primarily for use as a means of investing short-term cash
reserves in the Funds' Designated Currencies. Investors may also consider
purchasing Fund shares for a number of reasons including satisfying settlement
obligations or delivering a Fund's shares as collateral for a transactional
obligation in a Fund's Designated Currency. Each Fund offers two classes of
shares. The shares offered by this Prospectus are the Five Arrows shares, which
are available for direct purchase in initial aggregate amounts of $500,000 or
more. In addition, the Fund offers by separate Prospectus the Five Arrows
Service shares, which are available for purchase through certain broker-dealers
and other service organizations.
AN INVESTMENT IN THE TRUST IS NOT A BANK DEPOSIT OR AN OBLIGATION OF ROTHSCHILD
INTERNATIONAL ASSET MANAGEMENT LIMITED OR ANY OF ITS AFFILIATES AND IS NEITHER
GUARANTEED NOR INSURED BY THE UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE SYSTEM OR ANY OTHER AGENCY OF THE
UNITED STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE
TO MAINTAIN A CONSTANT NET ASSET VALUE PER SHARE. INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL . IN
ADDITION, THE DIVIDENDS PAID BY A FUND WILL GO UP AND DOWN.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FIVE ARROWS SHARES OF
THE TRUST AND EACH FUND THAT AN INVESTOR SHOULD KNOW BEFORE INVESTING. IT SHOULD
BE READ AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 3, 1997, AND AS IT MAY BE
FURTHER AMENDED FROM TIME TO TIME, WHICH PROVIDES FURTHER DISCUSSION OF CERTAIN
ITEMS IN THIS PROSPECTUS AND OTHER MATTERS, HAS BEEN FILED WITH THE SEC AND IS
INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, CALL 1-800-499-3603 OR WRITE
TO THE TRUST AT THE ADDRESS FOR THE TRUST'S DISTRIBUTOR LISTED HEREIN.
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.
The date of this Prospectus is February 3, 1997.
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FUND (AND ALLOCATED PORTFOLIO) FEES AND EXPENSES
Five Arrows shares are offered to shareholders on a no-load basis without any
commissions, distribution ("12b-1 plan") or service charges.
ALL FUNDS
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases................................................................... None
Maximum sales load imposed on reinvested dividends........................................................ None
Redemption fees........................................................................................... None
Exchange fees............................................................................................. None
</TABLE>
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL FUND
FEES EXPENSES EXPENSES(1)
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<S> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AND NET OF REIMBURSEMENTS)
U.S. Dollar.......................................................... .20% .075% .275%
Pound Sterling....................................................... .20% .15% .35%
Deutsche Mark........................................................ .20% .15% .35%
Canadian Dollar...................................................... .20% .15% .35%
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C> <C>
EXPENSES PER 1,000 SHARE INVESTMENT
U.S. Dollar.......................................................................... $3 $9
Pound Sterling....................................................................... L4 L11
Deutsche Mark........................................................................ DM4 DM11
Canadian Dollar...................................................................... C$4 C$11
</TABLE>
Assuming a hypothetical investment of U.S. $1,000, L1,000, DM1,000, or C$1,000
with a 5% annual return and redemption at the end of each time period, an
investor in the Trust will have paid transaction and operating expenses over the
time period as indicated above.
1. The Investment Adviser has voluntarily agreed to reimburse such portion of
its advisory fee as is necessary to cause the annualized total expenses of
each class of a Fund not to exceed a specified percentage of such class'
average daily net asset value (.275% in the case of the Five Arrows class of
the U.S. Dollar Fund and .35% in the case of the Five Arrows class of each
other Fund). If this reimbursement is not sufficient to cause the total
expenses of any Fund not to exceed the applicable percentage of average daily
net asset value, the Investment Adviser has agreed to pay such other expenses
of the applicable Fund as is necessary to keep total expenses from exceeding
the applicable percentage. This undertaking shall remain in effect for the
fiscal period ended December 31, 1997, and thereafter in the discretion of
the Investment Adviser. The Investment Adviser has reserved the right to
terminate or revise these limitations with respect to any period after
December 31, 1997. To the extent management fees are reimbursed by the
Investment Adviser, or expenses of a Fund are paid by the Investment Adviser,
the total return to shareholders will increase. Total return to shareholder
will decrease to the extent that management fees are no longer reimbursed or
expenses of a Fund are no longer paid.
The above table of fees and expenses is provided to assist investors in
understanding the various costs and expenses which may be borne directly or
indirectly by investors in the Funds. The Trust does not charge a sales load in
connection with the purchase or redemption of its shares. The percentages shown
above are based on an annualized estimate of the expenses to be incurred during
the current fiscal year, after expense reimbursements, and should not be
considered a representation of future costs and expenses or performance. Actual
costs and expenses or performance in future periods may be more or less than
those shown above. For the purpose of the example, assume reinvestment of all
dividends and distributions. The table does not reflect charges for optional
services, such as the fee for remittance of redemption proceeds by wire. For a
more complete discussion of the fees connected with an investment in the Trust
and the services provided to the Trust, see "Management", "How to Buy Five
Arrows Shares" and "How to Redeem Five Arrows Shares."
The Funds invest all of their Investable Assets in the Portfolios. The Trustees
of the Trust believe that, over time, the aggregate per share expenses of each
Fund and its corresponding Portfolio should be approximately equal to, or less
than, the per share expenses the Fund would incur if the Fund were instead to
retain the services of an investment adviser and its assets were invested
directly in the type of securities being held by the Portfolios.
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SUMMARY
The investment objectives of each Fund are to seek to maintain a high level of
liquidity, to preserve capital and stability of principal expressed in the
Fund's Designated Currency and, consistent with those objectives, to earn
current income. A Fund's investment objectives are fundamental and may not be
changed without the approval of its shareholders. Each Fund will seek to achieve
its investment objectives by investing all of its Investable Assets in a
Portfolio which has the same investment objectives as such Fund. There can be no
assurance that the investment objectives of either the Funds or the Portfolios
will be achieved. (See "Investment Objectives" and "Investment Policies and
Restrictions.") An investment in shares of any of the Funds involves certain
risks, as discussed below, and may not be appropriate for all investors.
The Funds are designed primarily for use as a means of investing short-term cash
reserves in the Funds' Designated Currencies. Investors may also consider
purchasing Fund shares for a number of reasons including satisfying settlement
obligations or delivering a Fund's shares as collateral for a transactional
obligation in a Fund's Designated Currency.
Rothschild International Asset Management Limited (the "Investment Adviser")
manages the Portfolio Trust's Portfolios and receives an advisory fee from each
Portfolio calculated daily and payable monthly at an annual rate of up to .20%
of average daily net assets of such Portfolio.
BISYS Fund Services Limited Partnership (the "Administrator") acts as the
administrator of the Trust and Portfolio Trust. Its affiliates, Five Arrows Fund
Distributors Inc. (the "Distributor") and BISYS Fund Services, Inc. (the
"Transfer Agent"), act as the distributor and transfer/dividend disbursing agent
of the Trust, respectively, and The Chase Manhattan Bank acts as custodian (the
"Custodian") of the Trust and the Portfolio Trust. See "Management."
The Trust and Portfolio Trust bear all operating costs not agreed to be borne by
the Investment Adviser, the Distributor, the Administrator, the Transfer Agent
or the Custodian including, without limitation, legal and auditing fees and
expenses, expenses of investor reports to be provided to existing shareholders;
registration and reporting fees and expenses; and Trustees' fees and expenses.
The Investment Adviser has voluntarily agreed to reimburse such portion of its
advisory fee as is necessary to cause the annualized total expenses of each
class of a Fund not to exceed a specified percentage of such class' average
daily net asset value (.275% in the case of the Five Arrows class of the U.S.
Dollar Fund and .35% in the case of the Five Arrows class of each other Fund).
If this reimbursement is not sufficient to cause the total expenses of any Fund
not to exceed the applicable percentage of average daily net asset value, the
Investment Adviser has agreed to pay such other expenses of the applicable Fund
as is necessary to keep total expenses from exceeding the applicable percentage.
This undertaking shall remain in effect for the fiscal period ending December
31, 1997, and thereafter in the discretion of the Investment Adviser. The
Investment Adviser has reserved the right to terminate or revise these
limitations with respect to any period after December 31, 1997.
Five Arrows shares will be issued at the net asset value next determined after
receipt by the Trust of an order in proper form and acceptance of that order by
the Trust. The Trust reserves the right to take appropriate action in the event
that Disbursable Funds (as defined
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below) for the purchase price for the shares being issued are not received on a
timely basis. Disbursable Funds may only be received by the Trust during the
operating times for the wire transmission systems designated for use in
transmitting money to the Funds. See "How to Buy Five Arrows Shares."
The Trust seeks to maintain a constant net asset value per share for each Fund,
although no assurances can be given that those per share values will be
maintained. Shares of a Fund may be redeemed by the shareholder from the Trust
at their next-determined net asset value. Each Fund is open for business on any
day on which the New York Stock Exchange (the "Exchange") is open for trading or
banks in New York City are open for business (a "Trust Business Day") from 9:00
a.m. to 5:00 p.m. U.S. Eastern Time ("Trust Hours of Operation"). Thus, the
Trust will be open for business every day except for Saturdays, Sundays, and
holidays which are observed by both the Exchange and New York City banks
(scheduled holidays for 1997 are New Year's Day, President's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). The value of
the investments held by each Fund is determined in its Designated Currency once
every 24 hours during Trust Hours of Operation. See "Calculation of Net Asset
Value" and "How to Redeem Five Arrows Shares."
Dividends of each Fund's net investment income are declared once a day and paid
monthly. Net capital gains, if any, realized by a Fund will be distributed
annually. Dividends paid by a Fund will be automatically reinvested in
additional shares of the Fund. See "Dividends and Distributions" and "Taxation."
DESCRIPTION OF THE TRUST AND PORTFOLIO TRUST
The Trust is a newly-formed open-end management investment company, registered
under the Investment Company Act of 1940 (the "1940 Act"). Under the terms of
the Agreement and Declaration of Trust establishing the Trust, which is governed
by the laws of Delaware, the Trustees of the Trust are ultimately responsible
for the management of the Funds' business and affairs. The Trust is currently
authorized to offer four individual Funds, each of which represents a separate
series of the Trust's shares of beneficial interest. The Trust's Board of
Trustees is empowered to establish additional Funds at any time without
shareholder approval. The Trustees have authorized shares of the Fund to be
issued in two classes: Five Arrows and Five Arrows Service. Because expenses
will vary between the classes, performance will vary with respect to each class.
Except for differences related to such differential expenses, each share of a
Fund has equal dividend, redemption and liquidation rights with other shares of
such Fund. Each share purchased in compliance with the procedures established by
the Trust will be fully paid and nonassessable.
Each Portfolio is a newly-formed separate investment series of the Portfolio
Trust, a newly-formed business trust organized under the laws of the State of
Delaware, and intends to be treated as a partnership for federal tax purposes.
Under the terms of the Portfolio Trust's Declaration of Trust, the affairs of
the Portfolios are managed under the supervision of the Trustees of the
Portfolio Trust.
The net asset value of a Fund's shares, when expressed in any currency other
than the Fund's Designated Currency, will fluctuate in response to changes in
the exchange rates
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between the Fund's Designated Currency and other currencies, including the
Designated Currencies of other Funds.
INVESTMENT OBJECTIVES
The investment objectives of each Fund are to seek to maintain a high level of
liquidity, preserve capital and stability of principal expressed in the Fund's
Designated Currency and, consistent with those objectives, to earn current
income. A Fund's investment objectives are fundamental and may not be changed
without the approval of its shareholders.
Each Fund will seek to achieve its investment objectives by investing all of its
Investable Assets in a Portfolio which has the same investment objectives as
such Fund. The investment objectives of the Portfolios are not fundamental and
may be changed upon notice to, but without the approval of, the Portfolios'
investors. There can be no assurance that the investment objectives of either
the Funds or the Portfolios will be achieved.
Since the investment characteristics of the Funds will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolios. Except as otherwise provided below,
the Funds' investment policies are not "fundamental policies" within the meaning
of the 1940 Act and may, therefore, be changed by the Trust's Board of Trustees
without a shareholder vote.
INVESTMENT POLICIES AND RESTRICTIONS
U.S. DOLLAR PORTFOLIO
The U.S. Dollar Portfolio's investment objective is to seek to maintain a high
level of liquidity, to preserve capital and stability of principal expressed in
U.S. Dollars and, consistent with those objectives, to earn current income. The
U.S. Dollar Portfolio will invest in securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities or by foreign governments or Supranational Organizations (such
as the World Bank, the Inter-American Development Bank, the Asian Development
Bank and the European Bank for Reconstruction and Development) as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances, and such short-term corporate debt securities as
commercial paper and master demand notes.
The U.S. Dollar Portfolio invests only in U.S. dollar-denominated high quality
securities as described in this paragraph. All of the U.S. Dollar Portfolio's
assets will consist of government securities and "first tier" eligible
securities as defined in Rule 2a-7 under the 1940 Act, which have been (i) rated
by at least two United States nationally recognized statistical rating
organizations ("NRSRO"s), such as Standard & Poor's Corporation or Moody's
Investors Service, Inc., in the highest rating category for short-term
obligations (or so rated by one such organization if it alone has rated the
security), (ii) issued by an issuer with comparable short-term obligations that
are rated in the highest rating category, or (iii) if unrated, determined to be
comparable to such securities. See the Statement of Additional Information.
All securities in which the U.S. Dollar Portfolio invests have remaining
maturities of thirteen months or less at the date of acquisition. The U.S.
Dollar Portfolio also maintains a dollar-weighted average portfolio maturity of
90 days or less. The U.S. Dollar Portfolio
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follows these policies in seeking to maintain a constant net asset value of
$1.00 per share, although there is no assurance it can do so on a continuing
basis.
The U.S. Dollar Portfolio may invest in U.S. dollar-denominated high quality
corporate debt securities such as commercial paper and bonds and long-term
unsecured debentures with remaining maturities of thirteen months or less. These
investments may include, for example, obligations issued by U.S. and foreign
corporations, Eurodollar bonds (which are U.S. dollar-denominated obligations of
foreign issuers), and Yankee bonds (which are U.S. dollar-denominated bonds
issued by foreign issuers in the U.S.). Under normal market conditions, the U.S.
Dollar Portfolio will have more than 25% of its total assets invested in the
obligations of issuers in the banking industry. See "Special Investment
Considerations and Risk Factors--Concentration in Obligations of Qualifying
Banks." For further information concerning debt securities ratings and
permissible money market investments of the U.S. Dollar Portfolio, see the
Statement of Additional Information.
Securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities in which the U.S. Dollar
Portfolio may invest include direct obligations of the U.S. Treasury, including
bills, bonds and notes; and obligations issued or guaranteed as to principal and
interest by U.S. Government agencies or instrumentalities and supported by any
of (i) the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association participation certificates); (ii) the right of the issuer
to borrow a limited amount from the U.S. Treasury (e.g., securities of the
Farmers Home Administration); (iii) the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality
(e.g., securities of the Federal National Mortgage Association); or (iv) the
credit of the agency or instrumentality (e.g., securities of a Federal Home Loan
Bank).
POUND STERLING PORTFOLIO
The Pound Sterling Portfolio's investment objective is to seek to maintain a
high level of liquidity, to preserve capital and stability of principal
expressed in Pounds Sterling and, consistent with those objectives, to earn
current income. The Pound Sterling Portfolio will invest in securities issued or
guaranteed as to principal and interest by the United Kingdom ("U.K.")
Government, local authorities, city corporations and county councils or their
agencies or by non-U.K. governments or Supranational Organizations as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances and such short-term corporate debt securities as
commercial paper.
The Pound Sterling Portfolio invests only in Pound Sterling-denominated high
quality securities as described in this paragraph. The Pound Sterling Portfolio
assets will consist of government securities and other securities, which have
been (i) rated by at least two NRSROs in the highest rating category for short-
term obligations (or so rated by one such organization if it alone has rated the
security), (ii) issued by an issuer with comparable short-term obligations that
are rated in the highest rating category, or (iii) if unrated, determined to be
comparable to such securities.
All securities in which the Pound Sterling Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Pound Sterling
Portfolio follows these policies in seeking to maintain a constant net asset
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value of L1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Pound Sterling Portfolio may invest in Pound Sterling-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Pound Sterling Portfolio will have more than
25% of its total assets invested in the obligations of issuers in the banking
industry. See "Special Investment Considerations and Risk Factors--Concentration
in Obligations of Qualifying Banks."
DEUTSCHE MARK PORTFOLIO
The Deutsche Mark Portfolio's investment objective is to seek to maintain a high
level of liquidity, to preserve capital and stability of principal expressed in
Deutsche Marks and, consistent with those objectives, to earn current income.
The Deutsche Mark Portfolio will invest in securities issued or guaranteed as to
principal and interest by the German Government, by its sub-divisions or their
agencies or by non-German governments or Supranational Organizations, as well as
high-quality, short-term money market instruments such as bank certificates of
deposit and such short-term corporate debt securities as commercial paper.
The Deutsche Mark Portfolio invests only in Deutsche Mark-denominated high
quality securities as described in this paragraph. The Deutsche Mark Portfolio's
assets will consist of government securities and other securities, which have
been (i) rated by at least two NRSROs in the highest rating category for
short-term obligations (or so rated by one such organization if it alone has
rated the security), (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category, or (iii) if unrated,
determined to be comparable to such securities.
All securities in which the Deutsche Mark Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Deutsche Mark
Portfolio follows these policies in seeking to maintain a constant net asset
value of DM1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Deutsche Mark Portfolio may invest in Deutsche Mark-denominated high quality
corporate debt securities such as commercial paper and bonds and long-term
unsecured debentures with remaining maturities of 60 days or less. Under normal
market conditions, the Deutsche Mark Portfolio will have more than 25% of its
total assets invested in the obligations of issuers in the banking industry. See
"Special Investment Considerations and Risk Factors--Concentration in
Obligations of Qualifying Banks."
CANADIAN DOLLAR PORTFOLIO
The Canadian Dollar Portfolio's investment objective is to seek to maintain a
high level of liquidity, to preserve capital and stability of principal
expressed in Canadian Dollars and, consistent with those objectives, to earn
current income. The Canadian Dollar Portfolio will invest in securities issued
or guaranteed as to principal and interest by the Canadian Government, the
Provinces of Canada, or their agencies or by non-Canadian governments or
Supranational Organizations as well as high-quality, short-term money market
instruments such as bank certificates of deposit and such short-term corporate
debt securities as commercial paper.
The Canadian Dollar Portfolio invests only in Canadian Dollar-denominated
high-quality securities as described in this paragraph. The
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Canadian Dollar Portfolio's assets will consist of government securities and
other securities which have been (i) rated by at least two NRSROs in the highest
rating category for short-term obligations (or so rated by one such organization
if it alone has rated the security), (ii) issued by an issuer with comparable
short-term obligations that are rated in the highest rating category by an
NRSRO, or (iii) if not rated by an NRSRO, determined to be comparable to such
securities. Presently many high-quality Canadian dollar-denominated securities
are rated only by one or more Canadian rating organizations, rather than by the
U.S. rating organizations which qualify as NRSROs. Accordingly, the Adviser
anticipates that many of the securities held by the Canadian Dollar Portfolio
will be securities which are not rated by an NRSRO but are determined to be
comparable to high-quality NRSRO-rated securities. In making this determination
the Adviser may rely upon ratings given by one or more Canadian rating
organizations. For further information concerning the ratings given by Canadian
rating organizations, see the Statement of Additional Information.
All securities in which the Canadian Dollar Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Canadian Dollar
Portfolio follows these policies in seeking to maintain a constant net asset
value of C$1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Canadian Dollar Portfolio may invest in Canadian Dollar-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Canadian Dollar Portfolio will have more
than 25% of its total assets invested in the obligations of issuers in the
banking industry. See "Special Investment Considerations and Risk
Factors--Concentration in Obligations of Qualifying Banks."
ALL PORTFOLIOS
In seeking to obtain its investment objectives, each Portfolio may invest in the
types of securities described below.
VARIABLE AND FLOATING RATE NOTES
Each Portfolio may purchase variable and floating rate instruments. These
instruments may include variable amount master demand notes, which are
instruments under which the indebtedness, as well as the interest rate, varies.
These securities must have the requisite credit quality (as described above) in
order to be eligible to be purchased by a Portfolio. Unless guaranteed by the
U.S. Government or one of its agencies or instrumentalities, variable or
floating rate instruments purchased by the U.S. Dollar Portfolio must permit
such Portfolio to demand payment of the instrument's principal at least once
every thirteen months. Variable or floating rate instruments purchased by each
of the other Portfolios must permit such Portfolio to demand payment of the
instrument's principal at least once every 60 days. Because of the absence of a
market in which to resell a variable or floating rate instrument, a Portfolio
might have trouble selling an instrument should the issuer default or during
periods when a Portfolio is not permitted by agreement to demand payment of the
instrument, and for this or other reasons a loss could occur with respect to the
instrument.
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements. A repurchase agreement
arises when an investor purchases a security and simultaneously agrees to resell
it to the counterparty on the repurchase agreement at an agreed-upon
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future date, normally one day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon rate which is effective for
the period of time the investor's money is invested in the security and which is
not related to the coupon rate on the purchased security. By providing a
flexible investment vehicle, repurchase agreements permit the Portfolios to
remain fully invested pending the purchase of appropriate longer-term
investments.
The Portfolios will enter into repurchase agreements only with financial
institutions rated by an NRSRO in the highest rating category for short-term
obligations and deemed to be creditworthy by the Investment Adviser, pursuant to
guidelines established by the Portfolio Trust's Board of Trustees. During the
term of any repurchase agreement, the Investment Adviser will monitor the
creditworthiness of the seller, and the seller must maintain the value of the
securities subject to the agreement in an amount that is greater than the
repurchase price. Default or bankruptcy of the seller would, however, expose the
Portfolios to possible loss because of adverse market action or delays in
connection with the disposition of the underlying obligations. Because of the
seller's repurchase obligations, the securities subject to repurchase agreements
do not have maturity limitations.
WHEN-ISSUED SECURITIES
Each Portfolio may purchase when-issued debt securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve the relevant Portfolio's investment objective and not for leverage.
The when-issued trading period generally lasts only from a few days up to a
month or more; during this period interest will not accrue. Such transactions
may involve a risk of loss if the value of the securities falls below the price
committed to prior to actual issuance. The Custodian will establish a segregated
account for a Portfolio when it purchases securities on a when-issued basis
consisting of cash or liquid securities equal to the amount of the when-issued
commitments.
ILLIQUID SECURITIES
Each Portfolio may invest up to 10% of its net assets in illiquid securities
(i.e. securities which a Portfolio could not reasonably expect to sell within
seven days at approximately the price at which they are valued). Under the
supervision of the Portfolio Trust's Board of Trustees the Investment Adviser
will determine the liquidity of each investment using various factors such as
(1) the frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender features)
and (5) the likelihood of continued marketability and credit quality of the
issuer. If they have a remaining maturity of more than seven days, time deposits
and repurchase agreements will be considered to be illiquid securities.
FUNDAMENTAL POLICIES
Each of the Funds and the Portfolios have adopted certain fundamental policies
which may not be changed without the approval of that Fund's shareholders or
that Portfolios' investors, as the case may be.
The Funds have the same investment restrictions as the Portfolios, except that
each Fund may invest all of its Investable Assets in an open-end management
investment company with substantially the same investment objectives as that
Fund. Therefore, references below to the Portfolios' investment restrictions
also
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include the Funds' investment restrictions. In addition, as a fundamental
policy, no Portfolio may: (i) borrow money, except from the Portfolio Trust's
Custodian or from other banks in connection with redemptions or for temporary or
emergency purposes (borrowings by a Portfolio may not exceed 20% of that
Portfolio's net assets computed immediately after the borrowing; no additional
investments may be made while any borrowings exceed 5% of the Portfolio's total
assets), or (ii) make any investment which would cause more than 25% of the
value of such Portfolio's total assets to be invested in securities of
nongovernmental issuers principally engaged in any one industry, except that
under normal market conditions each Portfolio will invest more than 25% of its
total assets in obligations of Qualifying Banks (as defined herein). Additional
fundamental policies of the Portfolios are set forth in the Statement of
Additional Information.
If a percentage restriction, including one that is a fundamental policy, 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
that restriction.
SPECIAL INVESTMENT CONSIDERATIONS AND RISK FACTORS
POSSIBLE CHANGES IN NET ASSET VALUE AND YIELD
Each Portfolio seeks to maintain a constant net asset value and generally values
its investments at amortized cost. However, the value of each Portfolio may be
affected by changes in interest rates and the credit standing of issuers of the
Portfolios' investments. The value of the investments held by each of the
Portfolios in which the Funds invest generally will vary inversely with changes
in prevailing interest rates, although this variance is expected to be minimal
due to the short maturities of the instruments held by the Portfolios.
Interest rates paid on instruments denominated in a given Designated Currency
may be higher or lower than those paid on instruments denominated in other
Designated Currencies. Investors should recognize that in periods of declining
short-term interest rates the inflow of net new money to a Portfolio from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of such Portfolio's investment
portfolio, thereby reducing the current yield of the Portfolio. In the periods
of rising interest rates, the opposite can be true. The securities in which the
Portfolios invest may not produce as high a level of income as could be obtained
from securities with longer maturities or those having a lesser degree of
safety.
INVESTMENTS IN A SINGLE ISSUER
Each Portfolio other than the U.S. Dollar Portfolio is non-diversified under the
1940 Act. These Portfolios intend to comply, however, with the diversification
requirements applicable to regulated investment companies under the United
States Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
Currently, those requirements provide that, as of the last day of each fiscal
quarter, each Portfolio's investments in the securities of any one issuer must
be limited to 25% of its total assets, provided that with respect to at least
50% of its total assets, a Portfolio may not have (a) invested more than 5% of
its total assets in the securities of any one issuer or (b) invested more than
10% of the outstanding voting securities of any one issuer. To the extent a
Portfolio is not diversified under the 1940 Act, it may be more susceptible than
a
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fully diversified Portfolio to adverse developments affecting a single issuer.
In addition to the foregoing, each of the Portfolios has adopted a
non-fundamental investment restriction which prevents it from investing (i) more
than 5% of the value of its total assets in the securities of any one issuer
(other than repurchase agreements and securities issued by a sovereign
government, its agencies and instrumentalities), (ii) more than 25% of the value
of its total assets in repurchase agreements with one counterparty or (iii) more
than 25% of the value of its total assets in securities issued by any sovereign
government, its agencies and instrumentalities (other than the federal
government of the United States). Securities held solely as collateral for
outstanding repurchase agreements shall be excluded for purposes of computing
compliance with restriction (iii). These restrictions may be eliminated or
modified at any time by the Trustees of the Portfolio Trust without a
shareholder vote.
CONCENTRATION IN OBLIGATIONS OF QUALIFYING BANKS
Under normal market conditions, each Portfolio will have more than 25% of its
total assets invested in obligations of Qualifying Banks. For the purposes of
this Prospectus, Qualifying Banks are defined as U.S. banks (including savings
banks or savings and loan associations) that are members of the Federal Deposit
Insurance Corporation ("FDIC") and "foreign banks," as defined in Rule 3a-6
under the 1940 Act, provided that any such institution has, at the date of
investment, capital, surplus and undivided profits (as of the date of its most
recently published financial statements) in excess of U.S. $100,000,000 or the
non-U.S. dollar equivalent, as the case may be. This concentration may result in
increased exposure to risks pertaining to the banking industry. These risks
include: a sustained increase in interest rates, which can adversely affect the
availability and cost of funds for a bank's lending activities; exposure to
credit losses during times of economic decline; concentration of loan portfolios
in certain industries; national and local regulatory developments; and
competition within the banking industry as well as from other financial
institutions. In addition, investments in banks located in foreign countries are
subject to risks resulting from the combination in those banks of banking and
securities underwriting and similar activities.
INVESTMENTS IN FOREIGN SECURITIES
Investing in securities issued by entities domiciled in a country other than an
investor's country of residence or denominated in a currency other than the
currency of the investor's country of residence may involve considerations and
possible risks and opportunities not typically encountered by the investor in
making investments in its country of residence and in securities denominated in
that country's currency. These considerations include favorable or unfavorable
changes in interest rates, currency exchange rates and exchange control
regulations, and the costs that may be incurred in connection with conversions
between various currencies. In addition, investments in countries other than the
United States could be affected by other factors generally not thought by
investors to be present in the United States, including less liquid and
efficient securities markets, greater price volatility, less publicly available
information about issuers, the imposition of withholding or other taxes,
restrictions on the expatriation of funds or other assets of a Portfolio,
expropriation of assets, adverse diplomatic developments, higher transaction and
custody costs, delays attendant in settlement procedures and
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difficulties in enforcing contractual
obligations.
INFORMATION CONCERNING THE MASTER-FEEDER FUND STRUCTURE
Each of the Funds seeks to achieve its investment objectives by investing all of
its Investable Assets in the Portfolio which has the same investment objectives
as such Fund and invests solely in assets denominated in that Fund's Designated
Currency. These Portfolios in turn invest in securities that are consistent with
those objectives. In addition to selling beneficial interests to the Funds, the
Portfolios may sell beneficial interests to other mutual funds or institutional
investors. Such investors will invest in the Portfolios on the same terms and
conditions and will pay a proportionate share of the Portfolios' expenses.
However, the other investors investing in the Portfolios are not required to
sell their shares at the same public offering price as the Funds due to the
imposition of sales commissions and variations in other operating expenses.
Therefore, investors in the Funds should be aware that these differences may
result in differences in returns experienced by investors in the different funds
that invest in the Portfolios. Such differences in returns are also present in
other mutual fund structures. Information concerning other holders of interests
in the Portfolios is available from the Administrator by calling 1-800-499-3603.
Smaller funds investing in the Portfolios may be materially affected by the
actions of larger funds investing in the Portfolios. For example, if a large
fund withdraws from a Portfolio, the remaining funds investing in that Portfolio
may experience higher pro rata operating expenses, thereby producing lower
returns (however, this possibility exists as well for traditionally structured
funds that have large institutional investors). Additionally, because the
Portfolio would have fewer assets in such a case, it may become less
diversified, resulting in increased portfolio risk. Also, funds with a greater
pro rata ownership in such a Portfolio could have effective voting control of
the operations of that Portfolio. Except as permitted by the SEC, whenever the
Trust is requested to vote on matters pertaining to the Portfolios (other than a
vote by the Funds to continue operations of the Portfolios upon the withdrawal
of another investor in the Portfolios), the Trust will hold a meeting of
shareholders of the Funds and will cast all of its votes in the same proportion
as the votes of the Funds' shareholders. The percentage of the Trust's votes
representing Funds shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the shareholders of the Funds
who do, in fact, vote. Shareholders of the Funds who do not vote will not affect
the Trust's votes at the Portfolios' meetings.
A Fund may withdraw its investment from a Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interests of the
shareholders of that Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including
investing all the Investable Assets of that Fund in another pooled investment
entity having the same investment objectives as the Fund or retaining Rothschild
International Asset Management Limited or another investment adviser to manage
the Fund's assets directly in accordance with the investment policies described
above with respect to the relevant Portfolio. Any such withdrawal could result
in distributions to such Fund from the Portfolio "in kind" of portfolio
securities (as opposed to a cash distri-
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bution) to the extent permitted by the 1940 Act, or rules adopted thereunder. If
securities are distributed, such Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of that Fund.
The Funds' investment objectives are fundamental policies and may not be changed
without the approval of the Funds' shareholders. The investment objectives of
the Portfolios are not fundamental policies and may be changed without the
approval of the investors in the Portfolio. Shareholders of a Fund will receive
30 days prior written notice with respect to any change in the investment
objective of its corresponding Portfolio. See "Investment Objective" and
"Investment Policies and Restrictions" for a description of the fundamental
policies of the Portfolios that cannot be changed without approval of the "vote
of a majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Portfolios.
For descriptions of the investment objectives, policies and restrictions of the
Portfolios, see "Investment Objectives" and "Investment Policies and
Restrictions." For descriptions of the management of the Portfolios, see
"Management" herein and in the Statement of Additional Information. For
descriptions of the expenses of the Portfolios, see "Management" herein.
MANAGEMENT
Each Fund is a separate series of the Trust, a Delaware business trust under the
terms of the Agreement and Declaration of Trust establishing the Trust, which is
governed by the laws of Delaware. The Trustees of the Trust are ultimately
responsible for the management of its business and affairs.
Each Portfolio is a separate investment series of the Portfolio Trust, which is
also a Delaware business trust under the terms of the Agreement and Declaration
of Trust establishing the Portfolio Trust, which is governed by the laws of
Delaware. Under the terms of the Portfolio Trust's Declaration of Trust, the
affairs of the Portfolio are managed under the supervision of the Trustees of
the Portfolio Trust.
The Boards of Trustees of the Portfolio Trust and the Trust establish their
respective policies and supervise and review the operations and management of
the Portfolio Trust and the Trust, respectively. The day-to-day operations of
the Portfolio Trust and the Trust are administered by officers elected by their
respective Board of Trustees.
A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust and the Portfolio Trust, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that the same individuals are Trustees of the
Trust and of the Portfolio Trust, up to and including creating separate Boards
of Trustees. See "Management of the Trust and Portfolio Trust" in the Statement
of Additional Information for more information about the Trustees and officers
of the Trust and the Portfolio Trust.
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT
The Investment Adviser serves pursuant to an Investment Advisory Agreement with
the Portfolio Trust. The Investment Adviser is a British corporation that was
formed in 1975 and is registered under the U.S. Investment Advisers Act of 1940,
as amended. It is an indirect
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subsidiary of Rothschild Concordia AG of Zug, Switzerland, a holding company
whose subsidiaries manage approximately $28.5 billion of assets, spread across
equities, bonds and currencies.
The Investment Adviser, subject to the supervision and direction of the
Portfolio Trust's Board of Trustees, professionally manages each Portfolio in
accordance with such Portfolio's investment objectives and policies and makes
all investment decisions for those Portfolios. In consideration of these
services, the Portfolio Trust has agreed to pay the Investment Adviser monthly
an annual advisory fee with respect to each Portfolio. The advisory fee for each
Portfolio is calculated daily and payable monthly at an annual rate of up to
.20% of average daily net assets.
The Investment Adviser and the Administrator may, at their own expense, provide
compensation to certain financial institutions whose customers purchase
significant amounts of shares of a Fund. The amount of such compensation may be
made on a one-time and/or periodic basis, and may be up to 100% of the annual
fees that are earned by the Investment Adviser or the Administrator (after
adjustments) and are attributable to shares held by such customers. Such
compensation will not represent an additional expense to the Funds or their
shareholders, since it will be paid from assets of the Investment Adviser and
the Administrator or their affiliates.
The portfolio manager for all of the Portfolios is Thomas Barman, who has been
employed by the Investment Adviser as its Director for Currency Management since
November 1994. He has been primarily responsible for the day-to-day management
of the Portfolios' portfolios since their commencement of operations. He has
over 25 years experience in fund management. From March 1993 to August 1994, Mr.
Barman was a portfolio manager for Glaxo (Bermuda) Limited. From April 1991 to
February 1993, he was a portfolio manager for the U.S. Office of Caisse des
Depots et Consignations. Prior to that time, he served as Foreign Exchange
Officer at the Federal Reserve Bank of New York and was head of U.S. Treasury
investments at Credit Suisse (New York).
Prior to the Trust's commencement of operations, the Investment Adviser and Mr.
Barman had not had previous experience managing a mutual fund registered under
the 1940 Act. However, they have had substantial experience managing publicly
offered European mutual funds.
The Investment Adviser has a Code of Ethics governing personal securities
transactions of certain of its employees. See the Statement of Additional
Information.
DISTRIBUTOR
The Distributor is an affiliate of the Administrator. Mutual funds structured
like the Funds sell shares on a continuous basis. The Funds' Shares are sold
through the Distributor. Certain officers of the Trust are also officers and/or
directors of the Distributor.
ADMINISTRATOR
The Administrator, a wholly-owned subsidiary of The BISYS Group, Inc., is
responsible for coordinating the Funds' efforts and generally assuring the
operation of the Funds' business. It has been providing services to mutual funds
since 1987.
The Administrator provides a wide range of services to the Funds, including
maintaining the Funds' offices, providing statistical and research data,
coordinating the preparation of reports to shareholders, calculating and
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providing for the calculation of net asset values of Fund shares, dividends and
capital gains distributions to shareholders, and performing other administrative
functions necessary for the smooth operation of the Funds.
The Administrator provides the Portfolio Trust with office space and with
certain clerical services and facilities. The Administrator is entitled to an
administration fee calculated daily and payable monthly at an annual rate of
.10% of the average daily net assets of all of the Funds. The Administrator
serves as such for an initial two year term (with subsequent annual, renewable
terms) pursuant to administration agreements with the Trust and the Portfolio
Trust. Those agreements provide that the Administrator shall receive payment in
full of its fee for the remainder of the relevant term if the Administrator is
terminated without cause prior to the end of such term.
TRANSFER AND DIVIDEND DISBURSING AGENT
Under its agreement with the Trust, BISYS Fund Services, Inc., as Transfer
Agent, provides customary transfer and dividend disbursing agent services,
including processing purchase, redemption and transfer transactions, responding
to shareholder inquiries, automatically investing dividends in Fund shares,
transmitting dividends to shareholders, assisting shareholders in changing
account designations and addresses and transmitting to shareholders proxy
statements, annual reports, prospectuses and other Trust communications. The
Transfer Agent serves as such for an initial two year term (with subsequent
annual, renewable terms) pursuant to a transfer agency agreement with the Trust.
That agreement provides that the Transfer Agent shall receive payment in full of
its fee for the remainder of the relevant term if the Transfer Agent is
terminated without cause prior to the end of such term. The Transfer Agent may
sub-contract any of its duties to another person, including its affiliates. See
"How to Buy Five Arrows Shares" and "How to Change Funds."
Pursuant to a separate agreement, BISYS Fund Services, Inc. also provides fund
accounting services to the Trust. As fund accountant, BISYS Fund Services, Inc.
serves for an initial two year term (with subsequent annual, renewable terms).
That agreement provides that the fund accountant shall receive payment in full
of its fee for the remainder of the relevant term if the fund accountant is
terminated without cause prior to the end of such term.
CUSTODIAN
The Chase Manhattan Bank is the custodian of the Trust and Portfolio Trust (the
"Custodian") and, in that capacity, maintains custody of the Trust's and
Portfolio Trust's assets. In maintaining the custody of assets located outside
the United States, the custodian may use one or more subcustodians.
EXPENSES
All expenses incurred in the operation of a Fund or a Portfolio are borne by
such Fund or Portfolio except to the extent specifically assumed by the
Investment Adviser, the Distributor, the Administrator, the Custodian, or the
Transfer Agent. Subject to the undertaking of the Investment Adviser to
reimburse the Funds or Portfolios, as the case may be, for certain of their
excess expenses, the Funds or Portfolios, as the case may be, have confirmed
their obligation to pay all their other respective expenses, including: taxes,
brokerage fees and commissions; certain insurance premiums; auditing, legal and
compliance expenses; costs of forming the Trust and Portfolio Trust and
maintaining corporate existence; costs of fund accounting; costs of preparing
and printing the
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Trust's prospectuses, statements of additional information and shareholder
reports and delivering them to shareholders; compensation of Trustees of the
Trust or Portfolio Trust who are not employees of the Distributor or
Administrator or their affiliates and costs of other personnel performing
services for the Trust or Portfolio Trust; costs of corporate meetings;
registration fees and related expenses for the Trust's registration with the SEC
and the securities regulatory authorities of other jurisdictions in which the
Funds' shares are sold; state securities law registration fees and related
expenses and other required registrations and related publication fees; fees
payable to the Investment Adviser under the Investment Advisory Agreement; fees
payable to the Administrator, Transfer Agent and Custodian.
The Investment Adviser has voluntarily agreed to reimburse such portion of its
advisory fee as is necessary to cause the annualized total expenses of each
class of a Fund not to exceed a specified percentage of such class' average
daily net asset value (.275% in the case of the Five Arrows class of the U.S.
Dollar Fund and .35% in the case of the Five Arrows class of each other Fund).
If this reimbursement is not sufficient to cause the total expenses of any Fund
not to exceed the applicable percentage of average daily net asset value, the
Investment Adviser has agreed to pay such other expenses of the applicable Fund
as is necessary to keep total expenses from exceeding the applicable percentage.
This undertaking shall remain in effect for the fiscal period ended December 31,
1997, and thereafter in the discretion of the Investment Adviser. The Investment
Adviser has reserved the right to terminate or revise these limitations with
respect to any period after December 31, 1997.
The Investment Adviser, the Distributor, the Administrator, the Transfer Agent
and the Custodian may also from time to time otherwise voluntarily waive their
respective fees. No fee waivers may be recouped beyond the end of any fiscal
year.
CALCULATION OF NET ASSET VALUE
The net asset value per share of each Fund, expressed in the relevant Fund's
Designated Currency, is determined by dividing the value of the Fund's net
assets (i.e., the value of its investment in its corresponding Portfolio and
other assets, including accrued but undistributed net investment income, less
liabilities) by the total number of shares of the Fund outstanding. Such net
asset values are determined once every Trust Business Day at 11:00 a.m. U.S.
Eastern Time for the U.S. Dollar and Canadian Dollar Funds, 9:00 a.m. U.S.
Eastern Time for the Pound Sterling Fund and 10:00 a.m. Eastern Time for the
Deutsche Mark Fund.
By investing all of their assets in the relevant Portfolio, each Fund seeks to
maintain the following constant net asset value per share:
<TABLE>
<S> <C>
U.S. Dollar Fund........... U.S.$1.00
Pound Sterling Fund........ L1.00
Deutsche Mark Fund......... DM1.00
Canadian Dollar Fund....... C$1.00
</TABLE>
It is anticipated that each Portfolio's assets will utilize the amortized cost
method of valuation as a reasonable means of approximating each Portfolio's
market value. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization or accretion to maturity of any
premium or discount. If at any time, however, the market value of any
Portfolio's total assets deviates more than 1/2 of 1% from their value
determined on an amortized cost basis, the Portfolio Trust's Board of Trustees
will consider whether any action
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should be initiated to prevent any adverse effects on the Portfolios'
shareholders. The Portfolio Trust's Board of Trustees will monitor the use of
the amortized cost method of valuation in order to ensure that this method
continues to be in the best interest of the Portfolios' shareholders. There may
be periods during which the stated value of an instrument determined under the
amortized cost method of valuation is higher or lower than the price the
Portfolio would receive if the instrument were sold, and the accuracy of
amortized cost valuation can be affected by changes in interest rates and the
credit standing of issuers of the Portfolio's investments. There is no assurance
that the Portfolios will maintain a stable net asset value per share.
If in the view of the Portfolio Trust's Board of Trustees it is inadvisable to
continue maintaining a constant net asset value for any Portfolio, the Board of
Trustees may discontinue using the amortized cost method of valuation for such
Portfolio. Shareholders of a Portfolio would be notified of a decision by the
Board of Trustees to discontinue the use of the amortized cost method with
respect to such Portfolio. The form of notification would depend on the context
of such a decision and could include, for example, the mailing of written
notifications and/or the issuance of a press release.
HOW TO BUY FIVE ARROWS SHARES
Five Arrows shares of the Funds are sold on a continuous basis by the
Distributor. Investors making an initial purchase of Five Arrows shares must
complete the Application Agreement accompanying this Prospectus, and forward it
to the Transfer Agent for acceptance by the Trust and establishment of an
account number. The investor must also wire funds that are immediately available
to the Trust for investment purposes (Disbursable Funds) to the Distributor in
accordance with the payment instructions and bank account details set out in the
Application Agreement. Subsequent investments may be made by notifying the Trust
of a purchase by telephoning the Distributor during Trust Hours of Operation and
by wiring "Disbursable Funds" to the Distributor in accordance with the payment
instructions and bank account details set out in the Application Agreement.
The minimum initial investment (the "Initial Investment Minimum") is $500,000
for Five Arrows shares (or the equivalent in the relevant Fund's Designated
Currency). The Initial Investment Minimum amount may either be satisfied by
investing such an amount in a single Fund or by aggregating purchases in several
Funds. The minimum subsequent investment ("Subsequent Investment Minimum") for
Five Arrows shares is $5,000 (or the equivalent in the relevant Fund's
Designated Currency). The Trust may, at its discretion, waive the minimum
investment requirements. The purchase of shares of each Fund must be made in the
Designated Currency for such Fund.
Purchases of Five Arrows shares of any of the Funds will be processed in
accordance with the procedures set forth below, at the net asset value per share
of the relevant Fund next determined after the purchase order is duly received.
No sales charge will be imposed at the time of purchase or redemption. The full
amount of the investor's purchase payment received by the Distributor will be
invested in the relevant Fund.
Purchases of shares of a Fund will be effected on Trust Business Days in
accordance with the procedures set forth below and only when the wire system
designated for use in transmitting
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money to the relevant Fund permits the timely transmission of Disbursable Funds.
Additionally, on days when the relevant trading market and/or the Trust's
Custodian or Distributor close early due to a partial holiday or otherwise, the
Trust reserves the right to advance the times at which purchase and redemption
orders must be received. Prospective or current Five Arrows shareholders may
transmit purchase orders by telephoning the Distributor at 1-800-824-3863.
- - Purchase orders for shares of the U.S. Dollar Fund received prior to 11 a.m.
U.S. Eastern Time on a Trust Business Day will settle on that same day (or the
next New York Banking Day (as defined below) if such Trust Business Day is not
a New York Banking Day).
- - Purchase orders for shares of the Canadian Dollar Fund received prior to 11
a.m. U.S. Eastern Time on a Trust Business Day will settle on that same day
(or the next Toronto Banking Day (as defined below) if such Trust Business Day
is not a Toronto Banking Day).
- - Purchase orders for shares of the Pound Sterling Fund received prior to 5 p.m.
U.S. Eastern Time on a Trust Business Day will settle on the following London
Banking Day (as defined below).
- - Purchase orders for shares of the Deutsche Mark Fund received prior to 10 a.m.
U.S. Eastern Time on a Trust Business Day will settle on the following
Frankfurt Banking Day (as defined below) provided, however, that if such a
Trust Business Day is not a Frankfurt Banking Day, the purchase order will
settle on the second following Frankfurt Banking Day.
If a purchase order is not received by the Trust prior to the applicable time
listed above, such purchase order shall be deemed to have been received on the
next following Trust Business Day.
Before placing a purchase order investors should acquaint themselves with the
minimum amounts and other requirements for using the relevant wire system for
the transfer of Disbursable Funds, and should ascertain whether the financial
institution from which the purchase payment is being sent, has access to the
appropriate system. It is essential that complete information, regarding the
investor's account, accompany all wire instructions in order to facilitate the
prompt and accurate handling of investments. Investors may obtain, from their
financial institution, further information about remitting funds by wire and any
fees that may be imposed for so doing. The Trust does not impose a fee for
receiving payment by wire.
Investors will be entitled to any dividends declared or income earned on the day
when their purchase orders settle, provided that Disbursable Funds are received
in the relevant Fund's Designated Currency in the appropriate bank account
(details of which are set out on the Application Agreement) by the close of
business on that same day. If Disbursable Funds, with respect to any purchase
order, are not received by this time by the Distributor, the Trust reserves the
right, in its sole discretion, (a) to accept the order and assess interest on
the overdue payment, or (b) to cancel the order, and to hold the purchaser
responsible for any loss and other costs incurred by the Distributor and/or the
Trust.
The Trust reserves the right to reject any purchase order in whole or in part.
All of a shareholder's accounts will be subject to the
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elections and instructions specified by the shareholder in the Application
Agreement covering the accounts.
United States Federal tax regulations require investors that are United States
persons to provide a certified Taxpayer Identification Number and/or certain
other required certifications within 30 days following the opening or reopening
of an account in order to avoid withholding of taxes on distributions and
proceeds of redemptions.
Ownership of the Trust's shares will be reflected by book-entry, and
certificates for shares will not be issued. Investment in the Trust is not
recommended for any investors who require a stock certificate to evidence their
shares.
All investments must be made in the Designated Currency of the Fund whose shares
are being purchased, as discussed above. Investors may convert other currencies
into the Designated Currency of a Fund through The Chase Manhattan Bank, in
accordance with its customary currency conversion credit and operational
arrangements and at its prevailing rates and fees to customers, or through other
dealers in foreign exchange, in accordance with their customary credit and
operational arrangements and at their prevailing rates and fees. Currency
conversions may result in capital gains or losses to an investor.
Neither the Trust nor its service contractors will be responsible for any loss
or expense for acting upon telephone instructions that are believed to be
genuine. In attempting to confirm that telephone instructions are genuine, the
Trust will use procedures considered reasonable. These procedures include
recording all telephone conversations, sending confirmations to shareholders
within 72 hours of the telephone transaction, verifying the account name and a
shareholder's account number or tax identification number and sending redemption
proceeds only to the address of record or to a previously authorized bank
account. To the extent that the Trust does not use reasonable procedures to form
its belief, it and/or its service contractors may be responsible for
instructions that are fraudulent or unauthorized.
A "New York Banking Day" is every day except Saturdays, Sundays and holidays
observed by New York City banks (scheduled holidays for 1997 are New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day).
A "London Banking Day" is every day except Saturdays, Sundays and holidays
observed by London banks (scheduled holidays for 1997 are New Year's Day, Good
Friday, Easter Monday, May Holiday, Spring Holiday, Late Summer Holiday,
Christmas Day and Boxing Day).
A "Frankfurt Banking Day" is every day except Saturdays, Sundays and holidays
observed by Frankfurt banks (scheduled holidays for 1997 are New Year's Day,
Epiphany, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit Monday,
Corpus Christii, Assumption Day, German Unity Day, All Saint's Day, Day of
Penance, Christmas Eve Holiday, Christmas Day, Boxing Day and New Year's
Holiday).
A "Toronto Banking Day" is every day except Saturdays, Sundays and holidays
observed by Toronto banks (scheduled holidays for 1997 are New Year's Day, Good
Friday, Easter Monday, Victoria Day, Canada Day, Labour Day, Thanksgiving,
Remembrance Day, Christmas Eve Holiday, Christmas Day and Boxing Day).
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HOW TO REDEEM FIVE ARROWS SHARES
Five Arrows shareholders will redeem their shares by contacting the Transfer
Agent directly in the manner specified in this prospectus. Subject to the right
of a Fund to make redemptions in kind under certain circumstances, all
redemption requests are treated as requests for redemption in the normal course
in the Fund's Designated Currency.
Redemptions of shares of a Fund will be effected on Trust Business Days in
accordance with the procedures set out below, and only when the wire system
designated for use in transmitting money from the relevant Fund permits the
timely transmission of redemption proceeds. Additionally, as for purchases of
shares, the Trust reserves the right to advance the times at which purchase and
redemption orders must be received (see section headed "How to Buy Five Arrows
Shares" above). Five Arrows shareholders will transmit redemption requests by
telephoning the Transfer Agent at 1-800-824-3863.
- - Redemption requests for shares of the U.S. Dollar Fund received prior to 11
a.m. U.S. Eastern Time on a Trust Business Day will settle on that same day
(or the next New York Banking Day if such Trust Business Day is not a New York
Banking Day).
- - Redemption requests for shares of the Canadian Dollar Fund received prior to
11 a.m. U.S. Eastern Time on a Trust Business Day will settle on that same day
(or the next Toronto Banking Day if such Trust Business Day is not a Toronto
Banking Day).
- - Redemption requests for shares of the Pound Sterling Fund received prior to 5
p.m. U.S. Eastern Time on a Trust Business Day will settle on the following
London Banking Day.
- - Redemption requests for shares of the Deutsche Mark Fund received prior to 10
a.m. U.S. Eastern Time on a Trust Business Day will settle on the following
Frankfurt Banking Day provided, however, that if such a Trust Business Day is
not a Frankfurt Banking Day, the redemption request will settle on the second
following Frankfurt Banking Day.
If a redemption request is not received prior to the applicable time listed
above, such request shall be deemed to have been received on the next following
Trust Business Day. Shareholders shall be entitled to any dividends declared or
income earned up to and including the day before the day on which the redemption
request is scheduled to settle.
If the Investment Adviser believes that market conditions exist which preclude
the Trust from making prompt payment in a Fund's Designated Currency, the Trust
can elect to take up to seven days to pay redemption proceeds or to pay
redemption proceeds wholly or partly in readily marketable portfolio securities.
The Trust is obligated to effect a redemption in currency without regard to
market conditions if requested by a shareholder redeeming no more than either
$250,000 (or in the applicable Designated Currency equivalent thereof) or 1% of
a Fund's net assets during any 90-day period.
Except as provided below, all redemptions in currency will be made by wire
transfer on the settlement day in the Designated Currency of the Fund whose
shares are being redeemed through a recognized electronic funds transfer system
which handles such Designated Currency. A charge of $20 (or the equivalent in
the relevant Fund's Designated Currency) against the shareholder's account will
be imposed for each wire redemption. Banks receiving
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redemption proceeds by wire may also impose a charge for doing so.
If a redemption request does not meet the minimum amount and other requirements
for sending currency through the electronic funds transfer system employed by
the Fund, redemption proceeds will be paid by check sent by mail. Each
shareholder may pre-designate one bank account per Fund to which redemption
proceeds can be directed.
When redemption proceeds are paid in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to currency. For
further information concerning redemptions in portfolio securities, shareholders
should telephone the Administrator. Redemption in portfolio securities will be
made by delivery to the shareholder, or to another party at the shareholder's
direction, of portfolio securities (together with a cash payment in the Fund's
Designated Currency equal to the value and in lieu of any fractional securities
required to be delivered) with a value determined at the time the redemption is
made to equal the aggregate net asset value of the Fund shares being redeemed
next determined following receipt of the redemption request.
To the extent permitted by applicable law, the right of redemption with respect
to a Fund may be suspended or the date of payment postponed for more than seven
days when trading in the markets in which the Fund's securities are traded is
restricted or for a period during which an emergency exists as a result of which
disposal by the Fund of its securities is not reasonably practicable or it is
not reasonably practicable for the Fund fairly to determine the value of its
assets. In addition, the right of redemption may be suspended or the date of
payment postponed for such other periods as the SEC by order may permit to
protect the Trust's shareholders.
The Trust will maintain a shareholder's account and the information contained in
the shareholder's Application Agreement in effect until the end of the calendar
year in which the redemption of all the shareholder's shares of the Funds
occurs. The Trust may thereafter require a shareholder to complete a new
Application Agreement in connection with a purchase of shares. This practice
permits a former shareholder to invest in shares of the Funds at any time during
the calendar year without completing a new Application Agreement.
The Trust reserves the right to redeem a shareholder's account at the Trust's
option, upon not less than 60 days' written notice to the shareholder, if for a
period of six months or more the account does not have in any Fund shares with a
net asset value equal to or greater than the Fund's Initial Investment Minimum.
During the 60-day period, a shareholder may avoid automatic redemption by
investing in any Fund an amount sufficient to increase the net asset value of
the account's shares of the Fund to the applicable Initial Investment Minimum.
Again, you should note that neither the Trust nor its service contractors will
be responsible for any loss or expense for acting upon telephone instructions
that are believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust will use procedures considered reasonable,
as described above.
HOW TO CHANGE FUNDS
A shareholder may change shares of one Fund into shares of another Fund by
redeeming
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shares of one Fund, converting the redemption proceeds into the Designated
Currency of another Fund and purchasing the shares of the other Fund with the
proceeds of the currency conversion. During the period between the net asset
value determination applicable to the shares being redeemed in one Fund and the
purchase of shares in another Fund, the shareholder will not be the owner of, or
be eligible to receive dividends with respect to, either the shares which have
been redeemed or the shares being acquired.
The length of time for completion of a Fund change will vary depending on the
Funds involved and the time during Trust Hours of Operation when the Fund change
is initiated. In general, the length of time for completion of a Fund change
will depend upon each of the time required to obtain payment of redemption
proceeds from the Fund whose shares are being redeemed and the time required to
effect any foreign exchange transaction which may be necessary for the
shareholder to obtain the currency of the Fund whose shares are being acquired.
The arrangements involved in effecting foreign exchange transactions will
depend, in part, on a shareholder's credit and operating relationships with the
foreign currency exchange dealer the shareholder uses and may shorten the length
of time required for completion of a Fund change. A shareholder is not required
to submit a new Application Agreement for the purchase of shares in connection
with a Fund change.
The Trust does not provide currency exchange services, either directly or
through its agents, and the selection of a foreign exchange dealer in connection
with a change of Funds is within the shareholder's sole discretion. The Trust
has been advised that The Chase Manhattan Bank's foreign exchange department is
available, at its customary currency conversion rates and fees and subject to
its customary credit and other requirements, to provide foreign exchange
services to shareholders changing Funds.
Fund changes may result in recognition of a taxable gain or loss. See
"Taxation."
TAXATION
The following discussion is only a summary of certain tax issues that may be of
interest to shareholders. All shareholders are urged to consult their tax
advisers for further information concerning the tax consequences of investing in
the Trust.
TAXATION OF THE TRUST
Under Subchapter M of the Internal Revenue Code, each Fund of the Trust is to be
treated as a separate corporation for U.S. Federal income tax purposes. It is
intended that each Fund will qualify for each fiscal year as a "regulated
investment company" under the Internal Revenue Code by complying with certain
requirements of the Internal Revenue Code regarding sources of income,
diversification of assets, and distribution of income to shareholders, although
no assurance can be given in this regard. As regulated investment companies, the
Funds will not be liable for U.S. Federal income taxes on the net investment
income and capital gain distributed to shareholders in accordance with the
applicable provisions of the Internal Revenue Code. Since it is intended that
each Fund will distribute all of its net income and net capital gain each year,
each Fund should avoid all U.S. Federal income taxes.
Under current law, the Trust does not anticipate that interest derived by the
Funds from sources outside the United States will be subject to non-U.S.
withholding taxes. To the
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extent any such withholding tax does arise, it may be possible to reduce or
eliminate it under the terms of applicable United States income tax treaties. If
it is subject to any such withholding tax, the Trust intends to undertake the
procedural steps required to claim the benefits of any such treaties. If any
non-U.S. taxes are paid by a Fund and, as is expected, more than 50% in value of
the Fund's total assets at the close of any taxable year consists of securities
of non-U.S. banks or corporations, the Fund may elect to treat any non-U.S.
taxes paid by it as paid by its shareholders with the consequences described
under "U.S. Federal Income Taxation of U.S. Shareholders" below.
Each Fund will determine its income in terms of its Designated Currency and, in
the case of each Fund other than the U.S. Dollar Fund, will translate its net
income for each year from its Designated Currency into U.S. dollars for U.S.
Federal income tax purposes. Under current Treasury regulations, regulated
investment companies are normally required to recognize for U.S. Federal income
tax purposes income or loss attributable to changes in exchange rates between
the U.S. dollar and the Fund's Designated Currency (i.e., currency gain or loss)
absent a ruling to the contrary from the Internal Revenue Service. Recognition
of currency gain in excess of currency loss in any given year would require the
affected Fund to pay dividends in excess of its interest income in order to pay
out all income as calculated for U.S. Federal income tax purposes. In reliance
upon a ruling from the Internal Revenue Service, the Trust calculates the income
of each Fund without recognizing currency gain or loss.
U.S. FEDERAL INCOME TAXATION OF
U.S. SHAREHOLDERS
Dividends paid by each Fund out of its net investment income and net realized
short-term capital gain, if any, are taxable to the U.S. shareholders of the
Fund (i.e., a United States corporation or an individual who is a citizen or
resident of the United States) as ordinary income. Dividends to corporate
shareholders will not be eligible for the dividends-received deduction. To the
extent that the Trust elects to declare certain dividends in October, November
or December and to distribute them to the shareholders the following January,
the dividends would be included in the income of the shareholders as if received
in December.
A U.S. shareholder of a Fund, other than the U.S. Dollar Fund, generally will
recognize gain or loss on a sale or redemption of shares (or on a change of
shares into shares in another Fund) in respect of any appreciation or
depreciation in the U.S. dollar-value of the shares from the time the shares are
acquired to the time of disposition. In general, that gain or loss will be
capital gain or loss. In addition, as discussed above, in the absence of the
continued availability of a ruling from the Internal Revenue Service, each Fund,
other than the U.S. Dollar Fund, would be required to recognize currency gain or
loss. Recognition by a Fund of currency gain in excess of currency loss in any
given year would result in the shareholders of that Fund recognizing ordinary
dividend income in addition to the daily dividends that are attributable to the
Fund's interest income. Any such additional dividends would increase a
shareholder's basis in the shares and would affect the shareholder's calculation
of capital gain or loss on disposition of the shares.
The Trust is required by U.S. Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to a non-corporate shareholder unless the shareholder
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certifies on its Application Agreement that the social security or tax
identification number provided is correct and that the shareholder is not
subject to 31% backup withholding for prior under-reporting to the Internal
Revenue Service.
Each Fund, other than the U.S. Dollar Fund, may be able to elect to pass-through
to its shareholders non-U.S. taxes paid by the Portfolio but does not currently
anticipate doing so. Shareholders of each Fund that so elects will be required
to include in income (in addition to any dividends the shareholders receive)
their proportionate shares of the amount of non-U.S. taxes paid by the Portfolio
and will be entitled to claim either a credit or a deduction for their shares of
such taxes in computing their U.S. Federal income tax liability. Availability of
such a credit or deduction is subject to certain limitations. Shareholders will
be informed each year in which a Fund makes such an election regarding the
amount and nature of non-U.S. taxes to be included in their income. Dividends
from a Fund will be considered to be from U.S. sources if an election to
pass-through non-U.S. taxes is not made. If such an election is made, dividends
from those Funds will be considered to be from non-U.S. sources for purposes of
computing the limitation of the Federal foreign tax credit.
Reports containing appropriate information with respect to the U.S. Federal
income tax status of dividends and distributions paid during the year by each
Fund will be mailed to shareholders shortly after the close of each year.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. SHAREHOLDERS
Non-U.S. shareholders who are not engaged in a U.S. trade or business or whose
distributions from a Fund are not effectively connected with the conduct of such
a trade or business will be generally subject to U.S. withholding tax at the
rate of 30% (or a lower rate under an applicable U.S. income tax treaty) on
dividends of net investment income received from the Trust (including for this
purpose any dividends deemed resulting from a Fund's election to treat non-U.S.
taxes paid by it as paid by its shareholders and, if the Funds are required to
recognize currency gain or loss, any dividends that a Fund, other than the U.S.
Dollar Fund, declares as a consequence of recognizing currency gain in excess of
currency loss for a particular year). Any gains realized from the redemption,
sale or exchange of shares will generally not be subject to U.S. tax for those
non-U.S. shareholders. In the case of individual shareholders who fail to
furnish the Trust with certain required certifications regarding their foreign
status, the Trust may be required to impose backup withholding of U.S. tax at
the rate of 31% on the proceeds of redemptions and exchanges.
If the dividends received from a Fund or gains realized upon the redemption,
exchange or other taxable disposition of Fund shares are effectively connected
with a U.S. trade or business of the shareholder, then all such dividends and
gains will be subject to U.S. Federal income tax at the graduated rates
applicable to U.S. shareholders, although the tax may be eliminated under the
terms of an applicable U.S. income tax treaty. Non- U.S. corporate shareholders
may also be subject to the U.S. branch profits tax in respect of those dividends
and gains.
Non-U.S. shareholders are advised to consult their tax advisers for further
information concerning the U.S. Federal and foreign tax consequences of
investing in the Trust.
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DIVIDENDS AND DISTRIBUTIONS
Dividends for each Fund are derived from the net investment of its corresponding
Portfolio, which flows from the interest that such Portfolio earns on the money
market and other instruments it holds. Dividends for each Fund are derived from
the net investment of its corresponding Portfolio, which flows from the interest
that such Portfolio earns on the money market and other instruments it holds.
Dividends on each share are determined in the same manner and are paid in the
same amount, regardless of class, except for such differences as are
attributable to differential class expenses.
Dividends will be declared daily and paid monthly with respect to shares of each
Fund. Generally, investors will receive dividends on shares from (and including)
the day upon which their purchase is effective to (but not including) the day
upon which their redemption is effective. See "How to Buy Five Arrows Shares"
and "How to Redeem Five Arrows Shares."
Dividends from each Fund are automatically reinvested in additional shares of
that Fund at net asset value.
PERFORMANCE
U.S. DOLLAR FUND
From time to time, the Trust may publish the "yield" and "effective yield" for
the U.S. Dollar Fund. Both yield figures are based on historical earnings and
are not intended to indicate future performance.
The U.S. Dollar Fund's yield is a way of showing the rate of income the Fund
earns on its investments as a percentage of the Fund's share price. To calculate
yield, the Fund takes the interest income it earned from its Fund of investments
for a 7-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of that period.
The "effective yield" is calculated in a similar manner, 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.
ALL OTHER FUNDS
From time to time, the Trust may publish the "current yield" and "total return"
for the Pound Sterling, Deutsche Mark and Canadian Dollar Funds. Both
calculations are based upon historical earnings and are not intended to indicate
future performances.
Current yield refers to a Fund's annualized net investment income per share over
a 30-day period, expressed as a percentage of the net asset value per share at
the end of the period. For purposes of calculating current yield, the amount of
net investment income per share during that 30-day period, computed in
accordance with regulatory requirements, is compounded by assuming that it is
reinvested at a constant rate over a six-month period. An identical result is
then assumed to have occurred during a second six-month period which, when added
to the result of the first six months, provides an "annualized" yield for an
entire one-year period. Calculations of current yield may reflect absorbed
expenses pursuant to any undertaking that may be in effect. See "Management."
Total return is computed on a per share basis and assumes the reinvestment of
dividends and
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distributions. Total return generally is expressed as a percentage rate which is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return.
To the extent consistent with applicable law, the Trust may also publish other
measures of the historical investment performance of the Pound Sterling,
Deutsche Mark and Canadian Dollar Funds, including 7-day yield information,
calculated in the manner described above with respect to the U.S. Dollar Fund.
Performance will vary from time to time and past results are not necessarily
representative of future results. You should remember that performance is a
function of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses. Performance information, such
as that described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
Comparative performance information may be used from time to time in advertising
or marketing the Fund's shares, including data from Lipper Analytical Services,
Inc., Standard & Poor's, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
ORGANIZATION
The Trust was organized as a Delaware business trust on August 13, 1996. The
Trust is authorized to issue an unlimited number of shares of beneficial
interest, par value of $.0001 per share. The Board of Trustees may, without
shareholder approval, divide the authorized stock into an unlimited number of
separate series, and the costs of doing so will be borne by the Trust.
Currently, the Board of Trustees has authorized four Funds.
Shares issued by the Funds have no preemptive, conversion or subscription
rights. Shareholders of a Fund have equal and exclusive rights to dividends and
distributions declared by that Fund and to the net assets of that Fund upon
liquidation or dissolution, except for such differences as are attributable to
differential class expenses. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in any election of Trustees can,
if they choose to do so, elect all of the Trustees. All shares when issued in
accordance with the terms of this Prospectus will be fully paid and
nonassessable.
The Trust is not required to hold annual meetings of shareholders. Special
meetings of shareholders may be called from time to time for purposes such as
electing or removing Trustees, changing a fundamental policy or approving an
investment advisory agreement.
If less than two-thirds of the Trustees holding office have been elected by
shareholders, a special meeting of shareholders of the Trust will be called to
elect Trustees. Under the Trust's Master Trust Agreement and the 1940 Act, the
record holders of not less than two-thirds of the outstanding shares of the
Trust may remove a Trustee by votes cast in person or by proxy at a meeting
called for that purpose or by a written declaration filed with the Trust's
custodian bank. Except as described above, the Trustees will continue to hold
office and may appoint successor Trustees. Whenever ten or more shareholders of
the Trust who have been such for at least six months, and who hold in the
aggregate shares having a net asset value
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of at least $25,000 or which represent at least 1% of the outstanding shares,
whichever is less, apply to the Trustees in writing stating that they wish to
communicate with other shareholders with a view to obtaining signatures to
request a meeting, and such application is accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five (5) Trust Business Days after receipt of such application either afford to
such applicants access to a list of the names and addresses of all shareholders
as recorded on the books of the Trust; or inform such applicants as to the
approximate number of shareholders of record and the approximate cost of mailing
to them the proposed communication or form of request.
The Portfolios, in which all the Investable Assets of the Funds are invested,
are series of the Portfolio Trust, which is an open-end management investment
company. The Portfolio Trust's Master Trust Agreement provides that the
Portfolio Trust may establish and designate separate series of the Portfolio
Trust. The Portfolio Trust has established four series and may establish
additional series at any time. No series of the Portfolio Trust has any
preference over any other series.
Investors in other series of the Portfolio Trust will not be involved in any
vote involving only Portfolios in which they do not invest. Investors of all of
the series of the Portfolio Trust will, however, vote together to elect Trustees
of the Portfolio Trust and for certain other matters affecting the Portfolio
Trust. As provided by the 1940 Act, under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.
Inquiries concerning the Funds should be made by contacting the Administrator at
the address stated herein or by telephoning 1-800-499-3603.
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INVESTMENT ADVISER:
Rothschild International Asset Management Limited
Five Arrows House, St. Swithin's Lane
London EC4N 8NR United Kingdom
DISTRIBUTOR:
Five Arrows Fund Distributors Inc.
3435 Stelzer Road
Columbus, OH 43219-3035
ADMINISTRATOR:
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, OH 43219-3035
TRANSFER AGENT:
BISYS Fund Services, Inc.
100 First Avenue, Suite 300
Pittsburgh, PA 15222
CUSTODIAN:
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
AUDITORS:
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
COUNSEL:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND (AND ALLOCATED PORTFOLIO) FEES AND
EXPENSES...................................... 2
SUMMARY......................................... 3
DESCRIPTION OF THE TRUST AND PORTFOLIO TRUST.... 4
INVESTMENT OBJECTIVES........................... 5
INVESTMENT POLICIES AND RESTRICTIONS............ 5
U.S. DOLLAR PORTFOLIO......................... 5
POUND STERLING PORTFOLIO...................... 6
DEUTSCHE MARK PORTFOLIO....................... 7
CANADIAN DOLLAR PORTFOLIO..................... 7
ALL PORTFOLIOS................................ 8
FUNDAMENTAL POLICIES.......................... 9
SPECIAL INVESTMENT CONSIDERATIONS AND RISK
FACTORS....................................... 10
INFORMATION CONCERNING THE MASTER-FEEDER FUND
STRUCTURE..................................... 12
MANAGEMENT...................................... 13
CALCULATION OF NET ASSET VALUE.................. 16
HOW TO BUY FIVE ARROWS SHARES................... 17
HOW TO REDEEM FIVE ARROWS SHARES................ 20
HOW TO CHANGE FUNDS............................. 22
TAXATION........................................ 22
DIVIDENDS AND DISTRIBUTIONS..................... 25
PERFORMANCE..................................... 25
GENERAL INFORMATION............................. 26
</TABLE>
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 FUND'S 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 OF ANY FUND'S SHARES IN ANY STATE IN WHICH, OR TO ANY PERSON
TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
FIVE ARROWS SHORT-TERM
INVESTMENT TRUST
FIVE ARROW SHARES
ROTHSCHILD INTERNATIONAL
ASSET MANAGEMENT LIMITED
INVESTMENT ADVISER
PROSPECTUS DATED
FEBRUARY 3, 1997
<PAGE> 33
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
FIVE ARROWS SERVICE SHARES
Five Arrows Short-Term Investment Trust (the "Trust") is an open-end management
investment company designed to offer investors a selection of four separate
funds (the "Funds"): the U.S. Dollar Fund, the Pound Sterling Fund, the Deutsche
Mark Fund, and the Canadian Dollar Fund.
Each Fund seeks to maintain a high level of liquidity, to preserve capital and
stability of principal expressed in the Fund's designated currency ("Designated
Currency") and, consistent with those objectives, to earn current income. Unlike
other mutual funds which acquire and manage their own portfolios of securities,
each Fund seeks to achieve its investment objective by investing all of its
investable assets ("Investable Assets") in a portfolio which is a series of the
International Currency Fund (the "Portfolio Trust") which invests in high
quality, short-term instruments denominated in the Designated Currency of the
relevant Fund. See "Information Concerning the Master-Feeder Structure" on page
12. The Portfolio Trust is also an open-end management investment company which
currently consists of four separate portfolios (the "Portfolios"): the U.S.
Dollar Portfolio, the Pound Sterling Portfolio, the Deutsche Mark Portfolio, and
the Canadian Dollar Portfolio.
The Trust seeks to maintain a constant net asset value expressed in the
Designated Currency for each Fund. Accordingly, the Trust invests only in
securities with short remaining maturities and generally values its securities
at their amortized cost. ONLY THE U.S. DOLLAR FUND IS A "MONEY MARKET FUND"
UNDER REGULATIONS ADOPTED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC").
NONE OF THE OTHER FUNDS IS A "MONEY MARKET FUND" UNDER THOSE REGULATIONS. The
net asset value of a Fund's shares, when expressed in a currency other than the
Fund's Designated Currency, will fluctuate, primarily in response to changes in
currency exchange rates between the Fund's Designated Currency and other
currencies, including other Designated Currencies.
The Funds are designed primarily for use as a means of investing short-term cash
reserves in the Funds' Designated Currencies. Investors may also consider
purchasing Fund shares for a number of reasons including satisfying settlement
obligations or delivering a Fund's shares as collateral for a transactional
obligation in a Fund's Designated Currency. Each Fund offers two classes of
shares. The shares offered by this Prospectus are the Five Arrows Service
shares, which are available for purchase through certain broker-dealers and
other authorized institutions ("Authorized Firms"). In addition, the Fund offers
by separate Prospectus the Five Arrows shares, which are available for direct
purchase in initial aggregate amounts of $500,000 or more.
AN INVESTMENT IN THE TRUST IS NOT A BANK DEPOSIT OR AN OBLIGATION OF ROTHSCHILD
INTERNATIONAL ASSET MANAGEMENT LIMITED OR ANY OF ITS AFFILIATES AND IS NEITHER
GUARANTEED NOR INSURED BY THE UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE SYSTEM OR ANY OTHER AGENCY OF THE
UNITED STATES GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE
TO MAINTAIN A CONSTANT NET ASSET VALUE PER SHARE. INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. IN
ADDITION, THE DIVIDENDS PAID BY A FUND WILL GO UP AND DOWN.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FIVE ARROWS SERVICE
SHARES OF THE TRUST AND EACH FUND THAT AN INVESTOR SHOULD KNOW BEFORE INVESTING.
IT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 3, 1997, AND AS IT MAY BE
FURTHER AMENDED FROM TIME TO TIME, WHICH PROVIDES FURTHER DISCUSSION OF CERTAIN
ITEMS IN THIS PROSPECTUS AND OTHER MATTERS, HAS BEEN FILED WITH THE SEC AND IS
INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, CALL 1-800-499-3603 OR WRITE
TO THE TRUST AT THE ADDRESS FOR THE TRUST'S DISTRIBUTOR LISTED HEREIN.
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.
The date of this Prospectus is February 3, 1997.
<PAGE> 34
[ROTH LOGO]
FUND (AND ALLOCATED PORTFOLIO) FEES AND EXPENSES
FIVE ARROWS SERVICE SHARES
ALL FUNDS
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases.................................................................... None
Maximum sales load imposed on reinvested dividends......................................................... None
Redemption fees............................................................................................ None
Exchange fees.............................................................................................. None
</TABLE>
<TABLE>
<CAPTION>
ADVISORY 12B-1 OTHER TOTAL FUND
FEES FEE(1)(3) EXPENSES EXPENSES(2)(3)
------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AND NET OF REIMBURSEMENTS)
U.S. Dollar..................................................... .20% .35% .075% .625%
Pound Sterling.................................................. .20% .35% .15% .70%
Deutsche Mark................................................... .20% .35% .15% .70%
Canadian Dollar................................................. .20% .35% .15% .70%
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------------- --------------
<S> <C> <C> <C> <C>
EXPENSES PER 1,000 SHARE INVESTMENT
U.S. Dollar.................................................................................. $6 $20
Pound Sterling............................................................................... L7 L22
Deutsche Mark................................................................................ DM7 DM22
Canadian Dollar.............................................................................. C$7 C$22
</TABLE>
Assuming a hypothetical investment of U.S. $1,000, L1,000, DM1,000, or C$1,000
with a 5% annual return and redemption at the end of each time period, an
investor in the Trust will have paid transaction and operating expenses over the
time period as indicated above.
1. The Trust's 12b-1 Plan provides for payments to the Distributor of up to .50%
of the average daily net asset value of the Five Arrows Service class of each
Fund. Of this total, .25% represents a service fee and any remaining amount
represents a distribution fee. The Distributor has voluntarily agreed to
waive a portion of these payments so that the total amount paid under the
12b-1 Plan does not exceed 0.35% (on an annual basis) of the average daily
net asset value of the Five Arrows Service class of any Fund.
2. The Investment Adviser has voluntarily agreed to reimburse such portion of
its advisory fee as is necessary to cause the annualized total expenses of
each class of a Fund not to exceed (on an annual basis) a specified
percentage of such class' average daily net asset value (.625% in the case of
the Five Arrows Service class of the U.S. Dollar Fund and .70% in the case of
the Five Arrows Service class of each other Fund). If this reimbursement is
not sufficient to cause the total expenses of any Fund not to exceed the
applicable percentage of average daily net asset value, the Investment
Adviser has agreed to pay such other expenses of the applicable Fund as is
necessary to keep total expenses from exceeding the applicable percentage.
3. The foregoing undertakings shall remain in effect for the fiscal period
ending December 31, 1997, and thereafter in the discretion of the Distributor
and the Investment Adviser, respectively. The Distributor and the Investment
Adviser have reserved the right to terminate or revise their respective
undertakings with respect to any period after December 31, 1997. To the
extent 12b-1 fees are waived by the Distributor, investment management fees
are reimbursed by the Investment Adviser, or expenses of a Fund are paid by
the Investment Adviser, the total return to shareholders will increase. Total
return to shareholder will decrease to the extent that such undertakings are
no longer in effect.
The above table of fees and expenses is provided to assist investors in
understanding the various costs and expenses which may be borne directly or
indirectly by investors in the Funds. The Trust does not charge a sales load in
connection with the purchase or redemption of its shares. The percentages shown
above are based on an annualized estimate of the expenses to be incurred during
the current fiscal year, after expense reimbursements, and should not be
considered a representation of future costs and expenses or performance. Actual
costs and expenses or performance in future periods may be more or less than
those shown above. For the purpose of the example, assume reinvestment of all
dividends and distributions. The table does not reflect charges for optional
services, such as the fee for remittance of redemption proceeds by wire. For a
more complete discussion of the fees connected with an investment in the Trust
and the services provided to the Trust, see "Management", "How to Buy Five
Arrows Service Shares" and "How to Redeem Five Arrows Service Shares."
Authorized Firms acting on behalf of their clients may impose additional fees
upon an investor such as account maintenance fees, compensating balance
requirements, or fees based upon account transactions, assets or income.
The Funds invest all of their Investable Assets in the Portfolios. The Trustees
of the Trust believe that, over time, the aggregate per share expenses of each
Fund and its corresponding Portfolio should be approximately equal to, or less
than, the per share expenses the Fund would incur if the Fund were instead to
retain the services of an investment adviser and its assets were invested
directly in the type of securities being held by the Portfolios.
2
<PAGE> 35
[ROTH LOGO]
SUMMARY
The investment objectives of each Fund are to seek to maintain a high level of
liquidity, to preserve capital and stability of principal expressed in the
Fund's Designated Currency and, consistent with those objectives, to earn
current income. A Fund's investment objectives are fundamental and may not be
changed without the approval of its shareholders. Each Fund will seek to achieve
its investment objectives by investing all of its Investable Assets in a
Portfolio which has the same investment objectives as such Fund. There can be no
assurance that the investment objectives of either the Funds or the Portfolios
will be achieved. (See "Investment Objectives" and "Investment Policies and
Restrictions.") An investment in shares of any of the Funds involves certain
risks, as discussed below, and may not be appropriate for all investors.
The Funds are designed primarily for use as a means of investing short-term cash
reserves in the Funds' Designated Currencies. Investors may also consider
purchasing Fund shares for a number of reasons including satisfying settlement
obligations or delivering a Fund's shares as collateral for a transactional
obligation in a Fund's Designated Currency.
Rothschild International Asset Management Limited (the "Investment Adviser")
manages the Portfolio Trust's Portfolios and receives an advisory fee from each
Portfolio calculated daily and payable monthly at an annual rate of up to .20%
of average daily net assets of such Portfolio.
BISYS Fund Services Limited Partnership (the "Administrator") acts as the
administrator of the Trust and Portfolio Trust. Its affiliates, Five Arrows Fund
Distributors Inc. (the "Distributor") and BISYS Fund Services, Inc. (the
"Transfer Agent"), act as the distributor and transfer/dividend disbursing agent
of the Trust, respectively, and The Chase Manhattan Bank acts as custodian (the
"Custodian") of the Trust and the Portfolio Trust. See "Management."
The Trust and Portfolio Trust bear all operating costs not agreed to be borne by
the Investment Adviser, the Distributor, the Administrator, the Transfer Agent
or the Custodian including, without limitation, legal and auditing fees and
expenses, expenses of investor reports to be provided to existing shareholders;
registration and reporting fees and expenses; and Trustees' fees and expenses.
The Investment Adviser has voluntarily agreed to reimburse such portion of its
advisory fee as is necessary to cause the annualized total expenses of each
class of a Fund not to exceed a specified percentage of such class' average
daily net asset value (.625% in the case of the Five Arrows Service class of the
U.S. Dollar Fund and .70% in the case of the Five Arrows Service class of each
other Fund). If this reimbursement is not sufficient to cause total expenses of
any Fund not to exceed the applicable percentage of average daily net asset
value, the Investment Adviser has agreed to pay such other expenses of the
applicable Fund as is necessary to keep total expense from exceeding the
applicable percentage. The foregoing undertaking shall remain in effect for the
fiscal period ending December 31, 1997, and thereafter in the discretion of the
Investment Adviser. The Investment Adviser has reserved the right to terminate
or revise this undertaking with respect to any period after December 31, 1997.
Five Arrows Service shares will be issued at the net asset value next determined
after receipt by the Trust of an order in proper form and acceptance of that
order by the Trust. The Trust reserves the right to take appropriate action in
the event that Disbursable Funds (as defined
3
<PAGE> 36
[ROTH LOGO]
below) for the purchase price for the shares being issued are not received on a
timely basis. Disbursable Funds may only be received by the Trust during the
operating times for the wire transmission systems designated for use in
transmitting money to the Funds. The Trust has adopted a Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act")
which provides for the payment to the Distributor of up to .50% of the average
daily net asset value of the Five Arrows Service class of each Fund in order to
finance distribution and shareholder servicing activities. The Distributor has
voluntarily agreed to waive such portion of such payments as is necessary to
cause the annualized 12b-1 fee not to exceed 0.35% of the average daily net
asset value of the Five Arrows Service class of any Fund. This undertaking shall
remain in effect for the fiscal period ending December 31, 1997, and thereafter
in the discretion of the Distributor. The Distributor has reserved the right to
terminate or revise this undertaking with respect to any period after December
31, 1997.
The Trust seeks to maintain a constant net asset value per share for each Fund,
although no assurances can be given that those per share values will be
maintained. Shares of a Fund may be redeemed by the shareholder from the Trust
at their next-determined net asset value. Each Fund is open for business on any
day on which the New York Stock Exchange (the "Exchange") is open for trading or
banks in New York City are open for business (a "Trust Business Day") from 9:00
a.m. to 5:00 p.m. U.S. Eastern Time ("Trust Hours of Operation"). Thus, the
Trust will be open for business every day except for Saturdays, Sundays, and
holidays which are observed by both the Exchange and New York City banks
(scheduled holidays for 1997 are New Year's Day, President's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). The value of
the investments held by each Fund is determined in its Designated Currency once
every 24 hours during Trust Hours of Operation. See "Calculation of Net Asset
Value" and "How to Redeem Five Arrows Service Shares."
Dividends of each Fund's net investment income are declared once a day and paid
monthly. Net capital gains, if any, realized by a Fund will be distributed
annually. Dividends paid by a Fund will be automatically reinvested in
additional shares of the Fund. See "Dividends and Distributions" and "Taxation."
DESCRIPTION OF THE TRUST AND PORTFOLIO TRUST
The Trust is a newly-formed open-end management investment company, registered
under the 1940 Act. Under the terms of the Master Trust Agreement establishing
the Trust, which is governed by the laws of Delaware, the Trustees of the Trust
are ultimately responsible for the management of the Funds' business and
affairs. The Trust is currently authorized to offer four individual Funds, each
of which represents a separate series of the Trust's shares of beneficial
interest. The Trust's Board of Trustees is empowered to establish additional
Funds at any time without shareholder approval. The Trustees have authorized
shares of the Fund to be issued in two classes: Five Arrows and Five Arrows
Service. Because expenses will vary between the classes, performance will vary
with respect to each class. Except for differences related to such differential
expenses, each share of a Fund has equal dividend, redemption and liquidation
rights with other shares of such Fund. Each share purchased in compliance with
the procedures
4
<PAGE> 37
[ROTH LOGO]
established by the Trust will be fully paid and nonassessable.
Each Portfolio is a newly-formed separate investment series of the Portfolio
Trust, a newly-formed business trust organized under the laws of the State of
Delaware, and intends to be treated as a partnership for federal tax purposes.
Under the terms of the Portfolio Trust's Master Trust Agreement, the affairs of
the Portfolios are managed under the supervision of the Trustees of the
Portfolio Trust.
The net asset value of a Fund's shares, when expressed in any currency other
than the Fund's Designated Currency, will fluctuate in response to changes in
the exchange rates between the Fund's Designated Currency and other currencies,
including the Designated Currencies of other Funds.
INVESTMENT OBJECTIVES
The investment objectives of each Fund are to seek to maintain a high level of
liquidity, preserve capital and stability of principal expressed in the Fund's
Designated Currency and, consistent with those objectives, to earn current
income. A Fund's investment objectives are fundamental and may not be changed
without the approval of its shareholders.
Each Fund will seek to achieve its investment objectives by investing all of its
Investable Assets in a Portfolio which has the same investment objectives as
such Fund. The investment objectives of the Portfolios are not fundamental and
may be changed upon notice to, but without the approval of, the Portfolios'
investors. There can be no assurance that the investment objectives of either
the Funds or the Portfolios will be achieved.
Since the investment characteristics of the Funds will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolios. Except as otherwise provided below,
the Funds' investment policies are not "fundamental policies" within the meaning
of the 1940 Act and may, therefore, be changed by the Trust's Board of Trustees
without a shareholder vote.
INVESTMENT POLICIES AND RESTRICTIONS
U.S. DOLLAR PORTFOLIO
The U.S. Dollar Portfolio's investment objective is to seek to maintain a high
level of liquidity, to preserve capital and stability of principal expressed in
U.S. Dollars and, consistent with those objectives, to earn current income. The
U.S. Dollar Portfolio will invest in securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities or by foreign governments or Supranational Organizations (such
as the World Bank, the Inter-American Development Bank, the Asian Development
Bank and the European Bank for Reconstruction and Development) as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances, and such short-term corporate debt securities as
commercial paper, and master demand notes.
The U.S. Dollar Portfolio invests only in U.S. dollar-denominated high quality
securities as described in this paragraph. All of the U.S. Dollar Portfolio's
assets will consist of government securities and "first tier" eligible
securities as defined in Rule 2a-7 under the 1940 Act, which have been (i) rated
by at least two United States nationally recognized statistical rating
organizations ("NRSRO"s), such as Standard & Poor's Corporation or Moody's
5
<PAGE> 38
[ROTH LOGO]
Investors Service, Inc., in the highest rating category for short-term
obligations (or so rated by one such organization if it alone has rated the
security), (ii) issued by an issuer with comparable short-term obligations that
are rated in the highest rating category, or (iii) if unrated, determined to be
comparable to such securities. See the Statement of Additional Information.
All securities in which the U.S. Dollar Portfolio invests have remaining
maturities of thirteen months or less at the date of acquisition. The U.S.
Dollar Portfolio also maintains a dollar-weighted average portfolio maturity of
90 days or less. The U.S. Dollar Portfolio follows these policies in seeking to
maintain a constant net asset value of $1.00 per share, although there is no
assurance it can do so on a continuing basis.
The U.S. Dollar Portfolio may invest in U.S. dollar-denominated high quality
corporate debt securities such as commercial paper and bonds and long-term
unsecured debentures with remaining maturities of thirteen months or less. These
investments may include, for example, obligations issued by U.S. and foreign
corporations, Eurodollar bonds (which are U.S. dollar-denominated obligations of
foreign issuers), and Yankee bonds (which are U.S. dollar-denominated bonds
issued by foreign issuers in the U.S.). Under normal market conditions, the U.S.
Dollar Portfolio will have more than 25% of its total assets invested in the
obligations of issuers in the banking industry. See "Special Investment
Considerations and Risk Factors--Concentration in Obligations of Qualifying
Banks." For further information concerning debt securities ratings and
permissible money market investments of the U.S. Dollar Portfolio, see the
Statement of Additional Information.
Securities issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities in which the U.S. Dollar
Portfolio may invest include direct obligations of the U.S. Treasury, including
bills, bonds and notes; and obligations issued or guaranteed as to principal and
interest by U.S. Government agencies or instrumentalities and supported by any
of (i) the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association participation certificates); (ii) the right of the issuer
to borrow a limited amount from the U.S. Treasury (e.g., securities of the
Farmers Home Administration); (iii) the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality
(e.g., securities of the Federal National Mortgage Association); or (iv) the
credit of the agency or instrumentality (e.g., securities of a Federal Home Loan
Bank).
POUND STERLING PORTFOLIO
The Pound Sterling Portfolio's investment objective is to seek to maintain a
high level of liquidity, to preserve capital and stability of principal
expressed in Pounds Sterling and, consistent with those objectives, to earn
current income. The Pound Sterling Portfolio will invest in securities issued or
guaranteed as to principal and interest by the United Kingdom ("U.K.")
Government, local authorities, city corporations and county councils or their
agencies or by non-U.K. governments or Supranational Organizations as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances and such short-term corporate debt securities as
commercial paper.
The Pound Sterling Portfolio invests only in Pound Sterling-denominated high
quality securities as described in this paragraph. The
6
<PAGE> 39
[ROTH LOGO]
Pound Sterling Portfolio assets will consist of government securities and other
securities, which have been (i) rated by at least two NRSROs in the highest
rating category for short-term obligations (or so rated by one such organization
if it alone has rated the security), (ii) issued by an issuer with comparable
short-term obligations that are rated in the highest rating category, or (iii)
if unrated, determined to be comparable to such securities.
All securities in which the Pound Sterling Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Pound Sterling
Portfolio follows these policies in seeking to maintain a constant net asset
value of L1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Pound Sterling Portfolio may invest in Pound Sterling-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Pound Sterling Portfolio will have more than
25% of its total assets invested in the obligations of issuers in the banking
industry. See "Special Investment Considerations and Risk Factors--Concentration
in Obligations of Qualifying Banks."
DEUTSCHE MARK PORTFOLIO
The Deutsche Mark Portfolio's investment objective is to seek to maintain a high
level of liquidity, to preserve capital and stability of principal expressed in
Deutsche Marks and, consistent with those objectives, to earn current income.
The Deutsche Mark Portfolio will invest in securities issued or guaranteed as to
principal and interest by the German Government, by its sub-divisions or their
agencies or by non-German governments or Supranational Organizations, as well as
high-quality, short-term money market instruments such as bank certificates of
deposit and such short-term corporate debt securities as commercial paper.
The Deutsche Mark Portfolio invests only in Deutsche Mark-denominated high
quality securities as described in this paragraph. The Deutsche Mark Portfolio's
assets will consist of government securities and other securities, which have
been (i) rated by at least two NRSROs in the highest rating category for
short-term obligations (or so rated by one such organization if it alone has
rated the security), (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category, or (iii) if unrated,
determined to be comparable to such securities.
All securities in which the Deutsche Mark Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Deutsche Mark
Portfolio follows these policies in seeking to maintain a constant net asset
value of DM1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Deutsche Mark Portfolio may invest in Deutsche Mark-denominated high quality
corporate debt securities such as commercial paper and bonds and long-term
unsecured debentures with remaining maturities of 60 days or less. Under normal
market conditions, the Deutsche Mark Portfolio will have more than 25% of its
total assets invested in the obligations of issuers in the banking industry. See
"Special Investment Considerations and Risk Factors--Concentration in
Obligations of Qualifying Banks."
CANADIAN DOLLAR PORTFOLIO
The Canadian Dollar Portfolio's investment objective is to seek to maintain a
high level of liquidity, to preserve capital and stability of principal
expressed in Canadian Dollars and,
7
<PAGE> 40
[ROTH LOGO]
consistent with those objectives, to earn current income. The Canadian Dollar
Portfolio will invest in securities issued or guaranteed as to principal and
interest by the Canadian Government, the Provinces of Canada, or their agencies
or by non-Canadian governments or Supranational Organizations as well as high-
quality, short-term money market instruments such as bank certificates of
deposit and such short-term corporate debt securities as commercial paper and
master demand notes.
The Canadian Dollar Portfolio invests only in Canadian Dollar-denominated
high-quality securities as described in this paragraph. The Canadian Dollar
Portfolio's assets will consist of government securities and other securities
which have been (i) rated by at least two NRSROs in the highest rating category
for short-term obligations (or so rated by one such organization if it alone has
rated the security), (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category by an NRSRO, or (iii)
if not rated by an NRSRO, determined to be comparable to such securities.
Presently many high-quality Canadian Dollar-denominated securities are rated
only by one or more Canadian rating organizations, rather than by the U.S.
rating organizations which qualify as NRSROs. Accordingly, the Adviser
anticipates that many of the securities held by the Canadian Dollar Portfolio
will be securities which are not rated by an NRSRO but are determined to be
comparable to high-quality NRSRO-rated securities. In making this determination
the Adviser may rely upon ratings given by one or more Canadian rating
organizations. For further information concerning the ratings given by Canadian
rating organizations, see the Statement of Additional Information.
All securities in which the Canadian Dollar Portfolio invests have remaining
maturities of 60 days or less at the date of acquisition. The Canadian Dollar
Portfolio follows these policies in seeking to maintain a constant net asset
value of C$1.00 per share, although there is no assurance it can do so on a
continuing basis.
The Canadian Dollar Portfolio may invest in Canadian Dollar-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Canadian Dollar Portfolio will have more
than 25% of its total assets invested in the obligations of issuers in the
banking industry. See "Special Investment Considerations and Risk
Factors--Concentration in Obligations of Qualifying Banks."
ALL PORTFOLIOS
In seeking to obtain its investment objectives, each Portfolio may invest in the
types of securities described below.
VARIABLE AND FLOATING RATE NOTES
Each Portfolio may purchase variable and floating rate instruments. These
instruments may include variable amount master demand notes, which are
instruments under which the indebtedness, as well as the interest rate, varies.
These securities must have the requisite credit quality (as described above) in
order to be eligible for purchase by a Portfolio. Unless guaranteed by the U.S.
Government or one of its agencies or instrumentalities, variable or floating
rate instruments purchased by the U.S. Dollar Portfolio must permit such
Portfolio to demand payment of the instrument's principal at least once every
thirteen months. Variable or floating rate instruments purchased by each of the
other Portfolios must permit such Portfolio to demand payment of the
instrument's principal at least once every 60 days. Because
8
<PAGE> 41
[ROTH LOGO]
of the absence of a market in which to resell a variable or floating rate
instrument, a Portfolio might have trouble selling an instrument should the
issuer default or during periods when a Portfolio is not permitted by agreement
to demand payment of the instrument, and for this or other reasons a loss could
occur with respect to the instrument.
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements. A repurchase agreement
arises when an investor purchases a security and simultaneously agrees to resell
it to the counterparty on the repurchase agreement at an agreed-upon future
date, normally one day or a few days later. The resale price is greater than the
purchase price, reflecting an agreed-upon rate which is effective for the period
of time the investor's money is invested in the security and which is not
related to the coupon rate on the purchased security. By providing a flexible
investment vehicle, repurchase agreements permit the Portfolios to remain fully
invested pending the purchase of appropriate longer-term investments.
The Portfolios will enter into repurchase agreements only with financial
institutions rated by an NRSRO in the highest rating category for short-term
obligations and deemed to be creditworthy by the Investment Adviser, pursuant to
guidelines established by the Portfolio Trust's Board of Trustees. During the
term of any repurchase agreement, the Investment Adviser will monitor the
creditworthiness of the seller, and the seller must maintain the value of the
securities subject to the agreement in an amount that is greater than the
repurchase price. Default or bankruptcy of the seller would, however, expose the
Portfolios to possible loss because of adverse market action or delays in
connection with the disposition of the underlying obligations. Because of the
seller's repurchase obligations, the securities subject to repurchase agreements
do not have maturity limitations.
WHEN-ISSUED SECURITIES
Each Portfolio may purchase when-issued debt securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve the relevant Portfolio's investment objective and not for leverage.
The when-issued trading period generally lasts only from a few days up to a
month or more; during this period interest will not accrue. Such transactions
may involve a risk of loss if the value of the securities falls below the price
committed to prior to actual issuance. The Custodian will establish a segregated
account for a Portfolio when it purchases securities on a when-issued basis
consisting of cash or liquid securities equal to the amount of the when-issued
commitments.
ILLIQUID SECURITIES
Each Portfolio may invest up to 10% of its net assets in illiquid securities
(i.e. securities which a Portfolio could not reasonably expect to sell within
seven days at approximately the price at which they are valued). Under the
supervision of the Portfolio Trust's Board of Trustees the Investment Adviser
will determine the liquidity of each investment using various factors such as
(1) the frequency of trades and quotations, (2) the number of dealers and
prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender features)
and (5) the likeli-
hood of continued marketability and credit quality of the issuer. If they have a
remaining maturity of more than seven days, time deposits and repurchase
agreements will be considered to be illiquid securities.
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FUNDAMENTAL POLICIES
Each of the Funds and the Portfolios have adopted certain fundamental policies
which may not be changed without the approval of that Fund's shareholders or
that Portfolios' investors, as the case may be.
The Funds have the same investment restrictions as the Portfolios, except that
each Fund may invest all of its Investable Assets in an open-end management
investment company with substantially the same investment objectives as that
Fund. Therefore, references below to the Portfolios' investment restrictions
also include the Funds' investment restrictions. In addition, as a fundamental
policy, no Portfolio may: (i) borrow money, except from the Portfolio Trust's
Custodian or from other banks in connection with redemptions or for temporary or
emergency purposes (borrowings by a Portfolio may not exceed 20% of that
Portfolio's net assets computed immediately after the borrowing; no additional
investments may be made while any borrowings exceed 5% of the Portfolio's total
assets), or (ii) make any investment which would cause more than 25% of the
value of such Portfolio's total assets to be invested in securities of
nongovernmental issuers principally engaged in any one industry, except that
under normal market conditions each Portfolio will invest more than 25% of its
total assets in obligations of Qualifying Banks (as defined herein). Additional
fundamental policies of the Portfolios are set forth in the Statement of
Additional Information.
If a percentage restriction, including one that is a fundamental policy, 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
that restriction.
SPECIAL INVESTMENT CONSIDERATIONS AND RISK FACTORS
POSSIBLE CHANGES IN NET ASSET VALUE AND YIELD
Each Portfolio seeks to maintain a constant net asset value and generally values
its investments at amortized cost. However, the value of each Portfolio may be
affected by changes in interest rates and the credit standing of issuers of the
Portfolios' investments. The value of the investments held by each of the
Portfolios in which the Funds invest generally will vary inversely with changes
in prevailing interest rates, although this variance is expected to be minimal
due to the short maturities of the instruments held by the Portfolios.
Interest rates paid on instruments denominated in a given Designated Currency
may be higher or lower than those paid on instruments denominated in other
Designated Currencies. Investors should recognize that in periods of declining
short-term interest rates the inflow of net new money to a Portfolio from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of such Portfolio's investment
portfolio, thereby reducing the current yield of the Portfolio. In the periods
of rising interest rates, the opposite can be true. The securities in which the
Portfolios invest may not produce as high a level of income as could be obtained
from securities with longer maturities or those having a lesser degree of
safety.
INVESTMENTS IN A SINGLE ISSUER
Each Portfolio other than the U.S. Dollar Portfolio is non-diversified under the
1940 Act. These Portfolios intend to comply, however, with the diversification
requirements applicable to regulated investment companies under
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the United States Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). Currently, those requirements provide that, as of the last day
of each fiscal quarter, each Portfolio's investments in the securities of any
one issuer must be limited to 25% of its total assets, provided that with
respect to at least 50% of its total assets, a Portfolio may not (a) have
invested more than 5% of its total assets in the securities of any one issuer or
(b) have invested more than 10% of the outstanding voting securities of any one
issuer. To the extent a Portfolio is not diversified under the 1940 Act, it may
be more susceptible than a fully diversified Portfolio to adverse developments
affecting a single issuer.
In addition to the foregoing, each of the Portfolios has adopted a
non-fundamental investment restriction which prevents it from investing (i) more
than 5% of the value of its total assets in the securities of any one issuer
(other than repurchase agreements and securities issued by a sovereign
government, its agencies and instrumentalities), (ii) more than 25% of the value
of its total assets in repurchase agreements with one counterparty or (iii) more
than 25% of the value of its total assets in securities issued by any sovereign
government, its agencies and instrumentalities (other than the federal
government of the United States). Securities held solely as collateral for
outstanding repurchase agreements shall be excluded for purposes of computing
compliance with restriction (iii). These restrictions may be eliminated or
modified at any time by the Trustees of the Portfolio Trust without a
shareholder vote.
CONCENTRATION IN OBLIGATIONS OF QUALIFYING BANKS
Under normal market conditions, each Portfolio will have more than 25% of its
total assets invested in obligations of Qualifying Banks. For the purposes of
this Prospectus, Qualifying Banks are defined as U.S. banks (including savings
banks or savings and loan associations) that are members of the Federal Deposit
Insurance Corporation ("FDIC") and "foreign banks," as defined in Rule 3a-6
under the 1940 Act, provided that any such institution has, at the date of
investment, capital, surplus and undivided profits (as of the date of its most
recently published financial statements) in excess of U.S. $100,000,000 or the
non-U.S. dollar equivalent, as the case may be. This concentration may result in
increased exposure to risks pertaining to the banking industry. These risks
include: a sustained increase in interest rates, which can adversely affect the
availability and cost of funds for a bank's lending activities; exposure to
credit losses during times of economic decline; concentration of loan portfolios
in certain industries; national and local regulatory developments; and
competition within the banking industry as well as from other financial
institutions. In addition, investments in banks located in foreign countries are
subject to risks resulting from the combination in those banks of banking and
securities underwriting and similar activities.
INVESTMENTS IN FOREIGN SECURITIES
Investing in securities issued by entities domiciled in a country other than an
investor's country of residence or denominated in a currency other than the
currency of the investor's country of residence may involve considerations and
possible risks and opportunities not typically encountered by the investor in
making investments in its country of residence and in securities denominated in
that country's currency. These considerations include favorable or unfavorable
changes in interest rates, currency exchange rates and exchange control
regulations, and the costs that may be
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incurred in connection with conversions between various currencies. In addition,
investments in countries other than the United States could be affected by other
factors generally not thought by investors to be present in the United States,
including less liquid and efficient securities markets, greater price
volatility, less publicly available information about issuers, the imposition of
withholding or other taxes, restrictions on the expatriation of funds or other
assets of a Portfolio, expropriation of assets, adverse diplomatic developments,
higher transaction and custody costs, delays attendant in settlement procedures
and difficulties in enforcing contractual obligations.
INFORMATION CONCERNING THE MASTER-FEEDER FUND STRUCTURE
Each of the Funds seeks to achieve its investment objectives by investing all of
its Investable Assets in the Portfolio which has the same investment objectives
as such Fund and invests solely in assets denominated in that Fund's Designated
Currency. These Portfolios in turn invest in securities that are consistent with
those objectives. In addition to selling beneficial interests to the Funds, the
Portfolios may sell beneficial interests to other mutual funds or institutional
investors. Such investors will invest in the Portfolios on the same terms and
conditions and will pay a proportionate share of the Portfolios' expenses.
However, the other investors investing in the Portfolios are not required to
sell their shares at the same public offering price as the Funds due to the
imposition of sales commissions and variations in other operating expenses.
Therefore, investors in the Funds should be aware that these differences may
result in differences in returns experienced by investors in the different funds
that invest in the Portfolios. Such differences in returns are also present in
other mutual fund structures. Information concerning other holders of interests
in the Portfolios is available from the Administrator by calling 1-800-499-3603.
Smaller funds investing in the Portfolios may be materially affected by the
actions of larger funds investing in the Portfolios. For example, if a large
fund withdraws from a Portfolio, the remaining funds investing in that Portfolio
may experience higher pro rata operating expenses, thereby producing lower
returns (however, this possibility exists as well for traditionally structured
funds that have large institutional investors). Additionally, because the
Portfolio would have fewer assets in such a case, it may become less
diversified, resulting in increased portfolio risk. Also, funds with a greater
pro rata ownership in such a Portfolio could have effective voting control of
the operations of that Portfolio. Except as permitted by the SEC, whenever the
Trust is requested to vote on matters pertaining to the Portfolios (other than a
vote by the Funds to continue operations of the Portfolios upon the withdrawal
of another investor in the Portfolios), the Trust will hold a meeting of
shareholders of the Funds and will cast all of its votes in the same proportion
as the votes of the Funds' shareholders. The percentage of the Trust's votes
representing Funds shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the shareholders of the Funds
who do, in fact, vote. Shareholders of the Funds who do not vote will not affect
the Trust's votes at the Portfolios' meetings.
A Fund may withdraw its investment from a Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interests of the
shareholders of that Fund to do so. Upon any such withdrawal, the Board of
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Trustees of the Trust would consider what action might be taken, including
investing all the Investable Assets of that Fund in another pooled investment
entity having the same investment objectives as the Fund or retaining Rothschild
International Asset Management Limited or another investment adviser to manage
the Fund's assets directly in accordance with the investment policies described
above with respect to the relevant Portfolio. Any such withdrawal could result
in distributions to such Fund from the Portfolio "in kind" of portfolio
securities (as opposed to a cash distribution) to the extent permitted by the
1940 Act, or rules adopted thereunder. If securities are distributed, such Fund
could incur brokerage, tax or other charges in converting the securities to
cash. In addition, the distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of that Fund.
Notwithstanding the above, there are other means for meeting redemption
requests, such as borrowing.
The Funds' investment objectives are fundamental policies and may not be changed
without the approval of the Funds' shareholders. The investment objectives of
the Portfolios are not fundamental policies and may be changed without the
approval of the investors in the Portfolio. Shareholders of a Fund will receive
30 days prior written notice with respect to any change in the investment
objective of its corresponding Portfolio. See "Investment Objective" and
"Investment Policies and Restrictions" for a description of the fundamental
policies of the Portfolios that cannot be changed without approval of the "vote
of a majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Portfolios.
For descriptions of the investment objectives, policies and restrictions of the
Portfolios, see "Investment Objectives" and "Investment Policies and
Restrictions." For descriptions of the management of the Portfolios, see
"Management" herein and in the Statement of Additional Information. For
descriptions of the expenses of the Portfolios, see "Management" herein.
MANAGEMENT
Each Fund is a separate series of the Trust, a Delaware business trust under the
terms of the Agreement and Declaration of Trust establishing the Trust, which is
governed by the laws of Delaware. The Trustees of the Trust are ultimately
responsible for the management of its business and affairs.
Each Portfolio is a separate investment series of the Portfolio Trust, which is
also a Delaware business trust under the terms of the Agreement and Declaration
of Trust establishing the Portfolio Trust, which is governed by the laws of
Delaware. Under the terms of the Portfolio Trust's Declaration of Trust, the
affairs of the Portfolio are managed under the supervision of the Trustees of
the Portfolio Trust.
The Boards of Trustees of the Portfolio Trust and the Trust establish their
respective policies and supervise and review the operations and management of
the Portfolio Trust and the Trust, respectively. The day-to-day operations of
the Portfolio Trust and the Trust are administered by officers elected by their
respective Board of Trustees.
A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust and the Portfolio Trust, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that the same individuals are Trustees of the
Trust and of the Portfolio Trust, up to and including
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creating separate Boards of Trustees. See "Management of the Trust and Portfolio
Trust" in the Statement of Additional Information for more information about the
Trustees and officers of the Trust and the Portfolio Trust.
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT
The Investment Adviser serves pursuant to an Investment Advisory Agreement with
the Portfolio Trust. The Investment Adviser is a British corporation that was
formed in 1975 and is registered under the U.S. Investment Advisers Act of 1940,
as amended. It is an indirect subsidiary of Rothschild Concordia AG of Zug,
Switzerland, a holding company whose subsidiaries manage approximately $28.5
billion of assets, spread across equities, bonds and currencies.
The Investment Adviser, subject to the supervision and direction of the
Portfolio Trust's Board of Trustees, professionally manages each Portfolio in
accordance with such Portfolio's investment objectives and policies and makes
all investment decisions for those Portfolios. In consideration of these
services, the Portfolio Trust has agreed to pay the Investment Adviser monthly
an annual advisory fee with respect to each Portfolio. The advisory fee for each
Portfolio is calculated daily and payable monthly at an annual rate of up to
.20% of average daily net assets.
The Investment Adviser and the Administrator may, at their own expense, provide
compensation to certain financial institutions whose customers purchase
significant amounts of shares of a Fund. The amount of such compensation may be
made on a one-time and/or periodic basis, and may be up to 100% of the annual
fees that are earned by the Investment Adviser or the Administrator (after
adjustments) and are attributable to shares held by such customers. Such
compensation will not represent an additional expense to the Funds or their
shareholders, since it will be paid from assets of the Investment Adviser and
the Administrator or their affiliates.
The portfolio manager for all of the Portfolios is Thomas Barman, who has been
employed by the Investment Adviser as its Director for Currency Management since
November 1994. He has been primarily responsible for the day-to-day management
of the Portfolios' portfolios since their commencement of operations. He has
over 25 years experience in fund management. From March 1993 to August 1994, Mr.
Barman was a portfolio manager for Glaxo (Bermuda) Limited. From April 1991 to
February 1993, he was a portfolio manager for the U.S. Office of Caisse des
Depots et Consignations. Prior to that time, he served as Foreign Exchange
Officer at the Federal Reserve Bank of New York and was head of U.S. Treasury
investments at Credit Suisse (New York).
Prior to the Trust's commencement of operations, the Investment Adviser and Mr.
Barman had not had previous experience managing a mutual fund registered under
the 1940 Act. However, they have had substantial experience managing publicly
offered European mutual funds.
The Investment Adviser has a Code of Ethics governing personal securities
transactions of certain of its employees. See the Statement of Additional
Information.
DISTRIBUTOR
The Distributor is an affiliate of the Administrator. Mutual funds structured
like the Funds sell shares on a continuous basis. The Funds' shares are sold
through the Distributor. Certain officers of the Trust are also officers and/or
directors of the Distributor.
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12B-1 PLAN
As further described below, the Trust has adopted a Plan of Distribution
Pursuant to Rule 12b-1 (the "12b-1 Plan") in accordance with the regulations
promulgated under the 1940 Act. The 12b-1 Plan provides that each Fund will make
certain payments to the Distributor.
ADMINISTRATOR
The Administrator, a wholly-owned subsidiary of The BISYS Group, Inc., is
responsible for coordinating the Funds' efforts and generally assuring the
operation of the Funds' business. It has been providing services to mutual funds
since 1987.
The Administrator provides a wide range of services to the Funds, including
maintaining the Funds' offices, providing statistical and research data,
coordinating the preparation of reports to shareholders, calculating and
providing for the calculation of net asset values of Fund shares, dividends and
capital gains distributions to shareholders, and performing other administrative
functions necessary for the smooth operation of the Funds.
The Administrator provides the Portfolio Trust with office space and with
certain clerical services and facilities.
The Administrator is entitled to an administration fee calculated daily and
payable monthly at an annual rate of .05% of the average daily net assets of all
of the Funds and .05% of the average daily net assets of all of the Portfolios.
The Administrator serves as such for an initial two year term (with subsequent
annual, renewable terms) pursuant to administration agreements with the Trust
and the Portfolio Trust. Those agreements provide that the Administrator shall
receive payment in full of its fee for the remainder of the relevant term if the
Administrator is terminated without cause prior to the end of such term. The
Administrator or its affiliates may also act as Authorized Firms (as defined
below).
TRANSFER AND DIVIDEND DISBURSING AGENT
Under its agreement with the Trust, BISYS Fund Services, Inc., as Transfer
Agent, provides customary transfer and dividend disbursing agent services,
including processing purchase, redemption and transfer transactions, responding
to shareholder inquiries, automatically investing dividends in Fund shares,
transmitting dividends to shareholders, assisting shareholders in changing
account designations and addresses and transmitting to shareholders proxy
statements, annual reports, prospectuses and other Trust communications. The
Transfer Agent serves as such for an initial two year term (with subsequent
annual, renewable terms) pursuant to a transfer agency agreement with the Trust.
That agreement provides that the Transfer Agent shall receive payment in full of
its fee for the remainder of the relevant term if the Transfer Agent is
terminated without cause prior to the end of such term. The Transfer Agent may
sub-contract any of its duties to another person, including its affiliates. See
"How to Buy Five Arrows Service Shares" and "How to Change Funds."
Pursuant to a separate agreement, BISYS Fund Services, Inc. also provides fund
accounting services to the Trust. As fund accountant, BISYS Fund Services, Inc.
serves for an initial two year term (with subsequent annual, renewable terms).
That agreement provides that the fund accountant shall receive payment in full
of its fee for the remainder of the relevant term if the fund accountant is
terminated without cause prior to the end of such term.
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CUSTODIAN
The Chase Manhattan Bank is the custodian of the Trust and Portfolio Trust (the
"Custodian") and, in that capacity, maintains custody of the Trust's and
Portfolio Trust's assets. In maintaining the custody of assets located outside
the United States, the custodian may use one or more subcustodians.
EXPENSES
All expenses incurred in the operation of a Fund or a Portfolio are borne by
such Fund or Portfolio except to the extent specifically assumed by the
Investment Adviser, the Distributor, the Administrator, the Custodian, or the
Transfer Agent. Subject to the undertaking of the Investment Adviser to
reimburse the Funds or Portfolios, as the case may be, for certain of their
excess expenses, the Funds or Portfolios, as the case may be, have confirmed
their obligation to pay all their other respective expenses, including: taxes,
brokerage fees and commissions; certain insurance premiums; auditing, legal and
compliance expenses; costs of forming the Trust and Portfolio Trust and
maintaining corporate existence; costs of fund accounting; costs of preparing
and printing the Trust's prospectuses, statements of additional information and
shareholder reports and delivering them to shareholders; compensation of
Trustees of the Trust or Portfolio Trust who are not employees of the
Distributor or Administrator or their affiliates and costs of other personnel
performing services for the Trust or Portfolio Trust; costs of corporate
meetings; registration fees and related expenses for the Trust's registration
with the SEC and the securities regulatory authorities of other jurisdictions in
which the Funds' shares are sold; state securities law registration fees and
related expenses and other required registrations and related publication fees;
fees payable to the Investment Adviser under the Investment Advisory Agreement;
fees payable to the Administrator, Transfer Agent and Custodian and all fees
paid by the Trust pursuant to the 12b-1 Plan.
The Investment Adviser has voluntarily agreed to reimburse such portion of its
advisory fee as is necessary to cause the annualized total expenses of each
class of a Fund not to exceed a specified percentage of such class' average
daily net asset value (.625% in the case of the Five Arrows Service class of the
U.S. Dollar Fund and .70% in the case of the Five Arrows Service class of each
other Fund). If this reimbursement is not sufficient to cause the total expenses
of any Fund not to exceed the applicable percentage of average daily net asset
value, the Investment Adviser has agreed to pay such other expenses of the
applicable Fund as is necessary to keep total expenses from exceeding the
applicable percentage. The foregoing undertaking shall remain in effect for the
fiscal period ending December 31, 1997, and thereafter in the discretion of the
Investment Adviser. The Investment Adviser has reserved the right to terminate
or revise this undertaking with respect to any period after December 31, 1997.
The Investment Adviser, the Distributor, the Administrator, the Transfer Agent
and the Custodian may also from time to time otherwise voluntarily waive their
respective fees. No fee waivers may be recouped beyond the end of any fiscal
year.
CALCULATION OF NET ASSET VALUE
The net asset value per share of each Fund, expressed in the relevant Fund's
Designated Currency, is determined by dividing the value of the Fund's net
assets (i.e., the value of its investment in its corresponding Portfolio and
other assets, including accrued but undistrib-
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uted net investment income, less liabilities) by the total number of shares of
the Fund outstanding. Such net asset values are determined once every Trust
Business Day at 11:00 a.m. U.S. Eastern Time for the U.S. Dollar and Canadian
Dollar Funds, 9:00 a.m. U.S. Eastern Time for the Pound Sterling Fund and 10:00
a.m. Eastern Time for the Deutsche Mark Fund.
By investing all of their assets in the relevant Portfolio, each Fund seeks to
maintain the following constant net asset value per share:
<TABLE>
<S> <C>
U.S. Dollar Fund........... U.S.$1.00
Pound Sterling Fund........ L1.00
Deutsche Mark Fund......... DM1.00
Canadian Dollar Fund....... C$1.00
</TABLE>
It is anticipated that each Portfolio's assets will utilize the amortized cost
method of valuation as a reasonable means of approximating each Portfolio's
market value. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization or accretion to maturity of any
premium or discount. If at any time, however, the market value of any
Portfolio's total assets deviates more than 1/2 of 1% from their value
determined on an amortized cost basis, the Portfolio Trust's Board of Trustees
will consider whether any action should be initiated to prevent any adverse
effects on the Portfolios' shareholders. The Portfolio Trust's Board of Trustees
will monitor the use of the amortized cost method of valuation in order to
ensure that this method continues to be in the best interest of the Portfolios'
shareholders. There may be periods during which the stated value of an
instrument determined under the amortized cost method of valuation is higher or
lower than the price the Portfolio would receive if the instrument were sold,
and the accuracy of amortized cost valuation can be affected by changes in
interest rates and the credit standing of issuers of the Portfolio's
investments. There is no assurance that the Portfolios will maintain a stable
net asset value per share.
If in the view of the Portfolio Trust's Board of Trustees it is inadvisable to
continue maintaining a constant net asset value for any Portfolio, the Board of
Trustees may discontinue using the amortized cost method of valuation for such
Portfolio. Shareholders of a Portfolio would be notified of a decision by the
Board of Trustees to discontinue the use of the amortized cost method with
respect to such Portfolio. The form of notification would depend on the context
of such a decision and could include, for example, the mailing of written
notifications and/or the issuance of a press release.
HOW TO BUY FIVE ARROWS
SERVICE SHARES
Shares of the Funds are sold on a continuous basis by the Distributor. Clients
of an Authorized Firm may only purchase Five Arrows Service shares through their
accounts at such Authorized Firm and should contact such Authorized Firm
directly for appropriate purchase instructions. When Five Arrows Service shares
are purchased through such Authorized Firms, an account fee may be charged by
those Authorized Firms for providing services in connection with an Investor's
investment which are not related to the services provided under the 12b-1 Plan.
These fees may include, for example, account maintenance fees, compensating
balance requirements or fees based upon account transactions, assets or income.
Information concerning these services and any charges should be obtained from
these Authorized Firms before a client authorizes the purchase of Fund shares,
and this
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Prospectus should be read in conjunction with any information so obtained.
As set forth above, Five Arrows Service shares of the Funds are offered
exclusively through participating Authorized Firms. All inquiries of beneficial
owners of Five Arrows Service shares should be directed to the Authorized Firm
from which such Five Arrows Service shares were purchased.
Purchases of Five Arrows Service shares of any of the Funds will be processed in
accordance with the procedures set forth below, at the net asset value per share
of the relevant Fund next determined after the purchase order is duly received.
No sales charge is imposed at the time of purchase or redemption. However, as
further described below, shareholders will bear an annual 12b-1 fee.
Because of the costs associated with the 12b-1 Plan, the dividends of the Five
Arrows Service shares of each Fund will be lower than the dividends of the Five
Arrows shares of that Fund.
Purchases of shares of a Fund will be effected on Trust Business Days in
accordance with the procedures set forth below and only when the wire system
designated for use in transmitting money to the relevant Fund permits the timely
transmission of funds that are immediately available to the Trust for investment
purposes ("Disbursable Funds"). Additionally, on days when the relevant trading
market and/or the Trust's Custodian or Distributor close early due to a partial
holiday or otherwise, the Trust reserves the right to advance the times at which
purchase and redemption orders must be received. Prospective or current Five
Arrows Service shareholders must transmit purchase orders through their
Authorized Firm.
- - Purchase orders for shares of the U.S. Dollar Fund received prior to 11 a.m.
U.S. Eastern Time on a Trust Business Day will settle on that same day (or the
next New York Banking Day (as defined below) if such Trust Business Day is not
a New York Banking Day).
- - Purchase orders for shares of the Canadian Dollar Fund received prior to 11
a.m. U.S. Eastern Time on a Trust Business Day will settle on that same day
(or the next Toronto Banking Day (as defined below) if such Trust Business Day
is not a Toronto Banking Day).
- - Purchase orders for shares of the Pound Sterling Fund received prior to 5 p.m.
U.S. Eastern Time on a Trust Business Day will settle on the following London
Banking Day (as defined below).
- - Purchase orders for shares of the Deutsche Mark Fund received prior to 10 a.m.
U.S. Eastern Time on a Trust Business Day will settle on the following
Frankfurt Banking Day (as defined below), provided however that if such a
Trust Business Day is not a Frankfurt Banking Day, the purchase order will
settle on the second following Frankfurt Banking Day.
If a purchase order is not received by the Trust prior to the applicable time
listed above, such purchase order shall be deemed to have been received on the
next following Trust Business Day. Before placing a purchase order investors
should acquaint themselves with the minimum amounts and other requirements for
using the relevant wire system for the transfer of Disbursable Funds, and should
ascertain whether the financial institution from which the purchase payment is
being sent, has access to the appropriate system. It is essential that complete
information, regarding the investor's
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account, accompany all wire instructions in order to facilitate the prompt and
accurate handling of investments. Investors may obtain, from their financial
institution, further information about remitting funds by wire and any fees that
may be imposed for so doing. The Trust does not impose a fee for receiving
payment by wire.
Investors will be entitled to any dividends declared or income earned on the day
when their purchase orders settle provided that Disbursable Funds are received
in the relevant Fund's Designated Currency in the appropriate bank account
(details of which are set out on the Application Agreement) by the close of
business on that same day. If Disbursable Funds, with respect to any purchase
order, are not received by this time by the Distributor, the Trust reserves the
right, in its sole discretion, (a) to accept the order and assess interest on
the overdue payment, or (b) to cancel the order, and to hold the purchaser
responsible for any loss and other costs incurred by the Distributor and/or the
Trust.
Authorized Firms act as agents for their customers and not as agents for the
Trust. It is the responsibility of Authorized Firms to transmit orders for
purchases by their clients promptly to the Trust, and to deliver the required
Disbursable Funds by the time stated above. If Disbursable Funds are not
received by the required time, the order may be cancelled and the Authorized
Firm will be held responsible for any loss and other costs incurred by the
Distributor and/or the Trust.
The Trust reserves the right to reject any purchase order in whole or in part.
All of a shareholder's accounts will be subject to the elections and
instructions specified by the shareholder in the Application Agreement covering
the accounts.
United States Federal tax regulations require investors that are United States
persons to provide a certified Taxpayer Identification Number and/or certain
other required certifications within 30 days following the opening or reopening
of an account in order to avoid withholding of taxes on distributions and
proceeds of redemptions.
Ownership of the Trust's shares will be reflected by book-entry, and
certificates for shares will not be issued. Investment in the Trust is not
recommended for any investors who require a stock certificate to evidence their
shares.
All investments must be made in the Designated Currency of the Fund whose shares
are being purchased, as discussed above. Investors may convert other currencies
into the Designated Currency of a Fund through The Chase Manhattan Bank, in
accordance with its customary currency conversion credit and operational
arrangements and at its prevailing rates and fees to customers, or through other
dealers in foreign exchange, in accordance with their customary credit and
operational arrangements and at their prevailing rates and fees. Currency
conversions may result in capital gains or losses to an investor.
Neither the Trust nor its service contractors will be responsible for any loss
or expense for acting upon telephone instructions that are believed to be
genuine. In attempting to confirm that telephone instructions are genuine, the
Trust will use procedures considered reasonable. These procedures include
recording all telephone conversations, sending confirmations to shareholders
within 72 hours of the telephone transaction, verifying the account name and a
shareholder's account number or tax identification number and sending redemption
proceeds only to the address of record or
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to a previously authorized bank account. To the extent that the Trust does not
use reasonable procedures to form its belief, it and/or its service contractors
may be responsible for instructions that are fraudulent or unauthorized.
A "New York Banking Day" is every day except Saturdays, Sundays and holidays
observed by New York City banks (scheduled holidays for 1997 are New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day).
A "London Banking Day" is every day except Saturdays, Sundays and holidays
observed by London banks (scheduled holidays for 1997 are New Year's Day, Good
Friday, Easter Monday, May Holiday, Spring Holiday, Late Summer Holiday,
Christmas Day and Boxing Day).
A "Frankfurt Banking Day" is every day except Saturdays, Sundays and holidays
observed by Frankfurt banks (scheduled holidays for 1997 are New Year's Day,
Epiphany, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit Monday,
Corpus Christii, Assumption Day, German Unity Day, All Saint's Day, Day of
Penance, Christmas Eve Holiday, Christmas Day, Boxing Day and New Year's
Holiday).
A "Toronto Banking Day" is every day except Saturdays, Sundays and holidays
observed by Toronto banks (scheduled holidays for 1997 are New Year's Day, Good
Friday, Easter Monday, Victoria Day, Canada Day, Labour Day, Thanksgiving,
Remembrance Day, Christmas Eve Holiday, Christmas Day and Boxing Day).
12B-1 PLAN
The Trust has adopted the 12b-1 Plan in accordance with the regulations
promulgated under the 1940 Act. The 12b-1 Plan provides that each Fund will make
payments to the Distributor equal to .50% (on an annual basis) of the average
daily value of the net assets of such Fund's Five Arrows Service class of shares
(the "12b-1 fee"). The 12b-1 fee has two components: a service fee and a
distribution fee. The 12b-1 Plan provides that each of these components will be
paid at an annual rate of 0.25% of the average daily value of the net assets of
such Fund's Five Arrows Service class of shares. The Distributor has voluntarily
agreed to waive a portion of the distribution fee component in order to limit
payments of the 12b-1 fee to 0.35% (on an annual basis) of the average daily net
asset value of the Five Arrows Service class of any Fund. This waiver shall
remain in effect for the fiscal period ending December 31, 1997, and thereafter
in the discretion of the Distributor. The Distributor has reserved the right to
terminate or revise this undertaking with respect to any period after December
31, 1997.
Some or all of the service fees are used to compensate Authorized Firms for
providing account administration services to their clients who are beneficial
owners of such shares. One or more affiliates of the Investment Adviser and the
Administrator may act as Authorized Firms. The Distributor will enter into
agreements with Authorized Firms which purchase Five Arrows Service shares on
behalf of their clients ("Service Agreements"). The Service Agreements will
provide for a service fee to the Authorized Firms in an amount up to .25% (on an
annual basis) of the average daily net assets of the Five Arrows Service shares
of the applicable Fund attributable to or held in the name of the Authorized
Firm for its clients.
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The services provided by the Authorized Firms may include, among other things,
receiving, aggregating and processing shareholder or beneficial owner
(collectively "shareholder") orders; furnishing shareholder subaccounting;
providing and maintaining retirement plan records; communicating periodically
with shareholders; acting as the sole shareholder of record and nominee for
shareholders; maintaining account records for shareholders; answering questions
and handling correspondence from shareholders about their accounts; issuing
various shareholder reports and confirmations for transactions by shareholders;
account and administrative services. Any service fees received by the
Distributor and not allocated to authorized firms may be retained by the
Distributor in consideration of its own role in servicing shareholder accounts.
Authorized Firms that have sold Five Arrows Service shares are eligible for
further compensation commencing as of the time of such sale. It is the
Distributor's current policy to pay a trailer commission to Authorized Firms in
an amount equal to .10% (on an annual basis) of the average daily net assets of
the Five Arrows Service shares of the applicable Fund attributable to or held in
the name of the Authorized Firm for its clients. This trailer commission
arrangement may be terminated or revised by the Distributor at any time. Any
distribution fee received by the Distributor and not allocated to Authorized
Firms may be applied by the Distributor in connection with sales or marketing
efforts (e.g. for advertising costs, the cost of printing and mailing
prospectuses and reports to potential investors) or retained by the Distributor
in consideration of its own role in marketing Five Arrows Service Shares.
Holders of Five Arrows Service shares of a Fund will bear all fees paid under
the 12b-1 Plan with respect to such shares as well as any other expenses which
are directly attributable to such shares.
Authorized Firms may charge other fees to their clients who are the beneficial
owners of Five Arrows Service shares in connection with their client accounts.
These fees would be in addition to any amounts received by the Authorized Firms
would be for services other than those provided under such an Agreement. Under
the terms of such Service Agreements, Authorized Firms are required to provide
their clients with a schedule of fees charged to such clients which relate to
the investment of customers' assets in Five Arrows Service shares at the time of
any investment and whenever changes to the schedule are made.
Each Fund will accrue payments made pursuant to the 12b-1 Plan daily. The 12b-1
payments which are required to be accrued to the Five Arrows Service shares on
any day will not exceed the distributable income to be accrued to such shares on
that day. All inquiries by a beneficial owner of Five Arrows Service shares must
be directed to such owner's Authorized Firm.
HOW TO REDEEM FIVE ARROWS SERVICE SHARES
Five Arrows Service shareholders will redeem their shares according to the
procedures established, if any, by the Authorized Firm through which they
purchased those shares. Thereafter, the relevant Authorized Firm may request
redemption of a Fund's shares at any time in any amount during Trust Hours of
Operation by contacting the Transfer Agent. Subject to the right of a Fund to
make redemptions in kind under certain circumstances, all redemption requests
are treated as requests for redemption
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in the normal course in the Fund's Designated Currency.
Redemptions of shares of a Fund will be effected on Trust Business Days in
accordance with the procedures set out below, and only when the wire system
designated for use in transmitting money from the relevant Fund permits the
timely transmission of redemption proceeds. Additionally, as for purchases of
shares, the Trust reserves the right to advance the times at which purchase and
redemption orders must be received. As noted above, Five Arrows Service
shareholders must transmit redemption requests through their respective
Authorized Firm.
- - Redemption requests for shares of the U.S. Dollar Fund received prior to 11
a.m. U.S. Eastern Time on a Trust Business Day will settle on that same day
(or the next New York Banking Day if such Trust Business Day is not a New York
Banking Day).
- - Redemption requests for shares of the Canadian Dollar Fund received prior to
11 a.m. U.S. Eastern Time on a Trust Business Day will settle that same day
(or the next Toronto Banking Day if such Trust Business Day is not a Toronto
Banking Day).
- - Redemption requests for shares of the Pound Sterling Fund received prior to 5
p.m. U.S. Eastern Time on a Trust Business Day will settle on the following
London Banking Day.
- - Redemption requests for shares of the Deutsche Mark Fund received prior to 10
a.m. U.S. Eastern Time on a Trust Business Day will settle on the following
Frankfurt Banking Day, provided, however, that if such a Trust Business Day is
not a Frankfurt Banking Day, the redemption request will settle on the second
following Frankfurt Banking Day.
If a redemption request is not received by the Trust prior to the applicable
time listed above, such request shall be deemed to have been received on the
next following Trust Business Day. Authorized Firms as agents for their
customers and not as agents for the Trust. It is the responsibility of Service
Organizations to transmit orders for redemptions by their customers promptly to
the Trust. Shareholders shall be entitled to any dividends declared or income
earned up to and including the day before the day on which the redemption
request is scheduled to settle.
If the Investment Adviser believes that market conditions exist which preclude
the Trust from making prompt payment in a Fund's Designated Currency, the Trust
can elect to take up to seven days to pay redemption proceeds or to pay
redemption proceeds wholly or partly in readily marketable portfolio securities.
The Trust is obligated to effect a redemption in currency without regard to
market conditions if requested by a shareholder redeeming no more than either
$250,000 (or in the applicable Designated Currency equivalent thereof) or 1% of
a Fund's net assets during any 90-day period.
Except as provided below, all redemptions in currency will be made by wire
transfer on the settlement day in the Designated Currency of the Fund whose
shares are being redeemed through a recognized electronic funds transfer system
which handles such Designated Currency. A charge of $20 (or the equivalent in
the relevant Fund's Designated Currency) against the shareholder's account will
be imposed for each wire redemption. Banks receiving redemption proceeds by wire
may also impose a charge for doing so.
If a redemption request does not meet the minimum amount and other requirements
for
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sending currency through the electronic funds transfer system employed by the
Fund, redemption proceeds will be paid by check sent by mail. Redemption
proceeds will be directed to the shareholder's account at his Authorized Firm.
When redemption proceeds are paid in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to currency. For
further information concerning redemptions in portfolio securities, shareholders
should telephone the Administrator. Redemption in portfolio securities will be
made by delivery to the shareholder, or to another party at the shareholder's
direction, of portfolio securities (together with a cash payment in the Fund's
Designated Currency equal to the value and in lieu of any fractional securities
required to be delivered) with a value determined at the time the redemption is
made to equal the aggregate net asset value of the Fund shares being redeemed
next determined following receipt of the redemption request.
To the extent permitted by applicable law, the right of redemption with respect
to a Fund may be suspended or the date of payment postponed for more than seven
days when trading in the markets in which the Fund's securities are traded is
restricted or for a period during which an emergency exists as a result of which
disposal by the Fund of its securities is not reasonably practicable or it is
not reasonably practicable for the Fund fairly to determine the value of its
assets. In addition, the right of redemption may be suspended or the date of
payment postponed for such other periods as the SEC by order may permit to
protect the Trust's shareholders.
The Trust reserves the right to redeem a shareholder's account at the Trust's
option, upon not less than 60 days' written notice to the shareholder, if for a
period of six months or more the account does not have in any Fund shares with a
net asset value equal to or greater than $1,500 or the non-U.S. dollar
equivalent, as the case may be. During the 60-day period, a shareholder may
avoid automatic redemption by investing in any Fund an amount sufficient to
increase the net asset value of the account's shares of the Fund to the
applicable Initial Investment Minimum.
Again, you should note that neither the Trust nor its service contractors will
be responsible for any loss or expense for acting upon telephone instructions
that are believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust will use procedures considered reasonable,
as described above.
HOW TO CHANGE FUNDS
A shareholder may change shares of one Fund into shares of another Fund by
redeeming shares of one Fund, converting the redemption proceeds into the
Designated Currency of another Fund and purchasing the shares of the other Fund
with the proceeds of the currency conversion. All purchase and redemption orders
for Five Arrows Service shares must be made through a shareholder's Authorized
Firm. During the period between the net asset value determination applicable to
the shares being redeemed in one Fund and the purchase of shares in another
Fund, the shareholder will not be the owner of, or be eligible to receive
dividends with respect to, either the shares which have been redeemed or the
shares being acquired.
The length of time for completion of a Fund change will vary depending on the
Funds involved and the time during Trust Hours of Operation when the Fund change
is initiated.
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In general, the length of time for completion of a Fund change will depend upon
each of the time required to obtain payment of redemption proceeds from the Fund
whose shares are being redeemed and the time required to effect any foreign
exchange transaction which may be necessary for the shareholder to obtain the
currency of the Fund whose shares are being acquired. The arrangements involved
in effecting foreign exchange transactions will depend, in part, on a
shareholder's credit and operating relationships with the foreign currency
exchange dealer the shareholder uses and may shorten the length of time required
for completion of a Fund change.
The Trust does not provide currency exchange services, either directly or
through its agents, and the selection of a foreign exchange dealer in connection
with a change of Funds is within the shareholder's sole discretion. The Trust
has been advised that The Chase Manhattan Bank's foreign exchange department is
available, at its customary currency conversion rates and fees and subject to
its customary credit and other requirements, to provide foreign exchange
services to shareholders changing Funds. Shareholders should contact their
Authorized Firm for further information.
Fund changes may result in recognition of a taxable gain or loss. See
"Taxation."
TAXATION
The following discussion is only a summary of certain tax issues that may be of
interest to shareholders. All shareholders are urged to consult their tax
advisers for further information concerning the tax consequences of investing in
the Trust.
TAXATION OF THE TRUST
Under Subchapter M of the Internal Revenue Code, each Fund of the Trust is to be
treated as a separate corporation for U.S. Federal income tax purposes. It is
intended that each Fund will qualify for each fiscal year as a "regulated
investment company" under the Internal Revenue Code by complying with certain
requirements of the Internal Revenue Code regarding sources of income,
diversification of assets, and distribution of income to shareholders, although
no assurance can be given in this regard. As regulated investment companies, the
Funds will not be liable for U.S. Federal income taxes on the net investment
income and capital gain distributed to shareholders in accordance with the
applicable provisions of the Internal Revenue Code. Since it is intended that
each Fund will distribute all of its net income and net capital gain each year,
each Fund should avoid all U.S. Federal income taxes.
Under current law, the Trust does not anticipate that interest derived by the
Funds from sources outside the United States will be subject to non-U.S.
withholding taxes. To the extent any such withholding tax does arise, it may be
possible to reduce or eliminate it under the terms of applicable United States
income tax treaties. If it is subject to any such withholding tax, the Trust
intends to undertake the procedural steps required to claim the benefits of such
treaties. If any non-U.S. taxes are paid by a Fund and, as is expected, more
than 50% in value of the Fund's total assets at the close of any taxable year
consists of securities of non-U.S. banks or corporations, the Fund may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders with the
consequences described under "U.S. Federal Income Taxation of U.S. Shareholders"
below.
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Each Fund will determine its income in terms of its Designated Currency and, in
the case of each Fund other than the U.S. Dollar Fund, will translate its net
income for each year from its Designated Currency into U.S. dollars for U.S.
Federal income tax purposes. Under current Treasury regulations, regulated
investment companies are normally required to recognize for U.S. Federal income
tax purposes income or loss attributable to changes in exchange rates between
the U.S. dollar and the Fund's Designated Currency (i.e., currency gain or loss)
absent a ruling to the contrary from the Internal Revenue Service. Recognition
of currency gain in excess of currency loss in any given year would require the
affected Fund to pay dividends in excess of its interest income in order to pay
out all income as calculated for U.S. Federal income tax purposes. In reliance
upon a ruling from the Internal Revenue Service, the Trust calculates the income
of each Fund without recognizing currency gain or loss.
U.S. FEDERAL INCOME TAXATION OF
U.S. SHAREHOLDERS
Dividends paid by each Fund out of its net investment income and net realized
short-term capital gain, if any, are taxable to the U.S. shareholders of the
Fund (i.e., a United States corporation or an individual who is a citizen or
resident of the United States) as ordinary income. Dividends to corporate
shareholders will not be eligible for the dividends-received deduction. To the
extent that the Trust elects to declare certain dividends in October, November
or December and to distribute them to the shareholders the following January,
the dividends would be included in the income of the shareholders as if received
in December.
A U.S. shareholder of a Fund, other than the U.S. Dollar Fund, generally will
recognize gain or loss on a sale or redemption of shares (or on a change of
shares into shares in another Fund) in respect of any appreciation or
depreciation in the U.S. dollar-value of the shares from the time the shares are
acquired to the time of disposition. In general, that gain or loss will be
capital gain or loss. In addition, as discussed above, in the absence of the
continued availability of a ruling from the Internal Revenue Service, each Fund,
other than the U.S. Dollar Fund, would be required to recognize currency gain or
loss. Recognition by a Fund of currency gain in excess of currency loss in any
given year would result in the shareholders of that Fund recognizing ordinary
dividend income in addition to the daily dividends that are attributable to the
Fund's interest income. Any such additional dividends would increase a
shareholder's basis in the shares and would affect the shareholder's calculation
of capital gain or loss on disposition of the shares.
The Trust is required by U.S. Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to a non-corporate shareholder unless the shareholder certifies on its
Application Agreement that the social security or tax identification number
provided is correct and that the shareholder is not subject to 31% backup
withholding for prior under-reporting to the Internal Revenue Service.
Each Fund, other than the U.S. Dollar Fund, may be able to elect to pass-through
to its shareholders non-U.S. taxes paid by the Portfolio but does not currently
anticipate doing so. Shareholders of each Fund that so elects will be required
to include in income (in addition to any dividends the shareholders receive)
their proportionate shares of the amount of non-U.S. taxes paid by the Portfolio
and will be
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entitled to claim either a credit or a deduction for their shares of such taxes
in computing their U.S. Federal income tax liability. Availability of such a
credit or deduction is subject to certain limitations. Shareholders will be
informed each year in which a Fund makes such an election regarding the amount
and nature of non-U.S. taxes to be included in their income. Dividends from a
Fund will be considered to be from U.S. sources if an election to pass-through
non-U.S. taxes is not made. If such an election is made, dividends from those
Funds will be considered to be from non-U.S. sources for purposes of computing
the limitation of the Federal foreign tax credit.
Reports containing appropriate information with respect to the U.S. Federal
income tax status of dividends and distributions paid during the year by each
Fund will be mailed to shareholders shortly after the close of each year.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. SHAREHOLDERS
Non-U.S. shareholders who are not engaged in a U.S. trade or business or whose
distributions from a Fund are not effectively connected with the conduct of such
a trade or business will be generally subject to U.S. withholding tax at the
rate of 30% (or a lower rate under an applicable U.S. income tax treaty) on
dividends of net investment income received from the Trust (including for this
purpose any dividends deemed resulting from a Fund's election to treat non-U.S.
taxes paid by it as paid by its shareholders and, if the Funds are required to
recognize currency gain or loss, any dividends that a Fund, other than the U.S.
Dollar Fund, declares as a consequence of recognizing currency gain in excess of
currency loss for a particular year). Any gains realized from the redemption,
sale or exchange of shares will generally not be subject to U.S. tax for those
non-U.S. shareholders. In the case of individual shareholders who fail to
furnish the Trust with certain required certifications regarding their foreign
status, the Trust may be required to impose backup withholding of U.S. tax at
the rate of 31% on the proceeds of redemptions and exchanges.
If the dividends received from a Fund or gains realized upon the redemption,
exchange or other taxable disposition of Fund shares are effectively connected
with a U.S. trade or business of the shareholder, then all such dividends and
gains will be subject to U.S. Federal income tax at the graduated rates
applicable to U.S. shareholders, although the tax may be eliminated under the
terms of an applicable U.S. income tax treaty. Non-U.S. corporate shareholders
may also be subject to the U.S. branch profits tax in respect of those dividends
and gains.
Non-U.S. shareholders are advised to consult their tax advisers for further
information concerning the U.S. Federal and foreign tax consequences of
investing in the Trust.
DIVIDENDS AND DISTRIBUTIONS
Dividends for each Fund are derived from the net investment of its corresponding
Portfolio, which flows from the interest that such Portfolio earns on the money
market and other instruments it holds. Dividends on each share are determined in
the same manner and are paid in the same amount, regardless of class, except for
such differences as are attributable to differential class expenses.
Dividends will be declared daily and paid monthly with respect to shares of each
Fund. Generally, investors will receive dividends on shares from (and including)
the day upon
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which their purchase is effective to (but not including) the day upon which
their redemption is effective. See "How to Buy Five Arrows Service Shares" and
"How to Redeem Five Arrows Service Shares."
Dividends from each Fund are automatically reinvested in additional shares of
that Fund at net asset value.
PERFORMANCE
U.S. DOLLAR FUND
From time to time, the Trust may publish the "yield" and "effective yield" for
the U.S. Dollar Fund. Both yield figures are based on historical earnings and
are not intended to indicate future performance.
The U.S. Dollar Fund's yield is a way of showing the rate of income the Fund
earns on its investments as a percentage of the Fund's share price. To calculate
yield, the Fund takes the interest income it earned from its Fund of investments
for a 7-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of that period.
The "effective yield" is calculated in a similar manner, 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.
ALL OTHER FUNDS
From time to time, the Trust may publish the "current yield" and "total return"
for the Pound Sterling, Deutsche Mark and Canadian Dollar Funds. Both
calculations are based upon historical earnings and are not intended to indicate
future performances.
Current yield refers to a Fund's annualized net investment income per share over
a 30-day period, expressed as a percentage of the net asset value per share at
the end of the period. For purposes of calculating current yield, the amount of
net investment income per share during that 30-day period, computed in
accordance with regulatory requirements, is compounded by assuming that it is
reinvested at a constant rate over a six-month period. An identical result is
then assumed to have occurred during a second six-month period which, when added
to the result of the first six months, provides an "annualized" yield for an
entire one-year period. Calculations of current yield may reflect absorbed
expenses pursuant to any undertaking that may be in effect. See "Management."
Total return is computed on a per share basis and assumes the reinvestment of
dividends and distributions. Total return generally is expressed as a percentage
rate which is calculated by combining the income and principal changes for a
specified period and dividing by the net asset value per share at the beginning
of the period. Advertisements may include the percentage rate of total return or
may include the value of a hypothetical investment at the end of the period
which assumes the application of the percentage rate of total return.
To the extent consistent with applicable law, the Trust may also publish other
measures of the historical investment performance of the Pound Sterling,
Deutsche Mark and Canadian Dollar Funds, including 7-day yield information,
calculated in the manner described above with respect to the U.S. Dollar Fund.
Performance will vary from time to time and past results are not necessarily
representative of
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future results. You should remember that performance is a function of portfolio
management in selecting the type and quality of portfolio securities and is
affected by operating expenses. Performance information, such as that described
above, may not provide a basis for comparison with other investments or other
investment companies using a different method of calculating performance.
Comparative performance information may be used from time to time in advertising
or marketing the Fund's shares, including data from Lipper Analytical Services,
Inc., Standard & Poor's, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
ORGANIZATION
The Trust was organized as a Delaware business trust on August 13, 1996. The
Trust is authorized to issue an unlimited number of shares of beneficial
interest, par value of $.0001 per share. The Board of Trustees may, without
shareholder approval, divide the authorized stock into an unlimited number of
separate series, and the costs of doing so will be borne by the Trust.
Currently, the Board of Trustees has authorized four Funds.
Shares issued by the Funds have no preemptive, conversion or subscription
rights. Shareholders of a Fund have equal and exclusive rights to dividends and
distributions declared by that Fund and to the net assets of that Fund upon
liquidation or dissolution, except such differences as are attributable to
differential class expenses. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in any election of Trustees can,
if they choose to do so, elect all of the Trustees. All shares when issued in
accordance with the terms of this Prospectus will be fully paid and
nonassessable.
The Trust is not required to hold annual meetings of shareholders. Special
meetings of shareholders may be called from time to time for purposes such as
electing or removing Trustees, changing a fundamental policy or approving an
investment advisory agreement.
If less than two-thirds of the Trustees holding office have been elected by
shareholders, a special meeting of shareholders of the Trust will be called to
elect Trustees. Under the Trust's Master Trust Agreement and the 1940 Act, the
record holders of not less than two-thirds of the outstanding shares of the
Trust may remove a Trustee by votes cast in person or by proxy at a meeting
called for that purpose or by a written declaration filed with the Trust's
custodian bank. Except as described above, the Trustees will continue to hold
office and may appoint successor Trustees. Whenever ten or more shareholders of
the Trust who have been such for at least six months, and who hold in the
aggregate shares having a net asset value of at least $25,000 or which represent
at least 1% of the outstanding shares, whichever is less, apply to the Trustees
in writing stating that they wish to communicate with other shareholders with a
view to obtaining signatures to request a meeting, and such application is
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five (5) Trust Business Days after receipt of such
application either afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the Trust; or inform
such applicants as to the approximate number of shareholders of record and the
approximate cost of mailing to them the proposed communication or form of
request.
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The Portfolios, in which all the Investable Assets of the Funds are invested,
are series of the Portfolio Trust, which is an open-end management investment
company. The Portfolio Trust's Master Trust Agreement provides that the
Portfolio Trust may establish and designate separate series of the Portfolio
Trust. The Portfolio Trust has established four series and may establish
additional series at any time. No series of the Portfolio Trust has any
preference over any other series.
Investors in other series of the Portfolio Trust will not be involved in any
vote involving only Portfolios in which they do not invest. Investors of all of
the series of the Portfolio Trust will, however, vote together to elect Trustees
of the Portfolio Trust and for certain other matters affecting the Portfolio
Trust. As provided by the 1940 Act, under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.
29
<PAGE> 62
INVESTMENT ADVISER:
Rothschild International Asset Management Limited
Five Arrows House, St. Swithin's Lane
London EC4N 8NR United Kingdom
DISTRIBUTOR:
Five Arrows Fund Distributors Inc.
3435 Stelzer Road
Columbus, OH 43219-3035
ADMINISTRATOR:
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, OH 43219-3035
TRANSFER AGENT:
BISYS Fund Services, Inc.
100 First Avenue, Suite 300
Pittsburgh, PA 15222
CUSTODIAN:
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
AUDITORS:
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
COUNSEL:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND (AND ALLOCATED PORTFOLIO) FEES AND
EXPENSES...................................... 2
SUMMARY......................................... 3
DESCRIPTION OF THE TRUST AND PORTFOLIO TRUST.... 4
INVESTMENT OBJECTIVES........................... 5
INVESTMENT POLICIES AND RESTRICTIONS............ 5
U.S. DOLLAR PORTFOLIO......................... 5
POUND STERLING PORTFOLIO...................... 6
DEUTSCHE MARK PORTFOLIO....................... 7
CANADIAN DOLLAR PORTFOLIO..................... 8
ALL PORTFOLIOS................................ 8
FUNDAMENTAL POLICIES.......................... 10
SPECIAL INVESTMENT CONSIDERATIONS AND RISK
FACTORS....................................... 10
INFORMATION CONCERNING THE MASTER-FEEDER FUND
STRUCTURE..................................... 12
MANAGEMENT...................................... 13
CALCULATION OF NET ASSET VALUE.................. 17
HOW TO BUY FIVE ARROWS SERVICE SHARES........... 17
HOW TO REDEEM FIVE ARROWS SERVICE SHARES........ 21
HOW TO CHANGE FUNDS............................. 23
TAXATION........................................ 24
DIVIDENDS AND DISTRIBUTIONS..................... 26
PERFORMANCE..................................... 27
GENERAL INFORMATION............................. 28
</TABLE>
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 FUND'S 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 OF ANY FUND'S SHARES IN ANY STATE IN WHICH, OR TO ANY PERSON
TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
FIVE ARROWS SHORT-TERM
INVESTMENT TRUST
FIVE ARROW SERVICE SHARES
ROTHSCHILD INTERNATIONAL
ASSET MANAGEMENT LIMITED
INVESTMENT ADVISER
PROSPECTUS DATED
FEBRUARY 3, 1997
<PAGE> 63
Five Arrows Short-Term Investment Trust
Statement of Additional Information
February 3, 1997
Five Arrows Short-Term Investment Trust (the "Trust") is an open-end
management investment company designed to offer four separate Funds (the
"Funds"): the U.S. Dollar Fund, which is diversified, and the Pound Sterling
Fund, the Deutsche Mark Fund, and the Canadian Dollar Fund, which are not
diversified. Each Fund is described in the Trust's Prospectus dated February __,
1997. This Statement of Additional Information supplements and should be read in
conjunction with the Prospectus as it may be revised from time to time. To
obtain a copy of the Prospectus, please write to the Trust at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, or call Five Arrows Fund Distributors Inc. (the
"Distributor"), at 1-800-499-3603.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE> 64
TABLE OF CONTENTS
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS............................1
MONEY MARKET INSTRUMENTS...................................................2
U.S. Dollar Portfolio.............................................2
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES FOR ALL PORTFOLIOS..................5
MANAGEMENT OF THE TRUST AND PORTFOLIO TRUST................................9
COMPENSATION OF TRUSTEES AND OFFICERS.....................................10
INVESTMENT ADVISORY, DISTRIBUTION,
AND ADMINISTRATION AGREEMENTS
AND 12b-1 PLANS..................................................11
REDEMPTION OF SHARES......................................................14
CALCULATION OF NET ASSET VALUE............................................14
PERFORMANCE INFORMATION...................................................15
PORTFOLIO TRANSACTIONS....................................................18
INFORMATION ABOUT THE TRUST AND
PORTFOLIO TRUST..................................................18
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING
AGENT, COUNSEL AND INDEPENDENT AUDITORS..........................20
ADDITIONAL INFORMATION....................................................20
INFORMATION ABOUT SECURITIES RATINGS
OF NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATIONS ("NRSROs").........................................21
Financial Statements
Report of Independent Auditors
<PAGE> 65
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As described in the Prospectus, each Fund seeks to achieve its
investment objectives by investing all of its Investable Assets in a Portfolio
which has the same investment objectives and restrictions as that Fund.
The Trust's Prospectus describes the investment objectives of the Funds
and the Portfolios and summarizes the investment policies they will follow.
Since the investment characteristics of the Funds will correspond directly with
those of the Portfolios, the following is a discussion of the various investment
policies and restrictions of the Portfolios and should be read in conjunction
with the sections in the Trust's Prospectus entitled "Description of the Trust
and Portfolio Trust," "Investment Objectives" and "Investment Policies and
Restrictions."
All of the Portfolios' fundamental investment restrictions are set
forth below. These fundamental investment restrictions may not be changed except
by the affirmative vote of a majority of the Portfolios outstanding voting
securities as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). Under the 1940 Act, a "vote of the majority of the outstanding
voting securities" means the vote, at the annual or a special meeting of
security holders duly called, (i) of 67% or more of the voting securities
present at the meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (ii) of more than 50% of the
outstanding voting securities, whichever is less. Under these restrictions, it
is the policy of each Portfolio:
(1) not to invest in a security if the transaction would result in
the Portfolio owning more than 10% of any class of voting
securities of an issuer;
(2) not to issue senior securities, except that the Portfolio may
borrow money in accordance with Restriction 10 below;
(3) not to underwrite or participate in the marketing of securities
of other issuers;
(4) not to purchase or sell real estate in fee simple;
(5) not to invest in commodities or commodity contracts;
(6) not to make loans except that the Portfolio may purchase bonds,
debentures, notes and similar debt obligations, including money
market instruments, directly from the issuer thereof or in the
open market and may engage in repurchase transactions;
(7) not to conduct arbitrage transactions;
(8) not to invest in interests in oil, gas or other mineral
exploration or development programs (provided that the Portfolio
may invest in securities which are based, directly or
indirectly, on the credit of companies which invest in or
sponsor such programs);
(9) not to make any investment which would cause more than 25% of
the value of such Portfolio's total assets to be invested in
securities of nongovernmental issuers principally engaged in any
one industry, except that under normal market conditions each
Portfolio will invest more than 25% of its total assets in
obligations of Qualifying Banks (as defined in the Prospectus)
and further provided that in the event that the diversification
requirements of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code") are revised so as to permit one or
more of the Portfolios to invest more than 25% of its total
assets in government obligations of the country that issues the
relevant Fund's Designated Currency, then each such Portfolio
will under normal market conditions invest more than 25% of its
total assets in such obligations;
<PAGE> 66
(10) not to borrow money except in connection with redemptions or for
temporary and emergency purposes and then not in an amount in
excess of 20% of the value of its net assets, provided that
additional investments will be suspended during any period when
borrowings exceed 5% of the Portfolio's total assets; and
(11) not to purchase securities on margin, make a short sale of any
securities or purchase or deal in puts, calls, straddles or
spreads with respect to any security, except that the Portfolio
may acquire puts in connection with enhancing the liquidity of
its securities.
The following investment restrictions may be changed by vote of a
majority of the Trustees of the Portfolio Trust. Under these restrictions, it is
the policy of each Portfolio:
(1) not to hypothecate, mortgage or pledge any of its assets except
as may be necessary in connection with permitted borrowings;
(2) not to purchase a security issued by another investment company
if, immediately after such purchase, the Portfolio would own, in
the aggregate, (i) more than 3% of the total outstanding voting
stock of such other investment company; (ii) securities issued
by such other investment company having an aggregate value in
excess of 5% of the value of the Portfolio's total assets; or
(iii) securities issued by such other investment company and all
other investment companies (other than treasury stock of the
Portfolio) having an aggregate value in excess of 10% of the
value of the Portfolio's total assets; provided, however, that
the Portfolio may purchase investment company securities without
limit for the purpose of completing a merger, consolidation or
other acquisition of assets;
(3) not to invest in companies for the purpose of exercising control
over their management;
(4) not invest more than 5% of the value of its total assets in any
issuer (other than repurchase agreements and securities issued
by a sovereign government, its agencies or instrumentalities);
(5) not to invest more than 25% of its total assets in securities
issued by a sovereign government, its agencies or
instrumentalities (other than the U.S. federal government),
provided that securities held solely as collateral for
outstanding repurchase agreements shall be excluded for purposes
of computing compliance with this restriction; and
(6) not to invest more than 25% of its total assets in repurchase
agreements with any one counterparty.
MONEY MARKET INSTRUMENTS
U.S. Dollar Portfolio
---------------------
The following describes further the money market instruments in which
the U.S. Dollar Portfolio will invest and is provided as a supplement to the
discussion appearing in the Prospectus.
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<PAGE> 67
Short-Term Corporate Debt Instruments
Short-term corporate debt instruments include commercial paper (i.e.,
short-term, unsecured promissory notes) issued by corporations (including bank
holding companies) to finance short-term credit needs. Commercial paper is
usually sold on a discounted basis and has a maturity at the time of issuance
not exceeding nine months.
Short-term corporate debt instruments also include master demand notes.
Master demand notes are obligations of companies that permit an investor to
invest fluctuating amounts at varying rates of interest pursuant to arrangements
between the investor, as lender, and the companies, as borrowers. The U.S.
Dollar Portfolio will have the right, at any time, to increase the amount lent
up to the full amount provided by a note. Because the U.S. Dollar Portfolio may
also decrease the amount lent at any time, such instruments are highly liquid
and in effect have a maturity of one business day. The borrower will have the
right, at any time, to prepay up to the full amount of the amount borrowed
without penalty. Because the notes are direct lending obligations between the
U.S. Dollar Portfolio and the borrowers, they are generally not traded and there
is no secondary market. Consequently, the U.S. Dollar Portfolio's ability to
receive repayment will depend upon the borrower's ability to pay principal and
interest on the U.S. Dollar Portfolio's demand. The U.S. Dollar Portfolio will
invest only in notes that either have the ratings described below for commercial
paper or (because notes are not typically rated by credit rating agencies)
unrated notes that are issued by companies having the ratings described below
for issuers of commercial paper. The Fund does not expect that the notes will be
backed by bank letters of credit. The Investment Adviser will monitor the value
of the U.S. Dollar Portfolio's investments in commercial paper and master demand
notes, taking into account such factors as the issuer's earning power, cash flow
and other liquidity ratios.
Commercial paper investments at the time of purchase will be rated in
the highest rating category by an NRSRO, such as A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"),
or, if not rated, issued by companies having an outstanding debt issue rated at
least AA by S&P or Aa by Moody's or equivalent or determined to be of comparable
quality. See "Information about Securities Ratings of NRSROs" below for further
information.
Under certain limited circumstances, the U.S. Dollar Portfolio may
invest in nonconvertible corporate debt securities (e.g., bonds and debentures
which may be issued by U.S. or non-U.S. corporations) with no more than thirteen
months remaining either to the date of maturity or the date on which, under the
indenture governing the security, it may be sold back to the issuer thereof for
payment of principal and accrued interest. Corporate debt securities with a
remaining maturity of thirteen months or less are liquid (and tend to become
more liquid as their maturities lessen) and are traded as money market
securities. Such securities also tend to have considerably less market value
fluctuation than longer term issues.
Corporate debt and other securities in which the U.S. Dollar Portfolio
invests must be U.S. dollar-denominated Eligible Securities (as defined in Rule
2a-7 under the 1940 Act) that are determined to present minimal credit risks. In
general, the term "Eligible Securities" is limited to:
(i) securities with remaining maturities of 13 months or less that
are rated (or have been issued by an issuer that is rated with
respect to a class of short-term debt obligations, or any
securities within that class, that are comparable in priority
and security with the relevant security) by the requisite number
(i.e., two, if two organizations have issued ratings and one if
only one has issued a rating) of NRSROs in one of the two
highest rating categories for short-term debt obligations
(within which there may be sub-categories or gradations
indicating relative standing), or
3
<PAGE> 68
(ii) securities that at the time of issuance were long-term
securities (i.e., that had remaining maturities greater than 397
calendar days) but that now have remaining maturities of 397
calendar days or less and which were issued by an issuer that
has received from the requisite NRSROs a rating, with respect to
a class of short-term debt obligations (or any security within
that class) that is comparable in priority and security with the
relevant security, in one of the two highest rating categories
for short-term debt obligations (within which there may be
sub-categories or gradations indicating relative standing), or
(iii) securities which are "unrated" (as defined in Rule 2a-7) but
determined to be of comparable quality to the foregoing by the
Portfolio Trust's Board of Trustees or the Investment Adviser
under their supervision (provided that a security that at the
time of issuance was a long-term security but that has a
remaining maturity of 397 calendar days less and that is an
"unrated" security is not an "Eligible Security" if the security
has a long-term rating from any NRSRO that is not within the
NRSRO's three highest categories (within which there may be
sub-categories or gradations indicating relative standing)).
As indicated in the Prospectus, the U.S. Dollar Portfolio will further
limit its investments to Eligible Securities that are government securities and
"first tier" Eligible Securities as defined in Rule 2a-7 under the 1940 Act.
Bank Money Investments
Bank money investments include but are not limited to certificates of deposit,
bankers' acceptances and time deposits. Certificates of deposit are generally
short-term (i.e., less than one year), interest-bearing negotiable certificates
issued by commercial banks or savings and loan associations against funds
deposited in the issuing institution. A banker's acceptance is a time draft
drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction (to finance the import, export, transfer
or storage of goods). A banker's acceptance may be obtained from a domestic or
foreign bank including a U.S. branch or agency of a foreign bank. The borrower
is liable for payment as well as the bank, which unconditionally guarantees to
pay the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity. Time deposits are nontransferable deposits made for a fixed period of
time at a stated interest rate. The U.S. Dollar Portfolio will not invest in
any bank money investment unless the investment is issued by a U.S. bank that
is a member of the Federal Deposit Insurance Corporation ("FDIC"), including
any foreign branch thereof, a U.S. branch or agency of a "foreign bank", as
defined under Rule 3a-6 of the 1940 Act, a foreign branch of a foreign bank, or
a savings bank or savings and loan association that is a member of the FDIC and
which at the date of investment has capital, surplus and undivided profits (as
of the date of its most recently published financial statements) in excess of
$100 million or the equivalent in the relevant Fund's Designated Currency (a
"Qualifying Bank").
U.S. branches and agencies of foreign banks are offices of foreign banks
and are not separately incorporated entities. They are chartered and regulated
either federally or under state law. U.S. federal branches or agencies of
foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect to obtain FDIC insurance. Unlike U.S. branches of
foreign banks, U.S. agencies of foreign banks may not accept deposits and thus
are not eligible for FDIC insurance. Both branches and agencies can maintain
credit balances, which are funds received by the office incidental to or arising
out of the exercise of their banking powers and can exercise other commercial
functions, such as lending activities.
U.S. Government Securities
4
<PAGE> 69
U.S. Government securities consist of various types of marketable
securities issued by the U.S. Treasury, i.e., bills, notes and bonds. Such
securities are direct obligations of the U.S. Government and differ mainly in
the lengths of their maturities. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
Government Agency Securities
Government agency securities consist of fixed income securities issued
or guaranteed by agencies and instrumentalities of the U.S. Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies and instrumentalities include, among others, the
Federal Housing Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association, Farmers Home Administration,
Export-Import Bank of the U.S., Federal Maritime Administration, General
Services Administration and Tennessee Valley Authority. Instrumentalities
include, for example, the Central Bank for Cooperatives, Federal Home Loan
Banks, Federal Farm Credit Banks, Student Loan Marketing Association, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks and the U.S. Postal Service. The U.S. Dollar Portfolio will purchase such
securities only so long as they are backed by any of (i) the full faith and
credit of the U.S. Treasury (e.g., U.S. Treasury bills, bonds and notes and GNMA
participation certificates), (ii) the right of the issuer to borrow a limited
amount from the U.S. Treasury (e.g., securities of the Farmers Home
Administration), (iii) the discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (e.g., securities
of the Federal National Mortgage Association) or (iv) the credit of the agency
or instrumentality (e.g., securities of a Federal Home Loan Bank).
Custodial Receipts
The U.S. Portfolio may acquire, subject to the limitations described
herein, custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms. Such notes and bonds are
held in custody by a bank on behalf of the owners of the receipts. These
custodial receipts are known by various names, including "Treasury Receipts"
("TRs"), "Treasury Investment Growth Receipts" ("TIGRs") and "Certificates of
Accrual on Treasury Securities" (CATS"), and may not be treated as U.S.
Government securities.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES FOR ALL PORTFOLIOS
Each Portfolio may invest in the securities or utilize the investment
techniques listed in this section:
Repurchase Agreements
A repurchase agreement is an agreement under which a Portfolio acquires
money market instruments (generally government securities, bankers' acceptances
or certificates of deposit) from a commercial bank, broker or dealer, subject to
resale to the seller at an agreed-upon price and date (normally the next
business day). The resale price reflects an agreed-upon interest rate effective
for the period the instruments are held by a Portfolio and is unrelated to the
interest rate on the instruments. The instruments acquired by a Portfolio
(including accrued interest) must have an aggregate market value in excess of
the resale price and will be held by the Custodian for such Portfolio until they
are repurchased. The Trustees of the Portfolio Trust will monitor the standards
which the Investment Adviser will use in reviewing the creditworthiness of any
party to a repurchase agreement with any of the Portfolios.
5
<PAGE> 70
The use of repurchase agreements involves certain risks. For example,
if the seller defaults on its obligation to repurchase the instruments acquired
by a Portfolio at a time when their market value has declined, such Portfolio
may incur a loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by such Portfolio are collateral for a loan by such
Portfolio and therefore are subject to sale by the trustee in bankruptcy.
Finally, it is possible that a Portfolio may not be able to substantiate its
interest in the instruments it acquires. While the Trustees of the Portfolio
Trust acknowledge these risks, it is expected that they can be controlled
through careful documentation and monitoring.
Illiquid Securities
No Portfolio may invest more than 10% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise "illiquid". The Investment Adviser will monitor the
amount of illiquid securities in each Portfolio's portfolio, to ensure
compliance with such Portfolio's investment restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the 1933 Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Portfolio might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty in satisfying
redemption requests within seven days. The Portfolio might also have to register
such restricted securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
All of the Portfolios may buy or sell restricted securities in
accordance with Rule 144A under the 1933 Act ("Rule 144A Securities").
Securities may be resold pursuant to Rule 144A under certain circumstances only
to qualified institutional buyers as defined in the rule, and the markets and
trading practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may be
deemed to be liquid as determined by or in accordance with methods adopted by
the Trustees of the Portfolio Trust. In all other cases, however, securities
subject to restrictions on resale will be deemed illiquid. Under such methods
the following factors are considered, among others: the frequency of trades and
quotes for the security, the number of dealers and potential purchasers in the
market, marketmaking activity, and the nature of the security and marketplace
trades. Investments in Rule 144A Securities could have the effect of increasing
the level of the relevant Portfolio's illiquidity to the extent that qualified
institutional buyers become, for a time, disinterested in purchasing such
securities. Also, the relevant Portfolio may be adversely impacted by the
possible illiquidity and subjective valuation of such securities in the absence
of a market for them.
6
<PAGE> 71
Concentration in Obligations of Qualifying Banks
Under normal market conditions, more than 25% of the total assets of
each Portfolio will be invested in obligations of Qualifying Banks as set forth
in the Prospectus.
Obligations of non-U.S. branches of U.S. banks and of non-U.S. banks,
such as certificates of deposit and time deposits, 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 U.S. banks or U.S.
branches of non-U.S. 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. Non-U.S. branches of
U.S. banks are not necessarily subject to the same or similar regulatory
requirements that apply to U.S. 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
non-U.S. branch of a U.S. bank or about a non-U.S. bank than about a U.S. bank.
Investing in Non-U.S. Securities
Each of the Portfolios may invest in non-U.S. securities. Non-U.S.
securities markets generally are not as developed or as 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 prices can be greater than in the United States. In
addition, there may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers are not generally subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
The value of securities purchased with and payable in one Designated
Currency will be affected favorably or unfavorably relative to other currencies
by changes in currency exchange rates and exchange control regulations.
Furthermore, some of the securities may be subject to foreign transaction taxes
which could have the effect of increasing the cost of such investments and which
would reduce the realized gain or increase the realized loss on such securities
at the time of sale. Transaction costs and custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities. Interest payments from certain foreign securities may be subject to
foreign withholding taxes on interest income payable on the securities.
U.S. Government policies have in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While no
material restrictions of that type are currently in effect, they could be
reinstituted. In an extreme case, restrictions of that type could require the
liquidation of a Portfolio (other than the U.S. Dollar Portfolio).
Floating Rate and Variable Rate Demand Notes
Each Portfolio may purchase floating rate and variable rate demand
notes and bonds. These securities may have a stated maturity in excess of one
year, but permit a holder to demand payment of principal plus accrued interest
upon a specified number of days notice. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks. The
issuer has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal of the obligation plus accrued interest
upon a specific number of days notice to the holders. The interest rate of a
floating rate instrument may be based on a known lending rate, such as a bank's
prime rate, and is reset whenever such rate is adjusted. The interest rate on a
variable rate demand note is reset at specified intervals at a market rate.
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<PAGE> 72
Investing in Supranational Organizations
The supranational organizations in which each Portfolio may invest
include, without limitation, the organizations listed below:
The International Bank for Reconstruction and Development (the "World
Bank"), which was established in 1945, is an international institution having as
members a large portion of the world's sovereign governments. The principal
purposes of the World Bank are: (i) to assist in the reconstruction and
development of its member countries by facilitating the investment of capital
for productive purposes, thereby promoting the long-range growth of
international trade and the improvement of standards of living; (ii) to promote
private foreign investment by guarantees of and participation in loans and other
investments made by private investors; and (iii) when private capital is not
available on reasonable terms, to make loans for productive purposes out of its
own resources or funds borrowed by it.
The Inter-American Development Bank, which became effective in 1959,
has a membership comprised primarily of sovereign governments located in the
western hemisphere as well as a number of countries from outside that region.
The principal purposes of the Bank are: (i) to promote the investment of public
and private capital for development purposes in the Americas; (ii) to utilize
its own capital, funds raised by it in financial markets, and other available
resources, for financing development of member countries, giving priority to
those loans and guarantees that will contribute most effectively to their
economic growth; (iii) to encourage private investment in projects, enterprises,
and activities contributing to economic development and to supplement private
investment when private capital is not available on reasonable terms and
conditions; (iv) to cooperate with member countries to orient their development
policies toward a better utilization of their resources, in a manner consistent
with objectives of making their economics more complimentary, and of fostering
orderly growth of their foreign trade; and (v) to provide technical assistance
for preparation, financing and implementation of development plans and projects,
including the study of priorities and the formulation of specific project
proposals.
The Asian Development Bank was established in 1965 and has a membership
comprised primarily of sovereign governments located in Asia, as well as a
number of nations outside the region. The purposes of the Bank are: (i) to
encourage regional economic cooperation in the Asian and Pacific region and (ii)
to encourage economic growth of its developing members by lending funds,
promoting investment and providing technical assistance with special regard to
the needs of smaller or less developed countries.
The European Bank for Reconstruction and Development was established in
1991 and has a membership comprised primarily of sovereign governments, the
European Union and the European Investment Bank. The purpose of the Bank is to
provide project specific direct financing to foster the economic and democratic
transition process and to promote private and entrepreneurial initiatives in
those countries through the provision of loans, equity investments, guarantees
and technical cooperation.
8
<PAGE> 73
MANAGEMENT OF THE TRUST AND PORTFOLIO TRUST
The Trustees and executive officers of the Trust are listed below. The
Trustees of the Portfolio Trust are identical to the Trustees of the Trust. The
officers of the Portfolio Trust hold the same offices with the Portfolio Trust
as with the Trust. All executive officers of the Trust and the Portfolio Trust
are affiliated persons of Rothschild International Asset Management Limited,
(the "Investment Adviser").
The Trustees and executive officers of the Trust and Portfolio Trust,
together with information as to their principal business occupations during the
last five years, are shown below. Each Trustee who is an "interested person" (as
defined in the 1940 Act) of the Trust or Portfolio Trust is indicated by an
asterisk.
Certain officers and members of the Board of Trustees of the Trust and the
Portfolio Trust are not residents of the United States. Virtually all or a
substantial portion of the assets of such persons are located outside of the
United States. It may not be possible for shareholders to effect service of
process within the United States upon such persons or to enforce in courts
inside or outside the United States judgements obtained against such persons in
courts in jurisdictions outside the United States, in each case, in any action,
including actions predicated upon the civil liability provisions of the United
States securities laws. In addition, it may be difficult for shareholders to
enforce, in original actions brought in courts in jurisdictions outside the
United States, liabilities predicated solely upon the United States securities
laws.
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION
NAME, ADDRESS AND POSITION HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
<S> <C> <C>
Peter B. Collacott* President and Trustee Managing Director,
Five Arrows House Rothschild, Asset
St. Swithin's Lane Management Limited;
London EC4N 8NR U.K. Director, International
Born June 19, 1944 Biotechnology Trust.
Paul R. Freeman* Senior Vice President Director, Rothschild Asset
Five Arrows House and Trustee Management Limited
St. Swithin's Lane (July 1994 to date);
London EC4N 8NR U.K. Product Development
Born September 30, 1955 Director,
Henderson Touche
Remnant Unit Trust
Management Limited
(Oct. 1993 - July 1994);
Prior to October 1993,
Company Secretary and
Head of Product
Development for GT
Management PLC
(Dec. 1988 - Oct. 1993).
Alan T. Jeffers Trustee Private Investor;
51 Clearwater Cove Consultant
Old Dunleary Road to Rothschild Asset
Dun Laoghaire, Management Limited from
County Dublin, Ireland 1986 to September 1996;
Born August 17, 1938 Chairman, Dipcot Holdings
Ltd.; Chairman, Danfay Ltd.;
Director, Hibernian Group
Plc; Founder and Director,
Banking Automation Ltd.;
Chairman, Provita Europe
Ltd.; Chairman, Biotrin
Holdings Ltd.; Chairman,
Capteur Sensors & Analysers
Limited.
Bryan J. Walsh Trustee President and Managing
11 Lower Tuckahoe Road West Director of Salisbury
Richmond, Virginia Research 1991-date.
23233-6129 U.S.A.
Born November 6, 1944
Roger M. Kubarych Trustee General Manager - Henry
65 East 55th Street Kaufman & Company Inc.
New York, NY 10022 overseeing the firm's
Born November 19, 1944 international money
management activities and
financial and economic
consulting services.
Tony Mercure Vice President Director of Client Services,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.
3435 Stelzer Road and has served in a variety
Columbus, OH 43219 of positions within
BISYS Fund Services, Inc.
since 1991.
Adrian Waters Vice President Managing Director,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.,
(Ireland) Limited. May 1993 to present;
Floor 2, Block 2 Manager, Price Waterhouse,
The Harcourt Centre 1989 - May 1993.
Dublin 2 Ireland
Mary Gamble Vice President Associate Director,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.,
First and Market Building, March 1995 to present;
Suite 300 Assistant Vice President,
100 First Avenue Concord Financial Group,
Pittsburgh, PA 15222 July 1987 to March 1995.
Chuck Booth Vice President Vice President, BISYS Fund Services, Inc.
BISYS Fund Services, Inc. and has served in a
3435 Stelzer Road variety of positions within
Columbus, OH 43219 BISYS Fund Services, Inc.
since 1991.
Bill Tomko Treasurer Senior Vice President,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.
3435 Stelzer Road and has served in a
Columbus, OH 43219 variety of positions within
BISYS Fund Services, Inc.
since 1991.
Alaina Metz Assistant Secretary Chief Administrator,
BISYS Fund Services, Inc. Administrative and Regulatory Services,
3435 Stelzer Road BISYS Fund Services, Inc.
Columbus, OH 43219 June 1995 to present; Supervisor,
Mutual Fund Legal Department,
Alliance Capital Management,
May 1989 to June 1995.
Catherine Brady Assistant Treasurer Accounting Services Manager,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.;
(Ireland) Limited March 1994 to present;
Floor 2, Block 2 Supervisor, Price Waterhouse,
The Harcourt Centre 1990 to March 1994.
Dublin 2 Ireland
Louise Egan Assistant Secretary Shareholder Servicing Manager,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.;
(Ireland) Limited February 1994 to present;
Floor 2, Block 2 Financial Controller,
The Harcourt Centre ITI Services Limited,
Dublin 2 Ireland 1990 to February 1994.
</TABLE>
9
<PAGE> 74
COMPENSATION OF TRUSTEES AND OFFICERS
Each of the Trust and the Portfolio Trust pays no compensation to the
Trustees of the Trust or Portfolio Trust affiliated with the Administrator, the
Distributor or the Investment Adviser, respectively, or the Trust's and
Portfolio Trust's officers.
The following sets forth an estimate of the compensation to be paid to
the Trust's Trustees for the period ending December 31, 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate Total
Compensation Compensation Compensation Compensation Compensation
Name of from U.S. from Pound from Deutsche Mark from Canadian from Fund
Trustee Dollar Portfolio Sterling Portfolio Portfolio Dollar Portfolio Complex (a)(b)
------- ---------------- ------------------ --------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Bryan J. Walsh $12,000 $12,000 $3,000 $3,000 $30,000
Roger M. Kubarych $10,000 $10,000 $2,500 $2,500 $25,000
Alan T. Jeffers $10,000 $10,000 $2,500 $2,500 $25,000
Peter B. Collacott $ 0 $ 0 $ 0 $ 0 $ 0
Paul R. Freeman $ 0 $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------
<FN>
(a) Currently the U.S. Dollar Fund, the Pound Sterling Fund, the
Deutsche Mark Fund and the Canadian Dollar Fund and their corresponding
Portfolios are the only funds in the fund complex. No other
compensation, including pension or other retirement benefits, is paid to
the Trustees by the fund complex. The Trustees receive no compensation
for their service as Trustees of the Trust.
(b) Trustees fees will be allocated among the Portfolios in proportion to
their respective net asset values. The allocation shown reflects an
estimate of the relative net asset values of the Portfolios for the
period ending December 31, 1997.
</TABLE>
As of the approximate time of this Statement of Additional Information,
an affiliated person of the Investment Adviser was the beneficial owner of all
or a substantial amount of the outstanding Five Arrows and Five Arrows Service
shares of the Funds and may be deemed to be in control of the Funds as control
is defined in the 1940 Act. Such owner may acquire additional shares of the
Funds. Although sales of the Funds' shares to other investors will reduce its
percentage ownership, so long as 25% of a class of shares is so owned, the owner
will be presumed to be in control of such class of shares for purposes of voting
on certain matters submitted to a vote of shareholders.
INVESTMENT ADVISORY, DISTRIBUTION,
AND ADMINISTRATION AGREEMENTS
AND 12b-1 PLANS
The following information supplements and should be read in conjunction
with the section in the Trust's Prospectus entitled "Management."
Investment Adviser of the Portfolio Trust
The Investment Adviser serves as the investment adviser to the
Portfolios pursuant to a written investment advisory agreement with the
Portfolio Trust (the "Investment Advisory Agreement"). The Investment
Adviser is a British corporation organized in 1975 and is registered under the
U.S. Investment Advisers Act of 1940.
10
<PAGE> 75
The Investment Adviser is an indirect, wholly-owned subsidiary of
Rothschild Continuation Holdings AG, a Swiss corporation. Twenty percent (20%)
of the equity of such entity is held by Sun Alliance Group Limited, a British
insurance company. The remainder of the equity is held by Rothschild Concordia
A.G., a holding company controlled by members of the Rothschild family.
Certain services provided by the Investment Adviser under the Master
Investment Advisory Agreement are described in the Prospectus. These services
are provided without reimbursement by the Portfolios for any costs incurred.
Under the Investment Advisory Agreement, the Investment Adviser is paid a
fee based upon a percentage of the Portfolios' average daily net asset value
computed as described in the Prospectus. The rate and time at which the fee is
paid is described in the Prospectus.
Pursuant to the Investment Advisory Agreement, the Portfolios bear
expenses of their operations other than those incurred by the Investment Adviser
pursuant to the Investment Advisory Agreement. Among other expenses, the
Portfolios will pay share pricing expenses; custodian fees and expenses;
administration fees; legal and auditing fees and expenses, expenses of investor
reports to be provided to existing shareholders; registration and reporting fees
and expenses; and Trustees' fees and expenses.
Unless terminated as provided below, the Investment Advisory
Agreement continues in full force and effect until October 16, 1998 and for
successive periods of one year thereafter, but only so long as each such
continuance is approved annually (i) by either the Trustees of the Portfolio
Trust or by the "vote of a majority of the outstanding voting securities" of
each Portfolio, and, in either event (ii) by vote of a majority of the Trustees
of the Portfolio Trust who are not parties to the Investment Advisory
Agreement or "interested persons" (as defined int he 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreement may be terminated at any time
without the payment of any penalty by vote of the Trustees of the Portfolio
Trust or by the "vote of a majority of the outstanding voting securities" of the
Portfolio or by the Investment Adviser, on sixty days' written notice to the
other parties. The Investment Advisory Agreement terminates in the event of its
assignment as defined in the 1940 Act.
In an attempt to avoid any potential conflict with portfolio
transactions for the Portfolios, the Investment Adviser, the Trust and the
Portfolio Trust have each adopted extensive restrictions on personal securities
trading by personnel of the Investment Adviser and its affiliates. These
restrictions are a continuation of the basic principle that the interests of the
Fund and its shareholders, and the Portfolio and its investors, come before
those of the Investment Adviser and its employees.
The Investment Advisory Agreement also provides that, with respect to
the Portfolio to which it pertains, the Investment Adviser shall not be liable
for any mistake of judgment or in any event whatsoever in the performance of its
duties to the Portfolio Trust, except for liability resulting from willful
misfeasance, bad faith or gross negligence in the performance of the Investment
Adviser's duties or by reason of reckless disregard of its obligations and
duties under the Investment Advisory Agreement.
The Investment Advisory Agreement provides that the Investment Advisor
may render advisory services to others.
In addition to receiving its advisory fee, the Investment Adviser may
also act and be compensated as investment manager for its clients with respect
to assets which are invested in a Portfolio. In some instances the Investment
Adviser may elect to credit against any investment management fee received from
a client who is also a shareholder in the Portfolio Trust an amount equal to all
or a portion of the fees received by the Investment Adviser or any affiliate of
the Investment Adviser from a Portfolio with respect to the client's assets
invested in the Portfolio.
11
<PAGE> 76
Distributor of the Trust
Five Arrows Fund Distributors Inc. (the "Distributor"), an affiliate
of the Administrator, serves as the Trust's exclusive principal underwriter
and holds itself available to receive purchase orders for the Funds' shares. In
that capacity, the Distributor has been granted the right, as agent of the
Trust, to solicit and accept orders for the purchase of the Funds' shares in
accordance with the terms of the Distribution Agreement between the Trust and
the Distributor. The Distribution Agreement shall continue in effect with
respect to each Fund until two years after its execution and for successive
periods of one year thereafter only if it is approved at least annually
thereafter (i) by a vote of the holders of a majority of the relevant Fund's
outstanding shares or by the Trustees of the Trust or (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Distribution Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority
of the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or by a vote of the holders of a majority of
the relevant Fund's outstanding shares, in any case without payment of any
penalty on not more than 60 days' written notice to the other party.
Administrator
BISYS Fund Services Limited Partnership, 3435 Stelzer Road, Columbus,
OH 43219-3035 serves as the administrator to the Funds and the Portfolios (the
"Administrator") pursuant to written administration agreements with the Trust on
behalf of the Funds and the Portfolio Trust on behalf of the Portfolios. Certain
services provided by the Administrator under these administration agreements are
described in the Prospectus. For the services provided to the Funds, each Fund
pays its pro-rata share of an annual fee to the Administrator, computed daily
and payable monthly, of .05% of the Fund's average net assets.
The administration agreement relating to the Funds provides that if the
total expenses of the Funds in any fiscal year exceed the most restrictive
expense limitation applicable to the Funds in any state in which shares of the
Funds are then qualified for sale, the compensation due the Administrator shall
be reduced by the amount of the excess, by a reduction or refund thereof at the
time such compensation is payable after the end of each calendar month during
the fiscal year, subject to readjustment during the year. Currently, the most
restrictive state expense limitation provision limits the Fund's expenses to
2 1/2% of the first $30 million of average net assets, 2% of the next $70
million of such net assets and 1 1/2% of such net assets in excess of $100
million.
The Administrator provides the Portfolio Trust with office space for
managing its affairs and with certain clerical services and facilities. For the
services provided to the Portfolios, each Portfolio pays its pro-rata share of
an annual fee to the Administrator, computed daily and payable monthly, of .05%
of the Portfolio's average daily net assets.
12b-1 Plan
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1
(the "12b-1 Plan") in accordance with the regulations promulgated under the
1940 Act. The 12b-1 Plan provides that each Fund will make payments to the
Distributor equal to 0.50% (on an annual basis) of the average daily value of
the net assets of such Fund's Five Arrows Service class of shares (the "12b-1
fee"). The 12b-1 fee has two components: a service fee and a distribution fee.
The 12b-1 Plan provides that each of these components will be paid at an annual
rate of 0.25% of the average daily value of the net assets of such Fund's Five
Arrows Service class of shares. The Distributor has voluntarily agreed to
waive a portion of the distribution fee component in order to limit payments of
the 12b-1 fee to 0.35% (on an annual basis) of the average daily net asset value
of the Five Arrows Service shares of any Fund. This waiver shall remain in
effect for the fiscal period ending December 31, 1997, and thereafter in the
discretion of the Distributor. The Distributor has reserved the right to
terminate or revise this undertaking with respect to any period after December
31, 1997.
Some or all of the service fees are used to compensate brokers and
other authorized institutions that sell Five Arrows Service shares ("Authorized
Firms") for providing account administration services to their clients who are
beneficial owners of such shares. One or more affiliates of the Investment
Adviser and the Administrator may act as Authorized Firms. The Trust will enter
into agreements with Authorized Firms which purchase Five Arrows Service shares
on behalf of their clients ("Service Agreements"). The Service Agreements will
provide for compensation to the Authorized Firms in an amount up to 0.25% (on an
annual basis) of the average daily net assets of the Five Arrows Service shares
of the applicable Fund attributable to or held in the name of the Authorized
Firm for its clients.
The services provided by the Authorized Firms may include, among other
things, receiving, aggregating and processing shareholder or beneficial owner
(collectively "shareholder") orders; furnishing shareholder subaccounting;
providing and maintaining retirement plan records; communicating periodically
with shareholders; acting as the sole shareholder of record and nominee for
shareholders; maintaining account records for shareholders; answering questions
and handling correspondence from shareholders about their accounts; issuing
various shareholder reports and confirmations for transactions by shareholders;
performing daily investment ("sweep") functions for shareholders and performing
similar account and administrative services. Any service fees received by the
Distributor and not allocated to Authorized Firms may be retained by the
Distributor in consideration of its own role in servicing shareholder accounts.
Authorized Firms that have sold Five Arrows Service shares are eligible
for further compensation commencing as of the time of such sale. It is the
Distributor's current policy to pay a trailer commission to Authorized Firms in
an amount equal to .10% (on an annual basis) of the average daily net assets of
the Five Arrows Service shares of the applicable Fund attributable to or held
in the name of the Authorized Firm for its clients. This trailer commission
arrangement may be terminated or revised by the Distributor at any time. Any
distribution fee received by the Distributor and not allocated to Authorized
Firms may be applied by the Distributor in connection with sales or
marketing efforts (e.g. for advertising costs, the cost of printing and mailing
prospectuses and reports to potential investors) or retained by the Distributor
in consideration of its own role in marketing Five Arrows Service shares.
12
<PAGE> 77
Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to an Authorized Firm's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
funds in Five Arrows Service shares. Authorized Firms, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board or the
Federal Deposit Insurance Corporation, and investment advisers and other money
managers subject to the jurisdiction of the Securities and Exchange Commission,
the Department of Labor or State Securities Commissions, are urged to consult
legal advisers before investing fiduciary assets in Five Arrows Service shares.
In addition, under some state securities laws, banks and other financial
institutions purchasing Five Arrows Service shares on behalf of their customers
may be required to register as dealers.
The Trustees of the Trust, including a majority of the Trustees who
are not interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the 12b-1 Plan or the related Service
Agreements, voted to adopt the 12b-1 Plan and Service Agreements at a meeting
called for the purpose of voting on such 12b-1 Plan and Service Agreements on
October 16, 1996. The 12b-1 Plan and Service Agreements will remain in effect
until October 16, 1998 and will continue in effect thereafter only if such
continuance is specifically approved annually by a vote of the Trustees in the
manner described above. All material amendments of the 12b-1 Plan must also be
approved by the Trustees in the manner described above. The 12b-1 Plan may be
terminated at any time by a majority of the Trustees as described above or by
vote of a majority of the outstanding Five Arrows Service shares of the
affected Fund. The Service Agreements may be terminated at any time, without
payment of any penalty, by vote of a majority of the Trustees as described
above or by a vote of a majority of the outstanding Five Arrows Service shares
of the affected Fund on not more than 60 days' written notice to any other
party to the Service Agreements. The Service Agreements shall terminate
automatically if assigned. So long as the 12b-1 Plan is in effect, the
selection and nomination of those Trustees who are not interested persons shall
be committed to the discretion of the non-interested members of the Board of
Trustees. The Trustees have determined that, in their judgment, there is a
reasonable likelihood that the 12b-1 Plan will benefit the Funds and holders of
Five Arrows Service shares of such Funds. In the Trustees' quarterly review of
the 12b-1 Plan and Service Agreements, they will consider their continued
appropriateness and the level of compensation provided therein.
REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the
Prospectus in the section entitled "How to Redeem Shares."
The Trust intends to pay in cash in the Designated Currency of the Fund
from which shares are redeemed for all Fund shares redeemed, but under certain
conditions, the Trust may make payment wholly or partly in portfolio securities
from the Portfolio, in conformity to the applicable rule of the SEC. Portfolio
securities paid upon redemption of Fund shares will be valued at their then
current market value. The Trust, on behalf of each of its series, has elected to
be governed by the provisions of Rule 18f-1 under the 1940 Act
13
<PAGE> 78
which contains a formula for determining the minimum amount of cash which may be
paid as part of any redemption, limiting cash payments to any shareholder during
any 90-day period to the lesser of $250,000 or 1% of the Fund's net asset value
at the beginning of such period.
An investor may incur brokerage costs in converting portfolio
securities received upon redemption to cash. The Portfolio Trust has advised the
Trust that the Portfolio Trust will not redeem in-kind except in circumstances
in which the Fund is permitted to redeem in-kind or except in the event the Fund
completely withdraws its interest from the Portfolio.
CALCULATION OF NET ASSET VALUE
The net asset value of the Portfolios and of shares of the Funds is
determined by the Administrator (as agent for the Funds and the Portfolios). The
Funds and the Portfolios will only price their respective shares or interests on
Trust Business Days (as such term is defined in the Prospectus).
It is anticipated that each Portfolio will utilize the amortized cost
method of valuation as a reasonable means of approximating the market value of
each Portfolio's assets. With respect to the U.S. Dollar Fund, which is a "money
market fund," as defined in the 1940 Act, and its corresponding Portfolio, the
valuation of the instruments held by the U.S. Dollar Portfolio at amortized
costs is permitted in accordance with Rule 2a-7 and certain procedures
established by the Trustees of the Trust and the Portfolio thereunder. With
respect to all other Funds, which are not money market funds, and their
corresponding Portfolios, the valuation of the instruments held by those
Portfolios is consistent with a long-standing practice of many U.S. registered
investment companies to value "high-quality" debt securities with maturities of
60 days or less at amortized cost.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accreting any discount or amortizing any premium from
its face value at a constant rate until maturity, regardless of the effect of
fluctuating interest rates on the market value of the instrument. Although the
amortized cost method provides certainty in valuation, it may result at times in
determinations of value that are higher or lower than the price the Portfolios
would receive if the instruments were sold. Consequently, changes in the market
value of instruments held by the Portfolios during periods of rising or falling
interest rates will not be reflected either in the computation of net asset
value of the Portfolios or in the daily computation of its net investment
income.
The procedures of the Funds and the Portfolios are designed to
facilitate, to the extent reasonably possible, the maintenance of the Funds'
price per share, as computed for the purpose of the distribution and redemption
of shares, at $1.00 in the case of the U.S. Dollar Fund, at (pound) 1.00 in the
case of the Pound Sterling Fund, at DM 1.00 in the case of the Deutsche Mark
Fund and at C$1.00 in the case of the Canadian Dollar Fund (the "Stabilized
Prices"). These procedures include review of the Portfolios' holdings by the
Trustees of the Portfolio Trust and Trust, at such intervals as they may deem
appropriate, to determine whether the Portfolios' net asset values calculated by
using readily available market quotations deviates from the valuation based on
amortized cost, and, if so, whether such deviation may result in material
dilution or is otherwise unfair to existing shareholders. In the event that the
Trustees of the Portfolio Trust and Trust determine that such a deviation
exists, they will take such corrective action as they consider to be necessary
or appropriate, which action could include the sale of instruments held by the
Portfolios prior to maturity (to realize capital gains or losses); the
shortening of average portfolio maturity; withholding dividends; redemption of
shares in kind; or establishing a net asset value per share by using readily
available market quotations.
14
<PAGE> 79
Since the net investment income of each Fund is declared as a dividend
each time such income is determined, the net asset value per share of each Fund
remains at its respective Stabilized Price immediately after such determination
and dividend declaration. It is expected that each Fund's net investment income
will be positive each time it is determined. However, if because of realized
losses on sales of portfolio investments, a sudden rise in interest rates,
default by an issuer of a portfolio security, or for any other reason the net
investment income of each Portfolio determined at any time is a negative amount,
such Portfolio will offset such amount allocable to each then shareholder's
account from dividends accrued with respect to such account. If at the time of
payment of a dividend (either at the regular dividend payment date, or, in the
case of an interest holder who is withdrawing all or substantially all of such
shareholder's interest in an account, at the time of redemption), such negative
amount exceeds a shareholder's accrued dividends, the relevant Portfolio will
reduce the interest by treating the shareholder as having contributed to the
capital of that Portfolio that amount of its interest which represents the
amount of the excess. Each shareholder is deemed to have agreed to such
contribution in these circumstances by his or her investment in the relevant
Fund.
Should the Portfolios incur or anticipate any unusual or unexpected
significant expense, loss or depreciation which would affect disproportionately
the Funds' net investment income for a particular period, the Trustees of the
Portfolio Trust and Trust would at that time consider whether to adhere to its
daily dividend policy or to revise it in the light of the then prevailing
circumstances. Such expenses, losses or depreciation may nevertheless result in
a shareholder receiving no dividends for the period during which the shares are
held and in receiving upon redemption a price per share lower than the purchase
price of such shares.
PERFORMANCE INFORMATION
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described below, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
The U.S. Dollar Fund
The U.S. Dollar Fund may provide current annualized and effective
annualized yield quotations based on its daily dividends. These quotations may
from time to time be used in advertisements, shareholder reports or other
communications to shareholders.
Any current yield quotation of the U.S. Dollar Fund which is used in
such a manner as to be subject to the provisions of Rule 482(d) under the
Securities Act of 1933, as amended, shall consist of an annualized historical
yield, carried at least to the nearest hundredth of one percent on a specific
seven calendar day period and shall be calculated by dividing the net change
during the seven day period in the value of an account having a balance of one
share at the beginning of the period by the value of the account at the
beginning of the period, and multiplying the quotient by 365/7. For this
purpose, the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses from the sale of securities or any
unrealized appreciation or depreciation on portfolio securities. In addition,
any effective annualized yield quotation used by the Trust shall be calculated
by compounding the current yield quotation for such period by adding 1 to the
product, raising the sum to a power equal to 365/7, and subtracting 1 from the
result. A one day yield quotation is determined by taking one-seventh of the
most recent calculated seven day yield.
15
<PAGE> 80
Although published yield information is useful to investors in
reviewing the U.S. Dollar Fund's performance, investors should be aware that the
U.S. Dollar Fund's yield fluctuates from day to day and that a Fund's yield for
any given period is not an indication or representation by the Trust of future
yields or rates of return on the U.S. Dollar Fund's shares. The yield of the
U.S. Dollar Fund is not fixed or guaranteed. Accordingly, the U.S. Dollar Fund's
yield information may not necessarily be used to compare its shares with
investment alternatives which, like money market instruments or bank accounts,
may provide a fixed rate of interest. In addition, investments in the Trust are
not insured or guaranteed, so the U.S. Dollar Fund's yield information may not
necessarily be used to compare the U.S. Dollar Fund with investment alternatives
which are insured or guaranteed.
All Other Funds
Each Fund, other than the U.S. Dollar Fund, may provide Total Return
and Current Yield quotations, as described below.
A Fund's "Total Return," as referred to in the Prospectus (see
Performance") is calculated as follows: Total Return ("T") is computed by using
the value at the end of the period ("V") of a hypothetical initial investment
of [Pounds] 1,000, DM 1,000, or C $1,000 (as applicable) ("P") over a period of
years ("n") according to the following formula as required by the SEC:
P(1+T)n=EV (the ending redeemable value of initial investment). The following
assumptions will be reflected in computations made in accordance with this
formula: (1) a deduction of the maximum front-end sales charge, if any, from
the initial investment; (2) reinvestment of dividends and distributions at net
asset value on the reinvestment date determined by the Trust's Board of
Trustees; (3) a complete redemption at the end of any period illustrated, and
(4) deduction of any applicable CDSC.
Current yield ("YIELD") is computed by dividing the difference between
dividends and interest earned during a one-month period ("a") and expenses
accrued for the period (net of reimbursements) ("b") by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends ("c") and the maximum offering price per share on the last
day of the period ("d") according to the following formula as required by the
SEC:
YIELD = 2[(a-b+1)6-1]
cd
To the extent consistent with applicable law, each Fund may provide
quotations of other measures of historical investment performance, including
seven day yield information calculated in the manner described above with
respect to the U.S. Dollar Fund.
Each Fund's investment results will vary from time to time depending
upon market conditions, the composition of the Fund's Corresponding Portfolio's
portfolio and operating expenses of the Fund, so that current or past yield or
total return should not be considered representations of what an investment in a
Fund may earn in any future period. These factors and possible differences in
the methods used in calculating investment results should be considered when
comparing a Fund's investment results with those published for other investment
companies and other investment vehicles. A Fund's results also should be
considered relative to the risks associated with such Fund's investment
objectives and policies. Each Fund and the Distributor may from time to time
compare the Funds with the following:
(1) Various Salomon Brothers World Bond Indices, which measure the total
return performance of high-quality securities in major sections of the worldwide
bond markets.
(2) The Shearson Lehman Government Corporate Bond Index, which is a
comprehensive measure of all
16
<PAGE> 81
public obligations of the U.S. Treasury (excluding flower bonds and foreign
targeted issues), all publicly issued debt of agencies of the U.S. government
(excluding mortgage backed securities), and all public, fixed rate,
non-convertible investment grade domestic corporate debt rated at least Aa by
Moody's or AA by S&P, or, in the case of bonds not rated by Moody's or S&P, BBB
by Fitch Investors Service (excluding Collateralized Mortgage Obligations).
(3) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on figures supplied
by the U.S. League of Savings Institutions). Savings accounts offer a guaranteed
rate of return on principal, but no opportunity for capital growth. During a
portion of the period, the maximum rates on some savings deposits were fixed by
law.
(4) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g., food,
clothing, shelter, fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
(5) Data and mutual fund rankings and comparisons published and prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), Morningstar Inc.
("Morningstar"), Micropal, Inc. ("Micropal"), CDA Investment Technologies, Inc.
("CDA"), Wiesenberger Investment Company Services ("Wiesenberger") and/or other
companies that rank or compare mutual funds by overall performance, investment
objectives, assets, expense levels, periods of existence and/or other factors.
In this regard, each Fund may be compared to its "peer group" as defined by
Lipper, Morningstar, Micropal, CDA, Wiesenberger and/or other firms, as
applicable or to specific funds or groups of funds within or without such peer
group.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and a GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
Indices prepared by the research departments of such financial
organizations as Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith,
Inc.; Bear Stearns & Co., Inc.; Morgan Stanley; and Ibbottson Associates may be
used, as well as information provided by the Federal Reserve Board. In addition,
performance rankings and ratings reported periodically in national financial
publications, including but not limited to Money Magazine, Forbes, Business
Week, The Wall Street Journal and Barrons's may also be used.
PORTFOLIO TRANSACTIONS
Portfolio securities are ordinarily purchased directly from the issuer
or from an underwriter or a market maker for the securities. Usually no
brokerage commissions are paid by any Portfolio for such purchases. Purchases
from underwriters of Portfolio securities include a concession paid by the
issuer to the underwriter and the purchase price paid to market makers for the
securities may include the spread between the bid and asked price.
A Portfolio may not always pay the lowest commission or spread
available. Rather, in determining the amount of commission paid in connection
with Portfolio transactions, the Investment Adviser takes into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Investment Adviser may also take into
account payments made by brokers effecting transactions with or for a Portfolio
(i) to the Portfolio or (ii) to other persons on behalf of the Portfolio for
services provided to it for which it would be obligated to pay.
17
<PAGE> 82
Investment decisions for the Portfolios will be made independently from
those for any other account or investment company that is or may in the future
become managed by the Investment Adviser or its affiliates. If, however, a
Portfolio and other investment companies or accounts managed by the Investment
Adviser are contemporaneously engaged in the purchase or sale of the same
security, the transactions may be averaged as to price and allocated equitably
to each account. In some cases, this policy might adversely affect the price
paid or received by a Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies and accounts managed by the
Investment Adviser occur contemporaneously, the purchase or sale orders may be
aggregated in order to obtain any price advantages available to large
denomination purchases or sales.
No portfolio transactions are executed with the Investment Adviser or
any of its affiliates.
INFORMATION ABOUT THE TRUST AND
PORTFOLIO TRUST
The Funds and Their Shares
The Funds are investment series of the Trust, a newly-formed
unincorporated business trust organized under the laws of the State of Delaware
and operates pursuant to an Amended and Restated Master Trust Agreement dated
October 16, 1996. Under the Master Trust Agreement of the Trust, the Trustees of
the Trust have authority to issue an unlimited number of shares of beneficial
interest, par value $.0001 per share, of the Funds. Each share represents an
equal proportionate interest in the relevant Fund with each other share and is
entitled to such dividends and distributions as are declared by the Trustees.
Upon any liquidation of the Funds, shareholders are entitled to share pro rata
in the net assets available for distribution.
All Fund shares have equal rights with regard to voting, and
shareholders of the Fund have the right to vote as a separate class with respect
to matters as to which their interests are not identical to those of
shareholders of other classes of the Trust, including any change of investment
policy requiring the approval of shareholders.
Except as described below, whenever the Trust is requested to vote on a
fundamental policy of or matters pertaining to the Portfolios, the Trust will
hold a meeting of the Funds' shareholders and will cast its vote proportionately
as instructed by the Funds' shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolios meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Subject to applicable statutory and regulatory requirements, the
Funds would not request a vote of their shareholders with respect to (a) any
proposal relating to the Portfolios, which proposal, if made with respect to the
Funds, would not require the vote of the shareholders of the Funds, or (b) any
proposal with respect to the Portfolios that is identical in all material
respects to a proposal that has previously been approved by shareholders of the
Funds. Any proposal submitted to holders in the Portfolios, and that is not
required to be voted on by shareholders of the Funds, would nonetheless be voted
on by the Trustees of the Trust.
The assets received by the Trust from the issue and sale of shares of
each Fund, and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are especially allocated to that Fund and constitute
the underlying assets of such Fund. The underlying assets of each Fund are
required to be segregated on the books of account and are to be charged with the
expenses of the Trust. Any general expenses of the Trust not readily
identifiable as belonging to a particular Fund shall be allocated by or under
the direction of the Trustees in such a manner as the Trustees determine to be
fair and equitable, taking into consideration, among other things, the nature
and the type of expense and the relative size of the Funds.
18
<PAGE> 83
Each share of a Fund has equal dividend, redemption and liquidation
rights with other shares of that Fund and when issued is fully paid and
non-assessable. Under the Trust's Agreement and Declaration of Trust
("Declaration of Trust"), no annual or regular meeting of shareholders is
required. Thus, there will ordinarily be no annual shareholders meeting unless
otherwise required by the 1940 Act. The initial shareholder elected the initial
Board of Trustees on October 16, 1996. Thereafter, the Board will be a
self-perpetuating body until fewer than 50% of the Trustees serving as such are
Trustees who were elected by shareholders. At that time, another meeting of
shareholders will be called to elect Trustees. Under the Declaration of Trust,
any Trustee may be removed by votes of two-thirds of the outstanding Trust
shares, and holders of ten percent or more of the outstanding shares of the
Trust can require the Trustees to call a meeting of shareholders for the
purpose of the removal of one or more Trustees. Whenever ten or more
shareholders of the Trust who have been such for at least six months, and who
hold in the aggregate shares having a net asset value of at least $25,000 or
which represent at least 1% of the outstanding shares, whichever is less, apply
to the Trustees in writing stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting, and such
application is accompanied by a form of communication and request which they
wish to transmit, the Trustees shall within five (5) Trust Business Days after
receipt of such application either (1) afford to such applicants access to a
list of the names and addresses of all shareholders as recorded on the books of
the Trust; or (2) inform such applicants as to the approximate number of
shareholders of record and the approximate cost of mailing to them the proposed
communication or form of request.
Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
The Portfolio and its Investors
The Portfolios are series of the International Currency Fund (the
"Portfolio Trust"), which is a newly-formed business trust and, like the Trust,
an open-end management investment company under the 1940 Act. The Portfolio
Trust was organized as a Delaware business trust under the laws of the State of
Delaware on August 13, 1996.
Interests in the Portfolios have no preemptive or conversion rights,
and are fully paid and non-assessable, except as set forth below. The
Portfolio Trust normally will not hold meetings of holders of such interests
except as required under the 1940 Act. The Portfolio Trust would be required
to hold a meeting of holders in the event that at any time less than a majority
of its Trustees holding office had been elected by holders. The Trustees of the
Portfolio Trust continue to hold office until their successors are elected and
have qualified. A Trustee of the Portfolio Trust may be removed upon a majority
vote of the interests held by holders in the Portfolio Trust qualified to vote
in the election. The 1940 Act requires the Portfolio Trust to assist its
holders in calling such a meeting. Upon liquidation of a Portfolio, holders in
the Portfolio would be entitled to share pro rata in the net assets of the
Portfolio Trust available for distribution to holders.
Each holder in a Portfolio is entitled to vote in proportion to its
percentage interest in such Portfolio.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING
AGENT, COUNSEL AND INDEPENDENT AUDITORS
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245,
acts as the Trust's and Portfolio Trust's Custodian. Rules adopted under the
1940 Act permit the Funds and Portfolios to maintain their foreign securities
and cash in the custody of certain eligible foreign banks. Sub-custodians
holding any foreign securities and cash on behalf of the Funds and Portfolios
will be approved by the Board of Trustees of
19
<PAGE> 84
the Trust or Portfolio Trust, as the case may be, in accordance with the
regulations of the Securities and Exchange Commission.
BISYS Fund Services, Inc., 100 First Avenue, Suite 300, Pittsburgh, PA
15222, provides customary transfer, dividend disbursing and shareholder
servicing agent services.
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02019-2881, is
legal counsel for the Trust and the Portfolio Trust.
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109,
independent auditors, have been selected to examine the annual financial
statements of the Trust and Portfolio Trust. The Trust and the Portfolio Trust
will send audited annual and unaudited semiannual financial statements to all
its shareholders of record.
ADDITIONAL INFORMATION
A Registration Statement, of which this Statement of Additional
Information is a part, in respect of the Fund's shares has been filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, as amended.
This Statement of Additional Information omits certain information
contained in the Registration Statement. Items which are thus omitted, including
contracts and other documents referred to or summarized herein and therein, may
be inspected at the offices of the Securities and Exchange Commission or
obtained from the Securities and Exchange Commission upon payment of the
prescribed fees.
20
<PAGE> 85
INFORMATION ABOUT SECURITIES RATINGS OF UNITED STATES
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS ("NRSROs")
Ratings of Long-Term Corporate Debt Securities
- -----------------------------------------------
MOODY'S INVESTORS SERVICE, INC. Aaa-Best quality. These securities
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or by an
exceptionally stable, margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa-High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which made the long-term risks appear somewhat greater.
STANDARD & POOR'S CORPORATION. AAA-Highest grade. They possess the
ultimate degree of protection as to principal and interest. Marketwise, they
move with interest rates, and hence provide the maximum safety on all counts.
AA-High grade. Generally, these bonds differ from AAA issues only in a small
degree. Here, too, prices move with the long-term money market.
FITCH INVESTORS SERVICE, INC. AAA-High grade, broadly marketable,
suitable for investment by trustees and fiduciary institutions, and liable to
but slight market fluctuation other than through changes in the money rate. The
prime feature of an "AAA" bond is the showing of earnings several times or many
times interest requirements for such stability of applicable interest that
safety is beyond reasonable question whenever changes occur in conditions.
Other features may be considered, such as a wide margin of protection through
collateral, security or direct lien on specific property. Sinking funds or
voluntary reduction of debt by call or purchase are often factors, while
guarantee or assumption by parties other than the original debtor may influence
their rating. AA-Of safety virtually beyond question and readily salable. Their
merits are not greatly unlike those of "AAA" class but a bond so rated may be
junior though it has a strong lien, or the margin of safety may be less
strikingly broad. The issue may be the obligation of a small company, strongly
secured, but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
21
<PAGE> 86
Rating of Short-Term Corporate Debt Securities
- ---------------------------------------------
MOODY's
Moody's Commercial Paper ratings, which are also applicable to
municipal paper investments permitted to be made by the Fund, are opinions of
the ability of issuers to repay punctually their promissory obligations not
having an original maturity in excess of nine months. Moody's employs the
following designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:
P-1 (Prime-1): Superior capacity for repayment.
22
<PAGE> 87
P-2 (Prime-2): Strong capacity for repayment.
S&P's
S&P's ratings are a current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. Ratings
are graded into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues within the "A" category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety, as
follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-3: Issues carrying this designation have an adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
IBCA LIMITED/IBCA INC.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong capacity
for timely repayment. Obligations rated A-2 have a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
FITCH INVESTORS SERVICES, INC.
Fitch Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less in
degree than issues rated F-1+, while the rating F-2 indicates a satisfactory
degree of assurance for timely payment, although the margin of safety is not as
great as indicated by the F-1+ and F-1 categories.
DUFF & PHELPS INC.
Duff & Phelps Inc. employs the designation of Duff 1 with respect to
top grade commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payment: Short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of time payment. Duff 2 indicates
good certainty of timely payment: liquidity factors and company fundamentals are
sound.
THOMSON BANKWATCH, INC. ("BANKWATCH")
BankWatch will assign both short-term debt ratings and issuer ratings
to the issuers it rates. BankWatch will assign a short-term rating ("TBW-1,"
"TBW-2," "TBW-3," or "TBW-4") to each class of debt (e.g., commercial paper or
non-convertible debt), having a maturity of one year or less, issued by a
holding company structure or an entity within the holding company structure that
is rated by BankWatch. Additionally, BankWatch will assign an issuer rating
("A," A/B," "B," "B/C, "C," "C/D," "D," "D/E," and "E") to each issuer that it
rates.
23
<PAGE> 88
Note: Certain NRSROs utilize rankings within rating categories
indicated by a + or -. The Fund, in accordance with industry practice,
recognizes such rankings with categories as graduations, viewing for example
S&P's rating of A-1+ and A-1 as being in S&P's highest rating category.
24
<PAGE> 89
INFORMATION ABOUT SECURITIES RATINGS OF CANADIAN
RATING ORGANIZATIONS
Ratings of Long-Term Debt Securities
- ------------------------------------
CANADIAN BOND RATING SERVICE ("CBRS")
- -------------------------------------
A++ -- Highest Quality. This category encompasses bonds of outstanding quality.
They possess the highest degree of protection of principal and interest.
Companies with debt rated A++ are generally large national and/or multinational
corporations whose products or services are essential to the Canadian economy.
These companies are the acknowledged leaders in their respective industries and
have clearly demonstrated their ability to best withstand adverse economic or
trade conditions either national or international in scope. Characteristically,
these companies have had a long and credible history of superior debt
protection, in which the quality of their assets and earnings has been
constantly maintained or improved, with strong evidence that this will continue.
A+ -- Very Good Quality. Bonds rated A+ are similar in characteristics to those
rated A++ and can also be considered superior in quality. These companies have
demonstrated a long and satisfactory history of growth with above-average
protection of principal and interest on their debt securities. These bonds are
generally rated lower in quality because the margin of assets or earnings
protection may not be as large or as stable as those rated A++. In both these
categories the nature and quality of the asset and earning coverages are more
important than numerical values of the ratios.
A -- Good Quality. Bonds rated A are considered to be good quality securities
and to have favorable long-term investment characteristics. The main feature
that distinguishes them from the higher rated securities is that these companies
are more susceptible to adverse trade or economic conditions. Consequently, the
protection is lower than for the categories A++ and A+. In all cases the A rated
companies have maintained a history of adequate asset and earnings protection.
There may be certain elements that may impair this protection sometime in the
future. Confidence that the current overall financial position will be
maintained or improved is slightly lower than for the securities rated above.
DOMINION BOND RATING SERVICE LIMITED ("DBRS")
- ---------------------------------------------
AAA -- highest credit quality. The degree of protection afforded principal and
interest is of the highest order. Earnings are relatively stable, the structure
of the industry in which the entity operates is very strong, and the outlook
for future profitability is extremely favorable. There are few qualifying
factors present which would detract from the performance of the entity, and the
strength of liquidity and coverage ratios is unquestioned.
AA -- superior credit quality. Protection of interest and principal is
considered high. In many cases, they differ from bonds rated AAA to a small
degree.
<PAGE> 90
A -- upper medium grade credit quality. Protection of interest and principal is
still substantial, but the degree of strength is less than with AA rated
entities. Entities in the A category may be more susceptible to adverse
economic conditions and have greater cyclical tendencies.
Ratings of Short-Term Debt Securities
- -------------------------------------
CBRS
- ----
A-1+ -- Highest Quality. Corporate and government organizations with short-term
debt rated A-1+ are considered to be of outstanding credit quality. In general,
these organizations maintain a strong liquidity and capital position and have a
strong level of revenues/earnings/cash flow to meet all current and long-term
obligations. Characteristically, these organizations have a long and creditable
record of excellent performance. These organizations also have the ability to
maintain their performance over an extended period. Although these
organizations may experience a decline in revenues/earnings/cash flow during
recessionary periods, their ability to restore performance in subsequent
periods is very good. These organizations are generally well established and a
significant factor in their fields. Management has clearly demonstrated its
competence and reliability.
A-1 -- Very Good Quality. Corporate and government organizations with
short-term debt rated A-1 are also very well established and have a creditable
operating history. However, their credit-risk profiles are not as strong as
those organizations in the A-1+ category. These organizations generally
maintain very good financial performance measurements throughout the economic
cycle; however, they are more vulnerable to economic and competitive conditions.
A-1 (Low) -- Good Quality. Corporate and government organizations with
short-term debt rated A-1 (Low) have a creditable operating history. However,
their credit-risk profiles are not as strong as those organizations rated in
the A-1 or A-1+ category. These organizations generally maintain good financial
performance measurements throughout the economic cycle. However, they are more
vulnerable to economic and competitive conditions. Moreover, the level of debt
protection as measured by their access to capital, debt service coverage
ratios, and capital underpinning, is relatively lower.
DBRS
- ----
R-1 -- high-grade prime credit. The entity's ability to repay its current
liabilities as they fall due is very high. The strength of the various
liquidity ratios is unquestioned, and alternative sources of funds to
commercial paper such as bank lines, ability to do long-term financing and a
strong parent exist. Furthermore, the outlook for future liquidity and the
trend of these ratios should be favorable. The level of profitability has been
reasonable and relatively stable, with only modest fluctuations. No substantial
qualifying negative factors exist, and the firm is of sufficient size to be a
strong influence in its industry.
<PAGE> 91
R-2 -- medium grade credit. The liquidity ratios of entities in this
classification are not as strong as those in the R-1 category, and the past and
future trend may suggest some deterioration in the strength of these ratios.
Alternative sources of liquidity support are considered strong; however, even
the strongest liquidity support will not improve the commercial paper rating of
the issuer. The size of the entity may restrict its flexibility, and its
relative position in the industry is not as strong as an R-1. Profitability
trends, past and future, may be less favorable, earnings not as stable, and
there may be some negative qualifying factors present.
Ratings of Government Debt Securities
- -------------------------------------
CBRS
- ----
AAA -- Highest Quality. Debt securities rated AAA are considered to be of the
highest quality and have a history of excellent protection of both principal
and interest. The issuer has enjoyed excellent management with its debt load
well within its capacity to service debt even during periods of economic
decline.
AA -- Very Good Quality. Issues rated AA are also considered to be of very good
quality and have recorded much of the same level of protection as those rated
AAA. However, the extent or margin of protection is slightly less than the
above category and there may be certain elements present which could cause a
decline in the quality.
A -- Good Quality. Issues rated A are regarded as being good quality
securities. Management is also considered good and has recorded a history of
providing good protection and stewardship. However, there are weaknesses
present which, under adverse economic circumstances, would impair the issuer's
ability to continue to maintain a good level of protection for its debt.
NOTE: CBRS's Commercial Paper ratings refer to an issuer's
commercial paper, short-term promissory notes, short-
term deposits, banker's acceptances, letters of
credit, treasury bills and/or other short-term
indebtedness with an original term of one year or
less.
(High) and (Low) designations after a rating indicate
an issuer's relative strength within a rating category.
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of Five Arrows Short-Term Investment Trust
We have audited the accompanying statements of assets and liabilities of each
series of Five Arrows Short-Term Investment Trust, comprised of the U.S. Dollar
Fund, Canadian Dollar Fund, Pound Sterling Fund and Deutsche Mark Fund, (the
"Funds"), as of January 20, 1997. These financial statements are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits of the financial statements
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Funds enumerated above as
of January 20, 1997, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 24, 1997
<PAGE> 93
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 20, 1997
<TABLE>
<CAPTION>
U.S. DOLLAR CANADIAN POUND DEUTSCHE MARK
FUND DOLLAR FUND STERLING FUND FUND
---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment in International Currency Fund.................. $100,000 C$ 10 L 10 DM 10
Deferred organization costs (Note)......................... 61,000 82,000 37,000 99,000
-------- ---------- ---------- ----------
TOTAL ASSETS............................................... 161,000 82,010 37,010 99,010
LIABILITIES:
Payable to Manager (Note).................................. 61,000 82,000 37,000 99,000
-------- ---------- ---------- -----------
NET ASSETS................................................. $100,000 C$ 10 L 10 DM 10
======== ========== ========== ===========
NET ASSETS CONSIST OF:
Shares of beneficial interest.............................. $ 10 C$ 0 L 0 DM 0
Additional paid-in capital................................. 99,990 10 10 10
-------- ---------- ---------- -----------
NET ASSETS................................................. $100,000 C$ 10 L 10 DM 10
======== ========== ========== ===========
Net asset value, offering & redemption price per share..... $ 1.00 C$ 1.00 L 1.00 DM 1.00
======== ========== ========== ===========
</TABLE>
NOTE:
The Five Arrows Short-Term Investment Trust (the "Trust") is an open-end
Investment Company established as a "Delaware Business Trust" under a
Declaration of Trust dated August 13, 1996 and is registered under the
Investment Company Act of 1940, as amended. The U.S. Dollar Fund, Canadian
Dollar Fund, Pound Sterling Fund, and Deutsche Mark Fund (the "Funds") are new
series of the Trust. The Funds' authorized capital consists of an unlimited
number of shares of beneficial interest at a $.0001 par value.
The Trust invests substantially all of its assets in corresponding portfolios
of the International Currency Fund, an open end investment company which has
the same investment objectives of the Trust. The statements of Assets and
Liabilities of the International Currency Fund are included elsewhere in this
report and should be read in conjunction with the Trust's statements of Assets
and Liabilities. The respective percentages of the corresponding International
Currency Fund portfolios owned by the Trust at January 20, 1997 were as
follows: U.S. Dollar Fund (66%); Canadian Dollar Fund (100%); Pound Sterling
Fund (100%); and Deutsche Mark Fund (100%). The trust records its investment in
International Currency Fund at value.
The Funds, through corresponding portfolios in the International Currency Fund,
seek to invest in high quality, short-term instruments denominated in the
designated currency of the fund. Accordingly, the Funds' statements of Assets
and Liabilities are presented in their functional currency as all related
investment transactions are recorded in that currency.
The deferred organization costs were incurred by the Funds in connection with
their organization. The Funds are expected to reimburse Rothschild
International Asset Management Limited (the "Manager"), for the payment of
these costs made in advance by the Manager. The costs have been deferred and
will be amortized on a straight-line basis over a five-year period beginning at
the commencement of operations of the Funds. In the event that any of the
initial shares of the Funds are redeemed during the amortization period, the
redemption proceeds will be reduced by any unamortized organizational expenses
in the same proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of such redemption.
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees
of International Currency Fund
We have audited the accompanying statements of assets and liabilities of each
series of International Currency Fund, comprised of the U.S. Dollar
Portfolio, Canadian Dollar Portfolio, Pound Sterling Portfolio and
Deutschemark Portfolio, (the "Portfolios"), as of January 20, 1997. These
financial statements are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits of the financial statements
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Portfolios enumerated
above as of January 20, 1997, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 24, 1997
<PAGE> 95
INTERNATIONAL CURRENCY FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 20, 1997
<TABLE>
<CAPTION>
U.S. DOLLAR CANADIAN POUND STERLING DEUTSCHEMARK
PORTFOLIO DOLLAR PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash....................................................... $152,500 C$ 10 L 10 DM 10
Deferred organization costs (Note)......................... 75,000 100,000 45,000 121,000
-------- -------- ---------- ----------
TOTAL ASSETS............................................... 227,500 100,010 45,010 121,010
LIABILITIES
Payable to Manager (Note).................................. 75,000 100,000 45,000 121,000
-------- --------- ---------- ----------
NET ASSETS................................................. $152,500 C$ 10 L 10 DM 10
======== ========= ========== ==========
</TABLE>
NOTE:
The International Currency Fund (the "Portfolio Trust") is an open-end
Investment Company established as a "Delaware Business Trust" under a
Declaration of Trust dated August 13, 1996 and is registered under the
Investment Company Act of 1940, as amended. The U.S. Dollar Portfolio, Canadian
Dollar Portfolio, Pound Sterling Portfolio, and Deutschemark Portfolio (the
"Portfolios") are new series of the Portfolio Trust. The Declaration of Trust
permits the Trustees to issue redeemable, non-transferable interests in the
Portfolio Trust. For federal income tax purposes, the Portfolio Trust qualifies
as a partnership and each investor is treated as the owner of its proportionate
share of the net assets.
The Portfolios seek to invest in high quality, short-term instruments
denominated in the designated currency of the portfolio. Accordingly, the
Portfolios' statements of Assets and Liabilities are presented in their
functional currency as all related investment transactions are recorded in that
currency.
The deferred organization costs were incurred by the Portfolios in connection
with their organization. The Portfolios are expected to reimburse Rothschild
International Asset Management Limited (the "Manager"), for the payment of
these costs made in advance by the Manager. The costs have been deferred and
will be amortized on a straight-line basis over a five-year period beginning at
the commencement of operations of the Portfolios.
The cash is in a non-interest bearing account at the Portfolio's custodian bank
and will be held until the Portfolios become operational.
<PAGE> 96
PART C
------
To the Registration Statement of Five Arrows
Short-Term Investment Trust (the "Trust")
Item 24. Financial Statements and Exhibits.
- -------- ----------------------------------
(a) Financial Statements:
(1) Financial Statements included in PART A of this
Registration Statement:
[None]
(2) Financial Statements included in PART B of this
Registration Statement:
Financial Statements for the U.S. Dollar Fund,
Pound Sterling Fund, Deutsche Mark Fund and
Canadian Dollar Fund (collectively, the "Funds")
as of January 20, 1997.
Report of Independent Accountants
Statement of Assets and Liabilities
(b) Exhibits:
Exhibit No. Description
----------- -----------
1 Agreement and Declaration of Trust of the Trust
incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement filed via EDGAR
on November 25, 1996.
2 By-Laws of the Trust incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration
Statement filed via EDGAR on November 25, 1996.
3 Not Applicable.
4 Not applicable.
5 Investment Advisory Contract between the International
Currency Fund and Rothschild International Asset
Management Limited.
6 Distribution Agreement between the Trust and
Five Arrows Fund Distributors Inc.
<PAGE> 97
Exhibit No. Description
----------- -----------
7 Not applicable.
8 Custody Agreement between the Trust and The Chase Manhattan
Bank.
9 (a) Transfer Agency and Service Agreement between the Trust
and BISYS Fund Services, Inc.
(b) Administration Agreement between the Trust and BISYS
Fund Services Limited Partnership.
(c) Fund Accounting Agreement between the Trust and BISYS
Fund Services, Inc.
(d) Feeder Fund Management Services Agreement.
10 Legal opinion and consent of Goodwin, Procter & Hoar LLP
with respect to the Funds.
11 Consent of Coopers & Lybrand L.L.P. with respect to the
Funds.
12 Not applicable.
13 Purchase agreements with respect to initial capital.
14 Not applicable.
15 Plan for distribution of Five Arrows Service shares
pursuant to Rule 12b-1.
16 Not applicable.
17 Financial Data Schedules for the Funds.
18 Plan for the issuance and distribution of multiple classes
of shares pursuant to Rule 18f-3.
Item 25. Persons Controlled by or Under Common Control with Trust.
- -------- ---------------------------------------------------------
As of the close of business on February 3, 1997, the U.S. Dollar Fund,
the Pound Sterling Fund, the Deutsche Mark Fund and the Canadian Dollar Fund
(the "Funds"), series of shares of the Trust, owned approximately 66% of the
value of the outstanding interests in Portfolios of the International Currency
Fund which invest in securities denominated in the Designated Currencies of the
Funds. In addition, as of the same date, Five Arrows Cash Management PLC, an
Irish umbrella company (the "Irish Company") consisting of numerous classes of
shares of beneficial interest categorized as sub-funds (the "Irish Funds"),
owned approximately 33% of the outstanding interests of the Portfolios of the
International Currency Fund. Because each Fund and each Irish Fund controls its
corresponding Portfolio, either may take actions without the approval of any
other investor in such Portfolio.
Since, as of the approximate time of this Prospectus, Five Arrows House
Investments Limited, an affiliated person of the Investment Adviser was the
beneficial owner of all or a substantial amount of the outstanding shares of the
Funds it may also be deemed to be in control of the Portfolios as control is
defined in the 1940 Act. Such owners may acquire additional shares of the Funds.
Although sales of the Funds' shares to other investors will reduce its
<PAGE> 98
percentage ownership in the Funds and the Portfolios, so long as 25% of a class
of shares of either a Funds or a Portfolio is so owned, the owner will be
presumed to be in control of such class of shares for purposes of voting on
certain matters submitted to a vote of shareholders.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of February 3, 1997, the record holders of each class of Trust's
securities were as follows:
Title of Class Number of Record Holders
-------------- ------------------------
U.S. Dollar Fund 1*
--------
Pound Sterling Fund 1*
--------
Deutsche Mark Fund 1*
--------
Canadian Dollar Fund 1*
--------
*Five Arrows House Investments Limited currently owns all of the outstanding
shares of the Funds.
Item 27. Indemnification.
- -------- ----------------
Under Article VI of the Trust's Agreement and Declaration of
Trust, any present or former Trustee, Officer, agent or employee or person
serving in such capacity with another entity at the request of the Trust
("Covered Person") shall be indemnified against all liabilities, including, but
not limited to, amounts paid in satisfaction of judgments, in compromises or as
fines or penalties, and expenses, including reasonable legal and accounting
fees, in connection with the defense or disposition of any proceeding by or in
the name of the Trust or any shareholder in his capacity as such if: (i) a
favorable final decision on the merits is made by a court or administrative
body; or (ii) a reasonable determination is made by a vote of the majority of a
quorum of disinterested Trustees or by independent legal counsel that the
Covered Person was not liable by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in his office
("Disabling Conduct"); or (iii) a determination is made to indemnify the Covered
Person under procedures approved by the Board of Trustees which in the opinion
of independent legal counsel are not inconsistent with the Investment Company
Act of 1940. Said Article VI further provides that the Trust shall indemnify any
Covered Person against any such liabilities and expenses incurred in connection
with the defense or disposition of any other type of proceeding except with
respect to any matter as to which the Covered Person shall have engaged in
Disabling Conduct or shall have been finally adjudicated not to have acted in
good faith and in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust.
Item 28. Business and Other Connections of Investment Adviser.
- -------- -----------------------------------------------------
Rothschild International Asset Management Limited (the
"Investment Adviser") is a registered investment adviser. The Investment
Adviser's offices are located at Five Arrows House, St. Swithin's Lane,
London EC4N 8NR England. The Investment Adviser is a British corporation that
was formed in 1975. It is an indirect subsidiary of Rothschild Concordia AG of
Zug, Switzerland, a holding company whose subsidiaries manage approximately
$28.5 billion of assets, spread across equities, bonds and currencies. The
Investment Adviser offers a wide range of investment advisory services to both
individuals and institutions.
<PAGE> 99
The business and other connections of the officers and directors of
Rothschild International Asset Management Limited , the Investment Adviser to
all series of the Trust, are listed on the Form ADV of the Investment Adviser as
currently on file with the Commission (File no. 801-15132), the text of which is
hereby incorporated by reference.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Five Arrows Fund Distributors Inc. acts as the distributor and
principal underwriter for each of the Funds. It does not act as principal
underwriter, depositor or investment adviser to any investment companies.
(b)(1) The following information relates to the directors, officers and
partners of Five Arrows Fund Distributors Inc.:
Name and Principal Positions and Offices Positions and Offices
Business Address With Registrant With Underwriter
---------------- --------------- ----------------
Lynn J. Mangum None Chairman
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
Walter B. Grimm None President/CEO
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Robert J. McMullan None Executive Vice President
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
J. Christopher Klutch None Senior Executive Vice
The BISYS Group, Inc. President
150 Clove Road
Little Falls, New Jersey 07424
William Blundin None Vice President
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
Dennis Sheehan None Vice President
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
Kevin Dell None Vice President/Secretary
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
Michael Burns None Vice President/
BISYS Fund Services, Inc. Compliance
3435 Stelzer Road
Columbus, Ohio 43219
Anna Porcaro None Assistant Secretary
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
(c) Not applicable.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
The accounts and records of the Trust are maintained at the
offices of the Trust at 3435 Stelzer Road, Columbus, OH 43219-3035.
Item 31. Management Services.
- -------- --------------------
Not applicable.
Item 32. Undertakings.
- -------- -------------
(a) Not applicable.
(b) The Trust hereby undertakes to file a post-effective amendment,
using financial statements which do not have to be certified, within four to six
months from the effective date of the Trust's 1933 Act registration statement.
(c) Trust hereby undertakes to furnish each person, upon request and
without charge, to whom a Prospectus with respect to a series of the Trust is
delivered with a copy of the latest annual report to shareholders with respect
to that series.
<PAGE> 100
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this
Pre-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 3rd day of
February, 1997.
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
By: /s/ Peter B. Collacott
-----------------------------
Peter B. Collacott, President
Name Title Date
---- ----- ----
Principal Executive Officer
/s/ Peter B. Collacott President and Trustee February 3, 1997
- --------------------------
Peter B. Collacott
Principal Financial and
Accounting Officer
* Treasurer February 3, 1997
- --------------------------
William Tomko
* Chairman and Trustee February 3, 1997
- --------------------------
Bryan J. Walsh
* Senior Vice President February 3, 1997
- -------------------------- and Trustee
Paul R. Freeman
* Trustee February 3, 1997
- --------------------------
Alan T. Jeffers
* Trustee February 3, 1997
- --------------------------
Roger M. Kubarych
* By: /s/ Peter B. Collacott
--------------------------
Peter B. Collacott
Attorney-in-fact under a Power of Attorney
dated November 25, 1996 included in the
Pre-Effective Amendment No. 1 and
incorporated by reference hereto.
<PAGE> 101
INTERNATIONAL CURRENCY FUND
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this
Pre-Effective Amendment to the Registration Statement of the Five Arrows
Short-Term Investment Trust to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 3rd day of February, 1997.
INTERNATIONAL CURRENCY FUND
By: /s/ Peter B. Collacott
-----------------------------
Peter B. Collacott, President
Name Title Date
---- ----- ----
Principal Executive Officer
/s/ Peter B. Collacott President and Trustee February 3, 1997
- --------------------------
Peter B. Collacott
Principal Financial and
Accounting Officer
* Treasurer February 3, 1997
- --------------------------
Adrian Waters
* Chairman and Trustee February 3, 1997
- --------------------------
Bryan J. Walsh
* Senior Vice President February 3, 1997
- -------------------------- and Trustee
Paul R. Freeman
* Trustee February 3, 1997
- --------------------------
Alan T. Jeffers
* Trustee February 3, 1997
- --------------------------
Roger M. Kubarych
* By: /s/ Peter B. Collacott
-------------------------------
Peter B. Collacott
Attorney-in-Fact
Under a Power of Attorney dated
November 25, 1996 included in the
Pre-Effective Amendment No. 1
and incorporated by reference hereto.
<PAGE> 1
Exhibit 5
ADVISORY AGREEMENT
AGREEMENT made as of the 16th day of January, 1997 between Rothschild
International Asset Management Limited (the "Adviser"), and the International
Currency Fund, a Delaware business trust (the "Trust").
WHEREAS, the Adviser is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust proposes to engage in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in four series,
the U.S. Dollar Portfolio, the Deutsche Mark Portfolio, the Pound Sterling
Portfolio, and the Canadian Dollar Portfolio, such series (the "Initial
Portfolios"), together with all other series subsequently established by the
Trust with respect to which the Adviser renders investment advisory services
pursuant to the terms of this Agreement, being herein collectively referred to
as the "Portfolios" and individually as a "Portfolio".
NOW THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF ADVISER.
(a) INITIAL PORTFOLIOS. The Trust hereby appoints the Adviser
to act as investment adviser to the Initial Portfolios for the period and on the
terms herein set forth. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
(b) ADDITIONAL PORTFOLIOS. In the event that the Trust
establishes one or more series of shares other than the Initial Portfolios with
respect to which it desires to retain the Adviser to render management and
investment advisory services hereunder, it shall so notify the Adviser in
writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If the Adviser is willing to render such services
on the terms provided for herein, it shall so notify the Trust in writing,
whereupon such series of shares shall become a Portfolio hereunder.
<PAGE> 2
(c) REGULATORY STATUS. The Adviser is regulated by the
Investment Management Regulatory Organisation Limited ("IMRO"), a
self-regulatory organization, in the conduct of its investment business. The
Adviser will provide services hereunder on the basis that the Trust is a
"Non-private customer" under the rules of IMRO.
2. DUTIES OF ADVISER.
The Adviser, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) INVESTMENT PROGRAM. The Adviser shall, subject to the
provisions of paragraph 11 hereof, (i) furnish continuously an investment
program for each Portfolio in compliance with that Portfolio's investment
objective and policies as set forth in the Trust's current Prospectus and
Statement of Additional Information, (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Portfolio and what portion
if any, of the assets of each Portfolio shall be held uninvested, and (iii) make
changes on behalf of the Trust in the investments of each Portfolio. The Adviser
shall also manage, supervise and conduct the other affairs and business of the
Trust and each Portfolio thereof and all matters incidental thereto, subject
always to the control of the Board of Trustees of the Trust and to the
provisions of the Trust's Agreement and Declaration of Trust and By-laws, as
amended, and the 1940 Act.
(b) INTERNAL REPORTS. The Adviser will advise the Trust's
custodian on a prompt basis of each purchase and sale of a portfolio security
specifying the name of the security purchased, the market price, commission and
gross or net price, trade date, settlement date and identity of the effecting
broker or dealer. From time to time as the Trustees of the Trust may reasonably
request, the Adviser will furnish or cause to be furnished to the Trust's
officers and to each of its Trustees reports on portfolio transactions and
reports on issues of securities held in the portfolio, all at such times (but
not less frequently than once every twelve months or such shorter period as may
from time to time be required by applicable law) and in such detail as the
Trustees may reasonably request. For the purpose of such reports, the value of
the securities held in the Portfolio will be calculated in accordance with the
procedures described in the applicable Prospectus and Statement of Additional
Information. The Adviser shall upon the request of the Trustees or the officers
of the Trust, supply or cause to be supplied reports which compare the
performance of the Portfolios with that of other mutual funds possessing similar
investment objectives and policies. The Adviser will also inform the Trust's
officers and Trustees promptly of changes in investment strategy or tactics and
may from time to time contact those persons in order to discuss the investments
of the Portfolios. The Adviser will make its officers and employees available to
meet with the Trust's officers and Trustees on due notice to review the
investments and investment program of a Portfolio in the light of current and
prospective economic and market conditions. Except as otherwise provided by
applicable law, the only restrictions on the amount of any one investment, or on
proportion of the Portfolios which any one investment or any particular kinds of
investment may contribute, are set forth in this
2
<PAGE> 3
Agreement and the applicable Prospectus and Statement of Additional Information,
or as otherwise established from time to time by the Trustees.
(c) REGULATORY REPORTS. The Adviser shall furnish to the
Trust necessary assistance in:
(i) the preparation of all reports now or hereafter
required by federal or other laws; and
(ii) the preparation of prospectuses, registration
statements and amendments thereto that may be required by federal or
other laws or by the rules or regulations of any duly authorized
commission or administrative body.
(d) SERVICES OF PERSONNEL. To the extent the Trust shall
compensate personnel, officers and Trustees of the Trust, the Adviser shall bear
the expense of compensating such persons who are also employees of the Adviser
or its affiliates.
(e) FIDELITY BOND. The Adviser shall arrange for providing and
maintaining a bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued against larceny and embezzlement
covering each officer and employee of the Trust, the Adviser and/or any
sub-adviser who may singly or jointly with others have access to funds or
securities of the Trust, with direct or indirect authority to draw upon such
funds or to direct generally the disposition of such funds. The bond shall be in
such reasonable amount as a majority of the Trustees who are not "interested
persons" of the Trust, as defined in the 1940 Act, shall determine, with due
consideration to the aggregate assets of the Trust to which any such officer or
employee may have access. The premium, or portion thereof pursuant to an
agreement among the insured parties in the case of a joint insured bond, for the
bond shall be payable by the Trust in accordance with paragraph 3(17).
3. ALLOCATION OF EXPENSES.
Except for the services or facilities to be provided by the Adviser set
forth in Paragraph 2 above, the Trust assumes and shall pay all expenses for all
other Trust operations and activities and shall reimburse the Adviser for any
such expense incurred by the Adviser (it being understood that the Trust shall
allocate such expenses between or among its Portfolios to the extent
contemplated by its Master Trust Agreement). The expenses to be borne by the
Trust shall include, without limitation:
(1) all expenses of organizing the Trust or forming any
series thereof;
(2) all expenses (including information, materials and
services other than services of the Adviser) of preparing, printing and mailing
all annual, semiannual and periodic reports, proxy materials and other
communications (including registration statements, prospectuses
3
<PAGE> 4
and amendments and revisions thereto) furnished to existing shareholders of the
Trust and/or regulatory authorities;
(3) fees involved in registering and maintaining registration
of the Trust and its shares with the Securities and Exchange Commission and
state regulatory authorities;
(4) any other registration, filing or other fees in connection
with requirements of regulatory authorities;
(5) expenses, including the cost of printing of certificates
relating to the issuance of shares of the Trust;
(6) to the extent not paid by the Trust's distributor, the
expenses of maintaining a shareholder account and furnishing, or causing to be
furnished, to each shareholder a statement of his account, including the expense
of mailing such statements;
(7) taxes and fees payable by the Trust to federal, state or
other governmental agencies;
(8) expenses related to the redemption of its shares,
including expenses attributable to any program of periodic redemption;
(9) all issue and transfer taxes, brokers' commissions and
other costs chargeable to the Trust in connection with securities transactions
to which the Trust is a party, including any portion of such commissions
attributable to research and brokerage services as defined by Section 28(e) of
the Securities Exchange Act of 1934, as amended from time to time;
(10) the charges and expenses of the custodian appointed by
the Trust, or any depository utilized by such custodian, for the safekeeping of
its property;
(11) charges and expenses of any shareholder servicing agents,
transfer agents and registrars appointed by the Trust, including costs of
servicing shareholder investment accounts;
(12) charges and expenses of independent accountants retained
by the Trust;
(13) legal fees and expenses in connection with the affairs of
the Trust, including legal fees and expenses in connection with registering and
qualifying its shares with federal and state regulatory authorities;
(14) compensation of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
4
<PAGE> 5
(15) expenses of shareholders' and Trustees' meetings,
including, without limitation, reasonable out-of-pocket expenses incurred by
Trustees in connection with attendance at Trustees' meetings (regardless of
whether such Trustees are also employees of the Adviser or its affiliates or are
otherwise "interested persons" of the Trust);
(16) membership dues in, and assessments of, the Investment
Company Institute or similar organizations;
(17) insurance premiums on fidelity, errors and omissions and
other coverages;
(18) expenses incurred in connection with any distribution
plan adopted by the Trust in compliance with Rule 12b-1 of the 1940 Act; and
(19) such other non-recurring expenses of the Trust as may
arise, including, without limitation, expenses of actions, suits, or proceedings
to which the Trust is a party and the legal obligation which the Trust may have
to indemnify its Trustees or shareholders with respect thereto.
4. ADVISORY FEE.
For the services to be provided by the Adviser, the Trust shall pay to
the Adviser investment advisory fees as set forth in Appendix A hereto. The
Adviser may from time to time and for such periods as it deems appropriate
reduce its compensation hereunder to the extent the Adviser may, by notice to
the Trust, voluntarily declare.
5. EXPENSE LIMITATION.
The Adviser agrees that if the total expenses of any Portfolio
(exclusive of interest, taxes, brokerage expenses, distribution expenses,
extraordinary items and any other items allowed to be excluded by applicable
state law) for any fiscal year of the Trust exceed the lowest expense limitation
validly imposed in any jurisdiction in which that Portfolio is then making sales
of its shares or in which its shares are then qualified for sale, the Adviser
will pay or reimburse such Portfolio for that excess up to the amount of its
advisory fee payable with respect to that Portfolio during that fiscal year. The
amount of the monthly advisory fee payable under Paragraph 4 hereof shall be
reduced to the extent that the monthly expenses of that Portfolio, on an
annualized basis, would exceed the foregoing limitation. At the end of each
fiscal year of the Trust, if the aggregate annual expenses chargeable to any
Portfolio for that year exceed the foregoing limitation based upon the average
of the monthly average net asset value of that Portfolio for the year, the
Adviser will promptly reimburse that Portfolio for the amount of such excess to
the extent not already reimbursed by reduction of the monthly advisory fee, but
if such expenses are within the foregoing limitation, any excess amount
previously withheld from the advisory fee during that fiscal year will be
promptly paid over to the Adviser.
5
<PAGE> 6
In the event that this Agreement (i) is terminated with respect to any
one or more Portfolios as of a date other than the last day of the fiscal year
of the Trust or (ii) commences with respect to one or more Portfolios as of a
date other than the first day of the fiscal year of the Trust, then the expenses
of such Portfolio or Portfolios shall be annualized and the Adviser shall pay
to, or receive from, the applicable Portfolio or Portfolios a pro rata portion
of the amount that the Adviser would have been required to pay or would have
received, if any, had this Agreement remained in effect with respect to such
Portfolio or Portfolios for the full fiscal year.
6. PORTFOLIO TRANSACTIONS.
In connection with the management of the investment and reinvestment of
the assets of the Trust, the Adviser, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to select the
brokers or dealers that will execute purchase and sale transactions for the
Trust. In executing portfolio transactions and selecting brokers or dealers, if
any, the Adviser will use its best efforts to seek on behalf of a Portfolio the
best overall terms available. In assessing the best overall terms available for
any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in and the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular transaction, the
Adviser may also consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to
any Portfolio of the Trust and/or other accounts over which the Adviser or an
affiliate of the Adviser exercises investment discretion. With the prior
approval of the Trustees, the Adviser may pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if, but only if, the
Adviser determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided. Such prior
approval may be obtained from the Trustees with respect to the Adviser's
investment program and need not be obtained on a transaction-by-transaction
basis. In the event that the Adviser wishes to enter into an arrangement with
any person pursuant to which it undertakes to place business with such person or
any of its associates or any other person at such person's discretion in return
for brokerage or research services provided by such person to the Adviser, or
enters into any other Soft Commission Arrangement as defined by IMRO Rules as in
effect from time to time, the Sub-Adviser will identify to the Trust in writing
each such broker-dealer, or other person and the nature of such services and
will obtain the consent of the Trust to the placing of business with such
broker/dealer. The Adviser will not, without the Trust's prior consent, invest
on behalf of any Portfolio in securities of which an issue or offer for sale was
underwritten, managed or arranged by the Adviser during the preceding twelve
months.
7. FURTHER INFORMATION CONCERNING ADVISORY SERVICES
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(a) The services provided by the Adviser may relate to investments or
assets denominated in various currencies. The Adviser and the Trust recognize
that movements of currency exchange rates may have an effect, favorable or
unfavorable, on the gain or loss otherwise experienced with respect to the
investments or assets of the Portfolios.
(b) In accordance with the provisions of the Investment Company Act of
1940, the Adviser may from time to time cause the Portfolios' assets to be held
in bank accounts outside the U.S. and the U.K. However, the Adviser will not
itself hold money or assets on behalf of the Portfolio.
(c) The Adviser may commit the Trust to a contract the performance of
which may require it to supplement the assets of the Portfolios, and may commit
the Trust to supplement the assets of the Portfolios by borrowing on their
behalf, but only the extent permitted under the terms of the Trust's
registration statement then in effect with the Securities and Exchange
Commission.
8. RELATIONS WITH TRUST.
(a) Subject to and in accordance with the Master Trust Agreement and
By-laws of the Trust and the Memorandum and Articles of Association of the
Adviser, it is understood that Trustees, officers, agents and shareholders of
the Trust are or may be interested in the Adviser (or any successor thereof) as
directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Adviser (or any successor) are or may be interested in the
Trust as Trustees, officers, shareholders or otherwise, that the Adviser (or any
such successor thereof) is or may be interested in the Trust as a shareholder or
otherwise and that the effect of any such adverse interests shall be governed by
said Agreement and Declaration of Trust, Articles of Organization and By-laws.
(b) CONFLICTS OF INTEREST. To the extent permissible under the 1940 Act
or any other applicable law, the Adviser may, without prior reference to the
Trust, effect any transaction in investments in which it or any affiliated
person has or will have:
(i) bought the investment from or sold the investment to the Trust
when acting as principal (in the case of the Adviser only for
currency transactions or in respect of transactions effected for
the purpose of realizing capital gains of a particular amount
within a specific tax year); or
(ii) acted in the same transaction as both an agent for the Trust and
also as an agent for any other person, which may be a customer of
the Adviser or of an affiliated person;
(iii) directly or indirectly a material interest of any description,
or has or will have a relationship of any description with
another person such as to place it in a position where its duty
to or interest in relation to that other person conflicts or may
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<PAGE> 8
conflict with its duty to the Trust. For example, such potential
conflicting interests or duties may arise because:
(aa) the Adviser or an affiliated person undertakes
investment business for other customer;
(bb) any of the Adviser's directors or employees, or those of
an affiliated person, is a director of, holds or deals
in securities of, or is otherwise interested in any
company whose securities are held or dealt in on behalf
of the Trust;
(cc) the transaction is in securities issued by an affiliated
person or by a customer of the Adviser or an affiliated
person;
(dd) the Adviser and/or the Custodian(s) may, acting as
principal, sell to or purchase from the Trust currency;
(ee) the transaction is in securities underwritten or
sub-underwritten by the Adviser or an affiliated person
in the previous twelve months;
(ff) the transaction is in units or shares of any company of
which the Adviser or any affiliated person is the
manager, operator, banker, adviser or trustee;
(gg) the Adviser or an affiliated person may receive
remuneration or other benefits by reason of acting in
corporate finance or similar transactions involving
companies whose securities held by the Trust; and
(hh) the transaction is in securities in respect of which the
Adviser or an affiliated person, or a director or
employee of an affiliated person, or a director or
employee of an affiliated person, is contemporaneously
trading or has traded on its own account or has either a
long or short position.
9. LIABILITY OF ADVISER.
Neither the Adviser nor its officers, directors, employees, agents or
controlling persons or assigns shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or its shareholders in
connection with the matters to which this Agreement relates; provided that no
provision of this Agreement shall be deemed to protect the Adviser against any
liability to the Trust or its shareholders to which it might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of its duties of its obligations and duties under this
Agreement. Nor shall any provision hereof be deemed to protect any Trustee or
officer of the Trust against any such liability to which he might otherwise
be subject
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by reason of any willful misfeasance, bad faith or gross negligence in the
performance of his duties or the reckless disregard of his obligations and
duties.
10. LIABILITY OF THE TRUST AND THE PORTFOLIOS
The term "The International Currency Fund" means and refers to the
Trustees from time to time serving under the Master Trust Agreement of the
International Currency Fund, a Delaware business trust, as the same may be
amended from time to time. It is expressly agreed that the obligations of the
International Currency Fund hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the
International Currency Fund personally, but shall bind only the trust property
of the International Currency Fund, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement have been authorized by the
Trustees and signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in its Master Trust Agreement.
With respect to any obligation of the International Currency Fund on
behalf of any Portfolio arising hereunder, the Adviser shall look for payment or
satisfaction of such obligations solely to the assets and property of the
Portfolio to which such obligation relates as though the International Currency
Fund had separately contracted with the Adviser by separate written instrument
with respect to each Portfolio. In addition, this Agreement may be terminated
with respect to one or more Portfolios without affecting the rights, duties or
obligations of any of the other Portfolios.
11. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) DURATION. This Agreement shall become effective with
respect to the Initial Portfolio on the date hereof and, with respect to any
additional Portfolio, on the date of receipt by the Trust of notice from the
Adviser in accordance with paragraph 1(b) hereof that the Adviser is willing to
serve as Adviser with respect to such Portfolio. Unless terminated as herein pro
vided, this Agreement shall remain in full force and effect for two years from
the date hereof with respect to the Initial Portfolios and, with respect to each
additional Portfolio, for two years from the date on which such Portfolio
becomes a Portfolio hereunder. Subsequent to such initial periods of
effectiveness, this Agreement shall continue in full force and effect for
periods of one year thereafter with respect to each Portfolio so long as such
continuance with respect to such Portfolio is approved at least annually (a) by
either the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of such Portfolio, and (b), in
either event, by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval.
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<PAGE> 10
(b) AMENDMENT. Any amendment to this Agreement shall become
effective with respect to a Portfolio upon approval of the Adviser and a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Portfolio.
(c) TERMINATION. This Agreement may be terminated with respect
to any Portfolio at any time, without payment of any penalty, by vote of the
Trustees or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Portfolio, or by the Adviser, in each case on
sixty (60) days' prior written notice to the other party. Any termination of
this Agreement will be without prejudice to the completion of transactions
already initiated by the Adviser on behalf of the Trust at the time of such
termination. The Adviser shall take all steps reasonably necessary after such
termination to complete any such transactions and is hereby authorization to
take such steps.
(d) AUTOMATIC TERMINATION. This Agreement shall automatically
and immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) APPROVAL, AMENDMENT OR TERMINATION BY INDIVIDUAL
PORTFOLIO. Any approval, amendment or termination of this Agreement by the
holders of a majority of the outstanding voting securities (as defined in the
1940 Act) of any Portfolio shall be effective to continue, amend or terminate
this Agreement with respect to any such Portfolio notwithstanding (i) that such
action has not been approved by the holders of a majority of the outstanding
voting securities of any other Portfolio affected thereby, and (ii) that such
action has not been approved by the vote of a majority of the outstanding voting
securities of the Trust, unless such action shall be required by any applicable
law or otherwise.
12. SERVICES NOT EXCLUSIVE.
The services of the Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
13. MISCELLANEOUS.
(a) NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to the other party
at such address as such other party may designate in writing for the receipt of
such notices.
(b) SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
(c) APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the laws of England.
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(d) IMRO. The Adviser has in operation a written procedure in
accordance with the IMRO Rules for the effective consideration and proper
handling of complaints from customers. Any complaint by the Trust under this
Mandate should be sent in writing and addressed to the Compliance Officer. The
Trust also has the right to complain to the Investment Ombudsman. The Trust may
request a statement describing the Trust's rights to compensation in the event
of the Adviser inability to meet any liabilities to the Trust.
[Remainder of the page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
ATTEST: INTERNATIONAL CURRENCY FUND
By: /s/ Paul R. Freeman By: /s/ Peter B. Collacott
------------------------------ --------------------------------
Senior Vice President President
ATTEST: ROTHSCHILD INTERNATIONAL ASSET
MANAGEMENT LIMITED
By: /s/ Sandy MacPhee By: /s/ Peter Troughton
------------------------------ --------------------------------
Secretary Chairman
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APPENDIX A
FEE SCHEDULE
------------
For the services to be provided by the Adviser hereunder, the Trust agrees
that each Initial Portfolio shall pay to the Manager a monthly fee as soon as
practical after the last day of each calendar month, which fee shall be paid at
a rate equal to twenty one hundredths of one percent (.20%) on an annual basis
of the average daily net asset value of such Portfolio for such calendar month,
commencing as of the date on which this Agreement becomes effective with respect
to such Portfolio.
In case of commencement or termination of this Agreement with respect to
any Portfolio during any calendar month, the fee with respect to such Portfolio
for that month shall be reduced proportionately based upon the number of
calendar days during which this agreement is in effect with respect to such
Portfolio, and the fee shall be computed based upon the average daily net asset
value of such Portfolio during such period.
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Exhibit 6
DISTRIBUTION AGREEMENT
AGREEMENT made this 16th day of January, 1997, between FIVE ARROWS
SHORT-TERM INVESTMENT TRUST (the "Trust"), a Delaware business trust and FIVE
ARROWS FUND DISTRIBUTORS, INC. ("Distributor"), a Delaware corporation.
WHEREAS, Distributor is an affiliate of BISYS Fund Services Limited
Partnership, BISYS Fund Services, Inc. and BISYS Fund Services (Ireland) Limited
(each such entity and any other entity hereafter providing services under a
BISYS Agreement (as defined below) is hereinafter referred to a "BISYS Entity");
WHEREAS, concurrently herewith, Distributor and the other BISYS
Entities are entering into other agreements to provide services to the Trust,
The International Currency Fund, and Five Arrows Cash Management Fund PLC (such
agreements and any other comparable agreements in effect from time to time being
referred to collectively as the "BISYS Agreements");
WHEREAS, the Trust is an open-end management investment company,
organized as a Delaware business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust, either now or hereafter created (such portfolios being referred to
individually as a "Fund" and collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement of the Trust then in effect under
the Securities Act of 1933, as amended (the "Securities Act"). As used in this
Agreement, the term "registration statement" shall mean Parts A (the
Prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "Prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto. The Distributor hereby agrees to act as
agent for the Trust in connection with any share repurchase arrangements from
time to time offered by the Trust in accordance with the terms of the Trust's
registration statement as from time to time amended.
<PAGE> 2
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Companies") including Companies having investment objectives similar to those
of the Trust. The Trust further understands that investors and potential
investors in the Trust may invest in shares of such other Companies. The Trust
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the Trust under this paragraph 1.2.
Distributor shall, at its own expense, finance
appropriate activities which it deems reasonable, which are primarily intended
to result in the sale of the Shares, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current Shareholders, and the printing and
mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, all rules and regulations promulgated by the Commission thereunder
and all rules and regulations adopted by any securities association registered
under the Securities Exchange Act of 1934, all provisions of the Trust's Master
Trust Agreement and other governing documents, and the terms of the Trust's
registration statement.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Trust.
1.5 Distributor will transmit on a timely basis any orders
received by it for purchase or redemption of the Shares to the transfer agent
and custodian for the Funds.
1.6 Whenever in their judgment such action is desirable, the
Trust may suspend, terminate or withdraw the offering of Shares, or decline to
accept any order.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request. The Distributor also agrees to furnish to
the Trust sufficient copies of any
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<PAGE> 3
sales literature it intends to use in connection with any sales of shares in
adequate time for the Trust to review such sales literature. The Distributor
agrees that it will be responsible for filing and clearing all such sales
literature with the proper authorities before the same is put in use to the
extent required by applicable law, and not to use the same until so filed and
cleared. The Distributor agrees that it will not use, distribute or disseminate
or authorize the use, distribution or dissemination by others in connection with
the sale of shares of the Funds, any statement, other than those contained in
the Trust's current registration statement, except such supplemental literature
or advertising as shall be approved by the Trust.
1.9 The Trust represents to Distributor that, with respect to
the Shares, all registration statements and prospectuses filed by the Trust with
the Commission under the Securities Act have been carefully prepared in
conformity, in all material respects, with requirements of said Act and rules
and regulations of the Commission thereunder. The registration statement and
prospectus contain all statements required to be stated therein in conformity
with said Act and the rules and regulations of said Commission and all
statements of fact contained in any such registration statement and prospectus
are true and correct in all material respects. Furthermore, neither any
registration statement nor any prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. The Trust may, but shall not be obligated to, propose from time to time
such amendment or amendments to any registration statement and such supplement
or supplements to any prospectus as, in the light of future developments, may,
in the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.10 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares so long as Distributor has not received notice to the contrary.
The Trust agrees to indemnify, defend and hold Distributor, its several partners
and employees, and any person who controls Distributor within the meaning of
Section 15 of the Securities Act free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which Distributor, its partners and employees, or any
such controlling person, may incur under the Securities Act or under common law
or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration statement or
any prospectus or arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in either any
registration statement or any prospectus or
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<PAGE> 4
necessary to make the statements in either thereof not misleading; provided,
however, that the Trust's agreement to indemnify Distributor, its partners or
employees, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations as are contained in any prospectus and in such financial and
other statements as are furnished in writing to the Trust by Distributor and
used in the registration statement or in the corresponding statements made in
the prospectus, or arising out of or based upon any omission or alleged omission
to state a material fact in connection with the giving of such information
required to be stated therein or necessary to such information not misleading;
and further provided that the Trust's agreement to indemnify Distributor and the
Trust's representations and warranties hereinbefore set forth in paragraph 1.10
shall not be deemed to cover any liability to the Trust or its Shareholders to
which Distributor would otherwise be subject by reason of willful misfeasance,
bad faith or negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties. The Trust's
agreement to indemnify Distributor, its partners and employees and any such
controlling person, as aforesaid, is expressly conditioned upon the Trust being
notified of any action brought against Distributor, its partners or employees,
or any such controlling person, such notification to be given in accordance with
Section 6 hereof, within 10 days after the summons or other first legal process
shall have been served. The failure to so notify the Trust of any such action
shall not relieve the Trust from any liability which the Trust may have to the
person against whom such action is brought by reason of any such untrue, or
allegedly untrue, statement or omission, or alleged omission, otherwise than
with respect to incremental liabilities resulting from such failure. The Trust
will be entitled to assume the defense of any suit brought to enforce any such
claim, demand or liability, but, in such case, such defense shall be conducted
by counsel of good standing chosen by the Trust and approved by Distributor,
which approval shall not be unreasonably withheld. In the event the Trust elects
to assume the defense of any such suit and retain counsel of good standing
approved by Distributor, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of them; but in case
the Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.10 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively
to Distributor's benefit, to the benefit of its several partners and employees,
and their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Trustees in connection with the issue and sale of any Shares.
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<PAGE> 5
1.11 Distributor agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers or
Trustees or any such controlling person, may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers or Trustees or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any (i) untrue, or alleged untrue, statement of a material fact contained
in information furnished in writing by Distributor to the Trust and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Trust required to be stated in such answers or necessary to make such
information not misleading (ii) sale by Distributor of Shares of the Trust in
any jurisdiction in which such Shares are not authorized to be sold, or (iii)
willful misfeasance, bad faith or negligence by Distributor. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office in Columbus,
Ohio, and sent to Distributor by the person against whom such action is brought,
within 10 days after the summons or other first legal process shall have been
served. Distributor shall have the right of first control of the defense of such
action, with counsel of its own choosing, satisfactory to the Trust, if such
action is based solely upon such alleged misstatement or omission on
Distributor's part, and in any other event the Trust, its officers or Trustees
or such controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify Distributor of any such action shall not relieve Distributor from any
liability which Distributor may have to the Trust, its officers or Trustees, or
to such controlling person by reason of any such untrue or alleged untrue
statement, or omission or alleged omission, otherwise than with respect to
incremental liabilities resulting from such failure.
1.12 No Shares shall be offered by either Distributor or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.12 shall in any way restrict
or have an application to or bearing upon the Trust's obligation to repurchase
Shares from any Shareholder in accordance with the provisions of the Trust's
prospectus, Agreement and Declaration of Trust, or Bylaws.
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<PAGE> 6
1.13 The Trust agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for amendments
to the registration statement or prospectus then
in effect or for additional information;
(b) in the event of the issuance by the Commission
of any stop order suspending the effectiveness
of the registration statement or prospectus then
in effect or the initiation by service of
process on the Trust of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue
any statement of a material fact made in the
registration statement or prospectus then in
effect or which requires the making of a change
in such registration statement or prospectus in
order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to
any amendment to any registration statement or
prospectus which may from time to time be filed
with the Commission.
For purposes of this section, informal requests by or
acts of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
1.14 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.15 For purposes of this Agreement, actions or omissions by
any BISYS Entity or its employees, agents, directors, officers or nominees made
in any capacity shall be deemed to be actions or omissions by Distributor.
Actions or omissions by a person who is both an officer or employee of the Trust
and an officer or employee of any BISYS Entity shall be deemed to have been
committed solely in such person's capacity as an officer or employee of such
BISYS Entity.
1.16 This Agreement shall be governed by the laws of the State
of Ohio.
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2. REPRESENTATIONS OF DISTRIBUTOR.
Distributor represents and warrants that: (a) Distributor is,
and shall continue to be duly registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, and applicable state law to the extent
required in connection with the performance of its duties under this Agreement;
(b) Distributor is duly organized, validly existing and in good standing under
the laws of the state of Delaware and has the power and authority to carry on
the activities contemplated by this Agreement; and (c) this Agreement has been
duly authorized, executed and delivered by Distributor, and is the legal, valid
and binding obligation of Distributor, enforceable in accordance with its terms.
3. COMPENSATION.
The Distributor shall be entitled, subject to the terms and
conditions of the Trust's Plan of Distribution Pursuant to Rule 12b-1, to
amounts payable by the Trust thereunder.
4. SALE AND PAYMENT.
Pursuant to the Agreement and Declaration of Trust dated as of
August 13, 1996, as amended, each Fund may be divided into separate classes of
Shares in which case the Shares of one or more classes may be subject to a
service fee pursuant to a duly adopted Service Plan. Prior to the time of
delivery of any Shares by a Fund to, or on the order of, Distributor,
Distributor shall pay or cause to be paid to the Fund or to its order an amount
in Boston or New York clearing house funds equal to the applicable net asset
value of such Shares. The public offering price of a Share shall be the net
asset value of such Share, all as set forth in the current prospectus of the
Fund. The net asset value of Shares shall be determined in accordance with the
provisions of the Agreement and Declaration of Trust and Bylaws of the Trust and
the applicable Prospectus and Statement of Additional Information.
5. TERM, DURATION AND TERMINATION.
This Agreement shall become effective with respect to each
Fund, either now or hereafter created, as of the date first written above and,
unless sooner terminated as provided herein, shall continue until January 16,
1999. Thereafter, if not terminated, this Agreement shall continue with respect
to a particular Fund automatically for successive one-year terms, provided that
such continuance is specifically approved at least annually by (a) by the vote
of a majority of those members of the Trust's Board of Trustees who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting for the purpose of voting on such approval and (b) by either
the vote of the Trust's Board of Trustees or the vote of a majority of the
outstanding voting securities of such Fund. This Agreement is terminable without
penalty, on not less than sixty days' prior written notice, by the Trust's Board
of Trustees, by vote of a majority of the outstanding voting securities of the
Trust or by the Distributor. This Agreement will also terminate automatically in
the event of its assignment. (As used in this Agreement, the
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<PAGE> 8
terms "majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meanings as ascribed to such terms in the 1940
Act.)
6. NOTICE.
Any notice, demand, request or other communication which may be
required or contemplated herein shall be sufficiently given if (i) given either
by facsimile transmission or telex, by reputable overnight delivery service,
postage prepaid, or by registered or certified mail, postage prepaid and return
receipt requested, to the address indicated below or to such other address as
any party hereto may specify as provided herein, or (ii) delivered personally at
such address.
If to the Trust: c/o Rothschild International Asset Management Limited
Five Arrows House
St. Swithin's Lane
London EC4N 8NR United Kingdom
Attention: Peter B. Collacott
with a copy to:
Geoffrey R.T. Kenyon
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
If to Distributor: 3435 Stelzer Road
Columbus, Ohio 43219.
Attention: George O. Martinez
7. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
8
<PAGE> 9
8. SEVERAL OBLIGATIONS OF THE FUNDS. The Trust is a series company with
multiple series, the Funds, and has entered into this Agreement on behalf of
those series, as amended from time to time on notice to the Distributor. With
respect to any obligation of the Trust on behalf of any Fund arising hereunder,
the Distributor shall look for payment or satisfaction of such obligations
solely to the assets and property of the Fund to which such obligation relates
as though the Trust had separately contracted with the Distributor by separate
written instrument with respect to each Fund. In addition, this Agreement may be
terminated with respect to one or more Funds without affecting the rights,
duties or obligations of any of the other Funds.
9. MISCELLANEOUS.
For purposes of this Agreement, no officer of the Trust who is an
employee of any BISYS Entity shall be deemed to be an authorized representative
of the Trust for the purposes of giving or receiving any notice, consent, or
other communication pursuant to Sections 1.9, 1.10, 1.11, 1.13, 1.14 and 5 or
not in the ordinary course of business. No provision of this Agreement shall be
deemed to limit the duties or obligations of Distributor or any other BISYS
Entity under any other BISYS Agreement. Paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
[Remainder of the page intentionally left blank.]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
FIVE ARROWS SHORT-TERM FIVE ARROWS FUND DISTRIBUTORS,
INVESTMENT TRUST INC.
By: /s/ Paul R. Freeman By: /s/ Walter Grimm
------------------------- --------------------------
Title: Senior Vice President Title: President
---------------------- -----------------------
Date: 6/1/97 Date: 1/15/97
----------------------- -----------------------
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<PAGE> 11
So long as this Distribution Agreement remains in effect, the
undersigned Rothschild International Asset Management Limited grants to the
Distributor a non-exclusive, non-transferable, non-assignable licence to use the
name or mark "Five Arrows" as part of its corporate name. Five Arrows Fund
Distributors, Inc. or any other corporate name to which Rothschild International
Asset Management Limited has given its prior written consent (at its absolute
discretion). During this period the Distributor will maintain the high standards
of professionalism that are associated with the N.M. Rothschild organization.
The Distributor will not sublicense the name "Five Arrows," nor use or authorize
any use of such name except in connection with the distribution of shares of
Five Arrows Short-Term Investment Trust in the manner contemplated by this
Distribution Agreement. Upon (i) any termination of this Distribution Agreement
or (ii) the commencement by the Distributor of any activity other than the
distribution of shares of Five Arrows Short-Term Investment Trust in the manner
contemplated by this Agreement, this license and all right of the Distributor to
use the names or marks "Five Arrows" shall terminate, whereupon within seven
days the Distributor will take all necessary actions to change its corporate
name to a name which neither makes use of such words nor names or marks that are
in the opinion of Rothschild International Asset Management confusingly similar
thereto.
Executed as of the date first set forth above.
ROTHSCHILD INTERNATIONAL
ASSET MANAGEMENT LIMITED
By: /s/ Peter Troughton
----------------------------
Acknowledged and Agreed
FIVE ARROWS FUND DISTRIBUTORS, INC.
By: /s/ Walter Grimm
-------------------------------
Walter Grimm
11
<PAGE> 1
Exhibit 8
[CHASE LOGO]
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 16, 1997, and is between THE CHASE
MANHATTAN BANK ("Bank") and FIVE ARROWS SHORT-TERM INVESTMENT TRUST
("Customer").
1. CUSTOMER ACCOUNTS.
Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3) for the account of Customer ("Securities"); and
(b) A deposit account in the name of Customer ("Deposit Account") for
any and all cash in any currency received by Bank or its Subcustodian for the
account of Customer, which cash shall not be subject to withdrawal by draft or
check.
Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to
Bank:
<PAGE> 2
(a) Securities shall be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and Bank can comply with such
Instructions, Bank is authorized to maintain cash balances on deposit for
Customer with itself or one of its "Affiliates" at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as Customer may direct, if acceptable to Bank. (For purposes
hereof, the term "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank)
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Bank may act hereunder through the subcustodians listed in Schedule A
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of the
Securities in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
A. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
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<PAGE> 3
4. USE OF SUBCUSTODIAN.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets
belonging to other customers of Bank in accounts identified on such
Subcustodian's books as custody accounts for the exclusive benefit of customers
of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets shall not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration. Where Securities
are deposited by a Subcustodian with a securities depository, Bank shall cause
the Subcustodian to identify on its books as belonging to Bank, as agent, the
Securities shown on the Subcustodian's account on the books of such securities
depository. The foregoing shall not apply to the extent of any special agreement
or arrangement made by Customer with any particular Subcustodian.
(e) As long as Securities and Exchange Commission Rule 17f-5 or the
1981 Chase SEC Order requires the Board of Directors/Trustees of a registered
investment company directly to approve its foreign custody arrangements, the
Bank shall furnish annually to the Customer information concerning Subcustodians
similar in kind and scope as that furnished to the Customer in connection with
the initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware of
any such material adverse change in the normal course of its custodial
activities.
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<PAGE> 4
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans (or as otherwise agreed in writing by Customer and Bank) from the date of
the advance to the date of payment (both after as well a before judgment) and
otherwise on the terms on which Bank makes similar overdrafts available from
time to time.
(c) If Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due ("AutoCredit"),
Customer shall promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary course
of business or (ii) that such amount was incorrectly credited. If Customer does
not promptly return any amount upon such notification, Bank shall be entitled,
upon oral or written notification to Customer, to reverse such credit by
debiting the Deposit Account for the amount previously credited. Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount, but may act for Customer
upon Instructions after consultation with Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account shall, where
reasonably feasible, be made in such manner as set forth in Instructions from
Customer, it being understood, however, that settlement and payment shall be
made in accordance with customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without
4
<PAGE> 5
limitation, delivery of Securities to a purchaser, dealer or their agents
against a receipt with the expectation of receiving later payment and free
delivery. Chase shall promptly advise Customer in writing (which advice may
consist of applicable market reports) as to those markets, in which securities
are held as of the date hereof, where it is local market practice to release and
deliver securities prior to the receipt of payment therefor and Chase shall
provide information as to additional such markets after Chase first has
knowledge that Securities are being purchased therein by Customer. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions reasonably acceptable to Bank.
(b) Bank, in its discretion, may effect the following book-entries with
respect to the settlement of trades:
(i) On sales: on the contractual settlement due for the sale, credit
the Cash Account with the sale proceeds of the sale and transfer the relevant
Securities to an account pending settlement of the trade if not already
delivered.
(ii) On purchases: on or before the contractual settlement date for the
purchase, debit the Cash Account with the settlement monies and credit a
separate account. At the same time Bank will post the Securities Accounts with
the expected Securities with a note to the effect that Bank is awaiting receipt,
pending actual receipt of such Securities. The Customer shall not be entitled to
the delivery of settlement monies in respect of Securities which are awaiting
receipt until they have actually been received by Bank or a Subcustodian.
(c) Bank may (in its absolute discretion) reverse any debit or credit
made pursuant to subparagraph (b). Customer shall be responsible for any direct
or indirect costs or liabilities resulting from such reversal, unless due to the
negligence, fraud or willful default of Bank, and will indemnify Bank
accordingly. Customer acknowledges that the procedures described in this
sub-clause are of an administrative nature and do not amount to an agreement by
Bank to make loans and/or Securities available to Customer.
(d) Unless the Cash Account is debited or credited (as the case may be)
on the contractual settlement date as referred to in subparagraph (b), Bank
shall credit the Cash Account with the proceeds of any sale or
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<PAGE> 6
exchanges of Securities and debit the Cash Account for the cost of the
Securities purchased or acquired only on the date cash or Securities are
actually received by Bank and reconciled to the Account.
7. ACTIONS OF BANK.
Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank will:
(i) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(ii) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(iii) Exchange interim receipts or temporary Securities for definitive
Securities.
(iv) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, Affiliates of Bank or any
Subcustodian.
(v) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. [Unless the
Customer sends the Bank a written exception or objection to any Bank statement
within 60 days after its next annual audit covering any period included in the
statement, the Customer shall be deemed to have approved such statement;
provided that, if such written exception or objection is received by Chase more
than 90 days from the statement, advice or notification date, Chase's obligation
to Customer in regard to any transactions covered thereby shall be reduced to
the extent that Chase's ability to mitigate any damages in connection with any
such transaction is compromised.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of
Customer. Bank shall have no liability for any loss occasioned by delay in
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<PAGE> 7
the actual receipt of notice by Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which Bank has agreed to take any action hereunder. With respect to
income on Securities which are not subject to AutoCredit, Bank shall advise
Customer of failure to receive such income in the ordinary course of business,
but a failure to provide sufficient notice shall not render Bank liable for such
amount except to the extent the failure directly results in Customer's inability
to recover such income.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) CORPORATE ACTIONS. Whenever Bank receives information concerning
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), Bank
shall give Customer notice of such Corporate Actions to the extent that Bank's
central corporate actions department has actual knowledge of a Corporate Action
in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, Bank shall endeavor to obtain
Instructions from Customer or its Authorized Person, but if Instructions are not
received in time for Bank to take timely action, or actual notice of such
Corporate Action was received too late to seek Instructions, Bank is authorized
to sell such rights entitlement or fractional interest and to credit the Deposit
Account with the proceeds or take any other action it deems, to be appropriate
in which case it shall be held harmless for any such action taken in good faith
and without negligence.
(b) PROXY VOTING. Bank shall provide proxy voting services, if elected
by Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) TAX RECLAIMS.
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<PAGE> 8
(i) Subject to the provisions hereof, Bank shall apply for a reduction
of withholding tax and any refund of any tax paid or tax credits which apply in
each applicable market in respect of income payments on Securities for the
benefit of Customer which Bank believes may be available to such Customer.
(ii) The provision of tax reclaim services by Bank is conditional upon
Bank receiving from the beneficial owner of Securities (A) a declaration of its
identity and place of residence and (B) certain other documentation (PRO FORMA
copies of which are available from Bank). Customer acknowledges that, if Bank
does not receive such declarations, documentation and information, additional
United Kingdom taxation shall be deducted from all income received in respect of
Securities issued outside the United Kingdom and that U.S. non-resident alien
tax or U.S. backup withholding tax shall be deducted from U.S. source income.
Customer shall provide to Bank such documentation and information as it may
require in connection with taxation, and warrants that, when given, this
information shall be true and correct in every material respect, not misleading
in any way, and contain all material information. Customer undertakes to notify
Bank immediately if any such information requires updating or amendment.
(iii) Bank shall not be liable to Customer or any third party for any
tax, fines or penalties payable by Bank or Customer, and shall be indemnified
accordingly, whether these result from the inaccurate completion of documents by
Customer or any third party, or as a result of the provision to Bank or any
third party of inaccurate or misleading information or the withholding of
material information by Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Deposit Account any taxes or levies required by any
revenue or governmental authority for whatever reason in respect of the
Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to Customer
from time to time and Bank may, by notification in writing, at its absolute
discretion, supplement or amend the markets in which the tax reclaim services
are offered. Other than as expressly provided in this sub-clause, Bank shall
have no responsibility with regard to Customer's tax position
8
<PAGE> 9
or status in any jurisdiction, it being understood that Bank shall use
reasonable care to assure that, in performing its services, such performance
does not, in and of itself, cause Customer to become resident for tax purposes
in any jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to Customer or the Securities and/or Cash held for Customer.
(vii) Tax reclaim services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be Affiliates of
Bank); provided that Bank shall be liable for the performance of any such third
party to the same extent as Bank would have been if it performed such services
itself.
9. NOMINEES.
Securities which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Securities
to cease to be registered in the name of any such nominee and to be registered
in the name of Customer. In the event that any Securities registered in a
nominee name are called for partial redemption by the issuer, Bank may allot the
called portion to the respective beneficial holders of such class of security in
any manner Bank deems to be fair and equitable. Customer shall hold Bank,
Subcustodians, and their respective nominees harmless from any liability arising
directly or indirectly from their status as a mere record holder of Securities
in the Custody Account.
10. AUTHORIZED PERSONS.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
9
<PAGE> 10
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith and in the absence of
negligence to have been given by Authorized Persons or which are transmitted
with proper testing or authentication pursuant to terms and conditions which
Bank may specify. Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until canceled or superseded.
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time. Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its obligations
hereunder and the safekeeping of Assets. Bank shall be liable to Customer for
any loss which shall occur as the result of the failure of a Subcustodian to
exercise reasonable care with respect to the safekeeping of such Assets to the
same extent that Bank would be liable to Customer if Bank were holding such
Assets in New York. In the event of any loss to Customer by reason of the
failure of Bank or its Subcustodian to utilize reasonable care, Bank shall be
liable to Customer only to the extent of Customer's direct damages, to be
determined based on the market value of the property which is the subject of the
loss at the date of notification of such loss to Customer and without reference
to any special
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<PAGE> 11
conditions or circumstances. Alternatively, Customer may, at its election and
its sole expense, be subrogated to the rights of Bank in respect of any
Subcustodian in connection with such a loss. Bank shall have no liability
whatsoever for any consequential, special, indirect or speculative loss or
damages (including, but not limited to, lost profits) suffered by Customer in
connection with the transactions contemplated hereby and the relationship
established hereby even if Bank has been advised as to the possibility of the
same and regardless of the form of the action. As long as Bank shall have been
in compliance with its obligations pursuant to Section 4(e) hereof, Bank shall
not be responsible for the insolvency of any Subcustodian which is not a branch
or Affiliate of Bank
(ii) Bank shall not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith; it being understood that
the appointees covered by this section shall be limited to those performing
ministerial functions such as the sale of fractional shares and the provision of
pricing information.
(iii) Bank shall be indemnified by, and without liability to Customer
for any action taken or omitted by Bank whether pursuant to Instructions or
otherwise within the scope hereof if such act or omission was in good faith,
without negligence and in compliance herewith. In performing its obligations
hereunder, Bank may rely on the genuineness of any document which it believes in
good faith to have been validly executed.
(iv) Customer agrees to pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income from
or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for Customer) on all matters and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
(vi) Bank need not maintain any insurance for the benefit of Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing or
holding Assets in a particular country including, but not limited
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<PAGE> 12
to, losses resulting from malfunction, interruption of or error in the
transmission of information caused by any machines or system or interruption of
communication facilities not within the control of Bank or its Subcustodians,
nationalization, expropriation or other governmental actions; regulation of the
banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war (whether declared or undeclared) or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or acts of God;
provided that in the event of the occurrence of any of the foregoing events, the
affected party shall, where feasible, take such steps as are reasonable to
restore service in a reasonable time, but shall not be obligated thereby to
settle any strike or resolve any work stoppage.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided in
Section 5(c) and the last paragraph of Section 7 hereof;
(iv) evaluate or report to Customer or an Authorized Person regarding
the financial condition of any broker, agent (other than a Subcustodian) or
other party to which Securities are delivered or payments are made pursuant
hereto, provided, however, that Bank shall exercise reasonable care when
appointing any broker, agent or other party in its discretion ; and
(v) review or reconcile trade confirmations received from brokers.
Customer or its Authorized Persons (as defined in Section 10) issuing
Instructions shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank.
12
<PAGE> 13
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Securities, act as a lender to the issuer of Securities, act in the
same transaction as agent for more than one customer, have a material interest
in the issue of Securities, or earn profits from any of the activities listed
herein.
13. FEES AND EXPENSES.
Customer agrees to pay Bank for its services hereunder the fees set
forth in Schedule B hereto or such other amounts as may be agreed upon in
writing, together with Bank's reasonable out-of-pocket expenses, including, but
not limited to, the reasonable fees and disbursements of Bank's legal advisers
in relation to the amendment or modification of any documentation in relation to
the Customer. Bank shall have a lien on and is authorized to charge any Accounts
of Customer for any amount owing to Bank under any provision hereof (other than
pursuant to the indemnity section); provided that, Bank's security interest in a
particular Security shall terminate at the time Customer pays Bank the
settlement amount for such Security in immediately available funds. Bank shall
give Customer prompt subsequent advice of any charge against Cash made hereunder
and not less than two days' prior notice of the liquidation or other disposition
of any Securities subject to lien in connection with satisfaction of any amount
owing to Bank.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
Customer's trading and investment activity, Bank is authorized to enter into
spot or forward foreign exchange contracts with Customer or an Authorized Person
for Customer and may also provide foreign exchange through its subsidiaries,
Affiliates or Subcustodians. Instructions, including standing instructions, may
be issued with respect to such contracts but Bank may establish rules or
limitations concerning any foreign exchange facility made available. Except
where the parties have otherwise negotiated different terms and conditions, in
all cases where Bank, its subsidiaries, Affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms
13
<PAGE> 14
and conditions of such entity's foreign exchange contract and, to the extent not
inconsistent, this Agreement shall apply to such transaction.
(b) CERTIFICATION OF RESIDENCY, ETC. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications, except to the extent attributable to
the Bank's failure to exercise reasonable care.
(c) ACCESS TO RECORDS. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) GOVERNING LAW; SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN NEW YORK and shall not be assignable by either party, but
shall bind the successors in interest of Customer and Bank.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the
Assets deposited in the Accounts are (Check one):
___ Employee Benefit Plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
X
___ Mutual Fund assets subject to certain Securities and Exchange
Commission ("SEC") rules and regulations;
___ Neither of the above.
14
<PAGE> 15
This Agreement consists exclusively of this document together with
Schedules A and B, Exhibits I - _______ and the following Rider(s) [Check
applicable rider(s)]:
ERISA
---
X MUTUAL FUND
---
X PROXY VOTING
---
SPECIAL TERMS AND CONDITIONS
---
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions hereof are
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) WAIVER. Except as otherwise provided herein, no failure or delay on
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) REPRESENTATIONS AND WARRANTIES. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Securities and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement is its
legal, valid and binding obligation, enforceable in accordance with its terms;
(D) it shall have sufficient authority and power to borrow moneys and enter into
foreign exchange transactions; and (E) it has not relied on any oral or written
representation made by Bank or any person on its behalf, and acknowledges that
this Agreement sets out to the fullest extent the duties of Bank. (ii) Bank
hereby represents and warrants to Customer that: (A) it has the power and
authority to perform its obligations hereunder, (B) this Agreement constitutes a
legal, valid and
15
<PAGE> 16
binding obligation on it; enforceable in accordance with its terms; and (C) that
it has taken all necessary action to authorize the execution and delivery
hereof.
(i) NOTICES. All notices hereunder shall be effective when actually
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, NY 11245, Attention: Global
Custody Division; and (b) Customer: Five Arrows Currency Trust, c/o BISYS Fund
Services, 3435 Stelzer Rd, Columbus, OH 43219, attention: George Martinez, with
a copy to: Rothschild International Asset Management Limited, Five Arrows House,
St. Swithin's Lane, London, EC4N 8NR, United Kingdom, Attention: Paul R.
Freeman.
(j) TERMINATION. This Agreement may be terminated by Customer or Bank
by giving sixty (60) days written notice to the other, provided that such notice
to Bank shall specify the names of the persons to whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice (or such other
period as specified by Customer pursuant to the final sentence of this
subparagraph (j)), deliver to Bank Instructions specifying the names of the
persons to whom Bank shall deliver the Assets. In either case Bank shall deliver
the Assets to the persons so specified, after deducting any amounts which Bank
determines in good faith to be owed to it under Section 13. If within sixty (60)
days following receipt of a notice of termination by Bank, Bank does not receive
Instructions from Customer specifying the names of the persons to whom Bank
shall deliver the Assets, Bank, at its election, may deliver the Assets to a
bank or trust company doing business in the State of New York to be held and
disposed of pursuant to the provisions hereof, or to Authorized Persons, or may
continue to hold the Assets until Instructions are provided to Bank; provided
that where Bank is the terminating party and Bank has not notified Customer that
termination was for breach by Customer or because, in Bank's reasonable
judgment, Customer has been subject to a material adverse change in its
financial condition, such sixty (60) day period shall be extended for an
additional period as requested by Customer in writing prior to the expiration of
the initial sixty (60) day period of up to sixty (60) days.
16
<PAGE> 17
(k) LIMITATION OF LIABILITY. The term "Customer" means and refers to
the Trustees from time to time serving under the Master Trust Agreement of Five
Arrows Currency Trust, a Delaware business trust, as the same may be amended
from time to time. The obligations of Customer hereunder shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents or employees
of Customer personally, but shall bind only the trust property of Customer, as
provided in the Master Trust Agreement. The execution and delivery of this
Agreement have been authorized by the Trustees and signed by an officer of the
Trust, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Master Trust
Agreement.
(l) SEVERAL OBLIGATIONS OF THE PORTFOLIO. Customer is a series company
with multiple portfolios and has entered into this Agreement on behalf of those
portfolios identified in Exhibit __ hereto, as amended from time to time on
notice to Bank (each a "Portfolio"). With respect to any obligation of Customer
on behalf of any Portfolio arising hereunder, Bank shall look for payment or
satisfaction of such obligations solely to the assets and property of the
Portfolio to which such obligation relates as though Customer had separately
contracted with Bank by separate written instrument with respect to each
Portfolio. In addition, this Agreement may be terminated with respect to one or
more Portfolios without affecting the rights, duties or obligations of any of
the other Portfolios.
(m) MONEY LAUNDERING. Customer warrants and undertakes to Bank for
itself and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(n) IMPUTATION OF CERTAIN INFORMATION. Bank shall not be held
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a 'Chinese Wall' arrangement. [If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.]
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above written.
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
By: /s/ Paul R. Freeman
-------------------------------------
Title: Senior Vice President
Date: 27 January 1997
THE CHASE MANHATTAN BANK
By: /s/ Marian Sullivan
-------------------------------------
Title: Vice President
Date: 27 January 1997
18
<PAGE> 19
Mutual Fund Rider to Global Custody Agreement
Between THE CHASE MANHATTAN BANK and
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
effective January 16, 1997
Customer represents that the Assets being placed in Bank's custody are
subject to the Investment Company Act of 1940 (the Act), as the same may be
amended from time to time.
Except for the SEC Exemptive Order applicable to accounts of this
nature issued to Bank (1940 Act, Release No. 12053, November 20, 1981), as
amended, or for rules, regulations and interpretations promulgated by or under
the authority of the SEC which are generally applicable to custodians holding
accounts of this nature, or unless Bank has otherwise specifically agreed,
Customer shall be solely responsible to assure that the maintenance of Assets
hereunder complies with such rules, regulations, interpretations or exemptive
order promulgated by or under the authority of the SEC.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
-----------------------------------------
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used herein shall
mean a branch of a qualified U.S. bank, an eligible foreign custodian or an
eligible foreign securities depository, which are further defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined
in Rule 17f-5 under the Investment Company Act of 1940;
(b) "eligible foreign custodian" shall mean (i) a banking institution
or trust company incorporated or organized under the laws of a country other
than the United States that is regulated as such by that country's government or
an agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof) (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
Bank; or (iv) any other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A hereto and the terms of the subcustody
agreements between Bank and each Subcustodian, which are attached as Exhibits I
through ____________ of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Fund(s) and its (their)
shareholders. Bank shall supply Customer with any amendment to Schedule A for
approval. Customer has supplied or shall supply Bank with certified copies of
its Board of Directors resolution(s) with respect to the foregoing prior to
placing Assets with any Subcustodian so approved.
Section 11. Instructions.
------------
Add the following language to the end of Section 11:
Deposit Account Payments and Custody Account Transactions made pursuant
to Section 5 and 6 hereof may be made only for the purposes listed below.
Instructions must specify the purpose for which any transaction is to be made
and Customer shall be solely responsible to assure that Instructions are in
accord with any limitations or restrictions applicable to Customer by law or as
may be set forth in its prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise
become payable;
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
1
<PAGE> 20
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to Customer;
(i) For the purpose of redeeming shares of the capital stock of
Customer and the delivery to, or the crediting to the account of, Bank, its
Subcustodian or Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of Customer against
delivery to Bank, its Subcustodian or Customer's transfer agent of such shares
to be so redeemed;
(k) For delivery in accordance with the provisions of any agreement
among Customer, Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of The National Association of Securities
Dealers, Inc., relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other arrangements in
connection with transactions by Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to Bank of monies for the premium due and a receipt for the Securities
which are to be held in escrow. Upon exercise of the option, or at expiration,
Bank shall receive from brokers the Securities previously deposited. Bank shall
act strictly in accordance with Instructions in the delivery of Securities to be
held in escrow and shall have no responsibility or liability for any such
Securities which are not returned promptly when due other than to make proper
request for such return;
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions
issued by an officer of Customer which shall include a statement of the purpose
for which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing Customer; and
(o) Upon the termination hereof as set forth in Section 14(j).
Section 12. Standard Of Care; Liabilities.
-----------------------------
Add the following at the end of Section as 12:
(d) Bank hereby warrants to Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding Customer's Securities pursuant
hereto afford protection for such Securities at least equal to that afforded by
Bank's established procedures with respect to similar securities held by Bank
and its securities depositories in New York.
Section 14. Access To Records.
-----------------
Add the following language to the end of section 14(c):
-------------------------------------------------------
Upon reasonable request from Customer, Bank shall furnish Customer such
reports (or portions thereof) of Bank's system of internal accounting controls
applicable to Bank's duties hereunder. Bank shall endeavor to obtain and furnish
Customer with such similar reports as it may reasonably request with respect to
each Subcustodian and securities depository holding Assets.
2
<PAGE> 21
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
dated January 16, 1997.
1. Global Proxy Services (the "Services") shall be provided for the countries
listed in the procedures and guidelines ("Procedures") furnished to Customer, as
the same may be amended by Bank from time to time on prior notice to Customer.
The Procedures are incorporated by reference herein and form a part of this
Rider.
2. The Services shall consist of those elements as set forth in the Procedures,
and shall include (a) notifications ("Notifications") by Bank to Customer of the
dates of pending shareholder meetings, resolutions to be voted upon and the
return dates as may be received by Bank or provided to Bank by its Subcustodians
or third parties, and (b) voting by Bank of proxies based on Customer
Directions. Original proxy materials or copies thereof shall not be provided.
Notifications shall generally be in English and, where necessary, shall be
summarized and translated from such non-English materials as have been made
available to Bank or its Subcustodian. In this respect Bank's only obligation is
to provide information from sources it believes to be reliable and/or to provide
materials summarized and/or translated in good faith. Bank reserves the right to
provide Notifications, or parts thereof, in the language received. Upon
reasonable advance request by Customer, backup information relative to
Notifications, such as annual reports, explanatory material concerning
resolutions, management recommendations or other material relevant to the
exercise of proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications where
Bank prepared the same in good faith.
4. Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the Agreement, in
performing Services Bank shall be acting solely as the agent of Customer, and
shall not exercise any discretion with regard to such Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Financial Assets are: (i) on
loan; (ii) at registrar for registration or reregistration; (iii) the subject of
a conversion or other corporate action; (iv) not held in a name subject to the
control of Bank or its Subcustodian or are otherwise held in a manner which
precludes voting; (v) not capable of being voted on account of local market
regulations or practices or restrictions by the issuer; or (vi) held in a margin
or collateral account.
6. Customer acknowledges that in certain countries Bank may be unable to vote
individual proxies but shall only be able to vote proxies on a net basis (E.G.,
a net yes or no vote given the voting instructions received from all customers).
7. Customer shall not make any use of the information provided hereunder, except
in connection with the funds or plans covered hereby, and shall in no event
sell, license, give or otherwise make the information provided hereunder
available, to any third party, and shall not directly or indirectly compete with
Bank or diminish the market for the Services by provision of such information,
in whole or in part, for compensation or otherwise, to any third party.
8. The names of Authorized Persons for Services shall be furnished to Bank in
accordance with Section 10 of the Agreement. Fees for the Services shall be
agreed as set forth in Section 13 of the Agreement or separately agreed.
1
<PAGE> 22
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
GLOBAL CUSTODY AGREEMENT
WITH
-----------------------------------
DATE
-----------------------------------
1
<PAGE> 23
DOMESTIC ONLY
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the provisions of Section
8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's nominee
or the nominee of a central depository) and communications with respect to
Securities in the Custody Account as call for voting or relate to legal
proceedings within a reasonable time after sufficient copies are received by
Bank for forwarding to its customers. In addition, Bank shall follow coupon
payments, redemptions, exchanges or similar matters with respect to Securities
in the Custody Account and advise Customer or the Authorized Person for such
Account of rights issued, tender offers or any other discretionary rights with
respect to such Securities, in each case, of which Bank has received notice from
the issuer of the Securities, or as to which notice is published in publications
routinely utilized by Bank for this purpose.
Fees
- ----
The fees referenced in Section 13 hereof cover only domestic and euro-dollar
holdings. There shall be no Schedule A hereto, as there are no foreign assets in
the Accounts.
1
<PAGE> 24
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Securities (the latter if held in
DTC), the following provisions shall apply rather than the pertinent provisions
of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a
Custody Account, such proxies (signed in blank, if issued in the name
of Bank's nominee or the nominee of a central depository) and
communications with respect to Securities in the Custody Account as
call for voting or relate to legal proceedings within a reasonable time
after sufficient copies are received by Bank for forwarding to its
customers. In addition, Bank shall follow coupon payments, redemptions,
exchanges or similar matters with respect to Securities in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Securities, in each case, of which Bank has received
notice from the issuer of the Securities, or as to which notice is
published in publications routinely utilized by Bank for this purpose.
1
<PAGE> 25
SCHEDULE A
----------
NOVEMBER, 1996
SUB-CUSTODIANS EMPLOYED BY
--------------------------
THE CHASE MANHATTAN BANK, LONDON, GLOBAL CUSTODY
------------------------------------------------
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
BANK
ARGENTINA The Chase Manhattan Bank The Chase Manhattan
--------- Arenales 707, 5th Floor Bank
De Mayo 130/140 Buenos Aires
1061 Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan
--------- 36th Floor Bank
World Trade Center Sydney
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais Bank
------- Julius Tandler Platz - 3 Vienna
A - 1011, Vienna
AUSTRIA
BAHRAIN The British Bank of the Middle National Bank of Bahrain
------- East Manama
PO Box
Manama
BAHRAIN
BANGLADESH Standard Chartered Bank Standard Chartered Bank
---------- 18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-100
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
------- 3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BANK
BOTSWANA Barclays Bank of Botswana Barclays Bank of
-------- Limited Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A Banco Chase Manhattan,
------ Chase Manhattan Center S.A
Rua Verbo Divino, 1400 Sao Paulo
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
------ Royal Bank Plaza Toronto
Toronto
Ontario M5J2J5
CANADA
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J2T2
CANADA
CHILE The Chase Manhattan Bank, The Chase Manhattan
----- Agustinas 1235 Bank,
Casilla 9192 Santiago
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
-------- Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CYPRUS Barclays Bank plc Barclays Bank plc
------ Cyprus Offshore Banking Unit Nicosia
2nd & 3rd Floor
88 Dighenis Akritas Avenue
PO Box 7320
1644 Nicosia
CYPRUS
BANK
CZECH Ceskoslovenska Obchodni Komercni Banka, A.S.,
REPUBLIC Banka, A.S. Praha
-------- Na Prikope 14
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
------- 2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
ECUADOR Citibank, N.A. Citibank, N.A.
------- Juan Leon Mera Quito
130 y Patria
Quito
ECUADOR
EGYPT National Bank of Egypt National Bank of Egypt
----- 1187, Corniche El-Nile Plaza Cairo
Cairo
EGYPT
ESTONIA HansaBank Tallinna Bank
------- Liivalaia 8 Tallinn
EE0100 Tallinn
ESTONIA
EUROBONDS Cedel Bank S.A. ECU: Lloyds Bank PLC
--------- 67 Boulevard Grande Duchesse International Banking
Charlotte Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies:
London see relevant
A/c No. 17817 country
</TABLE>
3
<PAGE> 27
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
EURO CDS First Chicago Clearing Centre ECU: Lloyds Bank PLC
-------- 27 Leadenhall Street Banking Division London
London EC3A IAA For all other currencies:
UNITED KINGDOM see relevant
country
FINLAND Merita Bank Ltd Merita Bank Ltd
------- 2598 Custody Services Helsinki
Fabianinkaru 29B
Helsinki
FINLAND
COUNTRY SUB-CUSTODIAN CORRESPONDENT
BANK
FRANCE Banque Paribas Societe Generale
------ Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank. A.G.
------- Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Ltd Barclays Bank
----- Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece
------ 1 Kolokotroni Street S.A.
10562 Athens Athens
GREECE A/c Chase Manhattan
Bank,
London A/c No.
040/7/921578-68
HONG KONG The Chase Manhattan Bank, The Chase Manhattan
--------- 40/F One Exchange Square Bank,
8, Connaught Place Hong Kong
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
------- Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and
----- Banking Corporation Limited Shanghai
52/60 Mahata Gandhi Road Banking Corporation
Bombay 400 001 Limited
INDIA Bombay
Deutsche Bank AG Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
</TABLE>
4
<PAGE> 28
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
INDONESIA The Hongkong and Shanghai The Chase Manhattan
--------- Banking Corporation Limited Bank
World Trade Center Jakarta
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
------- International Financial Services Dublin
Centre
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel
------ 19 Herzl Street B.M.
61000 Tel Aviv Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, The Chase Manhattan
----- Piazza Meda 1 Bank,
20121 Milan Milan
ITALY
JAPAN The Fuji Bank Ltd. The Chase Manhattan
----- 6-7 Nihonbashi-Kabutocho Bank
Chuo-Ku Tokyo
Tokyo
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
------ PO Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
----- Third Floor Nairobi
Queensway House
Nairobi
KENYA
LEBANON The British Bank of the Middle The Chase Manhattan
------- East Bank
Ras-Beirut Branch New York
PO Box 11-1380
Abdel Aziz,
Ras-Beirut
LEBANON
LUXEMBOURG Banque Generale du Banque Generale du
---------- Luxembourg S.A Luxembourg S.A
50 Avenue J.F. Kennedy Luxembourg
L-2951 LUXEMBOURG
MALAYSIA The Chase Manhattan Bank, The Chase Manhattan
-------- Pernas International Bank,
Jalan Sultan Ismail Kuala Lumpur
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Hongkong and Shanghai
--------- Banking Corporation Ltd Banking Corporation Ltd
Curepipe Road Curepipe
Curepipe
MAURITIUS
</TABLE>
5
<PAGE> 29
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
MEXICO The Chase Manhattan Bank, No correspondent Bank
------ S.A.
Prolongacion Paseo de la
Reforma no. 600,
PB Colonia Santa Fe Pena
Blanca
01210 Mexico D.F.
MOROCCO Banque Commerciale du Marox Banque Commerciale du
------- 2 Boulevard Moulay Youssef Maroc
Casablanca 20000 Casablanca
MOROCCO
NAMIBIA Standard Bank Namibia Ltd. Standard Corporate &
------- Mutual Platz - 3rd Floor Merchant Bank
PO Box 3327 South Africa
Windhoek
NAMIBIA
NETHERLANDS ABN AMRO N.V. Generale Bank
----------- Securities Centre Nederland N.V.
PO Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW National Nominees Limited National Bank of New
ZEALAND Level 2 BNZ Tower Zealand
------- 125 Queen Street Wellington
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
------ Stranden 21 Oslo
PO Box 1171 Sentrum
N-0107 Oslo
NORWAY
OMAN The British Bank of the Middle Oman Arab Bank
---- East Ruwi, Muscar
Bait Al Falaj
Main Office
Ruwi, Muscat
SULTANATE OF OMAN
PAKISTAN Citibank N.A. Citibank N.A.
-------- AWT Plaza Karachi
11 Chundrigar Road
Karachi 74200
PAKISTAN
Deutsche Bank A.G. Deutsche Bank A.G.
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank, N.A.
---- Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
</TABLE>
6
<PAGE> 30
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
PHILIPPINES The Hongkong and Shanghai The Hongkong and
----------- Banking Corporation Limited Shanghai
33/F Tektite Tower B Banking Corporation
Exchange Road Limited
Ortigas Center Manila
Pasig City
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki
------ Curtis Plaza, Woloska 18 S.A.
02-675 Warsaw Warsaw
POLAND
Bank Handlowy W. Warszawie, Bank Handlowy W.
S.A. Warszawie. S.A.
Custody Dept. Warsaw
Capital Markets Centre
U1, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo e Banco Nacional Ultra
-------- Comercial de Lisboa Marino
Servico de Gestaode Titulos Lisbon
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
RUSSIA Chase Manhattan Bank The Chase Manhattan
------ International ("CMBI") Bank
1st Tverskaya - Yamskaya, 23 New York
125047 Moscow A/c The Chase Manhattan
Russia London (US$ Nostro
Account)
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
-------- Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC
OF CHINA
BANK
SHENZHEN The Hongkong and Shanghai The Chase Manhattan
(CHINA) Banking Corporation Limited Bank
-------- 1st Floor Hong Kong
Century Plaza Hotel
No. 1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC
OF CHINA
SINGAPORE The Chase Manhattan Bank, The Chase Manhattan
--------- Shell Tower Bank,
50 Raffles Place Singapore
Singapore 0104
SINGAPORE
SLOVAK Ceskoslovenska Obchodni Ceskoslovenska Obchodni
REPUBLIC Banka, A.S. Banka, A.S.
-------- Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
</TABLE>
7
<PAGE> 31
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
SOUTH Standard Corporate and Standard Corporate and
AFRICA Merchant Bank Merchant Bank
------ 46 Marshall Street South Africa
Johannesburg 2001
SOUTH AFRICA
SOUTH The Hongkong & Shanghai The Hongkong &
KOREA Banking Corporation Shanghai Banking
----- Limited Corporation
6/F Kyobo Building Limited
#1 Chongro, 1-ka Chongro-Ku Seoul
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank Chase Manhattan Bank,
----- Paseo de la Castellana, 51 Madrid
28046 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong &
--------- Banking Corporation Shanghai Banking
Limited Corporation
Unit #02-02 West Block, World Limited, Colombo
Trade Center
Colombo 1,
SRI LANKA
BANK
SWAZILAND Stanbic Bank Swaziland Ltd. Standard Corporate and
--------- Stanbic House Merchant Bank,
P.O. Box A294, Swazi Plaza South Africa
Mbabane
SWAZILAND
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken,
------ Sergels Torg 2 Stockholm
S-106 40
Stockholm
SWEDEN
SWITZERLAND Union Bank of Switzerland Union Bank of
----------- 45 Bahnhofstrasse Switzerland,
8021 Zurich Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, No correspondent bank
------ 14th Floor
2, Tun Hwa S. Road Sec. 1
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank The Chase Manhattan
-------- Bubhajit Building Bank, Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Banque Internationale
------- Tunisie Arabe de Tunisie,
70-72 Avenue Habib Bourguiba Tunisia
P.O. Box 520
1080 Tunis Cedex
TUNISIA
</TABLE>
8
<PAGE> 32
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
------- ------------- ------------------
<S> <C> <C>
TURKEY The Chase Manhattan Bank The Chase Manhattan
------ Emirhan Cad. No: 145 Bank, Istanbul
Atakule, A Blok Kat: 11
80700-Dikilitas/Besiktas
Istanbul
TURKEY
U.K. The Chase Manhattan Bank The Chase Manhattan
---- Woolgate House Bank, London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of The First National Bank of
------- Boston Boston,
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank The Chase Manhattan
------ 1 Chase Manhattan Plaza Bank, New York
New York, New York 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A., Caracas
--------- Carmelitas a Altagracia
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia,
------ Kafue House Lusaka
Cairo Road
P.O. Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of
-------- Ground Floor Zimbabwe,
Tanganyika House Harare
Corner of 3rd Street & Union
Avenue
Harare
ZIMBABWE
</TABLE>
9
<PAGE> 33
SCHEDULE B
FEE AGREEMENT
BETWEEN
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AND
CHASE MANHATTAN BANK
U.S. Onshore Feader
- --------------------------
Third Party-Receipts (in US$, UK(pounds), Can $, Dem) US $7
(Chargeable where manual Instruction is required by Chase)
No charge will be levied for internal Chase account transfers between the
master and feader funds.
---------------------------------------------------------
For and on behalf of For and on behalf of
/s/ Marian Sullivan /s/ Paul R. Freeman
The Chase Manhattan Bank Five Arrows Short-Term
Investment Trust
Dated: 27 January 1997 Dated: 27 January 1997
----------------------- ---------------------
10
<PAGE> 1
Exhibit 9(a)
TRANSFER AGENCY AGREEMENT
-------------------------
AGREEMENT made this 16th day of January, 1997, between FIVE ARROWS
SHORT-TERM INVESTMENT TRUST (the "Trust"), a Delaware business trust and BISYS
FUND SERVICES, INC. ("BISYS"), a Delaware corporation.
WHEREAS, BISYS is an affiliate of Five Arrows Fund Distributors Inc.,
BISYS Fund Services Limited Partnership and BISYS Fund Services (Ireland)
Limited (each such entity and any other entity hereafter providing services
under a BISYS Agreement (as defined below) is hereinafter referred to as a
"BISYS Entity");
WHEREAS, concurrently herewith, BISYS and the other BISYS Entities are
entering into other agreements to provide services to the Trust, The
International Currency Fund, and Five Arrows Cash Management Fund PLC (such
agreements and any other comparable agreements in effect from time to time being
referred to collectively as the "BISYS Agreements");
WHEREAS, the Trust desires that BISYS perform certain transfer agency
services for each series of the Trust (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES.
Pursuant to this Agreement, BISYS shall perform for the Trust
the transfer agent services set forth in Schedule A hereto. BISYS also agrees to
perform for the Trust such special services incidental to the performance of the
services enumerated herein as agreed to by the parties from time to time. BISYS
shall perform such additional services as are provided on an amendment to
Schedule A hereof, in consideration of such fees as the parties hereto may
agree.
BISYS may, in its discretion, appoint in writing other BISYS
Entities qualified to perform transfer agency services reasonably acceptable to
the Trust (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund and BISYS may also,
with the prior written consent of the Trust, appoint any other non-affiliated
third party qualified to perform transfer agency services or to act as such a
Sub-transfer Agent, provided that, to the extent that the services to be
provided by such appointee involve only such ministerial tasks as are routinely
and commonly delegated by similarly situated service providers, such consent
shall not be unreasonably withheld; provided, however, that the Sub- transfer
Agent shall be the agent of BISYS and not the agent of the Trust or such Fund,
and that BISYS shall be fully responsible for the acts and omissions of such
Sub-transfer Agent and shall
<PAGE> 2
not be relieved of any of its responsibilities hereunder by the appointment of
such Sub-transfer Agent. Subject to the foregoing proviso, the Trust consents to
the appointment of BISYS Fund Services (Ireland) Limited to provide certain
services under this Agreement.
2. FEES.
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
3. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from
the Trust and in delivering all materials to
shareholders;
(b) All direct telephone, telephone transmission and
telecopy or other electronic transmission expenses
incurred by BISYS in communication with the Trust,
dealers, shareholders or others as required for BISYS to
perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction
of an officer of the Trust thereunto duly authorized.
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first
written above (the "Effective Date").
2
<PAGE> 3
5. TERM.
This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until January 16, 1999 (the "Initial Term"). Thereafter, if not earlier
terminated as herein provided, it shall continue from year to year so long as
such continuance with respect to any such Fund is approved at least annually by
the Trustees of the Trust. Notwithstanding the foregoing, this Agreement may be
terminated by either party, without payment of any penalty, except for the
liquidated damages described below, at any time with respect to any Fund, upon
not less than sixty (60) days' prior written notice to the other party. After
such termination, for so long as BISYS, with the written consent of the Trust,
in fact continues to perform any one or more of the services contemplated by
this Agreement or any Schedule or exhibit hereto, the provisions of this
Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect. Fees and out-of-pocket
expenses incurred by BISYS but unpaid by the Trust upon such termination shall
be immediately due and payable upon and notwithstanding such termination. BISYS
shall be entitled to collect from the Trust, in addition to the fees and
disbursements provided by Sections 2 and 3 hereof, the amount of all of BISYS'
cash disbursements and a reasonable fee (which fee shall be not less than one
hundred percent (100%) of the sum of the actual costs incurred by BISYS in
performing such service) for services in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its distributor or investment adviser and/or other parties, of the
Trust's property, records, instruments and documents, or any copies thereof. To
the extent that BISYS may retain in its possession copies of any Trust documents
or records subsequent to such termination which copies had not been requested by
or on behalf of the Trust in connection with the termination process described
above, BISYS, for a reasonable fee, will provide the Trust with reasonable
access to such copies.
If, this Agreement is terminated without Cause during the
Initial Term hereof, or during any subsequent annual term, and if the Transfer
Agent is not continuing to be compensated as provided in the foregoing
paragraph, then the Trust shall make a one-time cash payment, as liquidated
damages, to the Transfer Agent equal to the balance due the Transfer Agent for
the remainder of such term, assuming for purposes of calculation of the payment
that the asset level of the Trust on the effective date of such termination
would remain constant for the balance of the contract term. Notwithstanding the
foregoing, the Trust may terminate this Agreement at any time for Cause, without
incurring any additional cost and without liquidated damages. For purposes of
this Agreement, the term "Cause" shall mean (i) dishonest statements or acts
with respect to the Trust or any affiliate thereof; (ii) failure to perform to
the reasonable satisfaction of the Trust's Board of Trustees a substantial
portion of the Transfer Agent's duties and responsibilities hereunder; (iii)
gross negligence or willful misconduct of the Transfer Agent with respect to the
Trust or any affiliate thereof; or (iv) material breach by the Transfer Agent of
any of the Transfer Agent's obligations hereunder.
3
<PAGE> 4
6. LEGAL ADVICE.
BISYS shall notify the Trust at any time BISYS believes that
it is in need of the advice of counsel (other than counsel in the regular employ
of BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Trust, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel from counsel of the Trust at the expense of the Trust and BISYS shall in
no event be liable to the Trust or any Fund or any shareholder or beneficial
owner of the Trust for any action reasonably taken pursuant to such advice.
7. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS is notified to the contrary in a timely
manner by the Trust or its counsel.
8. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, provided that this indemnification shall not apply
to actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. For purposes of this Agreement, actions or omissions by any BISYS Entity
or its employees, agents, directors, officers or nominees made in any capacity
shall be
4
<PAGE> 5
deemed to be actions or omissions by BISYS. Any actions or omissions by a person
who is both an officer or employee of the Trust and an officer or employee of
any BISYS Entity shall be deemed to have been committed solely in such person's
capacity as an officer or employee of such BISYS Entity.
The Trust's agreement to indemnify BISYS, its partners and employees
and any such controlling person, as aforesaid, is expressly conditioned upon the
Trust being notified of any action brought against BISYS, its partners or
employees, or any such controlling person, such notification to be given in
accordance with Section 22 hereof within 10 days after the summons or other
first legal process shall have been served. The failure to so notify the Trust
of any such action shall not relieve the Trust from any liability which the
Trust may have to the person against whom such action is brought by reason of
any such untrue, or allegedly untrue, statement or omission, or alleged
omission, otherwise than with respect to incremental liabilities resulting from
such failure. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by BISYS, which approval shall not be unreasonably withheld. In the
event the Trust elects to assume the defense of any such suit and retain counsel
of good standing approved by BISYS, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them; but in case the Trust does not elect to assume the defense of any such
suit, or in case BISYS reasonably does not approve of counsel chosen by the
Trust, the Trust will reimburse BISYS, its partners and employees, or the
controlling person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by BISYS or them.
9. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
5
<PAGE> 6
10. REPORTS.
BISYS will furnish to the Trust and to its properly-authorized
auditors, examiners, distributors, dealers, underwriters, salesmen, insurance
companies and others designated by the Trust in writing, such reports at such
times as are prescribed in Schedule C attached hereto, or as subsequently agreed
upon by the parties pursuant to an amendment to Schedule C.
11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon
the Trust's demand, turn over to the Trust and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
13. BANK ACCOUNTS.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
14. REPRESENTATIONS OF THE TRUST.
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized an unlimited number of shares, and (b) by virtue
of its Declaration of Trust, shares of each Fund which are redeemed by the Trust
may be sold by the Trust from its treasury, and (c) this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its
6
<PAGE> 7
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties.
15. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, compliance in all material respects with all provisions
of law, including Section 17A(c) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), required in connection with the performance of its
duties under this Agreement; (b) the various procedures and systems which BISYS
has implemented with regard to safekeeping from loss or damage attributable to
fire, theft or any other cause of the blank checks, records, and other data of
the Trust and BISYS' records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as are required for the secure
performance of its obligations hereunder; (c) BISYS is duly organized, validly
existing and in good standing under the laws of the state of Delaware and has
the power and authority to carry on the activities contemplated by this
Agreement; and (d) this Agreement has been duly authorized, executed and
delivered by BISYS, and is the legal, valid and binding obligation of BISYS,
enforceable in accordance with its terms.
16. INSURANCE.
BISYS shall notify the Trust should its insurance coverage
with respect to professional liability or errors and omissions coverage be
canceled or reduced. Such notification shall include the date of change and the
reasons therefor. BISYS shall notify the Trust of any material claims against it
with respect to services performed under this Agreement, whether or not they may
be covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
17. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and
of any amendments thereto, certified by the proper
official of the state in which such Declaration has
been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments
thereto;
2. Certified copies of resolutions of the Board
of Trustees covering the following matters:
7
<PAGE> 8
A. Approval of this Agreement and
authorization of a specified
officer of the Trust to
execute and deliver this
Agreement and authorization
for specified officers of the
Trust to instruct BISYS
hereunder; and
B. Authorization of BISYS to act
as Transfer Agent for the
Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together
with specimen signatures of those officers, who
are authorized to instruct BISYS in all matters.
(d) Two copies of the following (if such documents
are employed by the Trust):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the
Trust or its Distributor with regard to
their relationships and transactions
with shareholders of the Funds.
(e) A certificate as to shares of beneficial
interest of the Trust authorized, issued, and
outstanding as of the Effective Date of BISYS'
appointment as Transfer Agent (or as of the date
on which BISYS' services are commenced,
whichever is the later date) and as to receipt
of full consideration by the Trust for all
shares outstanding, such statement to be
certified by the Treasurer of the Trust.
18. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments
thereto.
(c) Certified copies of actions of BISYS
covering the following matters:
1. Approval of this Agreement,
and authorization of a
specified officer of BISYS to
execute and deliver this
Agreement;
2. Authorization of BISYS to act
as Transfer Agent for the
Trust.
8
<PAGE> 9
(d) A copy of the most recent independent
accountants' report relating to internal
accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13
under the Exchange Act.
19. AMENDMENTS TO DOCUMENTS.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which would have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment would adversely affect the duties of BISYS hereunder in a
material manner unless the Trust first obtains BISYS' approval of such
amendments or changes, which approval shall not be unreasonably withheld.
20. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 17
and 19 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of any amendments or changes which would
materially adversely affect BISYS.
21. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Section 8
hereof or as contemplated by another BISYS Agreement, the Trust assumes full
responsibility for the preparation, contents, and distribution of each
prospectus of the Trust as to compliance with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act, and any other
laws, rules and regulations of governmental authorities having jurisdiction.
BISYS shall have no obligation to take cognizance of any laws relating to the
sale of the Trust's shares. The Trust represents and warrants that no shares of
the Trust will be offered to the public until the Trust's registration statement
under the 1933 Act and the 1940 Act has been declared or becomes effective.
9
<PAGE> 10
22. NOTICES.
Any notice, demand, request or other communication which may
be required or contemplated herein shall be sufficiently given if (i) given
either by facsimile transmission or telex, by reputable overnight delivery
service, postage prepaid, or by registered or certified mail, postage prepaid
and return receipt requested, to the address indicated below or to such other
address as any party hereto may specify as provided herein, or (ii) delivered
personally at such address.
If to the Trust: c/o Rothschild International Asset Management Limited
Five Arrows House
St. Swithin's Lane
London EC4N 8NR United Kingdom
Attention: Peter B. Collacott
with a copy to:
Geoffrey R.T. Kenyon
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
If to BISYS: 3435 Stelzer Road
Columbus, Ohio 43219.
Attention: George O. Martinez
23. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
24. SEVERAL OBLIGATIONS OF THE FUNDS.
The Trust is a series company with multiple series, the Funds,
and has entered into this Agreement on behalf of those series, as amended from
time to time on notice to the Fund Accountant. With respect to any obligation of
the Trust on behalf of any Fund arising hereunder,
10
<PAGE> 11
the Fund Accountant shall look for payment or satisfaction of such obligations
solely to the assets and property of the Fund to which such obligation relates
as though the Trust had separately contracted with the Fund Accountant by
separate written instrument with respect to each Fund. In addition, this
Agreement may be terminated with respect to one or more Funds without affecting
the rights, duties or obligations of any of the other Funds.
25. MISCELLANEOUS.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
For purposes of this Agreement, no officer of the Trust who is an employee of
any BISYS Entity shall be deemed to be an authorized representative of the Trust
for the purposes of giving or receiving any notice, consent, or other
communication pursuant to Sections 1, 3(e), 5, 6, 7, 8, 12, 16, 26 and 27 or not
in the ordinary course of business. No provision of this Agreement shall be
deemed to limit the duties or obligations of BISYS or any other BISYS Entity
under any other BISYS Agreement.
26. FORCE MAJEURE.
If the Transfer Agent is prevented, hindered or delayed from
or in performing any of its obligations under this Agreement by a Force Majeure
Event (as defined below) then:
(a) (i) the Transfer Agent's obligations under
this Agreement shall be suspended for so
long as the Force Majeure Event
continues and to the extent that it is
so prevented, hindered or delayed;
(ii) as soon as possible after the
commencement of the Force Majeure Event
the Transfer Agent shall notify the
Company in writing of the occurrence of
the Force Majeure Event, the date of
commencement of the Force Majeure Event
and the effect of the Force Majeure
Event on the Transfer Agent's ability to
perform its obligations under this
Agreement; and
(iii) as soon as possible after the cessation
of the Force Majeure Event the Transfer
Agent shall notify the Company in
writing of the cessation of the Force
Majeure Event and shall resume
performance of its obligations under
this Agreement.
(b) If the Force Majeure continues for more than one
month after the commencement of the Force
Majeure Event either party may terminate this
Agreement by giving not less than seven days
notice in writing to the other party.
11
<PAGE> 12
(c) "Force Majeure Event" means any event beyond the
reasonable control of a party including, without
limitation, acts of God, war, riot, civil commotion,
malicious damage, compliance with any law or
governmental order, rule, regulation or direction,
accident, breakdown of plant or machinery, fire,
flood or storm.
27. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not
be assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 27 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
[Remainder of the page intentionally left blank.]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
By: /s/ Paul R. Freeman
-------------------------------
BISYS FUND SERVICES, INC.
By: /s/ J. DAVID HUBER
-------------------------------
13
<PAGE> 14
Dated: January 16, 1997
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
------------------------
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended and applicable NASD
requirements.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reinvestment.
2. SHAREHOLDER INFORMATION SERVICES
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-1
<PAGE> 15
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under service plans and any 12b-1 plans.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a
load Fund.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE> 16
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
-------------------
ANNUAL BASE PER FUND: $16,000
- --------------------
ANNUAL PER ACCOUNT FEE:
- ----------------------
<TABLE>
<CAPTION>
Annual Per Account Retail Retail CDSC Retail No Institutional
Loaded Load*
<S> <C> <C> <C> <C>
Daily Dividend $25 $27 $21 $17
Periodic Dividend $23 $25 $19 $15
</TABLE>
ADDITIONAL SERVICES:
- --------------------
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
OUT-OF-POCKET EXPENSES:
- -----------------------
BISYS shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses authorized by Section 3 of the Transfer Agency Agreement
to which this Schedule B is attached.
- -------------
* Includes Funds with 12b-1 Plans so long as they have no front-end or back-end
sales load.
B-1
<PAGE> 17
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AND
BISYS FUND SERVICES, INC.
REPORTS
-------
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
B-2
<PAGE> 1
Exhibit 9(b)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 16th day of January, 1997, by and
between FIVE ARROWS SHORT-TERM INVESTMENT TRUST, a Delaware business trust (the
"Company"), and BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND
SERVICES (the "Administrator"), an Ohio limited partnership.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, Administrator is an affiliate of Five Arrows Fund Distributors
Inc., BISYS Fund Services, Inc. and BISYS Fund Services (Ireland) Limited (each
such entity and any other entity hereafter providing services under a BISYS
Agreement (as defined below) is hereinafter referred to as a "BISYS Entity");
and
WHEREAS, concurrently herewith, Administrator and the other BISYS
Entities are entering into other agreements to provide services to the Company,
the International Currency Fund, and Five Arrows Cash Management Fund PLC (such
agreements and any other comparable agreements in effect from time to time being
referred to collectively as the "BISYS Agreements"); and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Funds") and as listed on Schedule A attached hereto and made a part of this
Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Company hereby retains
the Administrator to act as the administrator of the Funds and to furnish the
Funds with the management and administrative services as set forth in Article 2
below. The Administrator hereby accepts such employment to perform the duties
set forth below. The Company consents to the performance of certain services
hereunder by Administrator's affiliate, BISYS Fund Services (Ireland) Limited
("BISYS Ireland"); provided, however, that Administrator shall be fully
responsible for the acts and omissions of BISYS Ireland and shall not be
relieved of any of its responsibilities hereunder by any such delegation.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
<PAGE> 2
ARTICLE 2. ADMINISTRATIVE SERVICES. The Administrator shall perform
administrative services in connection with the operations of the Funds, and, on
behalf of the Company, will investigate, assist in the selection of, supervise
the performance by and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Funds' operations. The Administrator shall
provide the Trustees of the Company with such reports regarding investment
performance as they may reasonably request but shall have no responsibility for
supervising the performance by any investment adviser or sub-adviser of its
responsibilities.
The Administrator shall provide the Company with regulatory reporting,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings) for handling the
affairs of the Funds and such other services as the Administrator shall, from
time to time, determine to be necessary to perform its obligations under this
Agreement. In addition, at the request of the Board of Trustees, the
Administrator shall make reports to the Company's Trustees concerning the
performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and, as appropriate, compute the
Company's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the Company's
Shares with state securities authorities, monitor the sale of
Company Shares for compliance with state securities laws, and
file with the appropriate state securities authorities the
registration statements and reports for the Company and the
Company's Shares and all amendments thereto, as may be necessary
or convenient to register and keep effective the Company and the
Company's Shares with state securities authorities to enable the
Company to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders, including
the annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Company Shareholders, and supervise and facilitate
the proxy
2
<PAGE> 3
solicitation process for all shareholder meetings, including
the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Funds for dissemination to
information services covering the investment company industry
including, without limitation, calculation of one, five and ten
year total returns and such other measures of performance
reasonably requested by the Company;
(h) coordinate and supervise the preparation and filing of the
Company's tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Company or any Fund of
the Company, including, without limitation, the Company's
investment adviser, distributor, custodian, fund accountant,
transfer agent, outside legal counsel and independent public
accountants, and, at the request of the Board of Trustees,
report to the Board on the performance of organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing
of the Company's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the Funds,
including new classes, investment objectives, policies and
structure;
(l) provide individuals reasonably acceptable to the Company's Board
of Trustees to serve as officers of the Company, who will be
responsible for the management of certain of the Company's
affairs as determined by the Company's Board of Trustees;
(m) advise the Company and its Board of Trustees on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company
in accordance with the requirements of Rules 17g-1 and 17d-1(7)
under the 1940 Act as such bonds and policies are approved by
the Company's Board of Trustees;
3
<PAGE> 4
(o) monitor and advise the Company and its Funds on their registered
investment company status under the Internal Revenue Code of
1986, as amended;
(p) perform all administrative services and functions of the Company
and each Fund to the extent administrative services and
functions are not provided to the Company or such Fund pursuant
to the Company's or such Fund's distribution agreement, transfer
agent agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other aspects
of the business and affairs of the Funds as the Company and the
Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the
Company on Form N-SAR and all required notices pursuant to Rule
24f-2.
The Administrator shall perform such other services for the Company
that are mutually agreed upon by the parties from time to time. Such services
may include performing internal audit examinations; mailing the annual reports
of the Funds; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the
Company will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all Trustees of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Trustees of the
Company to perform services on behalf of the Company.
(B) THE COMPANY. The Company assumes and shall pay or cause to be paid
all other expenses of the Company not otherwise allocated herein, including,
without limitation, organization costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of the Administrator or any affiliated
corporation of the Administrator, interest, brokerage costs, litigation and
other extraordinary or nonrecurring expenses.
4
<PAGE> 5
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly.
If this Agreement becomes effective subsequent to the first
day of a month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. Administrator shall use its best efforts to ensure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Company for any action taken or omitted by Administrator in the absence of bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. The Company agrees to indemnify and hold harmless
Administrator, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Administrator's actions or
omissions with respect to the performance of services under this Agreement or
based, if applicable, upon reasonable reliance on information, records,
instructions or requests given or made to Administrator by the Company, provided
that this indemnification shall not apply to actions or omissions of
Administrator in cases of its own bad faith, willful misfeasance, negligence or
from reckless disregard by it of its obligations and duties.
For purposes of this Agreement, actions or omissions by any BISYS
Entity or its employees, agents, directors, officers or nominees made in any
capacity shall be deemed to be actions or omissions by Administrator. Any
actions or omissions by a person who is both an officer or employee of the
Company and an officer or employee of any BISYS Entity shall be deemed to have
been committed solely in such person's capacity as an officer or employee of
such BISYS Entity.
The Company's agreement to indemnify Administrator, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Company being notified of any action brought against
Administrator, its partners or employees, or any such controlling person, such
notification to be given in accordance with Article 12 hereof within 10 days
after the
5
<PAGE> 6
summons or other first legal process shall have been served. The failure to so
notify the Company of any such action shall not relieve the Company from any
liability which the Company may have to the person against whom such action is
brought by reason of any such untrue, or allegedly untrue, statement or
omission, or alleged omission, otherwise than with respect to incremental
liabilities resulting from such failure. The Company will be entitled to assume
the defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of good standing
chosen by the Company and approved by Administrator, which approval shall not be
unreasonably withheld. In the event the Company elects to assume the defense of
any such suit and retain counsel of good standing approved by Administrator, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Company does not
elect to assume the defense of any such suit, or in case Administrator
reasonably does not approve of counsel chosen by the Company, the Company will
reimburse Administrator, its partners and employees, or the controlling person
or persons named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by Administrator or them.
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company and with accountants and other experts
with respect to any matter arising in connection with the Administrator's
duties, and the Administrator shall not be liable or accountable for any
reasonable action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Company are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Company, and that the Administrator may be or become
interested in the Company as a Shareholder or otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; the Administrator may also
at its expense, subcontract with any entity or person concerning the provision
of the services contemplated
6
<PAGE> 7
hereunder with the express prior written consent of the Company, provided that,
to the extent that the services delegated involve only such ministerial tasks as
are routinely and commonly delegated by similarly situated service providers,
such consent shall not be unreasonably withheld. The Administrator shall not,
however, be relieved of any of its obligations under this Agreement by the
appointment of such subcontractor and provided further, that the Administrator
shall be responsible, to the extent provided in Article 5 hereof, for all acts
of such subcontractor as if such acts were its own. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.
ARTICLE 9. AMENDMENTS. This Agreement may be amended by the parties by
a duly authorized written instrument.
ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator against such liability.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. NOTICE. Any notice, demand, request or other communication
which may be required or contemplated herein shall be sufficiently given if (i)
given either by facsimile transmission or telex, by reputable overnight delivery
service, postage prepaid, or by registered or certified mail, postage prepaid
and return receipt requested, to the address indicated below or to such other
address as any party hereto may specify as provided herein, or (ii) delivered
personally at such address.
If to the Company: c/o Rothschild International Asset Management Limited
Five Arrows House
St. Swithin's Lane
London EC4N 8NR United Kingdom
Attention: Peter Collacott
7
<PAGE> 8
with a copy to:
Geoffrey R.T. Kenyon
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
If to Administrator: 3435 Stelzer Road
Columbus, Ohio 43219.
Attention: George Martinez
ARTICLE 13. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Company hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Company personally, but shall bind only the trust property of
the Company. The execution and delivery of this Agreement have been authorized
by the Trustees, and this Agreement has been signed and delivered by an
authorized officer of the Company, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Company as provided in the Company's Agreement and Declaration of Trust.
ARTICLE 14. SEVERAL OBLIGATIONS OF THE FUNDS. The Company is a series
company with multiple series, the Funds, and has entered into this Agreement on
behalf of those series, as amended from time to time on notice to the
Administrator. With respect to any obligation of the Company on behalf of any
Fund arising hereunder, the Administrator shall look for payment or satisfaction
of such obligations solely to the assets and property of the Fund to which such
obligation relates as though the Company had separately contracted with the
Administrator by separate written instrument with respect to each Fund. In
addition, this Agreement may be terminated with respect to one or more Funds
without affecting the rights, duties or obligations of any of the other Funds.
ARTICLE 15. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
8
<PAGE> 9
ARTICLE 16. FORCE MAJEURE. If the Administrator is prevented, hindered
or delayed from or in performing any of its obligations under this Agreement by
a Force Majeure Event (as defined below), then:
(a) (i) the Administrator's obligations under this
Agreement shall be suspended for so long as the
Force Majeure Event continues and to the extent
that it is so prevented, hindered or delayed;
(ii) as soon as possible after the commencement of
the Force Majeure Event the Administrator shall
notify the Company in writing of the occurrence
of the Force Majeure Event, the date of
commencement of the Force Majeure Event and the
effect of the Force Majeure Event on the
Administrator's ability to perform its
obligations under this Agreement; and
(iii) as soon as possible after the cessation of the
Force Majeure Event the Administrator shall
notify the Company in writing of the cessation
of the Force Majeure Event and shall resume
performance of its obligations under this
Agreement.
(b) If the Force Majeure continues for more than one
month after the commencement of the Force Majeure
Event either party may terminate this Agreement by
giving not less than seven days notice in writing to
the other party.
(c) "Force Majeure Event" means any event beyond the
reasonable control of a party including, without
limitation, acts of God, war, riot, civil commotion,
malicious damage, compliance with any law or
governmental order, rule, regulation or direction,
accident, breakdown of plant or machinery, fire,
flood or storm.
ARTICLE 17. MISCELLANEOUS. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument. For purposes of this Agreement, no officer of the Company who is an
employee of any BISYS Entity shall be deemed to be an authorized representative
of the Company for the purposes of giving or receiving any notice, consent, or
other communication pursuant to Articles 5, 8, 10, 16 and Schedule A of this
Agreement or not in the ordinary course of business. No provision of this
Agreement shall be deemed to limit the duties or obligations of Administrator or
any other BISYS Entity under any other BISYS Agreement. Paragraph headings in
this Agreement are included for convenience only and are not to be used to
construe or interpret this Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
By: /s/ Paul R. Freeman
--------------------------------
Attest: /s/ J.C. Arme
----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
BY: BISYS FUND SERVICES, INC.,
GENERAL PARTNER
By: /s/ J. David Huber
--------------------------------
Attest: /s/ Elise Elman
----------------------------
10
<PAGE> 11
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF JANUARY 16, 1997
BETWEEN FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Funds: This Agreement shall apply to all Funds of Five Arrows Investment Trust,
either now or hereafter created. The current Funds of Five Arrows
Investment Trust, are set forth below: U.S. Dollar, Pound Sterling,
Deutsche Mark and Canadian Dollar (collectively, the "Funds").
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Company will pay the
Administrator on the first business day of each month, or at such
time(s) as the Administrator shall request and the parties hereto shall
agree, a fee computed daily and paid as specified below at the annual
rate equal to .05% of each Fund's average daily net assets, subject to
mutually agreed upon fee waivers from time to time. The fee for the
period from the day of the month this Agreement is entered into until
the end of that month shall be prorated according to the proportion
which such period bears to the full monthly period. Upon any termination
of this Agreement before the end of any month, the fee for such part of
a month shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
For purposes of determining the fees payable to the Administrator, the
value of the net assets of a particular Fund shall be computed in the
manner described in the Company's Declaration of Trust or in the
Prospectus or Statement of Additional Information respecting that Fund
as from time to time is in effect for the computation of the value of
such net assets in connection with the determination of the liquidating
value of the shares of such Fund.
The parties hereby confirm that the fees payable hereunder shall be
applied to each Fund as a whole, and not to separate classes of shares
within the Funds.
Term: Pursuant to Article 7, the term of this Agreement shall commence on and
shall remain in effect through January 16, 1999 ("Initial Term").
Thereafter, if not earlier terminated as herein provided, it shall
continue from year to year so long as such continuance with respect to
any such Fund is approved at least annually by the Trustees of the
Company. Notwithstanding the foregoing, this Agreement may be terminated
by either party, without payment of any penalty, except for the
liquidated damages described
A-1
<PAGE> 12
below, at any time with respect to any Fund upon not less than sixty
(60) days' prior written notice to the other party.
If this Agreement is terminated without Cause during the Initial Term
hereof, or during any subsequent annual term, and if the Administrator
is not continuing to be compensated as provided in Article 4 of this
Agreement, then the Company shall make a one-time cash payment, as
liquidated damages, to the Administrator equal to the balance due the
Administrator for the remainder of such term, assuming for purposes of
calculation of the payment that the asset level of the Company on the
effective date of such termination would remain constant for the balance
of the contract term. Notwithstanding the foregoing, the Company may
terminate this Agreement for Cause, without incurring any additional
cost and without liquidated damages. For purposes of this Agreement, the
term "Cause" shall mean (i) dishonest statements or acts with respect to
the Company or any affiliate thereof; (ii) failure to perform to the
reasonable satisfaction of the Company's Board of Trustees a substantial
portion of the Administrator's duties and responsibilities hereunder;
(iii) gross negligence or willful misconduct of the Administrator with
respect to the Company or any affiliate thereof; or (iv) material breach
by the Administrator of any of the Administrator's obligations
hereunder.
Notwithstanding the foregoing, after such termination for so long as the
Administrator, with the written consent of the Company, in fact
continues to perform any one or more of the services contemplated by
this Agreement or any schedule or exhibit hereto, the provisions of this
Agreement, including without limitation the provisions dealing with
indemnification, shall continue in full force and effect. Compensation
due the Administrator and unpaid by the Company upon such termination
shall be immediately due and payable upon and notwithstanding such
termination. The Administrator shall be entitled to collect from the
Company, in addition to the compensation described in this Schedule A,
the amount of all of the Administrator's cash disbursements for services
in connection with the Administrator's activities in effecting such
termination, including without limitation, the delivery to the Company
and/or its designees of the Company's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for a
reasonable fee, the Administrator will provide the Company with
reasonable access to any Company documents or records remaining in its
possession.
A-2
<PAGE> 1
Exhibit 9(c)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 16th day of January, 1997, between FIVE ARROWS
SHORT-TERM INVESTMENT TRUST (the "Trust"), a Delaware business trust and BISYS
FUND SERVICES, INC. ("Fund Accountant"), a corporation organized under the laws
of the State of Delaware.
WHEREAS, Fund Accountant is an affiliate of Five Arrows Fund Distributors
Inc., BISYS Fund Services Limited Partnership and BISYS Fund Services (Ireland)
Limited (each such entity and any other entity hereafter providing services
under a BISYS Agreement (as defined below) is hereinafter referred to as a
"BISYS Entity"); and
WHEREAS, concurrently herewith, Fund Accountant and the other BISYS
Entities are entering into other agreements to provide services to the Trust,
The International Currency Fund, and Five Arrows Cash Management Fund PLC (such
agreements and any other comparable agreements in effect from time to time
being referred to collectively as the "BISYS Agreements"); and
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. Fund Accountant will keep and
maintain the following books and records of each Fund pursuant to
Rule 31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail of
all purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
including interest accrued and interest received, as
required by subsection (b)(2)(I) of the Rule;
<PAGE> 2
(iii) Separate ledger accounts required by subsection (b)(2)(ii)
and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of
the Rule.
(b) Performance of Daily Accounting Services. In addition to the
maintenance of the books and records specified above, Fund
Accountant shall perform the following accounting services daily
for each Fund:
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(ii) Obtain security prices from independent pricing services, or
if such quotes are unavailable, then obtain such prices from
each Fund's designee, as approved by the Trust's Board of
Trustees;
(iii) Reconcile with the Funds' custodian all daily trade
activity;
(iv) Compute, as appropriate, each Fund's net income and capital
gains, dividend payables, dividend factors, 7-day yields,
7-day effective yields, 30-day yields, and weighted average
portfolio maturity;
(v) Review daily the net asset value calculation and dividend
factor (if any) for each Fund prior to release to
shareholders, check and confirm the net asset values and
dividend factors for reasonableness and deviations, and
distribute net asset values and yields to NASDAQ;
(vi) Post Fund transactions to appropriate categories;
(vii) Accrue expenses of each Fund according to instructions
received from the Trust's Administrator;
(viii) Determine the outstanding receivables and payables for all
(1) security trades, (2) Fund share transactions and (3)
income and expense accounts;
(ix) Provide accounting reports in connection with the Trust's
regular annual audit and other audits and examinations by
regulatory agencies; and
(x) Provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
<PAGE> 3
(c) Special Reports and Services.
(i) Fund Accountant may provide additional special reports upon
the request of the Trust, which may result in an additional
charge, the amount of which shall be agreed upon between the
parties.
(ii) Fund Accountant may provide such other similar services with
respect to a Fund as may be reasonably requested by the
Trust, which may result in an additional charge, the amount
of which shall be agreed upon between the parties.
(d) Additional Accounting Services. Fund Accountant shall also perform
the following additional accounting services for each Fund:
(i) Provide monthly a download (and hard copy thereof) of the
financial statements described below, upon request of the
Trust. The download will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise
tax returns;
(B) the Trust's semi-annual reports with the Securities and
Exchange Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if any)
shareholder reports;
(D) registration statements on Form N-1A and other filings
relating to the registration of shares;
(E) the Administrator's monitoring of the Trust's status as
a regulated investment company under Subchapter M of the
Internal Revenue Code, as amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
<PAGE> 4
2. Delegation.
The Trust consents to the appointment of the Fund Accountant's affiliate
BISYS Fund Services (Ireland) Limited ("BISYS Ireland") to provide certain
services under this Agreement and the Trust further agrees that the Fund
Accountant may delegate the responsibility to perform certain services to be
provided under this Agreement to non-affiliated third parties with the express
prior written consent of the Trust, provided that, to the extent that the
services delegated involve only such ministerial tasks as are routinely and
commonly delegated by similarly situated service providers, such consent shall
not be unreasonably withheld; provided, however, that Fund Accountant shall be
fully responsible for the acts and omissions of BISYS Ireland and its other
delegates and shall not be relieved of any of its responsibilities hereunder by
any such delegation.
3. Compensation.
For so long as the Trust invests all of its investable assets in the
International Currency Fund, the Trust shall not pay Fund Accountant a fee for
the services to be provided by Fund Accountant under this Agreement.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in Section 3
hereof, the Trust agrees to reimburse Fund Accountant for the following
out-of-pocket expenses incurred in providing services hereunder, including:
(a) All freight and other delivery and bonding charges incurred by Fund
Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Fund Accountant in
fulfillment of its obligations under this Agreement, other than
expenses incurred in communicating with other BISYS Entities and
any other affiliates;
(c) The cost of obtaining security market quotes pursuant to Section
l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other materials;
and
(e) Any expenses Fund Accountant shall incur at the written direction
of an officer of the Trust thereunto duly authorized.
<PAGE> 5
5. Effective Date.
This Agreement shall become effective with respect to a Fund as of the
date first written above (or, if a particular Fund is not in existence on that
date, on the date such Fund commences operation) (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to a Fund, unless
earlier terminated by either party hereto as provided hereunder, until
January 16, 1999 (the Initial Term"). Thereafter, if not earlier terminated as
herein provided, it shall continue from year to year so long as such
continuance with respect to any such Fund is approved at least annually by the
Trustees of the Trust. Notwithstanding the foregoing, this Agreement may be
terminated by either party, without payment of any penalty, except for the
liquidated damages described below, at any time with respect to any Fund upon
not less than sixty (60) days' prior written notice to the other party.
Notwithstanding the foregoing after such termination for so long as Fund
Accountant, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement or any schedule
or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due Fund Accountant and unpaid by the Trust
upon such termination shall be immediately due and payable upon and
notwithstanding such termination. Fund Accountant shall be entitled to collect
from the Trust, in addition to the compensation described under Section 3
hereof, the amount of all of Fund Accountant's cash disbursements for services
in connection with Fund Accountant's activities in effecting such termination,
including without limitation, the delivery to the Trust and/or its designees of
the Trust's property, records, instruments and documents, or any copies
thereof. Subsequent to such termination, for a reasonable fee, Fund Accountant
shall deliver to the Trust to any Trust documents or records remaining in its
possession.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by Fund Accountant in the absence of bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of
the Trust; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its
<PAGE> 6
obligations and duties.
For purposes of this Agreement, actions or omissions by any BISYS Entity
or its employees, agents, directors, officers or nominees made in any capacity
shall be deemed to be actions or omissions by Fund Accountant. Any actions or
omissions by a person who is both an officer or employee of the Trust and an
officer or employee of any BISYS Entity shall be deemed to have been committed
solely in such person's capacity as an officer or employee of such BISYS
Entity.
The Trust's agreement to indemnify Fund Accountant, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against Fund
Accountant, its partners or employees, or any such controlling person, such
notification to be given in accordance with Section 19 hereof within 10 days
after the summons or other first legal process shall have been served. The
failure to so notify the Trust of any such action shall not relieve the Trust
from any liability which the Trust may have to the person against whom such
action is brought by reason of any such untrue, or allegedly untrue, statement
or omission, or alleged omission, otherwise than with respect to incremental
liabilities resulting from such failure. The Trust will be entitled to assume
the defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of good standing
chosen by the Trust and approved by Fund Accountant, which approval shall not
be unreasonably withheld. In the event the Trust elects to assume the defense
of any such suit and retain counsel of good standing approved by Fund
Accountant, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case Fund
Accountant reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Fund Accountant, its partners and employees, or the
controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Fund Accountant or them.
8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust all books
and records which the Trust and Fund Accountant is, or may be, required to keep
and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further agrees that all such books and records shall be the property
of the Trust and to make such books and records available for inspection by the
Trust or by the Securities and Exchange Commission at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process.
9. Reports.
<PAGE> 7
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, examiners, distributors, dealers, underwriters, salesmen,
insurance companies and others designated by the Trust in writing, such reports
and at such times as are prescribed pursuant to the terms and the conditions of
this Agreement to be provided or completed by Fund Accountant, or as
subsequently agreed upon by the parties pursuant to an amendment hereto.
10. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
11. Return of Records.
Fund Accountant may at its option at any time, and shall promptly
upon the Trust's demand, turn over to the Trust and cease to retain Fund
Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
12. Representations of the Trust.
The Trust certifies to Fund Accountant that: (1) as of the close of
business on the Effective Date, each Fund that is in existence as of the
Effective Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
13. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
<PAGE> 8
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
14. Insurance.
Fund Accountant shall notify the Trust should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Fund Accountant shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Trust from time to time as may be appropriate of the total outstanding
claims made by Fund Accountant under its insurance coverage.
15. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the state
in which such document has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of Trustees
covering the approval of this Agreement, authorization of a
specified officer of the Trust to execute and deliver this
Agreement and authorization for specified officers of the
Trust to instruct Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct Fund
Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
<PAGE> 9
16. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Trust the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments thereto.
(b) Fund Accountant shall, upon request, furnish certified copies of
corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a specified
officer of Fund Accountant to execute and deliver this
Agreement; and
(ii) Authorization of Fund Accountant to act as fund accountant
for the Trust and to provide accounting services for the
Trust.
17. Amendments to Documents.
The Trust shall furnish Fund Accountant with written copies of any
amendments to, or changes in, any of the items referred to in Section 15 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
18. Compliance with Law.
Except for the obligations of Fund Accountant set forth in Section 7
hereof or as contemplated by another BISYS Agreement, the Trust assumes full
responsibility for the preparation, contents and distribution of each
prospectus of the Trust as to compliance with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act and
any other laws, rules and regulations of governmental authorities having
jurisdiction. Fund Accountant shall have no obligation to take cognizance of
any laws relating to the sale of the Trust's shares. The Trust represents and
warrants that no shares of the Trust will be offered to the public until the
Trust's registration statement under the Securities Act and the 1940 Act has
been declared or becomes effective.
19. Notices.
Any notice, demand, request or other communication which may be
required or contemplated herein shall be sufficiently given if (i) given
either by facsimile transmission or
<PAGE> 10
telex, by reputable overnight delivery service, postage prepaid, or by
registered or certified mail, postage prepaid and return receipt requested, to
the address indicated below or to such other address as any party hereto may
specify as provided herein, or (ii) delivered personally at such address.
If to the Trust: c/o Rothschild International Asset Management Limited
Five Arrows House
St. Swithin's Lane
London EC4N 8NR United Kingdom
Attention: Peter Collacott
with a copy to:
Geoffrey R.T. Kenyon
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
If to Fund Accountant: 3435 Stelzer Road
Columbus, Ohio 43219.
Attention: George Martinez
<PAGE> 11
20. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust.
21. Several Obligations of the Funds.
The Trust is a series company with multiple series, the Funds, and has
entered into this Agreement on behalf of those series, as amended from time to
time on notice to the Fund Accountant. With respect to any obligation of the
Trust on behalf of any Fund arising hereunder, the Fund Accountant shall look
for payment or satisfaction of such obligations solely to the assets and
property of the Fund to which such obligation relates as though the Trust had
separately contracted with the Fund Accountant by separate written instrument
with respect to each Fund. In addition, this Agreement may be terminated with
respect to one or more Funds without affecting the rights, duties or
obligations of any of the other Funds.
22. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. Governing Law.
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the State of Ohio. No provision of this Agreement
shall be deemed to limit the duties or obligations of Fund Accountant or any
other BISYS Entity under any other BISYS Agreement.
24. Force Majeure.
If the Fund Accountant is prevented, hindered or delayed from or in
performing any of its obligations under this Agreement by a Force Majeure Event
(as defined below), then:
(a) (i) the Fund Accountant's obligations under this Agreement shall
be suspended for so long as the Force Majeure Event
continues and
<PAGE> 12
to the extent that it is so prevented, hindered or delayed;
(ii) as soon as possible after the commencement of the Force
Majeure Event the Fund Accountant shall notify the Company
in writing of the occurrence of the Force Majeure Event, the
date of commencement of the Force Majeure Event and the
effect of the Force Majeure Event on the Fund Accountant's
ability to perform its obligations under this Agreement; and
(iii) as soon as possible after the cessation of the Force Majeure
Event the Fund Accountant shall notify the Company in
writing of the cessation of the Force Majeure Event and
shall resume performance of its obligations under this
Agreement.
(b) If the Force Majeure continues for more than one month after the
commencement of the Force Majeure Event either party may terminate
this Agreement by giving not less than seven days notice in writing
to the other party.
(c) "Force Majeure Event" means any event beyond the reasonable control
of a party including, without limitation, acts of God, war, riot,
civil commotion, malicious damage, compliance with any law or
governmental order, rule, regulation or direction, accident,
breakdown of plant or machinery, fire, flood or storm.
25. Miscellaneous.
Paragraph headings in this agreement are included for convenience only
and are not to be used to construe or interpret this Agreement. For purposes of
this Agreement, no officer of the Trust who is an employee of any BISYS Entity
shall be deemed to be an authorized representative of the Trust for the
purposes of giving or receiving any notice, consent, or other communication
pursuant to Section 2, 4(e), 6, 7, 11, 14, 22 or 24 of this Agreement or not in
the ordinary course of business. No provision of this Agreement shall be deemed
to limit the duties or obligations of Fund Accountant or any other BISYS Entity
under any other BISYS Agreement.
[Remainder of the page intentionally left blank]
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
FIVE ARROWS SHORT-TERM
INVESTMENT TRUST
By: /s/ Paul R. Freeman
_______________________________
BISYS FUND SERVICES, INC.
By: /s/ J. David Huber
-------------------------------
<PAGE> 1
Exhibit 9(d)
FEEDER FUND MANAGEMENT SERVICES AGREEMENT
AGREEMENT made this 16th day of January, 1997, between Five Arrows
Short-Term Investment Trust, a Delaware business trust (the "Trust"), on behalf
of the U.S. Dollar Fund, the Pound Sterling Fund, the Deutsche Mark Fund and the
Canadian Dollar Fund (the "Funds"), and Rothschild International Asset
Management Limited (the "Feeder Fund Manager").
1. Duties of the Feeder Fund Manager. The Trust hereby employs the
Feeder Fund Manager to act as Feeder Fund Manager of the Funds and to administer
their affairs, subject to the supervision of the Board of Trustees of the Trust,
for the period and on the terms set forth in this Agreement.
The Feeder Fund Manager hereby accepts such employment, and undertakes
to afford to the Trust and its Board of Trustees the advice and assistance of
the Feeder Fund Manager's organization in the administration of the Funds and to
furnish for the use of the Funds' personnel for administering the affairs of the
Funds and to pay the salaries and fees of all officers and Trustees of the Trust
who are members of the Feeder Fund Manager's organization and all personnel of
the Feeder Fund Manager performing services relating to administrative
activities (other than reasonable out-of-pocket expenses incurred by Trustees of
the Trust in connection with attendance at meetings of the Board of Trustees).
The Feeder Fund Manager shall for all purposes herein be deemed to be an
independent contractor and shall, except as otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
Notwithstanding the foregoing, the Feeder Fund Manager shall not be
deemed to have assumed any duties hereunder with respect to, and shall not, by
the execution of this Agreement, be responsible for, the management of the
Funds' assets or the rendering of investment advice and supervision with respect
thereto or the distribution of shares of the Funds, nor shall the Feeder Fund
Manager be deemed to have assumed hereunder or have any responsibility hereunder
with respect to functions specifically assumed by any transfer agent, custodian,
or shareholder servicing agent of the Trust or the Funds. It is intended that
the assets of the Funds will be invested in portfolios (the "Portfolios") having
substantially the same investment objective, policies and restrictions as the
Funds. The Portfolios are series of The International Currency Fund, a
registered open-end investment company (the "Portfolio Trust"). It is duly
recognized that Rothschild International Asset Management Limited acts as the
investment adviser to the Portfolios under an Investment Advisory Agreement. As
part of its duties hereunder, however, the Feeder Fund Manager shall obtain from
the Portfolios and compile such information about the Portfolios as requested
from time to time by the Trust's Board of Trustees.
<PAGE> 2
2. Allocation of Charges and Expenses. The Feeder Fund Manager will pay
all costs it incurs in connection with the performance of its duties under
Section 1 of this Agreement. The Feeder Fund Manager will pay the compensation
and expenses of all if its personnel and will make available, without expense to
the Trust, the services of such of its directors, officers and employees as may
duly be elected officers or Trustees of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. Notwithstanding the
foregoing, the Feeder Fund Manager shall not be obligated to pay the reasonable
out-of-pocket expenses incurred by Trustees of the Trust in connection with
attendance at meetings of the Board of Trustees. The Feeder Fund Manager will
not be required to pay any expenses of the Trust other than those specifically
allocated to the Feeder Fund Manager in this Section 2.
3. Compensation of Feeder Fund Manager. The Board of Trustees of the
Trust has currently determined that the Feeder Fund Manager shall receive no
compensation from the Trust or the Funds in respect of the services to be
rendered and the facilities to be provided by the Feeder Fund Manager under this
Agreement. If the parties determine that the Trust or Funds should in the future
compensate the Feeder Fund Manager for such services and facilities, such
compensation shall be set forth in a new agreement or in an amendment to this
Agreement to be entered into by the parties hereto.
4. Other Interests. It is understood that the Trustees and officers of
the Trust and shareholders of the Funds are or may be or become interested in
the Feeder Fund Manager are or may be or become interested in the Feeder Fund
Manager as directors, officers employees, shareholders or otherwise and that
directors, officers, employees and shareholders of the Feeder Fund Manager are
or may be or become similarly interested in the Fund, and that the Feeder Fund
Manager may be or become interested in the Funds, and that the Feeder Fund
Manager may be or become interested in the Funds as shareholder or otherwise. It
is also understood that directors, officers, employees and shareholders of the
Feeder Fund Manager may be or become interested (as directors, trustees,
officers, employees, stockholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the Feeder
Fund Manager may organize, sponsor or acquire, or with which it may merge or
consolidate, and which may include the words "Rothschild" or "Five Arrows" or
any combination or derivation thereof as part of their name, and that the Feeder
Fund Manager or its affiliates may enter into advisory or management or
administration agreements or other contracts or relationships with such other
companies or entities.
5. Feeder Fund Manager's Services Not Exclusive. The services of the
Feeder Fund Manager to the Trust and the Fund are not to be deemed to be
exclusive, the Feeder Fund Manager being free to render services to others and
engage in other business activities.
6. Sub-Feeder Fund Managers. The Feeder Fund Manager may employ one or
more sub-Feeder Fund Managers from time to time to perform such of the acts and
services of the Feeder Fund Manager and upon such terms and conditions as may be
agreed upon between the Feeder Fund Manager and such sub-Feeder Fund Managers
and approved by the Board of
<PAGE> 3
Trustees of the Trust.
7. Duration and Termination of this Agreement. This Agreement shall
become effective on the date hereof. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years from the date
hereof and shall continue in full force and effect for successive periods of one
year thereafter, but only so long as each such continuance is approved annually
(i) by the Board of Trustees of the Trust and (ii) by the vote of a majority of
the Trustees of the Trust who are not interest persons of the Feeder Fund
Manager or the Trust.
Either party hereto may, at any time, on sixty (60) days' prior written
notice to the other, terminated this Agreement without the payment of any
penalty, by action of Board of Trustees of the Trust or an authorized officer of
the Feeder Fund Manager, as the case may be. This Agreement shall terminate
automatically in the event of its assignment.
8. Amendment of the Agreement. This agreement may be amended by a
writing signed by both parties hereto, provided that no amendment to this
Agreement shall be effective until approved by the (i) vote of a majority of
this Trustees of the Trust who are no interested persons of the Feeder Fund
Manager of the Trust, and (ii) vote of a majority of the entire Board of
Trustees of the Trust.
9. Limitation of Liability of the Trust and Feeder Fund Manager. The
Feeder Fund Manager shall not 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 this Agreement relates, except a loss resulting form willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by the Feeder Fund Manager of its obligations and duties
under this Agreement. Any person, even though also employed by the Feeder Fund
Manager, who may be or become an employee of and paid by the Feeder Fund
Manager, who may be or become an employee of and paid by the Trust shall be
deemed, when acting within the scope of his or her employment by the Trust, to
be acting in such employment solely for the Trust and not as its employee or
agent. It is understood and expressly stipulated that none of the Trustees,
officers, agents or shareholders of the Trust shall be personally liable
hereunder. None of the trustees, officers agents or shareholders of the Trust
assume any personal liability for obligations entered into on behalf of the
Trust. All persons dealing with the Trust must look solely to the property of
the Trust for the enforcement of any claims against the Trust. The Funds shall
not be liable for any claims against any other series of the Trust.
With respect to any obligation of the Trust on behalf of any Fund
arising hereunder, the Feeder Fund Manager shall look for payment or
satisfaction of such obligations solely to the assets and property of the Fund
to which such obligation relates as though the Trust had separately contracted
with the Feeder Fund Manager by separate written instrument with respect to each
Fund. In addition, this Agreement may be terminated with respect to one or more
Funds without affecting the rights, duties or obligations of any of the other
Funds.
<PAGE> 4
10. Name of the Trust. So long as this Agreement remains in effect, the
Feeder Fund Manager grants to the Trust and each of the Funds a non-exclusive,
non-transferable, non-assignable licence to use the name or mark "Five Arrows"
as part of their respective names or any other corporate names to which the
Feeder Fund Manager has given its prior written consent (at its absolute
discretion). During this period the Trust and each of the Funds will maintain
the high standards of professionalism that are associated with the N.M.
Rothschild organization. The Trust and the Funds shall not sublicense the "Five
Arrows," name or use or authorize any use of such name except in connection with
the distribution of shares of the Funds. Upon any termination of this Agreement
this license and all right of the Trust and the Funds to use the name and mark
"Five Arrows" shall terminate, whereupon the of the Trust and the Funds will
change their respective names to a name which neither makes use of such names or
marks nor names or marks that in the opinion of the Feeder Fund Manager are
confusingly similar thereto.
11. Certain Definitions. The terms "assignment" and "interested
persons" when used herein shall have the respective meanings specified in the
Investment Company Act of 1940 as now in effect or as hereafter amended subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission by any rule, regulation or order.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of England.
[Remainder of Page Intentionally Left Blank.]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year above written.
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
By: /s/ Paul R. Freeman
_____________________________________
Its: Senior Vice President
____________________________________
ROTHSCHILD INTERNATIONAL ASSET
MANAGEMENT LIMITED
By: /s/ Peter Troughton
_____________________________________
Its: Chairman
____________________________________
<PAGE> 1
Exhibit 10
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
February 4, 1997
Five Arrows Short-Term Investment Trust
International Currency Fund
3435 Stelzer Road
Columbus, Ohio 43219
Gentlemen:
As counsel to Five Arrows Short-Term Investment Trust (the "Trust"), we
have been asked to render our opinion in connection with the issuance by the
Trust of shares of the U.S. Dollar Fund, the Pound Sterling Fund, the Deutsche
Mark Fund and the Canadian Dollar Fund (the "Funds"), the series of the Trust
which have been established and designated in Section 4.2 of the Trust's
Agreement and Declaration of Trust dated August 13, 1996
and as more fully described in the Prospectus and Statement of Additional
Information contained in the Form N-1A Registration Statement filed by the
Trust.
We have examined the Agreement and Declaration of Trust dated August
13, 1996 of the Trust, the By-Laws of the Trust, certain resolutions adopted by
the Board of Trustees of the Trust, the Prospectus, the Statement of Additional
Information and such other documents as we deemed necessary for purposes of
this opinion.
As counsel to International Currency Fund (the "Portfolio Trust"), we
have also been asked to render our opinion in connection with the issuance by
the Portfolio Trust to the Trust of shares of the U.S. Dollar Portfolio, the
Pound Sterling Portfolio, the Deutschemark Portfolio and the Canadian Dollar
Portfolio (the "Portfolios"), the series of the Portfolio Trust which have been
established and designated in Section 4.2 of the Trust's Amended and Restated
Agreement and Declaration of Trust dated October 16, 1996, as amended to date,
and as more fully described in Part A and Part B contained in the Form N-1A
Registration Statement filed by the Portfolio Trust.
We have examined the Agreement and Declaration of Trust dated October
16, 1996 of the Portfolio Trust, as amended to date, the By-Laws of the
Portfolio Trust, as amended to date, certain resolutions adopted by the Board
of Trustees of the Portfolio Trust, the
<PAGE> 2
GOODWIN, PROCTER & HOAR LLP
Five Arrows Short-Term Investment Trust
February 4, 1997
Page 2
Registration Statement and such other documents as we deemed necessary for
purposes of this opinion.
Based upon the foregoing, we are of the opinion that the shares of the
Funds and Portfolios which are the subject of the foregoing Registration
Statements will, when sold in accordance with the terms of the Prospectus and
Statement of Additional Information and the procedures described therein, in the
case of the Trust, and Part A and Part B of the Registration Statement, in the
case of the Portfolio Trust, in effect at the time of the sale, be legally
issued, fully-paid and non-assessable by the Trust or the Portfolio Trust, as
the case may be.
We consent to being named in the Registration Statements for the Trust
and Portfolio Trust and to a copy of this opinion being filed as an exhibit to
the foregoing Registration Statements.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------
The Board of Trustees
of Five Arrows Short-Term Investment Trust
We consent to the inclusion in Pre-Effective Amendment No. 2 to the
Registration Statement of Five Arrows Short-Term Investment Trust on Form N-1A
(File No. 333-10237) of our report dated January 20, 1997 on our audits of the
statements of assets and liabilities of each of the series of the Five Arrows
Short-Term Investment Trust, which report is included in the Registration
Statement. We also consent to the reference to our Firm under the caption
"Independent Auditors."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 3, 1997
<PAGE> 1
Exhibit 13
SUBSCRIPTION
January 6, 1997
Dear Sirs:
The undersigned hereby subscribes to one hundred thousand shares of
beneficial interest in the U.S. Dollar Fund series of Five Arrows Short-Term
Investment Trust at a price of $1.00 per share and agrees to pay therefor in
cash the amount of $100,000.
Very truly yours,
FIVE ARROWS HOUSE
INVESTMENTS LIMITED
By: /s/ Peter B. Collacott
-------------------------------
<PAGE> 2
SUBSCRIPTION
January 6, 1997
To: The Board of Trustees of Five Arrows Short-Term Investment Trust
Dear Sirs:
The undersigned hereby subscribes to ten shares of beneficial interest
in the Pound Sterling Fund series of Five Arrows Short-Term Investment Trust at
a price of 1.00 pound per share and agrees to pay therefor in cash the amount of
10.00 pounds.
Very truly yours,
FIVE ARROWS HOUSE
INVESTMENTS LIMITED
By: /s/ Peter B. Collacott
--------------------------
<PAGE> 3
SUBSCRIPTION
January 6, 1997
To: The Board of Trustees of Five Arrows Short-Term Investment Trust
Dear Sirs:
The undersigned hereby subscribes to ten shares of beneficial interest
in the Deutsche Mark Fund series of Five Arrows Short-Term Investment Trust at a
price of DM1.00 per share and agrees to pay therefor in cash the amount of
DM10.00.
Very truly yours,
FIVE ARROWS HOUSE
INVESTMENTS LIMITED
By: /s/ Peter B. Collacott
----------------------------
<PAGE> 4
SUBSCRIPTION
January 6, 1997
To: The Board of Trustees of Five Arrows Short-Term Investment Trust
Dear Sirs:
The undersigned hereby subscribes to ten shares of beneficial interest
in the Canadian Dollar Fund series of Five Arrows Short-Term Investment Trust at
a price of C$1.00 per share and agrees to pay therefor in cash the amount of
C$10.00.
Very truly yours,
FIVE ARROWS HOUSE
INVESTMENTS LIMITED
By: /s/ Peter B. Collacott
-----------------------------
<PAGE> 1
Exhibit 15
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
(FIVE ARROWS SERVICE SHARES)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, Five Arrows Short-Term Investment Trust, an unincorporated
association of the type commonly known as a business trust organized under the
laws of the State of Delaware (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (ii)
to divide the shares within each such series into two or more classes;
WHEREAS, the Trust has established four series, the U.S. Dollar Fund,
the Pound Sterling Fund, the Deutsche Mark Fund, and the Canadian Dollar Fund
(the "Initial Series," such series, together with all other series subsequently
established by the Trust and made subject to this Plan, being referred to herein
individually as a "Series" and collectively as the "Series");
WHEREAS, the Trust has established two classes of shares, such classes
being referred to as the "Five Arrows" and the "Five Arrows Service" shares; and
WHEREAS, the Trust may be deemed a distributor of the Five Arrows
Shares within the meaning of Rule 12b-1 under the Act, and desires to adopt a
Plan of Distribution with respect to the Five Arrows Service Class of shares
(the "Shares") of the Initial Series pursuant to such Rule (the "Plan"); and
WHEREAS, the Trust intends to enter into an agreement (the "Agreement")
for distribution of the Shares with Five Arrows Fund Distributors, Inc. (the
"Distributor"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
and any agreements relating to it (the "Qualified Trustees"), having determined,
in the exercise of their reasonable business judgment and in light of their
fiduciary duties under state law and under Section 36(a) and (b) of the Act,
that there is a reasonable likelihood that this Plan and the Agreement will
benefit the Five Arrows Service Class of the Initial Series and its
shareholders, have accordingly approved this Plan and the Agreement by votes
cast in person at a meeting called for the purpose of voting on this Plan and
the Agreement and any agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
<PAGE> 2
1. SHAREHOLDER SERVICING ACTIVITIES. Subject to the supervision of the
Board of Trustees, the Trust may engage, directly or indirectly, in financing
any activities relating to shareholder account administrative and servicing
functions, including without limitation making payments to certain service
organizations that wish to act as agents of their respective customers
("Agents") for one or more of the following activities: (a) answering inquiries
regarding account status and history, the manner in which purchases and
redemptions of the Shares may be effected, and certain other matters pertaining
to the Trust; (b) assisting in designating and changing dividend options,
account designations and addresses; (c) providing necessary personnel and
facilities to establish and maintain certain shareholder accounts and records,
as requested from time to time by the Trust; (d) assisting in processing
purchase and redemption transactions; (e) arranging for the wiring of funds; (f)
transmitting and receiving funds in connection with orders to purchase or redeem
Shares; (g) verifying and guaranteeing signatures in connection with redemption
orders, transfers among and changes in designated accounts; (h) providing
periodic statements showing account balances and, to the extent practicable,
integrating such information with other client transactions otherwise effected
with or through the Agent; (i) furnishing (either separately or on an integrated
basis with other reports sent by the Agent) monthly and annual statements and
confirmations of all purchases and redemptions of Shares in an account; (j)
transmitting proxy statements, annual reports, prospectuses and other
communications from the Trust; (k) receiving, tabulating and transmitting to the
Trust proxies executed with respect to annual and special meetings of
shareholders of the Trust; and (l) providing such other related services as the
Trust or customers of the Agent may reasonably request.
2. DISTRIBUTION ACTIVITIES. In addition to the activities described in
Section 1 hereof, subject to the supervision of the Board of Trustees, the Trust
may engage, directly or indirectly, in financing any activities primarily
intended to result in the sale of Shares, including, but not limited to, the
following: (1) making payments to underwriters, securities dealers and others
engaged in the sale of Shares, including payments to the Distributor to be used
to compensate or reimburse the Distributor or securities dealers and others
(including affiliates of the Distributor) engaged in the distribution and
marketing of Shares or furnishing assistance to investors on an ongoing basis,
and (2) providing reimbursement of direct out-of-pocket expenditures incurred in
connection with the distribution and marketing of Shares, including expenses
relating to the formulation and implementation of marketing strategies and
promotional activities such as direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, the preparation, printing
and distribution of sales literature, the preparation, printing and distribution
of prospectuses of the Trust and reports for recipients other than existing
shareholders of the Trust, and obtaining such information, analyses and reports
with respect to marketing and promotional activities and investor accounts as
the Trust may, from time to time, deem advisable. The Trust and the Series are
authorized to engage in the activities listed above, and in other activities
primarily intended to result in the sale of Shares, either directly or through
the Distributor and other persons with which the Trust has entered into
agreements pursuant to the Plan.
2
<PAGE> 3
3. PAYMENTS. Pursuant to this Plan, the Trust shall make periodic
payments to the Distributor with respect to Shares of the Initial Series (i) at
the annual rate of .25% of the average daily value of net assets represented by
such Shares as compensation for the activities described in Section 1 and (ii)
at the annual rate of .25% of the average daily value of net assets represented
by such Shares as compensation for the activities described in Section 2. The
Distributor shall in turn remit to and allocate among selected dealers and
others (including affiliates of the Distributor) in consideration of and as
reimbursement for expenses incurred in the provision of distribution and
marketing services and furnishing assistance to investors on an ongoing basis,
such amounts as the Distributor shall determine. Any amounts received by the
Distributor and not so allocated may be retained by the Distributor as
compensation to the Distributor for providing services under the Agreement
and/or as reimbursement for expenses incurred in connection with the
distribution and marketing of the Shares and the servicing of investor accounts
as contemplated by Section 1 hereof. The Distributor may from time to time and
for such periods as it deems appropriate reduce its compensation hereunder to
the extent the Distributor may, by notice to the Trust, voluntarily declare.
4. TERM AND TERMINATION.
(a) Initial Series. This Plan shall become effective with
respect to the Shares of the Initial Series as of the later of (i) the date on
which a Registration Statement on Form N-1A with respect to the Shares becomes
effective under the Securities Act of 1933, as amended, or (ii) the date on
which the Initial Series commences offering the Shares to the public and shall
continue in effect with respect to the Shares (subject to Section 5(c) hereof)
until one year from the date of such effectiveness, unless the continuation of
this Plan shall have been approved with respect to the Shares in accordance with
the provisions of Section 5(c) hereof.
(b) Additional Series. This Plan shall become effective with
respect to the Shares of each additional Series established by the Trust after
the date hereof and made subject to this Plan upon commencement of the initial
public offering thereof (provided that the Plan has previously been approved
with respect to the Series by votes of a majority of both (i) the Board of
Trustees of the Trust and (ii) the Qualified Trustees, cast in person at a
meeting held before the initial public offering of such additional Series
thereof and called for the purpose of voting on such approval), and shall
continue in effect with respect to each such additional Series (subject to
Section 5(c) hereof) for one year thereafter, unless the continuation of this
Plan shall have been approved with respect to such additional Series in
accordance with the provisions of Section 5(c) hereof. The Distributor and the
Trust on behalf of each such additional Series shall each sign an addendum
hereto agreeing to be bound hereby and setting
3
<PAGE> 4
forth such specific and different terms as the parties may agree upon,
including, without implied limitation, the amount and purpose of payments to be
made hereunder.
(c) Continuation. This Plan and the Agreement shall continue
in effect with respect to each Series subsequent to the initial term specified
in Section 5(a) and (b) for so long as such continuance is specifically approved
at least annually by votes of a majority of both (i) the Board of Trustees of
the Trust and (ii) the Qualified Trustees, cast in person at a meeting called
for the purpose of voting on this Plan, subject to any shareholder approval
requirements existing under applicable law.
(d) Termination.
(i) This Plan may be terminated at any time with
respect to the Trust or any Series thereof, as the case may be, by vote
of a majority of the Qualified Trustees, or by vote of a majority of
the outstanding Shares of that Series. For purposes of this Plan, the
term "vote of a majority of the outstanding Shares" of any Series shall
be interpreted in accordance with Section 2(a)(42) of the Act. The Plan
may remain in effect with respect to a Series even if it has been
terminated in accordance with this Section 5(d) with respect to one or
more other Series of the Trust.
(ii) The Agreement may be terminated at any time,
without penalty, with respect to the Shares of any Series by vote of a
majority of the Qualified Trustees or by vote of a majority of the
outstanding voting Shares of that Series on sixty days' written notice
to the Distributor. In addition, the Agreement provides for automatic
termination in the event of its assignment.
6. AMENDMENTS. This Plan may not be amended to increase materially the
amount of distribution expenditures provided for in Section 3 hereof unless such
amendment is approved by a vote of a majority of the outstanding Shares of each
Series with respect to which a material increase in the amount of distribution
expenditures is proposed, and no material amendment to the Plan shall be made
unless approved in the manner provided for annual renewal in Section 5(c)
hereof. Otherwise, this Plan may be amended with respect to the Shares of a
Series by vote of a majority of the Qualified Trustees or the outstanding voting
Shares of that Series.
7. INDEPENDENT TRUSTEES. While this Plan is in effect with respect to
any Series, the selection and nomination of Trustees who are not interested
persons (as defined in the Act) of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
4
<PAGE> 5
8. QUARTERLY REPORTS. The Treasurer of the Trust and the Treasurer of
the Distributor shall provide to the Trustees of the Trust and the Trustees
shall review, at least quarterly, a written report of the amounts expended for
distribution pursuant to this Plan and the purposes for which such expenditures
were made.
9. RECORD KEEPING. The Trust shall preserve copies of this Plan, the
Agreement and any related agreements and all reports made pursuant to Section 9
hereof, for a period of not less than six years from the date of this Plan and
the Agreement, the agreements or such reports, as the case may be, the first two
years in an easily accessible place.
Dated: October 16, 1996
5
<PAGE> 1
Exhibit 18
MULTIPLE CLASS EXPENSE ALLOCATION PLAN
ADOPTED PURSUANT TO RULE 18F-3
WHEREAS, Five Arrows Short-Term Investment Trust, an unincorporated
association of the type commonly known as a business trust organized under the
laws of the State of Delaware (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized to (i) issue shares of beneficial
interest ("Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets, and (ii) divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established four series as of the date hereof :
the U.S. Dollar Fund, the Canadian Dollar Fund, the Pound Sterling Fund, and the
Deutsche Mark Fund (such funds portfolios being referred to collectively herein
as the "Initial Series" -- such series, together with all other series
subsequently established by the Trust and made subject to this Plan, being
referred to herein individually as a "Series" and collectively as the "Series"),
and two classes thereof designated as "Five Arrows" and "Five Arrows Service"
shares; and
WHEREAS, the Trustees have determined to operate under Rule 18f-3 and
pursuant to such Rule the Board of Trustees as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the Act) (the "Qualified
Trustees"), having determined in the exercise of their reasonable business
judgment this Plan is in the best interest of each class of the Initial Series
individually and the Initial Series as a whole, have accordingly approved this
Plan.
NOW, THEREFORE, each Trust hereby adopts this Plan in accordance with
Rule 18f-3 under the Act, on the following terms and conditions:
1. CLASS DIFFERENCES. Each class of Shares of each Initial Series shall
represent interests in the same portfolio of investments of Initial Series and
shall be identical in all respects, and except as otherwise set forth in this
Plan, shall differ solely with respect to: (i) arrangements for shareholder
services or the distribution of Shares, or both, as provided for in Sections 2
and 3 of this Plan; (ii) the exclusive right of a Class to vote on certain
matters relating to any Service Plan adopted by the Trust with respect to such
Class; (iii) such differences relating to purchase minimums, sales charges and
eligible investors as may be set forth in the prospectuses and Statement of
Additional Information of the Initial Series, as the same may be amended or
supplemented from time to time (the "Prospectuses" and "SAI"); (iv) the
differences in any exchange privileges or conversion features of the classes of
Shares in effect from time to time; and (v) the designation of each Class of
shares.
<PAGE> 2
2. DIFFERENCES IN DISTRIBUTION AND SHAREHOLDER SERVICES. Five Arrows
Service Shares of the Initial Series shall be subject to (a) a service fee of up
to 0.25% of the average daily net assets represented by such Shares and (b) a
distribution fee of up to 0.25% of the average daily net assets represented by
such Shares. Five Arrows Shares shall not be subject to any such service fee or
distribution fee.
3. ALLOCATION OF EXPENSES. Expenses of the Series shall be allocated as
follows:
(a) Class Expenses. Expenses relating to different
arrangements for shareholder services or the distribution of Shares, or both,
shall be allocated to and paid by that class. A class may pay a different share
of other expenses, not including advisory or custodial fees or other expenses
related to the management of a Series' assets, if such expenses are actually
incurred in a different amount by that class, or if the class receives services
of a different kind or to a different degree than other classes.
(b) Other Allocations. All expenses of the Series not
allocated to a particular class pursuant to Sections 2 and 3(a) of this Plan
shall be allocated to each class on the basis of the net asset value of that
class in relation to the net asset value of the Series. Notwithstanding the
foregoing, the underwriter, adviser, or other provider of services to a Series
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under the Internal Revenue Code and Rule 18f-3 under the Act;
provided, however, that the Board shall monitor the use of such waivers or
reimbursements intended to differ by class.
4. TERM AND TERMINATION.
(a) Initial Series. This Plan shall become effective with
respect to the Initial Series as of October 16, 1996, and shall continue in
effect with respect to each Class of Shares of the Initial Series (subject to
Section 4(c) hereof) until terminated in accordance with the provisions of
Section 4(c) hereof.
(b) Additional Series or Classes. This Plan shall become
effective with respect to any class of the Initial Series other than the Five
Arrows and Five Arrows Service Classes and with respect to each additional
Series or class thereof established by the Trust after the date hereof and made
subject to this Plan, upon commencement of operations thereof or as otherwise
determined, and shall continue in effect with respect to each such additional
Series or class (subject to Section 4(c) hereof) until terminated in accordance
with the provisions of Section 4(c) hereof. An addendum hereto setting forth
such specific and different terms of such additional series of classes shall be
attached to this Plan.
(c) Termination. This Plan may be terminated at any time with
respect to the Trust or any Series or class thereof, as the case may be, by vote
of a majority of both the Trustees of the Trust and the Qualified Trustees. The
Plan may remain in effect with respect to a
2
<PAGE> 3
Series or class thereof even if it has been terminated in accordance with this
Section 4(e) with respect to such Series or class or one or more other Series of
the Trust.
5. AMENDMENTS. Any material amendment to this Plan shall require the
affirmative vote of a majority of both the Trustees of the Trust and the
Qualified Trustees.
Dated: October 16, 1996
3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<CURRENCY> BRITISH POUND
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<CURRENCY> GERMAN MARKS
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
