<PAGE> 1
As Filed with the Securities and Exchange Commission
on January 26, 1999
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. [ ]
Post-Effective Amendment No. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 [X]
(Check appropriate box or boxes.)
SSgA International Liquidity Fund
(formerly Five Arrows Short-Term Investment Trust)
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices)
(614) 470-8000
(Registrant's Telephone Number)
<PAGE> 2
Charles L. Booth
SSgA International Liquidity Fund
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)
[X] 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:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
- --------------------------------------------------------------------------------
This Post-Effective Amendment has been executed by the Trustees and
Officers of the International Currency Fund.
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<PAGE> 3
SSGA INTERNATIONAL LIQUIDITY FUND
U.S. Dollar Fund
Prospectus
Global Service Shares
March __, 1999
The Securities and Exchange Commission has not approved or disapproved of the
Fund's shares or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
The Funds' shares are not deposits or obligations of State Street Bank and Trust
Company. Furthermore, the Funds' shares are not guaranteed or insured by State
Street Bank and Trust Company or insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. The
shares involve possible loss of the amount invested.
<PAGE> 4
CONTENTS
Page
----
The Fund's Investment Objectives...............................................1
The Fund's Principal Investment Strategies.....................................1
Principal Risks................................................................1
Fees and Expenses..............................................................3
Investment Management..........................................................4
PRICING THE FUND'S SHARES......................................................4
HOW TO BUY SHARES..............................................................5
Purchases - General...................................................5
Acceptance and Settlement.............................................5
HOW TO REDEEM SHARES...........................................................6
Redemptions - General.................................................6
Redemptions - Settlement..............................................6
Redemption Proceeds...................................................6
ACCOUNT POLICIES...............................................................7
Purchasing By Wire....................................................7
Financial Services Firms - Order Transmission and Payment.............7
Accounts with Low Balances............................................7
Distribution/Service Fees (12b-1 Plan).........................................7
DIVIDENDS AND DISTRIBUTIONS....................................................8
TAXATION ......................................................................8
OTHER INFORMATION..............................................................8
Other Securities and Risks............................................8
Securities Ratings....................................................9
Foreign Investments...................................................9
Repurchase Agreements.................................................9
Master-Feeder Fund Structure..........................................9
Systems-Year 2000....................................................10
FINANCIAL HIGHLIGHTS..........................................................11
Additional Information........................................................12
(i)
<PAGE> 5
U.S. DOLLAR FUND
GLOBAL SERVICE SHARES
THE FUND'S INVESTMENT OBJECTIVES
The Fund seeks to maintain a high level of liquidity, to preserve capital and
stability of principal expressed in the U.S. Dollar and, consistent with those
objectives to earn current income.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund manages its investments subject to strict SEC guidelines, which are
designed to enable the Fund to maintain a stable net asset value of U.S. $1.00
per share. However, there is no guarantee that the Fund will do so.
All of the Fund's investments are short-term; the Fund's value weighted average
portfolio maturity may not exceed 60 days. In addition, the Fund purchases only
"first tier" securities denominated in the U.S. Dollar. Generally first tier
securities are rated by firms such as Moody's and Standard & Poor's in their
highest short-term major rating categories, or if unrated, are considered to be
of equivalent quality by the investment manager.
The Fund's investments in bank instruments will usually include certificates of
deposit, time deposits and acceptances. The Fund's holdings of corporate
securities will typically include commercial paper, which is used for short-term
borrowing, or longer term debt securities whose remaining maturities are
thirteen months or less. In addition, the Fund may engage in repurchase
agreements. The Fund invests more than 25% of its total assets in the banking
industry.
The Fund invests substantially all of its assets in a corresponding Portfolio of
the International Currency Fund, a registered investment company that has the
same goals as the Fund. All investments in individual securities will be made at
the level of the Portfolio. This structure is sometimes called a "master/feeder"
structure. The Fund's investment results will correspond directly to the
investment results of the underlying Portfolio it invests in. For simplicity,
this Prospectus uses the term "Fund" to include the Fund's underlying Portfolio.
The Fund may adjust its holdings as market conditions and economic outlooks
change.
PRINCIPAL RISKS
Because the Fund invests in high quality, short-term instruments denominated in
the U.S. Dollar and manages its portfolio to maintain a stable share price, one
risk associated with an investment in the Fund is the possibility of a decline
in the Fund's yield. A decline in short-term U.S. interest rates would lower the
Fund's yield. Among the situations which might cause short-term U.S. interest
rates to fall are strong equity markets or a weak economy in the United States.
In addition, although the Fund seeks to preserve a stable net asset value
expressed in the U.S. Dollar, it is possible to lose money by investing in the
Fund. Shares of the Fund are not bank deposits and are not guaranteed, endorsed
or insured by any financial institution, government entity or the FDIC.
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The Fund's net asset value will fluctuate when expressed in a currency other
than the U.S. Dollar, primarily in response to changes in currency exchange
rates. Furthermore, short-term interest rates paid on instruments denominated in
the U.S. Dollar may be higher or lower than those paid on instruments
denominated in other currencies.
PERFORMANCE
The Fund commenced operations on March 26, 1997
The Fund's seven day yield on June 30, 1998 was 5.88%. For the Fund's current
seven day yield, please call 1-800-824-3863.
2
<PAGE> 7
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
Shareholder fees are fees paid directly from your investment.
<S> <C>
Maximum Sales Charge (Load) imposed on Purchases...........................None
Maximum Deferred Sales Charge (Load).......................................None
Maximum Sales Charge (Load) imposed on
Reinvested Dividends and other Distributions.............................None
Redemption Fee ............................................................None
Exchange Fee...............................................................None
Maximum Account Fee........................................................None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)(2) Annual
Fund Operating Expenses are deducted from the Fund's assets, and thus are paid
indirectly by all the Fund's investors.
<TABLE>
<S> <C>
Management Fee..........................................................0.25%
Distribution/Service (12b-1) Fees.......................................0.25%
Other Expenses..........................................................1.49%
Total Annual Fund Operating Expenses(3).................................1.99%
</TABLE>
EXAMPLE
This Example is designed to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest US$10,000 in the Fund for the time periods
shown and then redeem all your shares at the end of those periods. The Example
also assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Dollar Fund ........................ US$202 US$629 US$1,086 US$1,779
</TABLE>
(1) Shareholder Fees do not reflect charges for optional shareholder
services, such as the fee for wiring redemption proceeds.
Broker-dealers and other authorized institutions acting on behalf of
their clients may impose additional fees on investors such as account
maintenance fees, compensating balance requirements, or fees based upon
account transactions, assets or income.
(2) Annual Fund Operating Expenses shown in the table reflect expenses at
both the Fund and the Portfolio level. "Other Expenses" are based on
amounts incurred during the most recent fiscal year.
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(3) The investment manager has voluntarily agreed to limit the annualized
total fund operating expenses of the Fund to .50% of average net
assets.
The voluntary expense limitations are in effect through December 31,
1999. After that date, the investment manager may choose to continue,
revise or discontinue the limitations. If the Fund's expense limitation
is removed or revised upward, total return to its shareholders will
decrease to the extent the Fund's expenses are greater than the amount
of the former limitation. Taking into account the effect of the expense
limitations, Management Fees, Distribution/Service (12b-1) Fees, Other
Expenses and Total Annual Fund Operating Expenses for the Fund would be
as follows:
<TABLE>
<S> <C>
Management Fee................................................0.00%
Distribution/Service (12b-1) Fees.............................0.25%
Other Expenses................................................0.25%
Total Annual Fund Operating Expenses..........................0.50%
</TABLE>
INVESTMENT MANAGEMENT
State Street Bank and Trust Company (State Street), 225 Franklin Street, Boston,
MA 02110, through its division State Street Global Advisors, serves as the
Fund's investment manager. State Street has engaged State Street Global Advisors
United Kingdom Limited (SSgAUK), 1 Canada Square, Canary Wharf, London E14 5AF,
an indirect wholly owned subsidiary of State Street to be responsible for
day-to-day management of the Fund's investment program. The Fund pays an annual
fee of .25% of its average daily net assets for the services provided by State
Street and SSgAUK. State Street currently pays one-half of the fee it receives
from the Fund to SSgAUK for acting as sub-adviser.
State Street is one of the largest providers of securities processing and
recordkeeping services for US mutual funds and pension funds. State Street
Global Advisors is the investment management business of State Street, a 200
year old pioneer and leader in the world of financial services. State Street
Global Advisors is a wholly owned indirect subsidiary of State Street
Corporation, a publicly held bank holding company. State Street, with over
US$422 billion under management as of September 30, 1998, provides complete
global investment management services from offices in the United States and
worldwide.
PRICING THE FUND'S SHARES
The Fund expresses its share price in the U.S. Dollar. The Fund's share price is
its assets minus its liabilities (net asset value or NAV), divided by the total
number of shares of the Fund outstanding. The Fund calculates its share price
once each day it is open for business at 11:00 a.m. U.S. Eastern Time.
The Fund is open for business from 9:00 a.m. to 5:00 p.m. U.S. Eastern Time on
any day on which the New York Stock Exchange (the "NYSE") is open for trading or
banks in New York City are open for business. In other words, the Fund will be
open for business every day except for Saturdays, Sundays, and holidays which
are observed by both the NYSE and New York City banks.
4
<PAGE> 9
In calculating the value of its shares, the Fund uses the amortized cost method
of valuation. This method involves valuing an instrument initially at its cost
and then amortizing any premium or discount at a constant rate until maturity.
However, when the Fund believes that use of amortized cost valuation may dilute
or adversely affect its shareholders, the Fund may take appropriate action to
eliminate or reduce the extent of any dilution or unfairness.
HOW TO BUY SHARES
PURCHASES - GENERAL
Investors may buy shares of the Fund's Global Service class only through
financial services firms who have made the necessary arrangements with the
Fund's distributor, BISYS Fund Services Limited Partnership (BISYS). Contact
your financial services firm directly for appropriate purchase instructions.
Financial services firms may charge fees in connection with a Fund investment
for services they provide in addition to those provided in connection with the
Fund's 12b-1 Plan (discussed below). Please obtain information on these fees
from your financial services firm and review it prior to making a Fund
investment.
The minimum initial investment in the Fund's Global Service Shares is US$10
million.
The distributor processes purchases of the Fund's Global Service shares at the
share price of the relevant Fund next determined after the distributor receives
a purchase order in the appropriate form and accepts it. If the distributor does
not receive a purchase order for Fund shares by [5:00 p.m.] U.S. Eastern time on
a Fund business day, the distributor will treat the order as being received on
the Fund's next business day:
On days when a trading market for the U.S. Dollar and/or the Fund's custodian or
the distributor close early due to a partial holiday or otherwise, the Fund may
advance the times at which the distributor must receive purchase (and
redemption) orders.
Purchases of the Fund's shares must be made by wire in U.S. Dollars and may only
be made when the wire system designated for use in transmitting money to the
Fund permits the timely transmission of funds that are immediately available to
the Fund for investment purposes. Prospective or current investors must transmit
purchase orders through their financial services firm. Please see the section
"Purchasing By Wire" and the Application Agreement for further details.
ACCEPTANCE AND SETTLEMENT
The Fund may accept or reject any purchase order in whole or in part. Investors
will be entitled to any dividends declared or income earned on the day when
their purchase orders settle provided (a) the Fund has received the amount of
the purchase order denominated in U.S. Dollars by the close of business on the
settlement date and (b) that amount is immediately available for investment by
the Fund.
- Purchase orders for shares of the Fund received prior to 11:00
a.m. U.S. Eastern Time on a Fund business day will settle on
that same day (or the next New York Banking Day thereafter if
that Fund business day is not a New York Banking Day).
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<PAGE> 10
A New York Banking Day is every day except Saturdays, Sundays
and holidays observed by banks in New York City.
For any purchase order, if the Fund does not receive immediately available funds
equal to the purchase amount by the close of the Fund business day on the date
the purchase order settles, the Fund may, in its sole discretion, cancel the
order and hold the purchaser and/or the financial services firm through which
the order was placed responsible for any loss and other costs incurred by the
distributor and/or the Fund.
Investors who may need a stock certificate to evidence their ownership of Fund
shares should note that the Fund records share ownership by the book entry
method and does not issue share certificates.
HOW TO REDEEM SHARES
REDEMPTIONS - GENERAL
Shareholders must make all requests to sell Global Service shares through the
financial services firms that maintain their Fund accounts. As with Fund
purchases, financial services firms may establish procedures and charge fees for
Fund redemptions. Investors should acquaint themselves with these requirements
well before they anticipate the need to sell Fund shares. Financial services
firms may request redemptions for their clients by contacting BISYS Fund
Services, Inc., the Fund's transfer agent, on a Fund business day during the
Fund's hours of operation.
REDEMPTIONS - SETTLEMENT
Redemptions of Fund shares will be effected on Fund business days in accordance
with the following procedures, and only when the wire system designated for use
in transmitting money from the relevant Fund permits the timely transmission of
redemption proceeds.
- Redemption requests for the Fund received prior to 11:00 a.m.
U.S. Eastern Time on a Fund business day will settle that same
day (or the next New York Banking Day thereafter if that Fund
business day is not a New York Banking Day).
If the Fund does not receive a redemption prior to the applicable time listed
above, the Fund will treat the request as having been received the next
following Fund business day. As with the purchase of Fund shares, the Fund may
advance the times by which redemption orders must be received. Shareholders will
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.
REDEMPTION PROCEEDS
Under ordinary circumstances, all redemption requests are treated as requests
for redemption in the normal course in U.S. Dollars. However, if the investment
manager believes that market conditions preclude the Fund from making prompt
payment in U.S. Dollars, the Fund may pay redemption proceeds wholly or partly
in readily marketable portfolio securities or can take up
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<PAGE> 11
to seven days to pay redemption proceeds (or longer if permitted by the SEC).
The Fund must nevertheless pay redemption proceeds in currency without regard to
market conditions if the shareholder is redeeming no more than the lesser of (a)
US$250,000 or (b) 1% of the 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 U.S. Dollars through a recognized electronic
funds transfer system which handles that currency. A shareholder's account is
subject to a charge of US$20 for each wire redemption. Banks receiving
redemption proceeds by wire may also impose charges.
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. Redemption
proceeds will be directed to the shareholder's account at the shareholder's
financial services firm.
ACCOUNT POLICIES
PURCHASING BY WIRE
Before placing purchase orders, investors should acquaint themselves with the
requirements for using the wire system designated for transferring money to the
Fund in which they wish to invest. Investors should also verify that the
financial institution sending the purchase payment 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
services firm, further information about remitting funds by wire and any fees
that may be imposed for so doing. The Fund does not impose a fee for receiving
payment by wire.
FINANCIAL SERVICES FIRMS - ORDER TRANSMISSION AND PAYMENT
Financial services firms who purchase and redeem Fund shares for their clients
are acting on behalf of their customers and not on behalf of the Fund. As a
consequence, financial services firms are responsible for placing their clients'
purchase and redemption orders promptly and for delivering the funds necessary
to settle those orders by the applicable time.
ACCOUNTS WITH LOW BALANCES
The Fund may redeem a shareholder's account upon at least 60 days' written
notice to the shareholder if the account does not have in any Fund shares with a
net asset value equal to or greater than US$10 million. 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.
DISTRIBUTION/SERVICE FEES (12b-1 PLAN)
The Fund has adopted a 12b-1 Plan for its Global Service class of shares which
allows the Fund to use its assets to pay certain service fees and distribution
expenses incurred by this class of its shares. (This type of plan is named after
the rule under the securities laws which permits it.) The 12b-1 Plan provides
for the Fund to compensate financial service firms
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<PAGE> 12
(which may include affiliates of the investment manager or the administrator)
who enter into Service Agreements to provide account administration services to
their clients who are shareholders. The service fees paid to a financial
services firm will be .25% (on an annual basis) of the average daily net assets
of the Fund's Global Service class of shares held by the firm's clients. A
financial services firm may charge its clients who purchase Global Service
shares fees for services other than those provided under a Service Agreement. In
addition, the Plan permits the Fund to reimburse certain expenses incurred by
BISYS in distributing the Fund's Global Service class of shares. The total fees
paid to financial services firms and the Distributor pursuant to the Plan in any
fiscal year may not, however, exceed .25% (on an annual basis) of the average
daily net assets of the Fund's Global Service class of shares. Because 12b-1
fees are an ongoing expense, they will increase the cost of a Fund investment,
and over time, may cost an investor more than other types of sales charges.
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare dividends daily and pay them monthly. 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 Shares" and "How to Redeem Shares." Dividends from
the Fund are automatically reinvested in additional shares of that Fund at net
asset value.
TAXATION
In general, any dividends you receive from the Fund are taxable as ordinary
income.
Every year, the Fund will send you information detailing the amount of ordinary
income (and capital gains, if any) distributed to you for the previous year.
Shares of the Fund will generally not be a tax-efficient investment for non-U.S.
shareholders.
By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.
This section summarizes some of the consequences under current federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Your investment in the Fund could have additional tax consequences. Consult your
tax advisor about the potential tax consequences of an investment in the Fund
under all applicable tax laws.
OTHER INFORMATION
OTHER SECURITIES AND RISKS
The Fund's principal investment practices and risk factors are outlined in the
description of the Fund beginning on page 1. Below are brief descriptions of
other securities and practices, along with their associated risks.
8
<PAGE> 13
SECURITIES RATINGS
When securities are rated by one or more independent rating agencies, the Fund
uses these ratings to determine credit quality. In cases where a security has
received a rating from only one independent rating agency, the Fund may rely on
that rating. If a security has received ratings from two or more rating agencies
and at least two of the ratings are equivalent, the Fund may rely on the two
equivalent ratings even if the other ratings are lower. In cases where a
security's two highest ratings are in conflicting categories, the Fund must
follow the lower rating. If a security is unrated, the Fund may assign it to a
given category based on its own credit research.
FOREIGN INVESTMENTS
Foreign money market instruments have more risk than their domestic
counterparts, in part because foreign markets can have higher political and
economic risk and because reliable information about foreign issuers may be less
available. In addition, it may be more difficult to purchase and sell securities
in foreign markets because of differing settlement and custody practices and
costs.
REPURCHASE AGREEMENTS
The Fund may buy securities with the understanding that the seller will buy them
back with interest at a later date. If the seller is unable to honor its
commitment to repurchase the securities, the Fund could lose money.
MASTER-FEEDER FUND STRUCTURE
Unlike many other mutual funds, which directly buy and manage their own
portfolio securities, the Fund seeks to achieve its investment objectives by
investing all its assets in the corresponding Portfolio of the International
Currency Fund. Investors in the Fund will acquire an indirect interest in the
Fund's underlying Portfolio.
Other "feeder" funds may also investment in the "master" Portfolio. This
structure may enable the Fund to reduce costs through economies of scale. A
larger investment portfolio may also reduce certain transaction costs to the
extent that contributions to and redemptions from the master fund from different
feeders may offset each other and produce a lower net cash flow.
The Fund may withdraw from its corresponding Portfolio at any time and may
invest all of its assets in another pooled investment vehicle or retain an
investment adviser to manage the Fund's assets directly if the Fund's Board of
Trustees determines that such a course of action would be in shareholders' best
interests.
Smaller feeder funds may be harmed by the actions of larger feeder funds. For
example, a larger feeder fund could have more voting power than a smaller Fund
over the operations of their underlying Portfolio.
Whenever a Portfolio holds a vote of its feeder funds, its corresponding Fund
will pass the vote through to its own shareholders.
9
<PAGE> 14
SYSTEMS-YEAR 2000
The services provided to the Fund and its shareholders by State Street, SSgAUK,
BISYS and other service providers depend on the smooth functioning of their
computer systems and those of their own service providers. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. This problem could
have a negative impact on the handling of securities trades, payment of interest
and dividends and pricing and account services, among other Fund operations.
Although at this time there can be no assurance that no harm to the Fund will
result, State Street, SSgAUK, BISYS and the Fund's other service providers have
advised the Fund that they have been actively working on necessary changes to
their computer systems in anticipation of the year 2000 and expect that their
systems, and those of their service providers, will be prepared for the event.
Making the necessary preparations, however, remains the responsibility of each
service provider. The Fund itself does not expect to incur any material expense
to address the year 2000 problem.
10
<PAGE> 15
SSGA INTERNATIONAL LIQUIDITY FUND
FINANCIAL HIGHLIGHTS
Contained below is the per share operating performance data for a share
outstanding throughout the period, total investment return, ratios and
supplemental data. This information has been derived from information provided
in the financial statements. The financial highlights shown below are for the
Five Arrows shares class of the U.S. Dollar Fund, which is not currently
offered. During the periods show, the Fund had a lower investment advisory fee,
and, unlike the Global Service Shares offered in this prospectus, Five Arrows
shares were not subject to a 12b-1 fee.
U.S. DOLLAR FUND
FIVE ARROWS SHARES (d)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
$ $
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value per share, beginning of period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.04
---------- ------------
Total income from investment operations 0.03 0.04
---------- ------------
LESS DISTRIBUTIONS:
Net investment income (0.03) (0.04)
---------- ------------
Total distributions (0.03) (0.04)
---------- ------------
Net asset value per share, end of period $ 1.00 $ 1.00
---------- ------------
Total Return 2.70%(b) 4.18%(b)
---------- ------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ('000) $ 483 $ 8,269
Ratio of expenses to average net assets 0.28%(c) 0.28%(c)
Ratio of net investment income to average net assets 6.66%(c) 5.33%(c)
after reimbursements and waivers
Ratio of expenses to average net assets(a) 1.92%(c) 3.04%(c)
Ratio of net investment income to average net assets 5.02%(c) 2.56%(c)
</TABLE>
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements
had not occurred, the ratios would have been as indicated.
(b) Not annualized.
(c) Annualized.
(d) Per share amounts and ratios/supplemental data reflect income and
expenses assuming inclusion of the Fund's proportionate share of the
income and expenses of the related portfolio.
11
<PAGE> 16
{Back Cover Page}
ADDITIONAL INFORMATION
A Statement of Additional Information (SAI), which is incorporated by reference
into (is legally part of) this prospectus, contains further information about
the Fund. The Fund's most recent annual and semi-annual reports contain
information about the Fund's investments.
You may request free of charge the current SAI or the most recent annual report
and any succeeding semi-annual report, or other information about the Fund, by
calling 1-800-824-3863 or writing to:
BISYS Fund Services Limited Partnership
3455 Stelzer Road
Columbus, OH 43219-3035
Please contact the broker-dealer or other financial services firm through whom
you learned about the Fund or have purchased your Fund shares for information
about purchases, sales or any other matters concerning your holdings or the
Funds.
The SEC also makes available to the public reports and information about the
Fund. Certain reports and information, including the SAI, are available on the
SEC's website (http://www.sec.gov) or at the SEC's Public Reference Room in
Washington, D.C. You may call 1-800-SEC-0330 to get information on the
operations of the Public Reference Room or you may write to Public Reference
Section, Washington, D.C. 20549-6009 to get information from the Public
Reference Section. The Public Reference Section will charge a duplicating fee
for copying and sending any information you request.
Investment Company Act File No. 811-07775.
12
<PAGE> 17
SSGA INTERNATIONAL LIQUIDITY FUND
Canadian Dollar Fund
Prospectus
Global Service Shares
March __, 1999
The Securities and Exchange Commission has not approved or disapproved of the
Fund's shares or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
The Funds' shares are not deposits or obligations of State Street Bank and Trust
Company. Furthermore, the Funds' shares are not guaranteed or insured by State
Street Bank and Trust Company or insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. The
shares involve possible loss of the amount invested.
<PAGE> 18
CONTENTS
Page
----
The Fund's Investment Objectives............................................1
The Fund's Principal Investment Strategies..................................1
Principal Risks.............................................................1
Fees and Expenses...........................................................3
Investment Management.......................................................4
PRICING THE FUND'S SHARES...................................................4
HOW TO BUY SHARES...........................................................5
Purchases - General................................................5
Acceptance and Settlement..........................................5
HOW TO REDEEM SHARES........................................................6
Redemptions - General..............................................6
Redemptions - Settlement...........................................6
Redemption Proceeds................................................6
ACCOUNT POLICIES............................................................7
Purchasing By Wire.................................................7
Financial Services Firms - Order Transmission and Payment..........7
Accounts with Low Balances.........................................7
Distribution/Service Fees (12b-1 Plan)......................................7
DIVIDENDS AND DISTRIBUTIONS.................................................8
TAXATION ...................................................................8
OTHER INFORMATION...........................................................9
Other Securities and Risks.........................................9
Securities Ratings.................................................9
Foreign Investments................................................9
Repurchase Agreements..............................................9
Master-Feeder Fund Structure.......................................9
Regulatory Status.................................................10
Systems-Year 2000.................................................10
Additional Information.....................................................11
(i)
<PAGE> 19
CANADIAN DOLLAR FUND
GLOBAL SERVICE SHARES
THE FUND'S INVESTMENT OBJECTIVES
The Fund seeks to maintain a high level of liquidity, to preserve capital and
stability of principal expressed in the Canadian Dollar and, consistent with
those objectives to earn current income.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund manages its investments subject to strict SEC guidelines, which are
designed to enable the Fund to maintain a stable net asset value of one Euro per
share. However, there is no guarantee that the Fund will do so.
All of the Fund's investments are short-term; the Fund's value weighted average
portfolio maturity may not exceed 60 days. In addition, the Fund purchases only
"first tier" securities denominated in the Canadian Dollar. Generally first tier
securities are rated by firms such as Moody's and Standard & Poor's in their
highest short-term major rating categories, or if unrated, are considered to be
of equivalent quality by the investment manager.
The Fund's investments in bank instruments will usually include certificates of
deposit, time deposits and acceptances. The Fund's holdings of corporate
securities will typically include commercial paper, which is used for short-term
borrowing, or longer term debt securities whose remaining maturities are
thirteen months or less. In addition, the Fund may engage in repurchase
agreements. The Fund invests more than 25% of its total assets in the banking
industry.
The Fund invests substantially all of its assets in a corresponding Portfolio of
the International Currency Fund, a registered investment company that has the
same goals as the Fund. All investments in individual securities will be made at
the level of the Portfolio. This structure is sometimes called a "master/feeder"
structure. The Fund's investment results will correspond directly to the
investment results of the underlying Portfolio it invests in. For simplicity,
this Prospectus uses the term "Fund" to include the Fund's underlying Portfolio.
The Fund may adjust its holdings as market conditions and economic outlooks
change.
PRINCIPAL RISKS
Because the Fund invests in high quality, short-term instruments denominated in
the Canadian Dollar and manages its portfolio to maintain a stable share price,
one risk associated with an investment in the Fund is the possibility of a
decline in the Fund's yield. A decline in short-term Canadian interest rates
would lower the Fund's yield. Among the situations which might cause short-term
Canadian interest rates to fall are strong equity markets or a weak economy in
Canada. In addition, although the Fund seeks to preserve a stable net asset
value expressed in the Canadian Dollar, it is possible to lose money by
investing in the Fund. Shares of the Fund are not bank deposits and are not
guaranteed, endorsed or insured by any financial institution, government entity
or the FDIC.
1
<PAGE> 20
The Fund's net asset value will fluctuate when expressed in a currency other
than the Canadian Dollar, primarily in response to changes in currency exchange
rates. Furthermore, short-term interest rates paid on instruments denominated in
the Canadian Dollar may be higher or lower than those paid on instruments
denominated in other currencies.
The Fund is not "diversified" within the meaning of the Investment Company Act
of 1940. This means that, compared with "diversified" funds, it may invest a
relatively greater portion of its assets in any single issuer. As a result, the
Fund may be more susceptible to negative developments affecting a single issuer.
PERFORMANCE
The Fund commenced operations on March ___, 1999.
For the Fund's current seven day yield, please call 1-800-824-3863.
2
<PAGE> 21
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
Shareholder fees are fees paid directly from your investment.
<S> <C>
Maximum Sales Charge (Load) imposed on Purchases..........................None
Maximum Deferred Sales Charge (Load)......................................None
Maximum Sales Charge (Load) imposed on
Reinvested Dividends and other Distributions............................None
Redemption Fee ...........................................................None
Exchange Fee..............................................................None
Maximum Account Fee.......................................................None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)(2) Annual
Fund Operating Expenses are deducted from the Fund's assets, and thus are paid
indirectly by all the Fund's investors.
<TABLE>
<S> <C>
Management Fee............................................................0.25%
Distribution/Service (12b-1) Fees.........................................0.25%
Other Expenses............................................................0.94%
Total Annual Fund Operating Expenses(3)...................................1.44%
</TABLE>
EXAMPLE
This Example is designed to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest 10,000 Canadian Dollars in the Fund for the
time periods shown and then redeem all your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Canadian Dollar Fund ................................. C$147 C$459
</TABLE>
(1) Shareholder Fees do not reflect charges for optional shareholder
services, such as the fee for wiring redemption proceeds.
Broker-dealers and other authorized institutions acting on behalf of
their clients may impose additional fees on investors such as account
maintenance fees, compensating balance requirements, or fees based upon
account transactions, assets or income.
(2) Annual Fund Operating Expenses shown in the table reflect expenses at
both the Fund and the Portfolio level. "Other Expenses" are based on
estimated amounts for the current fiscal year.
(3) The investment manager has voluntarily agreed to limit the annualized
total fund operating expenses of the Fund to .50% of average net
assets.
3
<PAGE> 22
The voluntary expense limitations are in effect through December 31,
1999. After that date, the investment manager may choose to continue,
revise or discontinue the limitations. If the Fund's expense limitation
is removed or revised upward, total return to its shareholders will
decrease to the extent the Fund's expenses are greater than the amount
of the former limitation. Taking into account the effect of the expense
limitations, Management Fees, Distribution/Service (12b-1) Fees, Other
Expenses and Total Annual Fund Operating Expenses for the Fund would be
as follows:
<TABLE>
<CAPTION>
<S> <C>
Management Fee..............................................0.00%
Distribution/Service (12b-1) Fees...........................0.25%
Other Expenses..............................................0.25%
Total Annual Fund Operating Expenses........................0.50%
</TABLE>
INVESTMENT MANAGEMENT
State Street Bank and Trust Company (State Street), 225 Franklin Street, Boston,
MA 02110, through its division State Street Global Advisors, serves as the
Fund's investment manager. State Street has engaged State Street Global Advisors
United Kingdom Limited (SSgAUK), 1 Canada Square, Canary Wharf, London E14 5AF,
an indirect wholly owned subsidiary of State Street to be responsible for
day-to-day management of the Fund's investment program. The Fund pays an annual
fee of .25% of its average daily net assets for the services provided by State
Street and SSgAUK. State Street currently pays one-half of the fee it receives
from the Fund to SSgAUK for acting as sub-adviser.
State Street is one of the largest providers of securities processing and
recordkeeping services for US mutual funds and pension funds. State Street
Global Advisors is the investment management business of State Street, a 200
year old pioneer and leader in the world of financial services. State Street
Global Advisors is a wholly owned indirect subsidiary of State Street
Corporation, a publicly held bank holding company. State Street, with over
US$422 billion under management as of September 30, 1998, provides complete
global investment management services from offices in the United States and
worldwide.
PRICING THE FUND'S SHARES
The Fund expresses its share price in the Canadian Dollar. The Fund's share
price is its assets minus its liabilities (net asset value or NAV), divided by
the total number of shares of the Fund outstanding. The Fund calculates its
share price once each day it is open for business at 11:00 a.m. U.S. Eastern
Time.
The Fund is open for business from 9:00 a.m. to 5:00 p.m. U.S. Eastern Time on
any day on which the New York Stock Exchange (the "NYSE") is open for trading or
banks in New York City are open for business. In other words, the Fund will be
open for business every day except for Saturdays, Sundays, and holidays which
are observed by both the NYSE and New York City banks.
4
<PAGE> 23
In calculating the value of its shares, the Fund uses the amortized cost method
of valuation. This method involves valuing an instrument initially at its cost
and then amortizing any premium or discount at a constant rate until maturity.
However, when the Fund believes that use of amortized cost valuation may dilute
or adversely affect its shareholders, the Fund may take appropriate action to
eliminate or reduce the extent of any dilution or unfairness.
HOW TO BUY SHARES
PURCHASES - GENERAL
Investors may buy shares of the Fund's Global Service class only through
financial services firms who have made the necessary arrangements with the
Fund's distributor, BISYS Fund Services Limited Partnership (BISYS). Contact
your financial services firm directly for appropriate purchase instructions.
Financial services firms may charge fees in connection with a Fund investment
for services they provide in addition to those provided in connection with the
Fund's 12b-1 Plan (discussed below). Please obtain information on these fees
from your financial services firm and review it prior to making a Fund
investment.
The minimum initial investment in the Fund's Global Service Shares is C$10
million.
The distributor processes purchases of the Fund's Global Service shares at the
share price of the relevant Fund next determined after the distributor receives
a purchase order in the appropriate form and accepts it. If the distributor does
not receive a purchase order for Fund shares by [5:00 p.m.] U.S. Eastern time on
a Fund business day, the distributor will treat the order as being received on
the Fund's next business day:
On days when a trading market for the Canadian Dollar and/or the Fund's
custodian or the distributor close early due to a partial holiday or otherwise,
the Fund may advance the times at which the distributor must receive purchase
(and redemption) orders.
Purchases of the Fund's shares must be made by wire in Canadian Dollars and may
only be made when the wire system designated for use in transmitting money to
the Fund permits the timely transmission of funds that are immediately available
to the Fund for investment purposes. Prospective or current investors must
transmit purchase orders through their financial services firm. Please see the
section "Purchasing By Wire" and the Application Agreement for further details.
ACCEPTANCE AND SETTLEMENT
The Fund may accept or reject any purchase order in whole or in part. Investors
will be entitled to any dividends declared or income earned on the day when
their purchase orders settle provided (a) the Fund has received the amount of
the purchase order denominated in Canadian Dollars by the close of business on
the settlement date and (b) that amount is immediately available for investment
by the Fund.
- Purchase orders for shares of the Fund received prior to 11:00
a.m. U.S. Eastern Time on a Fund business day will settle on
that same day (or the next Toronto Banking Day thereafter if
that Fund business day is not a Toronto Banking Day).
5
<PAGE> 24
A Toronto Banking Day is every day except Saturdays, Sundays
and holidays observed by banks in Toronto.
For any purchase order, if the Fund does not receive immediately available funds
equal to the purchase amount by the close of the Fund business day on the date
the purchase order settles, the Fund may, in its sole discretion, cancel the
order and hold the purchaser and/or the financial services firm through which
the order was placed responsible for any loss and other costs incurred by the
distributor and/or the Fund.
Investors who may need a stock certificate to evidence their ownership of Fund
shares should note that the Fund records share ownership by the book entry
method and does not issue share certificates.
HOW TO REDEEM SHARES
REDEMPTIONS - GENERAL
Shareholders must make all requests to sell Global Service shares through the
financial services firms that maintain their Fund accounts. As with Fund
purchases, financial services firms may establish procedures and charge fees for
Fund redemptions. Investors should acquaint themselves with these requirements
well before they anticipate the need to sell Fund shares. Financial services
firms may request redemptions for their clients by contacting BISYS Fund
Services, Inc., the Fund's transfer agent, on a Fund business day during the
Fund's hours of operation.
REDEMPTIONS - SETTLEMENT
Redemptions of Fund shares will be effected on Fund business days in accordance
with the following procedures, and only when the wire system designated for use
in transmitting money from the relevant Fund permits the timely transmission of
redemption proceeds.
- Redemption requests for the Fund received prior to 11:00 a.m.
U.S. Eastern Time on a Fund business day will settle that same
day (or the next Toronto Banking Day thereafter if that Fund
business day is not a Toronto Banking Day).
If the Fund does not receive a redemption prior to the applicable time listed
above, the Fund will treat the request as having been received the next
following Fund business day. As with the purchase of Fund shares, the Fund may
advance the times by which redemption orders must be received. Shareholders will
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.
REDEMPTION PROCEEDS
Under ordinary circumstances, all redemption requests are treated as requests
for redemption in the normal course in Canadian Dollars. However, if the
investment manager believes that market conditions preclude the Fund from making
prompt payment in Canadian Dollars, the Fund may pay redemption proceeds wholly
or partly in readily marketable portfolio securities
6
<PAGE> 25
or can take up to seven days to pay redemption proceeds (or longer if permitted
by the SEC). The Fund must nevertheless pay redemption proceeds in currency
without regard to market conditions if the shareholder is redeeming no more than
the lesser of (a) the equivalent of US$250,000 or (b) 1% of the 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 Canadian Dollars through a recognized
electronic funds transfer system which handles that currency. A shareholder's
account is subject to a charge of C$20 for each wire redemption. Banks receiving
redemption proceeds by wire may also impose charges.
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. Redemption
proceeds will be directed to the shareholder's account at the shareholder's
financial services firm.
ACCOUNT POLICIES
PURCHASING BY WIRE
Before placing purchase orders, investors should acquaint themselves with the
requirements for using the wire system designated for transferring money to the
Fund in which they wish to invest. Investors should also verify that the
financial institution sending the purchase payment 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
services firm, further information about remitting funds by wire and any fees
that may be imposed for so doing. The Fund does not impose a fee for receiving
payment by wire.
FINANCIAL SERVICES FIRMS - ORDER TRANSMISSION AND PAYMENT
Financial services firms who purchase and redeem Fund shares for their clients
are acting on behalf of their customers and not on behalf of the Fund. As a
consequence, financial services firms are responsible for placing their clients'
purchase and redemption orders promptly and for delivering the funds necessary
to settle those orders by the applicable time.
ACCOUNTS WITH LOW BALANCES
The Fund may redeem a shareholder's account upon at least 60 days' written
notice to the shareholder if the account does not have in any Fund shares with a
net asset value equal to or greater than C$10 million. 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.
DISTRIBUTION/SERVICE FEES (12B-1 PLAN)
The Fund has adopted a 12b-1 Plan for its Global Service class of shares which
allows the Fund to use its assets to pay certain service fees and distribution
expenses incurred by this class of its shares. (This type of plan is named after
the rule under the securities laws which permits it.) The 12b-1 Plan provides
for the Fund to compensate financial service firms
7
<PAGE> 26
(which may include affiliates of the investment manager or the administrator)
who enter into Service Agreements to provide account administration services to
their clients who are shareholders. The service fees paid to a financial
services firm will be .25% (on an annual basis) of the average daily net assets
of the Fund's Global Service class of shares held by the firm's clients. A
financial services firm may charge its clients who purchase Global Service
shares fees for services other than those provided under a Service Agreement. In
addition, the Plan permits the Fund to reimburse certain expenses incurred by
BISYS in distributing the Fund's Global Service class of shares. The total fees
paid to financial services firms and the Distributor pursuant to the Plan in any
fiscal year may not, however, exceed .25% (on an annual basis) of the average
daily net assets of the Fund's Global Service class of shares. Because 12b-1
fees are an ongoing expense, they will increase the cost of a Fund investment,
and over time, may cost an investor more than other types of sales charges.
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare dividends daily and pay them monthly. 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 Shares" and "How to Redeem Shares." Dividends from
the Fund are automatically reinvested in additional shares of that Fund at net
asset value.
TAXATION
In general, any dividends you receive from the Fund are taxable as ordinary
income.
Every year, the Fund will send you information detailing the amount of ordinary
income (and capital gains, if any) distributed to you for the previous year.
The Fund will determine its income in Canadian Dollars and will translate its
net income for each year from Canadian Dollars into U.S. Dollars for U.S.
Federal income tax purposes. While the Fund calculates its income without
recognizing currency gain or loss, U.S. shareholders of the Fund generally will
recognize gain or loss on a sale or redemption of shares as a result of
fluctuations in the relative values of the U.S. Dollar and the Canadian Dollar
that occur between the date of acquisition and the date of disposition. In
general, that gain or loss will be capital gain or loss.
Shares of the Fund will generally not be a tax-efficient investment for non-U.S.
shareholders.
By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.
This section summarizes some of the consequences under current federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Your investment in the Fund could have additional tax consequences. Consult your
tax advisor about the potential tax consequences of an investment in the Fund
under all applicable tax laws.
8
<PAGE> 27
OTHER INFORMATION
OTHER SECURITIES AND RISKS
The Fund's principal investment practices and risk factors are outlined in the
description of the Fund beginning on page 1. Below are brief descriptions of
other securities and practices, along with their associated risks.
SECURITIES RATINGS
When securities are rated by one or more independent rating agencies, the Fund
uses these ratings to determine credit quality. In cases where a security has
received a rating from only one independent rating agency, the Fund may rely on
that rating. If a security has received ratings from two or more rating agencies
and at least two of the ratings are equivalent, the Fund may rely on the two
equivalent ratings even if the other ratings are lower. In cases where a
security's two highest ratings are in conflicting categories, the Fund must
follow the lower rating. If a security is unrated, the Fund may assign it to a
given category based on its own credit research.
FOREIGN INVESTMENTS
Foreign money market instruments have more risk than their domestic
counterparts, in part because foreign markets can have higher political and
economic risk and because reliable information about foreign issuers may be less
available. In addition, it may be more difficult to purchase and sell securities
in foreign markets because of differing settlement and custody practices and
costs.
REPURCHASE AGREEMENTS
The Fund may buy securities with the understanding that the seller will buy them
back with interest at a later date. If the seller is unable to honor its
commitment to repurchase the securities, the Fund could lose money.
MASTER-FEEDER FUND STRUCTURE
Unlike many other mutual funds, which directly buy and manage their own
portfolio securities, the Fund seeks to achieve its investment objectives by
investing all its assets in the corresponding Portfolio of the International
Currency Fund. Investors in the Fund will acquire an indirect interest in the
Fund's underlying Portfolio.
Other "feeder" funds may also investment in the "master" Portfolio. This
structure may enable the Fund to reduce costs through economies of scale. A
larger investment portfolio may also reduce certain transaction costs to the
extent that contributions to and redemptions from the master fund from different
feeders may offset each other and produce a lower net cash flow.
The Fund may withdraw from its corresponding Portfolio at any time and may
invest all of its assets in another pooled investment vehicle or retain an
investment adviser to manage the
9
<PAGE> 28
Fund's assets directly if the Fund's Board of Trustees determines that such a
course of action would be in shareholders' best interests.
Smaller feeder funds may be harmed by the actions of larger feeder funds. For
example, a larger feeder fund could have more voting power than a smaller Fund
over the operations of their underlying Portfolio.
Whenever a Portfolio holds a vote of its feeder funds, its corresponding Fund
will pass the vote through to its own shareholders.
REGULATORY STATUS
Although the Fund is treated as a money market fund for most purposes, it is not
a money market fund for purposes of investment restrictions applicable to other
investment companies. In addition, banks, insurance companies and other entities
subject to government regulation should consult their legal advisers before
concluding that the Fund is a "money market fund" under any applicable
regulation.
SYSTEMS-YEAR 2000
The services provided to the Fund and its shareholders by State Street, SSgAUK,
BISYS and other service providers depend on the smooth functioning of their
computer systems and those of their own service providers. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. This problem could
have a negative impact on the handling of securities trades, payment of interest
and dividends and pricing and account services, among other Fund operations.
Although at this time there can be no assurance that no harm to the Fund will
result, State Street, SSgAUK, BISYS and the Fund's other service providers have
advised the Fund that they have been actively working on necessary changes to
their computer systems in anticipation of the year 2000 and expect that their
systems, and those of their service providers, will be prepared for the event.
Making the necessary preparations, however, remains the responsibility of each
service provider. The Fund itself does not expect to incur any material expense
to address the year 2000 problem.
10
<PAGE> 29
{Back Cover Page}
ADDITIONAL INFORMATION
A Statement of Additional Information (SAI), which is incorporated by reference
into (is legally part of) this prospectus, contains further information about
the Fund. The Fund's most recent annual and semi-annual reports contain
information about the Fund's investments.
You may request free of charge the current SAI or the most recent annual report
and any succeeding semi-annual report, or other information about the Fund, by
calling 1-800-824-3863 or writing to:
BISYS Fund Services Limited Partnership
3455 Stelzer Road
Columbus, OH 43219-3035
Please contact the broker-dealer or other financial services firm through whom
you learned about the Fund or have purchased your Fund shares for information
about purchases, sales or any other matters concerning your holdings or the
Funds.
The SEC also makes available to the public reports and information about the
Fund. Certain reports and information, including the SAI, are available on the
SEC's website (http://www.sec.gov) or at the SEC's Public Reference Room in
Washington, D.C. You may call 1-800-SEC-0330 to get information on the
operations of the Public Reference Room or you may write to Public Reference
Section, Washington, D.C. 20549-6009 to get information from the Public
Reference Section. The Public Reference Section will charge a duplicating fee
for copying and sending any information you request.
Investment Company Act File No. 811-07775.
11
<PAGE> 30
SSGA INTERNATIONAL LIQUIDITY FUND
Euro Fund
Prospectus
Global Service Shares
March __, 1999
The Securities and Exchange Commission has not approved or disapproved of the
Fund's shares or determined whether this prospectus is accurate or complete.
Anyone who tells you otherwise is committing a crime.
The Funds' shares are not deposits or obligations of State Street Bank and Trust
Company. Furthermore, the Funds' shares are not guaranteed or insured by State
Street Bank and Trust Company or insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. The
shares involve possible loss of the amount invested.
<PAGE> 31
CONTENTS
Page
----
The Fund's Investment Objectives.............................................1
The Fund's Principal Investment Strategies...................................1
Principal Risks..............................................................1
Fees and Expenses............................................................3
Investment Management........................................................4
PRICING THE FUND'S SHARES....................................................4
HOW TO BUY SHARES............................................................5
Purchases - General.................................................5
Acceptance and Settlement...........................................5
HOW TO REDEEM SHARES.........................................................6
Redemptions - General...............................................6
Redemptions - Settlement............................................6
Redemption Proceeds.................................................6
ACCOUNT POLICIES.............................................................7
Purchasing By Wire..................................................7
Financial Services Firms - Order Transmission and Payment...........7
Accounts with Low Balances..........................................7
Distribution/Service Fees (12b-1 Plan).......................................7
DIVIDENDS AND DISTRIBUTIONS..................................................8
TAXATION ....................................................................8
OTHER INFORMATION............................................................8
Other Securities and Risks..........................................8
Securities Ratings..................................................9
Foreign Investments.................................................9
Repurchase Agreements...............................................9
Master-Feeder Fund Structure........................................9
Regulatory Status..................................................10
Systems-Year 2000..................................................10
Additional Information......................................................11
(i)
<PAGE> 32
EURO FUND
GLOBAL SERVICE SHARES
THE FUND'S INVESTMENT OBJECTIVES
The Fund seeks to maintain a high level of liquidity, to preserve capital and
stability of principal expressed in the Euro and, consistent with those
objectives to earn current income.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund manages its investments subject to strict SEC guidelines, which are
designed to enable the Fund to maintain a stable net asset value of one Euro per
share. However, there is no guarantee that the Fund will do so.
All of the Fund's investments are short-term; the Fund's value weighted average
portfolio maturity may not exceed 60 days. In addition, the Fund purchases only
"first tier" securities denominated in the Euro. Generally first tier securities
are rated by firms such as Moody's and Standard & Poor's in their highest
short-term major rating categories, or if unrated, are considered to be of
equivalent quality by the investment manager.
The Fund's investments in bank instruments will usually include certificates of
deposit, time deposits and acceptances. The Fund's holdings of corporate
securities will typically include commercial paper, which is used for short-term
borrowing, or longer term debt securities whose remaining maturities are
thirteen months or less. In addition, the Fund may engage in repurchase
agreements. The Fund invests more than 25% of its total assets in the banking
industry.
The Fund invests substantially all of its assets in a corresponding Portfolio of
the International Currency Fund, a registered investment company that has the
same goals as the Fund. All investments in individual securities will be made at
the level of the Portfolio. This structure is sometimes called a "master/feeder"
structure. The Fund's investment results will correspond directly to the
investment results of the underlying Portfolio it invests in. For simplicity,
this Prospectus uses the term "Fund" to include the Fund's underlying Portfolio.
The Fund may adjust its holdings as market conditions and economic outlooks
change.
PRINCIPAL RISKS
Because the Fund invests in high quality, short-term instruments denominated in
the Euro and manages its portfolio to maintain a stable share price, one risk
associated with an investment in the Fund is the possibility of a decline in the
Fund's yield. A decline in short-term interest rates for the countries
participating in the Euro would lower the Fund's yield. Among the situations
which might cause short-term interest rates for the countries participating in
the Euro to fall are strong equity markets or a weak economies in those
countries. In addition, although the Fund seeks to preserve a stable net asset
value expressed in the Euro, it is possible to lose money by investing in the
Fund. Shares of the Fund are not bank deposits and are not guaranteed, endorsed
or insured by any financial institution, government entity or the FDIC.
1
<PAGE> 33
The Euro is a new currency that was created on January 1, 1999 by the action of
eleven participating countries. Full monetary union among these countries is not
scheduled to occur until mid-2002 and during the interim period their
pre-existing currencies will continue to exist as legal tender. Although the
participating countries are bound by treaty to complete the process of monetary
union, there can be no absolute assurance that they will do so. Several European
countries, including the United Kingdom and Switzerland, have not adopted the
Euro as their currency.
European monetary union represents an effort of historic breadth and complexity
that is likely to have far-reaching political, economic and social consequences,
many of which cannot be accurately predicted at this time. It is expected to
reshape the financial markets, banking systems and monetary policies of most
countries in Europe and in other parts of the world. Systems for trading,
clearing and settling Euro-denominated securities are newly developed and market
conventions are still evolving. Any of these factors could adversely affect the
value of the Fund's investments.
The Fund's net asset value will fluctuate when expressed in a currency other
than the Euro, primarily in response to changes in currency exchange rates.
Furthermore, short-term interest rates paid on instruments denominated in the
Euro may be higher or lower than those paid on instruments denominated in other
currencies.
The Fund is not "diversified" within the meaning of the Investment Company Act
of 1940. This means that, compared with "diversified" funds, it may invest a
relatively greater portion of its assets in any single issuer. As a result, the
Fund may be more susceptible to negative developments affecting a single issuer.
PERFORMANCE
The Fund commenced operations on March ___, 1999.
For the Fund's current seven day yield, please call 1-800-824-3863.
2
<PAGE> 34
FEES AND EXPENSES
<TABLE>
SHAREHOLDER FEES(1)
Shareholder fees are fees paid directly from your investment.
<S> <C>
Maximum Sales Charge (Load) imposed on Purchases..........................None
Maximum Deferred Sales Charge (Load)......................................None
Maximum Sales Charge (Load) imposed on
Reinvested Dividends and other Distributions............................None
Redemption Fee ...........................................................None
Exchange Fee..............................................................None
Maximum Account Fee.......................................................None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)(2) Annual
Fund Operating Expenses are deducted from the Fund's assets, and thus are paid
indirectly by all the Fund's investors.
<TABLE>
<S> <C>
Management Fee.........................................................0.25%
Distribution/Service (12b-1) Fees......................................0.25%
Other Expenses.........................................................0.50%
Total Annual Fund Operating Expenses(3)................................1.00%
</TABLE>
EXAMPLE
This Example is designed to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest 10,000 Euros in the Fund for the time
periods shown and then redeem all your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
Euro Fund ............................................ E102 E318
</TABLE>
(1) Shareholder Fees do not reflect charges for optional shareholder
services, such as the fee for wiring redemption proceeds.
Broker-dealers and other authorized institutions acting on behalf of
their clients may impose additional fees on investors such as account
maintenance fees, compensating balance requirements, or fees based upon
account transactions, assets or income.
(2) Annual Fund Operating Expenses shown in the table reflect expenses at
both the Fund and the Portfolio level. "Other Expenses" are based on
estimated amounts for the current fiscal year.
(3) The investment manager has voluntarily agreed to limit the annualized
total fund operating expenses of the Fund to .50% of average net
assets.
3
<PAGE> 35
The voluntary expense limitations are in effect through December 31,
1999. After that date, the investment manager may choose to continue,
revise or discontinue the limitations. If the Fund's expense limitation
is removed or revised upward, total return to its shareholders will
decrease to the extent the Fund's expenses are greater than the amount
of the former limitation. Taking into account the effect of the expense
limitations, Management Fees, Distribution/Service (12b-1) Fees, Other
Expenses and Total Annual Fund Operating Expenses for the Fund would be
as follows:
<TABLE>
<S> <C>
Management Fee..................................................0.00%
Distribution/Service (12b-1) Fees...............................0.25%
Other Expenses..................................................0.25%
Total Annual Fund Operating Expenses............................0.50%
</TABLE>
INVESTMENT MANAGEMENT
State Street Bank and Trust Company (State Street), 225 Franklin Street, Boston,
MA 02110, through its division State Street Global Advisors, serves as the
Fund's investment manager. State Street has engaged State Street Global Advisors
United Kingdom Limited (SSgAUK), 1 Canada Square, Canary Wharf, London E14 5AF,
an indirect wholly owned subsidiary of State Street to be responsible for
day-to-day management of the Fund's investment program. The Fund pays an annual
fee of .25% of its average daily net assets for the services provided by State
Street and SSgAUK. State Street currently pays one-half of the fee it receives
from the Fund to SSgAUK for acting as sub-adviser.
State Street is one of the largest providers of securities processing and
recordkeeping services for US mutual funds and pension funds. State Street
Global Advisors is the investment management business of State Street, a 200
year old pioneer and leader in the world of financial services. State Street
Global Advisors is a wholly owned indirect subsidiary of State Street
Corporation, a publicly held bank holding company. State Street, with over
US$422 billion under management as of September 30, 1998, provides complete
global investment management services from offices in the United States and
worldwide.
PRICING THE FUND'S SHARES
The Fund expresses its share price in the Euro. The Fund's share price is its
assets minus its liabilities (net asset value or NAV), divided by the total
number of shares of the Fund outstanding. The Fund calculates its share price
once each day it is open for business at 10:30 a.m. London Time (generally 5:30
a.m. U.S. Eastern Time).
The Fund is open for business from 9:00 a.m. to 5:00 p.m. U.S. Eastern Time on
any day on which the New York Stock Exchange (the "NYSE") is open for trading or
banks in New York City are open for business. In other words, the Fund will be
open for business every day except for Saturdays, Sundays, and holidays which
are observed by both the NYSE and New York City banks.
In calculating the value of its shares, the Fund uses the amortized cost method
of valuation. This method involves valuing an instrument initially at its cost
and then amortizing any
4
<PAGE> 36
premium or discount at a constant rate until maturity. However, when the Fund
believes that use of amortized cost valuation may dilute or adversely affect its
shareholders, the Fund may take appropriate action to eliminate or reduce the
extent of any dilution or unfairness.
HOW TO BUY SHARES
PURCHASES - GENERAL
Investors may buy shares of the Fund's Global Service class only through
financial services firms who have made the necessary arrangements with the
Fund's distributor, BISYS Fund Services Limited Partnership (BISYS). Contact
your financial services firm directly for appropriate purchase instructions.
Financial services firms may charge fees in connection with a Fund investment
for services they provide in addition to those provided in connection with the
Fund's 12b-1 Plan (discussed below). Please obtain information on these fees
from your financial services firm and review it prior to making a Fund
investment.
The minimum initial investment in the Fund's Global Service Shares is E10
million.
The distributor processes purchases of the Fund's Global Service shares at the
share price of the relevant Fund next determined after the distributor receives
a purchase order in the appropriate form and accepts it. If the distributor does
not receive a purchase order for Fund shares by [5:00 p.m.] U.S. Eastern time on
a Fund business day, the distributor will treat the order as being received on
the Fund's next business day:
On days when a trading market for the Euro and/or the Fund's custodian or the
distributor close early due to a partial holiday or otherwise, the Fund may
advance the times at which the distributor must receive purchase (and
redemption) orders.
Purchases of the Fund's shares must be made by wire in the Euro and may only be
made when the wire system designated for use in transmitting money to the Fund
permits the timely transmission of funds that are immediately available to the
Fund for investment purposes. Prospective or current investors must transmit
purchase orders through their financial services firm. Please see the section
"Purchasing By Wire" and the Application Agreement for further details.
ACCEPTANCE AND SETTLEMENT
The Fund may accept or reject any purchase order in whole or in part. Investors
will be entitled to any dividends declared or income earned on the day when
their purchase orders settle provided (a) the Fund has received the amount of
the purchase order denominated in the Euro by [the close of business] on the
settlement date and (b) that amount is immediately available for investment by
the Fund.
- Purchase orders for shares of the Euro Fund received prior to
5:00 p.m. U.S. Eastern Time on a Fund business day will settle
on the following Paris/Frankfurt Banking Day (or the next
Paris/Frankfurt Banking Day thereafter if that Fund business
day is not a Paris/Frankfurt Banking Day).
5
<PAGE> 37
A Paris/Frankfurt Banking Day is every day except Saturdays,
Sundays and holidays observed by banks in either city.
For any purchase order, if the Fund does not receive immediately available funds
equal to the purchase amount by the close of the Fund business day on the date
the purchase order settles, the Fund may, in its sole discretion, cancel the
order and hold the purchaser and/or the financial services firm through which
the order was placed responsible for any loss and other costs incurred by the
distributor and/or the Fund.
Investors who may need a stock certificate to evidence their ownership of Fund
shares should note that the Fund records share ownership by the book entry
method and does not issue share certificates.
HOW TO REDEEM SHARES
REDEMPTIONS - GENERAL
Shareholders must make all requests to sell Global Service shares through the
financial services firms that maintain their Fund accounts. As with Fund
purchases, financial services firms may establish procedures and charge fees for
Fund redemptions. Investors should acquaint themselves with these requirements
well before they anticipate the need to sell Fund shares. Financial services
firms may request redemptions for their clients by contacting BISYS Fund
Services, Inc., the Fund's transfer agent, on a Fund business day during the
Fund's hours of operation.
REDEMPTIONS - SETTLEMENT
Redemptions of Fund shares will be effected on Fund business days in accordance
with the following procedures, and only when the wire system designated for use
in transmitting money from the relevant Fund permits the timely transmission of
redemption proceeds.
- Redemption requests for the Euro Fund received prior to 5:00
p.m. U.S. Eastern Time on a Fund business day will settle on
the following Paris/Frankfurt Banking Day (or the next
Paris/Frankfurt Banking Day thereafter if that Fund business
day is not a Paris/Frankfurt Banking Day).
If the Fund does not receive a redemption prior to the applicable time listed
above, the Fund will treat the request as having been received the next
following Fund business day. As with the purchase of Fund shares, the Fund may
advance the times by which redemption orders must be received. Shareholders will
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.
REDEMPTION PROCEEDS
Under ordinary circumstances, all redemption requests are treated as requests
for redemption in the normal course in Euro. However, if the investment manager
believes that market conditions preclude the Fund from making prompt payment in
Euro, the Fund may pay redemption proceeds wholly or partly in readily
marketable portfolio securities or can take up
6
<PAGE> 38
to seven days to pay redemption proceeds (or longer if permitted by the SEC).
The Fund must nevertheless pay redemption proceeds in currency without regard to
market conditions if the shareholder is redeeming no more than the lessor of (a)
the equivalent of US$250,000 or (b) 1% of the 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 Euro through a recognized electronic funds
transfer system which handles that currency. A shareholder's account is subject
to a charge of E20 for each wire redemption. Banks receiving redemption proceeds
by wire may also impose charges.
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. Redemption
proceeds will be directed to the shareholder's account at the shareholder's
financial services firm.
ACCOUNT POLICIES
PURCHASING BY WIRE
Before placing purchase orders, investors should acquaint themselves with the
requirements for using the wire system designated for transferring money to the
Fund in which they wish to invest. Investors should also verify that the
financial institution sending the purchase payment 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
services firm, further information about remitting funds by wire and any fees
that may be imposed for so doing. The Fund does not impose a fee for receiving
payment by wire.
FINANCIAL SERVICES FIRMS - ORDER TRANSMISSION AND PAYMENT
Financial services firms who purchase and redeem Fund shares for their clients
are acting on behalf of their customers and not on behalf of the Fund. As a
consequence, financial services firms are responsible for placing their clients'
purchase and redemption orders promptly and for delivering the funds necessary
to settle those orders by the applicable time.
ACCOUNTS WITH LOW BALANCES
The Fund may redeem a shareholder's account upon at least 60 days' written
notice to the shareholder if the account does not have in any Fund shares with a
net asset value equal to or greater than E10 million. 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.
DISTRIBUTION/SERVICE FEES (12b-1 PLAN)
The Fund has adopted a 12b-1 Plan for its Global Service class of shares which
allows the Fund to use its assets to pay certain service fees and distribution
expenses incurred by this class of its shares. (This type of plan is named after
the rule under the securities laws which permits it.) The 12b-1 Plan provides
for the Fund to compensate financial service firms
7
<PAGE> 39
(which may include affiliates of the investment manager or the administrator)
who enter into Service Agreements to provide account administration services to
their clients who are shareholders. The service fees paid to a financial
services firm will be .25% (on an annual basis) of the average daily net assets
of the Fund's Global Service class of shares held by the firm's clients. A
financial services firm may charge its clients who purchase Global Service
shares fees for services other than those provided under a Service Agreement. In
addition, the Plan permits the Fund to reimburse certain expenses incurred by
BISYS in distributing the Fund's Global Service class of shares. The total fees
paid to financial services firms and the Distributor pursuant to the Plan in any
fiscal year may not, however, exceed .25% (on an annual basis) of the average
daily net assets of the Fund's Global Service class of shares. Because 12b-1
fees are an ongoing expense, they will increase the cost of a Fund investment,
and over time, may cost an investor more than other types of sales charges.
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare dividends daily and pay them monthly. 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 Shares" and "How to Redeem Shares." Dividends from
the Fund are automatically reinvested in additional shares of that Fund at net
asset value.
TAXATION
In general, any dividends you receive from the Fund are taxable as ordinary
income.
Every year, the Fund will send you information detailing the amount of ordinary
income (and capital gains, if any) distributed to you for the previous year.
The Fund will determine its income in the Euro and will translate its net income
for each year from Euro into U.S. Dollars for U.S. Federal income tax purposes.
While the Fund calculates its income without recognizing currency gain or loss,
U.S. shareholders of the Fund generally will recognize gain or loss on a sale or
redemption of shares as a result of fluctuations in the relative values of the
U.S. Dollar and the Euro that occur between the date of acquisition and the date
of disposition. In general, that gain or loss will be capital gain or loss.
Shares of the Fund will generally not be a tax-efficient investment for non-U.S.
shareholders.
By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.
This section summarizes some of the consequences under current federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Your investment in the Fund could have additional tax consequences. Consult your
tax advisor about the potential tax consequences of an investment in the Fund
under all applicable tax laws.
OTHER INFORMATION
OTHER SECURITIES AND RISKS
8
<PAGE> 40
The Fund's principal investment practices and risk factors are outlined in the
description of the Fund beginning on page 1. Below are brief descriptions of
other securities and practices, along with their associated risks.
SECURITIES RATINGS
When securities are rated by one or more independent rating agencies, the Fund
uses these ratings to determine credit quality. In cases where a security has
received a rating from only one independent rating agency, the Fund may rely on
that rating. If a security has received ratings from two or more rating agencies
and at least two of the ratings are equivalent, the Fund may rely on the two
equivalent ratings even if the other ratings are lower. In cases where a
security's two highest ratings are in conflicting categories, the Fund must
follow the lower rating. If a security is unrated, the Fund may assign it to a
given category based on its own credit research.
FOREIGN INVESTMENTS
Foreign money market instruments have more risk than their domestic
counterparts, in part because foreign markets can have higher political and
economic risk and because reliable information about foreign issuers may be less
available. In addition, it may be more difficult to purchase and sell securities
in foreign markets because of differing settlement and custody practices and
costs.
REPURCHASE AGREEMENTS
The Fund may buy securities with the understanding that the seller will buy them
back with interest at a later date. If the seller is unable to honor its
commitment to repurchase the securities, the Fund could lose money.
MASTER-FEEDER FUND STRUCTURE
Unlike many other mutual funds, which directly buy and manage their own
portfolio securities, the Fund seeks to achieve its investment objectives by
investing all its assets in the corresponding Portfolio of the International
Currency Fund. Investors in the Fund will acquire an indirect interest in the
Fund's underlying Portfolio.
Other "feeder" funds may also investment in the "master" Portfolio. This
structure may enable the Fund to reduce costs through economies of scale. A
larger investment portfolio may also reduce certain transaction costs to the
extent that contributions to and redemptions from the master fund from different
feeders may offset each other and produce a lower net cash flow.
The Fund may withdraw from its corresponding Portfolio at any time and may
invest all of its assets in another pooled investment vehicle or retain an
investment adviser to manage the Fund's assets directly if the Fund's Board of
Trustees determines that such a course of action would be in shareholders' best
interests.
9
<PAGE> 41
Smaller feeder funds may be harmed by the actions of larger feeder funds. For
example, a larger feeder fund could have more voting power than a smaller Fund
over the operations of their underlying Portfolio.
Whenever a Portfolio holds a vote of its feeder funds, its corresponding Fund
will pass the vote through to its own shareholders.
REGULATORY STATUS
Although the Fund is treated as a money market fund for most purposes, it is not
a money market fund for purposes of investment restrictions applicable to other
investment companies. In addition, banks, insurance companies and other entities
subject to government regulation should consult their legal advisers before
concluding that the Fund is a "money market fund" under any applicable
regulation.
SYSTEMS-YEAR 2000
The services provided to the Fund and its shareholders by State Street, SSgAUK,
BISYS and other service providers depend on the smooth functioning of their
computer systems and those of their own service providers. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. This problem could
have a negative impact on the handling of securities trades, payment of interest
and dividends and pricing and account services, among other Fund operations.
Although at this time there can be no assurance that no harm to the Fund will
result, State Street, SSgAUK, BISYS and the Fund's other service providers have
advised the Fund that they have been actively working on necessary changes to
their computer systems in anticipation of the year 2000 and expect that their
systems, and those of their service providers, will be prepared for the event.
Making the necessary preparations, however, remains the responsibility of each
service provider. The Fund itself does not expect to incur any material expense
to address the year 2000 problem.
10
<PAGE> 42
{Back Cover Page}
ADDITIONAL INFORMATION
A Statement of Additional Information (SAI), which is incorporated by reference
into (is legally part of) this prospectus, contains further information about
the Fund. The Fund's most recent annual and semi-annual reports contain
information about the Fund's investments.
You may request free of charge the current SAI or the most recent annual report
and any succeeding semi-annual report, or other information about the Fund, by
calling 1-800-824-3863 or writing to:
BISYS Fund Services Limited Partnership
3455 Stelzer Road
Columbus, OH 43219-3035
Please contact the broker-dealer or other financial services firm through whom
you learned about the Fund or have purchased your Fund shares for information
about purchases, sales or any other matters concerning your holdings or the
Funds.
The SEC also makes available to the public reports and information about the
Fund. Certain reports and information, including the SAI, are available on the
SEC's website (http://www.sec.gov) or at the SEC's Public Reference Room in
Washington, D.C. You may call 1-800-SEC-0330 to get information on the
operations of the Public Reference Room or you may write to Public Reference
Section, Washington, D.C. 20549-6009 to get information from the Public
Reference Section. The Public Reference Section will charge a duplicating fee
for copying and sending any information you request.
Investment Company Act File No. 811-07775.
11
<PAGE> 43
Statement of Additional Information
March __,1999
SSgA International Liquidity Fund (the "Trust") is an open-end
management investment company. The Trust has four series (the "Funds") which are
described in this Statement of Additional Information: the U.S. Dollar Fund,
which is diversified, the Euro Fund, the Canadian Dollar Fund and the Pound
Sterling Fund, which are not diversified. The Pound Sterling Fund is not
currently offered to the public.
The Funds seek to achieve their investment objectives by investing all
of their assets in the corresponding Portfolio of the International Currency
Fund (the "Portfolio Trust"). Investors in the Fund acquire an indirect interest
in the Fund's underlying Portfolio.
Each Fund is described in a separate Prospectus dated March __, 1999.
This Statement of Additional Information supplements and should be read in
conjunction with the Prospectuses as they may be revised from time to time. To
obtain a copy of the Prospectuses, please write to the Trust at 3435 Stelzer
Road, Columbus, Ohio 43219-3035, or call BISYS Fund Services Limited Partnership
(the "Distributor"), at 1-800-824-3863.
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> 44
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...............................1
Investment Objectives and Policies....................................1
Euro Portfolio...............................................1
U.S. Dollar Portfolio........................................2
Canadian Dollar Portfolio....................................3
Pound Sterling Portfolio.....................................4
Non-Fundamental Investment Restrictions...............................6
MONEY MARKET INSTRUMENTS.......................................................7
U.S. Dollar Portfolio.................................................7
Short-Term Corporate Debt Instruments.................................8
Bank Money Investments................................................9
U.S. Government Securities...........................................10
Government Agency Securities.........................................10
Custodial Receipts...................................................11
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES FOR ALL PORTFOLIOS....................11
Repurchase Agreements................................................11
When-Issued Securities...............................................12
Illiquid Securities..................................................12
Concentration in Obligations of Qualifying Banks.....................13
Investing in Non-U.S. Securities.....................................14
Investing in Supranational Organizations.............................14
Variable and Floating Rate Notes.....................................15
SPECIAL INVESTMENT CONSIDERATIONS AND RISK FACTORS............................16
Possible Changes in Net Asset Value and Yield........................16
Investments in a Single Issuer.......................................17
REGULATORY STATUS.............................................................18
MANAGEMENT OF THE TRUST AND PORTFOLIO TRUST...................................18
COMPENSATION OF TRUSTEES AND OFFICERS.........................................23
INVESTMENT ADVISORY, DISTRIBUTION, SUB-ADVISORY
AND ADMINISTRATION AGREEMENTS AND 12b-1 PLANS........................24
Investment Adviser of the Portfolio Trust............................24
Sub-Adviser..........................................................26
(i)
<PAGE> 45
PAGE
Distributor of the Trust.............................................26
Administrator........................................................27
12b-1 Plan - Global Service Shares...................................28
INFORMATION CONCERNING THE MASTER-FEEDER FUND STRUCTURE.......................30
REDEMPTION OF SHARES..........................................................32
CALCULATION OF NET ASSET VALUE................................................33
DIVIDENDS.....................................................................35
TAXATION .....................................................................35
Taxation of the Trust................................................35
U.S. Federal Income Taxation of U.S. Shareholders....................36
U.S. Federal Income Taxation of Non-U.S. Shareholders................37
PERFORMANCE INFORMATION.......................................................38
PORTFOLIO TRANSACTIONS........................................................40
INFORMATION ABOUT THE TRUST AND PORTFOLIO TRUST...............................41
The Funds and Their Shares...........................................41
The Portfolio and its Investors......................................42
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING
AGENT, FUND ACCOUNTANT, COUNSEL AND INDEPENDENT AUDITORS
....................................................................43
ADDITIONAL INFORMATION........................................................44
(ii)
<PAGE> 46
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives and Policies
As described in the Prospectuses, each Fund seeks to achieve its
investment objectives by investing all of its investable assets in a portfolio
(each, a "Portfolio") which has the same investment objectives and restrictions
as that Fund. Each Fund's investment objectives are fundamental and may not be
changed except by the affirmative vote of a majority of the Fund's 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. The investment objectives of
the Portfolios are not fundamental and may be changed upon notice to, but
without the approval of, the Portfolios' investors.
The Trust's Prospectuses describe the investment objectives of the
Funds and the Portfolios and summarize 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
objective, policies and restrictions of the Portfolios and should be read in
conjunction with the sections in the Trust's Prospectuses entitled "The Funds'
Investment Objective," "The Fund's Principal Investment Strategies" and
"Principal Risks". Except as otherwise provided, the Portfolios' (and the
Funds') investment policies and restrictions are not fundamental and may be
changed by the Portfolios' (or the Funds') Board of Trustees without a
shareholder vote.
Euro Portfolio
The Euro Portfolio's investment objective is to maximize current
income, to the extent consistent with the preservation of capital and liquidity
and the maintenance of a stable E1.00 per share net asset value. The Euro
Portfolio will invest in Euro-denominated securities issued or guaranteed as to
principal and interest by any government of a country participating in the
European Monetary Union (the "EMU"), by its sub-divisions or their agencies or
by non-EMU governments or Supranational Organizations, as well as high-quality,
short-term Euro-denominated money market instruments such as bank certificates
of deposit and such short-term corporate debt securities as commercial paper.
The Euro Portfolio invests only in Euro-denominated high quality
securities as described in this paragraph. The Euro Portfolio's assets will
consist of the securities of EMU governments and other securities, which have
been (i) rated by at least two nationally recognized statistical rating
organizations ("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.
<PAGE> 47
All securities in which the Euro Portfolio invests have remaining
maturities of thirteen months or less at the date of acquisition. The Euro
Portfolio also maintains a value-weighted average portfolio maturity of 60 days
or less. The Euro Portfolio follows these policies in seeking to maintain a
constant net asset value of E1.00 per share, although there is no assurance it
can do so on a continuing basis.
The Euro Portfolio may invest in Euro-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. Under
normal market conditions, the Euro Portfolio will have more than 25% of its
total assets invested in the obligations of issuers in the banking industry. See
"Additional Information Concerning Certain Investment Techniques for all
Portfolios--Concentration in Obligations of Qualifying Banks."
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 U.S. Dollar-denominated
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 U.S.
Dollar-denominated 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 United States government securities, and
other "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 NRSROs, 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)
of unrated, determined to be comparable to such securities.
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 value-weighted average portfolio maturity
of 60 days or less. The U.S. Dollar Portfolio follows these policies in seeking
to maintain a constant net asset value of US$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
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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 "Additional Information Concerning Certain Investment
Techniques for all Portfolios--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 "Money
Market Instruments" below.
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).
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 Canadian
dollar-denominated 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 Canadian dollar-denominated 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 Canadian 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
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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.
All securities in which the Canadian Dollar Portfolio invests have
remaining maturities of thirteen months or less at the date of acquisition. The
Canadian Dollar Portfolio also maintains a value-weighted average portfolio
maturity of 60 days or less. 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 thirteen months 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 "Additional Information Concerning Certain Investment
Techniques for all Portfolios--Concentration in Obligations of Qualifying
Banks."
Pound Sterling Portfolio
The Pound Sterling Fund is not currently offered to the public.
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 Pound
Sterling-denominated 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 Pound
Sterling-denominated 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 U.K. 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 thirteen months or less at the date of acquisition. The
Sterling Portfolio also maintains a value-weighted average portfolio maturity of
60 days or less. The Pound Sterling Portfolio
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follows these policies in seeking to maintain a constant net asset value of
(pound)l.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 thirteen months 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 "Additional Information Concerning Certain Investment
Techniques for all Portfolios--Concentration in Obligations of Qualifying
Banks."
Fundamental Investment Restrictions
All of the Portfolios' fundamental investment restrictions are set
forth below. If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in values or assets will not constitute a violation of that restriction. A
Portfolio's fundamental investment restrictions may not be changed except by the
affirmative vote of a majority of the Portfolio's outstanding voting securities
as defined in 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;
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(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 this
Statement of Additional Information) 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 a 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;
(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.
Non-Fundamental Investment Restrictions
The following investment restrictions may be changed by vote of a
majority of the Trustees of the Portfolio Trust. If a percentage restriction is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute a violation of
that restriction. 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
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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 Designated
Government Securities (defined as (a) any security issued or
guaranteed by (i) in the case of the Euro Portfolio, the
government of any country that participates in the European
Monetary Union (provided that the applicable government, as to
its Euro-denominated short-term obligations, has a First Tier
rating from the Requisite NRSROs (as defined in SEC Rule 2a-7)
and that in all other respects such securities are of
sufficient credit quality to qualify as First Tier
Securities); (ii) in the case of the U.S. Dollar Portfolio,
the U.S. federal government, (iii) in the case of the Canadian
Dollar Portfolio, the Canadian federal government, and (iv) in
the case of the Pound Sterling Portfolio, the U.K. government,
and (b) any security issued or guaranteed by a person
controlled or supervised by and acting as an instrumentality
of such government pursuant to authority granted by the
appropriate legislative or executive body in such countries
if, in each case, such Portfolio's investment adviser shall
have determined that such security has a creditworthiness
substantially equivalent to that of a direct obligation of the
applicable government; or (c) any certificate of deposit for
any of the foregoing); and
(5) 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 Prospectuses and in this Statement of Additional
Information.
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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.
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
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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
(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
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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
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 in which the U.S. Dollar Portfolio may
invest 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
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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. Dollar 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
securities (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.
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.
The use of repurchase agreements nevertheless involves certain
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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.
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
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.
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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. 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.
The Investment Adviser will determine the liquidity of Rule 144A Securities
under the supervision of the Portfolio Trust's Board of Trustees 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.
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.
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. "Qualifying
Banks" are 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 US$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.
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
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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. Investments in non-U.S. securities could also be
subject to 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.
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).
Investing in Supranational Organizations
The supranational organizations in which each Portfolio may invest
include, without limitation, the organizations listed below:
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<PAGE> 60
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.
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
15
<PAGE> 61
indebtedness, as well as the interest rate, varies. 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.
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 government issuing a Portfolio's designated currency (a "Designated
Government") or one of its agencies or instrumentalities, variable or floating
rate instruments purchased by a Portfolio must permit such Portfolio to demand
payment of the instrument's principal at least once every thirteen months upon
no more than 30 days notice. Because the market for a variable or floating rate
instrument may be less liquid than the market for other money market
instruments, 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.
SPECIAL INVESTMENT CONSIDERATIONS AND RISK FACTORS
In addition to those described in the Prospectus and elsewhere in this
Statement of Additional Information, the Portfolios are subject to the following
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
16
<PAGE> 62
as high a level of income as could be obtained from securities with longer
maturities or those having a lesser degree of safety.
Asset-Backed Securities
Asset-backed securities represent undivided fractional interests in
pools of instruments, such as consumer loans. Payments of principal and interest
are passed through to holders of the securities and are typically supported by
some form of credit enhancement, such as a letter of credit, surety bond,
limited guarantee by another entity or by priority to certain of the borrower's
other securities. The degree of credit-enhancement varies, generally applying
only until exhausted and covering only a fraction of the security's par value.
The value of asset-backed securities is affected by changes in the market's
perception of the asset backing the security, changes in the creditworthiness of
the servicing agent for the instrument pool, the originator of the instruments
or the financial institution providing any credit enhancement and the
expenditure of any portion of any credit enhancement. If the credit enhancement
of an asset-backed security held by a Portfolio has been exhausted, and if any
required payments of principal and interest are not made with respect to the
underlying loans, the Portfolio may experience loss or delay in receiving
payment and a decrease in the value of the security. The risks of investing in
asset-backed securities are ultimately dependent upon payment of the underlying
instruments by the obligors, and a Portfolio would generally have no recourse
against the obligee of the instruments in the event of default by an obligor.
The underlying instruments are subject to prepayments which shorten the weighted
average life of asset-backed securities and may lower their return.
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 (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. The Internal Revenue Code exempts certain U.S.
government securities (but not foreign government securities) from these
requirements.
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 its Designated
Government, and certain of such government's agencies and instrumentalities as
described in non-fundamental investment restriction (4) above), or (ii)
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<PAGE> 63
more than 25% of the value of its total assets in repurchase agreements with one
counterparty. These restrictions may be eliminated or modified at any time by
the Trustees of the Portfolio Trust without a shareholder vote.
REGULATORY STATUS
The Trust has received "no-action" letters from the Division of
Investment Management of the Securities and Exchange Commission which permit the
Pound Sterling, the Euro Fund and the Canadian Dollar Fund (the "Foreign
Currency Funds") to hold themselves out and otherwise operate as "money market
funds" for purposes of compliance with Rule 2a-7 under the 1940 Act and for
purposes of all other rules under the 1940 Act and all other rules and forms
under the Securities Act of 1993, as amended, that are applicable to "money
market funds." Notwithstanding the foregoing, the Foreign Currency Funds
generally will not be "money market funds" for purposes of the investment
restrictions applicable to other registered investment companies. Other entities
whose investment activities are regulated, such as banks and insurance
companies, should consult their legal advisers before concluding that the
Foreign Currency Funds will be considered "money market funds" under any
applicable restriction.
MANAGEMENT OF THE TRUST AND PORTFOLIO TRUST
Each Fund is a separate series of the Trust, a Delaware business trust
under the terms of the Amended and Restated 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 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 Master Trust Agreement
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.
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. Certain of the executive
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<PAGE> 64
officers of the Trust and the Portfolio Trust are affiliated persons of State
Street Bank and Trust Company and State Street Global Advisors United Kingdom
Limited.
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
NAME, ADDRESS AND POSITION(S) HELD OCCUPATION(S)
DATE OF BIRTH WITH TRUST DURING PAST 5 YEARS
- ------------- ---------- -------------------
<S> <C> <C>
Peter B. Collacott* President and Trustee Managing Director,
State Street Global Advisors Rothschild, Asset
United Kingdom Limited Management Limited;
Almack House Director, International
28 King Street Biotechnology Trust.
London, England
SW1 Y6QW
Born June 19, 1944
</TABLE>
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<PAGE> 65
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
<S> <C> <C>
Alan T. Jeffers Trustee Private Investor; Consultant
51 Clearwater Cove to Rothschild Asset
Old Dunleary Road Management Limited from
Dun Laoghaire, 1986 to September 1996;
County Dublin, Ireland Chairman, Dipcot Holdings
Born August 17, 1938 Ltd.; Chairman, Danfay
Ltd.; Director, Hibernian Group Plc;
Founder and Director Banking
Automation Ltd.; Chairman, Provita
Europe Ltd.; Chairman, Holdings
Ltd.; Chairman, Capteur Sensors &
Analysers Limited.
Bryan J. Walsh Trustee President and Managing
11 Lower Tuckahoe Road West Director of Salisbury
Richmond, Virginia 232330 Research from 1991 to date.
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.
Patrick J. Riley Trustee Partner - Riley,
21 Custom House Burke & Donahue
Boston, MA 02110 (law firm).
Born November 30, 1948
Bruce D. Taber Trustee Computer Simulation
26 Round Top Road Consultant, General Electric
Boxford, MA 01921 Industrial Controls; prior to
Born April 25, 1943 that, President, A.B. Reed,
Inc. - Engineers, Architects,
Planners; prior to that, Vice
President, Instrumentation
and Controls, A.B. Reed,
Inc.
</TABLE>
20
<PAGE> 66
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
<S> <C> <C>
Henry W. Todd Trustee President and Director,
111 Commerce Drive Zink & Triest Co., Inc.
Montgomeryville, PA 18936 (dealer in vanilla flavor
Born May 4, 1947 materials); Director, A.M.
Todd Co., and Flavorite
Laboratories.
Tony Mercure Vice President Vice President of Fund
BISYS Fund Services, Inc. Accounting,
3435 Stelzer Road BISYS Fund Services, Inc.
Columbus, OH 43219 and has served in a
Born September 17, 1960 variety of positions within
BISYS Fund Services, Inc.
since 1991.
Adrian Waters Vice President Managing Director,
BISYS Fund Services BISYS Fund Services
(Ireland) Ltd. (Ireland) Ltd.,
Floor 3, Block C May 1993 to present;
Ballsbridge Manager, Price Waterhouse,
Shelbourne Road 1989 - May 1993.
Dublin 4 Ireland
Born September 31, 1962
Charles L. Booth Vice President Vice President, BISYS Fund
BISYS Fund Services, Inc. and Secretary Services, Inc. and has served
3435 Stelzer Road in a variety of positions
Columbus, OH 43219 within BISYS Fund Services,
Born April 4, 1960 Inc. since 1991.
William J. Tomko Treasurer Executive 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
Born August 30, 1958 BISYS Fund Services, Inc.
since 1991.
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION(S)
NAME, ADDRESS AND POSITION(S) HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
<S> <C> <C>
Alaina Metz Assistant Secretary Chief Administrator,
BISYS Fund Services, Inc. Administrative and
3435 Stelzer Road Regulatory Services,
Columbus, OH 43219 BISYS Fund Services, Inc.
Born April 17, 1967 June 1995 to present;
Supervisor, Mutual Fund
Legal Department, Alliance
Capital Management, May
1989 to June 1995.
Catherine Brady Assistant Treasurer Accounting Services
BISYS Fund Services Manager, BISYS
(Ireland) Ltd Fund Services
Floor 3, Block C (Ireland) Ltd.;
Ballsbridge March 1994 to present;
Shelbourne Road Supervisor, Price
Dublin 4 Ireland Waterhouse, 1990 to
Born October 9, 1968 March 1994.
</TABLE>
All trustees and officers as a group own less than 1% of the
outstanding shares of each Fund and Portfolio as of December 31, 1998.
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<PAGE> 68
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 the compensation to be paid to the Trust's
Trustees for the period ending December 31, 1998.
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate Total
Compensation Compensation Compensation Compensation Compensation
Name of from U.S. from Pound from Euro 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
Patrick J. Riley $10,000 $10,000 $2,500 $2,500 $25,000
Bruce D. Taber $10,000 $10,000 $2,500 $2,500 $25,000
Henry W. Todd $10,000 $10,000 $2,500 $2,500 $25,000
Peter B. Collacott $0 $0 $0 $0 $0
</TABLE>
(a) Currently the U.S. Dollar Fund, the Pound Sterling Fund, the
Euro 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, 1998.
As of December 31, 1998, Frank Russell Investment Management Company
("FRIMC"), 909A Street, Tacoma, WA 98402-5120 owned 100% of each of the Funds
and may be deemed to be in control of the U.S. Dollar, Pound Sterling, Euro and
Canadian Dollar Funds as control is defined in the 1940 Act. 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.
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<PAGE> 69
FRIMC is a wholly owned subsidiary of Frank Russell Company. Frank
Russell Company, 909 A Street, Tacoma, WA 98402, which provides comprehensive
asset management consulting services for institutional pools of investment
assets, principally those of large corporate employees benefit plan. On January
1, 1999, The Northwestern Mutual Life Insurance Company ("Northwestern Mutual"),
720 East Wisconsin Avenue, Milwaukee, WI 53202 announced that it had completed
its acquisition of Frank Russell Company. Frank Russell Company will retain its
identity and operating independence, and will continue to operate globally as a
separate company. As of December 31, 1998, FRIMC may also be deemed a control
person of the Canadian Dollar and Euro Portfolios because each Fund owns 50% of
the outstanding shares of its corresponding Portfolio.
INVESTMENT ADVISORY, DISTRIBUTION, SUB-ADVISORY
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 "Investment Management."
Investment Adviser of the Portfolio Trust
State Street Bank and Trust Company ("State Street" or the "Investment
Adviser"), 225 Franklin Street, Boston, MA 02110, through its division State
Street Global Advisors, furnishes investment services to the Portfolios in which
the Funds invest all their investable assets and manages the Portfolios'
investments subject to the supervision of the Trustees of the Portfolio Trust
pursuant to an agreement dated September 22, 1998 (the "Advisory Agreement").
The Investment Adviser is a wholly owned subsidiary of State Street Corporation,
a bank holding company.
In consideration for its services to the Portfolios, the Portfolio
Trust has agreed to pay the Investment Adviser 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 .25% of average daily net
assets. The Investment Adviser has currently agreed to limit each Fund's total
expenses to 0.50% of average daily net assets. This limitation is in effect
through [December 31, 1999]. After that date, the Investment Adviser may revise
or eliminate the limitation at any time without notice. Beginning with the
second anniversary of its inception, the Advisory Agreement will continue from
year to year with respect to a Portfolio provided that a majority of the
Trustees who are not interested persons of the Portfolio Trust and either a
majority of all Trustees or a majority of the shareholders of the Portfolio
approve its continuance. The Advisory Agreement with respect to a Portfolio may
be terminated by the Investment Adviser or the Portfolio without penalty upon
sixty days' notice and will terminate automatically upon its assignment.
24
<PAGE> 70
From the U.S. Dollar Portfolio's inception through September 22, 1998,
Rothschild International Asset Management Limited ("RIAM") served as the
Portfolio's Investment Adviser for which RIAM was entitled to a fee at an annual
rate of .20% of the Portfolio's average daily net assets. For the period March
26, 1997 through December 31, 1997, RIAM waived its entire fee for the U.S.
Dollar Portfolio; without such waiver, such fees would have been $60,474.
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.
On September 22, 1998, State Street succeeded RIAM as the Portfolios'
Investment Adviser. For the period September 22, 1998 to November 30, 1998, RIAM
served as sub-adviser to the Portfolios pursuant to a Sub-Advisory Agreement
between State Street and RIAM and managed the Portfolios' investments and
affairs subject to the supervision of the Trustees of the Portfolio Trust and of
the Investment Adviser. RIAM is a British corporation which was organized in
1975 and is a registered investment adviser under the U.S. Investment Advisers
Act of 1940, as amended. RIAM is an indirect, subsidiary of Rothschild Concordia
AG of Zug, Switzerland, a holding company whose subsidiaries manage
approximately $28.5 billion in asset, spread across equities, bond and
currencies. For the services provided by RIAM under the Sub-Advisory Agreement,
State Street paid RIAM an advisory fee with respect to each Portfolio payable
monthly at an annual rate of .05% of the Portfolio's average daily net assets.
The Glass-Steagall Act prohibits a depository state chartered member
bank such as the Investment Adviser from engaging in the business of issuing,
underwriting, selling or distributing certain securities. Any activities of the
Investment Adviser in informing its customers of the Funds, performing
investment and redemption services and providing custodian, transfer,
shareholder servicing, dividend disbursing and investment advisory services must
be evaluated under these provisions. The Investment Adviser has been advised by
its counsel that its activities in connection with the Fund are consistent with
its statutory and regulatory obligations. The Funds' shares are not endorsed or
guaranteed by State Street or its affiliates, are not deposits or obligations of
State Street or its affiliates, and are not insured by the Federal Deposit
Insurance Corporation or any other governmental agency, and have investment
risks, including possible loss of principal.
Changes in federal or state statutes and regulations relating to the
permissible activities of banks and their affiliates, as well as judicial or
administrative decisions or interpretations of such or future statutes and
regulations, could prevent the Investment Adviser from continuing to perform all
or a part of the above services for its customers and/or the Portfolio Trust. If
the Investment Adviser were prohibited from serving the Portfolio Trust in any
of its present
25
<PAGE> 71
capacities, the Board of Trustees of the Portfolio Trust would seek an
alternative provider(s) of such services. In such event, changes in the
operation of the Portfolio Trust may occur. It is not expected by the Investment
Adviser that existing shareholders would suffer any adverse financial
consequences (if another advisor with equivalent abilities is found) as a result
of any of these occurrences.
Sub-Adviser
Effective [February __, 1999], the Investment Adviser has entered into
a sub-advisory agreement with respect to the Portfolios (the "Sub-Advisory
Agreement") with State Street Global Advisors United Kingdom Limited (the
"Sub-Adviser"), which is also a wholly-owned indirect subsidiary of State
Street. Under the terms of the agreement, the Sub-Adviser will continuously
furnish an investment program for the Portfolios, will make investment decisions
for each Portfolio and place all orders for the purchase and sale of portfolio
securities and all other instruments. The activities of the Sub-Adviser are
subject to the supervision and control of the Trustees of the Portfolio Trust
and the Investment Adviser.
The initial term of the Sub-Advisory Agreement is two years from its
inception. Beginning with the second anniversary of its inception, the
Sub-Advisory Agreement will continue from year to year with respect to each
Portfolio provided that its continuance is approved in the same manner as for
the Advisory Agreement. Each Portfolio, the Investment Adviser and the
Sub-Adviser may terminate the Sub-Advisory Agreement with respect to that
Portfolio without penalty upon sixty days notice to the other parties.
For its services under the Sub-Advisory Agreement, the Sub-Adviser
receives from the Investment Adviser one half of the net fee paid to the
Investment Adviser with respect to the Portfolios pursuant to the Advisory
Agreement.
Distributor of the Trust
BISYS Fund Services Limited Partnership (the "Distributor"), whose
address is 3435 Stelzer Road, Suite 1000, Columbus, OH 43219 acts as distributor
of shares of the Funds. The Distributor is a wholly-owned subsidiary of The
BISYS Group, Inc.
Pursuant to a Distribution Agreement dated December 1, 1998, the
Distributor acts as agent for the distribution of Fund shares and makes a
continuous offering of Fund shares during the term of the Agreement. Unless
otherwise terminated, the Distribution Agreement remains in effect with respect
to each Fund from year to year for successive annual periods if approved at
least annually (i) by the Board of Trustees or by the vote of a majority of the
outstanding shares of the Fund, and (ii) by the vote of a majority of the
Trustees who are not parties to the Distribution Agreement or interested persons
(as defined in the 1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Distribution Agreement is terminable at any time with respect to a Fund on 60
days' written notice without penalty by the Trustees, by a vote of a majority of
26
<PAGE> 72
the shareholders of the Fund, or by BISYS on 60 days' written notice. The
Distribution Agreement may be terminated in the event of any assignment, as
defined in the 1940 Act. Pursuant to the Distribution Agreement, the Fund has
agreed to indemnify BISYS to the extent permitted by applicable law against
certain liabilities under the Securities Act and the 1940 Act.
In its capacity as Distributor, BISYS solicits orders for the sale of
shares (but is not obligated to sell a specified number of shares), advertises
and pays the cost of advertising, office space and the personnel involved in
such activities.
Under the terms of the Distribution Agreement and in accordance with
the 12b-1 Plan, for each Fund's Global Service Shares class (see below), each
Fund reimburses the Distributor's (i) direct out-of-pocket expenditures incurred
in connection with the distribution and marketing of shares and the servicing of
investor accounts, 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 the Fund's prospectuses, Statements of
Additional Information and reports to recipients other than existing
shareholders of the Fund, 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; (ii) expenses incurred in
connection with the promotion and sale of the shares, including, without
limitation, Distributor's expenses for rent, office supplies, equipment, travel,
communication, compensation, and benefits for sales personnel; and (iii) payment
of any fees and expenses to shareholder servicing agents, including any
investment adviser of the Portfolio Trust, the Trust or their affiliates, that
have entered into shareholder servicing agreements with the Trust pursuant to
which the shareholder servicing agents may provide various shareholder services
with respect to shares held by or for customers of the shareholder servicing
agents.
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. 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. 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 or its
affiliates may also act as Authorized Firms (as defined below).
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<PAGE> 73
For the services provided by the Administrator, each Fund pays an
annual fee, computed daily and paid monthly, based on the Fund's average daily
net assets as follows:
<TABLE>
<CAPTION>
Asset Size* Fee Rate
----------- --------
<S> <C>
Up to 250 million 0.05%
In excess of 250 million up to 500 million 0.04%
In excess of 500 million 0.03%
</TABLE>
* In the Fund's designated currency.
For the period March 26, 1997 through December 31, 1997, the Fund paid
$1,875 in administration fees for the U.S. Dollar Fund.
The Administrator provides the Portfolio Trust with office space for
managing its affairs and with certain clerical services and facilities. For the
services provided by the Administrator, each Portfolio pays an annual fee to the
Administrator, computed daily and payable monthly, based on the Portfolio's
average daily net assets as follows:
<TABLE>
<CAPTION>
Asset Size* Fee Rate
----------- --------
<S> <C>
Up to 500 million 0.05%
In excess of 500 million up to 1 billion 0.04%
In excess of 1 billion 0.03%
</TABLE>
* In the Portfolio's designated currency.
12b-1 Plan - Global Service Shares
Under the 1940 Act, the Securities and Exchange Commission has adopted
Rule 12b-1, which regulates the circumstances under which a Fund may, directly
or indirectly, bear distribution and shareholder servicing expenses. The Rule
provides that a Fund may pay for such expenses only pursuant to a plan adopted
in accordance with the Rule. Accordingly, each Fund has adopted an active
distribution plan for the shares of its Global Service class (the "Plan"), which
is described in each Fund's prospectus for its Global Service class. The Plan
provides that a Fund will spend annually 0.25% of the value of its average net
assets of its Global class for distribution and shareholder servicing expenses
and certain expenses incurred by the Distributor pursuant to the Distribution
Agreement. The Plan does not provide for a Fund to be charged for interest,
carrying or any other financing charges on any distribution expenses carried
forward to subsequent years. A quarterly report of the amounts expended under
the Plan, and the purposes for which such expenditures were incurred, must be
made to the Trustees for their review. The Plan may not be amended without
shareholder approval to increase materially the shareholder servicing costs that
a Fund pays.
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Under the Plan, each Fund enters into agreements ("Servicing
Agreements") with financial institutions, which may include the Investment
Adviser and its affiliates ("Servicing Organizations"), to provide shareholder
servicing with respect to Global Service shares held by or for the customers of
the Servicing Organizations. Such arrangements are also described in the Funds'
Global Service shares Prospectus. Under the Servicing Agreements, the Servicing
Organizations may provide various services for such customers, including:
answering inquiries regarding the Fund; assisting customers in changing dividend
options, account designations and addresses; performing subaccounting for such
customers; establishing and maintaining customer accounts and records;
processing purchase and redemption transactions; providing periodic statements
showing customers' account balances and integrating such statements with those
of other transactions and balances in the customers' other accounts serviced by
the Servicing Organizations; arranging for bank wires transferring customers'
funds; performing daily investment ("sweep") functions for shareholders and such
other services as the customers may request in connection with the Funds, to the
extent permitted by applicable statute, rule or regulation. Servicing
Organizations will receive from a Fund, for shareholder servicing, monthly fees
at a rate equal to .25% per annum of the average daily net asset value of the
Fund's Global Service shares owned by or for shareholders with whom the
Servicing Organization has a servicing relationship. Banks and other financial
service firms may be subject to various state laws, and may be required to
register as dealers pursuant to state law. Servicing Organizations will be
responsible for prompt transmission of purchase and redemption orders and may
charge fees for their services.
The Trust has entered into Servicing Agreements with the Investment
Adviser and the following entities related to the Investment Adviser: [State
Street Brokerage Services, Inc., Metropolitan Division of Commercial Banking,
Global Cash Management and Retirement Investment Services, which includes State
Street Solutions.] These agreements are reviewed annually by the Board of
Trustees.
Under the Plan, each Fund also reimburse the Distributor's (i) direct
out-of-pocket expenditures incurred in connection with the distribution and
marketing of shares and the servicing of investor accounts, 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 the Fund's prospectuses, Statements of Additional Information and reports to
recipients other than existing shareholders of the Fund, 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; (ii) expenses incurred in connection with the promotion and sale of
the shares, including, without limitation, Distributor's expenses for rent,
office supplies, equipment, travel, communication, compensation, and benefits
for sales personnel; and (iii) payment of any fees and expenses to Servicing
Organizations, including any investment adviser of the Portfolio Trust, the
Trust or their affiliates, that have entered into Servicing Agreements with the
Trust pursuant to which the Servicing Organizations may
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<PAGE> 75
provide various shareholder services with respect to shares held by or for
customers of the Servicing Organizations.
The expenditures to be made pursuant to the Plan with respect to a
Fund, and the basis upon which payment of such expenditures will be made, shall
be determined by the Trust, but in no event shall such expenditures exceed an
annual rate of .25 of 1% of the average daily value of the net assets of that
Fund. In the event that the Distributor or any Servicing Organization is not
fully reimbursed for payments made or expenses incurred by it in any fiscal
year, the Distributor or Servicing Organization shall be entitled to carry
forward such expenses to subsequent fiscal years for submission to the
applicable Fund for payment, subject always to the limit on expenditures for
each Fund described previously; provided, however, that (i) each Fund's
liability for any such expenses carried forward shall terminate at the end of
two years following the year in which the expenditure was incurred, and (ii)
nothing herein shall prohibit or limit the Trustees from terminating this Plan
and all payments hereunder at any time as described in the next paragraph.
For the period March 26, 1997 through December 31, 1997, the Funds made
no 12b-1 payments.
The Plan and Servicing Agreements continue in effect only if such
continuance is specifically approved annually by a vote of 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 Plan or the related Servicing Agreements. All material amendments of the
Plan must also be approved by the Trustees in the manner just described. The
Plan may be terminated at any time by a majority of the Trustees as just
described above or by vote of a majority of the outstanding Global Service
shares of the affected Fund. The Servicing 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 Global Service
shares of the affected Fund on not more than 60 days' written notice to any
other party to the Servicing Agreements. The Servicing Agreements shall
terminate automatically if assigned. So long as the 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 Plan will benefit the Funds and holders of Global
Service shares of such Funds. In the Trustees' quarterly review of the Plan and
Servicing Agreements, they will consider their continued appropriateness and the
level of compensation provided therein.
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
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<PAGE> 76
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 [toll free number].
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 State
Street Bank and Trust Company 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.
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<PAGE> 77
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, Policies and
Restrictions."
REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the
Prospectuses.
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 with the applicable SEC rule. 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 which contains a
formula for determining the minimum amount of cash which may be paid as part of
any redemption. In effect, cash payments to any shareholder during any 90-day
period may be limited 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. 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
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<PAGE> 78
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.
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.
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 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
under the 1940 Act. On September 26, 1997, the Trust received a "no-action"
letter from the Division of Investment Management of the Securities and Exchange
Commission which permits the Pound Sterling Fund, the Euro Fund's predecessor,
the Deutsche Mark Fund, and the Canadian Dollar Fund and their corresponding
Portfolios to operate in accordance with Rule 2a-7, except that each such
Portfolio is permitted (a) to invest in securities denominated in its own
designated currency, and (b) to treat Designated Government Securities
comparably to the way U.S. government securities are treated by U.S.
Dollar-denominated money market funds. On December 2, 1998, the Trust also
received comparable no-action relief with respect to the Euro Fund.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accrediting 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
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<PAGE> 79
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 E1.00 in the case of the Euro Fund, at US$1.00 in the case of the
U.S. Dollar Fund, at C$1.00 in the case of the Canadian Dollar Fund and at
(pound)1.00 in the case of the Pound Sterling 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. 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.
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
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<PAGE> 80
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.
DIVIDENDS
Each Fund's dividends are derived from the net investment income of its
corresponding Portfolio which in turn flows from the interest that the Portfolio
earns on the money market and other instruments it holds. Dividends on each Fund
are determined in the same manner and are paid in the same amount, regardless of
whether the share belongs to the Fund's Global Service class or its Global
class, except to the extent that expenses are attributed to differential class
expenses.
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 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, interest derived by the Funds from sources outside
the United States may 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 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 may be able to elect to pass through to its shareholders
non-U.S. taxes paid by the Portfolio. Shareholders of each Fund that so elects
will be required to include in
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<PAGE> 82
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 generally 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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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.
Each of the Funds 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 a 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. For the seven day period ended June 30, 1998, the current and
effective yields of the U.S. Dollar Fund were 5.88% and 6.05%, respectively.
Although published yield information is useful to investors in
reviewing a Fund's performance, investors should be aware that a 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 shares. The yield of each Fund is not fixed or guaranteed. Accordingly, a
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 a Fund's yield information may not necessarily be
used to compare such Fund with investment alternatives which are insured or
guaranteed.
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
should not be considered representations of what an investment in a Fund may
earn in any future period. These factors and possible
38
<PAGE> 84
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 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, 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.
39
<PAGE> 85
(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.
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.
40
<PAGE> 86
INFORMATION ABOUT THE TRUST AND PORTFOLIO TRUST
The Funds and Their Shares
The Trust is an open-end management investment company, registered
under the 1940 Act. Under the terms of the Amended and Restated Master Trust
Agreement dated October 16, 1996, as amended, 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. On September
22, 1998, the Trust changed its name from Five Arrows Short-Term Investment
Trust to SSgA International Liquidity Fund. Each Fund 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 and the Trust will bear the cost of any additional series.
Shares of the Fund are currently issued in a single class, the Global Service
class. Each share purchased in compliance with the procedures established by the
Trust will be fully paid and nonassessable.
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. Shares issued by the Funds
have no preemptive, conversion or subscription rights. Each share of a Fund has
equal and exclusive rights to a proportionate share of 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.
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.
41
<PAGE> 87
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.
Each share of a Fund has equal dividend, redemption and liquidation
rights with other shares of that Fund. Under the Trust's Amended and Restated
Master Trust Agreement, 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. 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.
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 Master Trust Agreement and the 1940 Act, 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 like the Trust, is an open-end management investment
company under the 1940 Act, and intends to be treated as a partnership for tax
purposes. The Portfolio Trust was organized as a
42
<PAGE> 88
Delaware business trust under the laws of the State of Delaware on August 13,
1996. 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. 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.
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.
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.
Each holder in a Portfolio is entitled to vote in proportion to its
percentage interest in such Portfolio.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING
AGENT, FUND ACCOUNTANT, COUNSEL AND INDEPENDENT AUDITORS
The custodian for the Trust and Portfolio Trust is the Chase Manhattan
Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245. 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 the Trust or Portfolio Trust, as the case
may be, in accordance with the regulations of the Securities and Exchange
Commission.
Under an agreement with the Trust, BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, OH 43219 acts as Transfer Agent, and provides customary
transfer and dividend disbursing agent services to the Funds, including
processing purchase, redemption and transfer transactions, responding to
shareholder inquiries, automatically investing dividends in Fund
43
<PAGE> 89
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 may subcontract any of its duties to another person,
including its affiliates. Pursuant to a separate agreement, BISYS Fund Services,
Inc. also provides fund accounting services to the Trust.
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02019, is legal
counsel for the Trust and the Portfolio Trust.
PricewaterhouseCoopers LLP, 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.
44
<PAGE> 90
[LOGO]
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 Five Arrows Short-Term Investment Trust, comprised of the United States
Dollar Fund, Pound Sterling Fund, Canadian Dollar Fund and the Deutsche Mark
Fund, (the "Funds"), as of December 31, 1997, the related statement of
operations, the statement of changes in net assets and the financial highlights
for the periods then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
each series of Five Arrows Short-Term Investment Trust as of December 31, 1997,
the results of operations, the changes in its net assets and their financial
highlights for the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts. COOPERS & LYBRAND L.L.P.
Dated: February 26, 1998
3
<PAGE> 91
[LOGO]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
(LOCAL CURRENCIES) AS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND STERLING FUND*** DOLLAR FUND*** FUND***
$ (POUND) C$ DEM
ASSETS:
<S> <C> <C> <C> <C>
Investment in International Currency Fund 8,315,447 10 10 10
Deferred organizational costs 48,880 37,000 82,000 99,000
Receivable from Manager 10,068 - - -
Prepaid expenses 5,208 - - -
------------------------------------------------------------------------
TOTAL ASSETS 8,379,603 37,010 82,010 99,010
------------------------------------------------------------------------
LIABILITIES:
Amounts payable to Manager 61,000 37,000 82,000 99,000
Distribution payable from net investment income 30,541 - - -
Legal fees payable 9,902 - - -
Audit fees payable 6,420 - - -
Shareholder service fees payable 993 - - -
Administration fees payable 235 - - -
Other accrued expenses 1,184 - - -
------------------------------------------------------------------------
TOTAL LIABILITIES 110,275 37,000 82,000 99,000
------------------------------------------------------------------------
NET ASSETS 8,269,328 10 10 10
------------------------------------------------------------------------
NET ASSETS
Five Arrows Shares 8,269,328 10 10 10
Five Arrows Service Shares - - - -
------------------------------------------------------------------------
8,269,328 10 10 10
------------------------------------------------------------------------
SHARES OUTSTANDING
Five Arrows Shares 8,269,328 10 10 10
Five Arrows Service Shares - - - -
------------------------------------------------------------------------
TOTAL SHARES OUTSTANDING 8,269,328 10 10 10
------------------------------------------------------------------------
NET ASSET VALUE, OFFERING & REDEMPTION
------------------------------------------------------------------------
PRICE PER SHARE 1.00 1.00 1.00 1.00
------------------------------------------------------------------------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par 827 - - -
Additional paid-in capital 8,268,501 10 10 10
------------------------------------------------------------------------
NET ASSETS, DECEMBER 31, 1997 8,269,328 10 10 10
------------------------------------------------------------------------
<FN>
*** not yet commenced operations
</FN>
See notes to financial statements
</TABLE>
4
<PAGE> 92
[LOGO]
<TABLE>
<CAPTION>
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF OPERATIONS
(local currencies) For the period ended December 31, 1997
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND* STERLING FUND*** DOLLAR FUND*** FUND***
$ (POUND) C$ DEM
INVESTMENT INCOME:
Investment income allocated from
<S> <C>
International Currency Fund 210,153 - - -
------------------------------------------------------------------------
Expenses 30,023 - - -
Less: Fee waivers (7,534) - - -
Less: International Currency Fund
expense reimbursement (12,205) - - -
------------------------------------------------------------------------
NET EXPENSES 10,284 - - -
------------------------------------------------------------------------
NET INVESTMENT INCOME
FROM INTERNATIONAL CURRENCY FUND 199,869 - - -
------------------------------------------------------------------------
FUND EXPENSES:
Administration fees 1,875 - - -
Shareholder servicing fees 12,047 - - -
Printing fees 26,330 - - -
Amortization of organization costs 12,120 - - -
Registration fees 9,835 - - -
Legal fees 10,507 - - -
Audit fees 6,420 - - -
Other operating expenses 4,817 - - -
------------------------------------------------------------------------
TOTAL EXPENSES 83,951 - - -
Less Fee waivers and reimbursements - - -
by the Advisor and Administrator (83,951)
------------------------------------------------------------------------
TOTAL NET EXPENSES - - - -
------------------------------------------------------------------------
NET INVESTMENT INCOME 199,869 - - -
------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 199,869 - - -
------------------------------------------------------------------------
<FN>
* for period March 26, 1997 (commencement of operations) to December 31, 1997
*** not yet commenced operations
</FN>
See notes to financial statements
</TABLE>
5
<PAGE> 93
[LOGO]
<TABLE>
<CAPTION>
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(local currencies) For the period ended December 31, 1997
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND* STERLING FUND*** DOLLAR FUND*** FUND***
$ (POUND) C$ DEM
INCREASE IN NET ASSETS FROM:
OPERATIONS:
<S> <C>
Net investment income 199,869 - - -
------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 199,869 - - -
------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Five Arrows Shares (199,869) - - -
Net investment income -
Five Arrows Service Shares - - - -
------------------------------------------------------------------------
CHANGE IN NET ASSETS
FROM SHAREHOLDER DISTRIBUTIONS (199,869) - - -
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 18,651,422 10 10 10
Dividends reinvested 169,328 - - -
Cost of shares redeemed (10,551,422) - - -
------------------------------------------------------------------------
CHANGE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS 8,269,328 10 10 10
------------------------------------------------------------------------
CHANGE IN NET ASSETS 8,269,328 10 10 10
------------------------------------------------------------------------
NET ASSETS:
Beginning of period - - - -
------------------------------------------------------------------------
End of period 8,269,328 10 10 10
------------------------------------------------------------------------
<FN>
* for period March 26, 1997 (commencement of operations) to December 31, 1997.
*** not yet commenced operations
</FN>
See notes to financial statements
</TABLE>
6
<PAGE> 94
NOTE 1 - ORGANIZATION
Five Arrows Short Term Investment Trust, a Delaware business trust ("the
Trust"), is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-ended management investment company. At December 31,
1997 the Trust consisted of four Funds, the United States Dollar Fund, the Pound
Sterling Fund, the Canadian Dollar Fund and the Deutsche Mark Fund,
(individually a "Fund" and collectively the "Funds").
Each Fund seeks to achieve its investment objective by investing substantially
all of its investable assets in the corresponding portfolio of the International
Currency Fund, (individually a "Portfolio" and collectively the "Portfolios"),
which has the same investment objectives as that of such Fund. The value of each
Fund's investment in each Portfolio included in the accompanying statements of
assets and liabilities reflects each Fund's proportionate beneficial interest in
the net assets of that Portfolio. At December 31, 1997, the Funds held
proportionate interests in the corresponding Portfolios in the following
amounts:
- --------------------------------------------------------------------------------
United States Dollar Fund 15.4%
- --------------------------------------------------------------------------------
Pound Sterling Fund 00.0%
- --------------------------------------------------------------------------------
Canadian Dollar Fund 00.0%
- --------------------------------------------------------------------------------
Deutsche Mark Fund 00.0%
- --------------------------------------------------------------------------------
The financial statements of each Portfolio, including its portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with each Fund's financial statements.
BISYS Fund Services Limited Partnership ("BISYS") serves as the Trust's
administrator. 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 to the Funds, respectively.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with U.S. generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
VALUATION OF INVESTMENTS:
The Funds record respective investments in the Portfolios of International
Currency Fund at value. The valuation of securities held by the International
Currency Fund is discussed in the notes to the International Currency Fund
Financial Statements included elsewhere in this report.
INVESTMENT INCOME AND EXPENSES:
The Funds record their proportionate share of the investment income, expenses
and realized gains and losses recorded by the corresponding Portfolio on a daily
basis. The investment income, expenses and realized gains and losses are
allocated daily to investors in each Portfolio based upon the value of their
investments in each Portfolio. Such investments are adjusted on a daily basis.
Expenses directly attributable to each Fund are charged directly to the
respective Fund, while general Trust expenses attributable to more than one Fund
of the Trust are allocated among the respective Funds on the basis of their
relative net assets.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Each Fund's net investment income, if any, is declared daily in respect of each
class of share and paid monthly to shareholders of record on the date of
declaration. Dividends from each class of share are automatically reinvested in
additional shares of that class at net asset value unless the shareholders
specifically elect to receive dividends in the form of cash. Net realized gains
on portfolio securities, if any, are distributed at least annually. The amount
of dividends from net investment income and distributions from net realized
gains are determined in accordance with U.S. federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments for net operating losses,
expiring capital loss carryforwards, and deferral of certain losses.
FEDERAL INCOME TAXES:
Under Subchapter M of the Internal Revenue Code as amended (the "Code"), the
Funds will be treated as separate corporations 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 Code by complying with certain
requirements of the 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
7
<PAGE> 95
income and capital gains distributed to shareholders in accordance with the
applicable provisions of the 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.
Each Fund will determine its income in terms of its Designated Currency and, in
the case of each Fund other than the United States 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 U.S. Internal Revenue Service, the Trust calculates the
income of each Fund without recognising currency gain or loss.
ORGANIZATIONAL EXPENSES:
The Funds incurred certain costs in connection with their organization. The
Funds are expected to reimburse the Investment Adviser for the payment of these
expenses made in advance by the Manager. These costs have been deferred and are
being amortized on a straightline basis over five years from the date of
commencement of operations by each of the Funds.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Administration Agreement with BISYS and a Distribution
Agreement with the Distributor.
As Administrator, BISYS is responsible for coordinating and generally
administering the operation of the Funds' business. Pursuant to the terms of the
Administration Agreement, BISYS is entitled to a fee, accrued daily and payable
monthly, at an annual rate of 0.05% of each Fund's average daily net assets.
BISYS has agreed to provide 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 Portfolios' Investment Adviser has voluntarily agreed to waive such portion
of its advisory fee, pro rata as is necessary to cause the annualized total
expenses of each class of shares of a Fund not to exceed a specified percentage
of such class' average daily net assets (0.275% in the case of the Five Arrows
share class of the United States Dollar Fund and 0.35% in the case of the Five
Arrows share class of each other Fund). Similarly, for the Five Arrows Service
share class these percentages are 0.625% for the United States Dollar Fund and
0.70% for the other three Funds. If this waiver is not sufficient to cause the
total expenses of any Fund not to exceed the specified percentage of average
daily net assets, the Investment Adviser has agreed to reimburse such other
expenses of the applicable Fund as is necessary to keep total expenses from
exceeding the specified percentage. This undertaking has remained in effect for
the fiscal period ended December 31, 1997, and will remain in effect thereafter
at the discretion of the Investment Adviser. The Investment Adviser and
Administrator waived fees and reimbursed expenses in the following amounts so
that the Funds could meet these expense limitations:
- --------------------------------------------------------------------------------
United States Dollar Fund $103,690
- --------------------------------------------------------------------------------
Pound Sterling Fund nil
- --------------------------------------------------------------------------------
Canadian Dollar Fund nil
- --------------------------------------------------------------------------------
Deutsche Mark Fund nil
- --------------------------------------------------------------------------------
The Distributor, 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.
The Funds have adopted a 12b-1 Plan (the "Plan") in accordance with Rule 12b-1
promulgated under the Act. The 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 has two components: a service fee and a distribution fee. The 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
8
<PAGE> 96
payments of the 12b-1 fee to a total of 0.35% (on an annual basis) of the
average daily net assets of the Five Arrows Service class shares of any Fund.
This waiver has remained in effect for the fiscal period ended December 31, 1997
and will remain in effect thereafter at 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. For the period ended December 31,
1997, the Funds paid the following amounts to the Distributor in connection with
the Plan:
- --------------------------------------------------------------------------------
United States Dollar Fund nil
- --------------------------------------------------------------------------------
Pound Sterling Fund nil
- --------------------------------------------------------------------------------
Canadian Dollar Fund nil
- --------------------------------------------------------------------------------
Deutsche Mark Fund nil
- --------------------------------------------------------------------------------
NOTE 4 - TRUSTEE'S FEES
The Trust has to date paid no compensation to the Trustees of the Trust and it
will not pay any compensation to those Trustees affiliated with the Investment
Adviser, the Administrator or the Distributor. The Trust will not pay any
compensation to the Trust's officers.
NOTE 5 - CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period ended December 31, 1997 are
summarized below:
<TABLE>
<CAPTION>
FIVE ARROWS SHARES
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND STERLING FUND DOLLAR FUND FUND
<S> <C>
Shares subscribed 18,651,422 nil nil nil
Shares issued in reinvestment
of dividends 169,328 nil nil nil
Shares redeemed (10,551,422) nil nil nil
-----------------------------------------------------------------------------
Net increase 8,269,328 nil nil nil
-----------------------------------------------------------------------------
</TABLE>
9
<PAGE> 97
[LOGO]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
For the period ended December 31, 1997
Contained below is the per share operating performance data for a share
outstanding throughout the period, total investment return, ratios and
supplemental data. This information has been derived from information provided
in the financial statements.
<TABLE>
<CAPTION>
UNITED STATES DOLLAR FUND (d)
FIVE ARROWS FIVE ARROWS
SHARES* SERVICE SHARES***
PER SHARE OPERATING PERFORMANCE:
<S> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $1.00 -
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 -
-------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS 0.04 -
-------------------------------------
LESS DISTRIBUTIONS:
Net investment income (0.04) -
TOTAL DISTRIBUTIONS (0.04) -
-------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $1.00 -
-------------------------------------
TOTAL RETURN 4.18% (b) -
-------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (`000) $8,269 -
Ratio of expenses to average net assets after waivers and reimbursements 0.275% (c) -
Ratio of net investment income to average net assets after waivers 5.33% (c) -
and reimbursements
Ratio of expenses to average net assets (a) 3.04% (c) -
Ratio of net investment income to average net assets (a) 2.56% (c) -
<FN>
* for period March 26, 1997 (commencement of operations) to December 31, 1997.
*** not yet commenced operations
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense
reimbursements had not occurred, the ratios would have been as indicated.
(b) Not annualized
(c) Annualized
(d) Per share amounts and ratios/supplemental data reflect income and expenses
assuming inclusion of the Fund's proportionate share of the income and
expenses of the related Portfolio.
</FN>
</TABLE>
See notes to financial statements
10
<PAGE> 98
[LOGO]
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 United States Dollar
Portfolio, Pound Sterling Portfolio, Canadian Dollar Portfolio and Deutschmark
Portfolio, (the "Portfolios"), including the portfolios of investments for the
United States Dollar Portfolio and the Pound Sterling Portfolio as of December
31, 1997, the related statements of operations, the statements of changes in net
assets and the financial highlights for the period then ended. These financial
statements and the financial highlights are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
International Currency Fund as of December 31, 1997, the results of operations,
the changes in their net assets and their financial highlights for the periods
then ended in conformity with generally accepted accounting principles.
Boston, Massachusetts. COOPERS & LYBRAND L.L.P.
Dated: February 26, 1998
11
<PAGE> 99
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
UNITED STATES DOLLAR PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
PRINCIPAL DESCRIPTION RATE MATURITY MOODYS/ AMORTISED
AMOUNT DATE S&P (a) COST
TIME DEPOSITS -- 40.72%
BANKS
<S> <C> <C> <C> <C> <C>
2,000,000 ABN 5.69% 01/07/98 P1/A1+ $2,000,000
2,000,000 Bank of Montreal 5.69% 01/07/98 P1/A1+ 2,000,000
2,000,000 Credit Anstalt Bankverein 5.94% 01/07/98 P1/A1 2,000,000
2,000,000 Commerzbank, London 6.00% 01/05/98 P1/A1+ 2,000,000
2,000,000 Swiss Bank Corporation 5.88% 01/05/98 P1/A1+ 2,000,000
2,000,000 Den Danske Bank, London 5.80% 01/07/98 P1/A1 2,000,000
2,000,000 Dresdner Bank 5.75% 01/06/98 P1/A1+ 2,000,000
2,000,000 Lloyds Bank, London 5.88% 01/06/98 P1/A1+ 2,000,000
2,000,000 Rabobank 5.88% 01/05/98 P1/A1+ 2,000,000
2,000,000 Royal Bank of Canada 6.00% 01/05/98 P1/A1+ 2,000,000
2,000,000 Royal Bank of Scotland 5.69% 01/06/98 P1/A1+ 2,000,000
-----------
TOTAL TIME DEPOSITS 22,000,000
-----------
CERTIFICATES OF DEPOSIT -- 6.48%
1,000,000 Bank of Nova Scotia 5.74% 01/26/98 P1/A1+ 999,846
1,500,000 Barclays Bank, Canada 5.84% 01/05/98 P1/A1+ 1,499,980
1,000,000 Suedwestdeutsche Landesbank Euro 5.66% 01/05/98 P1/A1+ 999,948
-----------
TOTAL CERTIFICATES OF DEPOSIT 3,499,774
-----------
COMMERCIAL PAPER -- 3.70%
2,000,000 Halifax Building Society 6.03% 01/07/98 P1/A1+ 1,997,995
-----------
REPURCHASE AGREEMENTS -- 49.23%
13,300,000 Credit Suisse First Boston, dated
12/31/97, with a maturity value of
$13,304,618 (Collateralized by
$13,830,000 (par value) zero coupon
various U.S. Government Federal Home
Loan Notes, due 03/10/98, 01/21/98,
with a market value of $13,599,512) 6.25% 01/02/98 P1/A1+ 13,300,000
13,300,000 Merrill Lynch dated 12/31/97, with a
maturity value of $13,304,803
(Collateralized by $19,885,000 (par
value) zero coupons various U.S.
Government Federal National Mortgage
Association Medium Term Notes due
10/08/03, 04/08/04 & 10/08/04, with
a market value of $13,567,536) 6.50% 01/02/98 P1/A1+ 13,300,000
-----------
TOTAL REPURCHASE AGREEMENTS 26,600,000
-----------
TOTAL INVESTMENTS AT AMORTISED COST-- 100.13% 54,097,769
Liabilities in excess of other assets-- (0.13%) (70,328)
-----------
NET ASSETS-- 100.0% $54,027,441
-----------
<FN>
Percentages indicated are based on net assets of $54,027,441
(a) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available for the securities listed. Ratings are generally
ascribed to securities at the time of issuance. While agencies may from time to
time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities
as of December 31, 1997. Ratings are not covered by the report of independent
accountants.
</FN>
</TABLE>
See notes to financial statements
12
<PAGE> 100
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
POUND STERLING PORTFOLIO
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
PRINCIPAL DESCRIPTION RATE MATURITY MOODYS/ AMORTISED
AMOUNT DATE S&P (a) COST
TIME DEPOSITS -- 41.98%
BANKS
<S> <C> <C> <C> <C>
6,000,000 Bank of Montreal 7.25% 01/02/98 P1/A1+ (pound)6,000,000
6,000,000 Barclays 7.19% 01/02/98 P1/A1+ 6,000,000
6,000,000 Commerzbank 7.25% 01/02/98 P1/A1+ 6,000,000
6,000,000 Den Danske Bank 7.25% 01/02/98 P1/A1 6,000,000
6,000,000 Republic National Bank, New York 7.00% 01/02/98 P1/A1+ 6,000,000
6,000,000 Royal Bank of Canada 7.25% 01/02/98 P1/A1+ 6,000,000
5,752,000 Royal Bank of Scotland, London 6.94% 01/02/98 P1/A1+ 5,752,000
6,000,000 Bank of Nova Scotia 7.25% 01/02/98 P1/A1+ 6,000,000
6,000,000 Toronto Dominion Bank 7.25% 01/02/98 P1/A1+ 6,000,000
-----------
TOTAL TIME DEPOSITS 53,752,000
-----------
CERTIFICATES OF DEPOSIT -- 16.40%
BANKS
5,000,000 BNP 7.47% 01/06/98 P1/A1 5,000,000
5,000,000 Halifax 7.48% 01/16/98 P1/A1+ 5,000,000
6,000,000 NationsBank 7.47% 02/23/98 P1/A1+ 6,000,000
5,000,000 Westdeutsche Landesbank 7.50% 01/27/98 P1/A1+ 5,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT 21,000,000
-----------
COMMERCIAL PAPER -- 41.55%
BANKS
6,000,000 ANZ Melbourne 7.49% 02/18/98 P1/A1 5,940,748
5,000,000 National Australia Bank 7.11% 01/02/98 P1/A1+ 4,999,024
CONSUMER CREDIT
6,000,000 Avco Trust Plc 7.54% 02/17/98 P1/A1 5,941,654
DIVERSIFIED FOOD
5,000,000 Nestle 7.36% 01/09/98 P1/A1+ 4,991,883
FINANCIAL SERVICES
6,000,000 General Electric Capital Corporation 7.42% 02/24/98 P1/A1+ 5,934,002
INSURANCE
5,000,000 Commercial Union 7.52% 01/20/98 P1/A1+ 4,980,666
LEASING
3,500,000 ABN Lease Holdings 7.00% 01/05/98 P1/A1+ 3,497,147
PRINTING
6,000,000 Xerox Capital Europe 7.37% 01/30/98 P1/A1 5,964,625
UTILITIES
5,000,000 Scottish Power 7.53% 01/16/98 P1/A1 4,984,717
6,000,000 Scottish Hydro Electric 7.36% 01/30/98 P1/A1 5,964,672
-----------
TOTAL COMMERCIAL PAPER 53,199,138
-----------
TOTAL INVESTMENTS AT AMORTISED COST-- 99.93% 127,951,138
Other assets in excess of liabilities 0.07% 86,764
-----------
NET ASSETS-- 100.0% (pound)128,037,902
-----------
<FN>
Percentages indicated are based on net assets of (pound)128,037,902
(a) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available for the securities listed. Ratings are generally
ascribed to securities at the time of issuance. While agencies may from time to
time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities
as of December 31, 1997. Ratings are not covered by the report of independent
accountants.
</FN>
See notes to financial statements
</TABLE>
13
<PAGE> 101
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
STATEMENTS OF ASSETS AND LIABILITIES
(LOCAL CURRENCIES) AS AT DECEMBER 31, 1997
UNITED STATES POUND STERLING CANADIAN DOLLAR DEUTSCHEMARK
DOLLAR PORTFOLIO PORTFOLIO PORTFOLIO*** PORTFOLIO***
$ (POUND) C$ DEM
ASSETS:
<S> <C> <C> <C> <C>
Investments in securities, at amortised cost 54,097,769 127,951,138 -
(cost $54,097,769 and (pound)127,951,138,
respectively, including Repurchase
Agreements of $26,600,000 and
(pound)0 respectively.)
Deferred organisational costs 60,030 36,211 100,000 121,000
Cash - 986 10 10
Interest receivable 38,823 160,242 - -
Prepaid expenses 1,109 717 - -
-------------------------------------------------------------------------
TOTAL ASSETS 54,197,731 128,149,294 100,010 121,010
-------------------------------------------------------------------------
LIABILITIES:
Amounts payable to Manager 75,000 45,000 100,000 121,000
Administration fees payable 2,122 5,456 - -
Transaction fees payable 65,048 18,434 - -
Advisory fees payable - 19,865 - -
Legal fees payable 14,569 6,118 - -
Audit fees payable 5,904 2,639 - -
Custody fees payable 3,024 7,384 - -
Fund accounting fees payable 861 2,182 - -
Trustees fees payable 536 1,896 - -
Other accrued expenses 3,226 2,418 - -
-------------------------------------------------------------------------
TOTAL LIABILITIES 170,290 111,392 100,000 121,000
-------------------------------------------------------------------------
NET ASSETS, DECEMBER 31, 1997 54,027,441 128,037,902 10 10
-------------------------------------------------------------------------
<FN>
*** not yet commenced operations
</FN>
</TABLE>
See notes to financial statements
14
<PAGE> 102
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
STATEMENTS OF OPERATIONS
(LOCAL CURRENCIES) FOR THE PERIOD ENDED DECEMBER 31, 1997
UNITED STATES POUND STERLING CANADIAN DOLLAR DEUTSCHEMARK
DOLLAR PORTFOLIO* PORTFOLIO** PORTFOLIO*** PORTFOLIO***
$ (POUND) C$ DEM
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest income 1,686,338 4,955,525 - -
Other Income 741 - - -
-------------------------------------------------------------------------
TOTAL INCOME 1,687,079 4,955,525 - -
-------------------------------------------------------------------------
EXPENSES:
Advisory fees 60,474 146,274 - -
Administration fees 15,118 36,568 - -
Transactions fees 65,048 18,435 - -
Trustees fees 40,023 24,634 - -
Legal fees 20,819 27,786 - -
Amortisation of organisation costs 14,970 8,789 - -
Audit fees 12,009 6,363 - -
Fund accounting fees and expenses 6,048 12,627 - -
Custodian fees and expenses 3,024 7,384 - -
Other operating expenses 19,942 12,606 - -
-------------------------------------------------------------------------
TOTAL EXPENSES 257,475 301,466 - -
Fee Waivers (60,474) (126,409) - -
-------------------------------------------------------------------------
TOTAL NET EXPENSES 197,001 175,057 - -
-------------------------------------------------------------------------
NET INVESTMENT INCOME 1,490,078 4,780,468 - -
-------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,490,078 4,780,468 - -
-------------------------------------------------------------------------
<FN>
* for period from March 26, 1997 (commencement of operations) to December 31, 1997.
** for period from March 3, 1997 (commencement of operations) to December 31, 1997.
*** not yet commenced operations
</FN>
</TABLE>
See notes to financial statements
15
<PAGE> 103
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(LOCAL CURRENCIES) FOR THE PERIOD ENDED DECEMBER 31, 1997
UNITED STATES POUND STERLING CANADIAN DOLLAR DEUTSCHEMARK
DOLLAR PORTFOLIO* PORTFOLIO** PORTFOLIO*** PORTFOLIO***
$ (POUND) C$ DEM
INCREASE IN NET ASSETS FROM:
Operations:
<S> <C> <C> <C> <C>
Net investment income 1,490,078 4,780,468 - -
-------------------------------------------------------------------------
Change in net assets resulting from operations 1,490,078 4,780,468 - -
-------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Contributions 177,719,547 182,128,181 10 10
Withdrawals (125,182,184) (58,870,747) - -
-------------------------------------------------------------------------
Change in net assets
resulting from capital transactions 52,537,363 123,257,434 10 10
-------------------------------------------------------------------------
Change in Net Assets 54,027,441 128,037,902 10 10
-------------------------------------------------------------------------
NET ASSETS:
Beginning of period - - - -
-------------------------------------------------------------------------
End of period 54,027,441 128,037,902 10 10
-------------------------------------------------------------------------
<FN>
* for period from March 26, 1997 (commencement of operations) to December 31, 1997.
** for period from March 3, 1997 (commencement of operations) to December 31, 1997.
*** not yet commenced operations
</FN>
</TABLE>
See notes to financial statements
16
<PAGE> 104
(LOGO)
INTERNATIONAL CURRENCY FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANISATION
International Currency Fund (the "Portfolio Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-ended management investment company. At December 31, 1997 the
Portfolio Trust consisted of four portfolios; the United States Dollar
Portfolio, the Pound Sterling Portfolio, the Canadian Dollar Portfolio and the
Deutschemark Portfolio, (individually a "Portfolio" and collectively the
"Portfolios").
The investment objectives of each Portfolio are to seek to maintain a high level
of liquidity, preserve capital and stability of principal expressed in the
Portfolio's designated currency and, consistent with those objectives, to earn
current income. A Portfolio's investment objectives are fundamental and may not
be changed without the approval of its shareholders.
Rothschild International Asset Management Limited (the "Investment Adviser")
serves as the Portfolio Trust's Investment Adviser. BISYS Fund Services, Limited
Partnership ("BISYS") acts as Administrator to the Portfolios.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with U.S. generally accepted accounting principles. The preparation
of financial statements, requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
Portfolio Valuations:
The securities of the Portfolios are valued at amortised cost, which
approximates market value. The amortised cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortisation to maturity of the difference between the principal amount due at
maturity and cost. In accordance with policies adopted by the Portfolio Trust in
this regard, the Portfolios may not (a) purchase any instrument with an
effective remaining maturity greater than thirteen months, or (b) maintain a
weighted average maturity which exceeds 90 days.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognised on the accrual basis and
includes, where applicable, the amortisation of premium or accretion of
discount. Gains or losses realised on sales of securities are determined by
comparing the amortised cost of the security sold with the net sale proceeds.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Portfolio Trust expenses are allocated among the respective
Portfolios of the Trust on the basis of their relative net assets.
REPURCHASE AGREEMENTS:
The Portfolios will enter into repurchase agreements only with financial
institutions rated by a U.S. nationally recognised statistical rating
organisation (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 or equal to 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. Repurchase agreements are considered to be loans by a
Portfolio under the 1940 Act.
ORGANISATIONAL EXPENSES:
The deferred organisation costs were incurred by the Portfolios in connection
with their organisation. The Portfolios are expected to reimburse the Investment
Adviser for the payment of these costs made in advance by the Manager. The costs
have been deferred and will be amortised on a straight line basis over a five
year period from the commencement of operations by the Portfolios.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. federal income tax
purposes. As such, each U.S. investor in a Portfolio will be taxed on its share
of the Portfolio's ordinary income and capital gains. It is intended that the
17
<PAGE> 105
[LOGO]
Portfolios will be managed in such a way to satisfy the requirements of U.S.
Internal Revenue Code applicable to regulated investment companies.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio Trust acting on behalf of each of the Portfolios has an Investment
Advisory Agreement with the Investment Adviser and an Administration Agreement
with BISYS.
The Investment Adviser is responsible for managing the investment of the assets
of the Portfolios in conformity with the stated objectives and policies of the
Portfolios. Pursuant to the terms of the Investment Advisory Agreement, the
Investment Adviser is entitled to a fee, which is accrued daily and payable
monthly, at an annual rate of 0.20% of the average daily net assets of each
Portfolio of the Trust. For the period ended December 31, 1997, the Investment
Adviser waived its entire fee for the United States Dollar Portfolio and
partially waived its fee for the Pound Sterling Portfolio in the following
amounts.
- --------------------------------------------------------------------------------
United States Dollar $60,474
- --------------------------------------------------------------------------------
Pound Sterling (pound)126,409
- --------------------------------------------------------------------------------
Canadian Dollar nil
- --------------------------------------------------------------------------------
Deutschemark nil
- --------------------------------------------------------------------------------
As Administrator, BISYS assists in supervising the operations of the Portfolios.
Pursuant to the terms of the Administration Agreement, BISYS is entitled to a
fee from each Portfolio which is accrued daily and payable monthly, at an annual
rate of 0.05% of each of the Portfolio's average daily net assets. For the
period ended December 31, 1997 BISYS earned the following fees as Administrator
for each Portfolio.
- --------------------------------------------------------------------------------
United States Dollar $15,118
- --------------------------------------------------------------------------------
Pound Sterling (pound)36,568
- --------------------------------------------------------------------------------
Canadian Dollar nil
- --------------------------------------------------------------------------------
Deutschemark nil
- --------------------------------------------------------------------------------
BISYS is entitled to a fee from each Portfolio which is accrued daily and
payable monthly at an annual rate of 0.02% of each of the Portfolios average
daily net assets. BISYS earned the following amounts for the period ended
December 31, 1997 for providing accounting services to each portfolio.
United States Dollar $6,048
- --------------------------------------------------------------------------------
Pound Sterling (pound)12,627
- --------------------------------------------------------------------------------
Canadian Dollar nil
- --------------------------------------------------------------------------------
Deutschemark nil
- --------------------------------------------------------------------------------
NOTE 4 - TRUSTEES AND OFFICERS COMPENSATION
The Portfolio Trust has to date paid US$40,023 and (pound)24,634 in total to the
Trustees of the Portfolio Trust. The Portfolio Trust will not pay compensation
to the Trustees of the Portfolio Trust affiliated with the Investment Adviser or
the Administrator nor will it pay any compensation to the Trustees who are
officers of the Trust.
NOTE 5 - SECURITIES TRANSACTIONS
During the period ended December 31, 1997, each Portfolio purchased and matured
portfolio securities, in the following amounts:
PURCHASES MATURITIES
- --------------------------------------------------------------------------------
United States
Dollar Portfolio $3,978,547,508 $3,924,490,999
- --------------------------------------------------------------------------------
Pound Sterling Portfolio (pound)8,529,021,163 (pound)8,402,385,073
- --------------------------------------------------------------------------------
Canadian Dollar Portfolio nil nil
- --------------------------------------------------------------------------------
Deutschemark Portfolio nil nil
- --------------------------------------------------------------------------------
18
<PAGE> 106
[LOGO]
<TABLE>
<CAPTION>
INTERNATIONAL CURRENCY FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED DECEMBER 31, 1997
UNITED STATES POUND STERLING CANADIAN DOLLAR DEUTSCHEMARK
DOLLAR PORTFOLIO* PORTFOLIO** PORTFOLIO*** PORTFOLIO***
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C>
Net assets, end of period (`000) $54,027 (pound)128,038 - -
Ratio of expenses to average net assets
after waivers and reimbursements 0.65% (b) 0.24% (b) - -
Ratio of net investment income to average
net assets after waivers and reimbursements 4.93% (b) 6.56% (b) - -
Ratio of expenses to average net assets (a) 0.85% (b) 0.41% (b) - -
Ratio of net investment
income to average net assets (a) 4.73% (b) 6.38% (b) - -
Total Return since inception 3.00% (c) 4.00% (c) - -
<FN>
* for the period March 26, 1997 (commencement of operations) to December 31, 1997.
** for the period March 3, 1997 (commencement of operations) to December 31, 1997.
*** not yet commenced operations
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(b) Annualised
(c) Not annualised
</FN>
</TABLE>
See notes to financial statements
19
<PAGE> 107
[LOGO]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
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.
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Centre
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
International investing is subject to certain factors such as currency exchange
rate volatility, possible political, social or economic instability, foreign
taxation and differences in auditing and other financial standards.
The Fund is AAAm rated by Standard & Poor's. This rating is historical and is
based upon the Fund's credit quality, market exposure and management. It
signifies that the Fund's safety is excellent and that it has a superior
capacity to maintain a US$1.00/(pound)1.00/DM 1/C$1.00 per share.
<PAGE> 108
[LOGO]
ROTHSCHILD
ASSET MANAGEMENT
2/98
<PAGE> 109
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
(local currencies) as at June 30, 1998
<TABLE>
<CAPTION>
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND STERLING FUND*** DOLLAR FUND*** FUND***
$ (POUND STERLING) C$ DEM
<S> <C> <C> <C> <C>
ASSETS:
Investment in International Currency Fund 529,246 10 10 10
Deferred organizational costs 40,780 37,000 82,000 99,000
Receivable from Administrator 8,846 - - -
-------------------------------------------------------------
TOTAL ASSETS 578,872 37,010 82,010 99,010
-------------------------------------------------------------
LIABILITIES:
Amounts payable to Manager 48,840 37,000 82,000 99,000
Distribution payable from net investment income 30,425 - - -
Legal fees payable 6,261 - - -
Audit fees payable 4,182 - - -
Shareholder service fees payable 1,333 - - -
Administration fees papayable 107 - - -
Other accrued expenses 4,539 - - -
-------------------------------------------------------------
TOTAL LIABILITIES 95,687 37,000 82,000 99,000
-------------------------------------------------------------
NET ASSETS 483,185 10 10 10
-------------------------------------------------------------
NET ASSETS
Five Arrows Shares 483,185 10 10 10
Five Arrows Service Shares - - - -
-------------------------------------------------------------
483,185 10 10 10
-------------------------------------------------------------
SHARES OUTSTANDING
Five Arrows Shares 483,185 10 10 10
Five Arrows Service Shares - - - -
-------------------------------------------------------------
TOTAL SHARES OUTSTANDING 483,185 10 10 10
-------------------------------------------------------------
NET ASSET VALUE, OFFERING & REDEMPTION
PRICE PER SHARE 1.00 1.00 1.00 1.00
COMPOSITION OF NET ASSETS:
Shares of common stock, at par 827 - - -
Additional paid-in capital 482,358 10 10 10
-------------------------------------------------------------
NET ASSETS, JUNE 30, 1998 483,185 10 10 10
-------------------------------------------------------------
<FN>
*** not yet commenced operations
</TABLE>
See notes to financial statements
3
<PAGE> 110
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF OPERATIONS (UNAUDITED)
(local currencies) For the period ended June 30, 1998
<TABLE>
<CAPTION>
UNITED STATES POUND CANADIAN DEUTSCHE MARK
DOLLAR FUND STERLING FUND*** DOLLAR FUND*** FUND***
$ POUND STERLING C$ DEM
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Investment income allocated from
International Currency Fund 224,808 - - -
-----------------------------------------------------------------
Expenses 21,128 - - -
Less: Fee waivers (8,080) - - -
Less: International Currency Fund
expense reimbursement (2,285) - - -
-----------------------------------------------------------------
10,763 - - -
-----------------------------------------------------------------
NET INVESTMENT INCOME
FROM INTERNATIONAL CURRENCY FUND 214,045 - - -
-----------------------------------------------------------------
FUND EXPENSES:
Administration fees 1,990 - - -
Shareholder servicing fees 6,981 - - -
Printing fees 8,234 - - -
Amortization of organization costs 8,100 - - -
Registration fees 6,265 - - -
Legal fees 18,616 - - -
Audit fees 2,506 - - -
Other operating expenses 2,998 - - -
-----------------------------------------------------------------
TOTAL EXPENSES 55,690 - - -
Less Fee waivers and reimbursements - - -
by the Advisor and Administrator (55,690)
-----------------------------------------------------------------
TOTAL NET EXPENSES - - - -
-----------------------------------------------------------------
NET INVESTMENT INCOME 214,045 - - -
-----------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 214,045 - - -
-----------------------------------------------------------------
<FN>
*** not yet commenced operations
</TABLE>
See notes to financial statements
4
<PAGE> 111
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
UNITED STATES DOLLAR FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
$ $
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income 214,045 199,869
--------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 214,045 199,869
--------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Five Arrows Shares (214,045) (199,869)
Net investment income -
Five Arrows Service Shares - -
--------------------------------------------
CHANGE IN NET ASSETS
FROM SHAREHOLDER DISTRIBUTIONS (214,045) (199,869)
--------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 12,000,000 18,651,422
Dividends reinvested 213,857 169,328
Cost of shares redeemed (20,000,000) (10,551,422)
--------------------------------------------
CHANGE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS (7,786,143) 8,269,328
--------------------------------------------
CHANGE IN NET ASSETS (7,786,143) 8,269,328
--------------------------------------------
NET ASSETS:
Beginning of period 8,269,328 -
--------------------------------------------
End of period 483,185 8,269,328
--------------------------------------------
</TABLE>
See notes to financial statements
5
<PAGE> 112
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
POUND STERLING FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
POUND STERLING POUND STERLING
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income - -
-------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS - -
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Five Arrows Shares - -
Net investment income -
Five Arrows Service Shares - -
-------------------------------------
CHANGE IN NET ASSETS
FROM SHAREHOLDER DISTRIBUTIONS - -
-------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - 10
Dividends reinvested - -
Cost of shares redeemed - -
-------------------------------------
CHANGE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS - 10
-------------------------------------
CHANGE IN NET ASSETS - 10
-------------------------------------
NET ASSETS:
Beginning of period 10 -
-------------------------------------
End of period 10 10
-------------------------------------
</TABLE>
6
<PAGE> 113
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
CANADIAN DOLLAR FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
C$ C$
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income - -
-------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS - -
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Five Arrows Shares - -
Net investment income -
Five Arrows Service Shares - -
-------------------------------------
CHANGE IN NET ASSETS
FROM SHAREHOLDER DISTRIBUTIONS - -
-------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - 10
Dividends reinvested - -
Cost of shares redeemed - -
-------------------------------------
CHANGE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS - 10
-------------------------------------
CHANGE IN NET ASSETS - 10
-------------------------------------
NET ASSETS:
Beginning of period 10 -
-------------------------------------
End of period 10 10
-------------------------------------
</TABLE>
See notes to financial statements
7
<PAGE> 114
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
DEUTSCHE MARK FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
DEM DEM
<S> <C> <C>
INCREASE IN NET ASSETS FROM:
OPERATIONS:
Net investment income - -
-------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS - -
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -
Five Arrows Shares - -
Net investment income -
Five Arrows Service Shares - -
-------------------------------------
CHANGE IN NET ASSETS
FROM SHAREHOLDER DISTRIBUTIONS - -
-------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold - 10
Dividends reinvested - -
Cost of shares redeemed - -
-------------------------------------
CHANGE IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS - 10
-------------------------------------
CHANGE IN NET ASSETS - 10
-------------------------------------
NET ASSETS:
Beginning of period 10 -
-------------------------------------
End of period 10 10
-------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE> 115
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT TERM INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ORGANISATION
Five Arrows Short Term Investment Trust, a Delaware business trust ("the
Trust"), is registered under the Investment Company Act of 1940, as amended (the
"Act"), as an open-end management investment company. At June 30 1998 the Trust
consisted of four funds; the U.S. Dollar Fund, the Pound Sterling Fund, the
Canadian Dollar Fund and the Deutsche Mark Fund, (individually a "Fund" and
collectively the "Funds").
Each Fund seeks to achieve its investment objective by investing substantially
all of its investable assets in the corresponding portfolio of the International
Currency Fund, (individually a "Portfolio" and collectively the "Portfolios"),
which has the same investment objectives as that of such Fund. The value of each
Fund's investment in each Portfolio included in the accompanying statements of
assets and liabilities reflects each Fund's proportionate beneficial interest in
the net assets of that Portfolio. At June 30 1998, the Funds held proportionate
interests in the corresponding Portfolios in the following amounts:
<TABLE>
<CAPTION>
- -----------------------------------
<S> <C>
U.S. Dollar Fund 2.70%
- -----------------------------------
Pound Sterling Fund 00.00%
- -----------------------------------
Canadian Dollar Fund 00.00%
- -----------------------------------
Deutsche Mark Fund 00.00%
- -----------------------------------
</TABLE>
The financial statements of each Portfolio, including its portfolio of
investments, are included elsewhere within this report and should be read in
conjunction with each Fund's financial statements.
BISYS Fund Services Limited Partnership ("BISYS") serves as the Trust's
administrator. 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 to the Funds, respectively.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with U.S. generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
VALUATION OF INVESTMENTS:
The Funds record respective investments in the Portfolios of International
Currency Fund at value. The valuation of securities held by the International
Currency Fund is discussed in the notes to the International Currency Fund
Financial Statements included elsewhere in this report.
INVESTMENT INCOME AND EXPENSES:
The Funds record their proportionate share of the investment income, expenses
and realized gains and losses recorded by the corresponding Portfolio on a daily
basis. The investment income, expenses and realized gains and losses are
allocated daily to investors in each Portfolio based upon the value of their
investments in each Portfolio. Such investments are adjusted on a daily basis.
Expenses directly attributable to each Fund are charged directly to the
respective Fund, while general Trust expenses attributable to more than one Fund
of the Trust are allocated among the respective Funds.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Each Fund's net investment income, if any, is declared daily in respect of each
class of share and paid monthly to shareholders of record on the date of
declaration. Dividends from each class of share are automatically reinvested in
additional shares of that class at net asset value unless the shareholders
specifically elect to receive dividends in the form of cash. Net realized gains
on portfolio securities, if any, are distributed at least annually. The amount
of dividends from net investment income and distributions from net realized
gains are determined in accordance with U.S. federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments for net operating losses,
expiring capital loss carryforwards, and deferral of certain losses.
FEDERAL INCOME TAXES:
Under Subchapter M of the Internal Revenue Code (the "Code"), the Funds will be
treated as separate corporations 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 Code by complying with certain requirements of the
Code regarding sources of income, diversification of assets, and distribution of
income to shareholders, although no
9
<PAGE> 116
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT TERM INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 gains distributed to shareholders in accordance with the
applicable provisions of the 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.
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 U.S. Internal Revenue Service, the Trust calculates the
income of each Fund without recognising currency gain or loss.
ORGANISATIONAL EXPENSES:
The Funds incurred certain costs in connection with their organisation. The
Funds are expected to reimburse the Investment Adviser for the payment of these
expenses made in advance by the Manager. These costs have been deferred and are
being amortized on a straight-line basis over five years from the date of
commencement of operations by the Funds.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds have an Administration Agreement with BISYS and a Distribution
Agreement with the Distributor.
As Administrator, BISYS is responsible for coordinating and generally
administering the operation of the Funds' business. Pursuant to the terms of the
Administration Agreement, BISYS is entitled to a fee, accrued daily and payable
monthly, at an annual rate of 0.05% of each Fund's average daily net assets.
BISYS has agreed to provide 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.
Pursuant to an agreement dated July 19, 1998 it is proposed that State Street
Bank and Trust Company will replace Rothschild International Asset Management
Limited as Investment Adviser of the Master Fund. The Portfolios' Investment
Adviser has voluntarily agreed to waive such portion of its advisory fee as is
necessary to cause the annualized total expenses of each class of shares of a
Fund not to exceed a specified percentage of such class' average daily net
assets value (0.275% in the case of the Five Arrows share class of the U.S.
Dollar Fund and 0.35% in the case of the Five Arrows share class of each other
Fund). Similarly, for the Five Arrows Service share class these percentages are
0.625% for the U.S. Dollar Fund and 0.70% for the other three Funds. If this
reimbursement is not sufficient to cause the total expenses of any Fund not to
exceed the specified percentage of average daily net assets, the Investment
Advisor has agreed to pay such other expenses of the applicable Fund as is
necessary to keep total expenses from exceeding the specified percentage. This
undertaking has remained in effect for the fiscal period ended June 30, 1998,
and thereafter at the discretion of the Investment Adviser. The Investment
Advisor waived fees and reimbursed expenses in the following amounts so that the
Funds could meet these expense limitations:
<TABLE>
<S> <C>
- -----------------------------------------------
United States Dollar Fund $66,055
- -----------------------------------------------
Pound Sterling Fund Nil
- -----------------------------------------------
Canadian Dollar Fund Nil
- -----------------------------------------------
Deutsche Mark Fund Nil
- -----------------------------------------------
</TABLE>
The Distributor, 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.
The Funds have adopted a 12b-1 Plan (the "Plan") in accordance with rule 12b-1
promulgated under the 1940 Act. The 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
10
<PAGE> 117
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT TERM INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund's Five Arrows Service class of shares. The 12b-1 fee has two components: a
service fee and a distribution fee. The 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 a total of 0.35%
(on an annual basis) of the average daily net assets of the Five Arrows Service
class shares of any Fund. This waiver has remained in effect for the fiscal
period ended June 30, 1998 and thereafter at the discretion of the Distributor.
The Distributor has reserved the right to terminate or revise this undertaking
with respect to any period after June 30, 1998. For the period ended June 30,
1998, the Funds paid the following amounts to the Distributor in connection with
the Plan:
<TABLE>
<S> <C>
- ----------------------------------------
United States Dollar Fund Nil
- ----------------------------------------
Pound Sterling Fund Nil
- ----------------------------------------
Canadian Dollar Fund Nil
- ----------------------------------------
Deutsche Mark Fund Nil
- ----------------------------------------
</TABLE>
NOTE 5 - CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period ended June 30 1998 are
summarized below:
NOTE 4 - TRUSTEES' FEES
The Trust has to date paid no compensation to the Trustees of the Trust and it
will not pay any compensation to those Trustees affiliated with the Investment
Adviser, the Administrator or the Distributor. The Trust will not pay any
compensation to the Trust's officers.
FIVE ARROWS SHARES
<TABLE>
<CAPTION>
UNITED STATES POUND CANADIAN DEUTSCHEMARK
DOLLAR FUND STERLING FUND DOLLAR FUND FUND
<S> <C> <C> <C> <C>
Shares subscribed 12,000,000 nil nil nil
Shares issued to shareholders
in reinvestment of dividends 213,857 nil nil nil
Shares redeemed (20,000,000) nil nil nil
-----------------------------------------------------------------
NET INCREASE (7,786,143) nil nil nil
------------------------------------------------------------------
</TABLE>
11
<PAGE> 118
[Rothschild Asset Management Logo]
FIVE ARROWS SHORT TERM INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
Contained below is the per share operating performance data for a share
outstanding throughout the period, total investment return, ratios and
supplemental data. This information has been derived from information provided
in the financial statements.
UNITED STATES DOLLAR FUND
FIVE ARROWS SHARES (d)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
$ $
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.04
-------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS 0.03 0.04
-------------------------------------------
LESS DISTRIBUTIONS:
Net investment income (0.03) (0.04)
-------------------------------------------
TOTAL DISTRIBUTIONS (0.03) (0.04)
-------------------------------------------
NET ASSET VALUE PER SHARE, END OF PERIOD $1.00 $1.00
-------------------------------------------
TOTAL RETURN 2.70%(b) 4.18%(b)
-------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ('000) $483 $8,269
Ratio of expenses to average net assets 0.28%(c) 0.28%(c)
Ratio of net investment income to average net assets 6.66%(c) 5.33%(c)
Ratio of expenses to average net assets(a) 1.92%(c) 3.04%(c)
Ratio of net investment income to average net assets(a) 5.02%(c) 2.56%(c)
<FN>
(a) During the period, certain fees were voluntarily reduced and expenses reimbursed. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have been as indicated
(b) Not annualised
(c) Annualised
(d) Per share amounts and ratios/supplemental data reflect income and expenses assuming inclusion of the Fund's
proportionate share of the income and expenses of the related portfolio.
</TABLE>
See notes to financial statements
12
<PAGE> 119
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
UNITED STATES DOLLAR PORTFOLIO
Portfolio of Investments, (unaudited) June 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION RATE MATURITY MOODYS/ AMORTISED
AMOUNT DATE S&P (a) COST
TIME DEPOSITS - 75.84%
BANKS
<S> <C> <C> <C> <C> <C>
$900,000 Bank of Montreal 6.12% 07/01/98 P1/A1+ $900,000
900,000 Barclays 6.00% 07/01/98 P1/A1+ 900,000
950,000 BNP (London) 5.93% 07/01/98 P1/A1+ 950,000
950,000 Credit Agricole 6.25% 07/01/98 P1/A1+ 950,000
950,000 CIBC London 6.18% 07/01/98 P1/A1+ 950,000
900,000 Deutsche Bank 6.00% 07/01/98 P1/A1+ 900,000
900,000 Kredietbank London 6.00% 07/01/98 P1/A1+ 900,000
950,000 Lloyds London 6.00% 07/01/98 P1/A1+ 950,000
950,000 Nationsbank NA TD 5.87% 07/01/98 P1/A1+ 950,000
940,000 Rabobank 5.75% 07/02/98 P1/A1+ 940,000
950,000 RBC London Royal Bank of Canada, London 6.25% 07/01/98 P1/A1+ 950,000
950,000 Republic National Bank, New York 6.00% 07/02/98 P1/A1+ 950,000
900,000 Bank of Nova Scotia 6.06% 07/01/98 P1/A1+ 900,000
900,000 Svenska Handlesbanken 6.00% 07/01/98 P1/A1 900,000
914,000 United Bank of Switzerland (London) 6.00% 07/01/98 P1/A1+ 914,000
940,000 West LB 5.75% 07/02/98 P1/A1+ 940,000
-------------
TOTAL TIME DEPOSITS 14,844,000
-------------
REPURCHASE AGREEMENTS - 24.52%
Merrill Lynch dated 06/30/98, with a
maturity value of $4,800,000 (Collateralized by
$23,262,000 (par value) zero coupon various U.S.
Government Federal National Mortgage Association,
Medium Term Notes due 01/15/23, 10/15/24,
7/15/25, 10/15/25, 4/15/26, 10/15/26 &
1/15/21.
With a market value of $4,896,586) 6.50% 01/02/98 P1/A1+ 4,800,000
-------------
TOTAL REPURCHASE AGREEMENTS 4,800,000
-------------
TOTAL INVESTMENTS AT AMORTISED COST - 100.36% 19,644,000
Liabilities in excess of other assets - (0.36%) (69,576)
-------------
-------------
NET ASSETS - 100.0% $19,574,424
-------------
</TABLE>
Percentages indicated are based on net assets of $19,574,424
(a) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available for the securities listed. Ratings are generally
ascribed to securities at the time of issuance. While agencies may from time to
time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities
as of June 30, 1998.
See notes to financial statements
13
<PAGE> 120
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
POUND STERLING PORTFOLIO
Portfolio of Investments (unaudited) June 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION RATE MATURITY MOODYS/ AMORTISED
AMOUNT DATE S&P (A) COST
TIME DEPOSITS - 22.91%
BANKS
<S> <C>
6,000,000 Bank of Montreal 7.31% 07/01/98 P1/A1+ 6,000,000 (pound sterling)
6,000,000 Commerzbank 7.25% 07/01/98 P1/A1+ 6,000,000
6,000,000 Dresdner Bank 7.25% 07/01/98 P1/A1+ 6,000,000
5,391,000 Republic National Bank, New York 7.25% 07/01/98 P1/A1+ 5,391,000
6,000,000 Westdeutsche Landesbank 7.25% 07/01/98 P1/A1+ 6,000,000
-----------
TOTAL TIME DEPOSITS 29,391,000
-----------
COMMERCIAL PAPER - 4.65%
FINANCIAL SERVICES
6,000,000 Sigma Finance 7.00% 07/01/98 P1/A1+ 5,967,661
-----------
TOTAL COMMERCIAL PAPER 5,967,661
-----------
REPURCHASE AGREEMENTS - 72.48%
31,000,000 CSFB London, dated 06/30/98, with a
maturity value of 31,006,285 (pound
sterling) (Collateralised by
26,461,000 (pound sterling) (par
value) UK Treasuries due 09/25/09,
with a market value of 31,000,000)
(pound sterling) P1/A1+ 31,000,000
30,999,999 Goldman Sachs, dated 06/30/98, with a maturity
value of 31,005,987 (pound sterling)
(Collateralised by 29,459,279 (pound
sterling) (par value) UK Treasuries due
06/10/03, with a market value of 30,999,999)
(pound sterling) P1/A1+ 30,999,999
31,000,000 UBS, dated 06/30/98, with a maturity
value 31,006,030 (pound sterling)
(Collateralised by 26,461,000 (pound
sterling) (par value) UK Treasuries
due 03/01/99, with a market value of
31,712,657) (pound sterling) P1/A1+ 31,000,000
-----------
92,999,999 (pound sterling)
-----------
Total Investments at Amortised Cost - 100.04% 128,358,660
Other assets in excess of liabilities - (0.04%) (46,657)
-----------
NET ASSETS - 100.0% 128,312,003 (pound sterling)
-----------
</TABLE>
Percentages indicated are based on net assets of 128,312,003 (pound sterling)
(a) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available for the securities listed. Ratings are generally
ascribed to securities at the time of issuance. While agencies may from time to
time revise such ratings, they undertake no obligation to do so, and the ratings
do not necessarily represent what the agencies would ascribe to these securities
as of June 30, 1998.
See notes to financial statements
14
<PAGE> 121
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
(local currencies) As at June 30, 1998
<TABLE>
<CAPTION>
United States Pound Sterling Canadian Dollar Deutschemark
Dollar Portfolio Portfolio Portfolio*** Portfolio***
$ (pound sterling) C$ Dem
ASSETS:
<S> <C> <C> <C> <C>
Investments in securities, at amortised cost 19,644,000 128,358,660 -- --
(cost $19,644,000 and 128,358,660 (pound sterling)
C$0 and Dem) respectively, including Repurchase
Agreements of $4,800,000 and 92,999,999)
(pound sterling)
Deferred organisational costs 49,230 30,959 100,000 121,000
Cash -- -- 10 10
Interest receivable 4,136 24,227 -- --
-------------------------------------------------------------------------
Total Assets 19,697,366 128,413,846 100,010 121,010
-------------------------------------------------------------------------
LIABILITIES:
Amounts payable to Manager 60,030 45,000 100,000 121,000
Administration fees payable 2,348 5,184 -- --
Advisory fees payable -- 33,943 -- --
Legal fees payable 6,632 1,775 -- --
Audit fees payable 3,400 2,951 -- --
Custody fees payable 4,311 5,793 -- --
Other accrued expenses 46,221 7,197 -- --
-------------------------------------------------------------------------
Total Liabilities 122,942 101,843 100,000 121,000
-------------------------------------------------------------------------
NET ASSETS, JUNE 30, 1998 19,574,424 128,312,003 10 10
-------------------------------------------------------------------------
</TABLE>
*** not yet commenced operations
See notes to financial statements
15
<PAGE> 122
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
STATEMENTS OF OPERATIONS (UNAUDITED)
(local currencies) For the period ended June 30, 1998
<TABLE>
<CAPTION>
United States Pound Sterling Canadian Dollar Deutschemark
Dollar Portfolio Portfolio Portfolio*** Portfolio***
$ (pound sterling) C$ Dem
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income 1,694,562 4,444,890 -- --
-----------------------------------------------------------------
TOTAL INCOME 1,694,562 4,444,890 -- --
-----------------------------------------------------------------
EXPENSES:
Advisory fees 60,169 122,087 -- --
Administration fees 15,042 30,522 -- --
Trustee fees 32,757 18.824 -- --
Legal fees 17,721 11,222 -- --
Amortization of organization costs 10,800 4,500 -- --
Audit fees 7,339 3,801 -- --
Fund accounting fees and expenses 6,017 12,209 -- --
Custodian fees and expenses 3,009 6,104 -- --
Other operating expenses 9,310 7,992 -- --
-----------------------------------------------------------------
TOTAL EXPENSES 162,164 21217,261 -- --
Fee waivers (60,169) (79,357) -- --
-----------------------------------------------------------------
TOTAL NET EXPENSES 101,995 137,904 -- --
-----------------------------------------------------------------
NET INVESTMENT INCOME 1,592,567 4,306,986 -- --
-----------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,592,567 4,306,986 -- --
-----------------------------------------------------------------
</TABLE>
*** not yet commenced operations
See notes to financial statements
16
<PAGE> 123
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
STATEMENT OF CHANGES IN NET ASSETS
UNITED STATES DOLLAR PORTFOLIO
<TABLE>
<CAPTION>
For the period
from March 26, 1997
For the six months (commencement of
ended June 30, 1998 operations) to
(unaudited) December 31, 1997
$ $
INCREASE IN NET ASSETS FROM:
<S> <C> <C>
OPERATIONS:
Net investment income 1,592,567 1,490,078
------------ -------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,592,567 1,490,078
------------ -------------
CAPITAL TRANSACTIONS:
Contributions 169,773,940 177,719,547
Withdrawals (205,819,524) (125,182,184)
------------ -------------
CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS (36,045,584) 52,537,363
------------ -------------
CHANGE IN NET ASSETS (34,453,017) 54,027,441
------------ -------------
NET ASSETS:
Beginning of period 54,027,441 --
------------ -------------
End of period 19,574,424 54,027,441
------------ -------------
</TABLE>
See notes to financial statements
17
<PAGE> 124
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
STATEMENT OF CHANGES IN NET ASSETS
POUND STERLING PORTFOLIO
<TABLE>
<CAPTION>
For the period
from March 26, 1997
For the six months (commencement of
ended June 30, 1998 operations) to
(unaudited) December 31, 1997
(pound sterling) (pound sterling)
INCREASE IN NET ASSETS FROM:
<S> <C> <C>
OPERATIONS:
Net investment income 4,306,986 4,780,468
---------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,306,986 4,780,468
---------------------------------------
CAPITAL TRANSACTIONS:
Contributions 65,708,956 182,128,181
Withdrawals (69,741,841) (58,870,747)
---------------------------------------
CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS (4,032,885) 123,257,434
---------------------------------------
CHANGE IN NET ASSETS 274,101 128,037,902
---------------------------------------
NET ASSETS:
Beginning of period 128,037,902 --
---------------------------------------
End of period 128,312,003 128,037,902
---------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE> 125
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANISATION
International Currency Fund (the "Portfolio Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At June 30 1998 the Portfolio
Trust consisted of four portfolios; the U.S. Dollar Portfolio (the "U.S. Dollar
Portfolio"), the Pound Sterling Portfolio (the "Pound Sterling Portfolio"), the
Canadian Dollar Portfolio (the "Canadian Dollar Portfolio" and the Deutschemark
Portfolio (the "Deutschemark Portfolio") (collectively the "Portfolios").
The investment objectives of each Portfolio are to seek to maintain a high level
of liquidity, preserve capital and stability of principal expressed in the
Portfolio's designated currency and, consistent with those objectives, to earn
current income. A Portfolio's investment objectives are fundamental and may not
be changed without the approval of its shareholders.
Rothschild International Asset Management Limited (the "Investment Adviser")
serves as the Portfolio Trust's Investment Adviser. Pursuant to an agreement
dated June 19, 1998 it is proposed that the investment advisory service be
transferred to State Street Bank and Trust Company. BISYS Fund Services, Limited
Partnership ("BISYS") acts as Administrator to the Portfolios.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with U.S. generally accepted accounting principles. The preparation
of financial statements, requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
PORTFOLIO VALUATIONS:
The securities of the Portfolios are valued at amortised cost, which
approximates market value. The amortised cost method involves valuing a security
at its cost on the date of purchase and thereafter assuming a constant
amortisation to maturity of the difference between the principal amount due at
maturity and cost. In accordance with policies adopted by the Portfolio Trust in
theis regard, the Portfolios may not (a) purchase any instrument with an
effective remaining maturity greater than thirteen months, or (b) maintain a
weighted average maturity which exceeds 90 days.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognised on the accrual basis and
includes, where applicable, the amortisation of premium or accretion of
discount. Gains or losses realised on sales of securities are determined by
comparing the amortised cost of the security sold with the net sale proceeds.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Portfolio Trust expenses are allocated among the respective
Portfolios of the Trust.
REPURCHASE AGREEMENTS:
The Portfolios will enter into repurchase agreements only with financial
institutions rated by a U.S. nationally recognised statistical rating
organisation (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.
ORGANISATIONAL EXPENSES:
The deferred organisation costs were incurred by the Portfolios in connection
with their organisation. The Portfolios are expected to reimburse the Investment
Adviser for the payment of these costs made in advance by the Manager. The costs
have been deferred and will be amortised on a straight line basis over a five
year period from the commencement of operations by the Portfolios.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. federal income tax
purposes. As such, each U.S. investor in a Portfolio will be taxed on its share
of the Portfolio's ordinary income and capital gains. It is intended that the
Portfolios will be managed in such a way that an investor will be able to
satisfy the requirements of U.S. Internal Revenue code applicable to regulated
investment companies.
19
<PAGE> 126
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio Trust acting on behalf of each of the Portfolios has an Investment
Advisory Agreement with the Investment Adviser and an Administration Agreement
with BISYS.
The Investment Adviser is responsible for managing the investment of the assets
of the Portfolios in conformity with the stated objectives and policies of the
Portfolios. Pursuant to the terms of the Investment Advisory Agreement, the
Investment Adviser is entitled to a fee, which is accrued daily and payable
monthly, at an annual rate of 0.20% of the average daily net assets of each
Portfolio of the Trust. For the period ended June 30, 1998, the Investment
Adviser waived its entire fee for the United States Dollar Portfolio and
partially waived its fee for the Pound Sterling Portfolio in the following
amounts.
- --------------------------------------------------------------------
United States Dollar $60,169
- --------------------------------------------------------------------
Pound Sterling 122,087 (pound sterling)
- --------------------------------------------------------------------
Canadian Dollar Nil
- --------------------------------------------------------------------
Deutschemark Nil
- --------------------------------------------------------------------
As Administrator, BISYS assists in supervising the operations of the Portfolios.
Pursuant to the terms of the Administration Agreement, BISYS is entitled to a
fee from each Portfolio which is accrued daily and payable monthly, at an annual
rate of 0.05% of each of the Portfolio's average daily net assets. For the
period ended June 30, 1998 BISYS earned the following fees as Administrator for
each Portfolio.
- --------------------------------------------------------------------
United States Dollar $15,042
- --------------------------------------------------------------------
Pound Sterling 30,522 (pound sterling)
- --------------------------------------------------------------------
Canadian Dollar Nil
- --------------------------------------------------------------------
Deutschemark Nil
- --------------------------------------------------------------------
In addition BISYS earned the following amounts for the period ended June 30,
1998 for providing fund accounting services on a daily basis to each Portfolio.
- --------------------------------------------------------------------
United States Dollar $6,017
- --------------------------------------------------------------------
Pound Sterling 12,209 (pound sterling)
- --------------------------------------------------------------------
Canadian Dollar Nil
- --------------------------------------------------------------------
Deutschemark Nil
- --------------------------------------------------------------------
NOTE 4 - TRUSTEES AND OFFICERS COMPENSATION
For the six months ended June 30, 1998 the Portfolio Trust paid US$32,757 and
18,824 (pound sterling) in total to the Trustees of each Portfolio Trust. The
Portfolio Trust will not pay compensation to the Trustees of the Portfolio Trust
affiliated with the Investment Adviser or the Administrator nor will it pay any
compensation to the Trustees who are officers of the Trust.
NOTE 5 - SECURITIES TRANSACTIONS
During the period ended June 30, 1998, each Portfolio purchased and matured
portfolio securities, in the following amounts:
<TABLE>
<CAPTION>
Purchases Maturities
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United States
Dollar Portfolio $4,587,615,164 $4,622,186,000
- -------------------------------------------------------------------------------------------------------------
Pound Sterling
Portfolio 7,659,942,670 (pound sterling) 7,684,812,951 (pound sterling)
- -------------------------------------------------------------------------------------------------------------
Canadian Dollar
Portfolio nil nil
- -------------------------------------------------------------------------------------------------------------
Deutschemark
Portfolio nil nil
- -------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 127
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
FINANCIAL HIGHLIGHTS
UNITED STATES DOLLAR PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
$ $
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C>
Net assets, end of period ('000) $19,574 $54,027
Ratio of expenses to average net assets after waivers and reimbursements 0.36% (b) 0.65%(b)
Ratio of net investment income to average net assets 5.62%(b) 4.93%(b)
Ratio of expenses to average net assets (a) 0.56%(b) 0.85%(b)
Ratio of net investment income to average net assets (a) 5.42%(b) 4.73%(b)
</TABLE>
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions and expense reimbursements had not occurred the ratios
would have been as indicated.
(b) Annualized
See notes to financial statements
21
<PAGE> 128
[Rothschild Asset Management Logo]
INTERNATIONAL CURRENCY FUND
FINANCIAL HIGHLIGHTS
POUND STERLING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 26, 1997
FOR THE SIX MONTHS (COMMENCEMENT OF
ENDED JUNE 30, 1998 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1997
(POUND STERLING) (POUND STERLING)
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period ('000) 128,312 (pound sterling) 128,038 (pound sterling)
Ratio of expenses to average net assets after waivers and reimbursements 0.22%(b) 0.24%(b)
Ratio of net investment income to average net assets 6.88%(b) 6.56%(b)
Ratio of expenses to average net assets (a) 0.35%(b) 0.41%(b)
Ratio of net investment income to average net assets (a) 6.75%(b) 6.38%(b)
</TABLE>
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions and expense reimbursements had not occurred the ratios
would have been as indicated.
(b) Annualized
See notes to financial statements
22
<PAGE> 129
PART C
Item 23. Exhibits.
Exhibit No. Description
- ----------- -----------
A1 Master Trust Agreement incorporated by reference to Exhibit 1
to Pre-Effective Amendment No. 1 to the Registration Statement
filed via EDGAR on November 25, 1996.
A2 Amendment No. 1 to the Master Trust Agreement filed herewith.
A3 Amendment No. 2 to the Master Trust Agreement filed herewith.
A4 Form of Amendment No. 3 to the Master Trust Agreement filed
herewith.
B By-Laws of the Trust incorporated by reference to Exhibit 2 to
Pre-Effective Amendment No. 1 to the Registration Statement
filed via EDGAR on November 25, 1996.
C Sections 4.2(d), 4.2(e), 4.2(f), 4.2(i), 4.2(j), 4.2(k),
4.2(m), 4.6, 6.3, 6.5, 6.6, 7.1, 7.2 and 7.3 and Article 5 of
the Master Trust Agreement are incorporated herein by
reference.
D1 Investment Advisory Contract between the International
Currency Fund and State Street Bank and Trust Company filed
herewith.
D2 Form of Sub-Advisory Agreement between State Street Bank and
Trust Company and State Street Global Advisors United Kingdom
Limited with respect to the International Currency Fund filed
herewith.
E Distribution Agreement between the Trust and BISYS Fund
Services Limited Partnership filed herewith.
F Not applicable.
G Custody Agreement between the Trust and The Chase Manhattan
Bank incorporated by reference to Exhibit 8 to Pre-Effective
Amendment No. 2 to the Registration Statement filed via EDGAR
on February 4, 1997.
H1 Transfer Agency and Service Agreement between the Trust and
BISYS Fund Services, Inc. incorporated by reference to Exhibit
9a to Pre-Effective Amendment No. 2 to the Registration
Statement filed via EDGAR on February 4, 1997.
3
<PAGE> 130
Exhibit No. Description
- ----------- -----------
H2 Form of Administration Agreement between the Trust and BISYS
Fund Services Limited Partnership filed herewith.
H3 Fund Accounting Agreement between the Trust and BISYS Fund
Services, Inc. Incorporated herein by reference to Exhibit 9c
to Pre-Effective Amendment No. 2 to the Registration Statement
filed via EDGAR on February 4, 1997.
H4 Feeder Fund Management Services Agreement between the Trust
and State Street Bank and Trust Company filed herewith.
H5 Form of Shareholder Servicing Agreement filed herewith.
I Legal opinion of Goodwin, Procter & Hoar LLP as to legality of
securities being offered and consent to the use thereof
incorporated by reference to Exhibit 10 to Pre-Effective
Amendment No. 2 to the Registration Statement filed via EDGAR
on February 4, 1997.
J1 Consent of Goodwin, Proctor & Hoar LLP filed herewith.
J2 Consent of PricewaterhouseCoopers LLP filed herewith.
K Not applicable.
L Purchase agreements with respect to initial capital between
the Trust and Five Arrows House Investments Limited
incorporated by reference to Exhibit 13 to Pre-effective
Amendment No. 2 to the Registration Statement filed via EDGAR
on February 4, 1997.
M Form of Plan pursuant to Rule 12b-1 filed herewith.
N Financial Data Schedules for the U.S. Dollar Fund filed
herewith.
O Plan for the issuance and distribution of multiple classes of
shares pursuant to Rule 18f-3 incorporated by reference to
Exhibit 18 to Pre-Effective Amendment No. 2 to the
Registration Statement filed via EDGAR on February 4, 1997.
4
<PAGE> 131
Item 24. Persons Controlled by or Under Common Control with Trust.
As of December 31, 1998, the Euro Fund and the Canadian Dollar Fund
(each a "Fund"), series of shares of the Trust, owned approximately 50% of the
value of the outstanding interests in their corresponding Portfolios of the
International Currency Fund ("Master Fund") which invest in securities
denominated in their respective Designated Currencies. Since, as of December 31,
1998, Frank Russell Investment Management Company, a corporation formed under
the laws of the state of Washington, was the beneficial owner of all of the
outstanding shares of the Euro Fund and Canadian Dollar Fund of the Trust it may
also be deemed to be in control of the Euro and Canadian Dollar Portfolios as
control is defined in the 1940 Act.
Item 25. 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 26. Business and Other Connections of Investment Adviser.
State Street Global Advisors, the investment management division of
State Street Bank and Trust Company ("State Street") serves as investment
adviser to the Portfolios. State Street, a Massachusetts bank, currently manages
large institutional accounts and collective investment funds. The business,
profession, vocation or employment of a substantial nature which each director
or officer of the investment adviser is or has been, at any time during the past
two fiscal years, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee, is as follows:
5
<PAGE> 132
Names, Business and Address Capacity with Adviser
--------------------------- ---------------------
Tenley E. Albright, MD Director
Chairman
Western Resources, Inc.
Two Commonwealth Avenue
Boston, MA 02116-3134
I. MacAlister Booth Director
Retired Chairman, President and CEO
Polaroid Corporation
P.O. Box 428 - 68 Barnes Hill Road
Concord, MA 01742
Marshall N. Carter Chairman and CEO
State Street Bank and Trust Company
225 Franklin Street - P.O. Box 351
Boston, MA 02110
Truman S. Casner Director
Partner, Ropes & Gray
One International Place - 37th Floor
Boston, MA 02110
Nader F. Darehshori Director
Chairman, President and CEO
Houghton Mifflin Company
222 Berkeley - 5th Floor
Boston, MA 02116-3764
Arthur L. Goldstein Director
Chairman and CEO
Ionics, Inc.
65 Grove Street
P.O. Box 9131
Watertown, MA 02272-9131
David P. Gruber Director
Chairman and CEO
Wyman-Gordon Company
244 Worchester Street
N. Grafton, MA 01536-8001
6
<PAGE> 133
Charles F. Kaye Director
Chairman
Transportation Investments, Inc.
101 Federal Street - Suite 1900
Boston, MA 02110
John M. Kucharski Director
Chairman and CEO
EG&G, Inc.
45 William Street
Wellesley, MA 02181
Charles R. LaMantia Director
President and CEO
Arthur D. Little, Inc.
25 Acorn Park
Cambridge, MA 02140
David B. Perini Director
Chairman
Perini Corporation
73 Mt. Wayte Avenue
Framingham, MA 01701
Dennis J. Picard Director
Chairman and CEO
Raytheon Company
141 Spring Street
Lexington, MA 02173
David A. Spina President and Chief
State Street Corporation Operating Officer
225 Franklin Street - P.O. Box 351
Boston, MA 02110
Diana Chapman Walsh Director
President
Wellesley College
106 Central Street
Wellesley, MA 02181
7
<PAGE> 134
State Street Global Advisors Ltd. United Kingdom (SSgAUK), an indirect
wholly-owned subsidiary of State Street, serves as sub-adviser to the
Portfolios. SSgAUK currently manages investment portfolios for and advises
pension funds, high net worth individuals and institutional and international
investors. The business, profession, vocation or employment of a substantial
nature which each executive director or officer of SSgAUK is or has been at
anytime during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee, is as follows:
Name, Business and Address Capacity with SSGAUK
-------------------------- --------------------
Timothy B. Harbert Executive Director
Executive Vice President
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
John R. Serhant Executive Director
Principal
State Street Global Advisors
225 Franklin Street
Boston, MA 02110
Nigel Wightman Executive Director
Managing Director
State Street Global Advisors United Kingdom Limited
King Street Advisors Limited
Almack House
28 King Street
London SWIY 6QW
Executive Director
State Street Bank Europe Limited
1 Royal Exchange Steps
Royal Exchange
London EC3V 3LE
Jean-Francois Schock Executive Director
Executive Director
State Street Global Advisors United Kingdom Limited
Almack House
28 King Street
London SWIY 6QW
8
<PAGE> 135
Alan Brown Executive Director
Executive Director
State Street Global Advisors United Kingdom Limited
King Street Advisors Limited
Almack House
28 King Street
London SWIY 6QW
Executive Director
European Direct Capital Management
Plankengasse 4/4, A-1010
Vienna, Austria
Executive Director
Advanced International Technology
311 Park Place Blvd
Suite 250
Clearwater, Florida 33759
Executive Director (until September 11, 1997)
State Street Unit Trust Management
One Canada Square
Canary Wharf
London
James Palmer Executive Director
Sales Director
LCF Edmond de Rothschild Fund Management Limited
Orion House
5 Upper St Martins Lane
London
Sales Director (until May 1998) Executive Director
American Baltic Securities Fund Limited
c/o Hemisphere Management Limited
P O Box HM 951, Hamilton HM DX, Bermuda
Paul Duncombe Executive Director
Kanesh Lakhani Executive Director
Patrick Waller Executive Director
9
<PAGE> 136
Item 27. Principal Underwriters.
(a) BISYS Fund Services Limited Partnership acts as the distributor and
principal underwriter for each of the Funds. It also acts as principal
underwriter to the following other investment companies:
Alpine Equity Trust
The ARCH Fund, Inc.
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Gradison Custodian Trust
Gradison Growth Trust
Gradison-McDonald Cash Reserves Trust
Gradison-McDonald Municipal Custodian Trust
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
The Kent Funds
Magna Funds
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
The Parkstone Advantage
Funds Pegasus Funds
Puget Sound Alternative Investment Series Trust
Republic Advisor Funds Trust
Republic Funds Trust
The Riverfront Funds, Inc.
Sefton Funds Trust
The Sessions Group
Summit Investment Trust
Variable Insurance Trust
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
10
<PAGE> 137
(b) The following information relates to the directors, officers and
partners of BISYS Fund Services Limited Partnership:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address With Registrant With Underwriter
---------------- --------------- ----------------
<S> <C> <C>
WC Subsidiary Corporation None Sole General Partner
150 Clove Road
Little Falls, NJ 07424
BISYS Fund Services, Inc. None Sole Limited Partner
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
(c) Not applicable.
Item 28. 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 29. Management Services.
Not applicable.
Item 32. Undertakings.
Not applicable.
11
<PAGE> 138
SSgA INTERNATIONAL LIQUIDITY FUND
SIGNATURES
and
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Peter B. Collacott and Charles L. Booth,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to the Registration Statements of SSgA International Liquidity Fund and
International Currency Fund, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, SSgA International Liquidity Fund has duly
caused this Post-Effective Amendment to its Registration Statement to be signed
below by the following persons in the capacities and on the dates indicated:
Name Title Date
- ---- ----- ----
/s/ Peter B. Collacott President and Trustee January 19, 1999
- --------------------------- (Principal Executive Officer)
Peter B. Collacott
/s/ William J. Tomko (Principal Financial and January 19, 1999
- --------------------------- Treasurer Accounting Officer)
William J. Tomko
/s/ Bryan J. Walsh Trustee January 19, 1999
- ---------------------------
Bryan J. Walsh
12
<PAGE> 139
Name Title Date
- ---- ----- ----
/s/ Alan T. Jeffers Trustee January 19, 1999
- ---------------------------
Alan T. Jeffers
/s/ Roger M. Kubarych Trustee November 12, 1998
- ---------------------------
Roger M. Kubarych
/s/ Patrick J. Riley Trustee November 12, 1998
- ---------------------------
Patrick J. Riley
/s/ Bruce D. Taber Trustee November 12, 1998
- ---------------------------
Bruce D. Taber
/s/ Henry W. Todd Trustee January 19, 1999
- ---------------------------
Henry W. Todd
13
<PAGE> 140
INTERNATIONAL CURRENCY FUND
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, International Currency Fund has duly caused this
Post-Effective Amendment to the Registration Statement of SSgA International
Currency Fund to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 30th day of December, 1998.
INTERNATIONAL CURRENCY FUND
By: /s/ Peter B. Collacott
-----------------------------
Peter B. Collacott, President
14
<PAGE> 141
EXHIBITS
99a.2 Amendment No. 1 to the Master Trust Agreement
99a.3 Amendment No. 2 to the Master Trust Agreement
99a.4 Form of Amendment No. 3 to the Master Trust Agreement
99d.1 Investment Advisory Contract between International Currency Fund and
State Street Bank and Trust Company
99d.2 Form of Sub-Advisory Agreement between State Street Bank and Trust
Company and State Street Global Advisors United Kingdom Limited with
respect to the International Currency Fund
99e. Distribution Agreement between the Trust and BISYS Fund Services
Limited Partnership
99h.2 Form of Administration Agreement between the Trust and BISYS Fund
Services Limited Partnership
99h.4 Feeder Fund Management Services Agreement between the Trust and State
Street Bank and Trust Company
99h.5 Form of Shareholder Servicing Agreement
99j.1 Consent of Goodwin, Procter & Hoar LLP
99j.2 Consent of PricewaterhouseCoopers LLP
99m. Form of Plan Pursuant to Rule 12b-1
27 Financial Data Schedules for the U.S. Dollar Fund
15
<PAGE> 1
Exhibit 99a.2
-------------
ROTHSCHILD FIVE ARROWS CURRENCY TRUST
AMENDMENT NO. 1 TO
THE MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the Master Trust Agreement of Rothschild Five Arrows
Currency Trust (the "Trust") dated August 13, 1996 to be effective as of this
17th day of January, 1997.
W I T N E S S E T H
-------------------
WHEREAS, Section 7.3 of the Master Trust Agreement dated as of August
13, 1996 (the "Agreement") of the Trust provides that the Agreement may be
amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder; and
WHEREAS, Section 1.1 of the Agreement further provides that the
Trustees shall conduct the business of the Trust under such name as they may
from time to time determine;
WHEREAS, the Trustees wish to amend Section 1.1 of the Agreement to
change the name of the Trust;
NOW, THEREFORE, the Trustees hereby amend the Agreement as follows:
Section 1.1 shall be deleted and replaced in its entirety with the
following
Section 1.1 NAME AND PRINCIPAL OFFICE. The Trust shall be
known as "Five Arrows Short-Term Investment Trust" and the
Trustees shall conduct the business of the Trust under that
name or any other name or names as they may from time to time
determine. The principal office of the Trust is located at
3435 Stelzer Road, Columbus, OH 43219 or such location as the
Trustees may from time to time determine.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seal for themselves and their assigns, as of this 17th day of January, 1997.
/s/ Peter B. Collacott
-------------------------------
Peter B. Collacott
/s/ Paul R. Freeman
-------------------------------
Paul R. Freeman
/s/ Alan T. Jeffers
-------------------------------
Alan T. Jeffers
/s/ Roger M. Kubarych
-------------------------------
Roger M. Kubarych
/s/ Bryan J. Walsh
-------------------------------
Bryan J. Walsh
<PAGE> 1
Exhibit 99a.3
-------------
FIVE ARROWS SHORT-TERM INVESTMENT TRUST
AMENDMENT NO. 2 TO
THE MASTER TRUST AGREEMENT
AMENDMENT NO. 2 to the Master Trust Agreement of Five Arrows Short-Term
Investment Trust (the "Trust") dated August 13, 1996, as amended.
W I T N E S S E T H
-------------------
WHEREAS, Section 7.3 of the Master Trust Agreement dated as of August
13, 1996, as amended, of the Trust (the "Agreement") provides that the Agreement
may be amended at any time, so long as such amendment does not adversely affect
the rights of any shareholder, by an instrument in writing executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees of the
Trust and setting forth such amendment, and shall be effective as of the time
set forth in the instrument;
WHEREAS, Section 1.1 of the Agreement further provides that the
Trustees shall conduct the business of the Trust under such name as they may
from time to time determine;
WHEREAS, the Trustees wish to amend Section 1.1 of the Agreement to
change the name of the Trust;
NOW, THEREFORE, the undersigned, being a duly elected and qualified
officer of the Trust, certifies that (a) a majority of the Trustees of the Trust
at a meeting held on July 17, 1998 approved the following Amendment to the
Agreement; and that such Amendment was to be effective upon the Completion as
defined in the Agreement dated June 19, 1998 between Rothschild Asset Management
Limited, Rothschild International Asset Management Limited and State Street
Global Advisors United Kingdom Limited:
<PAGE> 2
"Section 1.1 shall be deleted and replaced in its entirety with the
following:
Section 1.1 NAME AND PRINCIPAL OFFICE. The Trust shall be
known as "SSgA International Liquidity Fund" and the Trustees
shall conduct the business of the Trust under that name or any
other name or names as they may from time to time determine.
The principal office of the Trust is located at 3435 Stelzer
Road, Columbus, OH 43219 or such location as the Trustees may
from time to time determine.
and (b) the Completion took place on September 22, 1998.
Dated: November 17, 1998
/s/ Charles L. Booth
--------------------------------
Charles L. Booth
Vice President and Secretary
<PAGE> 1
Exhibit 99a.4
-------------
SSgA INTERNATIONAL LIQUIDITY FUND
AMENDMENT NO. 3 TO
THE MASTER TRUST AGREEMENT
AMENDMENT NO. 3 to the Master Trust Agreement of SSgA International
Liquidity Fund (the "Trust") dated August 13, 1996, as amended (the
"Agreement").
W I T N E S S E T H
-------------------
WHEREAS, Section 7.3 of the Master Trust Agreement dated as of August
13, 1996, as amended, of the Trust (the "Agreement") provides that the Agreement
may be amended at any time, so long as such amendment does not adversely affect
the rights of any shareholder, by an instrument in writing executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees of the
Trust and setting forth such amendment, and shall be effective as of the time
set forth in the instrument;
WHEREAS, the amendment set forth below does not adversely affect the
rights of any shareholder of the Trust;
WHEREAS, a majority of the Trustees of the Trust at a meeting held on
August 20, 1998 approved the conversion of the "Deutschemark Fund" Sub-Trust of
the Trust to the "Euro Fund" Sub-Trust subject to the receipt of any necessary
regulatory relief from the Securities and Exchange Commission, such conversion
to take place in conjunction with the adoption of the Euro as the official
currency of the eleven European Union countries currently participating in such
adoption (the "Euro Adoption");
WHEREAS, by a letter dated December 2, 1998 the staff of the Securities
and Exchange Commission has granted the necessary regulatory relief.
<PAGE> 2
WHEREAS, the Euro Adoption became effective on January 1, 1999; NOW,
THEREFORE, the undersigned, being a duly elected and qualified officer
of the trust, certifies that, effective January 1, 1999, the Agreement
is amended to replace the portion of Section 4.2 immediately preceding
Section 4.2(a) with the following:
" Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate four Sub-Trusts: "U.S. Dollar Fund," "Pound
Sterling Fund," "Euro Fund" and "Canadian Dollar Fund". The Shares of
such Sub-Trusts and any Shares of any further Sub-Trust or class
thereof that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to
some further Sub-Trust at the time of establishing and designating the
same) have the following relative rights and preferences:"
Dated: January 4, 1999
/s/ Geoffrey R.T. Kenyon
------------------------------
Geoffrey R.T. Kenyon
Assistant Secretary
<PAGE> 1
Exhibit 99d.1
-------------
INVESTMENT ADVISORY AGREEMENT
BETWEEN
INTERNATIONAL CURRENCY FUND
AND
STATE STREET BANK AND TRUST COMPANY
This Agreement is made as of this 22nd day of September, 1998, between
International Currency Fund, a Delaware business trust (the "Investment
Company"), and State Street Bank and Trust Company, a Massachusetts trust
company (the "Adviser").
WHEREAS, the Investment Company is an open-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), currently consisting of the portfolio series, listed
on Schedule A hereto (the "Initial Portfolios"), each having its own investment
policies; and
WHEREAS, the Adviser is a Massachusetts trust company, and is in the
business of providing, among other things, fiduciary and investment advisory
services; and
WHEREAS, the Investment Company desires to retain the Adviser to render
investment advisory services to the Investment Company with respect to the
Initial Portfolios and possibly such other funds as the Investment Company and
the Adviser may agree upon (collectively, the "Funds"), and the Adviser is
willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Investment Company and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) INITIAL PORTFOLIOS. The Investment Company hereby appoints
the Adviser to act as investment adviser to the Initial Portfolios for the
period and on the terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided. The Investment Company warrants that the Adviser
has been duly appointed to act hereunder.
(b) ADDITIONAL FUNDS. In the event that the Investment Company
establishes one or more Funds other than the Initial Portfolios with respect to
which it desires to retain the Adviser to render investment advisory services
hereunder, it shall so notify the Adviser in writing, indicating the advisory
fee to be payable with respect to the additional Fund. If the Adviser is willing
to render such services, it shall so notify the Investment Company in writing,
whereupon such Fund shall become a Fund hereunder. In such event a writing
signed by both the Investment Company and the Adviser shall be annexed hereto as
a part hereof indicating that such additional Fund has become a Fund hereunder
and reflecting the agreed-upon fee schedule for such Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of
Trustees of the Investment Company, the Adviser shall manage the investment
operations and the composition of the Fund, including the purchase, retention
and disposition thereof, in accordance with the Fund's investment objective and
policies as stated in the Investment Company's Registration Statement. The
Adviser is authorized to engage one or more sub-advisers in connection with the
Adviser's duties under this Agreement, which sub-advisers
<PAGE> 2
may be affiliates of the Adviser. The Adviser's duties hereunder are subject to
the following understandings:
(a) The Adviser shall provide supervision of investments,
furnish a continuous investment program for the Fund, determine from time to
time what investments or securities will be purchased, retained or sold by the
Fund, and what portion of the assets will be invested or held uninvested as
cash;
(b) The Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the Master Trust
Agreement, By-Laws and Registration Statement of the Investment Company and with
the instructions and directions of the Board of Trustees of the Investment
Company, provided, however, the Adviser shall not be responsible for acting
contrary to any of the foregoing that are changed without notice of such change
to the Adviser; and the Adviser shall conform to and comply with the applicable
requirements of the 1940 Act and all other applicable federal or state laws and
regulations.
(c) The Adviser shall promptly communicate to the officers and
Trustees of the Investment Company such information relating to Fund
transactions as they may reasonably request. On occasions when the Adviser deems
the purchase or sale of a security to be in the best interest of a Fund as well
an other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased, provided that
in the opinion of the Adviser, all accounts are treated equitably and fairly. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, shall be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to Investment Company and to such other clients;
(d) The Adviser shall maintain books and records with respect
to the Investment Company's securities transactions and shall render to the
Investment Company's Board of Trustees such periodic and special reports as the
Board may reasonably request;
(e) The Adviser shall provide the Investment Company with a
list of all securities transactions as reasonably requested by the Investment
Company; and
(f) The investment advisory services of the Adviser to the
Investment Company under this Agreement are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSION.
The Adviser, subject to and in accordance with any directions which the
Investment Company's Board of Trustees may issue from time to time, shall place,
in the name of the Investment Company, orders for the execution of the
securities transactions in which any Fund is authorized to invest. When placing
such orders, the primary objective of the Adviser shall be to obtain the most
favorable price and execution for the Investment Company but this requirement
shall not be deemed to obligate the Adviser to place any order solely on the
basis of obtaining the lowest commission rate if the other standards set forth
in this section have been satisfied. The Investment Company recognizes that
there are likely to be many cases in which different brokers are equally able to
provide such best price and execution and that, in selection among such brokers
with respect to particular trades, it is desirable to choose those brokers who
furnish "brokerage and research services" (as defined in Section 28(e)(3) of the
Securities and Exchange Act of 1934) or statistical quotations and other
information to the Investment Company and/or the Adviser in accordance with the
standards set forth below. Moreover, to the extent that it continues to be
lawful to do so and so long as the Board determines as a matter of general
policy that the Investment Company will benefit, directly of indirectly, by
doing so, the Adviser may place orders with a broker who charges a commission
for that transaction which is in
2
<PAGE> 3
excess of the amount of commission that another broker would have charged for
effecting that transaction, provided that the excess commission is reasonable in
relation to the value of brokerage and research services provided by that
broker.
4. BOOKS AND RECORDS. The Adviser shall keep the Investment
Company's books and records required to be maintained by it pursuant to
paragraph 2(d) hereof. The Adviser agrees that all records which it maintains
for the Investment Company are the property of the Investment Company and it
shall surrender promptly to the Investment Company any of such records upon the
Investment Company's request. Nothing herein shall prevent the Adviser from
maintaining its own records as required by law, which may be a duplication of
the Investment Company's records.
5. REPORTS TO ADVISER. The Investment Company agrees to furnish
the Adviser at its principal office all prospectuses, proxy statements, reports
to stockholders, sales literature or other material prepared for distribution to
shareholders of the Investment Company or the public, which refer in any way to
the Adviser, ten (10) days prior to use thereof and not to use such material if
the Adviser should object thereto in writing within seven (7) days after receipt
of such material; provided, however, that the Adviser hereby approves all uses
of its name which merely refer in accurate terms to its appointment as
investment adviser hereunder, which merely identifies the Investment Company, or
which are required by the Securities and Exchange Commission or a state
securities commission. In the event of termination of this Agreement, the
Investment Company shall, on written request of the Adviser, forthwith delete
any reference to the Adviser from any materials described in the preceding
sentence. The Investment Company shall furnish or otherwise make available to
the Adviser such other information relating to the business affairs of the
Investment Company as the Adviser at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Investment Company gives written
instructions to the contrary, the Adviser shall vote or not vote all proxies
solicited by or with respect to the issuers of securities in which assets of any
Fund may be invested. The Adviser shall use its best good faith judgment to vote
or not vote such proxies in a manner which best serves the interests of the
Investment Company's shareholders.
7. EXPENSES. During the term of this Agreement, the Adviser
shall pay all of its own expenses incurred by it in connection with its
activities under this Agreement and the Fund of the Investment Company shall
bear all expenses that are incurred in its operations not specifically assumed
by the Adviser.
Expenses borne by the Fund will include but not be limited to the
following (or the Fund's proportionate share of the following): (a) brokerage
commissions relating to securities purchased or sold by the Fund or any losses
incurred in connection therewith; (b) fees payable to and expenses incurred on
behalf of the Fund by the Investment Company's administrator; (c) expenses of
organizing the Investment Company and the Fund; (d) filing fees and expenses
relating to the registration and qualification of the Fund's shares and the
Investment Company under federal or state securities laws and maintaining such
registrations and qualifications; (e) fees and salaries payable to the
Investment Company's Trustees and officers who are not officers or employees of
the Investment Company's administrator, any investment adviser or underwriter of
the Investment Company; (f) taxes (including any income or franchise taxes) and
governmental fees; (g) costs of any liability, uncollectible items of deposit
and other insurance or fidelity bonds; (h) any costs, expenses or losses arising
out of any liability of or claim for damage or other relief asserted against the
Investment Company or the Fund for violation of any law; (i) legal, accounting
and auditing expenses, including legal fees of special counsel for the
independent Trustees; (j) charges of custodians, transfer agents and other
agents; (k) costs of preparing share certificates (if any); (l) expenses of
setting in type and printing Prospectuses and Statements of Additional
Information and supplements thereto for existing shareholders, reports and
statements to shareholders and proxy materials (m) any extraordinary
3
<PAGE> 4
expenses (including fees and disbursements of counsel) incurred by the
Investment Company or the Fund; and (n) fees and other expenses incurred in
connection with membership in Investment Company organizations.
8. COMPENSATION OF THE ADVISER. For the services to be rendered
by the Adviser as provided in this Agreement, the Investment Company shall pay
to the Adviser such compensation as is designated in Schedule B to this
Agreement, so long as the Adviser has not waived all or a portion of such
compensation.
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a)
willful misfeasance, bad faith or gross negligence on the part of the Adviser,
or any sub-adviser engaged by the Adviser pursuant to Section 2 hereof, in
performance of its obligations and duties hereunder or (b) reckless disregard by
the Adviser, or any sub-adviser engaged by the Adviser pursuant to Section 2
hereof, of its obligations and duties hereunder, the Adviser shall not be
subject to any liability whatsoever to the Investment Company, or to any
shareholder of the Investment Company, for any error of judgment, mistake of law
or any other act or omission in the course of, or connected with, rendering
services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of the Investment Company.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to each
Fund on the date on which the Fund commences offering its shares to the public,
so long as with respect to any additional Funds, the provisions of Section l(b)
have been complied with. This Agreement, unless sooner terminated as provided
herein, shall continue for each Fund for two years following the effective date
of this Agreement with respect to the Fund, or the date of the first annual or
special meeting of the shareholders of the Fund following such effective date,
if approved by a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act), and thereafter shall continue automatically for
periods of one year so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Board of
Trustees of the Investment Company 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 such approval, and (b) by
the Board of Trustees of the Investment Company or by vote of a majority of the
outstanding voting securities of the Fund.
(b) This Agreement may be terminated by the Investment Company
at any time, without the payment of any penalty, by vote of a majority of those
members of the Board of Trustees who are not "interested persons" (as defined in
the 1940 Act) of the Adviser or the Investment Company or by the majority vote
of either the entire Board of Trustees of the Investment Company or by vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser. This Agreement may also be terminated by the Adviser on
60 days' written notice to the Investment Company. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
11. CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts and
any applicable federal law.
12. LIMITATION OF LIABILITY. The Master Trust Agreement dated
August 13, 1996, as amended from time to time, establishing the Investment
Company, which is hereby referred to and a copy of which is on file with the
Secretary of State of the State of Delaware, provides that the name
International Currency Fund means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement. It is expressly
acknowledged and agreed that the obligations of the Investment Company hereunder
shall not be binding upon any of the shareholders, Trustees, officers, employees
or agents of the
4
<PAGE> 5
Investment Company, personally, but shall bind only the trust property of the
Investment Company, as provided in its Master Trust Agreement. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Investment Company and signed by an officer of the Investment Company, 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 Investment Company as provided in its Master
Trust Agreement.
13. INITIALS "SSGA"; NAMES "STATE STREET" AND "STATE STREET GLOBAL
ADVISORS"; LOGOS. The Investment Company acknowledges that (i) the initials
"SSgA", (ii) the names "State Street" and "State Street Global Advisors", (iii)
the logo consisting of the initials "SSgA" with a globe inside the "g" and (iv)
all other related names, initials and logos (collectively with the names,
initials and logos referred to above, the "Marks") are the property of the
Adviser and its related entities and may be used by the Investment Company only
with the consent of the Adviser. The Adviser consents to the use by the
Investment Company of the Marks in such form as the Adviser shall in writing
approve, but only on condition and so long as (i) this Agreement shall remain in
full force and (ii) the Investment Company shall fully perform, fulfill and
comply with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it. No such name shall be used by the Investment
Company at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Adviser
to the Investment Company to use the Marks is not exclusive of the right of the
Adviser itself to use, or to authorize others to use, the same; the Investment
Company acknowledges and agrees that as between the Adviser and the Investment
Company, the Adviser has the exclusive right so to use, or authorize others to
use the Marks and the Investment Company agrees to take such action as may
reasonably be requested by the Adviser to give full effect to the provisions of
this section (including, without limitation, consenting to such use of the
Marks). Without limiting the generality of the foregoing, the Investment Company
agrees that, upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Investment Company, the Investment
Company will, at the request of the Adviser made within six months after the
Adviser has knowledge of such termination or violation, use its best efforts to
eliminate all reference, if any, to the initials "SSgA", and any other Marks and
will not thereafter transact any business in a name containing the initials
"SSgA" or any other Marks in any form or combination whatsoever, or designate
itself as the same entity as or successor to an entity of such name, or
otherwise use the initials "SSgA" or any other Mark or reference to the Adviser.
Such covenants on the part of the Investment Company shall be binding upon it,
its trustees, officers, stockholders, creditors and all other persons claiming
under or through it.
5
<PAGE> 6
IN WITNESS WHEREOF, the due execution hereof as of the date first above
written.
Attest: INTERNATIONAL CURRENCY FUND
By: /s/ Alan T. Jeffers By: /s/ Peter B. Collacott
---------------------- --------------------------
Attest: STATE STREET BANK AND TRUST COMPANY
By: /s/ Jennifer Mclaughlin By: /s/ Timothy B. Harbert
---------------------- --------------------------
Executive Vice President
6
<PAGE> 7
SCHEDULE A
INITIAL PORTFOLIOS
------------------
U.S. Dollar Portfolio
Pound Sterling Portfolio
Deutsche Mark Portfolio
Canadian Dollar Portfolio
7
<PAGE> 8
SCHEDULE B
FEE SCHEDULE
------------
For the services to be provided by the Adviser hereunder, the Investment
Company agrees that each Initial Portfolio shall pay to the Adviser 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-five one hundredths of one percent
(.25%) 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.
8
<PAGE> 1
Exhibit 99d.2
-------------
INTERNATIONAL CURRENCY FUND
Form of
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of ______ ______ 1998 between STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company (the "Adviser") and
STATE STREET GLOBAL ADVISORS UNITED KINGDOM, LTD. (the Sub-Adviser).
WITNESSETH
That in connection of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
Subject always to the control of the trustees (the "Trustees")
of International Currency Fund, a Delaware business trust (the "Trust"), the
Sub-adviser, at its expense, will furnish continuously an investment program for
the Initial Portfolios listed on Schedule A hereto (the "Initial Portfolios")
and such other funds as the Investment Company and the Adviser may agree upon
(collectively, the "Funds") and will make investment decisions on behalf of the
Funds and place all orders for the purchase and sale of portfolio securities and
all other investments. In the event that the Trust establishes one or more Funds
other than the Initial Portfolios with respect to which the Adviser desires to
retain the Sub-adviser to render investment advisory services hereunder, it
shall so notify the Sub-adviser in writing, indicating the advisory fee to be
payable with respect to the additional Fund. If the Sub-adviser is willing to
render such services, it shall so notify the Adviser in writing, whereupon such
Fund shall become a Fund hereunder. In such event a writing signed by both the
Adviser and the Sub-adviser shall be annexed hereto as a part hereof indicating
that such additional Fund has become a Fund hereunder and reflecting the
agreed-upon fee schedule for such Fund.
In the performance of its duties, the Sub-adviser (i) will comply with
the provisions of the Trust's Agreement and Declaration of Trust and By-laws,
including any amendments thereto (upon receipt of such amendments by the
Sub-adviser), and the investment objectives, policies and restrictions of the
Fund as set forth in its current Registration Statement (copies of which will be
supplied to the Sub-adviser upon filing with the Securities and Exchange
Commission), (ii) will use its best efforts to safeguard and promote the welfare
of each Fund, (iii) will comply with other policies which the Trustees or the
Adviser, as the case may be, may from time to time determine as promptly as
practicable after such policies have been communicated to the Sub-adviser in
writing, and (iv) shall exercise the same care and diligence expected of the
Trustees. The Sub-adviser and the Adviser shall each make its officers and
employees available to the other from time to time at reasonable times to review
investment policies of the Funds and to consult with each other regarding the
investment affairs of the Funds.
(a) The Sub-adviser, at its expense, will furnish all
necessary investment and management facilities,
including salaries of personnel, required for it to
execute its duties hereunder faithfully.
(b) In the selection of brokers, dealers or futures
commissions merchants (collectively, brokers) and the
placing of orders for the purchase and sale of
portfolio investments for the Funds, the Sub-adviser
shall seek to obtain for each Fund the
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most favorable price and execution available, except
to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research
services as described below. In using its best
efforts to obtain for each Fund the most favorable
price and execution available, the Sub-adviser,
bearing in mind the Fund's best interests at all
times, shall consider all factors it deems relevant,
including, by way of illustration, the price, the
size of the transaction, the nature of the market for
the security, the amount of the commission, the
timing of the transaction taking into account market
prices and trends, the reputation, experience and
financial stability of the broker involved and the
quality of service rendered by the broker in other
transactions. Subject to such policies as the
Trustees may determine and communicate to the
Sub-adviser in writing, the Sub-adviser shall not be
deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise
solely by reason of its having caused a Fund to pay a
broker that provides brokerage and research services
to the Sub-adviser or any affiliated person of the
Sub-adviser an amount of commission for effecting a
portfolio investment transaction in excess of the
amount of commission another broker would have
charged for effecting that transaction, if the
Sub-adviser determines in good faith that such amount
of commission was reasonable in relation to the value
of the brokerage and research services provided by
such broker, viewed in terms of either that
particular transaction or the Sub-adviser's overall
responsibilities with respect to the Fund and to
other clients of the Sub- adviser and any affiliated
person of the Sub-adviser as to which the Sub-adviser
or any affiliated person of the Sub-adviser exercises
investment discretion.
(c) The Sub-adviser shall not be obligated to pay any
expenses of or for the Trust or of or for a Fund not
expressly assumed by the Sub-adviser pursuant to this
Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-adviser, and in any person
controlling, controlled by or under common control with the Sub-adviser, and
that the Sub- adviser and any person controlling, controlled by or under common
control with the Sub-adviser may have an interest in the Trust. It is also
understood that the Sub-adviser and persons controlling, controlled by or under
common control with the Sub-adviser have and may have advisory, management
service, distribution or other contracts with other organizations and persons,
and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE ADVISER TO THE SUB-ADVISER
The Adviser will pay to the Sub-adviser as compensation for the
Sub-adviser's services rendered, for the facilities furnished and for the
expenses borne by the Sub-adviser pursuant to Section 1, a fee, computed and
paid monthly at the annual rate (based on the number of days elapsed through the
end of the month) set forth on Schedule B hereto. Such fee shall be payable for
each month within ten (10) business days after the end of such month. If the
Sub-adviser shall serve for less than the whole of a month, the foregoing
compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS
AGREEMENT
This Agreement shall automatically terminate as to a Fund, without the
payment of any penalty, in the event of its assignment or in the event that the
Investment Advisory Agreement dated as of September 22, 1998 between the Adviser
and the Trust, with respect to that Fund, shall have terminated for
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any reason, and the Adviser shall provide notice of any such termination of the
Investment Advisory Agreement to the Sub-adviser; and this Agreement shall not
be amended as to a Fund unless such amendment be approved by the affirmative
vote of a majority of the outstanding shares of that Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Adviser or of the Sub-adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as to a Fund as
follows:
(a) The Trust may at any time terminate this Agreement
with respect to a Fund by written notice delivered or
mailed by registered mail, postage prepaid, to the
Adviser and the Sub-adviser, or
(b) If (i) the Trustees or the shareholders of the Trust
by the affirmative vote of a majority of the
outstanding shares of a Fund, and (ii) a majority of
the Trustees who are not interested persons of the
Trust or of the Adviser or of the Sub-adviser, by
vote cast in person at a meeting called for the
purpose of voting on such approval, do not
specifically approve at least annually the
continuance of this Agreement, then this Agreement
shall automatically terminate at the close of
business on the second anniversary of its execution,
or upon the expiration of one year from the effective
date of the last such continuance, whichever is
later; provided, however, that if the continuance of
this Agreement is submitted to the shareholders of a
Fund for their approval and such shareholders fail to
approve such continuance of this Agreement as
provided herein, the Sub-adviser may continue to
serve hereunder in a manner consistent with the
Investment Company Act of 1940, as amended (the 1940
Act), and the rules and regulations thereunder, or
(c) The Adviser may at any time terminate this Agreement
by not less than 60 days' written notice delivered or
mailed by registered mail, postage prepaid, to the
Sub- adviser, and the Sub-adviser may at any time
terminate this Agreement by not less than 60 day's
written notice delivered or mailed by registered
mail, postage prepaid, to the Adviser.
Action by the Trust under paragraph (a) above may be taken either (i)
by vote of a majority of the Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the applicable Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION
The Sub-adviser shall promptly notify the Adviser in writing of the
occurrence of any of the following events: (a) the Sub-adviser shall fail to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Sub-adviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement or any other agreement
concerning the provision of investment advisory services to the Trust, (b) the
Sub-adviser shall have been served or otherwise have notice of any action,
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suit, proceeding, inquiry or investigation, at law or in equity, before or by
any court, public board or body, involving the affairs of the Trust, (c) there
is a change in control of the Sub-adviser or any parent of the Sub-adviser
within the meaning of the 1940 Act or (d) there is a material adverse change in
the business or financial position of the Sub-adviser.
7. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" means the affirmative vote, at a duly called and held
meeting of shareholders, (a) of the holders of 67% or more of the shares of a
Fund present (in person or by proxy) and entitled to vote at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of the holders of
more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms affiliated person,
control, interested person and assignment shall have their respective meanings
defined in the 1940 Act and the rules and regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under the 1940 Act; the term specifically approve at least annually
shall be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and the term brokerage and research services shall have
the meaning given in the 1934 Act and the rules and regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER
In the absence of wilful misfeasance, bad faith or gross negligence on
the part of the Sub-adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-adviser shall not be subject to any liability to the Adviser,
to the Trust, to any Fund, or to any shareholder, officer, director or Trustee
thereof, for any act or omission in the course of, or connected with, rendering
services hereunder.
9. EXERCISE OF VOTING RIGHTS
Except with the agreement or on the specific instructions of the
Trustees or the Adviser, the Sub- adviser shall not exercise or procure the
exercise of any voting right attaching to investments of a Fund.
10. NOTICES
All notices, requests and consents shall be in writing and shall be
personally delivered or mailed by registered mail, postage prepaid, to the other
party at such address as may be furnished in writing by such party.
11. APPLICABLE LAW AND LIABILITIES
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF STATE STREET BANK AND TRUST COMPANY and STATE STREET
GLOBAL ADVISORS UNITED KINGDOM, LTD. have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative, as of
the day and year first above written.
STATE STREET BANK AND TRUST
COMPANY
By:
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Name:
Title:
STATE STREET GLOBAL ADVISORS
UNITED KINGDOM, LTD.
By:
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Name:
Title:
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SCHEDULE A
INITIAL PORTFOLIOS
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Pound Sterling Portfolio
Euro Portfolio
U.S. Dollar Portfolio
Candian Dollar Portfolio
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SCHEDULE B
FEE SCHEDULE
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For the services to be provided by the Sub-adviser hereunder, the Adviser
agrees to pay the Sub-adviser a monthly fee with respect to each Initial
Portfolio as soon as practical after the last day of each calendar month, which
fee shall be equal to one half of the net fee paid for that month by the Initial
Portfolio to the Adviser pursuant to the investment advisory agreement between
the Trust and the Adviser, 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 99e.
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DISTRIBUTION AGREEMENT
OF
SSGA INTERNATIONAL LIQUIDITY FUND
This Distribution Agreement is made as of the 1st day of December, 1998
by and between SSgA International Liquidity Fund, a Delaware business trust
("Investment Company"), and BISYS Fund Services Limited Partnership, an Ohio
limited partnership ("Distributor").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and intends to offer for public sale distinct series of shares of
beneficial interest, each corresponding to a distinct portfolio ("Fund"); and
WHEREAS, the Investment Company wishes to retain Distributor as the
Investment Company's distributor in connection with the offering and sale f the
shares of such Funds as now exist and as hereafter may be established ("Shares")
and to furnish certain other services to the Investment Company as specified in
this Agreement; and
WHEREAS, Distributor is willing to furnish such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. The Investment Company hereby appoints Distributor to perform those
services described in this Agreement for each Fund of the Investment Company
that is listed in Schedule A attached hereto. In the event that the Investment
Company establishes one or more series of shares other than the Initial Funds
with respect to which it desires to retain the Distributor to serve as
distributor and principal underwriter hereunder, it shall so notify the
Distributor in writing. If the Distributor is willing to render such services,
it shall so notify the Investment Company in writing. In such event, a writing
signed by both the Investment Company and the Distributor shall be annexed
hereto as a part hereof indicating that such additional series of shares has
become a Fund hereunder.
2. The Investment Company authorizes Distributor as agent for the
Investment Company, subject to Distributor's obligation to comply with
applicable federal and state law and the Master Trust Agreement, By-Laws and the
then current Prospectus and Statement of Additional Information ("SAI") of the
Investment Company: (a) to promote and offer shares of each Fund; (b) to solicit
orders for the purchase of the Shares of each Fund subject to such terms and
conditions as the Investment Company may specify; (c) to accept orders for the
purchase of the Shares of each Fund on behalf of the Investment Company; and (d)
to incur the
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following expenses: (i) the incremental printing cost incurred in producing for
and distributing to persons other than current shareholders of the Investment
Company the reports, prospectuses, notices, and similar materials that are
prepared by the Investment Company for current shareholders; (ii) advertising;
(iii) the costs of preparing, printing and distributing any literature used in
connection with the offering of the Investment Company's Shares and not covered
by Subparagraph (in); (iv) expenses incurred in connection with the promotion
and sale of the Investment Company's Shares; and (v) payments made to
broker-dealers and other service organizations with whom the Distributor has
entered into sales agreements to distribute Shares of the Investment Company.
Distributor will be reimbursed by the Investment Company for incurring these
expenses as set forth in any Plan of Distribution pursuant to Rule 12b-1 under
the 1940 Act of the Investment Company as may, from time to time, be in effect.
Distributor shall offer the Shares of each Fund on an agency or "best efforts"
basis under which the Investment Company shall only issue such Shares as are
actually sold.
In connection with such sales and offers of sale, the Investment
Company shall not be responsible in any way for any other information,
statements, or representations given or made by Distributor or its
representatives or agents, except such information or representations as are
contained in the Investment Company's then current Prospectus or SAI or in
information furnished in writing to Distributor by the Investment Company.
3. The public offering price of the Shares shall be the net asset value
per share (as determined by the Investment Company) of the outstanding Shares of
the Investment Company plus a sales charges (if any) as set forth in the
Investment Company's then current Prospectus or SAI. The Investment Company
shall make available to Distributor a statement of each computation of net asset
value and of the details entering into such computation.
4. As used in this Agreement, the term "Registration Statement" shall
mean the Registration Statement most recently filed by the Investment Company
with the Securities and Exchange Commission and effective under the Securities
Act of 1933 (the "1933 Act"), as such Registration Statement is amended by any
amendments thereto at the time in effect, and the terms "Prospectus" and
"Statement of Additional Information" shall mean the most recent Prospectuses
and Statements of Additional Information filed by the Investment Company
pursuant to Rule 497 under the 1933 Act and any supplements thereto.
5. The Investment Company agrees, at its own expense, to register or
otherwise qualify the Shares with the Securities and Exchange Commission, state
and other regulatory bodies, and to prepare and file from time to time such
Prospectuses, amendments, supplements, reports and other documents as may be
necessary to maintain the Registration Statement. The Investment company shall
bear all expenses related to preparing and typesetting such Prospectuses,
Statements of Additional Information and other materials required by law and
such other expenses, including printing and mailing expenses, related to the
Investment Company's communications with persons who are shareholder of each
Fund.
6. Distributor represents and warrants that Distributor is, and shall
continue to be, duly registered as a broker-dealer under the Securities and
Exchange Act of 1934, as amended,
<PAGE> 3
and applicable state law to the extent required in connection with the
performance of its duties under this Agreement.
7. The Investment Company agrees to indemnify, defend and hold harmless
Distributor, each person who has been, is, or may hereafter be an officer,
director or employee or agent of Distributor, and any person who controls
Distributor within the meaning of Section 15 of the 1933 Act from and against
any and all claims, demands or liabilities and any counsel fees incurred in
connection therewith) which Distributor, its officers or directors, or any such
controlling person may incur under the 1933 Act or under common law which arises
out of or is alleged to arise out of or is based upon a violation of any of the
terms of this Agreement or otherwise arising out of or based upon any alleged
untrue statement of a material fact contained in the Registration Statement,
including the Prospectus and the SAI, or arising out of or based upon any
alleged omission to state a material fact required and to be stated in said
documents or necessary to make the statements in said documents not misleading,
provided that in no event shall anything contained in the Agreement be construed
so as to protect Distributor against any liability to the Investment Company 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 reckless disregard of its obligations and duties under this
Agreement.
8. Distributor agrees to indemnify, defend and hold harmless the
Investment Company, each person who has been, is, or may hereafter be an
officer, director or employee or agent of Distributor, and any person who
controls the Investment Company within the meaning of Section 15 of the 1933 Act
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 the
Investment Company, its officers or Trustees, or any such controlling person may
incur under the 1933 Act or under common law which arises out of or is alleged
to arise out of or is based upon a violation of any of the terms of this
Agreement or otherwise arising out of or based upon any alleged untrue statement
of a material fact contained in information furnished in writing by Distributor
to the Investment Company for use in the Registration Statement including the
Prospectus and the SAI, or arising out of or based upon any alleged omission to
state a material fact in connection with such information required to be stated
in the Registration Statement, including the Prospectus and SAI, or necessary to
make such information not misleading.
9. The Investment Company reserves the right at any time to withdraw
all offerings of the Shares by written notice to the Distributor at its
principal office.
10. Distributor at its sole discretion may repurchase Shares offered
for sale by the shareholders. Repurchase of Shares by Distributor shall be at
the net asset value next determined after a repurchase order has been received.
On each business day, Distributor shall notify by telex or in writing the
Investment Company or the Investment Company's transfer agent of the orders for
repurchase of shares received by Distributor since the last such report,
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the amount to be paid for such Shares, and the identity of shareholders offering
Shares for repurchase. Upon such notice, the Investment Company shall pay
Distributor such amounts as are required by Distributor for the repurchase of
such Shares in cash or in the form of a credit against monies due the Investment
Company from Distributor as proceeds from the sale of Shares. Distributor will
receive no commission or other remuneration for Shares. Distributor will receive
no commission or other remuneration for repurchasing Shares. The Investment
Company reserves the right to suspend such repurchase upon written notice to
Distributor. Distributor further agrees to act as agent for the Investment
Company to receive and transmit promptly to the Investment Company's transfer
agent any shareholder request for redemption of Shares.
11. Distributor is an independent contractor and shall be agent for the
Investment Company only with respect to the sale and repurchase of the Shares.
12. The services of Distributor to the Investment Company under this
Agreement are not to be deemed exclusive, and the Distributor shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
13. Distributor shall prepare reports for the Board of Trustees of the
Investment Company upon request showing information concerning expenditures
related to this Agreement.
14. As used in this Agreement, the term "net asset value" shall have
the meaning ascribed to it in the Investment Company's Master Trust Agreement;
and the terms "assignment," "interested person," and "majority of the
outstanding voting securities" shall have the meanings given to them by Section
2(a) of the 1940 act, subject to such exemptions as may be granted by the
Securities Exchange Commission by any rule, regulation or order.
15. This Agreement shall become effective with respect to each Fund on
the date which the Fund commences offering its shares to the public, so long as,
with respect to each additional Fund, the provisions of Section 1 have been
complied with. The Agreement shall continue in effect for each Fund for two
years following the effective date of this Agreement with respect to the Fund;
and thereafter only so long as its continuance is specifically approved at least
annually by a majority of the Trustees of the Investment Company who are not
parties to the Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval, or by vote of a
majority of the outstanding voting securities of the Fund.
16. This Agreement may be terminated at any time with respect to any
Fund:
(a) By a majority vote of the Trustees of the Investment Company,
by a majority vote of the Independent Trustees or by vote of a majority of the
outstanding voting securities of that Fund by sixty days' notice addressed to
the Distributor at its principal place of business;
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(b) By the Distributor by sixty days' written notice addressed to
the Investment Company at its principal place of business; and
(c) Immediately in the event of its assignment.
17. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this agreement shall be effective until approved by
vote of a majority of the Board of Trustees, by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding voting
securities of such Fund affected by the amendment.
18. If any provision of this Agreement shall be held or made invalid by
a court decision, statue, rule or otherwise, the remainder of this Agreement
shall not be effected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and there respective successors.
19. This Agreement shall be construed in accordance with the laws of
the State of Ohio and any applicable federal law.
20. It is expressly acknowledged and agreed that the obligations of the
Investment Company hereunder shall not be binding upon any of the Shareholders,
Trustees, officers, employees or agents of the Investment Company, personally,
but shall bind only the trust property of the Investment Company, as provided in
its Master Trust Agreement. The execution and delivery of this Agreement have
been authorized by the Trustees of the Investment Company and signed by an
officer of the Investment Company, acting as such, and neither such
authorization by such Trustee 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 Investment Company as provided in its Master Trust Agreement.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their officers thereunto duly authorized as of the date written
above.
Attest: SSGA INTERNATIONAL LIQUIDITY
FUND
By: /s/ Peter B. Collacott
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Its: Trustee and President
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Attest: BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc., its
General Partner
By: /s/ William J. Tomko
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Its: Executive Vice President
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SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
SSgA INTERNATIONAL LIQUIDITY FUND
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
U.S. Dollar Fund
Canadian Dollar Fund
Euro Fund
Pound Sterling Fund
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Exhibit 99h.2
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FORM OF
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of March, 1999, by and
between SSgA International Liquidity Fund, a Delaware business trust (the
"Company"), and BISYS FUND SERVICES OHIO, INC. (the "Administrator"), an Ohio
corporation.
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 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 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 SSgA 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.
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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.
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;
<PAGE> 3
(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 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;
<PAGE> 4
(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;
(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
<PAGE> 5
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.
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. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including, but not limited to, the travel and lodging expenses
incurred by officers and employees of the Administrator in connection with
attendance at Board meetings.
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.
<PAGE> 6
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 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
<PAGE> 7
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 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.
<PAGE> 8
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 Trust: State Street Global Advisers
Almack House
28 King Street
London, England SW1Y6QW
Attention: Peter B. Collacott
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: J. David Huber
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.
<PAGE> 9
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.
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
<PAGE> 10
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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
SSGA INTERNATIONAL LIQUIDITY FUND
By:
----------------------------------
Title:
-------------------------------
BISYS FUND SERVICES OHIO, INC.
By:
----------------------------------
Title:
-------------------------------
<PAGE> 11
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF MARCH 1, 1999
BETWEEN
SSgA International Liquidity Fund
AND
BISYS FUND SERVICES OHIO, INC.
Funds: This Agreement shall apply to all Funds of SSgA International
Liquidity Fund, either now or hereafter created. The current
Funds of SSgA International Liquidity Fund are set forth
below: U.S. Dollar, Pound Sterling, Euro 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:
Asset Size* Gross Fee bps
Up to 250m 5
In excess of 250m but less than 500m 4
In excess of 500m 3
All fees are incremental
* The asset size refers to the amount in the relevent designated currency.
WAIVERS USD COMPLEX BPS
The combined Master/Feeder administration fee 7
(Waiver being borne by the feeder)
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
<PAGE> 12
monthly period and shall be payable upon the date of
termination of this Agreement.
For purposes of determining the fees payable, the applicable
rate will be applied on an annual basis to each of the
Portfolio's average daily net assets, 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 March 1, 1999 and shall remain in effect through
March 1, 2000 ("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,
subject to the liquidated damages described below, at any time
with respect to any Fund upon not less than 120 days' prior
written notice to the other party.
The Company may terminate this Agreement for Cause, as defined
below, without incurring any additional cost. 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) a 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
<PAGE> 13
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.
<PAGE> 1
Exhibit 99h.4
-------------
FEEDER FUND MANAGEMENT SERVICES AGREEMENT
-----------------------------------------
AGREEMENT made as of the 22nd day of September, 1998, between SSgA
International Liquidity Fund, a Delaware business trust (the "Trust"), and State
Street Bank and Trust Company (the "Feeder Fund Manager").
1. Duties of the Feeder Fund Manager; Funds. The Trust hereby appoints the
Feeder Fund Manager to act as Feeder Fund Manager to the U.S. Dollar Fund, the
Pound Sterling Fund, the Deutsche Mark Fund and the Canadian Dollar Fund (the
"Initial Funds" and together with any series of the Trust hereafter covered by
this Agreement, "Funds") for the period and on the terms set forth in this
Agreement. The Feeder Fund Manager hereby accepts such appointment and agrees to
render the services herein set forth. The Trust warrants that the Feeder Fund
Manager has been duly appointed to act hereunder.
In the event that the Trust establishes one or more Funds other than
the Initial Funds with respect to which it desires to retain the Feeder Fund
Manager to render services hereunder, it shall so notify the Feeder Fund Manager
in writing. If the Feeder Fund Manager is willing to render such services, it
shall so notify the Trust in writing, whereupon such Fund shall become a Fund
hereunder. In such event a writing signed by both the Trust and the Feeder Fund
Manager shall be annexed hereto as a part hereof indicating that such additional
Fund has become a Fund hereunder.
The Feeder Fund Manager shall 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. 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 State Street Bank and Trust Company 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 "State Street" or "SSgA" 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. The Trust acknowledges that (i) the initials
"SSgA", (ii) the names "State Street" and "State Street Global Advisors", (iii)
the logo consisting of the initials "SSgA" with a globe inside the "g" and (iv)
all other related names, initials and logos (collectively with the names,
initials and logos referred to above, the "Marks") are the property of the
Feeder Fund Manager and its related entities and may be used by the Trust only
with the consent of the Feeder Fund Manager. The Feeder Fund Manager consents
to the use by the Trust of the name "SSgA International Liquidity Fund" or any
other name embodying the initials "SSgA" in such form as the Feeder Fund Manager
shall in writing approve, but only on condition and so long as (i) this
Agreement shall remain in full force and (ii) the Trust shall fully perform,
fulfill and comply with all provisions of this Agreement expressed herein to be
performed, fulfilled or complied with by it. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Feeder
Fund Manager to the Trust to use said initials as part of a business or name is
not exclusive of the right of the Feeder Fund Manager itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees that as
between the Feeder Fund Manager and the Trust, the Feeder Fund Manager has the
exclusive right so to authorize others to use the same; the Trust acknowledges
and agrees that as between the Feeder Fund Manager and the Trust, the Feeder
Fund Manager has the exclusive right so the use, or authorize others to use,
said initials and the Trust agrees to take such action as may reasonably be
requested by the Feeder Fund Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
initials). Without limiting the generality of the foregoing, the Trust agrees
that upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, the Trust will, at the request
of the Feeder Fund Manager made within six months after the Feeder Fund Manager
has knowledge of such termination or violation, use its best efforts to change
the name of the the Trust so as to eliminate all reference, if any, to the
initials "SSgA", and any other Marks and will not thereafter transact any
business in a name containing the initials "SSgA" or any other Marks in any form
or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the initials "SSgA" or any
other Mark or reference to the Feeder Fund Manager. Such covenants on the part
of the Trust shall be binding upon it, its trustees, officers, stockholders,
creditors and all other persons claiming under or through it.
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 the Commonwealth of Massachusetts.
[Remainder of Page Intentionally Left Blank.]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year above written.
SSGA INTERNATIONAL LIQUIDITY FUND
By: /s/ Peter B. Collacott
----------------------------
Its: President
---------------------------
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Timothy B. Harbert
----------------------------
Its: Executive Vice President
---------------------------
<PAGE> 1
Exhibit 99h.5
FORM OF
SSGA INTERNATIONAL LIQUIDITY FUND
SHAREHOLDER SERVICING AGREEMENT
AGREEMENT dated as of ________________ by and between SSgA
International Liquidity Fund (the "Trust"), a Massachusetts business trust,
having its principal place of business at 3435 Stelzer Road, Columbus, OH
43219-3035, and _________________________ (the "Agent"). The Agent wishes to act
as the agent of its customers (the "Customers") in performing certain
administrative functions in connection with purchases and redemptions of shares
of beneficial interest of certain series of the Trust described in Section 1
hereof ("Shares") from time to time upon the order and for the account of
Customers, and to provide related services to its Customers in connection with
their investments in the Trust. It is in the interest of the Trust to make the
services of the Agent available to Customers who are or may become shareholders
of the Trust.
In consideration of the foregoing recitals and the mutual covenants
herein contained, the Trust and the Agent hereby agree as follows:
1. APPOINTMENT. The Agent hereby agrees to perform the services
set forth below for Customers. Each series of the Trust for which the Agent acts
as a servicing agent pursuant to this Agreement is hereinafter referred to as a
"Fund." The Agent's appointment hereunder is non-exclusive, and the parties
recognize and agree that, from time to time, the Trust may enter into other
shareholder servicing agreements, with other financial institutions. As used in
this Agreement, "Shares" shall mean: (i) with respect to a Fund whose shares
have no class designation, all shares of beneficial interest in that Fund, and
(ii) with respect to a Fund whose shares do have class designations, the Global
Service shares of that Fund.
2. SERVICES TO BE PERFORMED. The Agent shall be responsible for
performing shareholder account servicing functions, which shall include without
limitation:
(a) assisting in processing Customer purchase and redemption
requests;
(b) answering Customer inquiries regarding account status and
history, the manner in which purchase and redemptions of the Shares may be
effected, and certain other matters pertaining to the Trust;
(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) arranging for the wiring of funds;
<PAGE> 2
(e) transmitting and receiving funds in connection with
Customer orders to purchase or redeem Shares;
(f) providing periodic statements showing a Customer's account
balances and, to the extent practicable, integration of such information with
other client transactions otherwise effected with or through the Agent;
(g) furnishing (either separately or on an integrated basis
with other reports sent to a Customer by the Agent) monthly and annual
statements and confirmations of all purchases and redemptions of Shares in a
Customer's account;
(h) aggregating and processing Customer purchase and
redemption requests for Shares and placing net purchase and redemption orders
with the Trust's transfer agent (currently BISYS Fund Services, Inc. ("BISYS"),
including any designee of BISYS, "Transfer Agent") in the manner described in
Section 4 hereof;
(i) providing complete subaccounting services and maintaining
complete subaccounting records regarding Shares beneficially owned by Customers;
(j) processing dividend payments;
(k) transmitting proxy statements, annual and semi-annual
reports, prospectuses and other communications from the Trust to Customers;
(l) receiving, tabulating and transmitting to the Trust
proxies executed by Customers with respect to annual and special meetings of
shareholders of the Trust;
(m) preparing and filing U.S. Treasury Department Forms 1099
and other appropriate forms required with respect to dividends and distributions
by federal authorities; and
(n) providing such other related services as the Trust or a
Customer may reasonably request.
The Agent shall provide all personnel, facilities and equipment necessary in
order for it to perform the functions described in this paragraph with respect
to its Customers. The Agent shall exercise reasonable care in performing all
such services and shall be liable for any failure to exercise such reasonable
care.
3. FEES.
(a) FEES FROM THE TRUST. In consideration for the services
described in Section 2 hereof, the Trust shall pay the Agent a fee as described
in Attachment A hereto. All fees shall be paid monthly in arrears.
2
<PAGE> 3
(b) FEES FROM CUSTOMERS. It is agreed that the Agent may
impose certain conditions on Customers, in addition to or different from those
imposed by the Trust, such as requiring a minimum initial investment or charging
Customers direct fees for the same or similar services as are provided hereunder
by the Agent as Agent (which fees may either relate specifically to the Agent's
services with respect to the Trust or generally cover services not limited to
those with respect to the Trust). The Agent shall bill Customers directly for
such fees. In the event the Agent charges Customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3(a) of this Agreement. It is understood, however, that in
no event shall the Agent have recourse or access to the account of any
shareholder of the Trust except to the extent expressly authorized: (i) by law;
(ii) by the Trust; or (iii) by such shareholder for payment of any direct fees
referred to in this Section 3(b).
4. PURCHASE AND REDEMPTION ORDERS.
(a) Agent will open with Transfer Agent an omnibus account.
Capital gains and dividend distributions payable with respect to Shares held in
the account shall be paid in additional Shares of the Fund. Transfer Agent shall
designate an account number for the account.
(b) For each business day on which any Customer places with
Agent a purchase or redemption order for Shares of a Fund, Agent shall aggregate
all such purchase orders and aggregate all such redemption orders and
communicate to Transfer Agent, by facsimile or, where feasible, by direct or
indirect systems access, an aggregate purchase order and an aggregate redemption
order for each omnibus account. To be effective on the date received, all orders
must:
(i) be received by Agent from Customers prior to [4:00
p.m.] Eastern time and transmitted to Transfer Agent prior to [9:00 a.m. Eastern
time on the next succeeding business day]; and
(ii) in the case of an aggregate purchase request, federal
funds in the amount of the purchase request must be wired from the custodial
account of the Customer to Transfer Agent prior to 4:00 p.m. Eastern time on the
next succeeding business day. Funds should be wired to Transfer Agent at
__________________________________.
(c) Prior to _____ Eastern time each business day, Agent shall
receive from Transfer Agent the net asset value per share of each Share of each
Fund for that business day.
(d) In the case of a redemption order, federal funds in the
amount of the redemption order shall be wired by ________ Eastern time on the
settlement date to the Agent at ________________________________. Each party
shall bear the cost of any wire transfer that it sends.
3
<PAGE> 4
(e) In the event adjustments are required to correct any error
in the computation of the net asset value or public offering price of Fund
Shares, the Trust shall notify Agent prior to making any adjustments and
describe the need for such adjustments (including the date of the error, the
incorrect price and the correct price). In such case, an appropriate adjustment
shall be made to the relevant omnibus account(s) and Agent shall make
corresponding adjustments to the accounts of its Customers.
(f) The Trust may cease offering Shares at any time, and in
its sole discretion may refuse any purchase order. Further, the Trust shall not
be required to accept orders for redemption of Shares of a Fund under this
Section 4 if the Trust has suspended redemptions with respect to such Fund in
accordance with Section 22(e) of the Investment Company Act of 1940, as amended
(the "1940 Act").
(g) For the purposes of this Agreement, "business day" shall
mean:
(i) with respect to a Fund that maintains a stable net
asset value per share, each day that banks in New York City and the New York
Stock Exchange are open for business; and
(ii) with respect to all other Funds, each day that the
New York Stock Exchange is open for business.
5. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(a) As to each Fund, as soon as practicable after the
announcement of a distribution, Agent shall be notified of the ex-date, record
date, payable date, distribution rate per Share, record date Share balances and
cash and reinvestment payment amounts.
(b) On the payable date, the Trust shall wire the cash
distribution from the appropriate Fund to Agent at __________________________.
(c) For each Fund that pays daily dividends, the Trust shall
provide on a daily basis, the following record date information: daily rate,
account share balance, account accrual dividend amount (for that day), account
accrual dividend amount (for period to date), and account transfers and
period-to-date accrual amounts. Such information shall be provided by facsimile
to ____________________.
(d) For annual tax reporting purposes, the Trust shall inform
Agent of the portion of distributions that include any of the following: foreign
source income, tax exempt income by state of origin, or return of capital.
4
<PAGE> 5
6. PREPARATION AND DISTRIBUTION OF WRITTEN MATERIALS.
(a) The Trust shall provide Agent with sufficient numbers of
each Fund's prospectus as requested by Agent and a master copy of each Fund's
Statement of Additional Information ("SAI") offering Shares. As soon as
practicable following the filing under the Securities Act of 1933, as amended,
of an amendment to the Trust's Registration Statement or a definitive Prospectus
or SAI of any Fund or a supplement to the Prospectus or SAI of any Fund, the
Trust shall provide a master copy of the Prospectus and SAI of each Fund
affected by the amendment or a copy of such supplement. Agent shall not be
responsible for the preparing or filing with any governmental authority any
Registration Statement, Prospectus, SAI or Supplement for the Trust or any Fund.
However, upon reasonable request by the Trust or any of the Trust's service
providers, Agent shall timely provide information necessary for the Trust or any
of the Trust's service providers to: (i) prepare and file any of the written
materials mentioned in this Section 6 or (ii) otherwise comply with applicable
law regarding the Trust.
(b) Agent shall timely provide copies of the following
materials to Customers: proxy statements, annual reports and semi-annual
reports. At no expense to Agent, the Trust shall provide Agent with as many
copies of such materials as Agent may reasonably request. Such materials shall
be sent to Agent at the following address: _______________________________.
Agent agrees to reimburse the Trust for the cost of materials if and to the
extent required by Attachment B to this Agreement.
7. CAPACITY AND AUTHORITY TO ACT. The Agent and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Customers or prospective Customers, excepting only
accurate communication of factual information contained in the then-current
Prospectus and SAI offering Shares of the relevant Fund or such other
communications as may be expressly authorized by the Trust. In performing its
services under this Agreement, the Agent shall act as agent for the Customer and
shall have no authority to act as agent for the Trust. Upon request by the
Trust, the Agent shall provide the Trust with copies of any materials which are
generally circulated by the Agent to its Customers or prospective Customers. The
Agent and its officers and employees shall be available during normal business
hours to consult with the Trust and the Trust's other service providers
concerning the performance of the Agent's responsibilities under this Agreement.
8. USE OF THE TRUST'S NAME. The Agent shall not use the name of
the Trust (other than for internal use in connection with performing its duties
under this agreement) in a manner not approved by the Trust prior thereto in
writing; PROVIDED, HOWEVER, that the approval of the Trust shall not be required
for the use of the Trust's name or the name of any Fund in connection with
communications permitted by Section 7 hereof or for any use of the Trust's name
or the name of any Fund which merely refers accurately to the Agent's role
hereunder or which is required by the Securities and Exchange Commission or any
state
5
<PAGE> 6
securities authority or any other appropriate regulatory, governmental or
judicial authority provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
9. USE OF THE AGENT'S NAME. The Trust shall not use the name of
the Agent in any prospectus, sales literature or other material relating to the
Trust in a manner not approved by the Agent prior thereto in writing; PROVIDED,
HOWEVER, that the approval of the Agent shall not be required for any use of its
name which merely refers accurately to its appointment hereunder or which is
required by the Securities and Exchange Commission or any state securities
authority or any other appropriate regulatory, governmental or judicial
authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
10. SECURITY. The Agent represents and warrants that, to the best
of its knowledge, the various procedures and systems which it has implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Agent'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 in its judgment are required for
the secure performance of its obligations hereunder. From time to time and upon
request, Agent shall permit the Trust or its designees to make a reasonable
inspection of Agent's security systems and procedures.
11. COMPLIANCE WITH LAWS; ETC. The Agent shall comply with all
applicable federal and state laws and regulations, including securities laws.
The Agent represents and warrants to the Trust that the performance of all its
obligations hereunder will comply with all applicable laws and regulations, the
provisions of its charter documents and by-laws and all material contractual
obligations binding upon the Agent. The Agent furthermore undertakes that it
will promptly inform the Trust of any change in applicable laws or regulations
(or interpretations thereof) or in its charter or by-laws or material contracts
which would prevent or impair full performance of any of its obligations
hereunder.
12. REPORTS. To the extent requested by the Trust from time to
time, the Agent agrees that it will provide the Trust with a written report of
the amounts expended by the Agent pursuant to this Agreement and the purposes
for which such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
13. RECORD KEEPING; REPORTING.
(a) SECTION 31(a), ETC. The Agent shall maintain records in a
form acceptable to the Trust and in compliance with applicable laws and the
rules and regulations of the Securities and Exchange Commission, including, but
not limited to, the record-keeping requirements of Section 31(a) of the 1940 Act
and the rules thereunder. Such records shall be deemed to be the property of the
Trust and will be made available, at the Trust's request, for inspection and use
by the Trust representatives of the Trust and governmental authorities.
6
<PAGE> 7
Agent shall permit the Trust and the Trust's other service providers reasonable
access to such information when necessary for the Trust or any such person to
comply with applicable law. In such case, the Trust shall cause such information
to remain confidential and shall not permit such information to be used by any
party or disclosed to any additional party except with Agent's written consent
or as required by applicable law or judicial process. The Agent agrees that, for
so long as it retains any records of the Trust, it will meet all reporting
requirements pursuant to the 1940 Act with respect to such records. The
record-keeping obligations imposed in this Section 13(a) shall survive the
termination of this Agreement.
(b) REPORTING OF PAYMENTS. From time to time, and upon
reasonable notice from the Trust, the Agent shall provide the Trust a written
accounting of all payments that the Agent receives under this Agreement.
(c) TRANSFER OF CUSTOMER DATA. In the event this Agreement is
terminated or a successor to the Agent is appointed, the Agent shall, at the
expense of the Trust, transfer to such designee as the Trust may direct a
certified list of the shareholders of the Trust serviced by the Agent (with
name, address and tax identification or Social Security number), a complete
record of the account of each such shareholder and the status thereof, and all
other relevant books, records, correspondence and other data established or
maintained by the Agent under this Agreement. In the event this Agreement is
terminated, the Agent will use its best efforts to cooperate in the orderly
transfer of such duties and responsibilities, including assistance in the
establishment of books, records and other data by the successor.
14. FORCE MAJEURE. The Agent shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
15. INDEMNITY.
(a) INDEMNIFICATION OF THE TRUST. The Agent shall indemnify
and hold the Trust harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by the Trust and resulting from any
Claim brought against the Trust and resulting from (i) the bad faith or
negligence of the Agent, its officers, employees or agents, or (ii) any breach
of its obligations under this Agreement or applicable law by the Agent, its
officers, employees or agents, or (iii) any false or misleading statement
contained in any communication by the Agent to any Customer or prospective
Customer not prepared by or expressly authorized by the Trust for use of the
Agent.
In any case in which the Agent may be asked to indemnify or
hold the Trust harmless, the Agent shall be advised of all pertinent facts
concerning the situation in question and the Trust shall use reasonable care to
identify and notify the Agent promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the
7
<PAGE> 8
Agent. The Agent shall have the option to defend the Trust against any Claim
which may be the subject of indemnification hereunder. In the event that the
Agent elects to defend against such Claim, the defense shall be conducted by
counsel chosen by the Agent and satisfactory to the Trust. The Trust may retain
additional counsel at its expense. Except with the prior written consent of the
agent, the Trust shall not confess any Claim or make any compromise in any case
in which the Agent will be asked to indemnify the Trust.
(b) INDEMNIFICATION OF THE AGENT. The Trust shall indemnify
and hold the Agent harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by the Agent and resulting from any
Claim brought against the Agent and resulting from (i) the bad faith or
negligence of the Trust, its officers, employees or agents, or (ii) any breach
of its obligations under this Agreement or applicable law by the Trust, its
officers, employees or agents, or (iii) any untrue statement, or alleged untrue
statement of a material fact including, without limitation, any such statement
or omission made in the Trust's Registration Statement or any Fund's Prospectus
or SAI, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated in either the Registration Statement
or any Prospectus, or necessary to make the statements in any thereof not
misleading; provided, however, that the Trust's agreement to indemnify such
persons shall not be deemed to cover any losses, claims, demands, liabilities or
expenses arising out of any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any
Prospectus or SAI in reliance upon and in conformity with information furnished
to the Trust by Agent specifically for use in the preparation thereof.
In any case in which the Trust may be asked to indemnify or
hold the Agent harmless, the Trust shall be advised of all pertinent facts
concerning the situation in question and the Agent shall use reasonable care to
identify and notify the Trust promptly concerning any situation which presents
or appears likely to present a claim for indemnification against the Trust. The
Trust shall have the option to defend the Agent against any claim which may be
the subject of indemnification hereunder. In the event that the Trust elects to
defend against such claim the defense shall be conducted by counsel chosen by
the Trust and satisfactory to the Agent. The Agent may retain additional counsel
at its expense. Except with the prior written consent of the Trust, the Agent
shall not confess any claim or make any compromise in any case in which the
Trust will be asked to indemnify the Agent.
(c) SURVIVAL OF INDEMNITIES. The indemnities granted by the
parties in this Section 15 shall survive the termination of this Agreement.
16. INSURANCE. The Agent shall maintain reasonable insurance
coverage against any and all liabilities which may arise in connection with the
performance of its duties hereunder. Upon request, Agent shall produce
certificates of coverage satisfactory to the Trust demonstrating compliance with
this Section 16.
17. NOTICES. All notices or other communications hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set
8
<PAGE> 9
forth in the preamble of this Agreement or at such other address as such party
may have designated by written notice to the other.
18. FURTHER ASSURANCES. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
19. TERMINATION. This Agreement may be terminated by either party,
without the payment of any penalty, by the Trust at any time upon not more than
60 days' nor less than 30 days' notice, by a vote of a majority of the Board of
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of any Plan of Distribution pursuant to Rule 12b-1 to which this
Agreement is related (a "Plan"), this Agreement or any other agreement related
to any such Plan (the "Qualified Trustees"), or (as to a particular Fund) by the
affirmative vote of the holders of a majority of the outstanding Shares (as
defined in the 1940 Act) of the Fund. The Agent may terminate this Agreement
upon not more than 60 days' nor less than 30 days' notice to the Trust.
Notwithstanding anything herein to the contrary, this Agreement may not be
assigned and shall terminate automatically without notice to either party upon
any assignment. Upon termination hereof, the Trust shall pay such compensation
as may be due the Agent as of the date of such termination. Upon and following
termination the parties shall take such steps as may be necessary or expedient
for the parties and the Trust to comply with applicable law.
20. CHANGES; AMENDMENTS. This Agreement may be changed or amended
only by written instrument signed by both parties.
21. LIMITATION OF LIABILITY. The Trust's Master Trust Agreement,
dated August 13, 1996 (the "Master Trust Agreement"), as amended from time to
time, establishing the Trust, provides that the Trustees from time to time
serving (as Trustees but not personally) under said Master Trust and it is
expressly acknowledged and agreed that, any and all obligations of the Trust
hereunder shall not be binding upon any of the Shareholders, Trustees, officers,
employees or agents of the Trust, personally, but shall bind only the assets and
property of the Trust, as provided in its Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the Trustees of the Trust
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 assets and property
of the Trust as provided in its Master Trust Agreement.
22. MISCELLANEOUS. This Agreement shall be construed and enforced
in accordance with and governed by the laws of The Commonwealth of
Massachusetts. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
9
<PAGE> 10
23. CONTINUATION. Unless sooner terminated pursuant to Section 19
hereof, this Agreement shall continue in effect with respect to each Fund
subsequent to the initial terms specified herein 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 Agreement.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first set forth above.
TRUST:
SSgA International Liquidity Fund
By:
------------------------------------
AGENT:
By:
------------------------------------
11
<PAGE> 12
ATTACHMENT A
TO
SHAREHOLDER SERVICING AGREEMENT
Each of the following series of SSgA International Liquidity Fund shall
be considered a "Fund" under Section 1 of the Shareholder Servicing Agreement,
dated as of _________________ and between SSgA International Liquidity Fund and
_________________. The fees to be paid pursuant to Section 3 of this Agreement
are indicated opposite the Fund name.
<TABLE>
<CAPTION>
PORTFOLIO NAME FEE FROM THE TRUST, BASED ON THE
AVERAGE DAILY VALUE OF ALL SHARES OF
THE GLOBAL SERVICE CLASS OF EACH
FUND OWNED BY CUSTOMERS:
<S> <C>
U.S. Dollar Fund .25 of 1%
Euro Fund .25 of 1%
Canadian Dollar Fund .25 of 1%
Euro Fund .25 of 1%
</TABLE>
And such other Funds, as may be established from time to time.
12
<PAGE> 13
ATTACHMENT B
TO
SHAREHOLDER SERVICING AGREEMENT
Agent agrees to reimburse BISYS as follows:
Prospectuses:
Cost Units
---- -----
@ Cost* per unit in excess of 1,000
Statements of Additional Information:
Cost Units
---- -----
@ Cost** per unit in excess of 1
Supplemental Sales Literature
As may be agreed upon in writing from time to time.
- -----------------------
* Est. __(cent) per copy.
** Est. __(cent) per copy.
13
<PAGE> 1
Exhibit 99j.1
-------------
[Goodwin, Procter & Hoar LLP Letterhead]
January 26, 1999
SSgA International Liquidity Fund
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
We hereby consent to the reference in Post-Effective Amendment No. 4
(the "Amendment") to the Registration Statement (No. 333-10237) on Form N-1A of
SSgA International Liquidity Fund (the "Registrant"), a Delaware business trust,
to our opinion with respect to the legality of the shares of the Registrant
representing interests in the U.S. Dollar Fund, Pound Sterling Fund, Deutsche
Mark Fund and Canadian Dollar Fund series of the Registrant (the "Funds"), which
opinion was filed with Pre-Effective Amendment No. 2 to the Registration
Statement.
We also hereby consent to the reference to this firm in the Funds'
Statement of Additional Information under the heading "Custodian, Transfer and
Dividend Disbursing Agent, Fund Accountant, Counsel and Independent Auditors"
which form a part of the Amendment and to the filing of this consent as an
exhibit to the Amendment.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
Exhibit 99j.2
-------------
[PricewaterhouseCoopers LLP Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Statement of Additional Information with
respect to the Post-Effective Amendment to the Registration Statement on Form
N-1A (File No. 333-10237) under the Securities Act of 1933, as amended, of the
SSgA International Liquidity Fund (formerly Five Arrows Short-Term Investment
Trust) of our reports dated February 26, 1998 on our audits of the financial
statements and financial highlights of Five Arrows Short-Term Investment Trust,
(comprised of the United States Dollar Fund, Pound Sterling Fund, Canadian
Dollar Fund and the Deutsche Mark Fund), and International Currency Fund,
(comprised of the United States Dollar Portfolio, Pound Sterling Portfolio,
Canadian Dollar Portfolio and Deutsche Mark Portfolio), as of and for the period
ended December 31, 1997.
We also consent to the reference of our Firm under the caption "Custodian,
Transfer and Dividend Disbursing Agent, Fund Accountant, Counsel and Independent
Auditors" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 20, 1999
<PAGE> 1
Exhibit 99m.
------------
Form of
SSGA INTERNATIONAL LIQUIDITY FUND
AMENDED AND RESTATED PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
February __, 1999
WHEREAS, SSgA International Liquidity Fund, a Delaware business trust
(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 Euro 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 a class of shares referred to as the
"Global Service" shares (the "Shares"); and
WHEREAS, the Trust may be deemed a distributor within the meaning of
Rule 12b-1 under the Act, and desires to adopt a Plan of Distribution with
respect to each of the Initial Series pursuant to such Rule (the "Plan"); and
WHEREAS, the Trust has entered into an agreement (the "Agreement") for
distribution of the Shares with BISYS Fund Services Limited Partnership (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 Global 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.
<PAGE> 2
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION AND SHAREHOLDER SERVICING ACTIVITIES
Subject to the supervision of the Trustees, the Trust and the Funds may
engage, directly or indirectly, in financing any activities primarily intended
to result in the sale of Shares or the servicing of shareholder accounts,
including, but not limited to, the following: (1) payment of commissions and/or
reimbursement to underwriters, securities dealers and others engaged in the sale
of Shares, including payments to the Distributor to be used to pay commissions
and/or reimbursement to securities dealers and others (including affiliates of
the Distributor) engaged in the distribution and marketing of Shares; and (2)
reimbursement of (i) direct out-of-pocket expenditures incurred by the
Distributor in connection with the distribution and marketing of Shares and the
servicing of investor accounts, 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 Funds,
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; (ii) expenses incurred in connection with the promotion
and sale of the Shares, including, without limitation, Distributor's expenses
for rent, office supplies, equipment, travel, communication, compensation, and
benefits for sales personnel; and (iii) payment of any fees and expenses to
shareholder servicing agents, including any investment adviser of the Trust or
of a portfolio in which the Trust invests or an affiliate thereof ( "Servicing
Agents"), that have entered into shareholder servicing agreements with the Trust
pursuant to which Servicing Agents may provide various shareholder services with
respect to shares of the Funds held by or for customers of Servicing Agents,
including: answering inquiries regarding the Funds; assisting customers in
changing dividend options, account designations and addresses; performing
sub-accounting for such customers; establishing and maintaining customer
accounts and records; processing purchase and redemption transactions; providing
periodic statements showing customer's account balances and integrating such
statements with those of other transactions and balances in the customers' other
accounts serviced by the Servicing Agents; arranging for bank wires transferring
customers' funds; providing daily investment ("sweep") functions; and such other
services as the customers may request in connection with the Funds, to the
extent permitted by applicable statute, rule or regulation. For purposes of this
Plan, references to the Prospectus of the Trust shall be deemed to include all
Prospectuses and Statements of Additional Information of any of the Funds and of
the Trust, all as from time to time amended and in effect.
The Trust and the Funds are authorized to engage in the activities
listed above, and in other activities primarily intended to result in the sale
of Shares or to make available shareholder services, either directly or through
other persons with which the Trust has entered into agreements pursuant to the
Plan.
2
<PAGE> 3
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made pursuant to this Plan with respect to a
Fund, and the basis upon which payment of such expenditures will be made, shall
be determined by the Trust, but in no event shall such expenditures exceed an
annual rate of .25 of 1% of the average daily value of the net assets of that
Fund.
The expenditures to be made pursuant to this Plan shall commence with
respect to each Fund as of the date on which this Plan becomes effective with
respect to such Fund.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make monthly payments to the
Distributor or Servicing Agents at the annual rate provided for in Section 2
with respect to each Fund. The Distributor shall apply amounts received for the
purposes contemplated by Section 1.
In the event that the Distributor or any Servicing Agent is not fully
reimbursed for payments made or expenses incurred by it in any fiscal year, the
Distributor or Servicing Agent shall be entitled to carry forward such expenses
to subsequent fiscal years for submission to the applicable Fund for payment
subject always to the annual maximum expenditures for each Fund set forth in
Section 2 hereof; provided, however, that (i) each Fund's liability for any such
expenses carried forward shall terminate at the end of two years following the
year in which the expenditure was incurred, and (ii) nothing herein shall
prohibit or limit the Trustees from terminating this Plan and all payments
hereunder at any time pursuant to Section 4(d) hereof.
Notwithstanding anything to the contrary herein, the aggregate of all
payments to the Distributor shall not exceed at any time the aggregate of all
payments made or expenses incurred by the Distributor pursuant to this Section
3.
SECTION 4. TERM AND TERMINATION
(a) Initial Series. This Plan shall become effective with
respect to the Shares of the Initial Series as of the date hereof and shall
continue in effect with respect to the Shares (subject to Section 4(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 4(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
3
<PAGE> 4
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 4(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 4(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 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 4(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 4(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.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 2 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 4(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.
4
<PAGE> 5
SECTION 6. 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.
SECTION 7. 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.
SECTION 8. 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.
IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution
dated as of February __, 1999, on the day and year set forth below.
SSGA INTERNATIONAL LIQUIDITY FUND
By:
-----------------------------------
ATTEST:
5
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