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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1996
File No. 811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE INTERNATIONAL CURRENCY FUND
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (809) 949-2001
George O. Martinez
The International Currency Fund
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Services)
With a copy to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
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EXPLANATORY NOTE
This Registration Statement on Form N-1A (the "Registration
Statement") has been filed by the Registrant pursuant to Section 8(b) of the
Investment Company Act of 1940, as amended. However, beneficial interests in
the series of the Registrant are not being registered under the Securities Act
of 1933, as amended (the "1933 Act"), because such interests will be issued
solely in transactions that are exempt from registration under the 1933 Act.
Investments in the Registrant's series may only be made by investment
companies, insurance company separate accounts, common or commingled trust
funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. The Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any beneficial interests in any series of the Registrant.
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THE INTERNATIONAL CURRENCY FUND
PART A
THIS PART A DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, ANY BENEFICIAL INTERESTS IN THE INTERNATIONAL CURRENCY FUND.
Response to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4 GENERAL DESCRIPTION OF REGISTRANT.
The International Currency Fund (the "Portfolio Trust") is an open-end
management investment company which is a Delaware business trust, which is
governed by the laws of the State of Delaware and was created on __________,
1996. Beneficial interests in the Portfolio Trust are divided into separate
sub-trusts or series, each having a distinct investment objectives and policies,
which are the U.S. Dollar Portfolio, the Pound Sterling Portfolio, the
Deutschemark Portfolio and the Canadian Dollar Portfolio (the "Portfolios").
Beneficial interests in each Portfolio are issued solely in transactions that
are exempt from registration under the Securities Act of 1933 (the "1933 Act").
Investments in the Portfolio Trust may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The Portfolios' investment objectives are to seek to maintain a high
level of liquidity, preserve capital and stability of principal expressed in the
Portfolio's designated currency ("Designated Currency") and, consistent with
those objectives, earn current income. The Portfolios will seek to achieve their
investment objectives primarily through investing in a portfolio of high
quality, short-term instruments denominated in the Portfolio's Designated
Currency. Because of the uncertainty inherent in all investments, no assurance
can be given that the Portfolio will achieve its investment objective.
The investment objective of the Portfolio is not a fundamental policy
any may be changed upon notice to, but without the approval of, the Portfolios
investors. Investment policies which are not fundamental policies may be changed
by the Trustees of the Portfolio Trust, without the approval of the Portfolios'
investors. The Portfolios' investment policies are described further in Part B.
INVESTMENT POLICIES AND RESTRICTIONS
Except as otherwise provided below, the Portfolios' investment policies
are not "fundamental policies" within the meaning of the 1940 Act and may,
therefore, be changed by the Portfolio Trust's Board of Trustees without a
shareholder vote.
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U.S. DOLLAR PORTFOLIO
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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, earn current
income. The U.S. Dollar Portfolio will invest in securities issued or guaranteed
as to principal and interest by the U.S. Government or its agencies or
instrumentalities or by foreign governments or Supranational Organizations (such
as the World Bank, the Inter-American Development Bank, the Asian Development
Bank and the European Bank for Reconstruction and Development) as well as
high-quality, short-term money market instruments such as bank certificates of
deposit, bankers' acceptances and such short-term corporate debt securities as
commercial paper and master demand notes.
The U.S. Dollar Portfolio invests only in U.S. dollar-denominated high
quality securities as described in this paragraph. All of the U.S. Dollar
Portfolio's assets will consist of government securities and "first tier"
eligible securities as defined in Rule 2a-7 under the 1940 Act, which have been
(i) rated by at least two United States nationally recognized statistical rating
organizations ("NRSRO"s), such as Standard & Poor's Corporation or Moody's
Investors Service, Inc., in the highest rating category for short-term
obligations (or so rated by one such organization if it alone has rated the
security), or (ii) issued by an issuer with comparable short-term obligations
that are rated in the highest rating category. See Part B.
All securities in which the U.S. Dollar Portfolio invests have
remaining maturities of thirteen months or less at the date of acquisition. The
U.S. Dollar Portfolio also maintains a dollar-weighted average portfolio
maturity of 90 days or less. The U.S. Dollar Portfolio follows these policies in
seeking to maintain a constant net asset value of $1.00 per share, although
there is no assurance it can do so on a continuing basis.
The U.S. Dollar Portfolio may invest in U.S. dollar-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of thirteen months or
less. These investments may include, for example, obligations issued by foreign
corporations and foreign counterparts of U.S. corporations, Eurodollar bonds
(which are U.S. dollar-denominated obligations of foreign issuers), and Yankee
bonds (which are U.S. dollar-denominated bonds issued by foreign issuers in the
U.S.). Under normal market conditions, the U.S. Dollar Portfolio will have more
than 25% of its total assets invested in the obligations of issuers in the
banking industry. See "Special Investment Considerations and Risk Factors --
Concentration in Obligations of Qualifying Banks." For further information
concerning debt securities ratings and permissible money market investments of
the U.S. Dollar Portfolio, see Part B.
Securities issued or guaranteed as to principal and interest by the
U.S. Government or its agencies or instrumentalities in which the U.S. Dollar
Portfolio may invest include direct obligations of the U.S. Treasury, including
bills, bonds and notes; and obligations issued or guaranteed as to principal and
interest by U.S. Government agencies or instrumentalities and supported by any
of (i) the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association participation certificates); (ii) the right of the issuer
to borrow a limited amount from the U.S. Treasury (e.g., securities of the
Farmers Home Administration); (iii) the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality
(e.g., securities of the Federal National Mortgage Association); or (iv) the
credit of the agency or instrumentality (e.g., securities of a Federal Home Loan
Bank).
POUND STERLING PORTFOLIO
The Pound Sterling Portfolio's investment objective is to seek to
maintain a high level of liquidity, to preserve capital and stability of
principal expressed in Pounds Sterling and, consistent with those objectives,
earn current income. The Pound Sterling Portfolio will invest in securities
issued or guaranteed as to principal and interest by the United Kingdom ("U.K.")
Government, local authorities, city corporations and county councils or their
agencies or by non-U.K. governments or Supranational Organizations as well as
high-quality,
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short-term money market instruments such as bank certificates of deposit,
bankers' acceptances and such short-term corporate debt securities as commercial
paper and master demand notes.
The Pound Sterling Portfolio invests only in Pound Sterling-denominated
high quality securities as described in this paragraph. The Pound Sterling
Portfolio assets will consist of government securities and other securities,
which have been (i) rated by at least two NRSROs in the highest rating category
for short-term obligations (or so rated by one such organization if it alone has
rated the security), or (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category. See Part B.
All securities in which the Pound Sterling Portfolio invests have
remaining maturities of 60 days or less at the date of acquisition. The Pound
Sterling Portfolio follows these policies in seeking to maintain a constant net
asset value of (pound)1.00 per share, although there is no assurance it can do
so on a continuing basis.
The Pound Sterling Portfolio may invest in Pound Sterling-denominated
high quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Pound Sterling Portfolio will have more than
25% of its total assets invested in the obligations of issuers in the banking
industry. See "Special Investment Considerations and Risk Factors --
Concentration in Obligations of Qualifying Banks."
DEUTSCHEMARK PORTFOLIO
The Deutschemark Portfolio's investment objective is to seek to
maintain a high level of liquidity, to preserve capital and stability of
principal expressed in Deutschemarks and, consistent with those objectives, earn
current income. The Deutschemark Portfolio will invest in securities issued or
guaranteed as to principal and interest by the German Government, by its
sub-divisions or their agencies or by non-German governments or Supranational
Organizations, as well as high-quality, short-term money market instruments such
as bank certificates of deposit, and such short-term corporate debt securities
as commercial paper and master demand notes.
The Deutschemark Portfolio invests only in Deutschemark-denominated
high quality securities as described in this paragraph. The Deutschemark
Portfolio's assets will consist of government securities and other securities,
which have been (i) rated by at least two NRSROs in the highest rating category
for short-term obligations (or so rated by one such organization if it alone has
rated the security), or (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category. See Part B.
All securities in which the Deutschemark Portfolio invests have
remaining maturities of 60 days or less at the date of acquisition. The
Deutschemark Portfolio follows these policies in seeking to maintain a constant
net asset value of DM1.00 per share, although there is no assurance it can do so
on a continuing basis.
The Deutschemark Portfolio may invest in Deutschemark-denominated high
quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Deutschemark Portfolio will have more than
25% of its total assets invested in the obligations of issuers in the banking
industry. See "Special Investment Considerations and Risk Factors --
Concentration in Obligations of Qualifying Banks."
CANADIAN DOLLAR PORTFOLIO
The Canadian Dollar Portfolio's investment objective is to seek to
maintain a high level of liquidity, to preserve capital and stability of
principal expressed in Canadian Dollars and, consistent with those objectives,
earn current income. The Canadian Dollar Portfolio will invest in securities
issued or guaranteed as to principal and interest by the Canadian Government,
the Provinces of Canada, or their agencies or by non-Canadian
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governments or Supranational Organizations as well as high-quality, short-term
money market instruments such as bank certificates of deposit, and such
short-term corporate debt securities as commercial paper and master demand
notes.
The Canadian Dollar Portfolio invests only in Canadian
Dollar-denominated high-quality securities as described in this paragraph. The
Canadian Dollar Portfolio's assets will consist of government securities and
other securities which have been (i) rated by at least two NRSROs in the highest
rating category for short-term obligations (or so rated by one such organization
if it alone has rated the security), or (ii) issued by an issuer with comparable
short-term obligations that are rated in the highest rating category. See the
Part B.
All securities in which the Canadian Dollar Portfolio invests have
remaining maturities of 60 days or less at the date of acquisition. The Canadian
Dollar Portfolio follows these policies in seeking to maintain a constant net
asset value of C$1.00 per share, although there is no assurance it can do so on
a continuing basis.
The Canadian Dollar Portfolio may invest in Canadian Dollar-denominated
high quality corporate debt securities such as commercial paper and bonds and
long-term unsecured debentures with remaining maturities of 60 days or less.
Under normal market conditions, the Canadian Dollar Portfolio will have more
than 25% of its total assets invested in the obligations of issuers in the
banking industry. See "Special Investment Considerations and Risk Factors --
Concentration in Obligations of Qualifying Banks."
ALL PORTFOLIOS
In seeking to obtain its investment objectives, each Portfolio may
invest in the types of securities described below.
Variable and Floating Rate Notes
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Each Portfolio may purchase variable and floating rate instruments.
These instruments may include variable amount master demand notes, which are
instruments under which the indebtedness, as well as the interest rate, varies.
In addition, these securities must be rated in the highest short-term rating
category by an NRSRO. Unless guaranteed by the U.S. Government or one of its
agencies or instrumentalities, variable or floating rate instruments purchased
by the U.S. Dollar Portfolio must permit such Portfolio to demand payment of the
instrument's principal at least once every thirteen months. Variable or floating
rate instruments purchased by each of the other Portfolios must permit such
Portfolio to demand payment of the instrument's principal at least once every 60
days. Because of the absence of a market in which to resell a variable or
floating rate instrument, a Portfolio might have trouble selling an instrument
should the issuer default or during periods when a Portfolio is not permitted by
agreement to demand payment of the instrument, and for this or other reasons a
loss could occur with respect to the instrument.
Repurchase Agreements
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Each Portfolio may invest in repurchase agreements. A repurchase
agreement arises when an investor purchases a security and simultaneously agrees
to resell it to the counterparty on the repurchase agreement at an agreed-upon
future date, normally one day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon rate which is effective for
the period of time the investor's money is invested in the security and which is
not related to the coupon rate on the purchased security. By providing a
flexible investment vehicle, repurchase agreements permit the Portfolios to
remain fully invested pending the purchase of appropriate longer-term
investments.
The Portfolios will enter into repurchase agreements only with
financial institutions rated by an NRSRO in the highest rating category for
short-term obligations deemed to be creditworthy by the Investment Adviser,
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pursuant to guidelines established by the Portfolio Trust's Board of Trustees.
During the term of any repurchase agreement, the Investment Adviser will monitor
the creditworthiness of the seller, and the seller must maintain the value of
the securities subject to the agreement in an amount that is greater than the
repurchase price. Default or bankruptcy of the seller would, however, expose the
Portfolios to possible loss because of adverse market action or delays in
connection with the disposition of the underlying obligations. Because of the
seller's repurchase obligations, the securities subject to repurchase agreements
do not have maturity limitations.
When-Issued Securities
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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
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Each Portfolio may invest up to 10% of its net assets in illiquid
securities (i.e. securities which a Portfolio could not reasonably expect to
sell within seven days at approximately the price at which they are valued).
Under the supervision of the Portfolio Trust's Board of Trustees the Investment
Adviser will determine the liquidity of each investment using various factors
such as (1) the frequency of trades and quotations, (2) the number of dealers
and prospective purchasers in the marketplace, (3) dealer undertakings to make a
market, (4) the nature of the security (including any demand or tender features)
and (5) the likelihood of continued marketability and credit quality of the
issuer. If they have a remaining maturity of more than seven days, time deposits
and repurchase agreements will be considered to be illiquid securities.
FUNDAMENTAL POLICIES
Each of the Portfolios have adopted certain fundamental policies which
may not be changed without the approval of that Portfolios' investors.
As a fundamental policy, no Portfolio may: (i) borrow money, except
from the Portfolio Trust's Custodian or from other banks in connection with
redemptions or for temporary or emergency purposes (borrowings by a Portfolio
may not exceed 20% of that Portfolio's net assets computed immediately after the
borrowing; no additional investments may be made while any borrowings exceed 5%
of the Portfolio's total assets), (ii) pledge, hypothecate, or mortgage any of
the Portfolio's assets other than in connection with permitted borrowings or
(iii) make any investment which would cause more than 25% of the value of such
Portfolio's total assets to be invested in securities of nongovernmental issuers
principally engaged in any one industry, except that under normal market
conditions each Portfolio will invest more than 25% of its total assets in
obligations of Qualifying Banks (as defined herein) and further provided that in
the event that the diversification requirements of the United States Internal
Revenue Code of 1986, as amended, (the "Internal Revenue Code") are revised so
as to permit one or more of the Portfolios to invest more than 25% of its total
assets in government obligations of the country that issues its corresponding
Designated Currency, then each such Portfolio will under normal market
conditions invest more than 25% of its total assets in such obligations.
Additional fundamental policies of the Portfolios are set forth in Part B.
If a percentage restriction, including one that is a fundamental
policy, is adhered to at the time of investment, a later increase or decrease in
percentage resulting from a change in values or assets will not constitute a
violation of that restriction.
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SPECIAL INVESTMENT CONSIDERATIONS AND RISK FACTORS
Possible Changes in Net Asset Value and Yield
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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 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
portfolio, thereby reducing the current yield of the Portfolio. In the periods
of rising interest rates, the opposite can be true. The securities in which the
Portfolios invest may not produce as high a level of income as could be obtained
from securities with longer maturities or those having a lesser degree of
safety.
Investments in a Single Issuer
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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 Internal Revenue Code. Currently, those requirements provide that, as of the
last day of each fiscal quarter, each Portfolio's investments in the securities
of any one issuer must be limited to 25% of its total assets, provided that with
respect to at least 50% of its total assets, a Portfolio may not have invested
more than (a) 5% of its total assets in the securities of any one issuer or (b)
10% of the outstanding voting securities of any one issuer. To the extent a
Portfolio is not diversified under the 1940 Act, it may be more susceptible than
a fully diversified Portfolio to adverse developments affecting a single issuer.
In the event of any change in the diversification requirements of the
Internal Revenue Code that would permit a Portfolio to invest more than 25% of
its total assets in government obligations of the country that issues such
Portfolio's Designated Currency, the Portfolio Trust intends to adopt a policy
with respect to such Portfolio that will permit it to invest in securities that
are direct obligations of or guaranteed by such country to the maximum extent
permitted by the Internal Revenue Code. Accordingly, in the future, each
Portfolio could invest up to 100% of its total assets in securities that are
direct obligations of or guaranteed by a single country.
In addition to the foregoing, each of the Portfolios has adopted a
non-fundamental investment restriction which prevents it from investing (i) more
than 5% of the value of its total assets in the securities of any one issuer
(other than repurchase agreements and securities issued by a sovereign
government, its agencies and instrumentalities), (ii) more than 25% of the value
of its total assets in repurchase agreements with one counterparty or (iii) more
than 25% of the value of its total assets in securities issued by any sovereign
government, its agencies and instrumentalities (other than the federal
government of the United States). Securities held solely as collateral for
outstanding repurchase agreements shall be excluded for purposes of computing
compliance with restriction (iii). These restrictions may be eliminated or
modified at any time by the Trustees of the Portfolio Trust without a
shareholder vote.
Concentration in Obligations of Qualifying Banks
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Under normal market conditions, each Portfolio will have more than 25%
of its total assets invested in obligations of Qualifying Banks. For the
purposes of this Prospectus, Qualifying Banks are defined as U.S.
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banks (including savings banks or savings and loan associations) that are
members of the Federal Deposit Insurance Corporation ("FDIC") and "foreign
banks," as defined in Rule 3a-6 under the 1940 Act, provided that any such
institution has, at the date of investment, capital, surplus and undivided
profits (as of the date of its most recently published financial statements) in
excess of U.S.$100,000,000 or the non-U.S. dollar equivalent, as the case may
be. This concentration may result in increased exposure to risks pertaining to
the banking industry. These risks include: a sustained increase in interest
rates, which can adversely affect the availability and cost of funds for a
bank's lending activities; exposure to credit losses during times of economic
decline; concentration of loan portfolios in certain industries; national and
local regulatory developments; and competition within the banking industry as
well as from other financial institutions. In addition, investments in banks
located in foreign countries are subject to risks resulting from the combination
in those banks of banking and securities underwriting and similar activities.
In the event the Portfolio Trust adopts policies in response to a
change in the diversification requirements of the Internal Revenue Code as
described above, the newly adopted policies could cause a Portfolio to cease to
have any of its assets invested in obligations of Qualifying Banks.
Investments in Foreign Securities
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Investing in securities issued by entities domiciled in a country other
than an investor's country of residence or denominated in a currency other than
the currency of the investor's country of residence may involve considerations
and possible risks and opportunities not typically encountered by the investor
in making investments in its country of residence and in securities denominated
in that country's currency. These considerations include favorable or
unfavorable changes in interest rates, currency exchange rates and exchange
control regulations, and the costs that may be incurred in connection with
conversions between various currencies. In addition, investments in countries
other than the United States could be affected by other factors generally not
thought by investors to be present in the United States, including less liquid
and efficient securities markets, greater price volatility, less publicly
available information about issuers, the imposition of withholding or other
taxes, restrictions on the expatriation of funds or other assets of a Portfolio,
expropriation of assets, adverse diplomatic developments, higher transaction and
custody costs, delays attendant in settlement procedures and difficulties in
enforcing contractual obligations.
ITEM 5. MANAGEMENT
TRUSTEES
The Portfolios' are a separate investment series of the Portfolio
Trust, a Delaware business trust governed by the laws of the State of Delaware.
Under the terms of the Declaration of Trust, the affairs of the Portfolio are
managed under the supervision of the Trustees of the Portfolio Trust.
A majority of the Trustees who are not "interested persons" (as defined
in the 1940 Act) of the Portfolio Trust, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interests arising from the fact that the same individuals are trustees of the
Portfolio Trust and an investor in the Portfolio Trust, up to and including
creating separate boards to trustees. See "Management" in Part B for more
information about the Trustees and officers of the Portfolio Trust.
INVESTMENT ADVISER
Rothschild International Asset Management Limited (the "Investment
Adviser"), Five Arrows House, St. Swithin's Lane, London EC4N 8NR England,
serves as investment adviser to the Portfolios pursuant to a Master Investment
Advisory Agreement and manages the Portfolios' investments and affairs subject
to the
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supervision of the Trustees of the Portfolio Trust. The Investment Adviser 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. It is an
indirect, subsidiary of Rothschild Concordia AG of Zug, Switzerland, a holding
company whose subsidiaries manage approximately $27 billion in assets, spread
across equities, bonds and currencies. The Investment Adviser is an affiliate of
the merchant bank NM Rothschild & Sons Limited.
Subject to the supervision and direction of the Trustees of the
Portfolio Trust, the Investment Adviser manages the Portfolios in accordance
with their stated investment objectives and policies, recommends investment
decisions for the Portfolios, places orders to purchase and sell securities on
behalf of the Portfolios. Pursuant to the Master Investment Advisory Agreement,
the Funds of the Rothschild Five Arrows Currency Trust, which invest all of
their investable assets in the Portfolios, are permitted to use the name
"Rothschild" for as long as such agreement remains in effect. In consideration
for its services to the Portfolios, the Portfolio Trust has agreed to pay the
Investment an annual advisory fee with respect to each Portfolio. The advisory
fee for each Portfolio is calculated daily and payable monthly at an annual rate
of up to .20% of average daily net assets.
The portfolio manager for all of the Portfolios is Thomas Barman, who
has been employed by the Investment Adviser as its Director for Currency
Management since November 1994. He has been primarily responsible for the
day-to-day management of the Portfolios' portfolios since their commencement of
operations. He has over 25 years experience in fund management. From March 1993
to August 1994, Mr. Barman was a portfolio manager for Glaxo (Bermuda) Limited.
From April 1991 to February 1993, he was a portfolio manager for the U.S. Office
of Caisse des Depots et Consignations. Prior to that time, he served as Foreign
Exchange Officer at the Federal Reserve Bank of New York and was head of the
U.S. Treasury investments at Credit Suisse (New York).
The Investment Adviser has a Code of Ethics governing personal
securities transactions of certain of its employees. See the Statement of
Additional Information.
ADMINISTRATOR OF THE PORTFOLIO
BISYS Fund Services Limited Partnership, a wholly-owned subsdiary of
the BISYS Group, Inc. serves as the administrator to the Portfolio (the
"Administrator") pursuant to a written administration agreement with the
Portfolio Trust on behalf of each Portfolio. The Administrator provides the
Portfolio Trust with office space and with certain clerical services and
facilities. The Administrator currently does not receive a fee from the
Portfolios for its services to the Portfolio Trust.
EXPENSES
The Portfolios are responsible for all of its costs and expenses not
expressly stated to be payable by Investment Adviser, the Administrator or the
Custodian. Among other expenses, the Portfolios pay investment advisory fees;
bookkeeping, share pricing and custodian fees and expenses; expenses of notices
and reports to interest holders. The Portfolios will also pay legal and auditing
fees; any registration and reporting fees and expenses; and Trustees, fees and
expenses. Expenses of the Portfolio Trust which relate to more than one of the
Portfolios are allocated among such Portfolios by the Investment Adviser and the
Portfolio Trust in an equitable manner, primarily on the basis of relative net
asset values.
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ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
Under the Portfolio Trust's Declaration of Trust, the Trustees are
authorized to issue beneficial interests in separate series of the Portfolio
Trust. Each investor is entitled to a vote in proportion to the amount of its
investment in a Portfolio. Investments in the Portfolios may not be transferred,
but an investor may withdraw all or any portion of his investment at any time at
net asset value. Investors in the Portfolios (e.g., investment companies,
insurance company separate accounts and common and commingled trust funds will
not be liable for the obligations of the Portfolios although they will bear the
risk of loss of their entire respective interests in the Portfolios in which
they invest. However, there is a risk that interest-holders in the Portfolios
may be held personally liable as partners for the Portfolios obligations.
Because the Portfolio Trust's Declaration of Trust disclaims interest-holder
liability and provides for indemnification against such liability, the risk of
an investor in the Portfolios incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance existed
and a Portfolio itself was unable to meet its obligations.
Each Portfolio intends to pay redemption proceeds in cash for all
interests redeemed, but, under certain conditions, each Portfolio may make
payment wholly or partly in portfolio securities. In addition, the Portfolio
Trust has elected to be governed by the provisions of Rule 18f-1 under the 1940
Act which limits each Portfolio's obligation to make cash redemption payments to
any investor during any 90 day period to the lesser of $250,000 or 1% of such
Portfolio's net asset value at the beginning of such period.
The Portfolio Trust reserves the right to create and issue any number
of series, in which case investments in each series would participate equally in
earnings and assets of the particular series. Currently, the Portfolio Trust has
four series: the U.S. Dollar Portfolio, the Pound Sterling Portfolio, the
Deutschemark Portfolio and the Canadian Dollar Portfolio.
Investments in the Portfolios have no pre-emptive or conversion rights
and are fully paid and non-assessable, except as set forth above. The Portfolio
Trust is not required and has no current intention to hold annual meetings of
investors, but the Portfolio Trust will hold special meetings of investors when
in the judgment of the Trustees it is necessary or desirable to submit matters
for an investor vote. Changes in fundamental policies will be submitted to
investors for approval. Investors have under certain circumstances (e.g. upon
application and submission of certain specified documents to the Trustees by a
specified percentage of the aggregate value of the Portfolio Trust's outstanding
interests) the right to communicate with other investors in connection with
requesting a meeting of investors for the purpose of removing one or more
Trustees. Investors also have the right to remove one or more Trustees without a
meeting by a declaration in writing by a specified number of investors. Upon
liquidation of a Portfolio, investors in that Portfolio would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
As of the close of business on ________, the U.S. Dollar Fund, the
Pound Sterling Fund, the Deutschemark Fund and the Canadian Dollar Fund (the
"Funds"), series of shares of Rothschild Five Arrows Currency Trust, owned
approximately __% of the value of the outstanding interests in their
corresponding Portfolios. To the extent that each Fund controls its
corresponding Portfolio, it may take actions without the approval of any other
investor in such Portfolio.
Since, as of the approximate time of this Prospectus, an affiliated
person of the Investment Adviser, was the beneficial owner of all or a
substantial amount of the outstanding shares of the Funds it may also be deemed
to be in control of the Portfolios as control is defined in the 1940 Act. Such
owners may acquire additional shares of the Funds. Although sales of the Funds'
shares to other investors will reduce its percentage ownership in the Funds and
the Portfolios, so long as 25% of a class of shares of either a Funds or a
Portfolio is so owned, the owner will be presumed to be in control of such class
of shares for purposes of voting on certain matters submitted to a vote of
shareholders.
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Inquiries concerning the Portfolios should be made by contacting the
Portfolios at the Portfolio Trust's registered office in care of the
Administrator.
Please see Item 7 for a discussion of the Portfolios' dividend
policies.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolios are issued solely in
transactions that are exempt from registration under the 1933 Act. See "General
Description of Registrant" above.
An investment in the Portfolios may be made without a sales load by
certain eligible investors. All investments are made at the net asset value next
determined after an order and payment for the investment is received by the
Portfolio Trust or its agent by the designated cutoff time for each investor.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in disbursable funds in the relevant Portfolio's
Designated Currency (i.e., monies credited to the account of the Portfolio
Trust's custodian bank by a designated bank.
The net asset value per share of each Portfolio, expressed in the
relevant Designated Currency, is determined by dividing the value of the
Portfolio's net assets (i.e., the value of its investment, including accrued but
undistributed net investment income, less liabilities) by the total number of
shares of the Portfolio outstanding. Such net asset values are determined once
every Trust Business Day at 2:00 p.m. U.S. Eastern Time for the U.S. Dollar and
Canadian Dollar Portfolios and 9:00 a.m. U.S. Eastern Time for the Pound
Sterling and Deutschemark Portfolios. A "Portfolio Trust Business Day" is
defined as any day on which the New York Stock Exchange (the "Exchange") is open
for trading or banks in New York City are open for business from 7:00 a.m. to
5:00 p.m. U.S. Eastern Time ("Portfolio Trust Hours of Operation"). Thus, the
Trust will be open for business every day except for Saturdays, Sundays and
holidays which are observed by both the Exchange and New York City banks
(scheduled holidays for 1996 are New Year's Day, President's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day). The value of
the investments held by each Portfolio is determined in its Designated Currency
once every 24 hours during Portfolio Trust Hours of Operation.
Each Portfolio seeks to maintain the following constant net asset value
per share:
U.S. Dollar Portfolio U.S. $1.00
Pound Sterling Portfolio (pound)1.00
Deutschemark Portfolio DM1.00
Canadian Dollar Portfolio C$1.00
It is anticipated that each Portfolio's assets will utilize the
amortized cost method of valuation as a reasonable means of approximating each
Portfolio's market value. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization or accretion to maturity of any
premium or discount. If at any time, however, the market value of any
Portfolio's total assets deviates more than 1/2 of 1% from their value
determined on an amortized cost basis, the Portfolio Trust's Board of Trustees
will consider whether any action should be initiated to prevent any adverse
effects on the Portfolios' shareholders. The Portfolio Trust's Board of Trustees
will monitor the use of the amortized cost method of valuation in order to
ensure that this method continues to be in the best interest of the Portfolios'
shareholders. There may be periods during which the stated value of an
instrument determined under the amortized cost method of valuation is higher or
lower than the price the Portfolio would receive if the instrument were sold,
and the accuracy of amortized cost
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valuation can be affected by changes in interest rates and the credit standing
of issuers of the Portfolio's investments. There is no assurance that the
Portfolios will maintain a stable net asset value per share.
If in the view of the Portfolio Trust's Board of Trustees it is
inadvisable to continue maintaining a constant net asset value for any
Portfolio, the Board of Trustees may discontinue using the amortized cost method
of valuation for such Portfolio.
The Portfolio Trust reserves the right to cease accepting
investments in any Portfolio at any time or to reject any purchase order in
whole or in part. All of a shareholder's accounts will be subject to the
elections and instructions specified by the shareholder in the Application
Agreement covering the accounts.
Ownership of interests in the Portfolio Trust will be reflected by
book-entry, and certificates for shares will not be issued. Investment in the
Portfolio Trust is not recommended for any investors who require a stock
certificate to evidence their shares.
Purchases of shares of a Portfolio will be effected on Portfolio Trust
Business Days in accordance with the procedures set out below and only when the
wire system designated for use in transmitting money to the relevant Portfolio
permits the timely transmission of Disbursable Funds. Additionally, on days when
the New York Stock Exchange and/or the Portfolio Trust's Custodian close early
due to a partial holiday or otherwise, the Portfolio Trust reserves the right to
advance the times at which purchase and redemption orders must be received.
o Purchase orders for shares of the U.S. Dollar Portfolio
received prior to 11 a.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be processed on that same day (or the
next New York Banking Day (as defined below) if such Portfolio
Trust Business Day is not a New York Banking Day).
o Purchase orders for shares of the Canadian Dollar Portfolio
received prior to 11 a.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be processed on that same day (or the
next Toronto Banking Day (as defined below) if such Portfolio
Trust Business Day is not a Toronto Banking Day).
o Purchase orders for shares of the Pound Sterling Portfolio
received prior to 5 p.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be processed on the following London
Banking Day (as defined below).
o Purchase orders for shares of the Deutschemark Portfolio
received prior to 10 a.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be processed on the following
Frankfurt Banking Day (as defined below).
If a purchase order is not received prior to the applicable time listed
above, such purchase order shall be deemed to have been received on the next
following Portfolio Trust Business Day. Investors will be entitled to any
dividends declared or income earned on the day when their purchase orders are
processed, provided that Disbursable Funds are received in the relevant
Portfolio's Designated Currency in the appropriate bank account (details of
which are set out on the Application Agreement) by the close of business on that
same day. If Disbursable Funds, with respect to any purchase order, are not
received by this time by the Portfolio Trust, the Portfolio Trust reserves the
right, in its sole discretion, (a) to accept the order and assess interest on
the overdue payment, or (b) to cancel the order, and to hold the purchaser
responsible for any loss and other costs incurred by the Portfolio Trust.
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<PAGE> 14
Under the anticipated method of operation of the Portfolios, it is
expected that each Portfolio will not be subject to any U.S. federal or state
income tax. However, any investor in the Portfolios that is subject to U.S. tax
will take into account its share (as determined in accordance with the governing
instruments of the relevant Portfolio) of that Portfolio's ordinary income and
capital gain in determining its income tax liability, if any. The determination
of such share will be made in accordance with the Internal Revenue Code.
It is intended that each Portfolio's assets, income and distributions
will be managed in such a way that an investor in any Portfolio will be able to
satisfy the requirements of Subchapter M of the Internal Revenue Code, assuming
that the investor invested all of its investment securities (as such phrase is
used in the 1940 Act) in the relevant Portfolio.
A "New York Banking Day" is every day except Saturdays, Sundays and
holidays observed by New York City banks (scheduled holidays for 1996 are New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and
Christmas Day).
A "London Banking Day" is every day except Saturdays, Sundays and
holidays observed by London banks (scheduled holidays for 1996 are New Year's
Day, Good Friday, Easter Monday, May Holiday, Spring Holiday, Late Summer
Holiday, Christmas Day and Boxing Day).
A "Frankfurt Banking Day" is every day except Saturdays, Sundays and
holidays observed by Frankfurt banks (scheduled holidays for 1996 are New Year's
Day, Epiphany, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit
Monday, Corpus Christii, Assumption Day, German Unity Day, All Saint's Day, Day
of Penance, Christmas Eve Holiday, Christmas Day, Boxing Day and New Year's
Holiday).
A "Toronto Banking Day" is every day except Saturdays, Sundays and
holidays observed by Toronto banks (scheduled holidays for 1996 are New Year's
Day, Good Friday, Easter Monday, Victoria Day, Canada Day, Labour Day,
Thanksgiving, Remembrance Day, Christmas Eve Holiday, Christmas Day and Boxing
Day).
ITEM 8. REDEMPTION.
Redemptions of shares of a Portfolio will be effected on Portfolio Trust
Business Days in accordance with the procedures set out below, and only when the
wire system designated for use in transmitting money from the relevant Portfolio
permits the timely transmission of redemption proceeds. Additionally, as for
purchases of shares, the Portfolio Trust reserves the right to advance the times
at which purchase and redemption orders must be received (see section headed
"Purchases Of Securities Being Offered" above).
o Redemption requests for shares of the U.S. Dollar Portfolio
received prior to 11 a.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be paid on that same day (or the next
New York Banking Day if such Portfolio Trust Business Day is
not a New York Banking Day).
o Redemption requests for shares of the Canadian Dollar
Portfolio received prior to 11 a.m. U.S. Eastern Time on a
Portfolio Trust Business Day will be paid on that same day (or
the next Toronto Banking Day if such Portfolio Trust Business
Day is not a Toronto Banking Day).
o Redemption requests for shares of the Pound Sterling Portfolio
received prior to 5 p.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be paid on the following London
Banking Day.
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<PAGE> 15
o Redemption requests for shares of the Deutschemark Portfolio
received prior to 10 a.m. U.S. Eastern Time on a Portfolio
Trust Business Day will be paid on the following Frankfurt
Banking Day.
If a redemption request is not received prior to the applicable time
listed above, such request shall be deemed to have been received on the next
following Portfolio Trust Business Day. Shareholders shall be entitled to any
dividends declared or income earned up to and including the day before the day
on which the redemption request is scheduled to be paid.
If the Investment Adviser believes that market conditions exist which
preclude the Portfolio Trust from making prompt payment in a Portfolio's
Designated Currency, the Portfolio Trust can elect to take up to seven days to
pay redemption proceeds or to pay redemption proceeds wholly or partly in
readily marketable portfolio securities. The Portfolio Trust is obligated to
effect a redemption in currency without regard to market conditions if requested
by a shareholder redeeming $250,000 or less (or in the applicable Designated
Currency equivalent thereof ) or 1% or less of a Portfolio's net assets,
whichever is less, during any 90-day period.
Except as provided below, all redemptions in currency are made by wire
transfer in the Designated Currency of the Portfolio whose shares are being
redeemed. The Portfolio Trust will wire redemption proceeds through Fedwire in
the case of the U.S. Dollar Portfolio, CHAPS in the case of the Pound Sterling
Portfolio, FLS in the case of the Deutschemark Portfolio and IIPS in the case of
the Canadian Dollar Portfolio. A charge of $20 (or the equivalent in the
relevant Portfolio's Designated Currency) against the shareholder's account will
be imposed for each wire redemption. Banks receiving redemption proceeds by wire
may also impose a charge for doing so.
If a redemption request does not meet the minimum amount and other
requirements for sending currency through the system, redemption proceeds will
be paid by check mailed to the shareholder. Each shareholder may pre-designate
one bank account per Portfolio to which redemption proceeds can be directed.
When redemption proceeds are paid in portfolio securities, brokerage
costs may be incurred by the investor in converting the securities to currency.
For further information concerning redemptions in portfolio securities,
shareholders should telephone the Administrator. Redemption in portfolio
securities will be made by delivery to the shareholder, or to another party at
the shareholder's direction, of portfolio securities (together with a cash
payment in the Portfolio'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
Portfolio 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 Portfolio may be suspended or the date of payment postponed for
more than seven days when trading in the markets in which the Portfolio's
securities are traded is restricted or for a period during which an emergency
exists as a result of which disposal by the Portfolio of its securities is not
reasonably practicable or it is not reasonably practicable for the Portfolio
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 Portfolio Trust's
shareholders.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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Dated ________, 1996
THE INTERNATIONAL CURRENCY FUND
PART B
ITEM 10. COVER PAGE.
This Part B expands upon and supplements the information contained in Part A of
The International Currency Fund (the "Portfolio Trust") of which there are four
separate investment series: the U.S. Dollar Portfolio, the Pound Sterling
Portfolio, the Deutschemark Portfolio and the Canadian Dollar Portfolio. This
Part B should be read in conjunction with such Part A.
NEITHER PART A NOR THIS PART B CONSTITUTES AN OFFER TO SELL, OR THE SOLICITATION
OF AN OFFER TO BUY, ANY BENEFICIAL INTERESTS IN THE INTERNATIONAL CURRENCY FUND.
ITEM 11. TABLE OF CONTENTS PAGE
GENERAL INFORMATION AND HISTORY..................................1
INVESTMENT OBJECTIVES AND POLICIES...............................2
MANAGEMENT......................................................10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............11
INVESTMENT ADVISORY AND OTHER SERVICES..........................12
BROKERAGE ALLOCATION AND OTHER PRACTICES........................13
CAPITAL STOCK AND OTHER SECURITIES..............................14
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING
OFFERED................................................14
TAX STATUS......................................................16
UNDERWRITERS....................................................16
CALCULATION OF PERFORMANCE DATA.................................16
FINANCIAL STATEMENTS............................................16
ITEM 12. GENERAL INFORMATION AND HISTORY.
The Portfolios are series of the Portfolio Trust, which is a
newly-formed business trust and an open-end management investment company under
the 1940 Act. The Portfolio Trust was organized as a Delaware business trust
under the laws of the State of Delaware on __________________, 1996.
Interests in the Portfolios have no preemptive or conversion rights,
and are fully paid and non-assessable, except as set forth below. The Portfolios
normally will not hold meetings of holders of such interests except as required
under the 1940 Act. The Portfolios 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 Portfolios Trust qualified to vote in the
election. The 1940 Act requires the Portfolios to assist their holders in
calling such a meeting. Upon liquidation of the Portfolios, holders in the
Portfolios would be entitled to share pro rata in the net assets of the
Portfolio Trust available for distribution to holders.
<PAGE> 17
Each holder in a Portfolio is entitled to vote in proportion to its
percentage interest in such Portfolio.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
Part A contains additional information about the investment objectives
and policies of the Portfolios. This Part B should be read only in conjunction
with Part A. This section contains supplemental information concerning the types
of securities and other instruments in which the Portfolios may invest, the
investment policies and portfolio strategies that the Portfolios may utilize and
certain risks attendant to those investments, policies and strategies.
All of the Portfolios' fundamental investment restrictions are set
forth below. These fundamental investment restrictions may not be changed except
by the affirmative vote of a majority of the Portfolios outstanding voting
securities as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). Under the 1940 Act, a "vote of the majority of the outstanding
voting securities" means the vote, at the annual or a special meeting of
security holders duly called, (i) of 67% or more of the voting securities
present at the meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (ii) of more than 50% of the
outstanding voting securities, whichever is less. Under these restrictions, it
is the policy of each Portfolio:
(1) not to invest in a security if the transaction would result in
the Portfolio owning more than 10% of any class of voting
securities of an issuer;
(2) not to issue senior securities, except that the Portfolio may
borrow money in accordance with Restriction 10 below;
(3) not to underwrite or participate in the marketing of
securities of other issuers;
(4) not to purchase or sell real estate in fee simple;
(5) not to invest in commodities or commodity contracts;
(6) not to make loans except that the Portfolio may purchase
bonds, debentures, notes and similar debt obligations,
including money market instruments, directly from the issuer
thereof or in the open market and may engage in repurchase
transactions;
(7) not to conduct arbitrage transactions;
(8) not to invest in interests in oil, gas or other mineral
exploration or development programs (provided that the
Portfolio may invest in securities which are based, directly
or indirectly, on the credit of companies which invest in or
sponsor such programs);
(9) not to make any investment which would cause more than 25% of
the value of such Portfolio's total assets to be invested in
securities of nongovernmental issuers principally engaged in
any one industry, except that under normal market conditions
each Portfolio will invest more than 25% of its total assets
in obligations of Qualifying Banks (as defined in the
Prospectus) and further provided that in the event that the
diversification requirements of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code") are revised so
as to permit one or more of the Portfolios to invest more than
25% of its total assets in government obligations of the
country that issues the relevant Fund's Designated Currency,
then each such Portfolio will under normal market conditions
invest more than 25% of its total assets in such obligations;
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(10) not to borrow money except in connection with redemptions or
for temporary and emergency purposes and then not in an amount
in excess of 20% of the value of its net assets, provided that
additional investments will be suspended during any period
when borrowings exceed 5% of the Portfolio's total assets; and
(11) not to purchase securities on margin, make a short sale of any
securities or purchase or deal in puts, calls, straddles or
spreads with respect to any security, except that the
Portfolio may acquire puts in connection with enhancing the
liquidity of its securities.
The following investment restrictions may be changed by vote of a
majority of the Trustees of the Portfolio Trust. Under these restrictions, it is
the policy of each Portfolio:
(1) not to hypothecate, mortgage or pledge any of its assets
except as may be necessary in connection with permitted
borrowings;
(2) not to purchase a security issued by another investment
company if, immediately after such purchase, the Portfolio
would own, in the aggregate, (i) more than 3% of the total
outstanding voting stock of such other investment company;
(ii) securities issued by such other investment company having
an aggregate value in excess of 5% of the value of the
Portfolio's total assets; or (iii) securities issued by such
other investment company and all other investment companies
(other than treasury stock of the Portfolio) having an
aggregate value in excess of 10% of the value of the
Portfolio's total assets; provided, however, that the
Portfolio may purchase investment company securities without
limit for the purpose of completing a merger, consolidation or
other acquisition of assets;
(3) not to invest in companies for the purpose of exercising
control over their management;
(4) not invest more than 5% of the value of its total assets in
any issuer (other than repurchase agreements and securities
issues by a sovereign government, its agencies or
instrumentalities);
(5) not to invest more than 25% of its total assets in securities
issued by a sovereign government, its agencies or
instrumentalities (other than the U.S. federal government),
provided that securities held solely as collateral for
outstanding repurchase agreements shall be excluded for
purposes of computing compliance with this restriction; and
(6) not to invest more than 25% of its total assets in repurchase
agreements with any one counterparty.
MONEY MARKET INSTRUMENTS
U.S. Dollar Portfolio
---------------------
The following describes further the money market instruments in which
the U.S. Dollar Portfolio will invest and is provided as a supplement to the
discussion appearing in the Prospectus.
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Short-Term Corporate Debt Instruments
Short-term corporate debt instruments include commercial paper (i.e.,
short-term, unsecured promissory notes) issued by corporations (including bank
holding companies) to finance short-term credit needs. Commercial paper is
usually sold on a discounted basis and has a maturity at the time of issuance
not exceeding nine months.
Short-term corporate debt instruments also include master demand notes.
Master demand notes are obligations of companies that permit an investor to
invest fluctuating amounts at varying rates of interest pursuant to arrangements
between the investor, as lender, and the companies, as borrowers. The U.S.
Dollar Portfolio will have the right, at any time, to increase the amount lent
up to the full amount provided by a note. Because the U.S. Dollar Portfolio may
also decrease the amount lent at any time, such instruments are highly liquid
and in effect have a maturity of one business day. The borrower will have the
right, at any time, to prepay up to the full amount of the amount borrowed
without penalty. Because the notes are direct lending obligations between the
U.S. Dollar Portfolio and the borrowers, they are generally not traded and there
is no secondary market. Consequently, the U.S. Dollar Portfolio's ability to
receive repayment will depend upon the borrower's ability to pay principal and
interest on the U.S. Dollar Portfolio's demand. The U.S. Dollar Portfolio will
invest only in notes that either have the ratings described below for commercial
paper or (because notes are not typically rated by credit rating agencies)
unrated notes that are issued by companies having the ratings described below
for issuers of commercial paper. The Fund does not expect that the notes will be
backed by bank letters of credit. The Investment Adviser will monitor the value
of the U.S. Dollar Portfolio's investments in commercial paper and master demand
notes, taking into account such factors as the issuer's earning power, cash flow
and other liquidity ratios.
Commercial paper investments at the time of purchase will be rated in
the highest rating category by an NRSRO, such as A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors Service, Inc. ("Moody's"),
or, if not rated, issued by companies having an outstanding debt issue rated at
least AA by S&P or Aa by Moody's or equivalent or determined to be of comparable
quality. See "Information about Securities Ratings of NRSROs" below for further
information.
Under certain limited circumstances, the U.S. Dollar Portfolio may
invest in nonconvertible corporate debt securities (e.g., bonds and debentures
which may be issued by U.S. or non-U.S. corporations) with no more than thirteen
months remaining either to the date of maturity or the date on which, under the
indenture governing the security, it may be sold back to the issuer thereof for
payment of principal and accrued interest. Corporate debt securities with a
remaining maturity of thirteen months or less are liquid (and tend to become
more liquid as their maturities lessen) and are traded as money market
securities. Such securities also tend to have considerably less market value
fluctuation than longer term issues.
Corporate debt and other securities in which the U.S. Dollar Portfolio
invests must be U.S. dollar-denominated Eligible Securities (as defined in Rule
2a-7 under the 1940 Act) that are determined to present minimal credit risks. In
general, the term "Eligible Securities" is limited to:
(i) securities with remaining maturities of 13 months or less that
are rated (or have been issued by an issuer that is rated with
respect to a class of short-term debt obligations, or any
securities within that class, that are comparable in priority
and security with the relevant security) by the requisite
number (i.e., two, if two organizations have issued ratings
and one if only one has issued a rating) of NRSROs in one of
the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or
gradations indicating relative standing), or
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<PAGE> 20
(ii) securities that at the time of issuance were long-term
securities (i.e., that had remaining maturities greater than
397 calendar days) but that now have remaining maturities of
397 calendar days or less and which were issued by an issuer
that has received from the requisite NRSROs a rating, with
respect to a class of short-term debt obligations (or any
security within that class) that is comparable in priority and
security with the relevant security, in one of the two highest
rating categories for short-term debt obligations (within
which there may be sub-categories or gradations indicating
relative standing), or
(iii) securities which are "unrated" (as defined in Rule 2a-7) but
determined to be of comparable quality to the foregoing by the
Portfolio Trust's Board of Trustees or the Investment Adviser
under their supervision (provided that a security that at the
time of issuance was a long-term security but that has a
remaining maturity of 397 calendar days less and that is an
"unrated" security is not an "Eligible Security" if the
security has a long-term rating from any NRSRO that is not
within the NRSRO's three highest categories (within which
there may be sub-categories or gradations indicating relative
standing)).
As indicated in the Prospectus, the U.S. Dollar Portfolio will further
limit its investments to Eligible Securities that are government securities and
"first tier" Eligible Securities as defined in Rule 2a-7 under the 1940 Act.
Bank Money Investments
Bank money investments include but are not limited to certificates of
deposit, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term (i.e., less than one year), interest-bearing negotiable
certificates issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). A banker's acceptance may be obtained from a domestic or
foreign bank including a U.S. branch or agency of a foreign bank. The borrower
is liable for payment as well as the bank, which unconditionally guarantees to
pay the draft at its face amount on the maturity date. Most acceptances have
maturities of six months or less and are traded in secondary markets prior to
maturity. Time deposits are nontransferable deposits made for a fixed period of
time at a stated interest rate. The U.S. Dollar Portfolio will not invest in any
bank money investment unless the investment is issued by a U.S. bank that is a
member of the Federal Deposit Insurance Corporation ("FDIC"), including any
foreign branch thereof, a U.S. branch or agency of a "foreign bank", as defined
under Rule 3a-6 of the 1940 Act, a foreign branch of a foreign bank, or a
savings bank or savings and loan association that is a member of the FDIC and
which at the date of investment has capital, surplus and undivided profits (as
of the date of its most recently published financial statements) in excess of
$100 million (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
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<PAGE> 21
U.S. Government securities consist of various types of marketable
securities issued by the U.S. Treasury, i.e., bills, notes and bonds. Such
securities are direct obligations of the U.S. Government and differ mainly in
the lengths of their maturities. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
Government Agency Securities
Government agency securities consist of fixed income securities issued
or guaranteed by agencies and instrumentalities of the U.S. Government,
including the various types of instruments currently outstanding or which may be
offered in the future. Agencies and instrumentalities include, among others, the
Federal Housing Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association, Farmers Home Administration,
Export-Import Bank of the U.S., Federal Maritime Administration, General
Services Administration and Tennessee Valley Authority. Instrumentalities
include, for example, the Central Bank for Cooperatives, Federal Home Loan
Banks, Federal Farm Credit Banks, Student Loan Marketing Association, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks and the U.S. Postal Service. The U.S. Dollar Portfolio will purchase such
securities only so long as they are backed by any of (i) the full faith and
credit of the U.S. Treasury (e.g., U.S. Treasury bills, bonds and notes and GNMA
participation certificates), (ii) the right of the issuer to borrow a limited
amount from the U.S. Treasury (e.g., securities of the Farmers Home
Administration), (iii) the discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (e.g., securities
of the Federal National Mortgage Association) or (iv) the credit of the agency
or instrumentality (e.g., securities of a Federal Home Loan Bank).
Custodial Receipts
The U.S. Portfolio may acquire, subject to the limitations described
herein, custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms. Such notes and bonds are
held in custody by a bank on behalf of the owners of the receipts. These
custodial receipts are known by various names, including "Treasury Receipts"
("TRs"), "Treasury Investment Growth Receipts" ("TIGRs") and "Certificates of
Accrual on Treasury Securities" (CATS"), and may not be treated as U.S.
Government securities.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES FOR ALL PORTFOLIOS
Each Portfolio may invest in the securities or utilize the investment
techniques listed in this section:
Repurchase Agreements
A repurchase agreement is an agreement under which a Portfolio acquires
money market instruments (generally government securities, bankers' acceptances
or certificates of deposit) from a commercial bank, broker or dealer, subject to
resale to the seller at an agreed-upon price and date (normally the next
business day). The resale price reflects an agreed-upon interest rate effective
for the period the instruments are held by a Portfolio and is unrelated to the
interest rate on the instruments. The instruments acquired by a Portfolio
(including accrued interest) must have an aggregate market value in excess of
the resale price and will be held by the Custodian for such Portfolio until they
are repurchased. The Trustees of the Portfolio Trust will monitor the standards
which the Investment Adviser will use in reviewing the creditworthiness of any
party to a repurchase agreement with any of the Portfolios.
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<PAGE> 22
The use of repurchase agreements involves certain risks. For example,
if the seller defaults on its obligation to repurchase the instruments acquired
by a Portfolio at a time when their market value has declined, such Portfolio
may incur a loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by such Portfolio are collateral for a loan by such
Portfolio and therefore are subject to sale by the trustee in bankruptcy.
Finally, it is possible that a Portfolio may not be able to substantiate its
interest in the instruments it acquires. While the Trustees of the Portfolio
Trust acknowledge these risks, it is expected that they can be controlled
through careful documentation and monitoring.
Illiquid Securities
No Portfolio may invest more than 10% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise "illiquid". The Investment Adviser will monitor the
amount of illiquid securities in each Portfolio's portfolio, to ensure
compliance with such Portfolio's investment restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the 1933 Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Portfolio might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty in satisfying
redemption requests within seven days. The Portfolio might also have to register
such restricted securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
All of the Portfolios may buy or sell restricted securities in
accordance with Rule 144A under the 1933 Act ("Rule 144A Securities").
Securities may be resold pursuant to Rule 144A under certain circumstances only
to qualified institutional buyers as defined in the rule, and the markets and
trading practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may be
deemed to be liquid as determined by or in accordance with methods adopted by
the Trustees of the Portfolio Trust. In all other cases, however, securities
subject to restrictions on resale will be deemed illiquid. Under such methods
the following factors are considered, among others: the frequency of trades and
quotes for the security, the number of dealers and potential purchasers in the
market, marketmaking activity, and the nature of the security and marketplace
trades. Investments in Rule 144A Securities could have the effect of increasing
the level of the relevant Portfolio's illiquidity to the extent that qualified
institutional buyers become, for a time, disinterested in purchasing such
securities. Also, the relevant Portfolio may be adversely impacted by the
possible illiquidity and subjective valuation of such securities in the absence
of a market for them.
7
<PAGE> 23
Concentration in Obligations of Qualifying Banks
Under normal market conditions, more than 25% of the total assets of
each Portfolio may be invested in obligations of Qualifying Banks as set forth
in the Prospectus.
Obligations of non-U.S. branches of U.S. banks and of non-U.S. banks,
such as certificates of deposit and time deposits, may be general obligations of
the parent banks in addition to the issuing branch, or may be limited by the
terms of a specific obligation and governmental regulation. Such obligations are
subject to different risks than are those of domestic U.S. banks or U.S.
branches of non-U.S. banks. These risks include foreign economic and political
developments, foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign exchange controls
and foreign withholding and other taxes on interest income. Non-U.S. branches of
U.S. banks are not necessarily subject to the same or similar regulatory
requirements that apply to U.S. banks such as mandatory reserve requirements,
loan limitations, and accounting, auditing and financial recordkeeping
requirements. In addition, less information may be publicly available about a
non-U.S. branch of a U.S. bank or about a non-U.S. bank than about a U.S. bank.
Investing in Non-U.S. Securities
Each of the Portfolios may invest in non-U.S. securities. Non-U.S.
securities markets generally are not as developed or as efficient as those in
the United States. Securities of some foreign issuers are less liquid and more
volatile than securities of comparable U.S. issuers. Similarly, volume and
liquidity in most foreign securities markets are less than in the United States
and, at times, volatility of prices can be greater than in the United States. In
addition, there may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers are not generally subject to uniform accounting and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. issuers.
The value of securities purchased with and payable in one Designated
Currency will be affected favorably or unfavorably relative to other currencies
by changes in currency exchange rates and exchange control regulations.
Furthermore, some of the securities may be subject to foreign transaction taxes
which could have the effect of increasing the cost of such investments and which
would reduce the realized gain or increase the realized loss on such securities
at the time of sale. Transaction costs and custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities. Interest payments from certain foreign securities may be subject to
foreign withholding taxes on interest income payable on the securities.
U.S. Government policies have in the past, through taxation and other
restrictions, discouraged certain investments abroad by U.S. investors. While no
material restrictions of that type are currently in effect, they could be
reinstituted. In an extreme case, restrictions of that type could require the
liquidation of a Portfolio (other than the U.S. Dollar Portfolio).
Floating Rate and Variable Rate Demand Notes
Each Portfolio may purchase floating rate and variable rate demand
notes and bonds. These securities may have a stated maturity in excess of one
year, but permit a holder to demand payment of principal plus accrued interest
upon a specified number of days notice. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks. The
issuer has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal of the obligation plus accrued interest
upon a specific number of days notice to the holders. The interest rate of a
floating rate instrument may be based on a known lending rate, such as a bank's
prime rate, and is reset whenever such rate is adjusted. The interest rate on a
variable rate demand note is reset at specified intervals at a market rate.
8
<PAGE> 24
Investing in Supranational Organizations
The supranational organizations in which each Portfolio may invest
include, without limitation, the organizations listed below:
The International Bank for Reconstruction and Development (the "World
Bank"), which was established in 1945, is an international institution having as
members a large portion of the world's sovereign governments. The principal
purposes of the World Bank are: (i) to assist in the reconstruction and
development of its member countries by facilitating the investment of capital
for productive purposes, thereby promoting the long-range growth of
international trade and the improvement of standards of living; (ii) to promote
private foreign investment by guarantees of and participation in loans and other
investments made by private investors; and (iii) when private capital is not
available on reasonable terms, to make loans for productive purposes out of its
own resources or funds borrowed by it.
The Inter-American Development Bank, which became effective in 1959,
has a membership comprised primarily of sovereign governments located in the
western hemisphere as well as a number of countries from outside that region.
The principal purposes of the Bank are: (i) to promote the investment of public
and private capital for development purposes in the Americas; (ii) to utilize
its own capital, funds raised by it in financial markets, and other available
resources, for financing development of member countries, giving priority to
those loans and guarantees that will contribute most effectively to their
economic growth; (iii) to encourage private investment in projects, enterprises,
and activities contributing to economic development and to supplement private
investment when private capital is not available on reasonable terms and
conditions; (iv) to cooperate with member countries to orient their development
policies toward a better utilization of their resources, in a manner consistent
with objectives of making their economics more complimentary, and of fostering
orderly growth of their foreign trade; and (v) to provide technical assistance
for preparation, financing and implementation of development plans and projects,
including the study of priorities and the formulation of specific project
proposals.
The Asian Development Bank was established in 1965 and has a membership
comprised primarily of sovereign governments located in Asia, as well as a
number of nations outside the region. The purposes of the Bank are: (i) to
encourage regional economic cooperation in the Asian and Pacific region and (ii)
to encourage economic growth of its developing members by lending funds,
promoting investment and providing technical assistance with special regard to
the needs of smaller or less developed countries.
The European Bank for Reconstruction and Development was established in
1991 and has a membership comprised primarily of sovereign governments, the
European Union and the European Investment Bank. The purpose of the Bank is to
provide project specific direct financing to foster the economic and democratic
transition process and to promote private and entrepreneurial initiatives in
those countries through the provision of loans, equity investments, guarantees
and technical cooperation.
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<PAGE> 25
ITEM 14. MANAGEMENT.
TRUSTEES AND OFFICERS OF THE PORTFOLIO TRUST
The Trustees and executive officers of the Portfolio Trust, together
with information as to their principal business occupations during the last five
years, are shown below. All executive officers of the Portfolio Trust are
affiliates of Rothschild International Asset Management Limited, the Portfolios'
Investment Adviser (the "Investment Adviser"). Each Trustee who is an
"interested person" (as defined in the 1940 Act) of the Portfolio Trust is
indicated by an asterisk.
PRINCIPAL
OCCUPATION
NAME, ADDRESS AND POSITION HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
Peter B. Collacott* President and Trustee Managing Director,
Five Arrows House Rothschild, Asset
St. Swithin's Lane Management Limited;
London EC4N 8NR U.K. Director, International
Born June 19, 1944 Biotechnology Trust
Paul R. Freeman* Senior Vice President Director, Rothschild
Five Arrows House and Trustee Asset Management Limited
St. Swithin's Lane (July 1994 to date).
London EC4N 8NR U.K. Director,
Born September 30, 1955 Henderson Touche
Remnant Unit Trust
Management Limited
(Oct. 1993 - July 1994)
Prior to October 1993,
Company Secretary and
Head of Product
Development for GT
Management PLC
(Dec. 1988 - Oct. 1993)
Alan T. Jeffers Trustee Private Investor;
51 Clearwater Cove Consultant to Rothschild
Old Dunleary Road Asset Management Limited
Dan Laoghaire, [dates to be inserted]
County Dublin, Ireland [Various non-executive
Born August 17, 1938 directorships -- Public
company directorships
to be listed]
Bryan J. Walsh Trustee President and Managing
11 Lower Tuckahoe Road West Directory of Salisbury
Richmond, Virginia Research 1991-date
23233-6129 U.S.A.
Born _______________
Roger M. Kubarych Trustee General Manager - Henry
65 East 55th Street Kaufman & Company Inc.
New York, NY 10022 overseeing the firm's
Born ______________ international money
management activities and
financial and economic
consulting services
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<PAGE> 26
COMPENSATION OF TRUSTEES AND OFFICERS
The Portfolio Trust pays no compensation to the Trustees of the
Portfolio Trust affiliated with the Adviser or to the Portfolio Trust's
officers.
The following is an estimate of the compensation to be paid to the
Portfolio Trust's Trustees for the period ending October 31, 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate Total
Compensation Compensation Compensation Compensation Compensation
Name of from U.S. from British Pound from Deutschemark 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
- --------------------------------------------------------------------------------
<FN>
(a) Currently the U.S. Dollar Fund, the Pound Sterling Fund, the Deutschemark
Fund and the Canadian Dollar Fund of the Rothschild Five Arrows Currency Trust
(the "Trust") and their corresponding Portfolios in the Portfolio Trust 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 October 31,
1997.
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of the close of business on ________, the U.S. Dollar Fund, the
Pound Sterling Fund, the Deutschemark Fund and the Canadian Dollar Fund (the
"Funds"), series of shares of Rothschild Five Arrows Currency Trust, owned
approximately 100% of the value of the outstanding interests in their
corresponding Portfolios. Because each Fund controls its corresponding
Portfolio, it may take actions without the approval of any other investor in
such Portfolio.
Since, as of the approximate time of this Prospectus, an affiliated
person of the Investment Adviser was the beneficial owner of all or a
substantial amount of the outstanding shares of the Funds it may also be deemed
to be in control of the Portfolios as control is defined in the 1940 Act. Such
owners may acquire additional shares of the Funds. Although sales of the Funds'
shares to other investors will reduce its percentage ownership in the Funds and
the Portfolios, so long as 25% of a class of shares of either a Funds or a
Portfolio is so owned, the owner will be presumed to be in control of such class
of shares for purposes of voting on certain matters submitted to a vote of
shareholders.
Each Fund has informed the Portfolio Trust that whenever it is
requested to vote on matters pertaining to the fundamental policies of its
corresponding Portfolio, the relevant Fund will hold a meeting of shareholders
and will cast its votes as instructed by such Fund's shareholders. It is
anticipated that other registered investment companies investing in the
Portfolios will follow the same or a similar practice.
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<PAGE> 27
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER OF THE PORTFOLIO TRUST
Rothschild International Asset Management Limited (the "Investment
Adviser") serves as the Investment Adviser to the Portfolio pursuant to a
written investment advisory agreement with the Portfolio Trust (the "Master
Investment Advisory Agreement"). The Investment Adviser is a British corporation
organized in 1975 and is registered under the Investment Advisers Act of 1940.
The Investment Adviser is an indirect, wholly-owned subsidiary of
Rothschild Continuation Holdings AG, a Swiss corporation. Twenty percent (20%)
of the equity of such entity is held by Sun Alliance Group Limited, a British
insurance company. The remainder of the equity is held by Rothschild Concordia
A.G., a holding company controlled by members of the Rothschild family.
Certain services provided by the Investment Adviser under the Master
Investment Advisory Agreement are described in Part A. These services are
provided without reimbursement by the Portfolios for any costs incurred. Under
the Master Investment Advisory Agreement, the Investment Adviser is paid a fee
based upon a percentage of the Portfolios' average daily net asset value
computed as described in Part A. The fee is accrued daily and paid monthly.
Pursuant to the Master Investment Advisory Agreement, the Portfolios
bear expenses of their operations other than those incurred by the Investment
Adviser pursuant to the Master 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 notices and reports; registration and reporting fees and expenses; and
Trustees, fees and expenses.
Unless terminated as provided below, the Master Investment Advisory
Agreement continues in full force and effect with respect to each Portfolio
until ________, 1998 and for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Portfolio Trust or by the "vote of a majority of the outstanding voting
securities" of the Portfolio, and, in either event (ii) by vote of a majority of
the Trustees of the Portfolio Trust who are not parties to the Master Investment
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of any
such party, cast in person at a meeting called for the purpose of voting on such
approval. The Master Investment Advisory Agreement may be terminated at any time
without the payment of any penalty by vote of the Trustees of the Portfolio
Trust or by the "vote of a majority of the outstanding voting securities" of any
Portfolio or by the Investment Adviser, on sixty days' written notice to the
other parties. The Master Investment Advisory Agreement terminates in the event
of its assignment as defined in the 1940 Act.
In an attempt to avoid any potential conflict with portfolio
transactions for the Portfolio, the Adviser and the Portfolio Trust have each
adopted extensive restrictions on personal securities trading by personnel of
the Adviser and its affiliates. These restrictions include: pre-clearance of all
personal securities transactions and a prohibition of purchasing initial public
offerings of securities. These restrictions are a continuation of the basic
principle that the interests of the Portfolio and its investors, come before
those of the Adviser, its affiliates and their employees.
The Master Investment Advisory Agreement also provides that, with
respect to the Portfolio to which it pertains, the Investment Adviser shall not
be liable for any mistake of judgment or in any event whatsoever in the
performance of its duties to the Portfolio Trust, except for liability resulting
from willful misfeasance, bad faith or gross negligence in the performance of
the Investment Adviser's duties or by reason of reckless disregard of its
obligations and duties under the Advisory Agreement.
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<PAGE> 28
The Master Advisory Agreement provides that the Investment Adviser may
render advisory services to others.
In addition to receiving its advisory fee, the Investment Adviser may
also act and be compensated as investment manager for its clients with respect
to assets which are invested in a Portfolio. In some instances the Investment
Adviser may elect to credit against any investment management fee received from
a client who is also a shareholder in the Portfolio Trust an amount equal to all
or a portion of the fees received by the Investment Adviser or any affiliate of
the Investment Adviser from a Portfolio with respect to the client's assets
invested in the Portfolio.
ADMINISTRATOR OF THE PORTFOLIO
BISYS Fund Services Limited Partnership, located at 3435 Stelzer Road,
Columbus, OH 43219, serves as the administrator to the Portfolios (the
"Administrator") pursuant to a written administration agreement with the
Portfolio Trust on behalf of the Portfolios. The Administrator provides the
Portfolio Trust with office space for managing its affairs and with certain
clerical services and facilities. The Administrator currently receives no fee
from the Portfolios for its services to the Portfolio Trust.
The Portfolios' administration agreement can be terminated by either
party on not more than sixty days' written notice.
CUSTODIAN
The Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY serves
as custodian of all cash and securities of the Portfolios.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. serves as independent accountants for the
Portfolio Trust and will audit each Portfolio's financial statements annually.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
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
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<PAGE> 29
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.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolios are series of The International Currency Fund, an
open-end management investment company registered under the 1940 Act (the
"Portfolio Trust"). The Portfolio Trust was organized as a business trust under
the laws of the state of Delaware on _________, 1996.
Interests in the Portfolios have no preemptive or conversion rights,
and are fully paid and non-assessable, except as set forth described in Part A.
The Portfolios normally will not hold meetings of holders of such interests
except as required under the 1940 Act or its Declaration of Trust. The
Portfolios would be required to hold a meeting of holders in the event that at
any time less than a majority of their Trustees holding office had been elected
by holders. The Trustees of each Portfolio continue to hold office until their
successors are elected and have qualified. Holders holding a specified
percentage of interests in a Portfolio may call a meeting of holders in the
relevant Portfolios for the purpose of removing any Trustee. A Trustee of any
Portfolio may be removed upon a majority vote of the interests held by holders
in that Portfolio qualified to vote in the election. The 1940 Act requires the
Portfolio to assist their holders in calling such a meeting. Upon liquidation of
any Portfolio, holders in such Portfolio would be entitled to share pro rata in
the net assets of such Portfolio available for distribution to holders.
Each holder in a Portfolio is entitled to a vote in proportion to its
percentage interest in the Portfolio.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolios are issued solely in
transactions that are exempt from registration under the Securities Act of 1933.
See "General Description of Registrant," "Purchase of Securities Being Offered"
and "Redemption" in Part A.
The net asset value of the Portfolios is determined by the
Administrator (as agent for the Portfolios). The Portfolios will only price
their respective shares or interests on Trust Business Days (as defined in Part
A). A Trust Business Day is every day except Saturdays, Sundays, Christmas Day
and New Year's Day. With respect to the U.S. Dollar Portfolio, which is a "money
market fund," as defined in the 1940 Act, the valuation of the instruments it
holds at amortized cost is permitted in accordance with Rule 2a-7 and certain
procedures established by the Trustees of the Portfolio Trust thereunder. With
respect to all other Portfolios, which are not money market funds, the use of
the amortized cost method as a reasonable means of approximating the market
value of each other Portfolio's assets is consistent with a long-standing
practice of many U.S. registered investment companies to value "high-quality"
debt securities with maturities of 60 days or less at amortized cost.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accreting any discount or amortizing any premium from
its face value at a constant rate until maturity, regardless of the effect of
fluctuating interest rates on the market value of the instrument. Although the
amortized cost method provides certainty in valuation, it may result at times in
determinations of value that are higher or lower than the price the Portfolios
would receive if the instruments were sold. Consequently, changes
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<PAGE> 30
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 Portfolios are designed to facilitate, to the
extent reasonably possible, the maintenance of the price per share of registered
investment companies and other collective investment vehicles that invest in the
Portfolios, as computed for the purpose of the distribution and redemption of
shares, at $1.00 in the case of an investor investing in the U.S. Dollar
Portfolio, at (pound)1.00 in the case of an investor investing in the Pound
Sterling Portfolio, at DM 1.00 in the case of an investor investing in the
Deutschemark Portfolio and at C$1.00 in the case of an investor investing in the
Canadian Dollar Fund (the "Stabilized Prices"). These procedures include review
of the Portfolios' holdings by the Trustees of the Portfolio Trust and Trust, at
such intervals as they may deem appropriate, to determine whether the
Portfolios' net asset values calculated by using readily available market
quotations deviates from the valuation based on amortized cost, and, if so,
whether such deviation may result in material dilution or is otherwise unfair to
existing interest holders. In the event 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 loses); 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.
Since the net investment incomes of each entity investing in a
Portfolio is declared as a dividend each time such income is determined, the net
asset value per share of each entity investing in a Portfolio remains at its
respective Stabilized Price immediately after such determination and dividend
declaration. It is expected that each such investing entity'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 interest
holder'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
its interest in an account, at the time of redemption), such negative amount
exceeds an interest holder's accrued dividends, the relevant Portfolio will
reduce the interest by treating the interest holder 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
entity investing in such Portfolio.
Should the Portfolios incur or anticipate any unusual or unexpected
significant expense, loss or depreciation which would affect disproportionately
their investors' net investment income for a particular period, the Trustees of
the Portfolio Trust would at that time consider whether to adhere to its daily
dividend policy or to revise it in the light of the then prevailing
circumstances. Such expenses, losses or depreciation may nevertheless result in
a shareholder's 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.
Each Portfolio intends to pay redemption proceeds in cash for all
interests redeemed but, under certain conditions, each Portfolio may make
payment wholly or partly in portfolio securities. Each Portfolio will select
such securities in a manner it considers equitable, regardless of which
securities were deposited by the investor or the composition of such Portfolio's
portfolio at the time of the redemption in-kind. Portfolio securities paid upon
withdrawal or reduction of an interest-holder's investment in such Portfolio
will be valued at their then current market value. The Portfolio Trust has
elected to be governed by the provisions of Rule 18f-1 under the 1940 Act which
limits each Portfolio's obligation to make cash redemption payments to any
investor during any 90 day period to the lesser of $250,000 or 1% of such
Portfolio's net asset value at the beginning of such period. An investor may
incur brokerage costs in converting portfolio securities received upon
redemption to
15
<PAGE> 31
cash. Each Portfolio intends not to redeem an investor's interest in-kind except
in circumstances in which the particular investor is permitted to redeem in-kind
or in the event that the particular investor completely withdraws its interest
in the such Portfolio.
ITEM 20. TAX STATUS.
The Portfolio Trust is organized as a business trust under Delaware
law. Under the Portfolio Trust's current method of operation as a partnership,
no Portfolio will be subject to any income tax. However, each investor in a
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio Trust) of such Portfolio's ordinary
income and capital gain in determining its income tax liability. The
determination of such share will be made in accordance with the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations promulgated thereunder.
The Portfolio Trust's taxable year-end is the last day of October.
Although the Portfolio Trust will not be subject to Federal income tax, it will
file appropriate federal income tax returns.
Each Portfolio's assets, income and distributions will be managed in
such a way that an investor in the Portfolio will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investor invested
all of its investable assets in the Portfolio. Investors are advised to consult
their own tax advisors as to the tax consequences of an investment in a
Portfolio.
ITEM 21. UNDERWRITERS.
Not applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
Investors will receive the relevant Portfolio's unaudited semi-annual
reports and annual reports audited by the Portfolio's independent accountants.
16
<PAGE> 32
PART C
------
To the Registration Statement of The International
Currency Fund (the "Trust")
Item 24. Financial Statements and Exhibits.
- -------- ----------------------------------
(a) Financial Statements:
(1) Financial Statements included in PART A of
this Registration Statement:
[None]
(2) Financial Statements included in PART B of
this Registration Statement:
Financial Statements for the U.S. Dollar
Portfolio, Pound Sterling Portfolio,
Deutschemark Portfolio and Canadian Dollar
Portfolio (collectively, the "Portfolios")
as of ______, 1996.*
Report of Independent Accountants
Statement of Assets and Liabilities
(b) Exhibits:
Exhibit No. Description
----------- -----------
1 Agreement and Declaration of Trust of the
Trust.*
2 By-Laws of the Trust.*
3 Not Applicable.
4 Not applicable.
5 Form of Investment Advisory Contract between
the International Currency Fund and
Rothschild International Asset Management
Limited.
6 Not applicable.
* To be filed by amendment.
<PAGE> 33
Exhibit No. Description
----------- -----------
7 Not applicable.
8 Custody Agreement between the Trust and The
Chase Manhattan Bank.*
9 (a) Administration Agreement between the
Trust and BISYS Fund Services Limited
Partnership.*
(b) Fund Accounting Agreement between the
Trust and BISYS Fund Services, Inc.*
10 Legal opinion and consent of Goodwin,
Procter & Hoar LLP with respect to the
Funds.*
11 Consent of Coopers & Lybrand L.L. P. with
respect to the Funds.*
12 Not applicable.
13 Purchase Agreement with respect to initial
capital.*
14 Not applicable.
15 Not applicable.
16 Not applicable.
17 Financial Data Schedules for the Funds.*
18 Not applicable.
19 Powers of Attorney.*
* To be filed by amendment.
Item 25. Persons Controlled by or Under Common Control with Trust.
- -------- ---------------------------------------------------------
As of the close of business on ________, the U.S. Dollar Fund, the
Pound Sterling Fund, the Deutschemark Fund and the Canadian Dollar Fund (the
"Funds"), series of shares of Rothschild Five Arrows Currency Trust, an
investment company registered under the Investment Company act of 1940, owned
approximately ___% of the value of the outstanding interests in the
corresponding Portfolios of the Trust that invest in securities denominated in
the Designated Currencies of such Funds. Because each Fund controls its
corresponding Portfolio, it may take actions without the approval of any other
investor in such Portfolio.
Since, as of the approximate time of this Prospectus, an affiliated
person of the Investment Adviser was the beneficial owner of all or a
substantial amount of the outstanding shares of the Funds it may also be deemed
to be in control of the Portfolios as control is defined in the 1940 Act. Such
owners may acquire additional shares of the Funds. Although sales of the Funds'
shares to other investors will reduce its percentage ownership in the Funds and
the Portfolios, so long as 25% of a class of shares of either a Funds
<PAGE> 34
or a Portfolio is so owned, the owner will be presumed to be in control of such
class of shares for purposes of voting on certain matters submitted to a vote of
shareholders.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of ___________, 1996, the record holders of each class of Trust's
securities were as follows:
Title of Class Number of Record Holders
-------------- ------------------------
U.S. Dollar Portfolio
Pound Sterling Portfolio
Deutschemark Portfolio
Canadian Dollar Portfolio
Item 27. Indemnification.
- -------- ----------------
Under Article VI of the Trust's Agreement and Declaration of
Trust, any present or former Trustee, Officer, agent or employee or person
serving in such capacity with another entity at the request of the Trust
("Covered Person") shall be indemnified against all liabilities, including, but
not limited to, amounts paid in satisfaction of judgments, in compromises or as
fines or penalties, and expenses, including reasonable legal and accounting
fees, in connection with the defense or disposition of any proceeding by or in
the name of the Trust or any shareholder in his capacity as such if: (i) a
favorable final decision on the merits is made by a court or administrative
body; or (ii) a reasonable determination is made by a vote of the majority of a
quorum of disinterested Trustees or by independent legal counsel that the
Covered Person was not liable by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in his office
("Disabling Conduct"); or (iii) a determination is made to indemnify the Covered
Person under procedures approved by the Board of Trustees which in the opinion
of independent legal counsel are not inconsistent with the Investment Company
Act of 1940. Said Article VI further provides that the Trust shall indemnify any
Covered Person against any such liabilities and expenses incurred in connection
with the defense or disposition of any other type of proceeding except with
respect to any matter as to which the Covered Person shall have engaged in
Disabling Conduct or shall have been finally adjudicated not to have acted in
good faith and in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust.
Item 28. Business and Other Connections of Investment Adviser.
- -------- -----------------------------------------------------
Rothschild International Asset Management Limited (the
"Investment Adviser") is a registered investment adviser. The Investment
Adviser's offices are located at Five Arrows House, St. Swithin's Lane, London
EC4N 8NR England. The Investment Adviser is a British corporation that was
formed in 1975. It is an indirect subsidiary of Rothschild Concordia AG of Zug,
Switzerland, a holding company whose subsidiaries manage approximately $27
billion of assets, spread across equities, bonds and currencies. The Investment
Adviser is an affiliate of the merchant bank NM Rothschild & Sons Limited. The
Investment Adviser offers a wide range of investment advisory services to both
individuals and institutions.
<PAGE> 35
The business and other connections of the officers and directors of
Rothschild International Asset Management Limited , the Investment Adviser to
all series of the Registrant, are listed on the Form ADV of the Investment
Adviser as currently on file with the Commission (File no. 801-15132), the text
of which is hereby incorporated by reference.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Rothschild Distributors, Inc. acts as the distributor and principal
underwriter for each of the Funds. It does not act as principal underwriter,
depositor or investment adviser to any investment companies.
(b)(1) The following information relates to the directors, officers and
partners of Rothschild Distributors, Inc.:*
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
(c) Not applicable.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
The accounts and records of the Trust are maintained at the
offices of the Trust at 3435 Stelzer Road, Columbus, OH 43219-3035.
Item 31. Management Services.
- -------- --------------------
Not applicable.
Item 32. Undertakings.
- -------- -------------
(a) Not applicable.
(b) The Trust hereby undertakes to file a post-effective
amendment, using financial statements which do not have to be certified, within
four to six months from the effective date of the Trust's 1933 Act registration
statement.
(c) Trust hereby undertakes to furnish each person, upon
request and without charge, to whom a Prospectus with respect to a series of the
Trust is delivered with a copy of the latest annual report to shareholders with
respect to that series.
* To be filed by amendment.
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in this City of London
in England on the 14th day of August, 1996.
THE INTERNATIONAL CURRENCY FUND
By: /s/ Paul R. Freeman
-----------------------------
Paul R. Freeman, Sole Trustee
Pursuant to the requirements of the Investment Company Act of 1940,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul R. Freeman Sole Trustee August 14, 1996
-------------------
Paul R. Freeman
