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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 August 13,
1996. Beneficial interests in the Portfolio Trust are divided into separate
sub-trusts or series, each having 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 objectives of a Portfolio is not a fundamental policy
any may be changed upon notice to, but without the approval of, the
Portfolio's 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), (ii) issued by an issuer with comparable short-term obligations
that are rated in the highest rating category, or (iii) if unrated, determined
to be comparable to such securities. See 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.
The Pound Sterling Portfolio invests only in Pound Sterling-denominated
high quality securities as described in this paragraph. The Pound Sterling
Portfolio assets will consist of government securities and other securities,
which have been (i) rated by at least two NRSROs in the highest rating category
for short-term obligations (or so rated by one such organization if it alone has
rated the security), (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category, or (iii) if unrated,
determined to be comparable to such securities.
All securities in which the Pound Sterling Portfolio invests have
remaining maturities of 60 days or less at the date of acquisition. The Pound
Sterling Portfolio follows these policies in seeking to maintain a constant net
asset 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.
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), (ii) issued by an issuer with comparable short-term
obligations that are rated in the highest rating category, or (iii) if unrated,
determined to be comparable to such securities.
All securities in which the 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.
The Canadian Dollar Portfolio invests only in Canadian
Dollar-denominated high-quality securities as described in this paragraph. The
Canadian Dollar Portfolio's assets will consist of government securities and
other securities which have been (i) rated by at least two NRSROs in the highest
rating category for short-term obligations (or so rated by one such organization
if it alone has rated the security), (ii) issued by an issuer with comparable
short-term obligations that are rated in the highest rating category, or (iii)
if unrated, determined to be comparable to such securities.
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 and 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). 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 United States Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). Currently, those requirements provide that, as of the
last day of each fiscal quarter, each Portfolio's investments in the securities
of any one issuer must be limited to 25% of its total assets, provided that with
respect to at least 50% of its total assets, a Portfolio may not have 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 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 Part A, 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.
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.
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 Adviser an annual advisory fee with respect to each Portfolio. The
advisory fee for each Portfolio is calculated daily and payable monthly at an
annual rate of up to .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 Fund 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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<PAGE> 12
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 investments, 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 Portfolio and noon U.S. Eastern Time for the Deutschemark
Portfolio. 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 Y
ork City are open for business from 9:00 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
1997 are New Year's Day, President's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day). The value of the investments held by
each 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
[/R]
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<PAGE> 13
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. Shareholders of a Portfolio would be notified
of a decision by the Board of Trustees to discontinue the use of the amortized
cost method with respect to such Portfolio. The form of notification would
depend on the context of such a decision and could include, for example, the
mailing of written notifications and/or the issuance of a press release.
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 forth below and only when
the wire system designated for use in transmitting money to the relevant
Portfolio permits the timely transmission of funds that are immediately
available to the Portfolio Trust for investment purposes ("Disburseable
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 settle 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 settle on the 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 settle 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 settle on the following Frankfurt
Banking Day (as defined below provided however that if such a
Portfolio Trust Business Day is not a Frankfurt Banking Day,
the purchase order will settle on its second following
Frankfurt Banking Day).
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 1997 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 1997 are New Year's
Day, Good Friday, Easter Monday, May Holiday, Spring Holiday, Late Summer
Holiday, Christmas Day and Boxing Day).
A "Frankfurt Banking Day" is every day except Saturdays, Sundays and
holidays observed by Frankfurt banks (scheduled holidays for 1997 are New Year's
Day, Epiphany, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit
Monday, Corpus Christii, Assumption Day, German Unity Day, All Saint's Day, Day
of Penance, Christmas Eve Holiday, Christmas Day, Boxing Day and New Year's
Holiday).
A "Toronto Banking Day" is every day except Saturdays, Sundays and
holidays observed by Toronto banks (scheduled holidays for 1997 are New Year's
Day, Good Friday, Easter Monday, Victoria Day, Canada Day, Labour Day,
Thanksgiving, Remembrance Day, Christmas Eve Holiday, Christmas Day and Boxing
Day).
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 settle 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 settle 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 settle 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 settle on the following Frankfurt
Banking Day provided, however, that if such a Portfolio Trust
Business Day is not a Frankfurt Banking Day , the redemption
request will settle on the second following Frankfurt Banking
Day.
If a redemption request is not received prior to the applicable time
listed above, such request shall be deemed to have been received on the next
following 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 settle.
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 will be are
made by wire transfer on the settlement day in the Designated Currency of the
Portfolio whose shares are being redeemed through a recognized electronic funds
transfer system which handles such designated covering. 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 electronic funds transfer system
employed by the Portfolio, 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 August 13, 1996.
Interests in the Portfolios have no preemptive or conversion rights,
and are fully paid and non-assessable, except as set forth below. The 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 Part A)
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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<PAGE> 18
(10) not to borrow money except in connection with redemptions or
for temporary and emergency purposes and then not in an amount
in excess of 20% of the value of its net assets, provided that
additional investments will be suspended during any period
when borrowings exceed 5% of the Portfolio's total assets; and
(11) not to purchase securities on margin, make a short sale of any
securities or purchase or deal in puts, calls, straddles or
spreads with respect to any security, except that the
Portfolio may acquire puts in connection with enhancing the
liquidity of its securities.
The following investment restrictions may be changed by vote of a
majority of the Trustees of the Portfolio Trust. Under these restrictions, it is
the policy of each Portfolio:
(1) not to hypothecate, mortgage or pledge any of its assets
except as may be necessary in connection with permitted
borrowings;
(2) not to purchase a security issued by another investment
company if, immediately after such purchase, the Portfolio
would own, in the aggregate, (i) more than 3% of the total
outstanding voting stock of such other investment company;
(ii) securities issued by such other investment company having
an aggregate value in excess of 5% of the value of the
Portfolio's total assets; or (iii) securities issued by such
other investment company and all other investment companies
(other than treasury stock of the Portfolio) having an
aggregate value in excess of 10% of the value of the
Portfolio's total assets; provided, however, that the
Portfolio may purchase investment company securities without
limit for the purpose of completing a merger, consolidation or
other acquisition of assets;
(3) not to invest in companies for the purpose of exercising
control over their management;
(4) not invest more than 5% of the value of its total assets in
any issuer (other than repurchase agreements and securities
issued by a sovereign government, its agencies or
instrumentalities);
(5) not to invest more than 25% of its total assets in securities
issued by a sovereign government, its agencies or
instrumentalities (other than the U.S. federal government),
provided that securities held solely as collateral for
outstanding repurchase agreements shall be excluded for
purposes of computing compliance with this restriction; and
(6) not to invest more than 25% of its total assets in repurchase
agreements with any one counterparty.
MONEY MARKET INSTRUMENTS
U.S. Dollar Portfolio
---------------------
The following describes further the money market instruments in which
the U.S. Dollar Portfolio will invest and is provided as a supplement to the
discussion appearing in the Prospectus.
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<PAGE> 19
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 or the equivalent in the relevant Portfolio's Designated Currency
(a "Qualifying Bank").
U.S. branches and agencies of foreign banks are offices of foreign
banks and are not separately incorporated entities. They are chartered and
regulated either federally or under state law. U.S. federal branches or agencies
of foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect to obtain FDIC insurance. Unlike U.S. branches of
foreign banks, U.S. agencies of foreign banks may not accept deposits and thus
are not eligible for FDIC insurance. Both branches and agencies can maintain
credit balances, which are funds received by the office incidental to or arising
out of the exercise of their banking powers and can exercise other commercial
functions, such as lending activities.
U.S. Government Securities
5
<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.
6
<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 Part A.
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.
9
<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. Certain officers and members of the Board of Trustees
of the Portfolio Trust are not residents of the United States. Virtually all or
a substantial portion of the assets of such persons are located outside of the
United States. It may not be possible for shareholders to effect service of
process within the United States upon such persons or to enforce in courts
inside or outside the United States judgements obtained against such persons in
courts in jurisdictions outside the United States, in each case, in any action,
including actions predicated upon the civil liability provisions of the United
States securities laws. In addition, it may be difficult for shareholders to
enforce, in original actions brought in courts in jurisdictions outside the
United States, liabilities predicated solely upon the United States securities
laws.
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION
NAME, ADDRESS AND POSITION HELD DURING PAST
DATE OF BIRTH WITH TRUST 5 YEARS
- ------------- ---------- -------
<S> <C> <C>
Peter B. Collacott* President and Trustee Managing Director,
Five Arrows House Rothschild, Asset
St. Swithin's Lane Management Limited;
London EC4N 8NR U.K. Director, International
Born June 19, 1944 Biotechnology Trust.
Paul R. Freeman* Senior Vice President Director, Rothschild
Five Arrows House and Trustee Asset Management Limited
St. Swithin's Lane (July 1994 to date);
London EC4N 8NR U.K. Product Development
Born September 30, 1955 Director,
Henderson Touche
Remnant Unit Trust
Management Limited
(Oct. 1993 - July 1994)
Prior to October 1993,
Company Secretary and
Head of Product
Development for GT
Management PLC.
Alan T. Jeffers Trustee Private Investor;
51 Clearwater Cove Consultant to Rothschild
Old Dunleary Road Asset Management Limited
Dun Laoghaire, from 1986 to September 1996;
County Dublin, Ireland Chairman, Dipcot Holdings Ltd.;
Born August 17, 1938 Chairman, Danfay Ltd; Director,
Hibernian Group Plc; Founder and
Director, Banking Automation Ltd.;
Chairman, Provita Europe Ltd.; Chairman,
Biotrin Holdings Ltd.; Chairman,
Capteur Sensors & Analysers Limited.
Bryan J. Walsh Trustee President and Managing
11 Lower Tuckahoe Road West Directory of Salisbury
Richmond, Virginia Research 1991-date.
23233-6129 U.S.A.
Born November 6, 1944
Roger M. Kubarych Trustee General Manager - Henry
65 East 55th Street Kaufman & Company Inc.
New York, NY 10022 overseeing the firm's
Born ______________ international money
management activities and
financial and economic
consulting services.
Tony Mercure Vice President Director of Client Services,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.
3435 Stelzer Road and has served in a variety
Columbus, OH 43219 of positions within
BISYS Fund Services, Inc.
since 1991.
Adrian Waters Treasurer Managing Director,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.,
(Ireland) Limited Manager, Price Waterhouse,
Floor 2, Block 2 1989 - May 1993.
The Harcourt Centre
Dublin 2 Ireland
Mary Gamble Vice President Associate Director,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.,
First and Market Building, March 1995 to present;
Suite 300 Assistant Vice President,
100 First Avenue Concord Financial Group,
Pittsburgh, PA 15222 July 1987 to March 1995.
Chuck Booth Vice President Vice President, BISYS Fund Services, Inc.
BISYS Fund Services, Inc. and has served in a
3435 Stelzer Road variety of positions within
Columbus, OH 43219 BISYS Fund Services, Inc.
since 1991.
Bill Tomko Vice President Senior Vice President,
BISYS Fund Services, Inc. BISYS Fund Services, Inc.
3435 Stelzer Road and has served in a
Columbus, OH 43219 variety of positions within
BISYS Fund Services, Inc.
since 1991.
Alaina Metz Assistant Secretary Chief Administrator,
BISYS Fund Services, Inc. Administrative and Regulatory Services,
3435 Stelzer Road BISYS Fund Services, Inc.
Columbus, OH 43219 June 1995 to present; Supervisor,
Mutual Fund Legal Department,
Alliance Capital Management,
May 1989 to June 1995.
Catherine Brady Assistant Treasurer Accounting Services Manager,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.,
(Ireland) Limited March 1994 to present;
Floor 2, Block 2 Supervisor, Price Waterhouse,
The Harcourt Centre 1990 to March 1994.
Dublin 2 Ireland
Louise Egan Assistant Secretary Shareholder Servicing Manager,
BISYS Fund Services BISYS Fund Services (Ireland) LTD.,
(Ireland) Limited February 1994 to present;
Floor 2, Block 2 Financial Controller,
The Harcourt Centre ITI Services Limited,
Dublin 2 Ireland 1990 to February 1994.
</TABLE>
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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 December 31, 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Aggregate Total
Compensation Compensation Compensation Compensation Compensation
Name of from U.S. from 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
Peter B. Collacott $ 0 $ 0 $ 0 $ 0 $ 0
Paul R. Freeman $ 0 $ 0 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------
<FN>
(a) Currently the U.S. Dollar Fund, the Pound Sterling Fund, the 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 December 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 October 16, 1998 and for successive periods of one year thereafter, but
only so long as each such continuance is approved annually (i) by either the
Trustees of the Portfolio Trust or by the "vote of a majority of the
outstanding voting securities" of 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.
12
<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
13
<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 August 13, 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). 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
14
<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, 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
INFORMATION ABOUT SECURITIES RATINGS OF NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS ("NRSROs")
Ratings of Short-Term Corporate Debt Securities
- ----------------------------------------------
MOODY'S INVESTORS SERVICE, INC. Moody's Commercial Paper ratings, which
are also applicable to municipal paper investments permitted to be made by the
Fund, are opinions of the ability of issuers to repay punctually their
promissory obligations not having an original maturity in excess of nine months.
Moody's employs the following designations, all judged to be investment grade,
to indicate the relative repayment capacity of rated issuers:
P-1 (Prime-1): Superior capacity for repayment.
P-2 (Prime-2): Strong capacity for repayment.
S&P's
S&P's ratings are a current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. Ratings
are graded into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues within the "A" category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety, as
follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-3: Issues carrying this designation have an adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
IBCA LIMITED/IBCA INC. Short-term obligations, including commercial
paper, rated A-1+ by IBCA Limited or its affiliate IBCA Inc. are obligations
supported by the highest capacity for timely repayment. Obligations rated A-1
have a very strong capacity for timely repayment. Obligations rated A-2 have a
strong capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.
FITCH INVESTORS SERVICES, INC. Fitch Investors Services, Inc. employs
the rating F-1+ to indicate issues regarded as having the strongest degree of
assurance for timely payment. The rating F-1 reflects an assurance of timely
payment only slightly less in degree than issues rated F-1+, while the rating
F-2 indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
DUFF & PHELPS INC. Duff & Phelps Inc. employs the designation of Duff 1
with respect to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment; Short-term liquidity is
clearly outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1- indicates high certainty of time payment. Duff
2 indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
THOMSON BANKWATCH, INC. ("BANKWATCH"). BankWatch will assign both
short-term debt ratings and issuer ratings to the issuers it rates. BankWatch
will assign a short-term ("TBW-1" "TBW-2," "TBW-3," or "TBW-4") to each class of
debt (e.g., commercial paper or non-convertible debt), having a maturity of
one-year or less, issued by a holding company structure or an entity within the
holding company structure that is rated by BankWatch. Additionally, BankWatch
will assign an issuer rating ("A" A/B," "B," "B/C," "C," "C/D" "D," "D/E," and
"E") to each issuer that it rates.
Certain NRSROs utilize rankings within rating categories indicated by a
+ or -. The Portfolios, in accordance with industry practice, recognize such
rankings with categories as graduations, viewing for example S&P's rating of
A-1+ and A-1 as being in S&P's highest rating category.
<PAGE> 33
Rating of Long-Term Corporate Debt Securities
- ----------------------------------------------
MOODY'S INVESTORS SERVICE, INC. Aaa-Best quality. These securities
carry the smallest degree if investment risk and are generally referred to as
"gilt edge." Interest payment are protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Aa-High quality by all
standards. They are rated lower than the best bond because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
which made the long-term risks appear somewhat greater.
STANDARD & POOR'S CORPORATION. AAA-Highest grade. They possess the
ultimate degree of protection as to principal and interest. Marketwise, they
move with interest rates, and hence provide the maximum safety on all counts.
AA-High grade. Generally, these bonds differ from AAA issues only in a small
degree. Here, too, prices move with the long-term money market.
FITCH INVESTORS SERVICE, INC. AAA-High grade, broadly marketable,
suitable for investment by trustees and fiduciary institutions, and liable to
but slight market fluctuation other than through changes in the money rate. The
prime feature of an "AAA" bond is the showing of earning several times or many
times interest requirements for such stability of applicable interest that
safety is beyond reasonable question whenever changes occur in conditions.
Other features may be considered, such as a wide margin of protection through
collateral, security or direct lien on specific property. Sinking funds or
voluntary reduction of debt by call or purchase are often factors, while
guarantee or assumption by parties other than the original debtor may influence
their rating. AA-Of safety virtually beyond question and readily salable. Their
merits are not greatly unlike those of "AAA" class but a bond so rated may be
junior though it has a strong lien, or the margin of safety may be less
strikingly broad. The issue may be the obligations of a small company, strongly
secured, but influenced as to rating by the lesser financial power of the
enterprise and more local type or market.
<PAGE> 34
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 Investment Advisory Contract between
the International Currency Fund and
Rothschild International Asset Management
Limited.*
6 Not applicable.
* To be filed by amendment.
<PAGE> 35
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 Not applicable
* 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 Five Arrows World Cash Management Fund, 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 Fund
<PAGE> 36
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 VIII 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 offers a wide range of investment advisory services to both individuals
and institutions.
<PAGE> 37
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) The shares of beneficial interest of the Trust are not publicly
offered and therefore the Trust does not utilize the services of a distributor
or principal underwriter.
(b) Not applicable
(c) Not applicable.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
The accounts and records of the Trust are maintained at the
offices of the Trust at 3435 Stelzer Road, Columbus, OH 43219-3035.
Item 31. Management Services.
- -------- --------------------
Not applicable.
Item 32. Undertakings.
- -------- -------------
(a) Not applicable.
(b) The Trust hereby undertakes to file a post-effective
amendment, using financial statements which do not have to be certified, within
four to six months from the effective date of the Trust's 1933 Act registration
statement.
(c) Trust hereby undertakes to furnish each person, upon
request and without charge, to whom a Prospectus with respect to a series of the
Trust is delivered with a copy of the latest annual report to shareholders with
respect to that series.
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
registrant has duly caused this Pre-Effective Amendment to its registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 25th day of November, 1996.
THE INTERNATIONAL CURRENCY FUND
By: /s/ Peter B. Collacott
-----------------------------
Peter B. Collacott, President
<PAGE> 1
Exhibit 1
INTERNATIONAL CURRENCY FUND
AMENDED AND RESTATED MASTER TRUST AGREEMENT
OCTOBER 16, 1996
(C)1996 GOODWIN, PROCTER & HOAR LLP
ALL RIGHTS RESERVED
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I - NAME AND DEFINITIONS..............................................1
Section 1.1 Name and Principal Office...................................1
Section 1.2 Definitions.................................................1
(a) "Act".......................................................1
(b) "Book Capital Account"......................................2
(c) "By-Laws"...................................................2
(d) "cash"......................................................2
(e) "class".....................................................2
(f) "Code"......................................................2
(g) "Commission"................................................2
(h) "Complete Redemption" ......................................2
(i) "Declaration of Trust"......................................2
(j) "Designated Currency".......................................2
(k) "Majority of the Outstanding Voting Shares".................2
(l) "1940 Act"..................................................2
(m) "person"....................................................2
(n) "Regulations"...............................................3
(o) "Shareholder"...............................................3
(p) "Shares"....................................................3
(q) "Sub-Trust" or "Series".....................................3
(r) "Trust".....................................................3
(s) "Trustees"..................................................3
ARTICLE II - PURPOSE OF TRUST.................................................3
ARTICLE III - THE TRUSTEES....................................................3
Section 3.1 Number, Designation, Election, Term, etc....................3
(a) Trustees....................................................3
(b) Number......................................................3
(c) Election and Term...........................................4
(d) Resignation and Retirement..................................4
(e) Removal.....................................................4
(f) Vacancies...................................................4
(g) Effect of Death, Resignation, etc...........................4
(h) No Accounting...............................................5
Section 3.2 Powers of Trustees..........................................5
(a) Investments.................................................6
(b) Disposition of Assets.......................................6
(c) Ownership Powers............................................6
(i)
<PAGE> 3
Page
----
(d) Subscription................................................6
(e) Form of Holding.............................................6
(f) Reorganization, etc.........................................6
(g) Voting Trusts, etc..........................................7
(h) Compromise..................................................7
(i) Partnerships, etc...........................................7
(j) Borrowing and Security......................................7
(k) Guarantees, etc.............................................7
(l) Insurance...................................................7
(m) Pensions, etc...............................................7
(n) Distribution Plans..........................................8
Section 3.3 Certain Contracts...........................................8
(a) Advisory....................................................8
(b) Administration..............................................8
(c) Distribution................................................8
(d) Custodian and Depository....................................8
(e) Transfer and Dividend Disbursing Agency.....................9
(f) Shareholder Servicing.......................................9
(g) Accounting..................................................9
Section 3.4 Payment of Trust Expenses and Compensation of Trustees.....10
Section 3.5 Ownership of Assets of the Trust...........................10
Section 3.6 Action by Trustees.........................................10
ARTICLE IV - SHARES..........................................................10
Section 4.1 Description of Shares......................................10
Section 4.2 Establishment and Designation of Sub-Trusts and Classes....12
(a) Assets Belonging to Sub-Trusts.............................12
(b) Liabilities Belonging to Sub-Trusts........................13
(c) Voting.....................................................14
(d) Non-Transferability........................................14
(e) Equality...................................................14
(f) Fractions..................................................14
(g) Conversion Rights..........................................14
(h) Class Differences..........................................15
Section 4.3 Ownership of Shares........................................15
Section 4.4 Investments in the Trust...................................15
Section 4.5 No Pre-emptive Rights......................................15
Section 4.6 Status of Shares and Limitation of Personal Liability......15
Section 4.7 No Appraisal Rights........................................16
ARTICLE V - INCREASES, DECREASES AND COMPLETE REDEMPTIONS
(ii)
<PAGE> 4
OF SHARES
........................................................................16
Section 5.1 Share Transactions..........................................16
Section 5.2 Redemption Price............................................16
Section 5.3 Net Asset Value.............................................16
Section 5.4 Valuation of Assets.........................................17
ARTICLE VI - BOOK CAPITAL ACCOUNT BALANCES AND DISTRIBUTIONS..................17
Section 6.1 Book Capital Account Balances...............................17
Section 6.2 Allocations and Distributions to Holders....................17
Section 6.3 Power to Modify Foregoing Procedures........................17
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS........................18
Section 7.1 Voting Powers...............................................18
Section 7.2 Meetings....................................................18
Section 7.3 Record Dates................................................19
Section 7.4 Quorum and Required Vote....................................19
Section 7.5 Action by Written Consent...................................19
Section 7.6 Inspection of Records.......................................19
Section 7.7 Additional Provisions.......................................20
ARTICLE VIII - LIABILITY OF SHAREHOLDERS; LIMITATIONS OF LIABILITY
OF TRUSTEES, OFFICERS, ETC.................................................20
Section 8.1 Liability of Shareholders; Indemnification..................20
Section 8.2 Trustees, etc. Not Personally Liable to Third Parties.......20
Section 8.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust,
Shareholders, etc...........................................21
Section 8.4 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety...........................................21
Section 8.5 Indemnification of Shareholders.............................21
Section 8.6 Indemnification of Trustees, Officers, etc..................22
Section 8.7 Compromise Payment..........................................23
Section 8.8 Indemnification Not Exclusive, etc..........................23
Section 8.9 Liability of Third Persons Dealing with Trustees............23
Section 8.10 Discretion..................................................23
ARTICLE IX - MISCELLANEOUS....................................................24
Section 9.1 Duration and Termination of Trust...........................24
Section 9.2 Reorganization..............................................24
Section 9.3 Amendments..................................................25
Section 9.4 Filing of Copies; References; Headings......................25
Section 9.5 Applicable Law..............................................26
(iii)
<PAGE> 5
Page
----
Section 9.6 Registered Agent...........................................26
Section 9.7 Integration................................................26
(iv)
<PAGE> 6
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made
as of this 16th day of October, 1996, by the Trustees hereunder, and by the
holders of shares of beneficial interest to be issued hereunder as hereinafter
provided.
W I T N E S S E T H:
WHEREAS this Trust was formed pursuant to a Master Trust Agreement
dated August 13, 1996 (the "Initial Master Trust Agreement") to carry on the
business of an investment company; and
WHEREAS, the Trustees have determined that it is in the best interest
of the Trust to modify certain provisions of the Initial Master Trust Agreement
by executing this Amended and Restated Master Trust Agreement; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust hereunder,
and to issue classes of Shares of any Sub-Trust or divide Shares of any
Sub-Trust into two or more classes, all in accordance with the provisions
hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. sec. 3801, et seq.),
as from time to time amended and including any successor statute of similar
import (the "Act"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees do hereby amend and restate the Initial
Master Trust Agreement in its entirety as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
--------- --------------------
Section 1.1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as the
"International Currency Fund" and the Trustees shall conduct the business of the
Trust under that name or any other name or names as they may from time to time
determine. The principal office of the Trust shall be located at 3435 Stelzer
Road, Columbus, OH 43219 or such location as the Trustees may from time to time
determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Act" shall have the meaning given to it in the recitals
of tis Declaration of Trust;
<PAGE> 7
(b) "Book Capital Account" shall mean, with respect to any
Shareholder in a Sub-Trust, the capital account of the Shareholder in such
Sub-Trust, determined in accordance with the method as may be established by the
Trustees pursuant to Section 6.1 hereof. The Trust shall maintain separate
records of Book Capital Accounts for each Sub-Trust;
(c) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
(d) "cash" shall mean money in the Designated Currency of the
Sub-Trust;
(e) "class" refers to any class of Shares of any Series or
Sub-Trust established and designated under or in accordance with the provisions
of Article IV;
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding law);
(g) "Commission" shall have the meaning given it in the 1940
Act;
(h) "Complete Redemption" shall mean the complete withdrawal
of the Shares of a Shareholder in a Sub-Trust;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
(j) "Designated Currency" shall have the meaning set forth in
the first paragraph of Section 4.2;
(k) "Majority of the Outstanding Voting Shares" of the Trust
or Sub-Trust or of a class of a Sub-Trust shall mean the vote, at the annual or
a special meeting of Shareholders duly called, (A) of 67 per centum or more of
the Shares of the Trust or Sub-Trust present at such meeting, (or of a class of
a Sub-Trust, as the case may be) if holders of more than 50 per centum of the
outstanding Shares of the Trust or Sub-Trust (or of a class of a Sub-Trust, as
the case may be) are present or represented by proxy; or (B) of more than 50 per
centum of the outstanding voting Shares of the Trust or Sub-Trust or of a class
of a Sub-Trust, as the case may be, whichever is the less;
(l) "1940 Act" refers to the Investment Company Act of 1940
and the rules and regulations thereunder, all as amended from time to time;
(m) "person" means a natural person, corporation, limited
liability company, trust, association, partnership (whether general, limited or
otherwise), joint venture or any other entity;
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(n) "Regulations" shall mean the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations);
(o) "Shareholder" means a beneficial owner of record of
Shares;
(p) "Shares" refers to the units of interest into which the
beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Sub-Trust (as the context may require) shall be divided from time
to time;
(q) "Sub-Trust" or "Series" refers to a series of Shares
established and designated under or in accordance with the provisions of Article
IV;
(r) "Trust" refers to the Delaware business trust established
by this Declaration of Trust, inclusive of each and every Sub-Trust established
hereunder; and
(s) "Trustees" refers to the trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III.
ARTICLE II - PURPOSE OF TRUST
---------- ----------------
The purposes of the Trust are (i) to operate as an investment company
and to offer Shareholders of the Trust and each Sub-Trust of the Trust one or
more investment programs primarily in securities and debt instruments, and (ii)
to engage in such activities that are necessary, suitable, incidental or
convenient to the accomplishment of the foregoing.
ARTICLE III - THE TRUSTEES
----------- ------------
Section 3.1 Number, Designation, Election, Term, etc.
----------------------------------------
(a) TRUSTEES. As of the date of this Amended and Restated
Master Trust Agreement, Peter B. Collacott, Paul R. Freeman, Alan T. Jeffers,
Roger M. Kubarych, and Bryan J. Walsh shall be the Trustees hereof and of each
Sub-Trust.
(b) NUMBER. The Trustees serving as such, whether named above
or hereafter becoming Trustees, may increase or decrease the number of Trustees
to a number other than the number theretofore determined. No decrease in the
number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of such Trustee's term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to subsection
(e) of this Section 3.1.
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(c) ELECTION AND TERM. Trustees, in addition to those named
above, may become such by election by Shareholders or the Trustees in office
pursuant to Section 3.1(f). Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee of the Trust and of each Sub-Trust
hereunder during the lifetime of this Trust and until its termination as
hereinafter provided except as such Trustee sooner dies, resigns, retires or is
removed. Subject to Section 16(a) of the 1940 Act, the Trustees may elect
successors and may, pursuant to Section 3.1(f) hereof, appoint Trustees to fill
vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign or
retire as a trustee of the Trust, by written instrument signed by such Trustee
and delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to the
Trust and each Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least three-fourths of the
number of Trustees in office immediately prior to such removal, specifying the
date upon which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then outstanding,
cast in person or by proxy at any meeting called for the purpose; or (iii) by a
written declaration signed by Shareholders holding not less than two-thirds of
the Shares then outstanding and filed with the minutes of the Trust. Any such
removal shall be effective as to the Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting from an
increase in the number of Trustees by the other Trustees may (but so long as
there are at least two remaining Trustees, need not unless required by the 1940
Act) be filled by a majority of the remaining Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, through the appointment in writing
of such other person as such remaining Trustees in their discretion shall
determine and such appointment shall be effective upon the written acceptance of
the person named therein to serve as a trustee of the Trust and agreement by
such person to be bound by the provisions of this Declaration of Trust, except
that any such appointment in anticipation of a vacancy to occur by reason of
voluntary or mandatory retirement, resignation or increase in number of Trustees
to be effective at a later date shall be deemed effective upon the effective
date of said retirement, resignation or increase in number of Trustees. As soon
as any Trustee so appointed shall have accepted such appointment and shall have
agreed in writing to be bound by this Declaration of Trust and the appointment
is effective, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
voluntary or mandatory retirement, removal or incapacity of the Trustees, or any
one of them, shall cause a Trustee to cease to be a trustee of the Trust but
shall not operate to annul or terminate the Trust
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or any Sub-Trust hereunder or to revoke or terminate any existing agency or
contract created or entered into pursuant to the terms of this Declaration of
Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940
Act or under circumstances which would justify removal for cause, no person
ceasing to be a trustee of the Trust as a result of death, resignation,
voluntary or mandatory retirement, removal or incapacity (nor the estate of any
such person) shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and all
acts and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries, but shall have
full authority and absolute power and control over the assets of the Trust and
the business of the Trust to the same extent as if the Trustees were the sole
owners of the assets of the Trust and the business in their own right, including
such authority, power and control to do all acts and things as they, in their
sole discretion, shall deem proper to accomplish the purposes of this Trust.
Without limiting the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the business and
affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; they may from time to
time in accordance with the provisions of Section 4.1 hereof establish
Sub-Trusts, each such Sub-Trust to operate as a separate and distinct investment
medium and with separately defined investment objectives and policies and
distinct investment purposes; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish Series or establish classes of Shares
of any Series or Sub-Trust or divide the Shares of any Series or Sub-Trust into
classes; they may as they consider appropriate designate employees and agents
who may be denominated as officers with titles, including, but not limited to,
"president," "vice-president," "treasurer," "secretary," "assistant secretary,"
"assistant treasurer," "managing director," "chairman of the board" and "vice
chairman of the board" and who in such capacity may act for and on behalf of the
Trust, as and to the extent authorized by the Trustees, and appoint and
terminate agents and consultants and hire and terminate employees, any one or
more of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing; they may appoint from their own number,
and terminate, any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee, which may, when the
Trustees are not in session and subject to the 1940 Act, exercise some or all of
the power and authority of the Trustees as the Trustees may determine; in
accordance with Section 3.3 they may employ one or more advisers,
administrators, depositories and custodians and may authorize any depository or
custodian to employ subcustodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt
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instruments, retain transfer, dividend, accounting or Shareholder servicing
agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more distributors, principal underwriters or otherwise, and
subject to Section 7.3, set record dates or times for the determination of
Shareholders or various of them with respect to various matters; they may
compensate or provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation, the power and authority to act in the name of the
Trust and any Sub-Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other
property, including, without implied limitation, to invest any and all of the
assets of the Trust in the securities of one or more open-end management
investment companies, and to hold cash or other property uninvested without in
any event being bound or limited by any present or future law or custom in
regard to investments by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation or
issuer, any security or debt
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instrument of which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security or debt instrument
held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any
securities or debt instruments in acting through a committee, depositary, voting
trustee or otherwise, and in that connection to deposit any security or debt
instrument with, or transfer any security or debt instrument to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security or debt instrument (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to agree to
pay, and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general
or limited partnerships, limited liability companies and any other combinations
or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of
any notes or other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to mortgage
and pledge the Trust property or any part thereof to secure any of or all such
obligations;
(l) INSURANCE. To purchase and pay for entirely out of Trust
property such insurance and/or bonding as they may deem necessary or appropriate
for the conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith), of
the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any such
person in any such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability;
(m) PENSIONS, ETC. To pay pensions for faithful service, as
deemed appropriate
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by the Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust; and
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any
Sub-Trust, including with respect to any class thereof, a plan of distribution
and related agreements thereto pursuant to the terms of Rule 12b-1 of the 1940
Act and to make payments from the assets of the Trust or the relevant Sub-Trust
or Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, limited liability companies, other type of
organizations, or individuals (a "Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any Sub-Trust, and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees with respect
to the investments of the Trust or of the assets belonging to any Sub-Trust of
the Trust (as that phrase is defined in subsection (a) of Section 4.2), to
manage such investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust (including each class thereof), to
supervise all or any part of the operations of the Trust and each Sub-Trust, and
to provide all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and
each Sub-Trust (including any classes thereof), to be principal underwriter of
such Shares, and/or to act as agent of the Trust and each Sub-Trust in the sale
of Shares and the acceptance or rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to
maintain custody
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of the property of the Trust and each Sub-Trust and accounting records in
connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain
records of the ownership of outstanding Shares, the issuance and redemption and
the transfer thereof, and to disburse any dividends declared by the Trustees and
in accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to
the relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relating to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships,
limited liability companies or other organizations, or have other
business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the
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contract involved is approved in good faith by a majority of such Trustees not
having any such relationship or interest (even though such unrelated or
disinterested Trustees are less than a quorum of all of the Trustees), (y) the
material facts as to such relationship or interest and as to the contract have
been disclosed to or are known by the Shareholders entitled to vote thereon and
the contract involved is specifically approved in good faith by vote of the
Shareholders, or (z) the specific contract involved is fair to the Trust as of
the time it is authorized, approved or ratified by the Trustees or by the
Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES.
The Trustees are authorized to pay or to cause to be paid out of the principal
or income of the Trust or any Sub-Trust, or partly out of principal and partly
out of income, and to charge or allocate the same to, between or among such one
or more of the Sub-Trusts and/or one or more classes of Shares thereof that may
be established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, any Sub-Trust and/or any class of Shares thereof, or
in connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, Shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as trustees of the Trust and may fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust and of each Sub-Trust shall at all times be considered as
vested in the Trust.
Section 3.6 ACTION BY TRUSTEES. Except as otherwise provided by the
l940 Act or other applicable law, this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees on behalf of or with respect to the Trust or
any Sub-Trust or class thereof may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least one-half of
the Trustees then in office, being present), within or without Delaware,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
ARTICLE IV - SHARES
---------- ------
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the
Trust shall be divided into Shares, all with $0.0001 par value, but the Trustees
shall have the authority from time to time
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to issue Shares in one or more Series (each of which Series of Shares shall
represent the beneficial interest in a separate and distinct Sub-Trust of the
Trust, including without limitation each Sub-Trust specifically established and
designated in Section 4.2), as they deem necessary or desirable. For all
purposes under this Declaration of Trust or otherwise, including, without
implied limitation, (i) with respect to the rights of creditors and (ii) for
purposes of interpreting the relevant rights of each Sub-Trust and the
Shareholders of each Sub-Trust, each Sub-Trust established hereunder shall be
deemed to be a separate trust. Notice of the limitation of liabilities of a
Sub-Trust shall be set forth in the certificate of trust of the Trust, and
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular Sub-Trust shall be enforceable
against the assets of such Sub-Trust only, and not against the assets of the
Trust generally or any other Sub-Trust. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate such
separate and distinct Sub-Trusts, and to fix and determine the relative rights
and preferences as between the shares of the separate Sub-Trusts as to right of
redemption and the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which the
several Sub-Trusts shall have separate voting rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any Sub-Trust into classes, each class having such
different dividend, liquidation, voting and other rights as the Trustees may
determine in their sole discretion, and may establish and designate the specific
classes of Shares of each Sub-Trust. The fact that a Sub-Trust shall have
initially been established and designated without any specific establishment or
designation of classes (i.e., that all Shares of such Sub-Trust are initially of
a single class), or that a Sub-Trust shall have more than one established and
designated class, shall not limit the authority of the Trustees to establish and
designate separate classes, or one or more further classes, of said Sub-Trust
without approval of the holders of the initial class thereof, or previously
established and designated class or classes thereof.
The number of authorized Shares and the number of Shares of each
Sub-Trust or class thereof that may be issued is unlimited, and the Trustees may
issue Shares of any Sub-Trust or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders.
Subject to Section 8.1, all Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Sub-Trust or class thereof into one or more Sub-Trusts or classes thereof
that may be established and designated from time to time. The Trustees may hold
as treasury Shares, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares of any
Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and
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times for the purposes of determining the holders of Shares entitled to be
treated as such, to the extent provided or referred to in Section 7.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation of
the relative rights and preferences of the Shares of such Sub-Trust or class,
(ii) upon the execution of an instrument in writing by an officer of the Trust
pursuant to the vote of a majority of the Trustees, or (iii) as otherwise
provided in either such instrument. At any time that there are no Shares
outstanding of any particular Sub-Trust or class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust pursuant to the
vote of a majority of the Trustees) abolish that Sub-Trust or class and the
establishment and designation thereof. Each instrument establishing and
designating any Sub-Trust shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the same
extent as if such person were not a Trustee, officer or other agent of the
Trust; and the Trust may issue and sell or cause to be issued and sold and may
purchase Shares of any Sub-Trust (including any classes thereof) from any such
person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Sub-Trust (including any classes thereof) generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate four Sub-Trusts: "U.S. Dollar Portfolio," "Pound Sterling
Portfolio," "Deutschemark Portfolio," and "Canadian Dollar Portfolio." The
Designated Currency for the U.S. Dollar Portfolio shall be the U.S. dollar, the
Designated Currency for the Pound Sterling Portfolio shall be the Pound
Sterling, the Designated Currency for the Deutschemark Portfolio shall be the
Deutschemark, and the Designated Currency for the Canadian Dollar Portfolio
shall be the Canadian dollar. The Shares of such Sub-Trusts and any Shares of
any further Sub-Trust or class thereof that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Sub-Trust at the time of establishing and
designating the same) have the following relative rights and preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received
by the Trust for the issue or sale of Shares of a particular Sub-Trust or any
classes thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of
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Shares of that Sub-Trust or class thereof and shall irrevocably belong to that
Sub-Trust (and be allocable to any classes thereof) for all purposes, and shall
be so recorded upon the books of account of the Trust. Separate and distinct
records shall be maintained for each Sub-Trust and the assets associated with a
Sub-Trust shall be held and accounted for separately from the other assets of
the Trust, or any other Sub-Trust. Such consideration, assets, income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds, in whatever form the same may be, together
with any General Items (as hereinafter defined) allocated to that Sub-Trust as
provided in the following sentence, are herein referred to as "assets belonging
to" that Sub-Trust (and allocable to any classes thereof). In the event that
there are any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular
Sub-Trust (collectively "General Items"), the Trustees shall allocate such
General Items to and among any one or more of the Sub-Trusts established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable; and any General Items so allocated to
a particular Sub-Trust shall belong to that Sub-Trust (and be allocable to any
classes thereof). Each such allocation by the Trustees shall be conclusive and
binding upon the holders of all Shares of all Sub-Trusts (including any classes
thereof) for all purposes.
(b) LIABILITIES BELONGING TO SUB-TRUSTS. The assets belonging
to each particular Sub-Trust shall be charged with the liabilities in respect of
that Sub-Trust and all expenses, costs, charges and reserves belonging to that
Sub-Trust, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and among any one or
more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion shall
determine. In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any one or more of
the classes of Shares of that Sub-Trust established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
shall determine. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Sub-Trust or class thereof are herein referred to
as "liabilities belonging to" that Sub-Trust or class thereof. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders, creditors and any other persons
dealing with the Trust or any Sub-Trust (including any classes thereof) for all
purposes. Any creditor of any Sub-Trust may look only to the assets and, to the
extent permitted in Section 8.1, the Shareholders of that Sub-Trust to satisfy
such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
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(c) VOTING. On each matter submitted to a vote of the
Shareholders, each holder of a Share shall be entitled to one vote for each
whole Share standing in such Shareholder's name on the books of the Trust
irrespective of the Series thereof or class thereof and all Shares of all Series
and classes thereof shall vote together as a single class; provided, however,
that as to any matter (i) with respect to which a separate vote of one or more
Series or classes thereof is required by the 1940 Act or the provisions of the
writing establishing and designating the Sub-Trust or class, such requirements
as to a separate vote by such Series or class thereof shall apply in lieu of all
Shares of all Series and classes thereof voting together; and (ii) as to any
matter which affects the interests of one or more particular Series or classes
thereof, only the holders of Shares of the one or more affected Series or
classes shall be entitled to vote, and each such Series or class shall vote as a
separate class.
(d) NON-TRANSFERABILITY. A Shareholder may not transfer,
assign, sell, or exchange shares in a Sub-Trust, except to another Shareholder
of such Sub-Trust or to the Sub- Trust itself in redemption of such Shares,
without the consent of a majority of the non-transferring Shareholders of such
Sub-Trust. Notwithstanding the foregoing, a Shareholder may assign its rights to
receive dividends, distributions, or other allocations of income or property
from the Sub-Trust, but such assignment will not result in a change in
ownership of the Shareholder's Shares in the Sub-Trust.
(e) EQUALITY. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares of
each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the case
of a class, belonging to that Sub-Trust and allocable to that class, subject to
the liabilities belonging to that Sub-Trust or class, and each Share of any
particular Sub-Trust or class shall be equal to each other Share of that
Sub-Trust or class; but the provisions of this sentence shall not restrict any
distinctions permissible under Article VI that may exist with respect to
allocations or dividends and distributions on Shares of the same Sub-Trust or
class. The Trustees in their sole discretion may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater or lesser
number of Shares of that Sub-Trust or class without thereby changing the
proportionate beneficial interest in the assets belonging to that Sub-Trust or
class or in any way affecting the rights of Shares of any other Sub-Trust or
class.
(f) FRACTIONS. Any fractional Share of any Sub-Trust or class,
if any such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Sub-Trust or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(g) CONVERSION RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that holders of Shares of any Sub-Trust or class thereof shall have the right to
convert said Shares into Shares of one or more other Sub-Trust or class thereof
in accordance with such requirements and procedures as may be
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established by the Trustees.
(h) CLASS DIFFERENCES. Subject to Section 4.1, the relative
rights and preferences of the classes of any Sub-Trust may differ in such other
respects as the Trustees may determine to be appropriate in their sole
discretion, provided that such differences are set forth in the instrument
establishing and designating such classes and executed by a majority of the
Trustees (or by an instrument executed by an officer of the Trust pursuant to a
vote of a majority of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Sub-Trust and each class thereof that has been established and designated. No
certificates certifying the ownership of Shares need be issued except as the
Trustees in their sole discretion may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each Sub-Trust and class
thereof held from time to time by each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept or reject
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize or determine. The Trustees may
authorize any distributor, principal underwriter, custodian, transfer agent or
other person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no
pre-emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Sub-Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this Declaration of Trust. Every Shareholder by virtue of acquiring Shares
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. Except as provided in Section 9.1, the death,
incapacity, dissolution, termination or bankruptcy of a Shareholder during the
continuance of the Trust shall not operate to dissolve or terminate the Trust or
any Sub-Trust thereof nor entitle the representative of such Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees, but only to the rights of such Shareholder under this Trust. Ownership
of Shares shall not entitle the Shareholder to any title in or to the whole or
any part of the Trust property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Except
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as specifically provided herein, neither the Trust nor the Trustees, nor any
officer, employee or agent of the Trust shall have any power to bind personally
any Shareholder, or call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay.
Section 4.7 NO APPRAISAL RIGHTS. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenters' rights by a shareholder of a corporation
organized under the General Corporation Law of the State of Delaware, or
otherwise.
ARTICLE V - INCREASES, DECREASES AND COMPLETE REDEMPTIONS
--------- ---------------------------------------------
OF SHARES
---------
Section 5.1 SHARE TRANSACTIONS. Subject to applicable law, to the
provisions of this Declaration of Trust, and to such restrictions as may from
time to time be adopted by the Trustees, each Shareholder may vary its number of
Shares in any Sub-Trust at any time by increasing its number of Shares (through
a capital contribution) or decreasing its number of Shares (through a capital
withdrawal) or by a Complete Redemption of all of its Shares. An increase in the
number of Shares shall be reflected as an increase in the Book Capital Account
balance of that Shareholder in that Sub-Trust, and a decrease in the number of
Shares of a Shareholder in a Sub- Trust or the Complete Redemption of all of the
Shares of that Shareholder shall be reflected as a decrease in the Book Capital
Account balance of that Shareholder in that Sub-Trust. The Sub- Trust shall,
upon appropriate and adequate notice from any Shareholder, increase, decrease,
or redeem such Shareholder's Shares for an amount determined in accordance with
Sections 5.2 and 5.3. The procedures, if any, for effecting decreases or
Complete Redemptions shall be as determined by the Trustees from time to time.
Section 5.2 REDEMPTION PRICE. The redemption price per Share shall be
the net asset value per Share when next determined by the Sub-Trust at such time
or times as the Trustees shall designate, following the time of presentation of
certificates for Shares, if issued, and an appropriate request for redemption,
or such other time as the Trustees may designate in accordance with any
provision of the 1940 Act, or any rule or regulation made or adopted by any
securities association registered under the Securities Exchange Act of 1934, as
determined by the Trustees, less any applicable charge or fee imposed from time
to time as determined by the Trustees.
Section 5.3 NET ASSET VALUE. Net asset value of each Sub-Trust or class
of Shares of a Sub-Trust (for the purpose of issuance of Shares as well as
redemptions thereof) shall be determined by dividing:
(i) the total value of the assets of such Sub-Trust or class
determined as provided in Section 5.4 below less, to the extent
determined by or pursuant to the direction
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of the Trustees in accordance with generally accepted accounting
principles, all debts, obligations, and liabilities of such Sub-Trust
or class (which debts, obligations and liabilities shall include,
without limitation of the generality of the foregoing, any and all
debts, obligations, liabilities, or claims, of any and every kind and
nature, fixed, accrued, and otherwise, including the estimated accrued
expenses of management and supervision, administration, and
distribution and any reserves or charges for any or all of the
foregoing, whether for taxes, expenses, or otherwise, and the price of
Shares redeemed but not paid for) but excluding the Sub-Trust's
liability upon its Shares and its surplus, by
(ii) the total number of Shares of such Sub-Trust or class
thereof outstanding.
Section 5.4 VALUATION OF ASSETS. In determining for purposes of this
Declaration of Trust the total value of the assets of each Sub-Trust or class of
Shares at any time, investments and any other assets of such Sub-Trust or class
shall be valued in such manner as may be determined from time to time by or
pursuant to the order of the Trustees.
ARTICLE VI - BOOK CAPITAL ACCOUNT BALANCES AND DISTRIBUTIONS
---------- -----------------------------------------------
Section 6.1 BOOK CAPITAL ACCOUNT BALANCES. The Book Capital Account
balance of Shareholders of a Sub-Trust shall be determined on such days and at
such time or times as the Trustees may determine. The Trustees may adopt
resolutions setting forth the method of determining the Book Capital Account
balance of each Shareholder. The power and duty to make calculations pursuant to
such resolutions may be delegated by the Trustees to the investment adviser or
administrator, custodian, or such other person as the Trustees may determine.
Upon the Complete Redemption of all of the Shares of a Shareholder in a
Sub-Trust, such Shareholder shall be entitled to receive the balance of its Book
Capital Account. A Shareholder may not transfer its Book Capital Account
balance.
Section 6.2 ALLOCATIONS AND DISTRIBUTIONS TO HOLDERS. The Trustees may,
in compliance with the Code, the 1940 Act, and generally accepted accounting
principles, establish the procedures by which the Trust shall make with respect
to each Sub-Trust (i) the allocation of unrealized gains and losses, taxable
income and tax loss, and profit and loss, or any item or items thereof, to each
Shareholder, (ii) the payment of distributions, if any, to Shareholders, and
(iii) upon liquidation, the final distribution of items of taxable income and
expense. Any such procedures shall be set forth in writing and be furnished to
the Trust's accountants. The Trustees may amend the procedures, if any, adopted
pursuant to this Section 6.2 from time to time. The Trustees may retain from the
net profits of each Sub-Trust such amount as they may deem necessary to pay the
liabilities and expenses of that Sub-Trust.
Section 6.3 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VI, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income and net assets of the Trust and of each
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Sub-Trust, the allocation of income of the Trust and of each Sub-Trust, the Book
Capital Account balance of each Shareholder, or the payment of distributions to
the Shareholders as they may deem necessary or desirable to enable the Trust or
a Sub-Trust to comply with any provision of the 1940 Act or any order of
exemption issued by the Commission or with the Code.
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------- ----------------------------------------
Section 7.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust to the extent and
as provided in Sections 9.1 and 9.2, (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Section 9.3, and (v) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy.
Proxies may be given orally or in writing or pursuant to any computerized or
mechanical data gathering process specifically approved by the Trustees. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. Until Shares are issued, the Trustees
may exercise all rights of Shareholders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 7.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees in their sole discretion to be necessary or desirable.
Shareholder meetings may be held at such time and place within the continental
United States as may be fixed by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days and not more than 90 days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares then outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after written application
by Shareholders holding at least 10% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein
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or in the By-Laws, then Shareholders holding at least 10% of the Shares then
outstanding may call and give notice of such meeting, and thereupon the meeting
shall be held in the manner provided for herein in case of call thereof by the
Trustees.
Section 7.3 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 90 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though such Shareholder has since that
date and time disposed of such Shareholder's Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 7.4 QUORUM AND REQUIRED VOTE. Except as otherwise provided by
the 1940 Act or other applicable law, thirty percent of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any meeting
of shareholders, whether or not a quorum is present, may be adjourned for any
lawful purpose provided that no meeting shall be adjourned for more than six
months beyond the originally scheduled meeting date. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting without the necessity of further notice. A majority of the
Shares voted at a meeting at which a quorum is present, shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws.
Section 7.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 7.6 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders for any lawful purpose reasonably related to
a Shareholder's interest as a Shareholder. The Trustees may from time to time
establish reasonable standards, including
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standards governing what information and documents are to be furnished, at what
time and location and at whose expense, with respect to Shareholders' inspection
of Trust records.
Section 7.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VIII - LIABILITY OF SHAREHOLDERS; LIMITATIONS OF LIABILITY
------------ ---------------------------------------------------
OF TRUSTEES, OFFICERS, ETC.
---------------------------
Section 8.1 LIABILITY OF SHAREHOLDERS; INDEMNIFICATION. Each
Shareholder shall be jointly and severally liable (with rights of contribution
inter se in proportion to their respective Shares in the Sub-Trust) for the
liabilities and obligations of the Sub-Trust in the event that the Sub-Trust
fails to satisfy such liabilities and obligations; provided, however, that, to
the extent assets are available in the Sub-Trust, the Sub-Trust shall indemnify
and hold each Shareholder harmless from and against any claim or liability to
which such Shareholder may become subject by reason of being or having been a
Shareholder to the extent that such claim or liability imposes on the
Shareholder an obligation or liability which, when compared to the obligations
and liabilities imposed on other Shareholders, is greater than such
Shareholder's percentage of Shares in such Sub-Trust, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by such
Shareholder in connection with any such claim or liability. The rights accruing
to a Shareholder under this Section 8.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything contained
herein restrict the right of the Sub-Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein. Notwithstanding the indemnification procedure described above and
subject to the following sentence, it is intended that each Shareholder shall
remain jointly and severally liable to the Sub-Trust's creditors as a legal
matter. Notwithstanding the foregoing or any other provision in this Declaration
of Trust, in the event that Regulations or other administrative rules are
adopted that would allow a Sub-Trust to make an election to be treated as a
partnership for United States federal income tax purposes, notwithstanding any
limitation on the liability of the Shareholders, and pursuant to such
Regulations or other administrative rules the Sub-Trust properly elects to be
treated as a partnership for United States federal income tax purposes, then
this Declaration of Trust shall be deemed to have been amended on the effective
date of such election to eliminate prospectively any such liability of
Shareholders; provided, however, that such amendment shall be effective only if
and to the extent that the resulting limitation of liability would not adversely
affect the Sub-Trust's classification as a partnership for United States federal
income tax purposes.
Section 8.2 TRUSTEES, ETC. NOT PERSONALLY LIABLE TO THIRD PARTIES. All
persons extending credit to, contracting with, or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract, or claim; and neither the
Shareholders of any Sub-Trust (except to the extent expressly provided in
Section 8.1) nor the Trustees, nor any of the Trust's officers, employees, or
agents, whether past, present, or
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<PAGE> 26
future, nor any other Sub-Trust shall be personally liable therefor. Every note,
bond, contract, instrument, certificate, or undertaking and every other act or
thing whatsoever executed or done by or on behalf of the Trust, any Sub-Trusts,
or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only by or for the Trust (or
the Sub-Trust) or the Trustees and not personally.
Section 8.3 LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES,
AGENTS, INDEPENDENT CONTRACTORS TO TRUST, SHAREHOLDERS, ETC. No Trustee,
officer, employee, agent, or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust or a Sub-Trust shall be liable to the Trust or a
Sub-Trust or the Shareholders for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for such person's own bad faith,
willful misfeasance, gross negligence, or reckless disregard of such person's
duties.
Section 8.4 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable to the
Trust and the Shareholders for such Trustee's own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (a)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrator,
distributor or principal underwriter, custodian or transfer, dividend
disbursing, Shareholder servicing or accounting agent of the Trust, nor shall
any Trustee be responsible for the act or omission of any other Trustee; (b) the
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (c) in discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the Trustees pursuant
to Section 3.3. The Trustees as such shall not be required to give any bond or
surety or any other security for the performance of their duties. To the extent
that, at law or in equity, a Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to a Shareholder, any such Trustee
acting under this Declaration of Trust shall not be liable to the Trust or to
any such Shareholder for the Trustee's good faith reliance on the provisions of
this Declaration of Trust. The provisions of this Declaration of Trust, to the
extent that they restrict the duties and liabilities of a Trustee otherwise
existing at law or in equity, are agreed by the Shareholders to replace such
other duties and liabilities of such Trustee.
Section 8.5 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or held
to be personally liable for any
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obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust on behalf of said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and, to the fullest extent permitted by law, the
Shareholder or former Shareholder (or such Shareholder's heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of said Sub-Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability.
Section 8.6 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. To the fullest
extent permitted by law, the Trust shall indemnify (from the assets of the
Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a "Covered
Person"]) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any matter as to which it has been determined that such Covered Person had
acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(such conduct referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the person to be indemnified was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the facts,
that the Covered Person was not liable by reason of Disabling Conduct by (a) a
vote of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in section 2(a)(l9) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time from funds attributable to
the Sub-Trust in question in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article VIII and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered
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Person ultimately will be found entitled to indemnification.
Section 8.7 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 8.8 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VIII shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. As
used in this Article VIII, "Covered Person" shall include such person's heirs,
executors and administrators, an "interested Covered Person" is one against whom
the action, suit or other proceeding in question or another action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such person.
Section 8.9 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 8.10 DISCRETION. Whenever in this Declaration of Trust the
Trustees are permitted or required to make a decision (a) in their "sole
discretion," "sole and absolute discretion," "full discretion," or "discretion,"
or under a similar grant of authority or latitude, the Trustees shall be
entitled to consider only such interests and factors as they desire, whether
reasonable or unreasonable, and may consider their own interests, and shall have
no duty or obligation to give any consideration to any interests of or factors
affecting the Trust or the Shareholders, or (b) in their "good faith" or under
another express standard, the Trustees shall act under such express standard and
shall not be subject to any other or different standards imposed by this
Declaration of Trust or by law or any other agreement contemplated herein. Each
Shareholder and Trustee hereby agrees that any standard of care or duty imposed
in this
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Declaration of Trust or any other agreement contemplated herein or under the Act
or any other applicable law, rule or regulation shall be modified, waived or
limited in each case as required to permit the Trustees to act under this
Declaration of Trust or any other agreement contemplated herein and to make any
decision pursuant to the authority prescribed in this Declaration of Trust.
ARTICLE IX - MISCELLANEOUS
---------- -------------
Section 9.1 DURATION AND TERMINATION OF TRUST.
(a) Unless terminated as provided in this subsection (a) and
subject to subsection (b) of this Section 9.1, the Trust shall continue without
limitation of time and, without limiting the generality of the foregoing, no
change, alteration or modification with respect to any Sub-Trust or class
thereof shall operate to terminate the Trust. The Trust may be terminated at any
time by a majority of the Trustees then in office subject to a favorable vote of
a Majority of the Outstanding Voting Shares of the Trust.
(b) A Sub-Trust shall terminate upon the bankruptcy of any
Shareholder in such Sub-Trust, unless the Sub-Trust is continued by the consent
within ninety (90) days following such event of a "majority in interest" (as
defined in Revenue Procedure 94-46, 1994-2 C.B. 688) of the remaining
Shareholders in such Sub-Trust.
(c) Upon termination, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or accrued or
anticipated as may be determined by the Trustees, the Trust shall in accordance
with such procedures as the Trustees consider appropriate reduce the remaining
assets to distributable form in cash, securities or other property, or any
combination thereof, and distribute the proceeds to the Shareholders, in
conformity with the provisions of subsection (d) of Section 4.2.
Section 9.2 REORGANIZATION. The Trust, or any one or more Sub-Trusts,
may, either as the successor, survivor, or non-survivor, (1) consolidate or
merge with one or more other trusts, Sub-Trusts, partnerships, limited liability
companies, associations or corporations organized under the laws of the State of
Delaware or any other state of the United States, to form a consolidated or
merged trust, partnership, limited liability company, association or corporation
under the laws of which any one of the constituent entities is organized, with
the Trust in the case of a merger to be the survivor or non-survivor of such
merger, or (2) transfer a substantial portion of its assets to one or more other
trusts, Sub-Trusts, partnerships, limited liability companies, associations or
corporations organized under the laws of the State of Delaware or any other
state of the United States, or have one or more such trusts, Sub-Trusts,
partnerships, limited liability companies, associations or corporations merged
into or transfer a substantial portion of its assets to it, any such
consolidation, merger or transfer to be upon such terms and conditions as are
specified in an agreement and plan of reorganization authorized and approved by
the Trustees and entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. Any such
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consolidation, merger or transfer shall require the affirmative vote of the
holders of a Majority of the Outstanding Voting Shares of the Trust (or each
Sub-Trust affected thereby, as the case may be), except that (a) such
affirmative vote of the holders of Shares shall not be required if the Trust (or
Sub-Trust affected thereby, as the case may be) shall be the survivor of such
consolidation or merger or transferee of such assets; (b) the Trustees may,
without shareholder approval, cause the Trust or any series of the Trust to
invest any or all of its assets in securities issued by a registered investment
company or series thereof, subject to the provisions of the 1940 Act; and (c)
the Trustees may, without shareholder approval, cause the Trust, or any series
of the Trust, to transfer all or substantially all of its assets and liabilities
to another registered investment company having substantially identical
investment objectives and policies in exchange for shares of such other
investment company if, but only if, the Trust or series, as the case may be,
retains the shares of such other investment company as an investment.
Section 9.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be applicable and so long
as such amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees (or
by an officer of the Trust pursuant to the vote of a majority of such Trustees).
Any amendment to this Declaration of Trust that materially adversely affects the
rights of Shareholders may be adopted at any time by an instrument in writing
signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when authorized to do so by
the vote in accordance with subsection (e) of Section 4.2 of Shareholders as
specified in Section 7.4 hereof. Subject to the foregoing, any such amendment
shall be effective as of any past or future time as provided in the instrument
containing the terms of such amendment or, if there is no provision therein with
respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
Section 9.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified by
an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended
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<PAGE> 31
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Section 9.5 APPLICABLE LAW. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Delaware. The Trust shall be of the type referred to in Section
3801 of the Act and of the type commonly called a business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust.
Section 9.6 REGISTERED AGENT. The Corporation Trust Company of 1209
Orange Street, City of Wilmington, County of New Castle, Delaware 19801 is
hereby designated as the initial registered agent for service of process on the
Trust in Delaware. The address of the registered office of the Trust in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801.
Section 9.7 INTEGRATION. This Declaration of Trust constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
[END OF TEXT]
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IN WITNESS WHEREOF, the undersigned has hereunto set their hands and
seals for themselves and their assigns, as of the day and year first above
written.
/s/ Peter B. Collacott
---------------------------------
Peter B. Collacott
/s/ Paul R. Freeman
---------------------------------
Paul R. Freeman
/s/ Alan T. Jeffers
---------------------------------
Alan T. Jeffers
/s/ Roger M. Kubarych
---------------------------------
Roger M. Kubarych
/s/ Bryan J. Walsh
---------------------------------
Bryan J. Walsh
330051.c2
27
<PAGE> 1
305187.c1
Exhibit 2
BY-LAWS
OF
THE INTERNATIONAL CURRENCY FUND
(A Delaware Business Trust)
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject
to the Master Trust Agreement, as from time to time in effect (the "Declaration
of Trust"), of the International Currency Fund, the Delaware business trust
established by the Declaration of Trust (the "Trust").
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places either within or without the State of
Delaware and at such times as the Trustees may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
Secretary or an Assistant Secretary or by the officer of the Trust calling the
meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or [by telegram] at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
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2.4 Quorum; Adjournment; Vote Required for Action. At any meeting of
the Trustees a majority of the Trustees then in office shall constitute a
quorum. Any meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice. At the adjourned
meeting, the Trustees may transact any business which might have been
transacted at the original meeting. Except in cases where the Declaration of
Trust or these By-Laws otherwise provide, the vote of a majority of the
Trustees present at a meeting at which a quorum is present shall be the act of
the Trustees.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, Assistant Treasurers and Assistant
Secretaries, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time
may in their discretion appoint. The Chairman of the Board shall be a Trustee
and may but need not be a beneficial owner of the Trust (a "Shareholder"); and
any other officer may be but none need be a Trustee or Shareholder. Any two or
more offices may be held by the same person.
3.2 Election. The Chairman of the Board, the President, the Treasurer,
and the Secretary shall be elected annually by the Trustees at a meeting held
within the first four months of the Trust's fiscal year. The meeting at which
the officers are elected shall be known as the annual meeting of Trustees.
Other officers, if any, may be elected or appointed by the Trustees at said
meeting or at any other time. Vacancies in any office may be filled at any
time.
3.3 Tenure. The Chairman of the Board, the President, the Treasurer,
and the Secretary shall hold office until the next annual meeting of the
Trustees and until their respective successors are chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Delaware business corporation and such other duties and powers as the Trustees
may from time to time designate.
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<PAGE> 3
3.5 Chairman; President. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is none, or in the absence of the Chairman,
the President shall preside at all meetings of the shareholders and of the
Trustees.
3.6 Vice President. The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination, then in the order of their election) shall
in the absence of the President or in the event of his or her inability or
refusal to act, perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Trustees may from time to time prescribe.
3.7 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.8 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.9 Secretary. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the Shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.10 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
3.11 Resignations and Removals. Any Trustee or officer may resign at
any time by written instrument signed by him or her and delivered to the
Chairman, the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by
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<PAGE> 4
them with or without cause. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided
by the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its action to the
Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the
time and in the manner required by the Declaration of Trust or any applicable
law. Officers and Committees shall render such additional reports as they may
deem desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed by resolution
of the Trustees.
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<PAGE> 5
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Delaware", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares of
the Trust, the Trustees or the transfer agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the record
holders of such shares, who shall in either case be deemed, for all purposes
hereunder, to be the holders of certificates for such shares as if they had
accepted such certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all Shareholders. In that event, a
Shareholder may receive a certificate stating the number of shares owned by him
or her, in such form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the President or a Vice President and by
the Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustees shall prescribe. The Trust
may require the owner of the lost, destroyed or mutilated share certificate, or
his or her legal representative, to give the Trust a bond sufficient to
indemnify
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<PAGE> 6
it against any claim that may be made against it on account of the alleged
loss, destruction or mutilation of any such certificate or the issuance of such
new certificate.
9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if
the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the pledgor shall be
stated thereon, who alone shall be liable as a Shareholder, and entitled to
vote thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at
any time discontinue the issuance of share certificates and may, by written
notice to each Shareholder, require the surrender of shares certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
Dealings with Trustees and Officers
10.1 General. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he or she were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
Amendments to the By-Laws
11.1 General. These By-Laws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the Trustees, or
by one or more writings signed by such a majority.
Adopted: October 16, 1996
6
