<PAGE>
As filed with the Securities and Exchange Commission on July 15, 1999
Securities Act File No. 333-70423
Investment Company Act of 1940 File No. 811-09195
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. 2 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 2 / X /
SA Funds - Investment Trust
(Formerly known as RWB Funds - Investment Trust)
(Exact Name of Registrant as Specified in Charter)
1190 Saratoga Avenue, Suite 200
San Jose, California 95129
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number (408) 260-3143
Cynthia Surprise
Vice President and Associate Counsel
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111-1724
(Name and Address of Agent for Service)
Copies to:
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104-2635
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after this
Registration Statement is declared effective.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 9(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SA FUNDS - INVESTMENT TRUST
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
Items in Part A of Form N-1A Heading
- ----------------------------- -------
<S> <C>
1. Front and Back Cover Pages Cover
2. Risk/Return Summary: Investments, Risk/Return Summary - Goal, Principal
Risks, and Performance Investment Strategies, Principal Risks
3. Risk/Return Summary: Fee Table Risk/Return Summary - Fees and Expenses
4. Investment Objectives; Principal Risk/Return Summary - Goal, Principal
Investment Strategies, and Related Risks Investment Strategies, Principal Risks;
More About SA Funds
5. Management's Discussion of Fund Not Applicable
Performance
6. Management, Organization, and Management
Capital Structure
7. Shareholder Information Your Account
8. Distribution Arrangements Your Account
9. Financial Highlights Information Not Applicable
</TABLE>
<PAGE>
SA FUNDS - INVESTMENT TRUST
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) (CONTINUED)
<TABLE>
<CAPTION>
Items in Part B of Form N-1A Heading
- ---------------------------- -------
<S> <C>
10. Cover Page and Table of Contents Cover and Table of Contents
11. Fund History History and General Information
12. Description of the Fund and Description of the Funds and Their
Its Investments and Risks Investments and Risks
13. Management of the Fund Management of the Trust
14. Control Persons and Principal Holders Control Persons and Principal Holders
of Securities of Securities
15. Investment Advisory and Other Investment Advisory and Other
Services Services
16. Brokerage Allocation and Other Brokerage Allocation and Other
Practices Practices
17. Capital Stock and Other Securities Information Concerning Shares
18. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of
Shares Shares
19. Taxation of the Fund Taxes
20. Underwriters Investment Advisory and Other
Services - Distribution
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
</TABLE>
<PAGE>
SA FUNDS - INVESTMENT TRUST
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) (CONTINUED)
<TABLE>
<CAPTION>
Items in Part C of Form N-1A Heading
- ---------------------------- -------
<S> <C>
23. Exhibits Exhibits
24. Persons Controlled by or Under Common Persons Controlled by or Under Common
Control with Registrant Control with Registrant
25. Indemnification Indemnification
26. Business and Other Connections of the Business and Other Connections of the
Investment Advisor Investment Advisor
27. Principal Underwriters Principal Underwriters
28. Location of Accounts and Records Location of Accounts and Records
29. Management Services Management Services
30. Undertakings Undertakings
</TABLE>
<PAGE>
SA FUNDS
SA FIXED INCOME FUND
SA U.S. MARKET FUND
SA U.S. HBtM FUND
SA U.S. SMALL COMPANY FUND
SA INTERNATIONAL HBtM FUND
SA INTERNATIONAL SMALL COMPANY FUND
PROSPECTUS
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities nor passed upon the accuracy or
adequacy of this prospectus. It is a criminal offense to state otherwise.
July [ ], 1999
<PAGE>
TABLE OF CONTENTS
2 RISK/RETURN SUMMARY
2 SA FIXED INCOME FUND
6 SA EQUITY FUNDS
6 SA U.S. Market Fund
7 SA HBtM Fund
8 SA U.S. Small Company Fund
9 SA International HBtM Fund
10 SA International Small Company Fund
14 MANAGEMENT
15 YOUR ACCOUNT
18 PRICING OF FUND SHARES
19 DISTRIBUTIONS
20 FEDERAL TAX CONSIDERATIONS
MORE ABOUT SA FUNDS
21 FIXED INCOME FUND
23 EQUITY FUNDS
BACK COVER FOR ADDITIONAL INFORMATION
<PAGE>
RISK/RETURN SUMMARY
- ------------------------------------------------------------------------------
This Risk/Return Summary briefly describes the goal and principal investment
strategies of each of the SA Funds and the principal risks of investing in the
Funds. For further information on the Funds' principal investments, strategies
and risks, please read the section entitled More About SA Funds. Each Fund may
also use other investment techniques to achieve its goal. For information on
these techniques and their related risks, please read the Statement of
Additional Information.
SA FIXED INCOME FUND
GOAL
The Fund's goal is to maximize total return available from a universe of high
quality fixed income investments maturing in five years or less.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to pursue its goal by investing at least 65% of its total
assets in high quality debt securities maturing in five years or less. These may
include:
- - obligations issued or guaranteed by the U.S. or foreign governments or
their agencies and instrumentalities;
- - corporate debt obligations;
- - bank obligations;
- - commercial paper;
- - repurchase agreements;
- - obligations of supranational organizations (such as the World Bank); and
- - Eurodollar obligations.
The Fund will attempt to maximize its total return by increasing or
decreasing its portfolio maturity length depending on prevailing interest
rates. For example, the subadvisor may sell a shorter term security and buy
a longer term security. If interest rates fall, prices for the longer term
security will rise more than the shorter term security. Thus, capital
appreciation is enhanced as well as total return. The subadviser will also
allocate assets among countries in an attempt to maximize total return.
The Fund may use foreign currency exchange contracts to hedge foreign currency
risks. The Fund may also engage in short-term trading, enter into futures and
options contracts and lend portfolio securities. These investments and
techniques are described under More About SA Funds.
PRINCIPAL RISKS
The share price of the Fund and the Fund's yield will change daily because of
changes in interest rates and other market conditions and factors. Therefore,
you may lose money if you invest in the Fund.
The principal risks of investing in the Fixed Income Fund are:
- INTEREST RATE RISK: In general, bond prices rise when interest rates
fall and fall when interest rates rise. Longer term bonds are
generally more sensitive to interest rate changes than shorter term
bonds. Generally, the longer the average maturity of the bonds held by
the Fund, the more the Fund's share price will fluctuate in response
to interest rate changes.
- CREDIT (or DEFAULT) RISK: It is possible that some of the issuers will
not make payments on debt securities held by the Fund, or there could
be defaults on repurchase agreements held by the Fund. Also, an issuer
may suffer adverse changes in financial condition that could lower the
credit quality of a security, leading to greater volatility in the
price of the security and in shares of the Fund. A change in the
quality rating of a bond can affect the bond's liquidity and make it
more difficult for the Fund to sell. If any of these events were to
occur, the Fund might suffer a loss.
- FOREIGN SECURITIES and CURRENCIES RISK: Investments by the Fund in
foreign securities involve risks in addition to those of U.S.
securities. Foreign securities are generally more volatile and less
liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available
about foreign companies. Issuers of foreign securities are generally
not subject to the same degree of regulations as are U.S. issuers. The
reporting, accounting and auditing standards of foreign countries may
differ, in some cases significantly, from U.S. standards. A further
risk is that a decline in
2
<PAGE>
the value of foreign currencies relative to the U.S. dollar will
reduce the value of securities denominated in those currencies.
- HEDGING RISK: Foreign currency exchange contracts may be used to hedge
foreign currency risk. Hedging tends to limit any potential gain that
may be realized if the value of the Fund's portfolio holdings
increases because of currency fluctuations. In addition, hedging may
increase the Fund's expenses. There is also a risk that a foreign
currency exchange contract intended as a hedge may not perform as
intended, in which case the Fund may not be able to minimize the
effects of foreign currency fluctuations and may suffer a loss.
- DERIVATIVES RISK: The Fund may experience losses as a result of its
use of futures, options and foreign currency exchange contracts, which
are forms of derivatives. The main risk with derivatives is that
the Fund may lose more money than its initial investment in the
derivative.
- EURO RISK: The Fund may be adversely affected by the conversion of
certain European currencies into the Euro. This conversion, which is
under way, is scheduled to be completed in 2002. However, problems
with the conversion process and delays could increase volatility in
world capital markets and affect European capital markets in
particular.
3
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy
and hold shares of the Fixed Income Fund. The Fund has no sales charge (load),
redemption fees or exchange fees, although some institutions may charge you a
fee for shares you buy or sell through them.
<TABLE>
<S> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Annual Account Maintenance Fee (for accounts under $100,000) (1)........$100.00
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
AS A % OF NET ASSETS
- ----------------------------
<TABLE>
<CAPTION>
CLASS S CLASS I
------- -------
<S> <C> <C>
Management/Advisory Fee 1.04% 1.04%
Other Expenses (2)
Shareholder Servicing Fees .25% .05%
Other Operating Expenses .82% .76%
---- ----
Total Other Operating Expenses 1.07% .81%
---- ---
Total Annual Fund Operating Expenses 2.11% 1.85%
Fee Waiver and/or Expense Reimbursement (.85)% (.85)%
----- ----
Net Expenses (3) 1.26% 1.00%
</TABLE>
(1) SA Funds may deduct an annual maintenance fee of $100.00 from accounts
with a value of less than $100,000. The account value is determined by
aggregating accounts with SA Funds. The Fund expects to value accounts on
the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee is
payable to the Fund and is designed to offset in part the relatively higher
costs of servicing smaller accounts. The Fund reserves the right to waive
the fee.
(2) Other expenses are based on estimated amounts for the current fiscal year.
(3) The manager has contractually agreed to waive its management fees and/or to
reimburse expenses to the extent necessary to limit the Fund's total
operating expenses to the amounts shown in the above table. This agreement
will remain in effect until July 15, 2009. The manager may elect to
recapture any amounts waived or reimbursed subject to the following
conditions: (1) the manager must request reimbursement within three years
from the year in which the waiver/reimbursement is made, (2) the Board of
Trustees must approve the reimbursement and (3) the Fund must be able to
make the reimbursement and still stay within the operating expense
limitation.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Fixed Income Fund to the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year, that the Fund's
operating expenses remain the same as shown in the table above and that all
dividends and distributions are reinvented. Although your actual costs and the
return on your investment may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
YEAR
- ---- CLASS S CLASS I
------- -------
<S> <C> <C>
1 $129 $102
3 $401 $319
</TABLE>
4
<PAGE>
PERFORMANCE
The Fund has not commenced operations as of the date of this Prospectus
and, therefore, does not have annual returns for a full calendar year. For this
reason, a bar chart and performance table showing performance information and
information on the Fund's best and worst calendar quarters is not provided in
this prospectus.
5
<PAGE>
SA EQUITY FUNDS
SA U.S. MARKET FUND
SA U.S. HBTM FUND
SA U.S. SMALL COMPANY FUND
SA INTERNATIONAL HBTM FUND
SA INTERNATIONAL SMALL COMPANY FUND
EQUITY INVESTMENT APPROACH
- - The sub-adviser believes that equity investing should involve a long-term
view and a focus on asset class (for example, small company stocks or large
company stocks) selection. Accordingly, the sub-adviser does not engage in
market-timing or conventional stock selection. The sub-adviser places a
premium on limiting portfolio turnover and does not take defensive
positions in anticipation of negative investment conditions.
- - The sub-adviser generally structures a Fund's portfolio by:
- Selecting a starting universe of securities (for example, all publicly
traded U.S. common stocks).
- Creating a sub-set of companies meeting the sub-adviser's investment
guidelines for each particular Fund.
- Excluding certain companies after analyzing various factors (for
example, solvency or involvement in a merger).
- Purchasing stocks so the portfolio is generally market capitalization
weighted, which means that stocks representing larger companies will
represent a proportionately larger percentage of the portfolio.
SA U.S. MARKET FUND
GOAL
The Fund's goal is to achieve long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to pursue its goal by investing in common stocks of U.S.
companies within a MARKET CAPITALIZATION RANGE of deciles 1-10. Although the
market capitalization of companies within this range will fluctuate, as of the
date of this prospectus, the companies within this range have market
capitalizations of between approximately $102 million and $334 billion.
Because it would be very expensive to buy and sell all of the stocks in the
Fund's target universe (all common stocks that are traded on the New York Stock
Exchange, the American Stock Exchange and the NASDAQ National Market System) the
sub-adviser will use a technique known as "sampling." The sub-adviser will
select stocks that will recreate in terms of market capitalization the Fund's
target universe.
The Fund will also invest up to 5% of its total assets in the U.S. 9-10 Small
Company Portfolio, an investment company that invests exclusively in stocks of
very small companies. Dimensional Fund Advisors Inc. ("DFA"), the sub-adviser of
the Fund, is the adviser of the U.S. Small Company portfolio.
The Fund may also invest a portion of its assets in fixed income securities and
may lend a portion of its portfolio securities.
ABOUT MARKET CAPITALIZATION RANGES
Market Capitalization is the total value of a company's stock in the marketplace
or on a stock exchange. For example, a company that has issued one million
shares that are selling for $30 per share would have a market capitalization of
$30,000,000.
Market capitalization ranges for the Funds are determined as follows:
1. The sub-adviser equally divides all the companies traded on the New York
Stock Exchange into 10 groups or "deciles" based on market capitalization.
Stocks in decile 1 have the biggest market capitalizations and those in
decile 10, the smallest.
2. The sub-adviser then combines two or more of these deciles into a market
capitalization segment or range.
3. The sub-adviser generally considers a stock (it may not necessarily be
traded on the New York Stock Exchange) for purchase only if its market
capitalization falls within the ranges created.
PRINCIPAL RISKS
The share price of the Fund may change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Fund. The
principal risks that apply to the Fund are:
- MARKET RISK: The value of the securities in which the Fund invests may
go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or
last for extended periods.
- LARGE COMPANY RISK: Larger, more established companies are generally
not nimble and may be unable to respond quickly to competitive
challenges, such as changes in technology and consumer tastes.
- SMALLER COMPANY STOCK RISK: The stocks of small and medium-size
companies may
6
<PAGE>
have more risks than those of larger companies. Small and medium-
size companies often have narrower markets and more limited
managerial and financial resources than larger, more established
companies. As a result, they may be more sensitive to changing
economic conditions, which could increase the volatility of the
Fund's portfolio. In addition, small company stocks typically trade
in lower volume, making them more difficult to sell. Generally, the
smaller the company size, the greater these risks.
SA U.S. HBtM FUND
GOAL
The Fund's goal is to provide long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to pursue its goal by investing at least 80% of its total
assets in common stocks of U.S. companies that the Fund believes are value
stocks. The Fund considers value stocks to be those of companies with high book
values in relation to their market values. In measuring value, factors such as
cash flow, economic conditions and developments in the issuer's industry are
also considered.
Generally, the Fund considers a company to have a high book to market ratio if
its ratio equals or exceeds the ratios of any of the 30% of New York Stock
Exchange listed companies with the highest book to market ratios.
The Fund intends to invest in common stocks of U.S. companies within a MARKET
CAPITALIZATION RANGE of deciles 1-5. Although the market capitalization of
companies within this range will fluctuate, as of the date of this prospectus,
companies within this range have market capitalizations of at least $800
million.
The Fund may use a variety of TAX-EFFICIENT MANAGEMENT TECHNIQUES, when
consistent with its strategies and operational needs, to minimize adverse tax
consequences to shareholders of the Fund.
The Fund may also invest a portion of its assets in fixed income securities and
may lend a portion of its portfolio securities.
ABOUT TAX-EFFICIENT MANAGEMENT TECHNIQUES
The sub-adviser may use the following Tax-Efficient Management Techniques to
minimize taxable distributions, particularly short-term capital gains and
current income, which are taxed at a higher rate than long-term capital gains.
- - Minimizing sales of securities that result in capital gains.
- - Maximizing the extent to which any realized net capital gains are long-term
in nature (taxable at lower capital gains tax rates).
- - Minimizing dividend income.
- - Realizing losses to offset gains, when prudent to do so.
PRINCIPAL RISKS
The share price of the Fund may change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Fund. The
principal risks that apply to the Fund are:
7
<PAGE>
- MARKET RISK: The value of the securities in which the Fund invests may
go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or
last for extended periods.
- VALUE STOCKS RISK: Value stocks may underperform when the market
strongly favors growth stocks over value stocks. In addition, a value
stock may not reach what the sub-adviser believes is its full market
value or its intrinsic value may go down.
- LARGE COMPANY STOCK RISK: Larger, more established companies are
generally not nimble and may be unable to respond quickly to
competitive challenges, such as changes in technology and consumer
tastes.
- MEDIUM SIZE COMPANY STOCK RISK: The stocks of medium-size companies
may have more risks than those of larger companies. They may be more
susceptible to market downturns and their prices may be more volatile.
SA U.S. SMALL COMPANY FUND
GOAL
The Fund's goal is to provide long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to pursue its goal by investing at least 80% of its total
assets in equity securities of U.S. companies with market capitalizations within
the smaller half of companies listed on the New York Stock Exchange. Although
the market capitalization of companies within this range will fluctuate, as of
the date of this prospectus, companies within this range have market
capitalizations of less than $900 million.
The Fund may use a variety of TAX-EFFICIENT MANAGEMENT TECHNIQUES to minimize
adverse tax consequences to shareholders of the Fund.
PRINCIPAL RISKS
The share price of the Fund may change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Fund. The
principal risks that apply to the Fund are:
- MARKET RISK: The value of the securities in which the Fund invests may
go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or
last for extended periods.
- SMALL COMPANY STOCK RISK: The stocks of small companies may have more
risks than those of larger companies. Small companies often have
narrower markets and more limited managerial and financial resources
than larger, more established companies. As a result, they may be more
sensitive to changing economic conditions, which could increase the
volatility of the Fund's portfolio. In addition, small company stocks
typically trade in lower volume, making them more difficult to
sell. Generally, the smaller the company size, the greater these
risks.
8
<PAGE>
SA INTERNATIONAL HBtM FUND
GOAL
The Fund's goal is to provide long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to pursue its goal by investing at least 65% of its total
assets in common stocks of large non-U.S. companies that it believes are value
stocks. The Fund considers value stocks to be those of companies with high book
values in relation to their market values. In measuring value, factors such as
cash flow, economic conditions and developments in the issuer's industry are
also considered.
Generally, the Fund considers a company to have a high book to market ratio if
its ratio equals or exceeds the ratios of any of the 30% of exchange-listed
companies (in the applicable country) with the highest book to market ratios.
The Fund intends to invest in companies in countries with developed markets (for
example, Australia, Denmark or France). At least 65% of the Fund's assets will
be invested in companies in at least three non-U.S. countries.
As of the date of this prospectus, the Fund expects to invest in companies with
market capitalizations of at least $800 million.
The Fund may use a variety of TAX-EFFICIENT MANAGEMENT TECHNIQUES to minimize
adverse tax consequences to shareholders of the Fund.
The Fund may also invest a portion of its assets in fixed income securities and
may lend a portion of its portfolio securities.
PRINCIPAL RISKS
The share price of the Fund may change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Fund. The
principal risks that apply to the Fund are:
- MARKET RISK: The value of the securities in which the Fund invests may
go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or
last for extended periods.
- FOREIGN SECURITIES AND CURRENCY RISK: Investments by the Fund in
foreign securities involve risks in addition to those of U.S.
securities. Foreign securities are generally more volatile and less
liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available
about foreign companies. Issuers of foreign securities are generally
not subject to the same degree of regulations as are U.S. issuers. The
reporting, accounting and auditing standards of foreign countries may
differ, in some cases significantly, from U.S. standards. A further
risk is that a decline in the value of foreign currencies relative to
the U.S. dollar will reduce the value of securities denominated in
those currencies.
- EURO RISK: The Fund may be adversely affected by the conversion of
certain European currencies into the Euro. This conversion, which is
under way, is scheduled to be completed in 2002. However, problems
with the conversion process and delays could increase volatility in
world capital markets and affect European capital markets in
particular.
- LARGE COMPANY STOCK RISK: Larger, more established companies are
generally not nimble and may be unable to respond quickly to
competitive challenges, such as changes in technology and consumer
tastes.
- MEDIUM-SIZE COMPANY STOCK RISK: The stocks of medium-size companies
may have more risks than those of larger companies. They may be more
susceptible to market downturns and their prices may be more volatile.
9
<PAGE>
SA INTERNATIONAL SMALL COMPANY FUND
GOAL
The Fund's goal is long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is a fund of funds, which means that it invests almost all of its
assets in other mutual funds. The Fund intends to pursue its goal by investing
its assets in the following mutual funds ("Portfolios"): DFA Japanese Small
Company Portfolio, DFA United Kingdom Small Company Portfolio, DFA Continental
Small Company Portfolio, DFA Pacific Rim Small Company Portfolio and DFA
Emerging Markets Portfolio.
The Portfolios are what is known as "feeder" funds. This means that instead of
buying securities directly, each Portfolio will invest substantially all of its
assets in a "master" fund (referred to in this prospectus as an "underlying
fund") with the same investment objective, and the underlying fund will, in
turn, purchase the appropriate portfolio securities.
The Portfolios and the underlying funds are series of The DFA Investment Trust
Company, an investment company advised by DFA, the sub-adviser of the
International Small Company Fund.
Because DFA receives both an administration fee and an investment advisory
fee through its management of the Portfolios and the underlying funds, DFA
will not receive any subadvisory fee for the International Small Company
Fund. DFA has agreed to this fee arrangement in order to prevent any
duplication of fees in this multi-tier arrangement.
The Fund will invest its assets in the Portfolios within the following ranges
(expressed as a percentage of the Fund's assets):
<TABLE>
<CAPTION>
Portfolio Investment Range
- --------- ----------------
<S> <C>
Japanese Portfolio 20% - 45%
U.K. Portfolio 5% - 40%
Continental Portfolio 20% - 45%
Pacific Rim Portfolio 0% - 25%
Emerging Markets Portfolio 0% - 25%
</TABLE>
The manager will determine periodically the allocations among Portfolios.
POLICIES OF ALL UNDERLYING FUNDS DFA structures each underlying fund by
generally basing the amount of each security purchased on the issuer's market
capitalization relative to other companies located in the same country (or
region, in the case of the Continental Portfolio and Pacific Rim Portfolio).
The Fund may also invest a portion of its assets in fixed income securities and
may lend a portion of its portfolio securities.
PRINCIPAL RISKS
The share price of the Fund may change daily based on market conditions and
other factors. Therefore, you may lose money if you invest in the Fund. The
principal risks that apply to the Fund are:
- MARKET RISK: The value of the securities in which the Fund invests may
go up or down in response to the prospects of individual companies
and/or general economic conditions. Price changes may be temporary or
last for extended periods. The stock of medium-size and small
companies may have more risks than those of larger companies.
The stocks of small companies may have more risks than those of larger
companies.
- SMALL COMPANY STOCK RISK: The stocks of small companies may have
more risks than those of larger companies. Small companies often
have narrower markets and more limited managerial and financial
resources than larger, more established companies. As a result,
they may be more sensitive to changing economic conditions, which
could increase the volatility of the Fund's portfolio. In addition,
small company stocks typically trade in lower volume, making them
more difficult to sell. Generally, the smaller the company size,
the greater these risks.
- FOREIGN SECURITIES AND CURRENCY RISK: Investments by the Fund in
foreign securities involve risks in addition to those of U.S.
securities. Foreign securities are generally more volatile and less
liquid than U.S. securities, in part because of greater political and
economic risks and because there is less public information available
about foreign companies. Issuers of foreign securities are generally
not subject to the same degree of regulations as are U.S. issuers. The
reporting, accounting and auditing standards of foreign countries may
differ, in some cases significantly, from U.S. standards. A further
risk is that a decline in the value of
10
<PAGE>
foreign currencies relative to the U.S. dollar will reduce the value
of securities denominated in those currencies.
- EURO RISK: The Fund may be adversely affected by the conversion of
certain European currencies into the Euro. This conversion, which is
under way, is scheduled to be completed in 2002. However, problems
with the conversion process and delays could increase volatility in
world capital markets and affect European capital markets in
particular.
- EMERGING MARKETS RISK: Numerous emerging countries have recently
experienced serious, and potentially continuing, economic and
political problems. Stock markets in many emerging countries are
relatively small, expensive and risky. Foreigners are often limited in
their ability to invest in, and withdraw assets from, these markets.
Additional restrictions may be imposed under emergency conditions.
Risks generally associated with foreign securities and currencies also
apply. These risks are greater for securities of issuers in
emerging market countries.
11
<PAGE>
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you
buy and hold shares of an Equity Fund. The Funds have no sales charge (load),
redemption fees or exchange fees, although some institutions may charge you a
fee for shares you buy or sell through them.
<TABLE>
<S> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Transaction Fees (as a % of offering price) (1)
International Small Company Fund.......................................0.675%
Annual Account Maintenance Fee (for accounts under $100,000) (2)........$100.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
(AS A % OF NET ASSETS)
- ----------------------------------------------------------------------------------------------------------------------
U.S. MARKET FUND U.S. HBtM FUND U.S. SMALL
COMPANY FUND
CLASS S CLASS I CLASS S CLASS I CLASS S CLASS I
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management/Advisory Fee .90% .90% 1.12% 1.12% 1.23% 1.23%
Other Expenses (3)
Shareholder Servicing Fees .25% .05% .25% .05% .25% .05%
Other Operating Expenses 1.04% .98% 1.52% 1.46% 1.70% 1.64%
---- ---- ------ ----- ----- -----
Total Other Operating Expenses 1.29% 1.03% 1.77% 1.51% 1.95% 1.69%
---- ---- ------ ----- ----- -----
Total Annual Fund Operating Expenses 2.19% 1.93% 2.89% 2.63% 3.18% 2.92%
Fee Waiver and/or Expense Reimbursement (.85)% (.85)% (1.50)% (1.50)% (1.64)% (1.64)%
---- ---- ------ ----- ----- -----
Net Expenses (4) 1.34% 1.08% 1.39% 1.13% 1.54% 1.28%
<CAPTION>
INTERNATIONAL HBTM FUND INTERNATIONAL SMALL COMPANY FUND
CLASS S CLASS I CLASS S CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Management/Advisory Fee 1.23% 1.23% .85% .85%
Other Expenses (3)
Shareholder Servicing Fees .25% .05% .25% .05%
Other Operating Expenses 1.23% 1.17% 1.31% 1.25%
---- ---- ---- ----
Total Other Operating Expenses 1.48% 1.22% 1.56% 1.30%
---- ---- ---- ----
Total Operating Expenses 2.71% 2.45% 2.41% 2.15%
Fee Waiver and/or Expense Reimbursement (.92%) (.92)% (.87)% (.87)%
---- ---- ---- ----
Net Expenses (4) 1.79% 1.53% 1.54% 1.28%
</TABLE>
- --------------
(1) The International Small Company Fund charges a transaction fee on
purchase of, and exchanges for, shares of that Fund. The fee does not
apply to reinvested dividends or capital gain distributions. The fee is
not a sales charge. It is paid to the Fund and is used to protect
existing shareholders by offsetting the transaction costs associated
with new purchases of securities by the Fund. The transaction fee is a
blended rate, which is based on the current target investment
allocations among the Portfolios. Consequently, the transaction fee will
change from time to time if the Fund changes the target investment
allocation. An investor may call the manager at (800) 366-7266 for the
transaction fee rate at the time of investment.
(2) The Funds may deduct an annual maintenance fee of $100.00 from accounts
with a value of less than $100,000. The account value is determined by
aggregating accounts with SA Funds. The Funds expects to value accounts on
the second Friday in November of each year. Accounts opened after September
30 will not be subject to the fee for that year. The fee is payable to the
Funds and is designed to offset in part the relatively higher costs of
servicing smaller accounts. The Funds reserve the right to waive the fee.
(3) Other expenses are based on estimates for the current fiscal year.
(4) The manager has contractually agreed to waive its management fees and/or to
reimburse expenses to the extent necessary to limit the Fund's total
operating expenses to the amounts shown in the above table. This agreement
will remain in effect until July 15, 2009. The manager may elect to
recapture any amounts waived or reimbursed subject to the following
12
<PAGE>
conditions: (1) the manager must request reimbursement within three years
from the year in which the waiver/reimbursement is made, (2) the Board of
Trustees must approve the reimbursement and (3) the Fund must be able to
make the reimbursement and still stay within the operating expense
limitation.
In addition to the expenses shown above, shareholders of the International
Small Company Fund will indirectly bear their pro rata share of the annual fees
and expenses of the Portfolios, which currently range from 0.70% to 1.00%.
EXAMPLE
This example is intended to help you compare the cost of investing in an SA
Fund to the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in a Fund for the time periods indicated and then sell all of
your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year, that the Fund's operating expenses remain
the same as shown in the table above and that all dividends and distributions
are reinvested. Although your actual costs and the return on your investment may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
U.S. MARKET FUND
CLASS S SHARES $137 $427
CLASS I SHARES $111 $345
U.S. HBtM FUND
CLASS S SHARES $142 $443
CLASS I SHARES $116 $361
U.S. SMALL COMPANY FUND
CLASS S SHARES $158 $490
CLASS I SHARES $131 $408
INTERNATIONAL HBtM FUND
CLASS S SHARES $183 $568
CLASS I SHARES $157 $487
INTERNATIONAL SMALL COMPANY FUND
CLASS S SHARES $158 $490
CLASS I SHARES $131 $408
</TABLE>
PERFORMANCE
The Funds have not commenced operations as of the date of this Prospectus
and, therefore, do not have annual returns for a full calendar year. For this
reason, a bar chart and performance table showing performance information and
information on each Fund's best and worst calendar quarters is not provided in
this prospectus.
13
<PAGE>
MANAGEMENT
- -------------------------------------------------------------------------------
RWB Advisory Services Inc., 1190 Saratoga Avenue, San Jose, California 95129, is
the Funds' investment manager. Founded in 1975, the manager provides investment
advisory services to individuals, pension and profit sharing plans, trusts,
estates, charitable organizations and other business entities. Today the firm
has approximately $1.4 billion in assets under management.
The manager, in its capacity as investment adviser, handles the business affairs
of the Funds and has general responsibility for the management of the Funds'
investments. In its capacity as administrator, the manager provides
administrative services to the Funds. The manager has no prior experience as
manager of a mutual fund.
The manager has engaged Dimensional Fund Advisors Inc., 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401, as investment sub-adviser to the Funds.
Since its organization in May 1981, the sub-adviser has provided investment
management services to institutional investors and to other mutual funds. The
sub-adviser presently serves as the investment adviser to four other investment
companies-The DFA Investment Trust Company, DFA Investment Dimensions Group
Inc., Dimensional Investment Group Inc. and Dimensional Emerging Markets Value
Fund Inc. Currently, the sub-adviser manages over $31 billion in assets,
including over $14 billion in mutual fund assets.
The sub-adviser, subject to the supervision of the manager, is responsible for
managing the assets of the Funds. The sub-adviser's investment committee makes
investment decisions for the Funds.
The following chart shows the aggregate annual investment management fees that
each Fund will pay to the manager and the sub-adviser. Fees are stated before
any waiver. Please refer to the Fees and Expenses Table at the beginning of the
prospectus for more information about fee waivers.
<TABLE>
<CAPTION>
INVESTMENT MANAGEMENT FEE
(EXPRESSED AS PERCENTAGE OF AVERAGE DAILY NET ASSETS)
-------------------------------------------------------
<S> <C>
Fixed Income Fund 1.04%
U.S. Market Fund .90%
U.S. HBtM Fund 1.12%
U.S. Small Company Fund 1.23%
International HBtM Fund 1.23%
International Small Company Fund .85%
</TABLE>
YEAR 2000
Like other mutual funds, financial institutions, business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the manager and the Funds' other service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. The manager is taking steps that it believes are
reasonably designed to address year 2000 computer-related problems with respect
to the computer systems that it uses and to obtain assurances that comparable
steps are being taken by the Funds' other, major service providers. Although
there can be no assurances, the manager believes that these steps will be
sufficient to avoid any adverse impact on any of the Funds. Similarly, there can
be no assurances that year 2000 issues will not affect the companies and other
issuers in which the Funds invest or affect worldwide markets and economies.
14
<PAGE>
YOUR ACCOUNT
- -------------------------------------------------------------------------------
This section describes how to do business with SA Funds and the services that
are available to shareholders.
HOW TO REACH SA FUNDS
By telephone: (800) 366-7266
Call for account information 8:00 a.m. to 5:00 p.m. Pacific
time Monday through Friday
By mail: 1190 Saratoga Avenue
Suite 200
San Jose, California 95125
SHARE CLASSES
Each Fund offers two classes of shares (Class S and Class I). Both of the
classes are offered without a sales charge (load). Different shareholder
servicing fees, which are payable to the manager as the Funds' shareholder
servicing agent, and different operating expenses are payable by each class.
Shareholder servicing fees will be paid at an annual rate of up to 0.25% and
0.05% of the daily net assets of the Class S and Class I Shares,
respectively. Other operating expenses paid by Class S Shares will exceed
those paid by Class I Shares by 0.06% of their respective daily net assets.
We base your eligibility to purchase shares of a class on the type of investor
you are. Investors who maintain aggregate accounts of at least $5,000,000 (or
less at the discretion of SA Funds) may purchase Class I shares.
All other investors must purchase Class S shares.
PURCHASING SHARES
Only clients of investment advisers are eligible to purchase shares of the
Funds.
If you are making an initial investment, you must complete and submit an account
application.
You or your financial representative should notify the manager of any proposed
investment.
If you purchase shares through an omnibus account maintained by a securities
firm, the firm may charge you a fee.
MINIMUM INVESTMENTS
The minimum initial investment is $100,000, unless waived by SA Funds.
There is no minimum for additional investments.
TIMING OF REQUESTS
All requests received by SA Funds' transfer agent, or other authorized
intermediary, before 4:00 p.m. Eastern time will be executed the same day, at
that day's net asset value per share ("NAV"). Orders received after 4:00 p.m.
Eastern time will be executed the following day, at that day's NAV. Authorized
intermediaries acting on a purchaser's behalf are responsible for transmitting
orders by the deadline.
SELLING SHARES
You or your financial representative may sell shares at any time by furnishing a
redemption request to the manager in the form required by the manager.
INCOMPLETE SELL REQUESTS
SA Funds will attempt to notify you or your financial representative promptly if
any information necessary to process your request is missing.
TIMING OF REQUESTS
All requests received (in the form required by the manager) by SA Funds, or
authorized intermediary, before 4:00 p.m. Eastern time will be executed the same
day, at that day's NAV. Requests received after 4:00 p.m. Eastern time will be
executed the following day, at that day's NAV.
WIRE TRANSACTIONS
A fee of $10 will be deducted from all proceeds sent by wire, and your bank may
charge an additional fee to receive wired funds.
SELLING SHARES RECENTLY PURCHASED
If you sell shares before the check or electronic funds transfer (ACH) for those
shares has been collected, you will not receive the proceeds until your initial
payment has cleared. This may take up to 15 days after your purchase was
recorded (in rare cases, longer). If you open an account with shares purchased
by wire, you cannot sell those shares until your application has been processed.
15
<PAGE>
ACCOUNTS WITH LOW BALANCES
If the value of your total account with SA Funds falls below $10,000 as a result
of selling or exchanging shares, SA Funds may send you a notice asking you to
bring the account back up to $10,000 or to close it out. If you do not take
action within 60 days, SA Funds may sell your shares and mail the proceeds to
you at the address of record.
EXCHANGES
There is no fee to exchange shares among SA Funds. The exchange privilege is not
intended as a way to speculate on short-term movements in the markets.
You may acquire shares of the Funds by exchanging shares of the SSgA Money
Market Fund and may exchange your shares of the Funds for shares of the SSgA
Money Market Fund, if such shares are offered in your state of residence. The
SSgA Money Market Fund is a portfolio of the SSgA Funds. The SSgA Funds is an
open-end management investment company with multiple portfolios advised by State
Street Bank and Trust Company, 225 Franklin Street, Boston MA 02110, and is not
affiliated with the SA Funds or the SA Fund's distributor. Prior to making such
an exchange, you should carefully read the prospectus for the SSgA Money Market
Fund. You can obtain a copy of the prospectus through your financial
representative or by calling the manager at (800) 366-7266. The exchange
privilege is not an offering or recommendation on the part of the SA Funds or
the distributor of an investment in the SSgA Money Market Fund.
The SSgA Money Market Fund's fundamental investment objective is to maximize
current income, to the extent consistent with the preservation of capital and
liquidity and the maintenance of a stable $1.00 per share net asset value, by
investing in dollar denominated securities with remaining maturities of one year
or less.
Investment in the SSgA Fund is neither insured nor guaranteed by the U.S.
Government. There is no assurance that the SSgA Money Market Fund will maintain
a stable net asset value of $1.00 per share.
ADDITIONAL POLICIES FOR PURCHASES, SALES AND EXCHANGES
- SA Funds reserves the right to reject any purchase order.
- At any time, SA Funds may change any of its purchase or redemption
procedures, and may suspend sale of its shares.
- SA Funds may delay sending your redemption proceeds for up to seven
days, or longer if permitted by the Securities and Exchange
Commission.
- In the interest of economy, SA Funds does not issue share
certificates.
- If accepted by SA Funds, you may purchase shares of the Funds (except
for the International Small Fund) with securities you own.
- SA Funds reserves the right to make payment for redeemed shares wholly
or in part by giving the redeeming shareholder portfolio securities.
The shareholder will pay transaction costs to dispose of these
securities.
- SA Funds may authorize certain financial intermediaries to accept
purchase, redemption and exchange orders from their customers on
behalf of the SA Funds. Other intermediaries may also be designated to
accept such orders, if approved by SA Funds. Authorized intermediaries
are responsible for transmitting orders on a timely basis. A Fund will
be deemed to have received an order when the order is accepted in
proper form by the authorized intermediary, and the order will be
priced at the Fund's NAV next determined.
16
<PAGE>
PRICING OF FUND SHARES
- ------------------------------------------------------------ ------------------
Each Fund's NAV is calculated on each day the New York Stock Exchange is open.
NAV is the value of a single share of a Fund. NAV is calculated by (1) taking
the current value of a Fund's total assets, (2) subtracting the liabilities and
(3) dividing that amount by the total number of shares owned by shareholders.
NAV includes interest on fixed income securities which is accrued daily.
The Funds calculate NAV as of the close of business on the New York Stock
Exchange, normally 4:00 p.m. Eastern time. If the New York Stock Exchange closes
early, the Funds accelerate calculation of NAV transaction deadlines to that
time.
Market or fair values of the Funds' portfolio securities are determined as
follows:
- - Equity securities listed on an exchange for which market quotations are
readily available: according to the last quoted sale price of the day (on
the exchange where the security is primarily traded).
- - In the absence of recorded sales for listed equity securities: according to
the mean between the most recent quoted bid and asked prices.
- - Unlisted equity securities for which market quotations are readily
available: mean between the most recent quoted bid and asked prices.
- - Bond and other fixed income securities: based on prices provided by an
independent pricing service.
- - Shares of an investment company: at the investment company's net asset
value.
- - All other securities: at fair value as determined in good faith by the
Board of Trustees of the Funds.
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. The Funds value foreign securities at
the latest closing price on the exchange on which they are traded immediately
prior to the closing of the New York Stock Exchange. Certain foreign currency
exchange rates may also be determined at the latest rate prior to the closing of
the New York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If such events
materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Board of Trustees.
Foreign securities may trade in their primary markets on weekends or other days
when the Fund does not price its shares. Therefore, the value of the portfolio
of a Fund holding foreign securities may change on days when shareholders will
not be able to buy or sell their shares.
17
<PAGE>
DISTRIBUTIONS
- -------------------------------------------------------------------------------
As a shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes substantially all of its earnings
along to its shareholders as distributions. When a Fund earns dividends from
stocks and interest from debt securities and distributes these earnings to
shareholders, it is called a DIVIDEND DISTRIBUTION. A Fund realizes capital
gains when it sells securities for a higher price than it paid. When these gains
are distributed to shareholders, it is called a CAPITAL GAIN DISTRIBUTION.
Dividend distributions may be made several times a year, while capital gain
distributions are generally made on an annual basis.
The Fixed Income Fund pays dividends, if any, quarterly.
The U.S. Market Fund, U.S. HBtM Fund, U.S. Small Company Fund, International
HBtM Fund and International Small Company Fund pay dividends, if any, annually.
You will receive distributions from a Fund in additional shares of that Fund
unless you elect to receive your distributions in cash. If you wish to receive
distributions in cash, you may either indicate this request on your account
application or you or your financial representative may notify the manager by
calling (800) 366-7266.
18
<PAGE>
FEDERAL TAX CONSIDERATIONS
- -------------------------------------------------------------------------------
Your investment in a Fund will have tax consequences that you should consider.
Some of the more common federal tax consequences are described here, but your
should consult your tax adviser about your own particular situation.
TAXES ON DISTRIBUTIONS
You will generally have to pay federal income tax on all Fund distributions.
Your distributions will be taxed in the same manner whether you receive the
distributions in cash or additional shares of the Fund. Distributions that are
derived from net long-term capital gains generally will be taxed as long-term
capital gains. Dividend distributions and short-term capital gains generally
will be taxed as ordinary income. The tax you pay on a given capital gain
distribution generally depends on how long the Fund held the portfolio
securities it sold. It does not depend on how long you held your Fund shares.
The SA Fixed Income Fund expects that its distributions will consist primarily
of ordinary income. The Equity Funds expect that their distributions will
consist primarily of capital gains.
You generally are required to report all Fund distributions on your federal
income tax return. Each year SA Funds will send you information detailing the
amount of ordinary income and capital gains paid to you for the previous year.
TAXES ON SALES OR EXCHANGES
If you sell your shares of a Fund or exchange them for shares of another Fund,
you generally will be subject to tax on any taxable gain. Your taxable gain is
computed by subtracting your tax basis in the shares from the redemption
proceeds (in the case of a sale) or the value of the shares received (in the
case of an exchange). Because your tax basis depends on the original purchase
price and on the price at which any dividends may have been reinvested, you
should be sure to keep your account statements so that you or your tax preparer
will be able to determine whether a sale or exchange will result in a taxable
gain.
OTHER CONSIDERATIONS
If you buy shares in a Fund just before the Fund makes any distribution, you
will receive some of the purchase price back in the form of a taxable
distribution.
By law, SA Funds must withhold a portion of your proceeds to pay federal income
taxes if you have not provided complete, correct taxpayer information.
19
<PAGE>
MORE ABOUT SA FUNDS
- -------------------------------------------------------------------------------
FIXED INCOME FUND
The Fund's main strategies and risks are summarized above in the section
entitled SA Fixed Income Fund. Below is further information about the Fund's
investments and strategies and their associated risks. The Fund may also use
strategies and invest in securities described in the SAI. The Fund's objective
may be changed without shareholder approval.
SHORT-TERM TRADING. The Fund may engage in short-term trading, which could
produce higher trading costs and taxable distributions. Frequent trading also
increases transaction costs, which could detract from the Fund's performance.
SECURITIES LENDING. The Fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional income gains
or losses. If the borrower fails to return the securities or the invested
collateral has declined in value, the Fund could lose money.
MATURITY RISK PREMIUMS. The sub-adviser will manage the fund with a view toward
capturing maturity risk premiums. The term "maturity risk premium" means the
anticipated incremental return on investment for holding securities with
maturities of longer than one month compared to securities with a maturity of
one month. This means that although the Fund will primarily invest in foreign
obligations, the Fund will invest in U.S. obligations when the sub-adviser
believes that foreign securities do not offer maturity risk premiums that
compare favorably with those offered by U.S. securities.
DERIVATIVES. The Fund may use futures, options and foreign currency exchange
contracts, which are forms of derivatives. Derivatives are financial contracts
whose value is based on a security, a currency exchange rate or a market index.
Derivatives can be used for hedging (attempting to reduce risk by offsetting one
investment position with another) or speculation (taking a position in the hope
of increasing return). The Fund will not use derivatives for speculative
purposes. The main risk with derivatives is that some types can amplify a gain
or loss, potentially earning or losing substantially more money than the actual
cost of the derivative. With some derivatives, there is also the risk that the
counterparty may fail to honor its contract terms, causing a loss for the Fund.
The Fund may, but is not required to, use foreign currency exchange contracts to
hedge foreign currency risks. A forward foreign currency exchange contract is an
obligation to exchange one currency for another on a future date at a specified
exchange rate. These contracts are privately negotiated transactions and can
have substantial price volatility. When used for hedging purposes, they tend to
limit any potential gain that may be realized if the value of the Fund's foreign
holdings increases because of currency fluctuations.
The Fund may, but is not required to, use futures contracts and options on
futures contracts, but only for the purpose of remaining fully invested and to
maintain liquidity to pay redemptions. A futures contract obligates the holder
to buy or sell an asset in the future at an agreed upon price. When the Fund
purchases an option on a futures contract, it has the right to assume a position
as a purchaser or seller of a futures contract at a specified price during the
option period. When the Fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
Futures contracts and options present the following risks: imperfect correlation
between the change in market value of a Portfolio's securities and the price of
futures contracts and options; the possible inability to close a futures
contract when desired; losses due to unanticipated market movements which are
potentially unlimited; and the possible inability of the investment management
team to correctly predict the direction of securities prices, interest rates,
currency exchange rates and other economic factors.
DEFENSIVE INVESTING. The Fund does not take temporary defensive positions in
anticipation of negative investment conditions.
DESCRIPTION OF INVESTMENTS
- - U.S. GOVERNMENT OBLIGATIONS- -Debt securities issued by the U.S. Treasury
which are direct obligations of the U.S. Government, including bills, notes
and bonds.
- - U.S. GOVERNMENT AGENCY OBLIGATIONS- - Issued or guaranteed by U.S.
Government - sponsored instrumentalities and
20
<PAGE>
federal agencies, including the Federal National Mortgage Association,
Federal Home Loan Bank and the Federal Housing Administration.
- - CORPORATE DEBT OBLIGATIONS- - Nonconvertible corporate debt securities
(e.g., bonds and debentures) which are issued by companies whose commercial
paper is rated Prime 1 by Moody's Investors Services, Inc. ("Moody's") or
A1 by S&P and dollar-denominated obligations of foreign issuers issued in
the U.S. If the issuer's commercial paper is unrated, then the debt
security would have to be rated at least AA by S&P or Aa2 by Moody's. If
there is neither a commercial paper rating nor a rating of the debt
security, then the sub-advisor must determine that the debt security is of
comparable quality to equivalent issues of the same issuer rated at least
AA or Aa2.
- - BANK OBLIGATIONS- - Obligations of U.S. banks and savings and loan
associations and dollar - denominated obligations of U.S. subsidaries and
branches of foreign banks, such as certificates of deposit (including
marketable variable rate certificates of deposit) and bankers' acceptances.
Bank certificates of deposit will only be acquired from banks having assets
in excess of $1,000,000,000.
- - COMMERCIAL PAPER- - Rated, at the time of purchase, A1 or better by S&P or
Prime 1 by Moody's, or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated AAA by Moody's or AAA by S&P, and
having a maximum maturity of nine months.
- - REPURCHASE AGREEMENTS- - Instruments through which the Fund purchases
securities ("underlying securities") from a bank, or a registered U.S.
government securities dealer, with an agreement by the seller to repurchase
the security at an agreed price, plus interest at a specified rate. The
underlying securities will be limited to U.S. Government and agency
obligations described above. The Funds will not enter into a repurchase
agreement with a duration of more than seven days if, as a result, more
than 15% of the value of the Fund total assets would be so invested. The
Funds will also only invest in repurchase agreements with a bank if the
bank has at least $1,000,000,000 in assets.
- - FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS- - Bills, notes, bonds and other
debt securities issued or guaranteed by foreign governments, or their
agencies and instrumentalities.
- - SUPRANATIONAL ORGANIZATION OBLIGATIONS- - Debt securities of supranational
organizations such as the World Bank, which are chartered to promote
economic development.
- - FOREIGN ISSUER OBLIGATIONS- - Debt securities of non-U.S. issuers rated AA
or better by S&P or Aa2 or better by Moody's.
- - EURODOLLAR OBLIGATIONS- - Debt securities of domestic or foreign issuers
denominated in U.S. dollars but not trading in the United States.
The Fund's investments may include both fixed and floating rate securities.
Floating rate securities bear interest at rates that vary with prevailing market
rates. Interest rate adjustments are make periodically (e.g., every six months),
usually based on a money market index such as the London Interbank Offered Rate
(LIBOR) or the Treasury bill rate.
21
<PAGE>
EQUITY FUNDS
The Funds' principal strategies and risks are summarized above in the section
entitled SA Equity Funds. Below is further information about each Fund's
principal investments and strategies and their associated risks. The Funds may
also use strategies and invest in securities described in the SAI. Each Fund's
objective may be changed without shareholder approval.
PORTFOLIO CONSTRUCTION
U.S. MARKET FUND. The U.S. Market Fund is approximately market capitalization
weighted. A company's stock may not be purchased if (i) in the sub-adviser's
judgment, the issuer is in extreme financial difficulty, (ii) the issuer is
involved in a merger or consolidation or is the subject of an acquisition or
(iii) a significant portion of the issuer's securities are closely held.
Further, securities of real estate investment trusts will not be acquired
(except as part of a merger, consolidation or acquisition of assets.)
U.S. HBtM FUND. The U.S. HBtM Fund is approximately market capitalization
weighted. On not less that a semi-annual basis, the sub-adviser will calculate
the book to market ratio necessary to determine those companies whose stock may
be eligible for investment by the Fund.
INTERNATIONAL HBtM FUND. As of the date of this prospectus, the International
HBtM Fund intends to invest in companies having at least $800 million of market
capitalization, and the Fund will be approximately market capitalization
weighted. The sub-adviser may reset such floor from time to time to reflect
changing market conditions. In determining market capitalization weights, the
sub-adviser, using its best judgment, will seek to eliminate the effect of cross
holdings on the individual country weights. As a result, the weighting of
certain countries in the Fund may vary from their weighting in international
indices such as those published by The Financial Times, Morgan Stanley Capital
International or Salomon/Russell. The sub-adviser, however, will not attempt to
account for cross holding within the same country.
It is management's belief that the value stocks of large companies offer, over a
long term, a prudent opportunity for capital appreciation, but, at the same
time, selecting a limited number of such issues for inclusion in the Fund
involves greater risk than including a large number of them.
U.S. SMALL COMPANY FUND AND INTERNATIONAL SMALL COMPANY FUND. The U.S. Small
Company Fund and each underlying fund of the International Small Company Fund
(except the Emerging Markets Series) (collectively the "Small Company Funds")
are approximately market capitalization weighted.
The decision to include or exclude the shares of an issuer will be made on the
basis of such issuer's relative market capitalization determined by reference to
other companies located in the same country, except that with respect to
Continental and Pacific Rim Series, such determination shall be made by
reference to other companies located in all countries in which those Series
invest. Company size is measured in terms of local currencies in order to
eliminate the effect of variations in currency exchange rates, except that
Continental and Pacific Rim Series each will measure company size in terms of a
common currency. Even though a company's stock may meet the applicable market
capitalization criterion of a particular Small Company Fund, it may not be
purchased if (i) in the sub-adviser's judgment, the issuer is in extreme
financial difficulty, (ii) the issuer is involved in a merger or consolidation
or is the subject of an acquisition or (iii) a significant portion of the
issuer's securities are closely held or (iv) in the sub-adviser's judgment the
issuer may be a "passive foreign investment company" (as defined in the Internal
Revenue Code). Further, none of the Small Company Funds will acquire (except as
part of a merger, consolidation or acquisition of assets) the securities of real
estate investment trusts.
If any Small Company Fund must sell securities in order to obtain funds to make
redemption payments, the Small Company Fund may repurchase such securities as
additional cash becomes available. In most instances, however, the sub-adviser
would anticipate selling securities which had appreciated sufficiently to be
eligible for sale and, therefore, would not need to repurchase such securities.
It is the Small Company Funds' belief that the stocks of small companies offer,
over a long term, a prudent opportunity for capital appreciation, but, at the
same time, selecting a limited number of such issues for investment involves
greater risk than investing in a large number of them.
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On a periodic basis, the sub-adviser will review the holdings of each Small
Company Fund and determine which, at the time of such review, are no longer
considered small U.S., Japanese, United Kingdom, European or Pacific Rim
companies. The present policy of the sub-adviser (except with respect to the
U.S. Small Company Fund) is to consider portfolio securities for sale when they
have appreciated sufficiently to rank, on a market capitalization basis, more
than one full decile higher than the company with the largest market
capitalization that is eligible for purchase by the particular Small Company
Fund as determined periodically by the sub-adviser. The sub-adviser may, from
time to time, revise that policy if, in the opinion of the sub-adviser, such
revision is necessary to maintain appropriate market capitalization weighting.
The Emerging Markets Series' policy of seeking broad market diversification
means that the sub-adviser will not utilize "fundamental" securities research
techniques in identifying securities selections. The decision to include or
exclude the shares of an issuer will be made primarily on the basis of such
issuer's relative market capitalization determined by reference to other
companies located in the same country. Company size is measured in terms of
reference to other companies located in the same country and in terms of local
currencies in order to eliminate the effect of variations in currency exchange
rates. The sub-adviser will also exercise discretion in determining the
allocation of investments as between approved markets.
PORTFOLIO TRANSACTIONS. Portfolio investments of the U.S. Market Fund, U.S. HBtM
Fund, U.S. Small Company Fund, International HBtM Fund and the underlying funds
of the International Small Company Fund, will generally be made in eligible
securities on a market capitalization weighted basis. Securities in each Fund's
portfolio will not be purchased or sold based on the prospects for the economy,
the securities markets or the individual issuers whose shares are eligible for
purchase. Securities in each Fund's portfolio which have depreciated in value
since their acquisition will not be sold solely because prospects for the issuer
are not considered attractive or due to an expected or realized decline in
securities prices in general. Securities in each Fund's portfolio will not be
sold to realize short-term profits, but when circumstances warrant, they may be
sold without regard to the length of time held. Securities in each Fund's
portfolio, including those eligible for purchase, may be disposed of, however,
at any time when, in the sub-adviser's judgment, circumstances, including but
not limited to tender offers, mergers and similar transactions, or bids made for
block purchases at opportune prices, warrant their sale. Generally, securities
in each Fund's portfolio will be purchased with the expectation that they will
be held for longer than one year and will be held until such time as they are no
longer considered an appropriate holding in light of the investment policy of
the relevant Fund.
The U.S. HBtM Fund will make investments in most eligible securities on a market
capitalization weighted basis. This Fund may sell portfolio securities when the
issuer's market capitalization falls substantially below that of the issuer with
the minimum market capitalization which is then eligible for purchase by the
Fund. In addition, this Fund may sell portfolio securities when their book to
market ratio falls substantially below that of the security with the lowest such
ratio that is then eligible for purchase by the Fund.
DEVIATION FROM MARKET CAPITALIZATION WEIGHTING. The portfolio structures of the
U.S. Market Fund, U.S. HBtM Fund, U.S. Small Company Fund, International HBtM
Fund and the underlying funds of the International Small Company Fund involve
market capitalization weighting. That is, their investment portfolios are market
capitalization weighted. Deviation from strict market capitalization weighting
may occur for several reasons. First, the sub-adviser may exclude the stock of a
company that meets each Fund's applicable market capitalization criterion if the
sub-adviser determines in its best judgment that the purchase of such stock is
inappropriate given other conditions. Deviation also will occur because the
sub-adviser intends to purchase in round lots only. Furthermore, the sub-adviser
may reduce the relative amount of any security held from the level of strict
adherence to market capitalization weighting, in order to retain sufficient
portfolio liquidity. A portion, but generally not in excess of 20% of each
Fund's assets, may be invested in interest bearing obligations, such as money
market instruments, thereby causing further deviation from strict market
capitalization weighting. A further deviation may occur due to investments by
each Fund in privately place convertible debentures. Finally, the tax management
strategies undertaken by the U.S. HBtM, U.S. Small Company and
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International HBtM Funds may cause deviation from market capitalization
weighting.
Block purchases of eligible securities may be made at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise required. In addition, securities eligible for purchase by each
Fund or otherwise represented in a portfolio of each Fund may be acquired in
exchange for the issuance of shares. While such transactions might cause a
temporary deviation from market capitalization weighting, they would ordinarily
be made in anticipation of further growth of assets.
Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase by each Fund take
place with every trade when the securities markets are open for trading due,
primarily, to price fluctuations of such securities. On at least a semi-annual
basis, the sub-adviser will determine those companies eligible for investment by
a Fund (other than the U.S. Market Fund). Additional investments generally will
not be made in securities which have changed in value sufficiently to be
excluded from the sub-adviser's then current market capitalization requirement
for eligible portfolio securities, but not by a sufficient amount to warrant
their sale.
SECURITIES LENDING. Each Fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains or
losses. If the borrower fails to return the securities or the invested
collateral has declined in value, the Fund could lose money.
FIXED INCOME SECURITIES. Each Fund may invest in fixed income securities. Risks
of these securities are:
- Interest rate risk: Increases in prevailing interest rates will cause
fixed income securities held by a Fund to decline in value. The
magnitude of the decline will be greater for longer-term fixed income
securities than for shorter-term fixed income securities.
- Credit (default) risk: It is possible that some of the issuers will
not make payments on debt securities held by a Fund, or there could be
defaults on repurchase agreements held by a Fund. Or, an issuer may
suffer adverse changes in financial condition that could lower the
credit quality of a security, leading to greater volatility in the
price of the security and in shares of a Fund. A change in the quality
rating of a bond can affect the bond's liquidity and make it more
difficult for the Fund to sell.
CASH MANAGEMENT. Each Fund may invest up to 20% of its assets in short-term,
high quality, highly-liquid, fixed-income obligations such as money market
instruments and short-term repurchase agreements pending investment or for
liquidity purposes.
MASTER/FEEDER STRUCTURE. Each Fund reserves the right to convert to a
"master/feeder" structure at a future date. Under such a structure, one or more
feeder funds invest all of their assets in a master fund, which, in turn,
invests directly in a portfolio of securities. If required by applicable law, a
Fund will seek shareholder approval before converting to a master/feeder
structure. If the requisite regulatory authorities determine that such approval
is not required, shareholders will be deemed, by purchasing shares, to have
consented to such conversion and no further shareholder approval will be sought.
INTERNATIONAL SMALL COMPANY FUND
UNDERLYING FUND SPECIFIC POLICIES. The following are the investment policies of
each underlying fund.
JAPANESE SERIES
The Japanese Series invests in a broad and diverse group of readily marketable
stocks of Japanese small companies which are traded in the Japanese securities
markets. A Japanese small company generally means a company located in Japan
whose market capitalization is not larger than the largest of those in the
smaller one-half of companies whose securities are listed on the First Section
of the Tokyo Stock Exchange. The Japanese Series will invest primarily in
securities traded on the Tokyo Stock Exchange or in other Japanese securities
markets. The Japanese Series intends to purchase a portion of the stock of each
eligible company on a market capitalization weighted basis. The Japanese Series
invests at least 80% of its total assets in equity securities of Japanese small
companies.
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U.K. SERIES
The U.K. Series invests in a broad and diverse group of readily marketable
stocks of United Kingdom small companies which are traded principally on the
International Stock Exchange of the United Kingdom and the Republic of Ireland
("ISE"). A United Kingdom small company typically means a company organized in
the United Kingdom, with shares listed on the ISE whose market capitalization is
not larger than the largest of those in the smaller one-half of companies
included in the Financial Times-Actuaries All Share Index ("FTA"). Generally,
the U.K. Series will not purchase shares of any company whose market
capitalization is less than $5,000,000. The Series intends to purchase a portion
of the stock of each eligible company on a market capitalization weighted basis.
The Series invests at least 80% of its total assets in equity securities of
United Kingdom small companies.
CONTINENTAL SERIES
The Continental Series invests in a broad and diverse group of readily
marketable stocks of small companies organized in certain European countries
whose shares are traded principally in securities markets located in those
countries. As of the date of this prospectus, the Series is authorized to invest
in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Netherlands, Norway, Spain, Sweden and Switzerland. DFA typically determines
company size by comparing the market capitalizations of companies in all
countries in which the Continental Series invests. Small companies are those
whose market capitalizations are not greater than the largest of those in the
smallest 20% of companies listed in the FTA. The Continental Series will not
purchase shares of any company whose market capitalization is less than
$5,000,000. The Series intends to purchase a portion of the stock of each
eligible company on a market capitalization weighted basis. The Series invests
at least 80% of its total assets in equity securities of European small
companies.
PACIFIC RIM SERIES
The Pacific Rim Series invests in a broad and diverse group of readily
marketable stocks of small companies located in Australia, New Zealand and Asian
countries whose share are traded principally in securities markets located in
those countries. Small companies are those whose market capitalizations are not
greater than the largest of those in the smallest 30% of companies listed in the
FTA as combined for the countries in which the Pacific Rim Series invests. The
Pacific Rim Series typically will not purchase shares of any company whose
market capitalization is less than $5,000,000. The Series intends to purchase a
portion of the stock of each eligible company on a market capitalization
weighted basis. The Series invests at least 80% of its total assets in equity
securities of small companies located in countries in the Pacific Rim.
EMERGING MARKETS SERIES
The Emerging Markets Series invests in companies located in emerging markets. An
emerging market is any country that the International Finance Corporation (a
member of the World Bank Group) considers an emerging market. In determining
what countries have emerging markets with respect to the Series, the data,
analysis and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (a member of the World
Bank Group) and the International Finance Corporation , among other things, will
be considered. Approved emerging markets may not include all such emerging
markets. In determining whether to approve markets for investment, the
sub-adviser will take into account, among other things, market liquidity,
relative availability of investor information, government regulation, including
fiscal and foreign exchange repatriation rules and the availability of other
access to these markets for the Series. The Series invests only in emerging
markets approved by DFA.
The Series invests primarily in equity securities listed on securities exchanges
or actively traded on OTC markets. The Series invests in companies whose
aggregate overall share of the emerging market's total public market
capitalization is at least in the upper 40% of such capitalization. The Series
may also invest in shares of other mutual funds that invest in the approved
emerging markets where access to those markets is otherwise significantly
limited.
As of the date of this Prospectus, the Emerging Markets Series is authorized to
invest in the following emerging market countries: Argentina, Brazil, Chile,
Greece, Hungary, Indonesia, Israel, Korea, Malaysia, Mexico, Philippines,
Portugal, Thailand, Turkey and Poland.
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FOR MORE INFORMATION
More information on SA Funds is available free upon request, including the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more details about the funds and their policies. A current SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-366-7266
BY MAIL Write to:
SA Funds
1190 Saratoga Avenue
Suite 200
San Jose, California 95129
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC 2054-6009.
SA FUNDS-INVESTMENT TRUST
SEC FILE NUMBER: 811-09195
<PAGE>
SA FUNDS
SA Fixed Income Fund
SA U.S. Market Fund
SA U.S. HBtM Fund
SA U.S. Small Company Fund
SA International HBtM Fund
SA International Small Company Fund
STATEMENT OF ADDITIONAL INFORMATION
July [ ], 1999
This Statement of Additional Information ("SAI") provides supplementary
information pertaining to all shares representing interests in each of the
no-load mutual funds listed above (the "Funds"). SA Funds Investment Trust (the
"Trust") currently offers a selection of six Funds, each of which is described
in this SAI. This SAI is not a prospectus, and should be read only in
conjunction with the Trust's Prospectus dated July [ ], 1999. A copy of the
Prospectus may be obtained by calling (800) 366-7266.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
1. History and General Information.......................................................................3
2. Description of the Funds and Their Investments and Risks..............................................3
Investments, Strategies and Risks..................................................................3
Tax Management Strategies of the U.S. HBtM Fund, U.S. Small Company Fund
and the International HBtM Fund..................................................................12
Fund Policies.....................................................................................13
3. Management of the Trust..............................................................................14
Trustees and Officers.............................................................................14
Compensation Table................................................................................16
4. Control Persons and Principal Holders of Securities..................................................16
5. Investment Advisory and Other Services...............................................................16
Investment Manager and Sub-Adviser................................................................16
Distributor.......................................................................................18
Shareholder Servicing Arrangements................................................................18
Administration....................................................................................18
Custodian.........................................................................................18
Transfer Agent and Dividend Disbursing Agent......................................................18
Counsel...........................................................................................19
Independent Auditors..............................................................................19
6. Brokerage Allocations and Other Practices............................................................19
7. Information Concerning Shares........................................................................20
8. Purchase, Redemption and Pricing of Shares...........................................................20
Purchase and Redemption Information...............................................................20
9. Taxes................................................................................................21
Tax Status of the Funds...........................................................................21
Taxation of Fund Distributions....................................................................22
Disposition of Shares.............................................................................23
Information Relating to Foreign Investments.......................................................24
Information Relating to Fund Investments..........................................................25
Backup Withholding................................................................................26
Other Taxation....................................................................................26
10. Performance Information...............................................................................27
11. Financial Statements..................................................................................28
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this SAI or in the Prospectus in connection
with the offering made by the Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Funds. The Prospectus does not constitute an offering by the Funds in any
jurisdiction in which such offering may not lawfully be made.
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HISTORY AND GENERAL INFORMATION
The Trust was organized as a Delaware business trust on June 16, 1998 under
the name RWB Funds Investment Trust which was changed on June 7, 1999 to SA
Funds-Investment Trust.
The Trust is an open-end, management investment company. The Declaration of
Trust permits the Trust to offer separate portfolios ("Funds") of shares of
beneficial interest and different classes of shares of each Fund. The Trust
currently offers six Funds, each of which is a diversified mutual fund.
The following Funds are described in this SAI:
SA Fixed Income Fund
SA U.S. Market Fund
SA U.S. HBtM Fund
SA U.S. Small Company Fund
SA International HBtM Fund
SA International Small Company Fund
The investment manager of each Fund is RWB Advisory Services Inc. ("RWBAS"
or the "Manager"). Dimensional Fund Advisors Inc. ("Dimensional" or the
"Sub-Adviser") serves as sub-adviser for each of the Funds.
RWB Securities, Inc. is the distributor of shares of the Funds.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
INVESTMENTS, STRATEGIES AND RISKS
The following supplements the information contained in the Prospectus
concerning the investments and investment techniques of the Funds. Each Fund's
investment objective is a non-fundamental policy and may be changed without the
approval of the Fund's shareholders. There can be no assurance that a Fund will
achieve its objective. A description of applicable credit ratings is set forth
in Appendix A to this SAI.
BORROWING. The Funds are authorized to borrow money in amounts up to 5% of
the value of their total assets at the time of such borrowings for temporary
purposes, and are authorized to borrow money in excess of the 5% limit as
permitted by the Investment Company Act of 1940, as amended (the "1940 Act").
This borrowing may be unsecured. The 1940 Act requires the Funds to maintain
continuous asset coverage of 300% of the amount borrowed. If the 300% asset
coverage should decline as a result of market fluctuations or other reasons, the
Funds may be required to sell some of their portfolio holdings within three days
to reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
Borrowed funds are subject to interest costs that may or may not be offset by
amounts earned on the borrowed funds. A Fund may also be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fees to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
Each Fund may, in connection with permissible borrowings, transfer as collateral
securities owned by the Funds.
CONVERTIBLE DEBENTURES. The International HBtM Fund and each investment
company in which the International Small Company Fund invests ("underlying
fund") may invest up to 5% of their assets in convertible debentures issued by
non-U.S. companies. Convertible debentures include corporate bonds and notes
that may be converted into or exchanged for common stock. These securities are
generally convertible either at a stated price or a stated rate (that is, for a
specific number of shares of common stock or other security). As with other
fixed income securities, the price of a convertible debenture to some extent
varies inversely with interest rates. While providing a fixed income stream
(generally higher in yield than the income derived from a common stock but lower
than that afforded by a nonconvertible debenture), a convertible debenture also
affords the investor an opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it is
convertible. As
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the market price of the underlying common stock declines, convertible debentures
tend to trade increasingly on a yield basis and so may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the price of a
convertible debenture tends to rise as a reflection of the value of the
underlying common stock. To obtain such a higher yield, a Fund may be required
to pay for a convertible debenture an amount in excess of the value of the
underlying common stock. Common stock acquired by a Fund upon conversion of a
convertible debenture will generally be held for so long as the Sub-Adviser
anticipates such stock will provide the Fund with opportunities which are
consistent with the Fund's investment objective and policies.
FOREIGN CURRENCY TRANSACTIONS. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
principally traded in the interbank market conducted directly between currency
traders (usually large, commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades.
A Fund may enter into forward contracts in connection with the management
of the foreign currency exposure of its portfolio. When the Fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date the security is
purchased or sold and the date on which payment is made or received.
When the Sub-Adviser believes that one currency may experience a
substantial movement against another currency, including the U.S. dollar, or it
wishes to alter the Fund's exposure to the currencies of the countries in its
investment universe, it may enter into a forward contract to sell or buy foreign
currency in exchange for the U.S. dollar or another foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the longer term investment decisions made with regard to overall diversification
strategies. However, the Sub-Adviser believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of a Fund will be served.
Each Fund may enter into forward contacts for any other purpose consistent
with the Fund's investment objective and program. The Fund will not enter into a
forward contract, or maintain exposure to any such contract(s), if the amount of
foreign currency required to be delivered thereunder would exceed the Fund's
holdings of liquid securities and currency available for cover of the forward
contract(s). In determining the amount to be delivered under a contract, the
Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and either extend the maturity of the forward contract (by "rolling"
that contract forward) or may initiate a new forward contract.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
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<PAGE>
the currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent of the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
A Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, each Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is not
required to enter into forward contracts with regard to its foreign currency
denominated securities and will not do so unless deemed appropriate by the
Sub-Adviser. It also should be realized that this method of hedging against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at
a future date. Additionally, although such contracts tend to minimize the risk
of loss due to a decline in the value of the hedged currency, at the same time,
they tend to limit any potential gain which might result from an increase in the
value of that currency.
Although each Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
Federal tax treatment of forward foreign exchange contracts is discussed in
the section entitled "Futures and Options on Futures -- Federal Tax Treatment of
Futures Contracts, Options and Forward Foreign Exchange Contracts."
FOREIGN SECURITIES. As stated in the Prospectus, certain Funds may invest
in foreign securities. Investors should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S. companies.
Foreign markets have substantially less volume than U.S. markets and securities
of some foreign companies are less liquid and more volatile than securities of
comparable U.S. companies. In many foreign countries, there is less government
supervision and regulation of stock exchanges, brokers, and listed companies
than in the United States. Such concerns are particularly heightened for
emerging markets and Eastern European countries.
Investments in companies domiciled in developing countries may be subject
to potentially higher risks than investments in developed countries. These risks
include: (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interest; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into
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United States dollars, the conversion rates may be artificial to the actual
market values and may be adverse to a Fund.
The Sub-Adviser endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread on currency exchange (to
cover service charges) may be incurred, particularly when the Fund changes
investments from one country to another or when proceeds of the sale of Fund
shares in U.S. dollars are used for the purchase of securities in foreign
countries. Also, some countries may adopt policies which would prevent the Fund
from transferring cash out of the country or withhold portions of interest and
dividends at the source. There is the possibility of expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments that could affect investments in securities of issuers in foreign
nations.
Foreign securities markets have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to a Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
A Fund may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Changes in foreign currency exchange rates will influence values
within a Fund from the perspective of U.S. investors, and may also affect the
value of dividends and interest earned, gains and losses realized on the sale of
securities, and net investment income and gains, if any, to be distributed to
shareholders by a Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by the forces of supply and demand in the foreign
exchange markets. These forces are affected by the international balance of
payments and other economic and financial conditions, government intervention,
speculation and other factors. The Sub-Adviser will attempt to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places a Fund's investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Funds may enter
into futures contracts and options on futures contracts only for the purpose of
remaining fully invested and to maintain liquidity to pay redemptions. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of defined securities at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges. A
Fund will be required to make a margin deposit in cash or government securities
with a broker or custodian to initiate and maintain positions in futures
contracts. Minimal initial margin requirements are established by the futures
exchange and brokers may establish margin requirements which are higher than the
exchange requirements. After a futures contract position is opened, the value of
the contract is marked to market daily. If the futures contract price changes,
to the extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely, reduction
in the contract value may reduce the required margin resulting in a repayment of
excess margin to a Fund. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. The Funds expect to
earn income on their margin deposits. To the extent that a Fund invests in
futures contracts and options thereon for other than bona fide hedging purposes,
no Fund will enter into such transactions if, immediately thereafter, the sum of
the amount of initial margin deposits and premiums paid for open futures options
would exceed 5% of the Fund's net assets, after taking into account
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unrealized profits and unrealized losses on such contracts it has entered into;
provided, however, that, in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%.
Pursuant to published positions of the Securities and Exchange Commission, the
Funds may be required to identify liquid assets, such as cash or liquid
securities (or, as permitted under applicable regulation, enter into offsetting
positions) in an account maintained with the Fund's custodian in connection with
their futures contract transactions in order to cover their obligations with
respect to such contracts.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract an any specific
time. Therefore, it might not be possible to close a futures position and, in
the event of adverse price movements, a Fund would continue to be required to
make variation margin deposits. In such circumstances, if a Fund has
insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when it might be disadvantageous to do so.
Management intends to minimize the possibility that it will be unable to close
out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid secondary
market.
A Fund may purchase and sell options on the same types of futures in which
it may invest.
Options on futures are similar to options on underlying instruments except
that options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put), rather than to purchase
or sell the futures contract, at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds (in the case of a call) or is less than
(in the case of a put) the exercise price of the option on the futures contract.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put options on stock
index futures, a Fund may write or purchase call and put options on stock
indices. Such options would be used in a manner similar to the use of options on
futures contracts.
SPECIAL RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES CONTRACTS. The risks
described above for futures contracts are substantially the same as the risks of
using options on futures. In addition, where a Fund seeks to close out an option
position by writing or buying an offsetting option covering the same underlying
instrument, index or contract and having the same exercise price and expiration
date, its ability to establish and close out positions on such options will be
subject to the maintenance of a liquid secondary market. Reasons for the absence
of a liquid secondary market on an exchange include the following: (i) there may
be insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options, or underlying instruments;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
the class or series of options) would cease to exist, although outstanding
options on the exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of any of the clearing corporations inadequate, and thereby result in
the institution by an exchange of special procedures which may interfere with
the timely execution of customers' orders.
ADDITIONAL FUTURES AND OPTIONS CONTRACTS. Although the Funds have no
current intention of engaging in futures or options transactions other than
those described above, they reserve the right to do so. Such futures and options
trading might involve risks which differ from those involved in the futures and
options described above.
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FEDERAL TAX TREATMENT OF FUTURES CONTRACTS, OPTIONS AND FORWARD FOREIGN
EXCHANGE CONTRACTS. Certain option, futures, and forward foreign exchange
contracts, including options and futures on currencies, which are Section 1256
contracts, may result in a Fund entering into straddles.
Open Section 1256 contracts at fiscal year end will be considered to have
been closed at the end of the Fund's fiscal year and any gains or losses will be
recognized for tax purposes at that time. Such gains or losses from the normal
closing or settlement of such transactions will be characterized as 60%
long-term capital gain or loss and 40% short-term capital gain or loss
regardless of the holding period of the instrument. The Fund will be required to
distribute net gains on such transactions to shareholders even though it may not
have closed the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts, including options
and futures on currencies, which offset a security or currency position may be
considered straddles for tax purposes, in which case a loss on any position in a
straddle will be subject to deferral to the extent of unrealized gain in an
offsetting position. The holding period of the securities or currencies
comprising the straddle may be deemed not to begin until the straddle is
terminated. The holding period of the security offsetting an "in-the-money
qualified covered call" option will not include the period of time the option is
outstanding.
Losses on written covered calls and purchased puts on securities, excluding
certain "qualified covered call" options, may be long-term capital loss, if the
security covering the option was held for more than twelve months prior to the
writing of the option.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of the value of its net
assets (determined at time of acquisition) in securities that are illiquid.
Illiquid securities would generally include securities for which there is a
limited trading market, repurchase agreements and time deposits with
notice/termination dates in excess of seven days, and certain securities that
are subject to trading restrictions because they are not registered under the
Securities Act of 1933, as amended (the "Act"). If, after the time of
acquisition, events cause this limit to be exceeded, the Fund will take steps to
reduce the aggregate amount of illiquid securities as soon as reasonably
practicable in accordance with the policies of the Securities and Exchange
Commission.
A Fund may invest in commercial obligations issued in reliance on the
"private placement" exemption from registration afforded by Section 4(2) of the
Act ("Section 4(2) paper"). A Fund may also purchase securities that are not
registered under the Act, but which can be sold to qualified institutional
buyers in accordance with Rule 144A under the Act ("Rule 144A securities").
Section 4(2) paper is restricted as to disposition under the Federal securities
laws, and generally is sold to institutional investors who agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of the issuer or investment dealers which make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities generally
must be sold only to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the Fund's limitation on
investment in illiquid securities. The Sub-Adviser will determine the liquidity
of such investments pursuant to guidelines established by the Board of Trustees.
It is possible that unregistered securities purchased by a Fund in reliance upon
Rule 144A could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
period, uninterested in purchasing these securities.
INVESTMENT COMPANY SECURITIES. Each Fund may invest in securities issued by
other investment companies. As a shareholder of another investment company, a
Fund would bear its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the expenses
each Fund bears directly in connection with its own operations. Each Fund (other
than the International Small Company Fund) currently intends to limit its
investments in securities issued by other investment companies so that, as
determined immediately after a purchase of such securities is made: (i) not more
than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more
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than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund. The International Small Company Fund intends to rely on an
exemption under Section 12(d)(1)(F) of the 1940 Act that permits the Fund to
invest without limit in the securities of other investment companies provided
that not more than 3% of the outstanding voting stock of any one investment
company may be owned by the Fund. Such 3% ownership limitation may restrict the
Fund's ability to pursue its strategy.
LENDING OF PORTFOLIO SECURITIES. To enhance the return on its portfolio,
each of the Funds may lend securities in its portfolio (subject to a limit of
33 1/3% of the total assets) to securities firms and financial institutions,
provided that each loan is secured continuously by collateral adjusted daily to
have a market value at least equal to the current market value of the securities
loaned. These loans are terminable at any time, and the Funds will receive any
interest or dividends paid on the loaned securities. In addition, it is
anticipated that a Fund may share with the borrower some of the income received
on the collateral for the loan or the Fund will be paid a premium for the loan.
The risk in lending portfolio securities, as with other extensions of credit,
consists of possible delay in recovery of the securities or possible loss of
rights in the collateral or loss on sale of the collateral should the borrower
fail financially. In determining whether the Funds will lend securities, the
Sub-Adviser will consider all relevant facts and circumstances. The Funds will
only enter into loan arrangements with broker-dealers, banks or other
institutions which the Manager has determined are creditworthy under guidelines
established by the Board of Trustees.
MONEY MARKET INSTRUMENTS. Each Fund may invest from time to time in "money
market instruments," a term that includes, among other instruments, bank
obligations, commercial paper, variable amount master demand notes and corporate
bonds with remaining maturities of 397 days or less.
Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks or
savings institutions. Although the Funds will invest in obligations of foreign
banks or foreign branches of U.S. banks only where the Sub-Adviser deems the
instrument to present minimal credit risks, such investments may nevertheless
entail risks that are different from those of investments in domestic
obligations of U.S. banks due to differences in political, regulatory and
economic systems and conditions. All investments in bank obligations are limited
to the obligations of financial institutions having more than $1 billion in
total assets at the time of purchase.
The Funds may also purchase variable amount master demand notes which are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Although the notes are
not normally traded and there may be no secondary market in the notes, a Fund
may demand payment of the principal of the instrument at any time. The notes are
not typically rated by credit rating agencies, but issuers of variable amount
master demand notes must satisfy the same criteria as set forth above for
issuers of commercial paper. If an issuer of a variable amount master demand
note defaulted on its payment obligation, a Fund might be unable to dispose of
the note because of the absence of a secondary market and might, for this or
other reasons, suffer a loss to the extent of the default. The Funds invest in
variable amount master notes only when the Sub-Adviser deems the investment to
involve minimal credit risk.
NON-DOMESTIC BANK OBLIGATIONS. Non-domestic bank obligations include
Eurodollar Certificates of Deposit ("ECDs"), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs"), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs"), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign bank and held in
the United States; and Yankee Bankers' Acceptances ("Yankee BAs"), which are
U.S. dollar denominated bankers' acceptances issued by a U.S. branch of a
foreign bank and held in the United States.
REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities from
financial institutions such as member banks of the Federal Reserve System or any
foreign bank or any domestic or foreign broker/dealer that is recognized as a
reporting government securities dealer, subject to the seller's agreement to
repurchase them at an
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agreed-upon time and price ("repurchase agreements"). The Sub-Adviser will
review and continuously monitor the creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain liquid assets
segregated on the books of the Fund or the Fund's custodian in an amount that is
greater than the repurchase price. Default by, or bankruptcy of, the seller
would, however, expose a Fund to possible loss because of adverse market action
or delays in connection with the disposition of underlying obligations except
with respect to repurchase agreements secured by U.S. Government securities.
The repurchase price under repurchase agreements generally equals the price
paid by a Fund plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement).
Securities subject to repurchase agreements will be held, as applicable, by
the Fund's custodian in the Federal Reserve/Treasury book-entry system or by
another authorized securities depositary. Repurchase agreements are considered
to be loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow funds for temporary or
emergency purposes by selling portfolio securities to financial institutions
such as banks and broker/dealers and agreeing to repurchase them at a mutually
specified date and price ("reverse repurchase agreements"). Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the repurchase price. A Fund will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Fund will maintain cash, U.S. Government
securities or other liquid high-grade securities earmarked on the books of the
Fund or the Fund's custodian in an amount at least equal to the market value of
the securities, plus accrued interest, subject to the agreement.
SUPRANATIONAL BANK OBLIGATIONS. The Fixed Income Fund may invest in the
obligations of supranational banks. Supranational banks are international
banking institutions designed or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., The World
Bank). Obligations of supranational banks may be supported by appropriated but
unpaid commitments of their member countries and there is no assurance these
commitments will be undertaken or met in the future.
U.S. GOVERNMENT OBLIGATIONS. Each Fund may purchase obligations issued or
guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the GNMA, are supported by the full faith and
credit of the U.S. Treasury. Others, such as those of the Export-Import Bank of
the United States, are supported by the right of the issuer to borrow from the
U.S. Treasury; and still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the agency or instrumentality
issuing the obligation. No assurance can be given that the U.S. Government would
provide financial support to U.S. government-sponsored instrumentalities if it
is not obligated to do so by law. Examples of the types of U.S. Government
obligations that may be acquired by the Funds include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, FNMA, Government National Mortgage
Association, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, FHLMC, Federal Intermediate Credit
Banks and Maritime Administration.
VARIABLE AND FLOATING RATE INSTRUMENTS. The Fixed Income Fund may invest in
variable and floating rate instruments. Debt instruments may also be structured
to have variable or floating interest rates. Variable and floating rate
obligations purchased by the Fund may have stated maturities in excess of the
Fund's maturity limitation if the Fund can demand payment of the principal of
the instrument at least once during such period on not more than thirty days'
notice (this demand feature is not required if the instrument is guaranteed by
the U.S. Government or an agency thereof). These instruments may include
variable amount master demand notes that permit the indebtedness to vary in
addition to providing for periodic adjustments in the interest rates. The
Sub-Adviser will consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments and, if the instrument
is subject to a demand feature, will continuously monitor their financial
ability to
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meet payment on demand. Where necessary to ensure that a variable or floating
rate instrument is equivalent to the quality standards applicable to the Fund,
the issuer's obligation to pay the principal of the instrument will be backed by
an unconditional bank letter or line of credit, guarantee or commitment to lend.
The absence of an active secondary market for certain variable and floating
rate notes could make it difficult to dispose of the instruments, and the Fund
could suffer a loss if the issuer defaulted or during periods that the Fund is
not entitled to exercise its demand rights.
Variable and floating rate instruments held by the Fund will be subject to
the Fund's limitation on illiquid investments when the Fund may not demand
payment of the principal amount within seven days absent a reliable trading
market.
WARRANTS. Warrants are privileges issued by corporations enabling the
owners to subscribe to and purchase a specified number of shares of the
corporation at a specified price during a specified period of time. The purchase
of warrants involves the risk that a Fund could lose the purchase value of a
warrant if the right to subscribe to additional shares is not exercised prior to
the warrant's expiration. Also, the purchase of warrants involves the risk that
the effective price paid for the warrant added to the subscription price of the
related security may exceed the value of the subscribed security's market price
such as when there is no movement in the level of the underlying security.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS (DELAYED-DELIVERY
TRANSACTIONS). Each Fund may purchase securities on a when-issued or delayed
delivery basis. When-issued purchases and forward commitments (delayed-delivery
transactions) are commitments by a Fund to purchase or sell particular
securities with payment and delivery to occur at a future date (perhaps one or
two months later). These transactions permit the Fund to lock-in a price or
yield on a security, regardless of future changes in interest rates.
When a Fund agrees to purchase securities on a when-issued or forward
commitment basis, the Fund will earmark cash or liquid portfolio securities
equal to the amount of the commitment. Normally, the Fund will earmark portfolio
securities to satisfy a purchase commitment, and in such a case the Fund may be
required subsequently to earmark additional assets in order to ensure that the
value of the account remains equal to the amount of the Fund's commitments. It
may be expected that the market value of the Fund's net assets will fluctuate to
a greater degree when it earmarks portfolio securities to cover such purchase
commitments than when it earmarks cash.
A Fund will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, a Fund may dispose of or renegotiate a commitment after it is
entered into, and may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. In these cases the
Fund may realize a taxable capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, are taken into account when determining the market value of
a Fund starting on the day the Fund agrees to purchase the securities. The Fund
does not earn interest on the securities it has committed to purchase until they
are paid for and delivered on the settlement date.
YIELDS AND RATINGS. The yields on certain obligations, including the money
market instruments in which the Funds may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the obligation,
the financial condition of the issuer, the size of the offering, the maturity of
the obligation and the ratings of the issue. The ratings of S&P, Moody's, Duff &
Phelps Credit Rating Co., Thomson Bank Watch, Inc., and other nationally
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recognized statistical rating organizations ("NRSROs") represent their
respective opinions as to the quality of the obligations they undertake to rate.
Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices.
OTHER. Subsequent to its purchase by a Fund, a rated security may cease to
be rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Board of Trustees or the Sub-Adviser, pursuant to
guidelines established by the Board, will consider such an event in determining
whether the Fund should continue to hold the security in accordance with the
interests of the Fund and applicable regulations of the Securities and Exchange
Commission.
Because the structure of the Equity Funds is based on the relative market
capitalizations of eligible holdings, it is possible that the Funds might hold
at least 5% of the outstanding voting securities of one or more issuers. In such
circumstances, the Trust and the issuer would be deemed "affiliated persons"
under the 1940 Act and certain requirements of the 1940 Act regulating dealings
between affiliates might become applicable. However, based on the present
capitalizations of the groups of companies eligible for purchase by the Funds
and the anticipated amount of a Fund's assets intended to be invested in such
securities, management does not anticipate that a Fund will hold as much as 5%
of the voting securities of any issuer.
TAX MANAGEMENT STRATEGIES OF THE U.S. HBTM FUND, U.S. SMALL FUND AND THE
INTERNATIONAL HBTM FUND
These Funds may try to minimize the impact of federal taxes on returns by
managing their portfolios in a manner that will defer the realization of net
capital gains where possible and may minimize ordinary income.
When selling securities, each Fund typically will select the highest cost
shares of the specific security in order to minimize the realization of capital
gains. In certain cases, the highest cost shares may produce a short-term
capital gain. Since short-term capital gains are taxed at higher tax rates than
long-term capital gains, the highest cost shares with a long-term holding period
may be disposed of instead. Each Fund also will seek, when possible, not to
dispose of a security until the long-term holding period for capital gains for
tax purposes has been satisfied. Additionally, each Fund may, when consistent
with all other tax management policies, sell securities in order to realize
capital losses. Realized capital losses can be used to offset realized capital
gains, thus reducing capital gains distributions. However, realization of
capital gains is not entirely within the Sub-Adviser's control. Capital gains
distributions may vary considerably from year to year; there will be no capital
gains distributions in years when a Fund realizes net capital losses.
The timing of purchases and sales of securities may be managed to minimize
dividends to the extent possible. With respect to dividends that are received,
the Funds may not be eligible to flow through the dividends received deduction
to corporate shareholders, if because of timing activities, the requisite
holding period is not met. Except for the U.S. HBtM Fund, portfolio holdings may
be managed to minimize high dividend-yielding securities and to emphasize low
dividend-yielding securities.
The Funds are expected to deviate from their market capitalization
weightings to a greater extent than the other Funds. For example, the
Sub-Adviser may exclude the stock a company that meets applicable market
capitalization criterion in order to avoid dividend income, and the Sub-Adviser
may sell the stock of a company that meets applicable market capitalization
criterion in order to realize a capital loss. Additionally, while the Funds are
managed so that securities will generally be held for longer than one year, the
Funds may dispose of any securities whenever the Sub-Adviser determines that
such disposition would be consistent with the tax management strategies of the
Funds.
Although the Sub-Adviser may manage each Fund to minimize the realization
of capital gains and taxable dividend distributions during a particular year,
the Funds may nonetheless distribute taxable gains and taxable income to
shareholders from time to time. Furthermore, shareholders may be required to pay
taxes on capital gains realized, if any, upon redemption of shares of a Fund, if
the amount realized on redemption is greater than the amount the shareholder
paid for the shares.
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FUND POLICIES
FUNDAMENTAL POLICIES. Each Fund is subject to the investment limitations
enumerated in this section which may be changed with respect to a particular
Fund only by a vote of the holders of a majority of such Fund's outstanding
shares. As used in this SAI and in the Prospectus, a "majority of the
outstanding shares" of a Fund means the lesser of (a) 67% of the shares of the
particular Fund represented at a meeting at which the holders of more than 50%
of the outstanding shares of such Fund are present in person or by proxy, or (b)
more than 50% of the outstanding shares of such Fund.
1. No Fund may invest more than 25% of its total assets in any one
industry (securities issued or guaranteed by the United States
Government, its agencies or instrumentalities are not considered to
represent industries).
2. No Fund may with respect to 75% of the Fund's assets, invest more than
5% of the Fund's assets (taken at a market value at the time of
purchase) in the outstanding securities of any single issuer or own
more than 10% of the outstanding voting securities of any one issuer,
in each case other than securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
3. No Fund may borrow money or issue senior securities (as defined in the
1940 Act) except that the Funds may borrow amounts not exceeding 33
1/3% of its total assets (including the amount borrowed) valued at the
lesser of cost or market, less liabilities (not including the amount
borrowed) valued at the time the borrowing is made and additionally
for temporary or emergency purposes in amounts not exceeding 5% of its
total assets.
4. No Fund may pledge, mortgage or hypothecate its assets other than to
secure borrowings permitted by investment limitation 3 above
(collateral arrangements with respect to margin requirements for
options and futures transactions are not deemed to be pledges or
hypothecations for this purpose).
5. No Fund may make loans of securities to other persons in excess of 33
1/3% of a Fund's total assets; provided the Funds may invest without
limitation in short-term debt obligations (including repurchase
agreements) and publicly distributed debt obligations.
6. No Fund may underwrite securities of other issuers, except insofar as
a Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, in selling portfolio securities.
7. No Fund may purchase or sell real estate or any interest therein,
including interests in real estate limited partnerships, except
securities issued by companies (including real estate investment
trusts) that invest in real estate or interests therein.
8. No Fund may purchase securities on margin, except for the use of
short-term credit necessary for the clearance of purchases and sales
of portfolio securities, but the Funds may make margin deposits in
connection with transactions in options, futures and options on
futures.
9. No Fund may invest in commodities or commodity futures contracts,
provided that this limitation shall not prohibit the purchase or sale
by the Fund of forward foreign currency exchange contracts, financial
futures contracts and options on financial futures contracts, foreign
currency futures contracts, and options on securities, foreign
currencies and securities indices, as permitted by the Fund's
prospectus.
NON-FUNDAMENTAL POLICIES. Additional investment restrictions adopted by
each Fund, which may be changed by the Board of Trustees, provide that a Fund
may not:
13
<PAGE>
1. Invest more than 15% of its net assets (taken at market value at the
time of purchase) in securities which cannot be readily sold or
disposed of within the ordinary course of business within seven days
at approximately the value at which the Fund has valued the
investment;
2. Purchase or sell interests in oil, gas or other mineral exploration or
development plans or leases;
3. Make investments for the purpose of exercising control or management;
or
4. Invest in other investment companies except as permitted under the
1940 Act.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
a Fund's investments will not constitute a violation of such limitation, except
that any borrowing by a Fund that exceeds the fundamental investment limitations
stated above must be reduced to meet such limitations within the period required
by the 1940 Act (currently three days). Otherwise, a Fund may continue to hold a
security even though it causes the Fund to exceed a percentage limitation
because of fluctuation in the value of the Fund's assets.
MANAGEMENT OF THE TRUST
The management of the Trust is supervised by the Board of Trustees under
the laws of the State of Delaware. Subject to the provisions of the 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.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust and their principal
occupations during the past five years are as set forth below. An asterisk
indicates a Trustee who may be deemed to be an "interested person" (as defined
by the 1940 Act) of the Trust.
<TABLE>
<CAPTION>
NAME, ADDRESS AND DATE OF BIRTH POSITION(S) HELD WITH FUND PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------- -------------------------- ---------------------------------------------------
<S> <C> <C>
Bryan W. Brown Trustee Self Employed Management Consultant (since 1992)
950 Hayman Place
Los Altos, CA 94024
DOB: 02/09/45
David G. Booth* Trustee President and Chairman-Chief Executive Officer of
1299 Ocean Avenue the following companies: Dimensional Fund Advisors
Santa Monica, CA 90401 Inc., DFA Securities Inc., DFA Australia Limited,
DOB: 12/02/46 DFA Investment Dimensions Group Inc., Dimensional
Investment Group Inc. and Dimensional Emerging
Markets Value Fund Inc.; Trustee, President and
Chairman-Chief Executive Officer of the DFA
Investment Trust Company (registered investment
company); Chairman and Director, Dimensional Fund
Advisors Ltd.
John J. Bowen, Jr.* Trustee, President Chief Executive Officer and
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
1190 Saratoga Avenue, Suite 200 and Chief Executive Officer President, Assante Capital Management Inc. (holding
San Jose, CA 95120 company) (since July 1998); Chief Executive Officer,
DOB: 10/01/55 Registered Principal and President, RWB Securities
Inc. (since July 1998); Chief Executive Officer and
President, RWB Advisory Services Inc. (since July
1998); Chief Executive Officer, Registered Principal
and President, Reinhardt Werba Bowen Securities,
Inc. (December 1993 to October 1998); Chief
Executive Officer, Director and President,
Reinhardt, Werba, Bowen, Inc. (investment adviser)
(July 1980 to October 1998).
Patrick Keating* Trustee Director, Assante Corporation (financial services
Commodity Exchange Tower company) (since September 1998); President and Chief
1500-360 Main Street Ward") Executive Officer, Loring Ward (since
Winnipeg, Manitoba, Canada, R3C3Z3 Investment Counsel Ltd. ("Loring September 1998);
DOB: 12/21/54 Executive Vice President, Loring Ward (January 1996
to September 1998); Manager, Client Services, Loring
Ward (May 1995 to December 1995); General Manager,
Advance Electronics Ltd. (retail organization)
(until May 1995).
Harold M. Shefrin Trustee Professor of Finance, Santa Clara University.
Leavey School of Business
Santa Clara University
Santa Clara, CA 95053
DOB: 07/27/48
Alexander B. Potts Vice President and Secretary Vice President of Advisor Services and Investment
1190 Saratoga Avenue, Suite 200 Operations, RWB Advisory Services Inc. (since
San Jose, CA 95120 October 1998); Vice President of Advisor Services
DOB: 06/14/67 and Investment Operations, Reinhardt, Werba, Bowen
Inc. (April 1990 - October 1998).
Michael R. Clinton Treasurer and Chief Financial and Treasurer and Chief Financial Officer, RWB Advisory
1190 Saratoga Avenue, Suite 200 Accounting Officer Services Inc. (since October 1998); Treasurer and
San Jose, CA 95120 Chief Financial Officer, Reinhardt, Werba, Bowen
DOB: 10/06/66 Inc. (June 1995 to October 1998); CPA, Crawford,
Pimentel & Co., Inc.
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
(accounting firm) (September 1989 to June 1995).
Ronald G. Reynolds Assistant Secretary and Assistant Chief Operating Officer, RWB Advisory Services Inc.
1190 Saratoga Avenue, Suite 200 Treasurer (since July 1998); Chief Operating Officer,
San Jose, CA 95120 Reinhardt, Werba, 1998); Bowen, Inc. (January 1997
DOB: 6/20/41 to October Consultant (February 1995 to January
1997); Vice President Operations/Corporate
Secretary, Coastcom (telecommunications) (August
1994 to February 1995); Vice President Operations,
Litton Corporation (February 1967 to August 1994).
</TABLE>
COMPENSATION TABLE
For their services as trustees, the trustees who are not "interested
persons" (as defined in the 1940 Act) receive a $5,000 annual retainer fee and
$1,000 per meeting attended, as well as reimbursement for expenses incurred in
connection with attendance at such meetings. The interested trustees receive no
compensation for their services as trustees. The following table summarizes the
estimated compensation to be paid by the Trust to its trustees during the
current fiscal year. The aggregate compensation is provided for the Trust, which
is comprised of six Funds.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION FROM THE PENSION OR RETIREMENT
NAME OF TRUSTEE TRUST BENEFITS
- ------------------------------------------------------------------------------
<S> <C> <C>
Bryan W. Brown $9,000 None
David G. Booth None None
John J. Bowen, Jr. None None
Patrick Keating None None
Harold M. Shefrin $9,000 None
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of the date of this SAI, RWBAS may be deemed to control the Funds
because it is the record and beneficial owner of 100% of each class of each
Fund. As a result, RWBAS will be able to affect the outcome of matters presented
for a vote of each Fund's shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER AND SUB-ADVISER
The Trust, on behalf of each Fund, has entered into an Investment Advisory
and Administrative Services Agreement (the "Agreement") with the Manager, an
indirect, wholly-owned subsidiary of Assante Corporation, which is a privately
held financial services company located in Winnipeg, Canada.
The Agreement will continue in effect for a period of two years from its
effective date. If not sooner terminated, the Agreement will continue in effect
for successive one year periods thereafter, provided that its continuance is
specifically approved annually by (a) the vote of a majority of the Board of
Trustees who are not
16
<PAGE>
parties to the Agreement or interested persons (as defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on approval, and
(b) either (i) the vote of a majority of the outstanding voting securities of
the affected Fund, or (ii) the vote of a majority of the Board of Trustees. The
Agreement is terminable with respect to a Fund by vote of the Board of Trustees,
or by the holders of a majority of the outstanding voting securities of the
Fund, at any time without penalty, on 60 days' written notice to the Manager.
The Manager may also terminate its advisory relationship with respect to a Fund
without penalty on 90 days' written notice to the Trust, as applicable. The
Advisory Agreement terminates automatically in the event of its assignment (as
defined in the 1940 Act).
For the advisory services provided pursuant to the Agreement, the Manager
is entitled to a fee from each Fund computed daily and payable monthly at the
rate of .85% of the average daily net assets of each Fund.
For the administrative services provided, the Manager is entitled to a fee
from each Fund computed daily and payable monthly at the rate of .10% of the
average daily net assets of each Fund.
Dimensional is the Sub-Adviser to each Fund. Dimensional is a Delaware
corporation and is registered with the Securities and Exchange Commission as an
investment adviser. David G. Booth and Rex A. Sinquefield, directors and
officers of Dimensional and shareholders of approximately 51% of Dimensional's
outstanding stock, may be considered controlling persons of the Sub-Adviser.
The Trust has entered into a sub-advisory agreement (the "Sub-Advisory
Agreement") with Dimensional. Under the terms of the Sub-Advisory Agreement,
Dimensional provides sub-advisory services to the Funds. Subject to supervision
of the Manager, Dimensional is responsible for the management of each the Fund's
portfolio, including decisions regarding purchases and sales of portfolio
securities by the Funds. Dimensional is also responsible for arranging the
execution of portfolio management decisions, including the selection of brokers
to execute trades and the negotiation of brokerage commissions in connection
therewith.
The Sub-Advisory Agreement will continue in effect with respect to a Fund
for a period of two years from its effective date. If not sooner terminated, the
Sub-Advisory Agreement will continue in effect for successive one year periods
thereafter, provided that each continuance is specifically approved annually by
(a) the vote of a majority of the Board of Trustees who are not parties to the
Sub-Advisory Agreement or interested persons (as defined in the 1940 Act), cast
in person at a meeting called for the purpose of voting on approval, and (b) the
vote of a majority of the Board of Trustees. The Sub-Advisory Agreement is
terminable by vote of the Board of Trustees, or, with respect to a Fund, by the
holders of a majority of the outstanding voting securities of that Fund, at any
time without penalty, on 60 days' written notice to Dimensional. Once the
Sub-Advisory Agreement has been in effect for a period of not less than four
years, it may be terminated by the Manager or Dimensional as to all the Funds by
giving not less than twelve month's written notice. The Sub-Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act).
For the sub-advisory services provided, Dimensional is entitled to a fee
from each Fund (except the International Small Company Fund) computed daily and
payable monthly at an annual rate based on each Fund's average daily net assets
as set forth below. Because Dimensional receives administrative fees from the
feeder funds in which the International Small Company Fund invests and
investment advisory fees from their related master funds, Dinmensional has
agreed that it will not receive a sub-advisory fee for its services to the Fund
<TABLE>
<CAPTION>
FUND FEE
- ---- ---
<S> <C>
Fixed Income Fund .19%
U.S. Market Fund .05%
U.S. HBtM Fund .27%
U.S. Small Company Fund .38%
International HBtM Fund .38%
International Small Company Fund .00%
</TABLE>
The following individuals are affiliated persons of the Trust and of the
Manager: John J. Bowen, Jr.; Patrick Keating; Alexander B. Potts; Michael R.
Clinton and Ronald G. Reynolds. David G. Booth is an affiliated
17
<PAGE>
person of the Trust and of the Sub-Adviser. The capacities in which each such
individual is affiliated with the Trust and the Manager or Sub-Adviser is set
forth above under "Trustees and Officers."
DISTRIBUTOR
RWB Securities, Inc. (the "Distributor") and the Trust have entered into a
distribution agreement, under which the Distributor, as agent, sells shares of
each Fund on a continuous basis. The Distributor's principal offices are located
at 1190 Saratoga Avenue, Suite 200, San Jose, CA 95129. The Distributor is an
indirect, wholly-owned subsidiary of Assante Capital Management, Inc. and is an
affiliate of RWBAS. The Distributor receives no compensation for distribution of
the Funds shares.
John J. Bowen, Jr. is an affiliated person of the Trust and of the
Distributor.
SHAREHOLDER SERVICING ARRANGEMENTS
Under a Shareholder Servicing Agreement with the Trust, the Manager
performs various services for the Funds, including establishing a toll-free
telephone number for shareholders of each Fund to use to obtain up-to-date
account information; providing to shareholders quarterly and other reports with
respect to the performance of each Fund; and providing shareholders with such
information regarding the operations and affairs of each Fund, and their
investment in its shares, as the shareholders or the Board of Trustees may
reasonably request. The Manager is paid an annual service fee at the rate of up
to 0.25% of the value of average daily net assets of the Class S shares, and an
annual service fee at the rate of up to 0.05% of the value of average daily net
assets of the Class I shares of each Fund.
ADMINISTRATION
State Street Bank and Trust Company ("State Street"), whose principal
business address is 225 Franklin Street, Boston, Massachusetts, 02110, serves as
sub-administrator for the Trust, pursuant to a sub-administration agreement (the
"Sub-Administration Agreement") with the manager and the Trust.
Under the Sub-Administration Agreement, State Street has agreed to oversee
the computation of each Fund's net asset value, net income and realized capital
gains, if any; furnish statistical and research data, clerical services, and
stationery and office supplies; prepare and file various reports with the
appropriate regulatory agencies; and prepare various materials required by the
Securities and Exchange Commission. For providing these services, State Street
receives a fee which is calculated daily and paid monthly at an annual rate
based on the average daily net assets of each Fund as follows: 0.06% on the
first $750 million of net assets, plus 0.04% for net assets between $750 million
and $1.5 billion, plus 0.02% on net assets over $1.5 billion. There is a minimum
charge of $85,000 per fund.
CUSTODIAN
State Street is the custodian of each Fund's assets pursuant to a custodian
agreement (the "Custody Contract") with the Trust. State Street is also the
custodian with respect to the custody of foreign securities held by the Funds.
Under the Custody Contract, State Street (i) holds and transfers portfolio
securities on account of each Fund, (ii) accepts receipts and makes
disbursements of money on behalf of each Fund, (iii) collects and receives all
income and other payments and distributions on account of each Fund's securities
and (iv) makes periodic reports to the Board of Trustees concerning the Funds'
operations.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street serves as the transfer agent and dividend disbursing agent for
the Funds.
18
<PAGE>
COUNSEL
The law firm of Paul, Hastings, Janofsky & Walker LLP, 345 California
Street, San Francisco, California 94104, has passed upon certain legal matters
in connection with the shares offered by the Funds and serves as counsel to the
Trust.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLC, 555 California Street, San Francisco,
California 94101, serves as the independent auditors for the Trust, providing
audit and accounting services including: examination of each Fund's annual
financial statements, assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission; and
preparation of income tax returns.
BROKERAGE ALLOCATIONS AND OTHER PRACTICES
Subject to the general supervision of the Trustees, the Sub-Adviser makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for the Funds.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers.
Over-the-counter issues, including corporate debt and government
securities, are normally traded on a "net" basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Sub-Adviser
will normally deal directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable prices and execution
are available elsewhere. The cost of foreign and domestic securities purchased
from and sold to dealers include a dealer's mark-up or mark-down.
The Sub-Adviser will place portfolio transaction with a view to receiving
the best price and execution.
Transactions may be placed with brokers who provide the Sub-Adviser with
investment research, such as reports concerning individual issuers, industries
and general economic and financial trends and other research services. The
Sub-Advisory Agreement permits the Sub-Adviser to cause the Funds to pay a
broker or dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker or dealer for
effecting the same transaction, provided that the Sub-Adviser determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either the particular transaction or the overall responsibilities of
the Sub-Adviser to the Funds.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Sub-Adviser and does not
reduce the advisory fees payable to the Sub-Adviser. It is possible that certain
of the supplementary research or other services received will primarily benefit
one or more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Investment decisions for each Fund and for other investment accounts
managed by the Sub-Adviser are made independently of each other in the light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as to
amount in a manner deemed equitable to each such account. While in some cases
this practice could have a detrimental effect on the price or value of the
security as far as a Fund is concerned, in other cases it is believed to be
beneficial to a Fund. To the extent permitted by law, the Sub-Adviser may
aggregate the securities to be sold or purchased for a Fund with those to be
sold or purchased for other investment companies or accounts in executing
transactions.
19
<PAGE>
Portfolio securities will not be purchased from or sold to the Manager,
Sub-Adviser, Distributor or any affiliated person (as defined in the 1940 Act)
of the foregoing entities except to the extent permitted by Securities and
Exchange Commission exemptive order or by applicable law. A Fund will not
purchase securities during the existence of any underwriting or selling group
relating to such securities of which the Manager, Sub-Adviser or any affiliated
person (as defined in the 1940 Act) thereof is a member except pursuant to
procedures adopted by the Trust's Board of Trustees in accordance with Rule
10f-3 under the 1940 Act.
INFORMATION CONCERNING SHARES
The Trust is a Delaware business trust. Under the Declaration of Trust, the
beneficial interest in the Trust may be divided into an unlimited number of full
and fractional transferable shares. The Declaration of Trust authorizes the
Board of Trustees to classify or reclassify any unissued shares of the Trust
into one or more classes by setting or changing, in any one or more respects,
their respective designations, preferences, conversion or other rights, voting
powers, restrictions, limitations, qualifications and terms and conditions of
redemption. Currently, the Trust's Board of Trustees has authorized the issuance
of an unlimited number of shares of beneficial interest in the Trust,
representing interests in six separate series, each of which is a Fund. Each
Fund currently offers two classes of shares.
In the event of a liquidation or dissolution of the Trust, shareholders of
a particular Fund would be entitled to receive the assets available for
distribution belonging to such Fund, and a proportionate distribution, based
upon the relative net asset values of the Funds, of any general assets not
belonging to any particular Fund which are available for distribution.
Shareholders of a Fund are entitled to participate in the net distributable
assets of the particular Fund involved on liquidation, based on the number of
shares of the Fund that are held by each shareholder.
Shares of the Trust have noncumulative voting rights and, accordingly, the
holders of more than 50% of the Trusts outstanding shares (irrespective of
class) may elect all of the trustees. Shares have no preemptive rights and only
such conversion and exchange rights as the Board may grant in its discretion.
When issued for payment as described in the applicable Prospectus, shares will
be fully paid and non-assessable by the Trust.
Shareholder meetings to elect trustees will not be held unless and until
such time as required by law. At that time, the trustees then in office will
call a shareholders' meeting to elect trustees. Except as set forth above, the
trustees will continue to hold office and may appoint successor trustees.
Meetings of the shareholders, shall be called by the trustees upon the written
request of shareholders owning at least 10% of the outstanding shares entitled
to vote.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION INFORMATION
Purchases and redemptions are discussed in the Funds' Prospectus and such
information is incorporated herein by reference.
RETIREMENT PLANS. Shares of any of the Funds may be purchased in connection
with various types of tax deferred retirement plans, including individual
retirement accounts ("IRAs"), 401(k) plans, deferred compensation for public
schools and charitable organizations (403(b) plans) and simplified employee
pension IRAs (SEP-IRAs). An individual or organization considering the
establishment of a retirement plan should consult with an attorney and/or an
accountant with respect to the terms and tax aspects of the plan. A $10.00
annual custodial fee is also charged on IRAs. This custodial fee is due by
December 15 of each year and may be paid by check or shares liquidated from a
shareholder's account.
20
<PAGE>
IN-KIND PURCHASES. Payment for shares may, in the discretion of the
Sub-Adviser, be made in the form of securities that are permissible investments
for the Funds as described in the Prospectuses. For further information about
this form of payment please contact the Manager. In connection with an in-kind
securities payment, a Fund will require, among other things, that the securities
(a) meet the investment objectives and policies of the Funds; (b) are acquired
for investment and not for resale; (c) are liquid securities that are not
restricted as to transfer either by law or liquidity of markets; (d) have a
value that is readily ascertainable by a listing on a nationally recognized
securities exchange; and (e) are valued on the day of purchase in accordance
with the pricing methods used by the Fund and that the Fund receive satisfactory
assurances that (i) it will have good and marketable title to the securities
received by it; (ii) that the securities are in proper form for transfer to the
Fund; and (iii) adequate information will be provided concerning the basis and
other tax matters relating to the securities.
REDEMPTION IN-KIND. Redemption proceeds are normally paid in cash; however,
each Fund reserves the right to pay the redemption price in whole or part by a
distribution in kind of securities from the portfolio of the particular Fund, in
lieu of cash. Redemption in-kind will be made in conformity with applicable
rules of the Securities and Exchange Commission taking such securities at the
same value employed in determining net asset value and selecting the securities
in a manner the Board of Trustees determines to be fair and equitable. The Trust
has elected to be governed by Rule 18f-1 under the 1940 Act under which the Fund
is obligated to redeem shares for any one shareholder in cash only up to the
lesser of $250,000 or 1% of the class' net asset value during any 90-day period.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash.
OTHER REDEMPTION INFORMATION. The Funds reserve the right to suspend or
postpone redemptions during any period when: (i) trading on the New York Stock
Exchange (the "NYSE") is restricted by applicable rules and regulations of the
Securities and Exchange Commission; (ii) the NYSE is closed for other than
customary weekend and holiday closings; (iii) the Securities and Exchange
Commission has by order permitted such suspension or postponement for the
protection of the shareholders; or (iv) an emergency, as determined by the
Securities and Exchange Commission, exists, making disposal of portfolio
securities or valuation of net assets of a Fund not reasonably practicable.
The Funds may involuntarily redeem an investor's shares if the net asset
value of such shares is less than $10,000; provided that involuntary redemptions
will not result from fluctuations in the value of an investor's shares. A notice
of redemption, sent by first-class mail to the investor's address of record,
will fix a date not less than 60 days after the mailing date, and shares will be
redeemed at the net asset value at the close of business on that date unless
sufficient additional shares are purchased to bring the aggregate account value
up to $10,000 or more. A check for the redemption proceeds payable to the
investor will be mailed to the investor at the address of record.
TAXES
The following summarizes certain additional federal and state income tax
considerations generally affecting the Funds and their shareholders that are not
described in the Funds' Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. This discussion is based upon present provisions of the
Code, the regulations promulgated thereunder, and judicial and administrative
ruling authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership and
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.
TAX STATUS OF THE FUNDS
Each Fund intends to elect and qualify to be taxed separately as a
regulated investment company under the Code. As a regulated investment company,
each Fund generally is exempt from federal income tax on its net investment
income and realized capital gains which it distributes to shareholders, provided
that it distributes an amount equal to the sum of (a) at least 90% of its
investment company taxable income (net investment income and
21
<PAGE>
the excess of net short-term capital gain over net long-term capital loss), if
any, for the year and (b) at least 90% of its net tax-exempt interest income, if
any, for the year (the "Distribution Requirement") and satisfies certain other
requirements of the Code that are described below. Distributions of investment
company taxable income and net tax-exempt interest income made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year will satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, each Fund must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement").
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of each Fund's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold more than 10% of
the outstanding voting securities of such issuer) and no more than 25% of the
value of each Fund's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses.
If for any taxable year any Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income and would be eligible for the dividends received
deduction in the case of corporate shareholders to the extent of such Fund's
current and accumulated earnings and profits.
Although a Fund expects to qualify as a "regulated investment company" and
to be relieved of all or substantially all Federal income taxes, depending upon
the extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, a Fund may be subject to
the tax laws of such states or localities.
TAXATION OF FUND DISTRIBUTIONS
Distributions of net investment income received by a Fund from investments
in debt securities and any net realized short-term capital gains distributed by
a Fund will be taxable to shareholders as ordinary income and will not be
eligible for the dividends received deduction for corporations.
Each Fund intends to distribute to shareholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is taxable
to shareholders as gain from the sale or exchange of a capital asset held for
more than one year, regardless of the length of time a shareholder has held his
or her Fund shares and regardless of whether the distribution is paid in cash or
reinvested in shares. The Funds expect that capital gain dividends will be
taxable to shareholders as long-term gain. Capital gain dividends are not
eligible for the dividends received deduction.
In the case of corporate shareholders, distributions of a Fund for any
taxable year generally qualify for the dividends received deduction to the
extent of the gross amount of "qualifying dividends" received by such Fund for
the year and if certain holding period requirements are met. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, a Fund must distribute during each
calendar year an amount equal to the sum of (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses, as prescribed by the Code) for the
one-year period ending on October 31 of the
22
<PAGE>
calendar year, and (3) any ordinary income and capital gains for previous years
that was not distributed during those years. A distribution will be treated as
paid on December 31 of the current calendar year if it is declared by a Fund in
October, November or December with a record date in such a month and paid by a
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To prevent application of the excise tax, a Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
Shareholders will be advised annually as to the federal income tax
consequences of distributions made by the Funds each year.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her shares, a shareholder
will realize a taxable gain or loss depending upon his or her basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands and will be long-term or
short-term, generally, depending upon the shareholder's holding period for the
shares. Any loss realized on a redemption, sale or exchange will be disallowed
to the extent the shares disposed of are replaced (including through
reinvestment of dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on the sale of Fund shares held by the shareholder for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gains received or treated as having been
received by the shareholder with respect to such shares and treated as long-term
capital gains. Furthermore, a loss realized by a shareholder on the redemption,
sale or exchange of shares of a Fund with respect to which exempt-interest
dividends have been paid will, to the extent of such exempt-interest dividends,
be disallowed if such shares have been held by the shareholder for six months or
less.
INFORMATION RELATING TO FOREIGN INVESTMENTS
Income received by a Fund from sources within foreign countries may be
subject to withholding and other foreign taxes. The payment of such taxes will
reduce the amount of dividends and distributions paid to the Funds'
shareholders. So long as a Fund qualifies as a regulated investment company,
certain distribution requirements are satisfied, and more than 50% of the value
of the Fund's assets at the close of the taxable year consists of securities of
foreign issuers, the Fund may elect, subject to limitation, to pass through its
foreign tax credits to its shareholders. The Fund may qualify for and make this
election in some, but not necessarily all, of its taxable years. If a Fund were
to make an election, an amount equal to the foreign income taxes paid by the
Fund would be included in the income of its shareholders and the shareholders
would be entitled to credit their portions of this amount against their U.S. tax
due, if any, or to deduct such portions from their U.S. taxable income, if any.
Shortly after any year for which it makes such an election, a Fund will report
to its shareholders, in writing, the amount per share of such foreign tax that
must be included in each shareholder's gross income and the amount which will be
available for deduction or credit. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions. Certain limitations are
imposed on the extent to which the credit (but not the deduction) for foreign
taxes may be claimed.
Shareholders who choose to utilize a credit (rather than a deduction) for
foreign taxes will be subject to limitations, including the restriction that the
credit may not exceed the shareholder's United States tax (determined without
regard to the availability of the credit) attributable to his or her total
foreign source taxable income. For this purpose, the portion of dividends and
distributions paid by the Fund from its foreign source income will be treated as
foreign source income. The Fund's gains and losses from the sale of securities
will generally be treated as derived from United States sources and certain
foreign currency gains and losses likewise will be treated as derived from
United States sources. The limitation on the foreign tax credit is applied
separately to foreign source "passive income", such as the portion of dividends
received from the Fund which qualifies as foreign source income. In addition,
only a portion of the foreign tax credit will be allowed to offset any
alternative minimum tax imposed on
23
<PAGE>
corporations and individuals. Because of these limitations, shareholders may be
unable to claim a credit for the full amount of their proportionate shares of
the foreign income taxes paid by the Fund.
Certain Funds may invest in shares of foreign corporations that may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute passive assets, or 75% or more of its gross passive
income. If a Fund receives a so-called "excess distribution" with respect to
PFIC stock, the Fund itself may be subject to a tax on a portion of the excess
distribution, whether or not the corresponding income is distributed by the Fund
to shareholders. In general, under the PFIC rules, an excess distribution is
treated as having been realized ratably over the period during which the Fund
held the PFIC shares. Each Fund will itself be subject to tax on the portion, if
any, of an excess distribution that is so allocated to prior Fund taxable years
and an interest factor will be added to the tax, as if the tax had been payable
in such prior taxable years. Certain distributions from a PFIC as well as gain
from the sale of PFIC shares are treated as excess distributions. Excess
distributions are characterized as ordinary income even though, absent
application of the PFIC rules, certain excess distributions might have been
classified as capital gain.
The Funds may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions were received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election would involve
marking to market the Fund's PFIC shares at the end of each taxable year, with
the result that unrealized gains would be treated as though they were realized
and reported as ordinary income. Any mark-to market losses and any loss from an
actual disposition of Fund shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
INFORMATION RELATING TO FUND INVESTMENTS
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS. Special rules govern the Federal
income tax treatment of financial instruments that may be held by some of the
Funds. These rules may have a particular impact on the amount of income or gain
that the Funds must distribute to their respective shareholders to comply with
the Distribution Requirement and on the income or gain qualifying under the
Income Requirement.
ORIGINAL ISSUE DISCOUNT. The Funds may purchase debt securities with
original issue discount. Original issue discount represents the difference
between the original issue price of the debt instrument and the stated
redemption price at maturity. Original issue discount is required to be accreted
on a daily basis and is considered interest income for federal income tax
purposes and, therefore, such income would be subject to the distribution
requirements applicable to regulated investment companies.
MARKET DISCOUNT. The Funds may purchase debt securities at a discount in
excess of the original issue discount, or at a discount to the stated redemption
price at maturity (for debt securities without original issue discount). This
discount is called "market discount". Market discount is permitted to be
recorded daily or at time of disposition of the debt security. If market
discount is to be recognized at time of disposition of the debt security,
accrued market discount is recognized to the extent of gain on the disposition
of the debt security.
HEDGING TRANSACTIONS. The taxation of equity options and over-the-counter
options on debt securities is governed by Code section 1234. Pursuant to Code
section 1234, the premium received by a Fund for selling a put or call option is
not included in income at the time of receipt. If the option expires, the
premium is short-term capital gain to the Fund. If the Fund enters into a
closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-
24
<PAGE>
term or short-term depending upon the holding period of the security. With
respect to a put or call option that is purchased by a Fund, if the option is
sold, any resulting gain or loss will be a capital gain or loss, and will be
long-term or short-term, depending upon the holding period of the option. If the
option expires, the resulting loss is a capital loss and is long-term or
short-term, depending upon the holding period of the option. If the option is
exercised, the cost of the option, in the case of a call option, is added to the
basis of the purchased security and, in the case of a put option, reduces the
amount realized on the underlying security in determining gain or loss.
Any regulated futures and foreign currency contracts and certain options
(namely, nonequity options and dealer equity options) in which a Fund may invest
may be "section 1256 contracts." Gains or losses on section 1256 contracts are
generally considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses arising from certain section 1256
contracts may be treated as ordinary income or loss. Also, section, 1256
contracts held by a Fund at the end of each taxable year (and generally for
purposes of the 4% excise tax, on October 31 of each year) are
"marked-to-market" with the result that unrealized gains or losses are treated
as though they were realized.
Generally, hedging transactions, if any, undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Funds. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences of hedging transactions to the Funds are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Funds which is taxed as ordinary income when
distributed to shareholders.
The Funds may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.
The diversification requirements applicable to the Funds' assets may limit
the extent to which the Funds will be able to engage in transactions in options,
futures or forward contracts.
CONSTRUCTIVE SALES. Recently enacted rules may affect the timing and
character of gain if a Fund engages in transactions that reduce or eliminate its
risk of loss with respect to appreciated financial positions. If the Fund enters
into certain transactions in property while holding substantially identical
property, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code.
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES. Under the Code,
gains or losses attributable to fluctuations in exchange rates which occur
between the time a Fund accrues receivables or liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income and loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain futures, forward contracts and options, gains or
losses attributable to fluctuations in the value of the foreign currency between
the date of acquisition of the security or contract and the date of disposition
also may be treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "Section 988"
25
<PAGE>
gains or losses, may increase or decrease the amount of a Fund's investment
company taxable income to be distributed to its shareholders as ordinary income.
BACKUP WITHHOLDING
The Trust will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable distributions, including gross proceeds
realized upon sale or other dispositions paid to any shareholder (i) who has
provided an incorrect tax identification number or no number at all, (ii) who is
subject to backup withholding by the Internal Revenue Service for failure to
report the receipt of taxable interest or dividend income properly, or (iii) who
has failed to certify that he is not subject to backup withholding or that he is
an "exempt recipient."
OTHER TAXATION
The foregoing discussion relates only to U.S. federal income tax law and
certain state taxes as applicable to U.S. persons (i.e., U.S. citizens and
residents and domestic corporations, partnerships, trusts and estates).
Distributions by the Funds, and dispositions of Fund shares also may be subject
to other state and local taxes, and their treatment under state and local income
tax laws may differ from the U.S. federal income tax treatment. Shareholders
should consult their tax advisers with respect to particular questions of U.S.
federal, state and local taxation. Shareholders who are not U.S. persons should
consult their tax advisers regarding U.S. and foreign tax consequences of
ownership of shares of the Fund, including the likelihood that distributions to
them would be subject to withholding of U.S. federal income tax at a rate of 30%
(or at a lower rate under a tax treaty). Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
PERFORMANCE INFORMATION
The 30-day (or one month) standard yield is calculated for the Fixed Income
Fund in accordance with the method prescribed by the SEC for mutual funds:
6
YIELD = 2 [( a-b + 1) - 1]
---
cd
Where:
a=dividends and interest earned by the Fund during the period;
b=expenses accrued for the period (net of reimbursements and waivers);
c=average daily number of shares outstanding during the period entitled
to receive dividends;
d=maximum offering price per share on the last day of the period.
For the purpose of determining interest earned on debt obligations
purchased by the Fund at a discount or premium (variable "a" in the formula),
the Fund computes the yield to maturity of such instrument based on the market
value of the obligation (including actual accrued interest) at the close of
business on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest).
Such yield is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is in the portfolio. It is assumed in the above
calculation that each month contains 30 days. The maturity of a debt obligation
with a call provision is deemed to be the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. For the
purpose of computing yield on equity securities held by the Fund, dividend
income is recognized by accruing 1/360 of the stated dividend rate of the
security for each day that the security is held by the Fund.
Interest earned on tax-exempt obligations that are issued without original
issue discount and have a current market discount is calculated by using the
coupon rate of interest instead of the yield to maturity. In the case of
tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt
26
<PAGE>
obligations that are issued with original issue discount but which have the
discounts based on current market value that are less than the then-remaining
portion of the original issue discount (market premium), the yield to maturity
is based on the market value.
With respect to mortgage or other receivables-backed debt obligations
purchased at a discount or premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule will be adjusted monthly
to reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring fees
charged by the Fund to all shareholder accounts in proportion to the length of
the base period and the Fund's mean (or median) account size. Undeclared earned
income will be subtracted from the offering price per share (variable "d" in the
formula).
TOTAL RETURN
Each Fund that advertises its "average annual total return" computes such
return by determining the average annual compounded rate of return during
specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
n
P (1 + T) = ERV
Where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year (or other) periods at the end of
the applicable period (or a fractional portion thereof)
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in years.
Each Fund that advertises its "aggregate total return" computes such
returns by determining the aggregate compounded rates of return during specified
periods that likewise equate the initial amount invested to the ending
redeemable value of such investment.
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per share
existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value is determined by assuming
complete redemption of the hypothetical investment after deduction of all
non-recurring charges at the end of the measuring period.
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses.
From time to time, the performance of a Fund may be compared in
publications to the performance of various indices and investments for which
reliable performance data is available. The performance of a Fund may also be
compared in publications to averages, performance rankings, or other information
prepared by recognized mutual fund statistical services.
FINANCIAL STATEMENTS
The Financial Statements for the Trust at July 7, 1999 including the notes
thereto and the report of PricewaterhouseCoopers LLP thereon are contained in
this SAI on the following pages.
27
<PAGE>
SA Funds - Investment Trust
Statements of Assets and Liabilities
July 7, 1999
<TABLE>
<CAPTION>
SA SA SA SA SA SA
Fixed U.S. U.S. U.S. Inter- Inter-
Income Market HBtM Small national national
Fund Fund Fund Company HBtM Small
------- ------- ------- Fund Fund Company
------- ------- Fund
--------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $50,000 $10,000 $10,000 $10,000 $10,000 $10,000
Reimbursement due from Manager 18,276 18,276 18,276 18,275 18,275 18,275
------- ------- ------ ------- ------- -------
Total Assets 68,276 28,276 28,276 28,275 28,275 28,275
------- ------- ------ ------- ------- -------
LIABILITIES
Payable to Manager for
organizational expenses 18,276 18,276 18,276 18,275 18,275 18,275
Total Liabilities 18,276 18,276 18,276 18,275 18,275 18,275
------- ------- ------ ------- ------- -------
TOTAL NET ASSETS $50,000 $10,000 $10,000 $10,000 $10,000 $10,000
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
NET ASSETS CONSIST OF:
Paid in capital $50,000 $10,000 $10,000 $10,000 $10,000 $10,000
TOTAL NET ASSETS $50,000 $10,000 $10,000 $10,000 $10,000 $10,000
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
CLASS I:
Net Assets $25,000 $5,000 $5,000 $5,000 $5,000 $5,000
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
Shares of beneficial interest
outstanding, with a par value of $.01 2,500 500 500 500 500 500
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
Net asset value per share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
CLASS S:
Net Assets $25,000 $5,000 $5,000 $5,000 $5,000 $5,000
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
Shares of beneficial interest
outstanding, with a par value of $.01 2,500 500 500 500 500 500
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
Net asset value per share $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
</TABLE>
See accompanying notes.
28
<PAGE>
SA Funds - Investment Trust
Statements of Operations
July 7, 1999
<TABLE>
<CAPTION>
SA SA SA SA SA SA
Fixed U.S. U.S. U.S. Inter- Inter-
Income Market HBtM Small national national
Fund Fund Fund Company HBtM Small
------- ------- ------- Fund Fund Company
------- ------- Fund
--------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------- ------- ------ ------- ------- -------
EXPENSES
Organizational expenses 18,276 18,276 18,276 18,275 18,275 18,275
------- ------- ------ ------- ------- -------
Total Expenses before
Reimbursement 18,276 18,276 18,276 18,275 18,275 18,275
------- ------- ------ ------- ------- -------
Reimbursement from Manager (18,276) (18,276) (18,276) (18,275) (18,275) (18,275)
------- ------- ------ ------- ------- -------
NET EXPENSES 0 0 0 0 0 0
------- ------- ------ ------- ------- -------
NET INVESTMENT INCOME $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------- ------- ------ ------- ------- -------
</TABLE>
See accompanying notes.
29
<PAGE>
SA Funds - Investment Trust
Notes to Statements of Assets and Liabilities and Statements of Operations
July 7, 1999
1. ORGANIZATION
SA Funds - Investment Trust (the "Trust"), is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists of six series of shares, each
having distinct investment objectives and policies: SA Fixed Income Fund,
SA U.S. Market Fund, SA U.S. HBtM Fund, SA U.S. Small Company Fund, SA
International HBtM Fund and SA International Small Company Fund, each of
which is a diversified fund (individually, a "Fund", collectively, the
"Funds"). The Trust currently offers two classes of shares - Class I and
Class S. Each class has its own expense structure, including different
shareholder servicing fees and operating expenses. Both classes are
offered without a sales charge.
The Trust was organized as a Delaware business trust on June 16, 1998,
under the name RWB Funds - Investment Trust, which was changed on June 7,
1999 to SA Funds - Investment Trust. Prior to July 7, 1999, the Trust had
no operations other than its organization. On July 7, 1999, the SA Fixed
Income Fund issued 2,500 Class I shares and 2,500 Class S shares, and each
of the SA U. S. Market Fund, the SA U.S HBtM Fund, the SA U.S. Small
Company Fund, the SA International HBtM Fund and the SA International Small
Company Fund issued 500 Class I shares and 500 Class S shares at net asset
value (the "Initial Shares") to RWB Advisory Services Inc.
2. SIGNIFICANT ACCOUNTING POLICY
USE OF ESTIMATES -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results could differ from
those estimates.
FEDERAL INCOME TAX -
The Fund's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute all of its taxable income to its stockholders. Therefore, no
Federal income tax provision is required.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has an Investment Advisory and Administrative Service Agreement
with RWB Advisory Services Inc. (the "Manager"), an indirect, wholly-owned
subsidiary of Assante Corporation which is a privately held financial
service company located in Winnipeg, Canada, under which the Manager
manages the investments of and provides administrative services to each
Fund. For the advisory services provided, the Manager is entitled to a fee
from each Fund computed daily and payable monthly at the rate of 0.85% of
the average daily net assets of each Fund. For the administrative services
provided, the Manager is entitled to a fee from each Fund
30
<PAGE>
computed daily and payable monthly at the rate of 0.10% of the average
daily net assets of each Fund.
SA Funds - Investment Trust
Notes to Statements of Assets and Liabilities and Statements of Operations
July 7, 1999
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Trust has a Shareholder Servicing Agreement with the Manager. For the
shareholder services provided, the Manager is paid an annual service fee at
the rate of up to 0.25% of the value of average daily net assets of the
Class S shares, and an annual service fee at the rate of up to 0.05% of the
value of average daily net assets of Class I shares of each Fund.
The Manager has contractually agreed to waive its management fees and/or to
reimburse expenses to the extent necessary to limit each Fund's total
operating expenses to the amounts shown in the table below. This agreement
will remain in effect until July 7, 2009.
<TABLE>
<CAPTION>
FUND CLASS I CLASS S
---- ------- -------
<S> <C> <C>
Fixed Income Fund 1.00% 1.26%
U.S. Market Fund 1.08% 1.34%
U.S. HBtM Fund 1.13% 1.39%
U.S. Small Company Fund 1.28% 1.54%
International HBtM Fund 1.53% 1.79%
International Small Company Fund 1.28% 1.54%
</TABLE>
The manager may elect to recapture any amounts waived or reimbursed subject
to the following conditions: (1) the manager must request reimbursement
within three years from the year in which the waiver/reimbursement is made,
(2) the Board of Trustees must approve the reimbursement and (3) the Fund
must be able to make the reimbursement and still stay within the operating
expense limitations. As of July 7, 1999, the following amounts are subject
to this recapture through July 7, 2002.
<TABLE>
<CAPTION>
FUND
----
<S> <C>
Fixed Income Fund $18,276
U.S. Market Fund $18,276
U.S. HBtM Fund $18,276
U.S. Small Company Fund $18,275
International HBtM Fund $18,275
International Small Company Fund $18,275
</TABLE>
The Trust has entered into Sub-Advisory Agreement with Dimensional Fund
Advisors Inc. ("Dimensional"). For the sub-advisory services provided,
Dimensional is entitled to a fee from each Fund (other than the
International Small Company Fund) computed daily and payable monthly at an
annual rate based on each Fund's average daily net assets as set forth
below. The International Small Company Fund will not pay a fee to
Dimensional for its sub-advisory services. Dimensional, however, receives
administration fees from the feeder funds in which the International Small
Company Fund invests and also receives advisory fees for providing advisory
services to the corresponding master funds.
31
<PAGE>
SA Funds - Investment Trust
Notes to Statements of Assets and Liabilities and Statements of Operations
July 7, 1999
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
<TABLE>
<CAPTION>
FUND SUB-ADVISORY FEE
---- ----------------
<S> <C>
Fixed Income Fund .19%
U.S. Market Fund .05%
U.S. HBtM Fund .27%
U.S. Small Company Fund .38%
International HBtM Fund .38%
</TABLE>
4. ORGANIZATION EXPENSES
Costs and expenses of the Trust paid by the Manager in connection with the
organization of the Trust and the initial public offering of its shares
were immediately expensed by each Fund.
32
<PAGE>
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<S> <C>
(a)(i) Agreement and Declaration of Trust(1)
(ii) Amendment to Agreement and Declaration of Trust is filed herewith.
(b)(i) By-Laws(1)
(ii) Amendment to By-Laws is filed herewith.
(c) Not Applicable
(d)(i) Form of Investment Advisory and Administrative Services Agreement
with RWB Advisory Services Inc. is filed herewith.
(ii) Form of Investment Sub-Advisory Agreement with Dimensional Fund
Advisors, Inc. is filed herewith.
(e) Form of Distribution Agreement with RWB Securities Inc.(2)
(f) Not Applicable
(g) Custodian Agreement with State Street Bank and Trust Company ("State
Street") is filed herewith.
(h)(i) Form of Sub-Administration Agreement with State Street Bank(2)
(ii) Form of Transfer Agency and Service Agreement with State Street(2)
(iii) Form of Shareholder Servicing Agreement(2)
(i) Opinion and Consent of Paul, Hastings, Janovsky & Walker LLP is filed
herewith.
(j)(i) Consent of PricewaterhouseCoopers, LLP is filed herewith.
(ii) Opinion of PricewaterhouseCoopers, LLP is filed herewith.
(k) Not Applicable
(l) Initial Capital Agreement is filed herewith.
(m) Not Applicable
(n) Not Applicable
(o) Multi-Class Plan is filed herewith.
(p) Powers of Attorney(2)
</TABLE>
- --------------
(1) Incorporated herein by reference from Registrant's Registration Statement
on Form N-1A (the "Registration Statement") (File Nos. 333-70423, 811-09195) as
filed with the U.S. Securities and Exchange Commission on January 11, 1999.
(2) Incorporated herein by reference from Pre-Effective Amendment No. 1 to the
Registration Statement as filed with the Securities and Exchange Commission on
June 9, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
Not applicable.
<PAGE>
ITEM 25. INDEMNIFICATION
Indemnification of Registrant's principal underwriter against certain
losses is provided for in the Distribution Agreement incorporated herein by
reference to Exhibit (e) hereto.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of
Registrant, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Trustees shall not be responsible or liable in any event for any
neglect or wrong-doing of any officer, agent, employee, Investment Adviser or
principal underwriter of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and the Trust out of its assets shall
indemnify and hold harmless each and every Trustee from and against any and all
claims, demands and expenses (including reasonable attorneys' fees) whatsoever
arising out of or related to each Trustee's performance of his or her duties as
a Trustee of the Trust; provided that nothing herein contained shall indemnify,
hold harmless or protect any Trustee from or against any liability to the Trust
or any Shareholder to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Every note, bond, instrument, certificate or undertaking and every other
act or thing whatsoever issued, executed or done by or on behalf of the Trust or
the Trustees or any of them in connection with the Trust shall be conclusively
deemed to have been issued, executed or done only in or with respect to their or
his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall
not be personally liable thereon.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
RWB Advisory Services Inc. performs investment advisory services for Registrant
and institutional and individual investors.
Dimensional Fund Advisors Inc. performs investment advisory services for
Registrant and other investment companies and institutional and individual
investors.
See the information concerning RWB Advisory Services Inc. and Dimensional Fund
Advisors Inc. set forth in Parts A and B of this Registration Statement.
RWB Advisory Services Inc. and Dimensional Fund Advisors Inc. are both
investment advisers registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). The list required by this Item 26 of directors,
officers or partners of RWB Advisory Services Inc. and Dimensional Fund Advisors
Inc., together with any information as to any business profession, vocation
<PAGE>
or employment of a substantial nature engaged in by such directors, officers or
partners during the past two years, is incorporated herein by reference from
Schedules B and D of Forms ADV filed by RWB Advisory Services Inc. (SEC File No.
801-55934) and Dimensional Fund Advisors Inc. (SEC File No. 801-16283), pursuant
to the Advisers Act.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Not Applicable
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
UNDERWRITER WITH FUND
<S> <C> <C>
John J. Bowen, Jr.
RWB Securities Inc. Chief Executive Officer, Chief Executive Officer,
1190 Saratoga Avenue Registered Principal and President President and Trustee
Suite 200
San Jose, CA 95129
</TABLE>
(c) Not Applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The following entities prepare, maintain and preserve the records required by
Section 31(a) of the 1940 Act for the Registrant. These services are provided to
the Registrant through written agreements between the parties to the effect that
such records will be maintained on behalf of the Registrant for the periods
prescribed by the rules and regulations of the Commission under the 1940 Act and
that such records are the property of the entity required to maintain and
preserve such records and will be surrendered promptly on request:
(1) RWB Advisory Services Inc.
1190 Saratoga Avenue, Suite 200
San Jose, California 95129
(2) Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
(3) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(4) Boston Financial Data Services, Inc.
Two Heritage Drive
North Quincy, Massachusetts 02171
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKING
Not Applicable
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
(a) (ii) Amendment No. 1 to the Declaration of Trust
(b) (ii) Amendment to By-Laws
(d) (i) Form of Investment Advisory & Administrative Services Agreement
(d) (ii) Form of Sub-Advisory Agreement
(g) Custodian Agreement
(i) Opinion and Consent of Paul, Hastings, Janovsky & Walker, LLP
(j) (i) Consent of PricewaterhouseCoopers, LLP
(j) (ii) Opinion of PricewaterhouseCoopers, LLP
(l) Initial Capital Agreement
(o) Multi-Class Plan
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this amendment to the registration statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston and the Commonwealth of
Massachusetts, on the 15th day of July, 1999.
SA FUNDS - INVESTMENT TRUST
By: * /s/ John J. Bowen, Jr.
------------------------
John J. Bowen, Jr.
President and Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed below by the
following person in the capacities and on the date indicated:
SIGNATURES TITLE DATE
- ---------- ----- ----
* /s/ John J. Bowen, Jr. Trustee July 15, 1999
- ------------------------
John J. Bowen, Jr.
* /s/ Bryan W. Brown Trustee July 15, 1999
- ------------------------
Bryan W. Brown
* /s/ David G. Booth Trustee July 15, 1999
- ------------------------
David G. Booth
* /s/ Patrick Keating Trustee July 15, 1999
- ------------------------
Patrick Keating
* /s/ Harold M. Shefrin Trustee July 15, 1999
- ------------------------
Harold M. Shefrin
* /s/ Michael Clinton Treasurer and Chief July 15, 1999
- ------------------------ Financial and Accounting Officer
Michael Clinton
*By: /s/ Cynthia Surprise
--------------------
Cynthia Surprise
As Attorney-in-Fact
<PAGE>
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
Effective June 7, 1999:
The name of the Trust is hereby amended to be SA FUNDS--INVESTMENT
TRUST. In addition, the Agreement and Declaration of Trust is further
amended as follows:
(1) CAPTION. The Caption is amended to read:
AGREEMENT AND DECLARATION OF TRUST
OF
SA FUNDS--INVESTMENT TRUST
(2) ARTICLE I, SECTION 1. is amended to read:
SECTION 1. NAME. This Trust shall be known as SA
Funds--Investment Trust, and the Trustees shall conduct the
business of the Trust under that name or any other name as they
may from time to time determine.
(3) ARTICLE VIII, SECTION 9. is amended to read:
SECTION 9. USE OF THE IDENTIFYING WORDS "SA FUNDS--INVESTMENT
TRUST" AND "SA FUNDS". The identifying words "SA
FUNDS--INVESTMENT TRUST," and "SA FUNDS," and all rights to the
use of such identifying words belong to Reinhardt Werba Bowen,
the Investment Adviser of the Trust's Shares. Reinhardt Werba
Bowen has licensed the Trust to use the identifying words "SA
FUNDS" in the Trust's name and to use the identifying words "SA
FUNDS" in the name of any series of the Trust. In the event that
Reinhardt Werba Bowen or an affiliate of Reinhardt Werba Bowen is
not appointed or ceases to be the Investment Manager of the
Trust, the non-exclusive license may be revoked by Reinhardt
Werba Bowen, and the Trust and any series thereof shall
respectively cease using the identifying words "SA
FUNDS--INVESTMENT TRUST," and "SA FUNDS," unless otherwise
consented to by Reinhardt Werba Bowen or any successor to
Reinhardt Werba Bowen's interest.
<PAGE>
AMENDMENT TO BY-LAWS
Effective June 7, 1999:
The name of the Trust is hereby amended to be SA FUNDS--INVESTMENT
TRUST. In addition, the Bylaws are further amended as follows:
(1) Face Page and Caption. The Face Page and Caption are amended to
read:
By-Laws of SA Funds--Investment Trust
(2) ARTICLE I, SECTION 1. Article 1, Section 1 is amended to read:
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix
and, from time to time, may change the location of the
principal executive office of SA FUNDS--INVESTMENT TRUST
(the "Trust") at any place within or outside the State of
Delaware.
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
This Amendment to the Certificate of Trust of RWB FUNDS--INVESTMENT TRUST,
(the "Business Trust"), executed by the undersigned trustee(s) and filed under
and in accordance with the provisions of the Delaware Business Trust Act (12
Del. C. Section 3801, ET. SEQ.), sets forth the following amendments to the
Certificate of Trust as filed with the Delaware Secretary of State:
AMENDMENTS TO CHANGE THE NAME OF THE BUSINESS TRUST
A. The references to "RWB FUNDS--INVESTMENT TRUST" in the title and first
paragraph of the Certificate of Trust shall, in each case be amended to
read:
"SA FUNDS--INVESTMENT TRUST."
B. The FIRST Article of the Certificate of Trust shall be amended to read:
"FIRST: The name of the Business Trust is "SA FUNDS--INVESTMENT TRUST."
IN WITNESS THEREOF, the undersigned, being a trustee of the Business Trust, has
duly executed this Certificate of Amendment this _____ day of ____________,
1999.
----------------------------------
John Bowen
<PAGE>
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENT
THIS INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENT made
as of the ____ day of _______ 1999, by and between SA Funds - Investment
Trust, a Delaware business trust (the "Trust"), on behalf of each series of
the Trust listed in APPENDIX A hereto, as may be amended from time to time
(each, a "Fund") and RWB Advisory Services Inc., a Corporation organized and
existing under the laws of the State of Maryland (the "Manager").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company,
registered as such under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and is engaged in the
business of supplying investment advice, investment management and
administrative services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render
investment management and administrative services to the Funds pursuant to
the terms and provisions of this Agreement, and the Manager is willing to
furnish such advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF MANAGER. The Manager is hereby appointed to serve
as the investment adviser and administrator to the Funds, to provide
investment advisory and administrative services with respect to each Fund for
the period and on the terms set forth in this Agreement, subject to the
supervision and direction of the Trust's Board of Trustees. The Manager
hereby accepts such employment.
<PAGE>
2. RETENTION OF SUB-ADVISERS AND SUB-ADMINISTRATORS. Subject to the
provisions of the Trust's Agreement and Declaration of Trust and the 1940
Act, the Manager may (A) select and contract with: (i) one or more investment
advisers (the "Sub-Advisers") to provide to the Manager such investment
advice relating to the assets of a Fund and related services and (ii) one or
more administrators (the "Sub-Administrators") to provide certain
administrative services to assist the Manager in carrying out its
responsibilities as administrator to the Trust, as the Manager may from time
to time deem appropriate; or (B) delegate any or all of its functions
hereunder to one or more Sub-Advisers or Sub-Administrators, provided that
the Trust's Board of Trustees shall approve any such contract with a
Sub-Adviser or Sub-Administrator. So long as any Sub-Adviser or
Sub-Administrator serves as investment adviser or administrator to any Fund
pursuant to a subadvisory or subadministration agreement, the
responsibilities and obligations of the Manager under this Agreement shall
be, subject in any event to the control of the Trust's Board of Trustees, to
determine and review with such Subadviser the investment objectives, policies
and restrictions and placing of all orders for the purchase and sale of
portfolio securities for the Funds, all as further described in the
subadvisory agreement, and to determine and review with such Subadministrator
the policies related to the administration of the Funds, as further described
in the subadministration agreement. The retention of a Sub-Adviser or
Sub-Administrator shall in no way reduce the responsibilities and obligations
of the Manager under this Agreement and the Manager shall be responsible to
the Trust for all acts or omissions of the Sub-Adviser or Sub-Administrator
in connection with the performance of the Manager's duties under this
Agreement. The Manager may terminate the services of any Subadviser or
Subadministrator at any time, subject to the approval of the Trust's Board of
Trustees, and shall at such time assume the responsibilities and obligations
of such Subadviser or Subadministrator unless and until a successor
Subadviser or Subadministrator is selected.
2
<PAGE>
3. DUTIES OF MANAGER.
(a) INVESTMENT MANAGEMENT. The Manager shall act as
investment manager to the Funds and shall supervise and direct, or cause the
Sub-Adviser to supervise and direct, investment of the Funds' assets on
behalf of the Funds in accordance with applicable law, the Trust's governing
and documents, the investment objectives, investment program, policies and
restrictions of the Funds as provided in the then-current prospectus and the
then-current Statement of Additional Information contained in the Trust's
Registration Statement under the 1940 Act and the Securities Act of 1933, as
amended (the "1933 Act") and such other limitations as the Trustees may
impose from time to time in writing to the Manager. The Manager shall cause
the Sub-Adviser to formulate a continuing program for the management of each
Fund's assets, and the Manager shall supervise such investment programs
formulated by the Sub-Adviser and monitor the Sub-Adviser's implementation of
such investment programs. Without limiting the generality of the foregoing,
the Manager shall: (i) furnish, or cause or permit the Sub-Adviser to
furnish, the Funds with advice and recommendations with respect to the
investment of each Fund's assets and the purchase and sale of portfolio
securities for the Funds, including the taking of such other steps as may be
necessary to implement such advice and recommendations; (ii) furnish the
Funds with reports, statements and other data on securities, economic
conditions and other pertinent subjects which the Trust's Board of Trustees
may reasonably request; (iii) manage the investments of the Funds, subject to
the ultimate supervision and direction of the Trust's Board of Trustees; and
(iv) render to the Trust's Board of Trustees such periodic and special
reports with respect to each Fund's investment activities as the Board may
reasonably request.
(b) BROKERAGE. The Manager shall place orders, or cause or
permit the Sub-Adviser to place orders, for the purchase and sale of
securities either directly with the issuer or with a broker or dealer
selected by the Manager or the Sub-Adviser. In placing each Fund's securities
trades, it is recognized that the Manager or Sub-Adviser will give primary
consideration to securing the most
3
<PAGE>
favorable price and efficient execution, so that each Fund's total cost or
proceeds in each transaction will be the most favorable under all the
circumstances. Within the framework of this policy, the Manager or
Sub-Adviser may consider the financial responsibility, research and
investment information, and other services provided by brokers or dealers who
may effect or be a party to any such transaction or other transactions to
which other clients of the Manager or Sub-Adviser may be a party.
It is understood that it is desirable for the Funds that the Manager
and the Sub-Adviser have access to investment and market research and
securities and economic analyses provided by brokers and others. It is also
understood that brokers providing such services may execute brokerage
transactions at a higher cost to the Funds than might result from the
allocation of brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the purchase and sale of
securities for the Funds may be made with brokers who provide such research
and analysis, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice to
determine whether each Fund benefits, directly or indirectly, from such
practice. The Manager or the Sub-Adviser may select broker-dealers for the
execution of the Funds' portfolio transactions who provide research and
analysis as the Manager or Sub-Adviser may lawfully and appropriately use in
its investment management and advisory capacities, whether or not such
research and analysis may also be useful to the Manager or Sub-Adviser in
connection with their services to other clients.
On occasions when the Manager or Sub-Adviser deems the purchase or
sale of a security to be in the best interests of one or more of the Funds as
well as of other clients, the Manager or Sub-Adviser, to the extent permitted
by applicable laws and regulations, may aggregate the securities to be so
purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and the most efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Manager or Sub-Adviser in
the manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Funds and to such other clients.
4
<PAGE>
(c) ADMINISTRATIVE SERVICES. The Manager shall oversee the
administration of all aspects of the Trust's business and affairs and shall
provide certain services required for effective administration of the Trust.
The Manager shall furnish, without cost to the Trust, services of persons to
perform the executive, administrative, compliance and clerical functions of
the Trust that are not performed by or through other persons or agents
engaged by the Trust (including, e.g., the transfer and dividend disbursing
agent or the depository agent or accounting agent).
The Manager shall provide suitable office space and
furnishing (which may be in the offices of the Manager), small office
equipment and utilities, supplies and postage as are necessary for the
performance of its duties to the Trust under this Agreement.
The Manager shall assist the Trust in selecting,
coordinating the activities of, supervising and acting as liason with any
other persons and agents engaged by the Trust, including the Trust's
depository agent or custodian, accounting agent, transfer agent, dividend
disbursing agent, sub-administrator, independent accountants and legal
counsel.
The Manager will ensure that all financial, accounting,
corporate and other records required to be maintained and preserved by the
Trust or on its behalf will be maintained in accordance with applicable laws
and regulations.
The Manager shall provide persons satisfactory to the
Trust's Board of Trustees to act as officers and employees of the Trust and
the Funds (such officers and employees, as well as certain trustees, may be
trustees, directors, officers, partners, or employees of the Manager or its
affiliates).
The Manager shall furnish to or place at the disposal of
the Trust such information, reports, evaluations, analyses and opinions
relating to its administrative functions as the Trust may, at any time or
from time to time, reasonably request or as the Manager may deem helpful to
the Trust.
5
<PAGE>
The Manager shall assist in the development and preparation
of all reports and communications by the Trust to the Funds' shareholders and
all reports and filings necessary to maintain the registrations and
qualifications of the Trust's shares under federal and state law. The Manager
will also prepare or assist in the preparation of all required tax returns,
proxy statements and reports or filings with any governmental agency.
The Manager shall respond to all inquires from shareholders
or otherwise answer communications from shareholders. If any such inquiry or
communication would be more properly answered by one of the agents listed
above, the Manager will oversee their response.
4. BEST EFFORTS AND JUDGMENT. The Manager shall use its best
judgment and efforts in rendering the advice and services to the Trust as
contemplated by this Agreement.
5. INDEPENDENT CONTRACTOR. The Manager shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized to do so, have no authority to
act for or represent the Trust or the Funds in any way, or in any way be
deemed an agent for the Trust or for the Funds. It is expressly understood
and agreed that the services to be rendered by the Manager to the Funds under
the provisions of this Agreement are not to be deemed exclusive, and the
Manager shall be free to render similar or different services to others so
long as its ability to render the services provided for in this Agreement
shall not be impaired thereby.
6. MANAGER'S PERSONNEL. The Manager shall, at its own expense
(except as otherwise provided in this Agreement), maintain such staff and
employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Manager shall be deemed to include
persons employed or retained by the Manager to furnish statistical
information, research, and other factual information, advice regarding
economic factors
6
<PAGE>
and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the
Manager or the Trust's Board of Trustees may desire and reasonably request.
7. REPORTS BY TRUST TO MANAGER. The Trust shall from time to time
furnish or otherwise make available to the Manager detailed statements of the
investments and assets, prospectuses, Statements of Additional Information,
financial reports, proxy statements, legal and other information relating to
the business and affairs of the Trust, with respect to each Fund, as may be
in its possession or available to it, together with such other information as
the Manager may reasonably request.
8. OWNERSHIP AND CONFIDENTIALITY OF RECORDS. All records required to
be maintained and preserved by the Trust pursuant to the provisions of rules
or regulations of the Securities and Exchange Commission under Section 31(a)
of the 1940 Act and maintained and preserved by the Manager on behalf of the
Trust are the property of the Trust and shall be surrendered by the Manager
promptly on request by the Trust. The Manager shall not disclose or use any
records or information obtained pursuant to this Agreement in any manner
whatsoever except as expressly authorized by this Agreement and applicable
law. The Manager shall keep confidential any information obtained in
connection with its duties hereunder and shall disclose such information only
if the Trust has authorized such disclosure or if such disclosure is
expressly required by applicable law or federal or state regulatory
authorities.
9. ALLOCATION OF EXPENSES.
(a) Expenses Paid by the Manager.
(1) SALARIES AND FEES OF TRUSTEES AND OFFICERS. As
between the Trust and the Manager, the Manager shall
pay all salaries, expenses, and fees, if any, of the
directors, officers, and employees of the Manager who
are Trustees, officers, or employees of the Trust.
7
<PAGE>
(2) WAIVER OR ASSUMPTION AND REIMBURSEMENT OF TRUST
EXPENSES BY THE MANAGER. The waiver or assumption and
reimbursement by the Manager of any expense of the
Trust that the Manager is not required by this
Agreement to waive, or assume or reimburse, shall not
obligate the Manager to waive, or assume or
reimburse, the same or any similar expense of the
Trust on any subsequent occasion, unless so required
pursuant to a separate agreement between the Trust
and the Manager.
(b) Expenses Paid by the Trust. The Trust, shall bear all
expenses of its organization, operation, and business not
specifically waived, assumed, or agreed to be paid by the
Manager as provided in this Agreement or any other agreement
between the Trust and the Manager. In particular, the expenses
that the Trust shall bear include, but are not limited to:
(1) CUSTODY AND ACCOUNTING SERVICES. All fees and
expenses of depositories, custodians, accounting
service agents and other agents for the transfer,
receipt, safekeeping, servicing of and accounting for
the Funds' cash, securities, and other property.
(2) DISTRIBUTION EXPENSES. Distribution expenses of
the Funds paid pursuant to any plan of distribution
that may be adopted in accordance with the provisions
of Rule 12b-1 under the 1940 Act.
(3) SHAREHOLDER SERVICE EXPENSES. Shareholder service
expenses of the Funds paid pursuant to the
Shareholder Service Agreement between the Trust and
the Manager and any similar agreement that the Trust
may adopt.
(4) TRANSFER AGENCY AND DIVIDEND DISBURSEMENT. All
costs of establishing, maintaining and servicing
accounts of shareholders of the Funds, all fees and
8
<PAGE>
expenses of the Trust's transfer agent,
sub-administrator, dividend disbursing agent and
any other agents engaged by the Trust to service
such accounts.
(5) SHAREHOLDER REPORTS AND OTHER COMMUNICATIONS.
All costs of preparing, setting in type, printing
and distributing reports and other communications
to shareholders of the Funds.
(6) PROSPECTUSES. All costs of preparing, setting in
type, printing and mailing to shareholders of the
Funds annual or more frequent revisions of the
Trust's prospectuses and Statements of Additional
Information and any supplements thereto.
(7) SHAREHOLDER MEETINGS. All costs incidental to
holding meetings of shareholders of the Funds,
including the printing of notices and proxy
materials, and proxy solicitations therefor.
(8) PRICING AND PORTFOLIO VALUATION. All costs of
daily valuation of the individual portfolio
securities of the Funds and daily computation of
the net asset value per share of the Funds,
including the cost of any equipment obtained by the
Trust, the Manager, or agents of the Trust, or a
proportionate share of the cost of any equipment
currently owned by the Manager, that will be used
to price the Funds' shares or value the Funds'
assets or the cost of the services of any agents
engaged by the Trust for the purpose of pricing
Fund shares or valuing the assets of the Funds.
(9) COMMUNICATIONS. All charges for equipment or
services used for communications with respect to
the Funds between the Manager or the Trust and the
depository agent or custodian, accounting pricing
agent, transfer agent,
9
<PAGE>
dividend disbursing agent, sub-administrator or any
other agent engaged by the Trust to provide
services to the Funds.
(10) INDEPENDENT LEGAL AND ACCOUNTING FEES. All
charges for services and expenses of the Trust's
independent legal counsel and independent
accountants.
(11) TRUSTEES' FEES AND EXPENSES. All compensation
of Trustees (other than those Trustees affiliated
with the Manager or the Sub-Adviser), all expenses
incurred in connection with their services as
Trustees, and all expenses of meetings of the Board
of Trustees of the Trust and committees of the
Board of Trustees.
(12) FEDERAL REGISTRATION FEES. All fees and expenses
of maintaining the registration of the Trust under
the 1940 Act and maintaining the registration of the
Fund's shares or registering additional shares of the
Fund under the 1933 Act, including all fees and
expenses incurred in connection with the preparation,
setting in type, printing and filing of any
post-effective amendments or supplements to the
Registration Statement, prospectuses and Statements
of Additional Information for the Trust under the
1933 Act or the 1940 Act that may be prepared from
time to time.
(13) BLUE SKY FEES. All fees and expenses (i) of
filing documentation to permit the offer and sale
of shares of the Trust or the Funds, as
appropriate, under the securities laws of various
states and jurisdictions and (ii) of maintaining
the registration and qualification of the Trust or
the Funds, as appropriate, under all other laws
applicable to the Trust or the Funds, as
appropriate, or its business activities.
10
<PAGE>
(14) ISSUE, REDEMPTION AND TRANSFER OF THE FUNDS'
SHARES. All expenses incurred in connection with
the issue, redemption and transfer of the Funds'
shares, including the expenses of confirming all
share transactions and of transmitting share
certificates, if any are issued, for the Funds.
(15) BONDING AND INSURANCE. All expenses of bond,
liability and other insurance coverage required by
law or regulation or deemed advisable by the Board
of Trustees of the Trust, including, without
limitation, such bond, liability and other
insurance expense that may from time to time be
allocated to the Trust in a manner approved by the
Board of Trustees of the Trust.
(16) BROKERAGE COMMISSIONS. All brokers'
commissions and other charges incident to the
purchase, sale, or lending of the Funds' portfolio
securities.
(17) TAXES. All taxes or governmental fees payable
to federal, state, or other governmental agencies,
domestic or foreign, including issue, stamp, or
transfer taxes.
(18) TRADE ASSOCIATION FEES. All fees, dues, costs
of attendance at meetings and conferences and other
expenses incurred in connection with the Trust's
membership in any trade association or other
investment organization.
(19) PERFORMANCE INFORMATION. Industry performance
reporting services fees reasonably necessary for
Board of Trustees of the Trust to keep current
regarding industry and regulatory requirements.
(20) NONRECURRING AND EXTRAORDINARY EXPENSES. Such
nonrecurring and extraordinary expenses as may arise,
including the costs of actions, suits, or proceedings
to which the Trust is a party and the expenses the
Trust may incur as
11
<PAGE>
a result of its legal obligation to provide
indemnification to its Trustees, officers,
employees and agents.
10. FEES.
(a) Each Fund shall pay to the Manager, and the Manager
agrees to accept, as full compensation for all administrative and investment
management services furnished or provided to such Fund pursuant to this
Agreement, the fees as set forth in the Fee Schedule attached hereto as
APPENDIX B, as may be amended in writing from time to time by the Trust and
the Manager.
(b) The fees shall be accrued daily by each Fund and paid
to the Manager monthly on the first business day of the next calendar month.
(c) If this Agreement becomes effective or terminates prior
to the end of any month, the fee to the Manager for the period from the
effective date to the end of such month or from the beginning of such month
to the date of termination, as the case maybe, shall be prorated according to
the proportion which such period bears to the full month in which such
effectiveness or termination occurs. In the case of termination, such fee
shall be payable within ten (10) days after the date of termination.
(d) The Manager may reduce any portion of the compensation
or reimbursement of expenses due to it pursuant to this Agreement and may
agree to make payments to limit the expenses which are the responsibility of
one or more Funds under this Agreement. Any such reduction or payment shall
be applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement
due to the Manager hereunder or to continue future payments. Any such
reduction will be agreed to prior to accrual of the related expense or fee
and will be estimated daily and reconciled and paid on a monthly basis. To
the extent such an expense limitation has been agreed to by the Manager and
such limit has been disclosed to shareholders of a Fund in a prospectus, the
Manager may not change the limitation without first disclosing the change in
an updated prospectus. Any fee withheld pursuant to this paragraph from the
Manager may be reimbursed by the
12
<PAGE>
appropriate Fund to the Manager in the first, second or third (or any
combination thereof) fiscal year next succeeding the fiscal year of the
withholding provided that the aggregate expenses for the next succeeding
fiscal year or second succeeding fiscal year or third succeeding fiscal year
do not exceed any more restrictive limitation to which the Manager has agreed
and the Board of Trustees of the Trust, including a majority of Trustees who
are not "interested persons" of the Manager, approves such reimbursement. The
Manager generally may request and receive reimbursement for the oldest
reductions and waivers before payment for fees and expenses for the current
year.
(e) The Manager may agree not to require payment of any
portion of the compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement prior to the time such compensation or
reimbursement has accrued as a liability of the Fund. Any such agreement
shall be applicable only with respect to the specific items covered thereby
and shall not constitute an agreement not to require payment of any future
compensation or reimbursement due to the Manager hereunder.
11. FUND SHARE ACTIVITIES OF MANAGERS PARTNERS, OFFICERS AND
EMPLOYEES. The Manager agrees that neither it nor any of its partners,
officers or employees shall take any short position in the shares of the
Funds. This prohibition shall not prevent the purchase of such shares by any
of the officers and partners or bona fide employees of the Manager or any
trust, pension, profit-sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof at
the time of purchase, as allowed pursuant to rules promulgated under the 1940
Act.
12. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS.
Nothing herein contained shall be deemed to require the Trust or the Funds to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive
the Board of Trustees of the Trust of its responsibility for and control of
the conduct of the affairs of the Trust and Funds.
13
<PAGE>
13. MANAGER'S LIABILITIES.
(a) Neither the Manager nor any of its directors, officers,
employees or agents performing services for the Trust, with respect to the
Funds, at the direction or request of the Manager in connection with the
Manager's discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement, shall be liable for any act or omission in the
course of or in connection with the Manager's services hereunder, including
any error of judgment or mistake of law or for any loss suffered by the Trust
in connection with the matters to which this Agreement relates; provided,
that nothing herein contained shall be construed to protect the Manager or
any such persons against any liability to the Trust or its shareholders to
which the Manager or such persons would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
the obligations or duties under this Agreement in the performance of its or
their duties on behalf of the Trust or for failure by the Manager or any such
persons to exercise due care in rendering other services to the Trust.
(b) The Funds shall indemnify and hold harmless the Manager
and the shareholders, directors, officers and employees of each of them (any
such person, an "Indemnified Party") against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating and
defending any alleged loss, liability, claim, damage or expenses and
reasonable legal fees incurred in connection therewith) arising out of the
Indemnified Party's performance or non-performance of any duties under this
Agreement provided, however, that nothing herein shall be deemed to protect
any Indemnified Party against any liability to which such Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of the obligations and duties under this Agreement.
(c) No provision of this Agreement shall be construed to
protect any Trustee or officer of the Trust, or partner or officer of the
Manager, from liability in violation of Sections 17(h) and (i) of the 1940
Act.
14
<PAGE>
14. NON-EXCLUSIVITY. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for herein.
In the event this Agreement is terminated with respect to any Fund, this
Agreement shall remain in full force and effect with respect to all other
Funds listed on Appendix A hereto, as the same may be amended.
15. TERM. This Agreement shall become effective on the date that is
the latest of (1) the execution of this Agreement, (2) the approval of this
Agreement by the Board of Trustees of the Trust including a majority of the
Trustees who are not parties to this Agreement nor "interested persons" of
the Manager and (3) the approval of this Agreement by the shareholders of
each Fund in a special meeting of shareholders of the Fund. This Agreement
shall remain in effect for a period of two years, unless sooner terminated as
hereinafter provided. This Agreement shall continue in effect thereafter for
additional periods not exceeding one year so long as such continuation is
approved for each Fund at least annually by (i) the Board of Trustees of the
Trust or by the vote of a majority of the outstanding voting securities of
each Fund and (ii) the vote of a majority of the Trustees of the Trust who
are not parties to this Agreement nor "interested persons" of the Manager or
the Trust, cast in person at a meeting called for the purpose of voting on
such approval. Any approval of this Agreement by the holders of a majority of
the outstanding voting securities of a particular Fund shall be effective to
continue this Agreement, notwithstanding (i) that a comparable agreement has
not been approved by the holders of a majority of the outstanding shares of
any other Fund and (ii) that this Agreement has not been approved by the vote
of a majority of the outstanding shares of the Trust, unless such approval
shall be required by any other applicable law or otherwise. The Manager shall
furnish to the Trust, promptly upon its request, such information as may be
reasonably necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment thereof.
15
<PAGE>
16. AMENDMENT OF AGREEMENT. Any amendment to this Agreement shall be
in writing and signed by the parties hereto; provided, that no material
amendment shall be effective unless authorized on behalf of the Trust (i) by
resolution of the Board of Trustees of the Trust, including a majority of the
non-interested Trustees and (ii) if required by law, by vote of a majority of
the outstanding voting securities of the Funds or a particular Fund.
17. TERMINATION. This Agreement may be terminated by the Trust on
behalf of any one or more of the Funds at any time without payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities of the relevant Fund or Funds, upon sixty
(60) days' written notice to the Manager, and by the Manager upon sixty (60)
days' written notice to the Fund.
18. TERMINATION BY ASSIGNMENT. This Agreement shall terminate
automatically in the event of any transfer or assignment thereof.
19. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected
thereby.
20. DEFINITIONS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by
the United States courts or, in the absence of any controlling decision of
any such court by rules, regulations, or orders of the Securities and
Exchange Commission validly issued pursuant to the 1940 Act. Specifically,
the terms "vote of a majority of the outstanding voting securities,"
"interested person," "assignment" and "affiliated person" shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In addition, where
the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is relaxed by a rule, regulation, or order of the Securities
and Exchange Commission, whether of special or of
16
<PAGE>
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
21. NOTICE OF DECLARATION OF TRUST. The Manager agrees that the
Trust's obligations under this Agreement shall be limited to the Funds and to
their assets, and that the Manager shall not seek satisfaction of any such
obligation from the shareholders of the Funds nor from any trustee, officer,
employee or agent of the Trust or the Funds.
22. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
23. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without
giving effect to the conflict of laws principles thereof; provided that
nothing herein shall be construed to preempt, or to be inconsistent with, any
federal law, regulation or rule, including the 1940 Act and the Investment
Advisors Act of 1940 and any rules and regulations promulgated thereunder.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers, all on the
day and year first above written.
SA Funds - Investment Trust RWB Advisory Services Inc.
By: ____________________________ By: ____________________________________
John J. Bowen, Jr.
Title: President Title: _________________________________
18
<PAGE>
APPENDIX A
FUND SCHEDULE
Fund Effective Date
---- --------------
SA Fixed Income Fund
SA U.S. Market Fund
SA U.S HBtM Fund
SA U.S. Small Company Fund
SA International HBtM Fund
SA International Small Company Fund
19
<PAGE>
APPENDIX B
FEE SCHEDULE
FUND Advisory Fee as a percentage of average
- ---- daily net assets
----------------
SA Fixed Income Fund %
SA U.S. Market Fund %
SA U.S. HBtM Fund %
SA U.S. Small Company Fund %
SA International HBtM Fund %
SA International Small Company Fund %
Administrative Fee as a percentage of
average daily net assets
------------------------
CLASS I CLASS S
------- -------
SA Fixed Income Fund % %
SA U.S. Market Fund % %
SA U.S. HBtM Fund % %
SA U.S. Small Company Fund % %
SA International HBtM Fund % %
SA International Small Company Fund % %
20
<PAGE>
Draft 7/2/99
SA FUNDS - INVESTMENT TRUST
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT executed as of July , 1999 by and among SA FUNDS
- -INVESTMENT TRUST (THE "TRUST"), RWB ADVISORY SERVICES ("RWBAS") and
DIMENSIONAL FUND ADVISORS INC., a Delaware corporation and registered
investment adviser ("Sub-Adviser").
WHEREAS, RWBAS is the investment manager for the Trust, an
open-end management investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, RWBAS desires to retain Sub-Adviser as agent to furnish
investment advisory services to the investment portfolios of the Trust listed
on Schedule A hereto and Sub-Adviser has agreed to act in such capacity (each
a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. APPOINTMENT. RWBAS hereby appoints Sub-Adviser to provide
sub-investment advisory services to the Funds for the period and on the terms
set forth in this Agreement. Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. RWBAS has furnished Sub-Adviser with
copies properly certified or authenticated of each of the following:
(a) the Trust's Declaration of Trust, as filed with the
Secretary of State of Delaware and all amendments thereto or
restatements thereof (such Declaration of Trust, as presently in effect
and as it shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
(b) the Trust's By-Laws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of Sub-Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
(the "SEC") on January 11, 1999 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-lA under the
Securities Act of 1933, as amended ("1933 Act") (File No. 33-70423) and
under the 1940 Act (File No. 811-09195) as filed with the SEC and all
amendments thereto insofar as such Registration Statement and such
amendments relate to the Funds; and
<PAGE>
(f) the Trust's most recent prospectus and Statement of
Additional Information for the Funds (such prospectus and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto, are - herein collectively called the
"Prospectus").
RWBAS will furnish the Sub-Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. MANAGEMENT. Subject always to the supervision of Trust's Board of
Trustees and RWBAS, the Sub-Adviser will furnish an investment program in
respect of, and make investment decisions for, all assets of the Funds and
place all orders for the purchase and sale of securities, all on behalf of
the Funds. In the performance of its duties, the Sub-Adviser will satisfy its
fiduciary duties to the Funds and will monitor the Funds' investments, and
will comply with the provisions of Trust's Declaration of Trust and By-Laws,
as amended from time to time, and the stated investment objectives, policies
and restrictions of the Funds as contained in the Prospectus. The Sub-Adviser
and RWBAS will make their officers and employees available to the other from
time to time at reasonable times to review investment policies of the Funds
and to consult with each other regarding the investment affairs of the Funds.
The Sub-Adviser will report to the Board of Trustees and RWBAS to with
respect to the implementation of such program.
The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(b) will conform with all applicable U.S. rules and
regulations pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment
determinations for the Funds either directly with the issuer or with
any broker or dealer. The Sub-Adviser will place orders for the
purchase or sale of securities with a view to receiving the best price
and execution for such purchase or sale. Where the Sub-Adviser places
orders for the purchase or sale of securities for the Funds, in
selecting brokers or dealers to execute such orders, the Sub-Adviser is
expressly authorized to consider the fact that a broker or dealer has
been or will be furnishing research or other information or services
which assist the Sub-Adviser's performance of its investment
decision-making responsibilities generally, provided that the
commission cost is reasonable in relation to the brokerage and research
services provided. Compensation received by the Sub-Adviser pursuant to
this Agreement shall not be reduced by any benefits received by the
Sub-Adviser pursuant to this section. The Sub-Adviser may direct
brokerage to whomever it deems appropriate consistent with the
foregoing. In no instance will portfolio securities be purchased from
or sold to RWBAS or any of its affiliated brokers or dealers, the
Sub-Adviser or any affiliated person of either the Trust, RWBAS or
Sub-Adviser, except as may be permitted under the 1940 Act;
(d) will report regularly to RWBAS and to the Board of
Trustees and will make appropriate persons available for the purpose of
reviewing with representatives of RWBAS and the Board of Trustees on a
regular basis at reasonable times the management of the Funds,
including, without limitation, review of the general investment
strategy of the Funds, the performance of the Funds in relation to
standard industry indices, interest rate considerations and
<PAGE>
general conditions affecting the marketplace and will provide various
other reports from time to time as reasonably requested by RWBAS;
(e) will maintain books and records with respect to Trust's
securities transactions and will furnish RWBAS and the Trust's Board of
Trustees such periodic and/or special reports as the Board or RWBAS may
request;
(f) will act upon instructions from RWBAS not inconsistent
with its fiduciary duties hereunder;
(g) will treat confidentially and as proprietary information
of Trust all such records and other information relative to Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification
to and approval in writing by Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Sub-Adviser may
be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by Trust;
(h) will receive the research and recommendations of RWBAS
with respect to the investment and reinvestment of the assets of the
Funds; and
(i) will vote proxies received by the Sub-Adviser in
connection with securities held by the Funds consistent with its
fiduciary duties hereunder.
4. RWBAS'S DUTIES. RWBAS shall continue to have responsibility for
all other services to be provided to the Funds pursuant to its Investment
Management Agreements and shall oversee and review the Sub-Adviser's
performance of its duties under this Agreement. The Advisor shall also retain
direct portfolio management responsibility with respect to any assets of the
Series which are not allocated by it to the portfolio management of the
Sub-Adviser.
5. REFERENCES TO SUB-ADVISER. During the term of this Agreement,
RWBAS agrees to furnish to the Sub-Adviser at its principal office all
prospectuses, proxy statements, reports to stockholders, sales literature or
other material prepared for distribution to sales personnel, shareholders of
the Fund or the public, which refer to the Sub-Adviser or its clients in any
way, prior to use thereof and not to use such material if the Sub-Adviser
reasonably objects in writing five business days (or such other time as may
be mutually agreed upon) after receipt thereof. Sales literature may be
furnished to the Sub-Adviser hereunder by first-class or overnight mail,
facsimile transmission equipment or hand delivery, attn: Legal Department.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule
3la-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records
which it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. Sub-Adviser further agrees to maintain the records required
to be maintained by subsections (b)(1), (b)(5), (b)(9), (b)(10), (b)(11), (e)
and (f) of Rule 3la-1 under the 1940 Act and preserve them for the periods
prescribed by Rule 3la-2 under the 1940 Act.
7. EXPENSES. During the term of this Agreement, Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities
<PAGE>
(including brokerage commissions, custodial fees and expenses and stamp
duties, if any) purchased for the Funds.
8. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, RWBAS Investment Trust will pay the Sub-Adviser,
and the Sub-Adviser agrees to accept as full compensation therefor, a
sub-advisory fee, accrued daily and payable monthly, in accordance with
SCHEDULE A hereto.
9. Services to Others. Subject to exclusivity clauses in the DFA
Services Agreement, RWBAS understands, and has advised Trust's Board of
Trustees, that the Sub-Adviser now acts, and may in the future act, as an
investment adviser to fiduciary and other managed accounts, and as investment
adviser, sub-investment adviser, and/or administrator to other investment
companies. RWBAS has no objection to the Sub-Adviser's acts in such
capacities, provided that whenever one or more of the Funds and one or more
other investment companies or accounts advised by Sub-Adviser have available
funds for investment, investments suitable and appropriate for each will be
allocated in accordance with a manner believed by the Sub-Adviser to be
equitable consistent with its fiduciary obligations to the Funds and such
other investment entities. RWBAS recognizes, and has advised Trust's Board of
Trustees, that in some cases this procedure may adversely affect the size of
the position that the participating Fund(s) may obtain in a particular
security. In addition, RWBAS understands, and has advised Trust's Board of
Trustees, that the persons employed by the Sub-Adviser to assist in the
Sub-Adviser's duties under this Agreement will not devote their full time to
such service and nothing contained in this Agreement will be deemed to limit
or restrict the right of the Sub-Adviser or any of its affiliates to engage
in and devote time and attention to other businesses or to render services of
whatever kind or nature.
10. CLIENT SUITABILITY. RWBAS understands and agrees that the
Sub-Adviser, as part of its duties hereunder, is not responsible for
determining whether or not any of the Funds are suitable and appropriate
investments for the clients who invest in such Funds.
11. LIMITATION OF LIABILITY. RWBAS will not take any action against
the Sub-Adviser to hold the Sub-Adviser liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
performance of the Sub-Adviser's duties under this Agreement, except a loss
resulting from the Sub-Adviser's willful misfeasance, bad faith, or gross
negligence in the performance of its duties under this Agreement.
12. INDEMNIFICATION. RWBAS and the Sub-Adviser each agree to
indemnify the other against any claim against, loss or liability to such
other party (including reasonable attorneys fees) arising out of any action
on the part of the indemnifying party which constitutes willful misfeasance,
bad faith or gross negligence.
13. DURATION AND TERMINATION. This Agreement will become effective
as to each Fund as to the date set forth opposite each Fund's name on
SCHEDULE A, provided that it has been approved by a vote of a majority of the
outstanding voting securities of such Fund in accordance with the
requirements under the 1940 Act and, unless sooner terminated as provided
herein, will continue in effect for two (2) years from such date.
Thereafter, if not terminated as to a Fund, this Agreement will
continue in effect as to a Fund for successive periods of twelve (12) months,
PROVIDED that such continuation is specifically approved at least annually
(a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not
<PAGE>
interested persons of the Trust, the Sub-Adviser, or RWBAS, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to the Fund at any time, without the payment of any penalty, on
sixty (60) days' written notice by the Trust. Once this Agreement has been in
effect for a period of not less than one (1) year, then unless otherwise
terminated in accordance with the foregoing, this Agreement may be terminated
by RWBAS or by the Sub-Adviser, as to all Funds, by giving not less than
sixty (60) days' notice. This Agreement will immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of
the outstanding voting securities", "interested persons" and "assignment"
have the same meaning of such terms in the 1940 Act.)
14. AMENDMENT OF THIS AGREEMENT. No provision this Agreement may be
changed, waived, discharged or, terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought.
15. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be
affected thereby. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and will be
governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
SA FUNDS - INVESTMENT TRUST
By:
Name:
Title:
DIMENSIONAL FUND ADVISORS INC.
By:
Name:
Title:
RWB ADVISORY SERVICES INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A
Fund Fee
- ---- ---
SA Fixed Income Fund 19.24 basis points annually
SA U.S. Market Fund 4.62 basis points annually
SA U.S. HBTM Fund 26.94 basis points annually
SA U.S. Small Company Fund 38.48 basis points annually
SA International HBTM Fund 38.48 basis points annually
SA International Small Company Fund 28.48 basis points annually
SA FUNDS - INVESTMENT TRUST
By:
Name:
Title:
DIMENSIONAL FUND ADVISORS INC.
By:
Name:
Title:
RWB ADVISORY SERVICES INC.
By:
Name:
Title:
<PAGE>
CUSTODIAN AGREEMENT
This Agreement between SA FUNDS - INVESTMENT TRUST a business trust
organized and existing under the laws of Delaware (the "FUND"), and STATE
STREET BANK and TRUST COMPANY, a Massachusetts trust company (the
"CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to six series: SA
Fixed Income Fund, SA U.S. Total Market Fund, SA HBtM Fund, SA U.S. Small
Company Fund, SA International HBtM Fund and SA International Small Company
Fund (such series together with all other series subsequently established by
the Fund and made subject to this Agreement in accordance with Section 18, be
referred to herein as the "PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("DOMESTIC SECURITIES") and securities it desires to be held outside
the United States ("FOREIGN SECURITIES"). The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities and cash of
the Portfolios, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios ("SHARES") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian. With
respect to uncertificated shares (the "UNDERLYING SHARES") of registered
"investment companies" (as defined in Section 3(a)(1) of the Investment
Company Act of 1940, as amended (the "1940 ACT"), whether in the same "group
of investment companies" (as defined in Section 12(d)(1)(G)(ii) of the 1940
Act) or otherwise, including, pursuant to Section 12(d)(1)(F) of the 1940 Act
(hereinafter sometimes referred to as the "UNDERLYING PORTFOLIOS"), the
holding of confirmation statements that identify the shares as being recorded
in the Custodian's name on behalf of the Portfolios will be deemed custody
for purposes hereof.
<PAGE>
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians located in
the United States, but only in accordance with an applicable vote by the
Board of Trustees of the Fund (the "BOARD") on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodian for the Fund's
foreign securities on behalf of the applicable Portfolio(s) the foreign
banking institutions and foreign securities depositories designated in
Schedules A and B hereto but only in accordance with the applicable
provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
FUND HELD BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and
physically segregate for the account of each Portfolio all non-cash property,
to be held by it in the United States including all domestic securities owned
by such Portfolio, other than (a) securities which are maintained pursuant to
Section 2.8 in a clearing agency which acts as a securities depository or in
a book-entry system authorized by the U.S. Department of the Treasury (each,
a "U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent ("DIRECT
PAPER") which is deposited and/or maintained in the Direct Paper System of
the Custodian (the "DIRECT PAPER SYSTEM") pursuant to Section 2.9; and (c)
the Underlying Shares owned by the Fund which are maintained pursuant to
Section 2.10A in an account with State Street Bank and Trust Company or such
other entity which may from time to time act as a transfer agent for the
Underlying Portfolios and with respect to which the Custodian is provided
with Proper Instructions (the "UNDERLYING TRANSFER AGENT").
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in
a U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") or in
an account at the Underlying Transfer Agent, only upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
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3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.7 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; PROVIDED that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by
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the U.S. Department of the Treasury, the Custodian will not
be held liable or responsible for the delivery of securities
owned by the Portfolio prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a futures commission merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission ("CFTC")
and/or any contract market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption;
15) In the case of a sale processed through the Underlying
Transfer Agent of Underlying Shares, in accordance with
Section 2.10A hereof; and
16) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any
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nominee of the Fund on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Portfolio,
UNLESS the Fund has authorized in writing the appointment of a nominee to be
used in common with other registered investment companies having the same
investment adviser as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.7 or in the name or nominee name of any
sub-custodian appointed pursuant to Section 1. All securities accepted by the
Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or
for the account of the Portfolio, other than cash maintained by the Portfolio
in a bank account established and used in accordance with Rule 17f-3 under
the 1940 Act. Funds held by the Custodian for a Portfolio may be deposited by
it to its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the 1940 Act and that
each such bank or trust company and the funds to be deposited with each such
bank or trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely basis all income and
other payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to custom
in the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due each Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Fund with such information
or data as may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is properly
entitled.
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SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper
Instructions on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall pay
out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.8 hereof; (c) in the case of a purchase of
Underlying Shares, in accordance with the conditions set forth
in Section 2.10A hereof; (d) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.9; (e) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (f) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set
forth in Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared
pursuant to the governing documents of the Fund;
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<PAGE>
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2
as the Custodian may from time to time direct; PROVIDED, HOWEVER, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder. The Underlying Transfer Agent
shall not be deemed an agent or subcustodian of the Custodian for purposes of
this Section 2.7 or any other provision of this Agreement.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS.
The Custodian may deposit and/or maintain securities owned by a Portfolio in
a U.S. Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that payment for such securities
has been transferred to the U.S. Securities System Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the
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Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf
of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) [Reserved.];
6) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in
the Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account, which account shall not
include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
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4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Portfolio or
commodity futures contracts or options thereon purchased or sold by the
Portfolio, (iii) for the purposes of compliance by the Portfolio with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release of the SEC, or interpretative opinion of the staff of the
SEC, relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper trust purposes, BUT ONLY, in
the case of clause (iv), upon receipt of Proper Instructions from the Fund on
behalf of the applicable Portfolio, setting forth the purpose or purposes of
such segregated account and declaring such purpose(s) to be a proper trust
purpose.
SECTION 2.10A DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER
AGENT. Underlying Shares shall be deposited and/or maintained in an account
or accounts maintained with the Underlying Transfer Agent. The Underlying
Transfer Agent shall be deemed to be
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acting as if it is a "securities depository" for purposes of Rule 17f-4 under
the 1940 Act. The Fund hereby directs the Custodian to deposit and/or
maintain such securities with the Underlying Transfer Agent, subject to the
following provisions:
1) The Custodian shall keep Underlying Shares owned by a
Portfolio with the Underlying Transfer Agent provided that
such securities are maintained in an account or accounts on
the books and records of the Underlying Transfer Agent in the
name of the Custodian as custodian for the Portfolio.
2) The records of the Custodian with respect to Underlying Shares
which are maintained with the Underlying Transfer Agent shall
identify by book-entry those Underlying Shares belonging to
each Portfolio;
3) The Custodian shall pay for Underlying Shares purchased for
the account of a Portfolio upon (i) receipt of advice from the
Portfolio's investment adviser that such Underlying Shares
have been purchased and will be transferred to the account of
the Custodian, on behalf of the Portfolio, on the books and
records of the Underlying Transfer Agent, and (ii) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. The
Custodian shall receive confirmation from the Underlying
Transfer Agent of the purchase of such securities and the
transfer of such securities to the Custodian's account with
the Underlying Transfer Agent only after such payment is made.
The Custodian shall transfer Underlying Shares redeemed for
the account of a Portfolio (i) upon receipt of an advice from
the Portfolio's investment adviser that such securities have
been redeemed and that payment for such securities will be
transferred to the Custodian and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. The Custodian will
receive confirmation from the Underlying Transfer Agent of the
redemption of such securities and payment therefor only after
such securities are redeemed. Copies of all advices from the
Portfolio's investment adviser of purchases and sales of
Underlying Shares for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian, and be provided to the investment adviser at its
request;
4) The Custodian shall be not be liable to the Fund or any
Portfolio for any loss or damage to the Fund or any Portfolio
resulting from maintenance of Underlying Shares with
Underlying Transfer Agent except for losses resulting directly
from the negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees.
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SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are registered
otherwise than in the name of the Portfolio or a nominee of the Portfolio,
all proxies, without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES.
Subject to the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund for each Portfolio all written information (including,
without limitation, pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund on behalf of the Portfolio and the
maturity of futures contracts purchased or sold by the Portfolio) received by
the Custodian from issuers of the securities being held for the Portfolio.
With respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and from
the party (or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1 DEFINITIONS. The following capitalized terms shall have
the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held
in custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of
Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank
(as defined in Rule 17f-5), a bank holding company meeting the requirements
of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other
appropriate action of the SEC), or a foreign branch of a Bank
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(as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a
custodian under Section 17(f) of the 1940 Act, except that the term does not
include Mandatory Securities Depositories.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and
such cash and cash equivalents as are reasonably necessary to effect the
Portfolios' transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if
the Fund, on the Portfolios' behalf, determines to place Foreign Assets in a
country outside the United States (i) because required by law or regulation;
(ii) because securities cannot be withdrawn from such foreign securities
depository or clearing agency; or (iii) because maintaining or effecting
trades in securities outside the foreign securities depository or clearing
agency is not consistent with prevailing or developing custodial or market
practices.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by the Board, hereby delegates to the
Custodian with respect to the Portfolios, subject to Section (b) of Rule
17f-5, the responsibilities set forth in this Section 3 with respect to
Foreign Assets of the Portfolios held outside the United States, and the
Custodian hereby accepts such delegation, as Foreign Custody Manager with
respect to the Portfolios.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be
amended from time to time by the Fund with the Agreement of the Foreign
Custody Manager. The Foreign Custody Manager shall list on Schedule A the
Eligible Foreign Custodians selected by the Foreign Custody Manager to
maintain the assets of the Portfolios, which list of Eligible Foreign
Custodians may be amended from time to time in the sole discretion of the
Foreign Custody Manager. Mandatory Securities Depositories are listed on
Schedule B to this Contract, which Schedule B may be amended from time to
time by the Foreign Custody Manager. The Foreign Custody Manager will provide
amended versions of Schedules A and B in accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper
Instructions to open an account or to place or maintain Foreign Assets in a
country listed on Schedule A, and the fulfillment by the Fund on behalf of
the Portfolios of the applicable account opening requirements for such
country, the Foreign Custody Manager shall be deemed to have been
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delegated by the Board on behalf of the Portfolios responsibility as Foreign
Custody Manager with respect to that country and to have accepted such
delegation. Following the receipt of Proper Instructions directing the
Foreign Custody Manager to close the account of a Portfolio with the Eligible
Foreign Custodian selected by the Foreign Custody Manager in a designated
country, the delegation by the Board on behalf of the Portfolios to the
Custodian as Foreign Custody Manager for that country shall be deemed to have
been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to
the Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall
have no further responsibility as Foreign Custody Manager to the Fund with
respect to the country as to which the Custodian's acceptance of delegation
is withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may
place and maintain the Foreign Assets in the care of the Eligible Foreign
Custodian selected by the Foreign Custody Manager in each country listed on
Schedule A, as amended from time to time. In performing its delegated
responsibilities as Foreign Custody Manager to place or maintain Foreign
Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall
determine that the Foreign Assets will be subject to reasonable care, based
on the standards applicable to custodians in the country in which the Foreign
Assets will be held by that Eligible Foreign Custodian, after considering all
factors relevant to the safekeeping of such assets, including, without
limitation the factors specified in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign
Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign
Custodian that is a foreign securities depository or clearing agency)
governing the foreign custody arrangements with each Eligible Foreign
Custodian selected by the Foreign Custody Manager will satisfy the
requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system
to monitor (i) the appropriateness of maintaining the Foreign Assets with
such Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian (or the rules or established practices and procedures in
the case of an Eligible Foreign Custodian selected by the Foreign Custody
Manager which is a foreign
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securities depository or clearing agency that is not a Mandatory Securities
Depository). In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are
no longer appropriate, the Foreign Custody Manager shall notify the Board in
accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and
maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of
the Portfolios, and the Board shall be deemed to be monitoring on a
continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate. The Fund and the Custodian each expressly
acknowledge that the Foreign Custody Manager shall not be delegated any
responsibilities under this Section 3 with respect to Mandatory Securities
Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of assets of
management investment companies registered under the 1940 Act would exercise.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager
shall report the withdrawal of the Foreign Assets from an Eligible Foreign
Custodian and the placement of such Foreign Assets with another Eligible
Foreign Custodian by providing to the Board amended Schedules A or B at the
end of the calendar quarter in which an amendment to either Schedule has
occurred. The Foreign Custody Manager shall make written reports notifying
the Board of any other material change in the foreign custody arrangements of
the Portfolios described in this Section 3 after the occurrence of the
material change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this
Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS
FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of
execution of this Agreement and shall remain in effect until terminated at
any time, without penalty, by written notice from the terminating party to
the non-terminating party. Termination will become effective thirty (30) days
after receipt by the non-terminating party of such notice. The provisions of
Section 3.3
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hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated
countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall
have the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each
Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold
foreign securities for all of its customers, including the Portfolios, with
any Foreign Sub-Custodian in an account that is identified as belonging to
the Custodian for the benefit of its customers, provided however, that (i)
the records of the Custodian with respect to foreign securities of the
Portfolios which are maintained in such account shall identify those
securities as belonging to the Portfolios and (ii), to the extent permitted
and customary in the market in which the account is maintained, the Custodian
shall require that securities so held by the Foreign Sub-Custodian be held
separately from any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only
through arrangements implemented by the Foreign Sub-Custodian in such country
pursuant to the terms of this Agreement.
SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. Delivery of Foreign Securities. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System
account, only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
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(i) upon the sale of such foreign securities for the Portfolios in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivery against
expectation of receiving later payment; or (B) in the case of
a sale effected through a Foreign Securities System in
accordance with the rules governing the operation of the
Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; PROVIDED that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
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(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the foreign securities to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies
of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vi) in connection with the borrowing or lending of foreign
securities; and
(vii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be
made.
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4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained
for the account of the Portfolios may be effected in accordance with the
customary established securities trading or processing practices and
procedures in the country or market in which the transaction occurs,
including, without limitation, delivering Foreign Assets to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
with the expectation of receiving later payment for such Foreign Assets from
such purchaser or dealer.
The Custodian shall provide to the Board the information with
respect to custody and settlement practices in countries in which the
Custodian employs a Foreign Sub-Custodian, including without limitation
information relating to Foreign Securities Systems, described on Schedule C
hereto at the time or times set forth on such Schedule. The Custodian may
revise Schedule C from time to time, provided that no such revision shall
result in the Board being provided with substantively less information than
had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign
securities maintained in the custody of a Foreign Sub-Custodian (other than
bearer securities) shall be registered in the name of the applicable
Portfolio or in the name of the Custodian or in the name of any Foreign
Sub-Custodian or in the name of any nominee of the foregoing, and the Fund on
behalf of such Portfolio agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities. The Custodian or
a Foreign Sub-Custodian shall not be obligated to accept securities on behalf
of a Portfolio under the terms of this Agreement unless the form of such
securities and the manner in which they are delivered are in accordance with
reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books
as belonging to the Fund cash (including cash denominated in foreign
currencies) deposited with the Custodian. Where the Custodian is unable to
maintain, or market practice does not facilitate the maintenance of, cash on
the books of the Custodian, a bank account or bank accounts opened and
maintained outside the United States on behalf of a Portfolio with a Foreign
Sub-Custodian shall be subject only to draft or order by the Custodian or
such Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to
hold cash received by or from or for the account of the Portfolio.
SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable
commercial efforts to collect all income and other payments with respect to
the Foreign Assets held hereunder to which the Portfolios shall be entitled
and shall credit such income, as collected, to the applicable Portfolio. In
the event that extraordinary measures are required to collect such income,
the Fund and the Custodian shall consult as to such measures and as to the
compensation and expenses of the Custodian relating to such measures.
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SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign
securities held pursuant to this Agreement, the Custodian will use reasonable
commercial efforts to facilitate the exercise of voting and other shareholder
rights, subject always to the laws, regulations and practical constraints
that may exist in the country where such securities are issued. The Fund
acknowledges that local conditions, including lack of regulation, onerous
procedural obligations, lack of notice and other factors may have the effect
of severely limiting the ability of the Fund to exercise shareholder rights.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities
and expirations of rights in connection therewith) received by the Custodian
via the Foreign Sub-Custodians from issuers of the foreign securities being
held for the account of the Portfolios. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information
so received by the Custodian from issuers of the foreign securities whose
tender or exchange is sought or from the party (or its agents) making the
tender or exchange offer. The Custodian shall not be liable for any untimely
exercise of any tender, exchange or other right or power in connection with
foreign securities or other property of the Portfolios at any time held by it
unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual
possession of such foreign securities or property and (ii) the Custodian
receives Proper Instructions with regard to the exercise of any such right or
power, and both (i) and (ii) occur at least three business days prior to the
date on which the Custodian is to take action to exercise such right or power
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN
SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as
a Foreign Sub-Custodian shall, to the extent possible, require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties
and, to the extent possible, to indemnify, and hold harmless, the Custodian
from and against any loss, damage, cost, expense, liability or claim arising
out of or in connection with the Foreign Sub-Custodian's performance of such
obligations. At the Fund's election, the Portfolios shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims against
a Foreign Sub-Custodian as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Portfolios have not
been made whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of
the United States or of any state or political subdivision thereof. It shall
be the responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund with respect to the Portfolios or the Custodian as
custodian of the Portfolios by the tax law of countries other than those
mentioned in the above sentence,
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including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to
use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of countries for which the Fund has
provided such information.
SECTION 4.12 CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section
3 hereof, in the event of any conflict between the provisions of Sections 3
and 4 hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent and deposit into the account of the appropriate
Portfolio such payments as are received for Shares thereof issued or sold
from time to time by the Fund. The Custodian will provide timely notification
to the Fund on behalf of each such Portfolio and the Transfer Agent of any
receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection
with the redemption or repurchase of Shares, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection with
the redemption or repurchase of Shares, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been
furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Proper Instructions
may include communications effected directly between electro-mechanical or
electronic devices provided that the Fund and the Custodian agree to security
procedures, including but not limited to, the security
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procedures selected by the Fund in the Funds Transfer Addendum attached
hereto. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from
the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, PROVIDED that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Fund ("CERTIFIED
RESOLUTION") as conclusive evidence (a) of the authority of any person to act
in accordance with such resolution or (b) of any determination or of any
action by the Board as described in such resolution, and such resolution may
be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board to keep the books of account
of each Portfolio and/or compute the
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net asset value per Share of the outstanding Shares or, if directed in
writing to do so by the Fund on behalf of the Portfolio, shall itself keep
such books of account and/or compute such net asset value per Share. If so
directed, the Custodian shall also calculate daily the net income of the
Portfolio as described in the Prospectus and shall advise the Fund and the
Transfer Agent daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The Fund acknowledges and agrees that, with respect to
investments maintained with the Underlying Transfer Agent, the Underlying
Transfer Agent is the sole source of information on the number of shares of a
fund held by it on behalf of a Portfolio and that the Custodian has the right
to rely on holdings information furnished by the Underlying Transfer Agent to
the Custodian in performing its duties under this Agreement, including
without limitation, the duties set forth in this Section 9 and in Section 10
hereof; provided, however, that the Custodian shall be obligated to reconcile
information as to purchases and sales of Underlying Shares contained in trade
instructions and confirmations received by the Custodian and to report
promptly any discrepancies to the Underlying Transfer Agent. The calculations
of the net asset value per Share and the daily income of each Portfolio shall
be made at the time or times described from time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Fund under the
1940 Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund
and employees and agents of the SEC. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by the
Fund and for such compensation as shall be agreed upon between the Fund and
the Custodian, include certificate numbers in such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on
behalf of each applicable Portfolio may from time to time request, to obtain
from year to year favorable opinions from the Fund's independent accountants
with respect to its activities hereunder in connection with the preparation
of the Fund's Form N-1A, and Form N-SAR or other annual reports to the SEC
and with respect to any other requirements thereof.
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SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or
maintained in a U.S. Securities System or a Foreign Securities System,
relating to the services provided by the Custodian under this Agreement; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Agreement and shall be held
harmless in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options agreement. The
Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement, but shall be kept indemnified by and shall
be without liability to the Fund for any action taken or omitted by it in
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice. The Custodian shall be without liability to the Fund
and the Portfolios for any loss, liability, claim or expense resulting from
or caused by anything which is (A) part of Country Risk (as defined in
Section 3 hereof), including without limitation nationalization,
expropriation, currency restrictions, or acts of war, revolution, riots or
terrorism, or (B) part of the "prevailing country risk" of the Portfolios, as
such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as
such term or other similar terms are now or in the future interpreted by the
SEC or by the staff of the Division of Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or
agent, the Custodian shall be without
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liability to the Fund for any loss, liability, claim or expense resulting
from or caused by; (i) events or circumstances beyond the reasonable control
of the Custodian or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without limitation, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay
or failure of any broker, agent or intermediary, central bank or other
commercially prevalent payment or clearing system to deliver to the
Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure
of any company, corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund, the
Custodian's sub-custodians, nominees or agents or any consequential losses
arising out of such delay or failure to transfer such securities including
non-receipt of bonus, dividends and rights and other accretions or benefits;
(vi) delays or inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities System;
and (vii) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or any other country,
or political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set
forth with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable
for the payment of money or incurring liability of some other form, the Fund
on behalf of the Portfolio, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and
form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities
in connection with the performance of this Agreement, except such as may
arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of
the applicable Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
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SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than sixty (60) days after the date of such delivery or mailing;
provided, however, that the Fund shall not amend or terminate this Agreement
in contravention of any applicable federal or state regulations, or any
provision of the Fund's Declaration of Trust, and further provided, that the
Fund on behalf of one or more of the Portfolios may at any time by action of
its Board (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be
due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be
appointed by the Board, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities of each applicable Portfolio then held
by it hereunder and shall transfer to an account of the successor custodian
all of the securities of each such Portfolio held in a Securities System or
at the Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a Certified Resolution, deliver at the
office of the Custodian and transfer such securities, funds and other
properties in accordance with such resolution.
In the event that no written order designating a successor custodian
or Certified Resolution shall have been delivered to the Custodian on or
before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, or New York, New York, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Agreement on behalf of each applicable
Portfolio, and to transfer to an account of such successor custodian all of
the securities of each such Portfolio held in any Securities System or at the
Underlying Transfer
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Agent. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Agreement.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a
successor custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Agreement
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian
and the Fund on behalf of each of the Portfolios, may from time to time agree
on such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor
of this Agreement. Any such interpretive or additional provisions shall be in
a writing signed by both parties and shall be annexed hereto, PROVIDED that
no such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares
in addition to RWB U.S. Bond Fund, U.S. Total Market Fund, U.S. High Book to
Market Fund, U.S. Small Companies Fund, International High Book to Market
Fund and International Small Company Fund, with respect to which it desires
to have the Custodian render services as custodian under the terms hereof, it
shall so notify the Custodian in writing, and if the Custodian agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
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SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set
forth herein during normal business hours or delivered prepaid registered
mail or by telex, cable or telecopy to the parties at the following addresses
or such other addresses as may be notified by any party from time to time.
To the Fund: SA FUNDS - INVESTMENT TRUST
1190 Saratoga Avenue
Suite 200
San Jose, California 95129
Attention: John J. Bowen, Jr., Chairman
Telephone: (408) 260-3100
Telecopy: (408) 247-1108
To the Custodian: STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention: Michael E. Prendergast,
Vice President
Telephone: (617) 985-0387
Telecopy: (617) 985-0554
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case
of cable, telex or telecopy on the business day after the receipt thereof.
Evidence that the notice was properly addressed, stamped and put into the
post shall be conclusive evidence of posting.
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SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
parties hereto all/each agree that any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business, and
that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence.
SECTION 23. DATA ACCESS SERVICES ADDENDUM
The Custodian and the Fund agree to be bound by the terms of the
Data Access Services Addendum attached hereto.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account
of customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held
by the bank unless the beneficial owner has expressly objected to disclosure
of this information. In order to comply with the rule, the Custodian needs
the Fund to indicate whether it authorizes the Custodian to provide the
Fund's name, address, and share position to requesting companies whose
securities the Fund owns. If the Fund tells the Custodian "no", the Custodian
will not provide this information to requesting companies. If the Fund tells
the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any
funds or accounts established by the Fund. For the Fund's protection, the
Rule prohibits the requesting company from using the Fund's name and address
for any purpose other than corporate communications. Please indicate below
whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
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SECTION 25. YEAR 2000
The Custodian will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available state of the
art technology to offer products that are Year 2000 compliant, including, but
not limited to, century recognition of dates, calculations that correctly
compute same century and multi century formulas and date values, and
interface values that reflect the date issues arising between now and the
next one-hundred years, and if any changes are required, the Custodian will
make the changes to its products at no cost to the Fund and in a commercially
reasonable time frame and will require third-party suppliers to do likewise.
Remainder of Page Intentionally Left Blank
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IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of July 1, 1999.
FUND SIGNATURE ATTESTED TO BY: RWB FUNDS - INVESTMENT TRUST
By: By: /s/ John J. Bowen, Jr.
------------------------ ------------------------------
Name: Name: John J. Bowen, Jr.
------------------------ ------------------------------
Title: Title:
------------------------ ------------------------------
SIGNATURE ATTESTED TO BY: STATE STREET BANK AND TRUST COMPANY
By: /s/ Stephanie L. Poster By: /s/ Ronald E. Logue
------------------------- ---------------------------
Name: Stephanie L. Poster Name: Ronald E. Logue
Title: Vice President Title: Vice Chairman
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
THIS ADDENDUM to the Custodian Agreement (as such term is defined below)
between SA Funds - Investment Trust (the "Customer") and State Street Bank
and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of the Customer pursuant to that certain Custodian Agreement (the "Custodian
Agreement") dated as of July 1, 1999;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency
HORIZON-SM- Accounting System, in its role as custodian of the Customer, and
maintains certain Customer-related data ("Customer Data") in databases under
the control and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer, and intends to
provide additional services, consistent with the terms and conditions of this
Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
(a) SYSTEM. Subject to the terms and conditions of this Addendum,
State Street hereby agrees to provide the Customer with access to State
Street's Multicurrency HORIZON-SM- Accounting System and the other
information systems (collectively, the "System") as described in Attachment
A, on a remote basis for the purpose of obtaining reports and information,
solely on computer hardware, system software and telecommunication links as
listed in Attachment B (the "Designated Configuration") of the Customer, or
certain third parties approved by State Street that serve as investment
advisors or investment managers or in other service capacities to the
Customer such as the Customer's independent auditors (each, an "Investment
Advisor"), solely with respect to the Customer, or on any designated
substitute or back-up equipment configuration with State Street's written
consent, such consent not to be unreasonably withheld.
(b) DATA ACCESS SERVICES. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Addendum and data access operating standards and procedures as may be issued
by State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody
by State Street or (ii) transmit accounting or other information (such
transactions are referred to herein as "Client Originated Electronic
Financial Instructions"), and (iii) access data for the purpose of reporting
and analysis, shall be deemed to be Data Access Services for purposes of this
Addendum.
(c) ADDITIONAL SERVICES. State Street may from time to time agree to
make available to the Customer additional Systems that are not described in
the attachments to this Addendum. In the absence of any other written
agreement concerning such additional systems, the term "System" shall
include, and this Addendum shall govern, the Customer's access to and use of
any additional System made available by State Street and/or accessed by the
Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Addendum, the Customer will have
access, through the Data Access Services, to Customer Data and to functions
of State Street's proprietary systems; provided, however that in no event
will the Customer have direct access to any third party systems-level
software that retrieves data for, stores data from, or otherwise supports the
System.
<PAGE>
3. LIMITATION ON SCOPE OF USE
(a) DESIGNATED EQUIPMENT; DESIGNATED LOCATION. The System and the Data
Access Services shall be used and accessed solely on and through the
Designated Configuration at the offices of the Customer [located in San Jose,
California or the Investment Advisor located in Santa Monica, California]
("Designated Location").
(b) DESIGNATED CONFIGURATION; TRAINED PERSONNEL. State Street shall
be responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable
both parties to perform their respective obligations under this Addendum.
State Street agrees to use commercially reasonable efforts to maintain the
System so that it remains serviceable, provided, however, that State Street
does not guarantee or assure uninterrupted remote access use of the System.
(c) SCOPE OF USE. The Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of
reporting and analysis. The Customer shall not, and shall cause its
employees and agents not to (i) permit any third party to use the System or
the Data Access Services, (ii) sell, rent, license or otherwise use the
System or the Data Access Services in the operation of a service bureau or
for any purpose other than as expressly authorized under this Addendum, (iii)
use the System or the Data Access Services for any fund, trust or other
investment vehicle without the prior written consent of State Street, (iv)
allow access to the System or the Data Access Services through terminals or
any other computer or telecommunications facilities located outside the
Designated Locations, (v) allow or cause any information (other than
portfolio holdings, valuations of portfolio holdings, and other information
reasonably necessary for the management or distribution of the assets of the
Customer) transmitted from State Street's databases, including data from
third party sources, available through use of the System or the Data Access
Services to be redistributed or retransmitted to another computer, terminal
or other device for other than use for or on behalf of the Customer or (vi)
modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
(d) OTHER LOCATIONS. Except in the event of an emergency or of a
planned System shutdown, the Customer's access to services performed by the
System or to Data Access Services at the Designated Location may be
transferred to a different location only upon the prior written consent of
State Street. In the event of an emergency or System shutdown, the Customer
may use any back-up site included in the Designated Configuration or any
other back-up site agreed to by State Street, which agreement will not be
unreasonably withheld. The Customer may secure from State Street the right
to access the System or the Data Access Services through computer and
telecommunications facilities or devices complying with the Designated
Configuration at additional locations only upon the prior written consent of
State Street and on terms to be mutually agreed upon by the parties.
(e) TITLE. Title and all ownership and proprietary rights to the
System, including any enhancements or modifications thereto, whether or not
made by State Street, are and shall remain with State Street.
(f) NO MODIFICATION. Without the prior written consent of State
Street, the Customer shall not modify, enhance or otherwise create derivative
works based upon the System, nor shall the Customer reverse engineer,
decompile or otherwise attempt to secure the source code for all or any part
of the System.
(g) SECURITY PROCEDURES. The Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and
to access the Data Access Services. The Customer shall have access only to
the Customer Data and authorized transactions agreed upon from time to time
by State Street and, upon notice from State Street, the Customer shall
discontinue remote use of the System and access to Data Access Services for
any security reasons cited by State Street; provided, that, in such event,
State Street shall, for a period not less than 180 days (or such other
shorter period specified by the Customer) after such discontinuance, assume
responsibility to provide accounting services under the terms of the
Custodian Agreement.
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(h) INSPECTIONS. State Street shall have the right to inspect the use
of the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this Addendum. The on-site inspections
shall be upon prior written notice to the Customer and the Investment Advisor
and at reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's
business.
4. PROPRIETARY INFORMATION
(a) PROPRIETARY INFORMATION. The Customer acknowledges and State
Street represents that the System and the databases, computer programs,
screen formats, report formats, interactive design techniques, documentation
and other information made available to the Customer by State Street as part
of the Data Access Services and through the use of the System constitute
copyrighted, trade secret, or other proprietary information of substantial
value to State Street. Any and all such information provided by State Street
to the Customer shall be deemed proprietary and confidential information of
State Street (hereinafter "Proprietary Information"). The Customer agrees
that it will hold such Proprietary Information in the strictest confidence
and secure and protect it in a manner consistent with its own procedures for
the protection of its own confidential information and to take appropriate
action by instruction or agreement with its employees who are permitted
access to the Proprietary Information to satisfy its obligations hereunder.
The Customer further acknowledges that State Street shall not be required to
provide the Investment Advisor with access to the System unless it has first
received from the Investment Advisor an undertaking with respect to State
Street's Proprietary Information in the form of Attachment C to this
Addendum. The Customer shall use all commercially reasonable efforts to
assist State Street in identifying and preventing any unauthorized use,
copying or disclosure of the Proprietary Information or any portions thereof
or any of the logic, formats or designs contained therein.
(b) COOPERATION. Without limitation of the foregoing, the Customer
shall advise State Street immediately in the event the Customer learns or has
reason to believe that any person to whom the Customer has given access to
the Proprietary Information, or any portion thereof, has violated or intends
to violate the terms of this Addendum, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief
in the name of the Customer or State Street against any such person.
(c) INJUNCTIVE RELIEF. The Customer acknowledges that the disclosure
of any Proprietary Information, or of any information which at law or equity
ought to remain confidential, will immediately give rise to continuing
irreparable injury to State Street inadequately compensable in damages at
law. In addition, State Street shall be entitled to obtain immediate
injunctive relief against the breach or threatened breach of any of the
foregoing undertakings, in addition to any other legal remedies which may be
available.
(d) SURVIVAL. The provisions of this Section 4 shall survive the
termination of this Addendum.
5. LIMITATION ON LIABILITY
(a) LIMITATION ON AMOUNT AND TIME FOR BRINGING ACTION. The Customer
agrees that any liability of State Street to the Customer or any third party
arising out of State Street's provision of Data Access Services or the System
under this Addendum shall be limited to the amount of custody fees paid by
the Customer for the preceding two months. In no event shall State Street be
liable to the Customer or any other party for any special, indirect, punitive
or consequential damages even if advised of the possibility of such damages.
No action, regardless of form, arising out of this Addendum may be brought by
the Customer more than two years after the Customer has knowledge that the
cause of action has arisen.
(b) LIMITED WARRANTIES. NO OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE
STREET.
(c) THIRD-PARTY DATA. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
3
<PAGE>
(d) REGULATORY REQUIREMENTS. As between State Street and the Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System
and the conformity thereof with any requirements of law.
(e) FORCE MAJEURE. Neither party shall be liable for any costs or
damages due to delay or nonperformance under this Addendum arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the
other party, or the Customer as a result of work stoppage, power or other
mechanical failure, computer virus, natural disaster, governmental action, or
communication disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any
loss, damage or expense including reasonable attorney's fees, (a "loss")
suffered by State Street arising from (i) the negligence or willful
misconduct in the use by the Customer of the Data Access Services or the
System, including any loss incurred by State Street resulting from a security
breach at the Designated Location or committed by the Customer's employees or
agents or the Investment Advisor and (ii) any loss resulting from incorrect
Client Originated Electronic Financial Instructions. State Street shall be
entitled to rely on the validity and authenticity of Client Originated
Electronic Financial Instructions without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule
in effect from time to time between the parties (the "Fee Schedule"). Any
tariffs, duties or taxes imposed or levied by any government or governmental
agency by reason of the transactions contemplated by this Addendum,
including, without limitation, federal, state and local taxes, use, value
added and personal property taxes (other than income, franchise or similar
taxes which may be imposed or assessed against State Street) shall be borne
by the Customer. Any claimed exemption from such tariffs, duties or taxes
shall be supported by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
(a) TRAINING. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the
Customer's personnel in connection with the use of the System on the
Designated Configuration. The Customer agrees that it will set aside, during
regular business hours or at other times agreed upon by both parties,
sufficient time to enable all operators of the System and the Data Access
Services, designated by the Customer, to receive the training offered by
State Street pursuant to this Addendum.
(b) INSTALLATION AND CONVERSION. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of
the Designated Configuration. The Customer shall have the following
responsibilities in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the timely acquisition
and maintenance of the hardware and software that attach to the
Designated Configuration in order to use the Data Access Services
at the Designated Location.
(ii) State Street and the Customer each agree that they will assign
qualified personnel to actively participate during the Installation
and Conversion phase of the System implementation to enable both
parties to perform their respective obligations under this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
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10. TERM OF ADDENDUM
(a) TERM OF ADDENDUM. This Addendum shall become effective on the date
of its execution by State Street and shall remain in full force and effect
until terminated as herein provided.
(b) TERMINATION OF ADDENDUM. Either party may terminate this Addendum
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State
Street to the Customer or thirty days' notice in the case of notice from the
Customer to State Street of termination; or (ii) immediately for failure of
the other party to comply with any material term and condition of this
Addendum by giving the other party written notice of termination. In the
event the Customer shall cease doing business, shall become subject to
proceedings under the bankruptcy laws (other than a petition for
reorganization or similar proceeding) or shall be adjudicated bankrupt, this
Addendum and the rights granted hereunder shall, at the option of State
Street, immediately terminate with notice to the Customer. This Addendum
shall in any event terminate as to any Customer within 90 days after the
termination of the Custodian Agreement applicable to such Customer.
(c) TERMINATION OF THE RIGHT TO USE. Upon termination of this Addendum
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Customer shall immediately cease use of the
System and the Data Access Services. Immediately upon termination of this
Addendum for any reason, the Customer shall return to State Street all copies
of documentation and other Proprietary Information in its possession;
provided, however, that in the event that either party terminates this
Addendum or the Custodian Agreement for any reason other than the Customer's
breach, State Street shall provide the Data Access Services for a period of
time and at a price to be agreed upon by the parties.
11. MISCELLANEOUS
(a) ASSIGNMENT; SUCCESSORS. This Addendum and the rights and
obligations of the Customer and State Street hereunder shall not be assigned
by either party without the prior written consent of the other party, except
that State Street may assign this Addendum to a successor of all or a
substantial portion of its business, or to a party controlling, controlled
by, or under common control with State Street.
(b) SURVIVAL. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Addendum.
(c) ENTIRE AGREEMENT. This Addendum and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all
prior or contemporaneous representations or agreements, whether oral or
written, between the parties as such may relate to the Data Access Services
or the System, and cannot be modified or altered except in a writing duly
executed by the parties. This Addendum is not intended to supersede or
modify the duties and liabilities of the parties hereto under the Custodian
Agreement or any other agreement between the parties hereto except to the
extent that any such agreement specifically refers to the Data Access
Services or the System. No single waiver of any right hereunder shall be
deemed to be a continuing waiver.
(d) SEVERABILITY. If any provision or provisions of this Addendum
shall be held to be invalid, unlawful, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired.
(e) GOVERNING LAW. This Addendum shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts
without regard to the conflict of laws provisions thereof.
5
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ATTACHMENT A
Multicurrency HORIZON-SM- Accounting System
System Product Description
I. The Multicurrency HORIZON-SM- Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general
ledger entries; 2) calculation of daily income and expense; 3) reconciliation
of daily activity with the trial balance, and 4) appropriate automated
feeding mechanisms to (i) domestic and international settlement systems, (ii)
daily, weekly and monthly evaluation services, (iii) portfolio performance
and analytic services, (iv) customer's internal computing systems and (v)
various State Street provided information services products.
II. GlobalQuest-Registered Trademark- is designed to provide customer access
to the following information maintained on The Multicurrency HORIZON-SM-
Accounting System: 1) cash transactions and balances; 2) purchases and sales;
3) income receivables; 4) tax refund receivables; 5) daily priced positions;
6) open trades; 7) settlement status; 8) foreign exchange transactions; 9)
trade history, and 10) daily, weekly and monthly evaluation services.
6
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ATTACHMENT B
*DESIGNATED CONFIGURATION
7
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ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as
Investment Advisor to SA Funds - Investment Trust (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON-SM- Accounting System and other information systems
(collectively, the "System").
The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by
State Street as part of the Data Access Services provided to the Customer and
through the use of the System constitute copyrighted, trade secret, or other
proprietary information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with
its employees who are permitted access to the Proprietary Information to
satisfy its obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is
not authorized. It will not intentionally adversely affect the integrity of
the System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned
shall immediately cease use of the System and the Data Access Services.
Immediately upon notice by State Street for any reason, the Undersigned shall
return to State Street all copies of documentation and other Proprietary
Information in its possession.
RWB ADVISORY SERVICES INC.
By:
---------------------------------------
Title:
---------------------------------------
Date:
---------------------------------------
8
<PAGE>
ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as
Investment Advisor to SA Funds - Investment Trust (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON-SM- Accounting System and other information systems
(collectively, the "System").
The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by
State Street as part of the Data Access Services provided to the Customer and
through the use of the System constitute copyrighted, trade secret, or other
proprietary information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with
its employees who are permitted access to the Proprietary Information to
satisfy its obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is
not authorized. It will not intentionally adversely affect the integrity of
the System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned
shall immediately cease use of the System and the Data Access Services.
Immediately upon notice by State Street for any reason, the Undersigned shall
return to State Street all copies of documentation and other Proprietary
Information in its possession.
DIMENSIONAL FUND ADVISORS, INC.
By:
---------------------------------------
Title:
---------------------------------------
Date:
---------------------------------------
9
<PAGE>
ATTACHMENT C
UNDERTAKING
The Undersigned understands that in the course of its employment as
Independent Auditor to SA Funds - Investment Trust (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON-SM- Accounting System and other information systems
(collectively, the "System").
The Undersigned acknowledges that the System and the databases, computer
programs, screen formats, report formats, interactive design techniques,
documentation and other information made available to the Undersigned by
State Street as part of the Data Access Services provided to the Customer and
through the use of the System constitute copyrighted, trade secret, or other
proprietary information of substantial value to State Street. Any and all
such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with
its employees who are permitted access to the Proprietary Information to
satisfy its obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is
not authorized. It will not intentionally adversely affect the integrity of
the System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned
shall immediately cease use of the System and the Data Access Services.
Immediately upon notice by State Street for any reason, the Undersigned shall
return to State Street all copies of documentation and other Proprietary
Information in its possession.
PRICEWATERHOUSECOOPERS LLC
By:
---------------------------------------
Title:
---------------------------------------
Date:
---------------------------------------
10
<PAGE>
ATTACHMENT D
SUPPORT
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a. TELEPHONE SUPPORT. The Customer Designated Persons may contact
State Street's Multicurrency HORIZON-SM- Help Desk and Customer Assistance
Center between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business
days for the purpose of obtaining answers to questions about the use of the
System, or to report apparent problems with the System. From time to time,
the Customer shall provide to State Street a list of persons, not to exceed
five in number, who shall be permitted to contact State Street for assistance
(such persons being referred to as "the Customer Designated Persons").
b. TECHNICAL SUPPORT. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The
total amount of technical support provided by State Street shall not exceed
10 resource days per year. State Street shall provide such additional
technical support as is expressly set forth in the fee schedule in effect
from time to time between the parties (the "Fee Schedule"). Technical
support, including during installation and testing, is subject to the fees
and other terms set forth in the Fee Schedule.
c. MAINTENANCE SUPPORT. State Street shall use commercially
reasonable efforts to correct system functions that do not work according to
the System Product Description as set forth on Attachment A in priority order
in the next scheduled delivery release or otherwise as soon as is practicable.
d. SYSTEM ENHANCEMENTS. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such
enhancement, State Street shall notify the Customer and shall offer the
Customer reasonable training on the enhancement. Charges for system
enhancements shall be as provided in the Fee Schedule. State Street retains
the right to charge for related systems or products that may be developed and
separately made available for use other than through the System.
e. CUSTOM MODIFICATIONS. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall
make a written request to State Street providing specifications for the
desired modification. Any custom modifications may be undertaken by State
Street in its sole discretion in accordance with the Fee Schedule.
f. LIMITATION ON SUPPORT. State Street shall have no obligation to
support the Customer's use of the System: (i) for use on any computer
equipment or telecommunication facilities which does not conform to the
Designated Configuration or (ii) in the event the Customer has modified the
System in breach of this Addendum.
11
<PAGE>
FUNDS TRANSFER ADDENDUM [LOGO]
OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's (as named below) account(s) upon the receipt of a payment order in
compliance with the selected Security Procedure chosen for funds transfer and
in the amount of money that State Street has been instructed to transfer.
State Street shall execute payment orders in compliance with the Security
Procedure and with the Client's instructions on the execution date provided
that such payment order is received by the customary deadline for processing
such a request, unless the payment order specifies a later time. All payment
orders and communications received after this time will be deemed to have
been received on the next business day.
2. SECURITY PROCEDURE: The Client acknowledges that the Security Procedure
it has designated on the Selection Form was selected by the Client from
Security Procedures offered by State Street. The Client shall restrict
access to confidential information relating to the Security Procedure to
authorized persons as communicated in writing to State Street. The Client
must notify State Street immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Client's authorized personnel. State Street shall verify the authenticity of
all instructions according to the Security Procedure.
3. ACCOUNT NUMBERS: State Street shall process all payment orders on the
basis of the account number contained in the payment order. In the event of
a discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern.
4. REJECTION: State Street reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of State Street's
receipt of such payment order; (b) if initiating such payment order would
cause State Street, in State Street's sole judgment, to exceed any volume,
aggregate dollar, network, time, credit or similar limits upon wire transfers
which are applicable to State Street; or (c) if State Street, in good faith,
is unable to satisfy itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to
act on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are
received in a timely manner affording State Street reasonable opportunity to
act. However, State Street assumes no liability if the request for amendment
or cancellation cannot be satisfied.
6. ERRORS: State Street shall assume no responsibility for failure to
detect any erroneous payment order provided that State Street complies with
the payment order instructions as received and State Street complies with the
Security Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: State Street shall assume no
responsibility for lost interest with respect to the refundable amount of any
unauthorized payment order, unless State Street is notified of the
unauthorized payment order within thirty (30) days of notification by State
Street of the acceptance of such payment order. In no event shall State
Street be liable for special, indirect or consequential damages, even if
advised of the possibility of such damages and even for failure to execute a
payment order.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When a Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the New England Clearing House Association, State Street will
act as an Originating Depository Financial Institution and/or Receiving
Depository Institution, as the case may be, with respect to such entries.
Credits given by State Street with respect to an ACH credit entry are
provisional until State Street receives final settlement for such entry from
the Federal Reserve Bank. If State Street does not receive such final
settlement, the Client agrees that State Street shall receive a refund of the
amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid
the amount of the entry.
9. CONFIRMATION STATEMENTS: Confirmation of State Street's execution of
payment orders shall ordinarily be provided within 24 hours notice which may
be delivered through State Street's proprietary information systems, such as,
but not limited to Horizon and GlobalQuest-Registered Trademark-, or by
facsimile or callback. The Client must report any objections to the execution
of a payment order within 30 days.
<PAGE>
FUNDS TRANSFER ADDENDUM [LOGO]
SECURITY PROCEDURE(S) SELECTION FORM
Please select one or more of the funds transfer security procedures indicated
below.
- -SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is
limited to securities brokers and dealers, clearing and depository
institutions, recognized exchanges for securities, and investment management
institutions. SWIFT provides a number of security features through encryption
and authentication to protect against unauthorized access, loss or wrong
delivery of messages, transmission errors, loss of confidentiality and
fraudulent changes to messages. SWIFT is considered to be one of the most
secure and efficient networks for the delivery of funds transfer
instructions.
SELECTION OF THIS SECURITY PROCEDURE WOULD BE MOST APPROPRIATE FOR EXISTING
SWIFT MEMBERS.
- -STANDING INSTRUCTIONS
Standing Instructions may be used where funds are transferred to a broker on
the Client's established list of brokers with which it engages in foreign
exchange transactions. Only the date, the currency and the currency amount
are variable. In order to establish this procedure, State Street will send to
the Client a list of the brokers that State Street has determined are used
by the Client. The Client will confirm the list in writing, and State Street
will verify the written confirmation by telephone. Standing Instructions will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the Standing Instruction will be confirmed by telephone
prior to execution.
- -REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU)
data communications between the Client and State Street. Security procedures
include encryption and or the use of a test key by those individuals
authorized as Automated Batch Verifiers.
CLIENTS SELECTING THIS OPTION SHOULD HAVE AN EXISTING FACILITY FOR COMPLETING
CPU-CPU TRANSMISSIONS. THIS DELIVERY MECHANISM IS TYPICALLY USED FOR
HIGH-VOLUME BUSINESS.
- -GLOBAL HORIZON INTERCHANGE-SM- FUNDS TRANSFER SERVICE
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients
to electronically transmit authenticated Fedwire, CHIPS or internal book
transfer instructions to State Street.
THIS DELIVERY MECHANISM IS MOST APPROPRIATE FOR CLIENTS WITH A LOW-TO-MEDIUM
NUMBER OF TRANSACTIONS (5-75 PER DAY), ALLOWING CLIENTS TO ENTER, BATCH, AND
REVIEW WIRE TRANSFER INSTRUCTIONS ON THEIR PC PRIOR TO RELEASE TO STATE
STREET.
- -TELEPHONE CONFIRMATION (CALLBACK)
Telephone confirmation will be used to verify all non-repetitive funds
transfer instructions received via untested facsimile or phone. This
procedure requires Clients to designate individuals as authorized initiators
and authorized verifiers. State Street will verify that the instruction
contains the signature of an authorized person and prior to execution, will
contact someone other than the originator at the Client's location to
authenticate the instruction.
SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE THE
CAPABILITY TO USE OTHER SECURITY PROCEDURES.
- -REPETITIVE WIRES
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and
currency amount are variable, a repetitive wire may be implemented.
Repetitive wires will be subject to a mutually agreed upon limit. If the
payment order exceeds the established limit, the instruction will be
confirmed by telephone prior to execution. Telephone confirmation is used to
establish this process. Repetitive wire instructions must be reconfirmed
annually.
THIS ALTERNATIVE IS RECOMMENDED WHENEVER FUNDS ARE FREQUENTLY TRANSFERRED
BETWEEN THE SAME TWO ACCOUNTS.
- -TRANSFERS INITIATED BY FACSIMILE
The Client faxes wire transfer instructions directly to State Street Mutual
Fund Services. Standard security procedure requires the use of a random
number test key for all transfers. Every six months the Client receives test
key logs from State Street. The test key contains alpha-numeric characters,
which the Client puts on each document faxed to State Street. This procedure
ensures all wire instructions received via fax are authorized by the Client.
WE PROVIDE THIS OPTION FOR CLIENTS WHO WISH TO BATCH WIRE INSTRUCTIONS AND
TRANSMIT THESE AS A GROUP TO STATE STREET MUTUAL FUND SERVICES ONCE OR
SEVERAL TIMES A DAY.
<PAGE>
FUNDS TRANSFER ADDENDUM [LOGO]
- -AUTOMATED CLEARING HOUSE (ACH)
State Street receives an automated transmission or a magnetic tape from a
Client for the initiation of payment (credit) or collection (debit)
transactions through the ACH network. The transactions contained on each
transmission or tape must be authenticated by the Client. Clients using ACH
must select one or more of the following delivery options:
- -GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic
transmissions in standard NACHA formats.
- -Transmission from Client PC to State Street Mainframe with Telephone
Callback
- -Transmission from Client Mainframe to State Street Mainframe with Telephone
Callback
- -Transmission from DST Systems to State Street Mainframe with Encryption
- -Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only
via the delivery methods and security procedures indicated. The selected
delivery methods and security procedure(s) will be effective _________________
for payment orders initiated by our organization.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
_____________________________________ ______________________________________
Name Name
_____________________________________ ______________________________________
Address Address
_____________________________________ ______________________________________
City/State/Zip Code City/State/Zip Code
_____________________________________ ______________________________________
Telephone Number Telephone Number
_____________________________________ ______________________________________
Facsimile Number Facsimile Number
_____________________________________
SWIFT Number
_____________________________________
Telex Number
<PAGE>
FUNDS TRANSFER ADDENDUM [LOGO]
INSTRUCTION(S)
TELEPHONE CONFIRMATION
FUND SA FUNDS - INVESTMENT TRUST
----------------------------------------------------------------
INVESTMENT ADVISER RWB ADVISORY SERVICES INC. [AND SUB-ADVISER, DIMENSIONAL
FUND ADVISORS, INC.]
AUTHORIZED INITIATORS
Please Type or Print
PLEASE PROVIDE A LISTING OF FUND OFFICERS OR OTHER INDIVIDUALS ARE CURRENTLY
AUTHORIZED TO INITIATE WIRE TRANSFER INSTRUCTIONS TO STATE STREET:
NAME TITLE (Specify whether position SPECIMEN SIGNATURE
is with Fund or Investment
Adviser)
_____________________ _______________________________ __________________
_____________________ _______________________________ __________________
_____________________ _______________________________ __________________
_____________________ _______________________________ __________________
_____________________ _______________________________ __________________
AUTHORIZED VERIFIERS
Please Type or Print
PLEASE PROVIDE A LISTING OF FUND OFFICERS OF OTHER INDIVIDUALS WHO WILL BE
CALLED BACK TO VERIFY THE INITIATION OF REPETITIVE WIRES OF $10 MILLION OR
MORE AND ALL NON REPETITIVE WIRE INSTRUCTIONS:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY)
_____________________ _________________________ __________________________
_____________________ _________________________ __________________________
_____________________ _________________________ __________________________
_____________________ _________________________ __________________________
_____________________ _________________________ __________________________
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada State Street Trust Company Canada --
Chile Citibank, N.A. Deposito Central de Valores S.A.
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
Cyprus The Cyprus Popular Bank Ltd. --
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Iceland Icebank Ltd.
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d=Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Fuji Bank, Limited Japan Securities Depository Center
Sumitomo Bank, Ltd.
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia JSC Hansabank-Latvija --
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa -
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodni Banka, A.S. --
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
6
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de
Depot et de Virement de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB CLIENTS PRESENTLY USE CBLC
Central de Custodia e de
Liquidacao Financeira de Titulos
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central
of China Clearing and Registration Corporation
Shenzhen Securities Central
Clearing Co., Ltd.
Costa Rica Central de Valores S.A. (CEVAL)
* Mandatory depositories include entities for which use is mandatory as a 1
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Croatia Ministry of Finance
National Bank of Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (the Danish
Securities Center)
Egypt Misr Company for Clearing,
Settlement, and Central Depository
Estonia Eesti Vaartpaberite
Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and
Clearing House (Budapest) Ltd.
(KELER)[MANDATORY FOR GOV'T BONDS
ONLY; SSB DOES NOT USE FOR OTHER
SECURITIES]
India The National Securities Depository
Limited
* Mandatory depositories include entities for which use is mandatory as a 2
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica The Jamaican Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
* Mandatory depositories include entities for which use is mandatory as a 3
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Lithuania The Central Securities Depository of
Lithuania
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of Pakistan
Limited
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
* Mandatory depositories include entities for which use is mandatory as a 4
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartos ciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
* Mandatory depositories include entities for which use is mandatory as a 5
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Sri Lanka Central Depository System
(Pvt) Limited
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle de
Compensation et de Depot de
Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
* Mandatory depositories include entities for which use is mandatory as a 6
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
* Mandatory depositories include entities for which use is mandatory as a 7
matter of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE C
MARKET INFORMATION
<TABLE>
<CAPTION>
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
(FREQUENCY)
<S> <C>
THE GUIDE TO CUSTODY IN WORLD MARKETS An overview of safekeeping and settlement practices and
(annually) procedures in each market in which State Street Bank
and Trust Company offers custodial services.
GLOBAL CUSTODY NETWORK REVIEW Information relating to the operating history and
(annually) structure of depositories and subcustodians located in
the markets in which State Street Bank and Trust
Company offers custodial services, including
transnational depositories.
GLOBAL LEGAL SURVEY With respect to each market in which State Street Bank
(annually) and Trust Company offers custodial services, opinions
relating to whether local law restricts (i) access of a
fund's independent public accountants to books and
records of a Foreign Sub-Custodian or Foreign
Securities System, (ii) the Fund's ability to recover
in the event of bankruptcy or insolvency of a Foreign
Sub-Custodian or Foreign Securities System, (iii) the
Fund's ability to recover in the event of a loss by a
Foreign Sub-Custodian or Foreign Securities System, and
(iv) the ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars.
SUBCUSTODIAN AGREEMENTS Copies of the subcustodian contracts State Street Bank
(annually) and Trust Company has entered into with each
subcustodian in the markets in which State Street Bank
and Trust Company offers subcustody services to its US
mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors in the markets in
which State Street Bank and Trust Company offers
custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which State Street Bank and
Trust Company offers custodial services which exhibit
special custody risks, developments which may impact
State Street's ability to deliver expected levels of
service.
</TABLE>
<PAGE>
[LETTERHEAD OF PAUL, HASTINGS, JANOFSKY & WALKER LLP]
July 14, 1999
SA Funds Investment Trust
1190 Saratoga Avenue, Suite 200
San Jose, California 95129
Re: SA Fixed Income Fund
SA U.S. Market Fund
SA HBtM Small Company Fund
SA International HBtM Fund
SA International Small Company Fund
Ladies and Gentlemen:
We have acted as counsel to SA Funds Investment Trust, a Delaware
business trust (the "Trust"), in connection with the filing of the Trust's
Registration Statement (the "Registration Statement") and the Pre-Effective
Amendments to the Registration Statement filed on Form N-1A with the Securities
and Exchange Commission (the "Pre-Effective Amendments"), relating to the
issuance by the Trust of an indefinite number of $0.01 par value shares of
beneficial interest (the "Shares") by the following series of the Trust: SA
Fixed Income Fund, SA U.S. Market Fund, SA HBtM Small Company Fund, and SA
International Small Company Fund (each a "Fund", and collectively, the "Funds").
In connection with this opinion, we have assumed the authenticity of
all records, documents and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents and instruments submitted
to us as copies. We have based our opinion upon our review of the following
records, documents and instruments:
(a) the Trust's Certificate of Trust, (as filed with the Delaware
Secretary of State on June 17, 1998), as amended on June 7, 1999 (as
filed with Delaware Secretary of State on June 22, 1999) (as so
amended, the "Certificate of Trust") certified to us by an officer of
the Trust as being in effect on the date hereof;
<PAGE>
PAUL, HASTINGS, JANOFSKY & WALKER LLP
SA Funds Trust
July 14, 1999
Page 2
(b) the Trust's Agreement and Declaration of Trust dated June 16, 1998, as
amended on June 7, 1999 (as filed with the Delaware Secretary of Trust
on June 22, 1999) (as so amended, the "Declaration of Trust"),
certified to us by an officer of the Trust as being true and complete
and in effect on the date hereof;
(c) the By-Laws of the Trust, certified to us by an officer of the Trust
as being true and complete and in effect on the date hereof;
(d) resolutions of the Trustees of the Trust adopted at various meetings
of the Trust, authorizing the establishment of the Funds and the
issuance of Shares of the Funds, certified to us by an officer of the
Trust as being true and complete and in effect on the date hereof;
(e) the Registration Statement filed with the Securities and Exchange
Commission on Form N-1A and the Pre-Effective Amendments filed
thereto; and
(f) a certificate of an officer of the Trust concerning certain factual
matters relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the State of Delaware. We are not
licensed to practice law in the State of Delaware, and we have based our opinion
below solely on our review of Title 12, Chapter 38 of the Delaware Code and the
case law interpreting such Chapter as reported in The Delaware Law of
Corporations and Business Organizations Statutory Handbook (Aspen Law &
Business, 1999 Edition) as updated on Westlaw through July 13, 1999. We have
not undertaken a review of other Delaware law or of any administrative or court
decisions in connection with rendering this opinion. We disclaim any opinion as
to any law other than that of the United States of America and the business
trust law of the State of Delaware as described above, and we disclaim any
opinion as to any statute, rule, regulation, ordinance, order or other
promulgation of any regional or local government authority.
Based on the foregoing and our examination of such questions of law as we
have deemed necessary and appropriate for the purpose of this opinion, and
assuming that: (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance with
statements in the Funds' Prospectus, included in the Funds' Registration
Statement and the Pre-Effective Amendments, and in accordance with the
Declaration of Trust, (ii) all consideration for the Shares will be actually
received by the Trust, and (iii) all applicable securities laws will be complied
with; then it is our opinion that, when issued and sold by the Trust the Shares
will be legally issued, fully paid and nonassessable.
This opinion is rendered to you solely in connection with the Registration
Statement and the Pre-Effective Amendments for the Trust's shares as filed on
Form N-1A and is solely for your benefit. We hereby consent to the Trust's
filing of this opinion as an exhibit to the Trust's Registration Statement and
the Pre-Effective Amendments filed thereto. This opinion may not
2
<PAGE>
PAUL, HASTINGS, JANOFSKY & WALKER LLP
SA Funds Trust
July 14, 1999
Page 3
be relied upon by you for any other purpose. Nor may any other person, firm,
corporation or other entity rely on this opinion without our prior written
consent. We disclaim any obligation to advise you of any developments in areas
covered by this opinion that occur after the date of this opinion.
Very truly yours,
/s/ PAUL, HASTINGS, JANOFSKY & WALKER
3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Statement of Additional Information
constituting part of this Pre-effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
July 7, 1999, relating to the financial statements of the SA Fixed Income
Fund , SA U.S. Market Fund, SA U.S. HBtM Fund, SA U.S. Small Company Fund, SA
International HBtM Fund, SA International Small Company Fund, which are also
included in the Registration Statement. We also consent to the reference to
us under the heading "Financial Statements" in such Statement of Additional
Information.
PricewaterhouseCoopers LLP
San Francisco, Ca
July 14, 1999
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Trustees
of the SA Funds,
In our opinion, the accompanying statements of assets and liabilities and
statements of operations present fairly, in all material respects, the
financial position of the SA Fixed Income Fund , SA U.S. Market Fund, SA U.S.
HBtM Fund, SA U.S. Small Company Fund, SA International HBtM Fund, SA
International Small Company Fund (the "SA Funds") at July 7, 1999, and the
results of their operations for the period then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, Ca
July 7, 1999
<PAGE>
SA Funds - Investment Trust
1. SHARE PURCHASE. RWB Advisory Services Inc. ("RWB") hereby purchases
from SA Funds - Investment Trust (the "Trust"), a series-type investment
company initially having six investment portfolios (the "Funds"), the
following shares of beneficial interest ("Shares") of the below named Funds
at the per-share purchase price indicated below, on the terms and conditions
set forth herein and in the registration statement described below:
<TABLE>
<CAPTION>
Amount Price Shares
Funds Purchased Per Share Purchased
- ----- --------- --------- ---------
<S> <C> <C> <C>
SA Fixed Income Fund $50,000 $10 5,000
SA U.S. Market Fund $10,000 $10 1,000
SA U.S. HBtM Fund $10,000 $10 1,000
SA U.S. Small Company Fund $10,000 $10 1,000
SA International HBtM Fund $10,000 $10 1,000
SA International Small Company Fund $10,000 $10 1,000
</TABLE>
RWB hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Shares, and the Trust hereby acknowledges
receipt from RWB of funds in the amount of $100,000 in full payment of the
Shares.
RWB understands that the Trust has filed with the Securities and
Exchange Commission a Registration Statement which contains the prospectus
describing the Trust and the Shares to be issued thereunder. By its signature
hereto, the undersigned hereby acknowledges receipt of a copy of the
Registration Statement.
2. REPRESENTATIONS AND WARRANTIES. RWB hereby represents and warrants to
the Trust as follows:
(a) It is aware that no federal or state agency has made any
findings or determinations as to the fairness for investment,
nor any recommendations or endorsement, of the Trust's shares;
(b) It has such knowledge and experience of financial and business
matters as will enable it to utilize the information made
available to it in connection with the offering described in
the Trust's Registration Statement, to evaluate the merits and
risks of the prospective investment and to make an informed
investment decision;
(c) It recognizes that the Trust has only recently been organized
and has no financial or operating history and, further, that
investment in the Trust involves certain risks related to the
purchase of the Trust's shares, and it acknowledges that it
has suitable financial resources and anticipated income to
bear the economic risk of such an investment;
<PAGE>
(d) It is purchasing the Shares for its own account, for
investment, in order to provide initial capital or "seed
money," for each of the Funds and not with any intent to
distribute or resell the Shares, either in whole or in part,
and with no present intent to sell or otherwise dispose of the
Shares, either in whole or in part;
(e) It will not sell the Shares purchased by it without
registration of such Shares under the Securities Act of 1933
except in reliance upon an exemption therefrom;
(f) It has been furnished with, and has carefully read, this
purchase agreement and the Registration Statement and such
material documents relating to the Trust as its has requested
and as have been provided to it by the Trust; and
(g) It has had the opportunity to ask questions of, and receive
answers from, the Trust concerning each Fund and the terms of
the offering.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
July ___, 1999.
RWB Advisory Services Inc.
By: /s/ John J. Bowen, Jr.
-----------------------------------
[name]
President and Chief Executive Officer
-----------------------------------
[title]
SA Funds - Investment Trust
By: /s/ John J. Bowen, Jr.
-----------------------------------
[name]
President
-----------------------------------
[title]
<PAGE>
SA FUNDS - INVESTMENT TRUST
PLAN FOR MULTIPLE CLASSES OF SHARES
WHEREAS, SA Funds - Investment Trust (the "Trust") is a Delaware
business trust, engaged in business as an open-end management investment
company and registered as such under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, pursuant to the terms of the Trust's Agreement and
Declaration of Trust, as well as the 1940 Act and the rules and regulations
thereunder, the Board of Trustees of the Trust (the "Board") has authority to
approve and authorize the issuance of, and has approved and authorized the
issuance of, shares of beneficial interest as Class S Shares and Class I
Shares of each investment Fund (a "Fund") of the Trust listed herein on
Schedule A, as may be amended;
WHEREAS, the Trust wishes to adopt this Plan for Multiple Classes of
Shares (the "Multi-Class Plan"), which is a plan as contemplated by Rule
18f-3 of the 1940 Act; and
WHEREAS, at a meeting held on July 9, 1999, the Board, including a
majority of the Trustees who are not interested persons of the Trust (as
defined in section 2(a)(19) of the 1940 Act) (the "Independent Trustees"),
approved and adopted this Multi-Class Plan and determined that this
Multi-Class Plan is: (a) in the best interest of the holders of Class S
Shares; (b) in the best interest of the holders of Class I Shares; and (c) in
the best interest of the Trust as a whole;
NOW, THEREFORE, this Multi-Class Plan, as amended from time to time,
shall remain in effect until such time as the Board terminates this
Multi-Class Plan.
SECTION I: CLASS SHAREHOLDER SERVICES FEES
- -------------------------------------------
Class S Shares of each Fund are offered at net asset value and are
subject to annual asset-based shareholder service fees of 0.25% of the
average daily net assets of the Class S Shares of such Fund. Such fees are
calculated daily and paid monthly to RWB Advisory Services Inc. ("RWB") for
providing shareholder support services.
Class I Shares of each Fund are offered at net asset value and are
subject to annual asset-based shareholder service fees of 0.05% of the
average daily net assets of the Class I Shares of such Fund. Such fees are
calculated daily and paid monthly to RWB for providing shareholder support
services.
Notwithstanding the foregoing, the aggregate amount of any
asset-based shareholder service fees paid by the Trust shall not exceed such
amount as is permitted under Section 26(d) of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (the "NASD"), as amended
from time to time, and any other rules or regulations promulgated by the NASD
or Securities and Exchange Commission applicable to mutual fund service fees.
<PAGE>
SECTION II: ALLOCATION OF CLASS EXPENSES; OTHER PROVISIONS
- -----------------------------------------------------------
Class S Shares and Class I Shares represent interests in the same
Funds of the Trust. Class S Shares of a Fund may be exchanged for Class S
Shares of any other Fund. Class I Shares of a Fund may be exchanged for Class
I Shares of any other Fund. Each class of shares shall have the same rights,
preferences, voting powers, restrictions and limitations, except as follows:
(1) each class will bear different Class Expenses (as defined
below);
(2) each class will have exclusive voting rights with respect to
matters that exclusively affect such class and separate voting
rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other
class;
(3) each class will bear a different name or designation.
The Board, acting in its sole discretion, has determined that the
following expenses attributable to the shares of a particular class ("Class
Expenses") will be borne solely by the class to which they are attributable:
(1) transfer agency fees as identified by the transfer agent
as being attributable to a specific class;
(2) printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders;
(3) extraordinary non-recurring expenses such as litigation and
other legal expenses relating to a particular class; and
(4) asset-based shareholder service fees.
Class Expenses may be waived or reimbursed proportionately and on a
pro rata basis between classes of a Fund by RWB or any other provider of
services to the Trust.
Investment advisory fees and other expenses relating to the
management of a Fund's assets shall not be allocated on a class-specific
basis.
SECTION III: ALLOCATION OF FUND INCOME AND EXPENSES
- ----------------------------------------------------
Income, realized and unrealized capital gains and losses, and
expenses that are not allocated to a specific class pursuant to Section II
above, shall be allocated to each class of a Fund on the basis of the net
asset value of that class in relation to the net asset value of the Fund.
<PAGE>
SECTION IV: AMENDMENTS
- -----------------------
This Multi-Class Plan may not be amended to change any material
provision unless such amendment is approved by a vote of the majority of the
Board, including a majority of the Trustees who are not interested persons of
the Trust, based on its finding that the amendment is in the best interest of
each class individually and the Trust as a whole.
IN WITNESS WHEREOF, the Trust has executed this Multi-Class Plan on
the day and year set forth below.
Date: July 9, 1999
----------------------------
SA Funds - Investment Trust
By: /s/ John J. Bowen, Jr.
----------------------------
John J. Bowen, Jr.
Title: President
<PAGE>
SCHEDULE A
SA FUNDS - INVESTMENT TRUST
SA Fixed Income Fund
SA U.S. Market Fund
SA U.S. HBtM Fund
SA U.S. Small Company Fund
SA International HBtM Fund
SA International Small Company Fund
