<PAGE>
As Filed with the Securities and Exchange Commission on April 24, 1996
Registration Nos. 33-1312 and 811-4453
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 17 [X]
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19 [X]
HSBC FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 634-2536
Steven R. Howard, Secretary
Baker & McKenzie, 805 Third Avenue, 30th Floor
New York, New York 10022
(Name and Address of Agent for Service)
--------------------------
It is proposed that this filing will become effective (check
appropriate box):
X immediately upon filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (b)
---
75 days after filing pursuant to paragraph (a)
---
on (date) pursuant to paragraph (a) of Rule 485
---
--------------------------
The Registrant has registered an indefinite number of shares of
beneficial interest, par value $0.001 per share, by filing a declaration
pursuant.
Calculation of Registration Fee
<TABLE>
<CAPTION>
Titles of Securities Being Amount Being Proprosed Maximum Proposed Maximum Amount of
Registered Registered* Offering Price Per Aggregate Offering Registration Fee
Unit Price **
<S> <C> <C> <C> <C>
Shares of Beneficial Interest;
$.001 par value of each
Portfolio Indefinite
Government Money Market Fund 75,518,930 $1.00 $ 116,110 $ 40.04
U.S. Treasury Money Market Fund 69,166,295 $1.00 $ 106,343 $ 36.67
Cash Management Fund 27,980,305 $1.00 $ 43,020 $ 14.83
Tax-Free Money Market Fund 15,952,130 $1.00 $ 24,526 $ 8.46
----------- --------- -------
Total 188,617,659 $ 290,000 $100.00
</TABLE>
* Registrant continues its election to register an indefinite number of shares
of beneficial interest pursuant to rule 24f-2 under the Investment Company
Act of 1940.
** The calculation of the maxiumum aggregate offering price is made pursuant to
rule 24e-2(a) under the Investment Company Act of 1940 and is based on the
following: the total amount of securities redeemed or repurchased of the
Registrant's series indicated above during the fiscal year ended December 31,
1995 was 1,562,814,952 securities of the Cash Management Fund; 667,839,459
securities of the Government Money Market Fund; 460,536,912 securities of the
U.S. Treasury Money Market Fund; and 54,342,723 securities of the Tax-Free
Money Market Fund; 1,533,194,649 securities of the Cash Management Fund;
587,894,170 securities of the Government Money Market Fund; 387,316,602
securities of the U.S. Treasury Money Market Fund; and 37,455,598 securities
of the Tax-Free Money Market Fund, were previously used for reduction
pursuant to Rule 24f-2 and 188,617,659 (representing 27,980,305 shares of the
Cash Management Fund; 75,518,930 shares of the Government Money Market Fund;
69,166,295 of the U.S. Treasury Money Market Fund; and 15,952,130 shares of
the Tax-Free Money Market Fund), is being so used for such reduction in this
Amendment.
<PAGE>
to Rule 24f-2 under the Investment Company Act of 1940. A Rule 24f-2 Notice for
the fiscal year ended December 31, 1995 was filed with the Commission on or
about February 29, 1996.
================================================================================
Total Pages: ___
Exhibit Index: ___
<PAGE>
HSBC FUNDS TRUST
----------------
CASH MANAGEMENT FUND
GOVERNMENT MONEY MARKET FUND
U.S. TREASURY MONEY MARKET FUND
NEW YORK TAX-FREE MONEY MARKET FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
N-1A Item No. Location
- ------------- --------
Part A Prospectus Caption
- ------ ------------------
Item 1. Cover Page..................... Cover Page
Item 2. Synopsis....................... Summary of Annual Fund
Operating Expenses
Item 3. Condensed Financial
Information.................... Yield Information;
Financial Highlights
Item 4. General Description of
Registrant..................... Investment Objective
and Policies;
Investment Restrictions
Item 5. Management of the Fund......... Management of the
Funds; Transactions
with Affiliates;
Purchase of Shares;
Transfer and Dividend
Disbursing Agent and
Custodian
Item 5A. Management's Discussion of Fund
Performance.................... N/A
Item 6. Capital Stock and Other
Securities..................... Dividends and
Distributions; Federal
Income Taxes; Account
Services; Shares of
Beneficial Interest;
New York Taxes (New
York Tax-Free Money
Market Fund only)
Item 7. Purchase of Securities
<PAGE>
Being Offered.................. Determination of Net
Asset Value; Purchase
of Shares; Exchange
Privilege
Item 8. Redemption or Repurchase....... Redemption of Shares;
Redemptions (Part B)
Item 9. Legal Proceedings.............. Not Applicable
Part B. Statement of Additional
Information Caption
-----------------------
Item 10. Cover Page..................... Cover Page
Item 11. Table of Contents.............. Table of Contents
Item 12. General Information
and History.................... Not Applicable
Item 13. Investment Objective and
Policies....................... Investment Policies;
Investment Restrictions
Item 14. Management of the Registrant... Management
Item 15. Control Persons and
Principal Holders of
Securities.................... Management; Shares of
Beneficial Interest
Item 16. Investment Advisory and
Other Services................ Management; Custodian,
Transfer Agent and
Dividend Disbursing
Agent; Independent
Auditors
Item 17. Brokerage Allocation........... Portfolio Transactions
Item 18. Capital Stock and Other
Securities.................... Shares of Beneficial
Interest
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered................. Purchase of Shares
(Part A); Redemptions;
Redemption of Shares
(Part A); Determination
of Net Asset Value;
Exchange Privilege
<PAGE>
Item 20. Tax Status..................... Federal Income Taxes
(Parts A and B); New
York Taxes (Part A -
New York Tax-Free Money
Market Fund only)
Item 21. Underwriters................... Management
Item 22. Calculation of Performance
Data.......................... Calculation of Yields
and Performance
Information
Item 23. Financial Statements........... Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
<PAGE>
HSBC Funds Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Management Fund
Government Money Market Fund
U.S. Treasury Money Market Fund
New York Tax-Free Money Market Fund
3435 Stelzer Road, Columbus, Ohio 43219
Information: (800) 634-2536
HSBC ASSET MANAGEMENT AMERICAS INC.
- --Investment Adviser and Co-Administrator
BISYS FUND SERVICES--Distributor
- --------------------------------------------------------------------------------
HSBC Funds Trust, formerly known as Mariner Funds Trust (the "Trust") was
organized in Massachusetts on October 31, 1985 as a Massachusetts business trust
and is a no-load, open-end, diversified management investment company with
multiple investment portfolios, including the Cash Management Fund, the
Government Money Market Fund, the U.S. Treasury Money Market Fund (collectively,
the "Money Market Funds") and the New York Tax-Free Money Market Fund (the "New
York Tax-Free Fund") described below. (The Money Market Funds and the New York
Tax-Free Fund are herein collectively, the "Funds".) The investment objective of
each Money Market Fund is to achieve as high a level of current income as is
consistent with preservation of capital and liquidity. The investment objective
of the New York Tax-Free Fund is to provide its shareholders with as high a
level of current income exempt from regular Federal, New York State and New York
City income taxes as is consistent with preservation of capital and liquidity.
Each Fund is required to maintain a dollar-weighted average portfolio maturity
of 90 days or less.
Cash Management Fund (the "Cash Management Fund") invests in a variety of
high quality, short-term money market instruments, with remaining maturities of
thirteen months or less, including obligations in which the Government Money
Market Fund invests.
Government Money Market Fund (the "Government Fund") invests exclusively in
short-term obligations issued or guaranteed by the United States Government or
its agencies or instrumentalities with remaining maturities of thirteen months
or less, and repurchase agreements.
U.S. Treasury Money Market Fund (the "U.S. Treasury Fund") invests
exclusively in short-term, direct obligations of the United States Treasury with
remaining maturities of thirteen months or less, and repurchase agreements.
(continued on next page)
- --------------------------------------------------------------------------------
This Prospectus should be read and retained for ready reference to
information about the Funds.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE TRUST IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE TRUST WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
April 24, 1996
<PAGE>
(continued from previous page)
New York Tax-Free Money Market Fund invests primarily in high quality
obligations issued by or on behalf of New York, its cities, municipalities or
other public authorities that are exempt from regular Federal, New York State
and New York City income tax in the opinion of bond counsel to the issuer ("New
York Municipal Obligations") with remaining maturities of thirteen months or
less.
Shares of the Funds are offered for sale through its Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Certain broker-dealers, banks, financial institutions and corporations (the
"Participating Organizations") have agreed to act as shareholder servicing
agents for investors who maintain accounts at these Participating Organizations
and to perform certain services for the Funds.
The Funds' investment adviser is HSBC Asset Management Americas Inc. ("HSBC
Americas" or the "Adviser"), the North American affiliate of HSBC Holdings plc
(Hongkong and Shanghai Banking Corporation) (the "HSBC Group"). See "Management
of the Funds" in this Prospectus.
Prospective investors should be aware that shares of the Funds are not an
obligation of or guaranteed or endorsed by HSBC Group or its affiliates. In
addition, such shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency and may involve
investment risks, including the possible loss of principal.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. A Statement of Additional Information
(the "SAI"), dated April 24, 1996 containing additional detailed information
about the Funds including audited financial statements, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference into
this Prospectus. A copy is available without charge and can be obtained by
writing the Trust at the address on the cover page, or calling the telephone
number listed above.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Summary of Annual Fund Operating Expenses...... 3
Financial Highlights........................... 5
Investment Objective, Policies
and Risk Factors.......................... 9
Investment Restrictions........................ 17
Management of the Funds........................ 18
Transactions with Affiliates................... 21
Determination of Net Asset Value............... 21
Purchase of Shares............................. 22
Redemption of Shares........................... 24
Exchange Privilege............................. 26
Dividends and Distributions.................... 26
Federal Income Taxes........................... 27
New York Taxes................................. 28
Account Services............................... 28
Transfer and Dividend Disbursing Agent
and Custodian............................. 29
Yield Information.............................. 29
Shares of Beneficial Interest.................. 30
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
The purpose of the following information is to assist an investor in
understanding the costs and expenses that an investor in the Funds will bear
directly or indirectly. The information is based on expenses for each Fund for
the fiscal year ended December 31, 1995, as adjusted for estimated other
operating expenses and voluntary reductions of investment advisory,
co-administration and 12b-1 fees.
<TABLE>
<CAPTION>
U.S. New York
Government Treasury Tax-Free
Cash Money Money Money
Management Market Market Market
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Annual Fund Operating Expenses:
Management Fees (net of fees not imposed)*............... 0.35% 0.35% 0.35% 0.20%
12b-1 Fees (net of fees not imposed)**................... 0.06% 0.07% 0.07% 0.07%
Other Expenses (net of fees and expenses not imposed)
Administrative Services Fee+........................ 0.10% 0.10% 0.10% 0.10%
Co-Administrative Services Fee++.................... 0.00% 0.00% 0.00% 0.00%
Other Operating Expenses............................ 0.27% 0.23% 0.46% 0.31%
------- ------- ------- -------
Total Fund Operating Expenses (net of fees and
expenses not imposed)***............................ 0.78% 0.75% 0.98% 0.68%
======= ======= ======= =======
Total Fund Operating Expenses Before Non-
Imposition of Fees and Expenses..................... 1.04% 1.00% 1.23% 1.08%
======= ======= ======= =======
</TABLE>
3
<PAGE>
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual shareholder's
own investment in the Funds. Rather, the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.
The following example should not be considered a representation of past or
future expenses. The expenses set forth above and example set forth below
reflect the non-imposition of certain fees and expenses. The actual expenses may
be greater or lesser than those shown. The following example assumes a 5% annual
return; however, the Funds' actual return will vary and may be greater or less
than 5%.
Example:
You would pay the following expenses on a $1,000 investment assuming a 5%
annual return:
<TABLE>
<CAPTION>
U.S. New York
Government Treasury Tax-Free
Cash Money Money Money
Management Market Market Market
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
1 year.............................................. $8 $8 $10 $7
3 years............................................. $25 $24 $31 $22
5 years............................................. $43 $42 $54 $38
10 years............................................. $97 $93 $120 $85
</TABLE>
- ---------------
* Reflects advisory fees not imposed as a result of a voluntary waiver by the
Adviser. If these fees had been imposed, the New York Tax-Free Money Market
Fund would have paid 0.35% for its first $500 million of average daily net
assets for advisory fees. See "Management of the Funds--Investment
Adviser".
** The fee under the Funds' Distribution Plan and Agreement is calculated on
the basis of the average daily net assets of each Fund at an annual rate
not to exceed 0.20% with respect to each Fund. See "Management of the
Funds--Distribution Plan and Agreement".
*** Investors who purchase and redeem shares of a Fund through a customer
account maintained at a Participating Organization may be charged
additional fees by the Participating Organization. See "Management of the
Funds--Service Agreements."
+ Reflects administrative fees not imposed as a voluntary waiver by BISYS
Fund Services of 0.05% for each Fund.
++ Reflects co-administrative fees of 0.03% and shareholder servicing fees of
0.04% voluntarily waived by HSBC Americas for each Fund. See "Management of
the Funds--Administrator, and Shareholder Servicing Agent".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following supplementary financial information for each of the five
years in the period ended December 31, 1991 through 1995 has been audited by
Ernst & Young LLP whose reports thereon appears in the Statement of Additional
Information ("SAI"). The supplementary financial information for each of the
years ended December 31, 1990 and 1989 also has been audited by Ernst & Young
LLP whose report thereon was unqualified. The supplementary financial
information for the periods ended December 31, 1988 and prior has been audited
by other auditors whose report thereon was unqualified. This information should
be read in conjunction with the financial statements and notes thereto which
appear in the SAI and may be obtained by shareholders.
Selected data for a share outstanding throughout each period:
Cash Management Fund
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
Income from Investment Operations:
- ----------------------------------
Net investment income....... 0.053 0.039 0.027 0.037 0.058 0.077 0.087 0.071 0.063 0.064
Net realized gain........... -- -- 0.002 -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations 0.053 0.039 0.029 0.037 0.058 0.077 0.087 0.071 0.063 0.064
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
- -------------------
Dividends from net investment income (0.053) (0.039 ) (0.027) (0.037) (0.058) (0.077) (0.087) (0.071) (0.063) (0.064)
Dividends from realized gain -- -- (0.002) -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions...... (0.053) (0.039 ) (0.029) (0.037) (0.058) (0.077) (0.087) (0.071) (0.063) (0.064)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year..... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return..................... 5.41% 3.95% 3.11% 3.77% 5.92% 8.01% 9.09% 7.36% 6.47% 6.59%
Ratios/Supplemental Data:
- -------------------------
Net Assets (000), end of year $170,869 $200,492 $172,518 $246,543 $373,694 $429,096 $901,134 $644,481 $557,000 $531,716
Ratio of expenses (without fee
waivers) to average net assets 0.80% 0.64% 0.58% 0.62% 0.66% 0.59% 0.55% 0.60% 0.62% 0.59%
Ratio of expenses (with fee waivers)
to average net assets.... 0.79% 0.63% 0.58% 0.62% 0.66% 0.59% 0.50% 0.55% 0.62% 0.59%
Ratio of net investment income
(without fee waivers) to average
net assets 5.28% 3.83% 2.88% 3.75% 5.80% 7.75% 8.65% 7.07% 6.29% 6.40%
Ratio of net investment income (with
fee waivers) to average net assets 5.29% 3.84% 2.88% 3.75% 5.80% 7.75% 8.70% 7.12% 6.29% 6.40%
</TABLE>
5
<PAGE>
Government Money Market Fund
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment Operations:
- ----------------------------------
Net investment income....... 0.052 0.038 0.028 0.037 0.056 0.076 0.086 0.070 0.061 0.064
Net realized gain........... -- -- 0.001 -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations 0.052 0.038 0.029 0.037 0.056 0.076 0.086 0.070 0.061 0.064
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
- -------------------
Dividends from net investment income (0.052) (0.038) (0.028) (0.037) (0.056) (0.076) (0.086) (0.070) (0.061) (0.064)
Dividends from realized gain -- -- (0.001) -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions...... (0.052) (0.038) (0.029) (0.037) (0.056) (0.076) (0.086) (0.070) (0.061) (0.064)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year..... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return..................... 5.32% 3.83% 2.99% 3.80% 5.79% 7.92% 8.92% 7.22% 6.28% 6.56%
Ratios/Supplemental Data:
- -------------------------
Net Assets (000), end of year ........ $86,850 $166,796 $138,085 $246,327 $201,232 $237,381 $191,766 $196,094 $168,246 $343,686
Ratio of expenses (without fee
waivers) to average net assets ..... 0.78% 0.64% 0.61% 0.62% 0.63% 0.58% 0.60% 0.64% 0.58% 0.51%
Ratio of expenses (with fee waivers)
to average net assets............... 0.76% 0.63% 0.61% 0.62% 0.63% 0.58% 0.60% 0.58% 0.58% 0.51%
Ratio of net investment income (without
fee waivers) to average net assets . 5.19% 3.75% 2.89% 3.72% 5.70% 7.63% 8.60% 6.93% 6.11% 6.37%
Ratio of net investment income (with fee
waivers) to average net assets ..... 5.21% 3.76% 2.89% 3.72% 5.70% 7.63% 8.60% 6.99% 6.11% 6.37%
</TABLE>
6
<PAGE>
U.S. Treasury Money Market Fund
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from Investment Operations:
- ----------------------------------
Net investment income....... 0.049 0.036 0.026 0.032 0.055 0.077 0.086 0.069 0.060 0.062
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions:
- -------------------
Dividends from net investment income (0.049) (0.036) (0.026) (0.032) (0.055) (0.077) (0.086) (0.069) (0.060) (0.062)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year..... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return..................... 5.04% 3.60% 2.65% 3.27% 5.60% 7.94% 8.97% 7.18% 6.14% 6.39%
Ratios/Supplemental Data:
Net Assets (000), end of year $32,500 $105,720 $133,070 $257,898 $220,371 $236,223 $144,982 $112,479 $105,600 $116,019
Ratio of expenses (without fee
waivers) to average net assets 0.84% 0.69% 0.59% 0.67% 0.68% 0.52% 0.49% 0.51% 0.47% 0.52%
Ratio of expenses (with fee waivers)
to average net assets.... 0.82% 0.68% 0.59% 0.67% 0.68% 0.43% 0.30% 0.31% 0.47% 0.52%
Ratio of net investment income (without
fee waivers) to average net assets 4.92% 3.47% 2.62% 3.22% 5.45% 7.50% 8.46% 6.75% 5.97% 6.21%
Ratio of net investment income (with fee
waivers) to average net assets 4.94% 3.84% 2.62% 3.22% 5.45% 7.59% 8.65% 6.95% 5.97% 6.21%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
New York Tax-Free Money Market Fund
January 8, 1986
commencement of
operations)
Year Ended December 31, through
----------------------- December 31,1986
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year .. $ 1.000 $ 1,000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------- -------- -------- ------- --------
Income from Investment Operations:
- ----------------------------------
Net investment income.............. 0.031 0.022 0.018 0.024 0.038 0.051 0.054 0.045 0.038 0.043
Less Distributions:
- -------------------
Dividends from net investment
income............................. (0.031) (0.022) (0.018) (0.024) (0.038) (0.051) (0.054) (0.045) (0.038) (0.043)
------- ------- ------- ------- ------- -------- -------- -------- ------- --------
Net asset value, end of year ........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======== ======== ======== ======= ========
Total Return......................... 3.17% 2.23% 1.86% 2.44% 3.85% 5.25% 5.58% 4.59% 3.88% 4.35%
Ratios/Supplemental Data:
- -------------------------
Net Assets (000), end of year ..... $64,884 $53,538 $59,394 $56,386 $75,850 $121,433 $159,847 $127,771 $81,420 $114,609
------- ------- ------- ------- ------- -------- -------- -------- ------- --------
Ratio of expenses (without
fee waivers) to average
net assets........................ 0.85% 0.73% 0.72% 0.73% 0.68% 0.40% 0.41% 0.39% 0.31% 0.29%*
Ratios of expenses
(with fee waivers)
to average net assets ............ 0.69% 0.57% 0.55% 0.56% 0.51% 0.22% 0.22% 0.10% 0.31% 0.29%*
Ratio of net investment
income (without fee waivers)
to average net assets ............ 2.97% 2.04% 1.68% 2.24% 3.61% 4.94% 5.24% 4.21% 3.81% 4.27%*
Ratio of net investment income
to average net assets
(with fee waivers). .............. 3.13% 2.20% 1.85% 2.41% 3.78% 5.12% 5.43% 4.50% 3.81% 4.27%*
- ------------------
* Annualized.
</TABLE>
8
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The investment objective of each Money Market Fund is to achieve as high a
level of current income as is consistent with preservation of capital and
liquidity. The investment objective of the New York Tax-Free Fund is to provide
investors with as high a level of current income exempt from regular Federal,
New York State and New York City income taxes as is consistent with preservation
of capital and liquidity. To attempt to achieve their objectives, the Funds
invest in certain eligible short-term, high quality securities, as described
below, which are determined to present minimal credit risks. Generally, the
short-term, high quality securities in which the Funds invest may not yield as
high a level of current income as longer term or lower grade securities.
However, the shorter maturities and higher grades of the securities held by the
Funds can be expected to result in higher liquidity and less fluctuation in
market value as a result of changes in interest rates. There is no assurance
that a Fund's objectives will be attained.
Cash Management Fund
The Cash Management Fund invests in a broad range of short-term money
market instruments which have remaining maturities not exceeding thirteen months
or 397 days, variable rate demand notes, variable rate master demand notes and
certain repurchase agreements. The average weighted maturities of the securities
purchased by the Fund cannot exceed 90 days. These money market instruments may
include obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities and the following other kinds of investments:
Variable Rate Demand Notes and Master Demand Notes. Variable rate demand
notes may be issued by corporations, financial institutions and government
agencies and instrumentalities. Typically, these securities will have a maturity
in the range of 5 to 20 years but carry with them the right of the holder to put
the securities to a remarketing agent or other entity on 30 days' notice. The
obligation of the issuer of the put to repurchase the securities is usually
backed by a letter of credit or other obligations issued by a bank or other
financial institution. The purchase price is ordinarily par plus accrued and
unpaid interest.
The Cash Management Fund may also buy variable rate master demand notes.
The terms of these obligations permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit weekly, and in some instances, daily,
changes in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note agreement,
or to decrease the amount, and the borrower may prepay up to the full amount of
the note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the lender and
borrower, it is not generally contemplated that they will be traded. There is no
secondary market for them, although they are redeemable (and thus immediately
repayable by the borrower) at principal amount, plus accrued interest, at any
time. In connection with such purchases and on an ongoing basis, the investment
adviser will review publicly available information in connection with the
earning power, cash flow and other liquidity ratios of the issuer.
Bank Obligations. These obligations include negotiable certificates of
deposit, bankers' acceptances, fixed time deposits and other obligations issued
or supported by banks. The Cash Management Fund may not invest less than 25% of
the current value of its total assets in bank obligations (including bank
obligations subject to repurchase agreements), except that if at some future
date adverse economic conditions prevail in the banking industry, the Cash
Management Fund may, for defensive purposes, temporarily invest less than 25% of
its assets
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in bank obligations. The Cash Management Fund will not invest in any
obligations of HSBC Group or its affiliates (as defined under the Investment
Company Act of 1940). The Cash Management Fund is permitted to invest in
obligations of correspondent banks of HSBC Group which are not affiliates of the
Trust, but the Fund will not give preference in its investment selections to
those obligations.
The Cash Management Fund limits its investments in United States bank
obligations to obligations of United States banks (including foreign branches)
which have more than $1 billion in total assets at the time of investment and
are members of the Federal Reserve System or are examined by the Comptroller of
the Currency or whose deposits are insured by the Federal Deposit Insurance
Corporation. The Cash Management Fund limits its investments in foreign bank
obligations to United States dollar denominated obligations of foreign banks
(including United States branches) which at the time of investment (i) have more
than $10 billion, or the equivalent in other currencies, in total assets; (ii)
have branches or agencies in the United States; and (iii) in the opinion of the
Fund's investment adviser, are of an investment quality comparable to
obligations of United States banks which may be purchased by the Fund and
present minimal credit risk.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. The Cash Management
Fund may not invest in fixed time deposits subject to withdrawal penalties
maturing in more than seven calendar days; investments in fixed time deposits
subject to withdrawal penalties maturing from two business days through seven
calendar days may not exceed 10% of the value of the total assets of the Fund.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions like exchange controls may be adopted which might adversely affect
the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. In that connection, foreign banks are not subject to examination by any
United States Government agency or instrumentality. There is no limitation on
the amount of Cash Management Fund assets which may be invested in obligations
of foreign banks which meet the conditions set forth above.
Commercial Paper. Commercial paper includes short-term unsecured promissory
notes, variable rate demand notes and variable rate master demand notes issued
by domestic and foreign bank-holding companies, corporations and financial
institutions and government agencies and instrumentalities (but only in the case
of taxable securities). All commercial paper purchased by the Fund is, at the
time of investment, required to be rated by two of the following four rating
agencies as follows: "P-1" or better by Moody's Investors Service, Inc.
("Moody's"); "A-1" or better by Standard & Poor's Corporation ("S & P"); "A-1"
or better by IBCA Limited and its affiliate, IBCA Inc. ("IBCA"); or "F-1" or
better by Fitch Investors Services, Inc. ("Fitch"). S & P and Moody's are
considered by the Fund's investment adviser to be the primary rating agencies.
If the commercial paper is rated by only one rating agency, it must be rated, at
the time of purchase, in one of the categories set forth above. Unrated
commercial paper must be deemed, in the opinion of the Fund's investment
adviser, to be of an investment quality comparable to rated commercial paper in
which the Fund may invest to be eligible for purchase by the Fund.
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Corporate Debt Securities. Investments by the Cash Management Fund in these
securities are limited to non-convertible corporate debt securities such as
bonds and debentures which have thirteen months or less remaining to maturity
and which are rated "AA" or better by S & P and "Aa" or better by Moody's and of
comparable high quality ratings by other nationally recognized statistical
rating organizations that have rated such securities.
Government Fund
The Government Fund invests exclusively in obligations issued or guaranteed
by the United States Government or its agencies or instrumentalities which have
remaining maturities not exceeding thirteen months and certain repurchase
agreements. United States Government agency and instrumentality obligations are
debt securities issued by United States Government sponsored enterprises and
Federal agencies. Some obligations of agencies and instrumentalities of the
United States Government are supported by the full faith and credit of the
United States or United States Treasury guarantees; others, by the right of the
issuer to borrow from the United States Treasury; others, by discretionary
authority of the United States Government to purchase certain obligations of the
agency or instrumentality; and others, only by the credit of the agency or
instrumentality issuing the obligation. In the case of obligations not backed by
the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment. United States Government agency and instrumentality obligations
include master notes issued by Federal agencies or instrumentalities (see the
SAI for further details about master notes). The Government Fund and the Cash
Management Fund will invest in obligations of United States Government agencies
and instrumentalities only when the Funds' investment adviser and the Board of
Trustees are satisfied that the issuer's credit risk is minimal.
U.S. Treasury Fund
The U.S. Treasury Fund invests exclusively in direct obligations of the
United States Treasury which have remaining maturities not exceeding thirteen
months and certain repurchase agreements. The U.S. Treasury Fund will not invest
in obligations issued or guaranteed by agencies or instrumentalities of the
United States Government and will not enter into loans of its portfolio
securities.
New York Tax-Free Fund
Quality Standards
To attain its objectives, the New York Tax-Free Fund invests primarily in a
broad range of Municipal Obligations which are exempt from regular Federal, New
York State and New York City income tax and which meet the rating standards
described below. (For a description of other securities eligible for purchase,
please see "Taxable Securities"). As a matter of fundamental policy, the New
York Tax-Free Fund will maintain at least 80% of its net assets in tax-exempt
Municipal Obligations.
Municipal Obligations purchased by the New York Tax-Free Fund are debt
obligations issued by or on behalf of states, cities, municipalities and other
public authorities and include:
Municipal Bonds. Municipal bonds generally have a maturity at the time of
issuance of more than a year. Investments in municipal bonds are limited to
bonds with a remaining maturity of thirteen months or 397 days or less and which
are rated at the date of purchase "AA" or better by S & P and "Aa" or better by
Moody's or have
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comparably high quality ratings by other nationally recognized statistical
rating organizations that have rated such bonds, or which if not rated, are, in
the opinion of the Fund's investment adviser, of comparable investment quality.
The two highest ratings for municipal bonds under the Moody's
classification are "Aaa" and "Aa". Bonds rated "Aaa" are judged to be of the
"best quality" and carry the smallest amount of investment risk. Bonds rated
"Aa" are of "high quality by all standards", but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
The two highest ratings for municipal bonds under the S & P classification
are "AAA" and "AA". Bonds rated "AAA" have the highest rating assigned by S & P
with an extremely strong capacity to pay interest and repay principal. Bonds
rated "AA" differ "from the highest rated issues only in a small degree."
Municipal Notes. Municipal notes generally have maturities at the time of
issuance of thirteen months or less. Investments in municipal notes are limited
to notes which are rated at the date of purchase "MIG 1" or "VMIG 1" or "MIG 2"
or "VMIG 2" by Moody's and/or (if only rated by one agency) "SP-1" or "SP-2" by
S & P or "FIN-1" or "FIN-2" by Fitch or of comparable high quality as determined
by IBCA or Duff & Phelps Credit Rating Co., or, if not rated, are, in the
opinion of the Fund's investment adviser, of comparable investment quality.
The ratings set forth above generally are the highest rating categories
established by the respective rating agencies described above. Notes rated "MIG
1" or "VMIG 1" are judged to be of the "best quality" and notes rated "MIG 2" or
"VMIG 2" are of "high quality, with margins of protection ample, although not as
large in the preceding group". Notes rated "FIN-1" represent the "strongest"
securities available and notes rated "FIN-2" reflect "a lesser margin of safety"
with respect to the "degree of assurance of timely payment than those rated
"FIN-1". Notes rated "SP-1" show a "very strong capacity to pay principal and
interest" and notes rated "SP-2" show a "satisfactory capacity" to do so.
Municipal Commercial Paper. Municipal commercial paper is a debt obligation
with a stated maturity of thirteen months or less which is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. Investments in municipal commercial paper are limited to
commercial paper which is rated at the time of purchase by two of the following
four rating agencies as follows: "P-1" or better by Moody's; "A-1" or better by
S & P; "A-1" or better by IBCA; or "F-1" or better by Fitch. S & P and Moody's
are considered by the Fund's investment adviser to be the primary rating
agencies. If the municipal commercial paper is rated by only one rating agency,
it must be rated, at the time of purchase, in one of the categories set forth
above. Unrated municipal commercial paper must be deemed, in the opinion of the
Fund's investment adviser, to be of an investment quality comparable to rated
municipal commercial paper in which the Fund may invest to be eligible for
purchase by the Fund.
The highest rating for both municipal commercial paper and taxable
commercial paper under the Moody's classification is "P-1" (Prime-1). Issuers
rated "P-1" have a "superior capacity for repayment of short-term promissory
obligations".
The "A-1" rating for commercial paper under the S & P classification
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong". Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+".
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After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Fund's
investment adviser must report such event to the Board of Trustees as soon as
possible to permit the Board to reassess the security promptly to determine
whether it may be retained as an eligible investment for the Fund. To the extent
the ratings given by a nationally recognized statistical rating organization may
change as a result of changes in such organizations or their rating systems, the
Fund will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in this Prospectus and in the
SAI.
Although an investment in the New York Tax-Free Fund is not insured,
certain of the Municipal Obligations purchased by the Tax-Free Fund may be
insured as to principal and interest by, among others, the Municipal Bond
Insurance Association. Insured obligations are identified in the New York
Tax-Free Fund's financial statements.
New York Municipal Obligations
The New York Tax-Free Fund's assets will be invested primarily in New York
Municipal Obligations and in participation certificates in such obligations
purchased from banks, insurance companies and other financial institutions. (For
a description of other securities eligible for purchase please see "Taxable
Securities" below). As a matter of fundamental policy, the New York Tax-Free
Fund will maintain at least 80% of its net assets in New York Municipal
Obligations.
Opinions relating to the validity of Municipal Obligations (including New
York Municipal Obligations) and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective issuers at
the time of issuance. Neither the Funds, the Trust nor HSBC Americas will review
the proceedings relating to the issuance of Municipal Obligations or the basis
for such opinions.
The New York Tax-Free Fund is permitted to invest more than 5% (but not
more than 25%) of its total assets in the securities of any one issuer, which
otherwise satisfies that Fund's other investment restrictions. To the extent
that the New York Tax-Free Fund invests up to 25% of its total assets in the
securities of any one issuer, there may be an increased risk of loss to that
Fund.
Risk Considerations for the New York Tax-Free Fund
Investors should be aware that certain substantial issuers of New York
Municipal Obligations (including issuers whose obligations may be acquired by
the New York Tax-Free Fund), have experienced serious financial difficulties in
recent years. These difficulties have at times jeopardized the credit standing
and impaired the borrowing abilities of all New York issuers and have generally
contributed to higher interest rates and lower market prices for their debt
obligations. A recurrence of the financial difficulties previously experienced
by such issuers could result in defaults or declines in the market values of
their existing obligations and, possibly, in the obligations of other issuers of
New York Municipal Obligations.
The ability of the New York Tax-Free Fund to meet its objective is affected
by the ability of issuers to meet their payment obligations. There are
additional risks associated with an investment which concentrates in issues of
one state. Since the New York Tax-Free Fund invests primarily in obligations of
New York issuers, the marketability and market value of these obligations may be
affected by long-term economic problems which face New York City and New York
State. In particular, the ability of the State and the City to finance
independently have been adversely affected in the
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past by their inability to achieve or maintain favorable credit ratings. There
can also be an effect on the market price of securities of other New York issues
if the City receives less favorable credit ratings and if certain of its
economic problems continue. If these problems are not resolved, or if new ones
develop, they could adversely affect the various New York issuers' ability to
meet their financial obligations. Recently, for example, a significant slowdown
in the financial services sector of New York City has adversely affected the
City's revenues and has created budget gaps. In addition, the State's budget
includes dramatic reductions in Medicaid and other sources of State aid to the
City and local entities. It is unclear at this time what the effect of these
reductions, if passed, will be on the finances of the City and local entities.
There can be no assurance that New York City or the local entities, or the
State, will not face budget gaps in future years. In addition, Moody's and S&P
have on several occasions lowered their ratings of New York State and City debt
obligations. As of the date of this Prospectus, New York State Debt Obligations
are rated A by Moody's and A- by S&P. On July 10, 1995, S&P revised its rating
of the City's General Obligation Bonds downward to BBB+. S&P stated that
"structural budgetary balance remains elusive because of persistent softness in
the City's economy, highlighted by weak job growth and a growing dependence on
the historically volatile financial services sector." Other factors identified
by S&P in lowering its rating on City bonds included a trend of using one-time
measures, including debt refinancing, to close projected budget gaps, dependence
on unratified labor savings to help balance the Financial Plan, optimistic
projections on additional Federal and State aid or mandate relief, a history of
cash flow difficulties caused by State budget delays and continued high debt
levels. Moody's ratings on New York City's bonds currently are Baa1. On March 1,
1996, Moody's stated that the rating for City General Obligation Bonds remains
under review pending the outcome of the adoption of the City's budget for the
1997 fiscal year and in light of the status of the debate on public assistance
and Medicaid reform; the enactment of a State budget, upon which major
assumptions regarding State aid are dependent, which may be extensively delayed;
and the seasoning of the City's economy with regard to its strength and
direction in the face of a potential national economic slowdown.
Ratings reflect only the respective views of such organizations, and an
explanation of the significance of such ratings must be obtained from the rating
agency furnishing the same. There is no assurance that a particular rating will
continue for any given period of time or that any such rating will not be
revised downward or withdrawn entirely if, in the judgment of the agency
originally establishing the rating, circumstances so warrant. A downward
revision or withdrawal of such ratings, or either of them, may have an effect on
the market price of the Bonds.
The New York Tax-Free Fund does not intend to concentrate its investments
in any industry. The New York Tax-Free Fund may, however, invest 25% or more of
its assets in municipal obligations that are related in other ways such that an
economic, business or political development or change affecting one such
obligation could also affect the other obligations; for example, municipal
obligations the interest on which is paid from revenues of similar types of
projects.
The liquidity of the New York Tax-Free Fund may not be equal to that of a
money market fund which invests exclusively in short-term taxable money market
instruments. The taxable money market is a broader and more liquid market with a
greater number of investors, issuers and market makers than the market for
short-term Municipal Obligations. The limited marketability of short-term
tax-exempt Municipal Obligations may make it difficult in certain circumstances
to dispose of large investments advantageously. Nonetheless, HSBC Americas has
determined that there is a sufficient market to invest in short-term tax-exempt
Municipal Obligations.
In general, tax-exempt Municipal Obligations are subject to credit risks
such as the loss of credit ratings or possible default. Recent changes in the
Federal income tax law as a result of the Tax Reform Act of 1986 may affect the
value and availability of Municipal Obligations and New York Municipal
Obligations. See "Federal Income Taxes" in this Prospectus.
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Although an investment in the Fund is not insured, certain of the Municipal
Obligations purchased by the New York Tax-Free Fund may be insured as to
principal and interest by companies that provide insurance for municipal
obligations.These obligations are identified as such in the Trust's financial
statements.
Floating Rate Instruments
Certain of the Municipal Obligations which the New York Tax-Free Fund may
purchase have a floating or variable rate of interest. Such obligations bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices, such as a Federal Reserve composite index. Certain of
such obligations may carry a demand or "put" feature which would permit the
holder to tender them back to the issuer (or to a third party) at par value
prior to maturity. The New York Tax-Free Fund may invest in floating and
variable rate Municipal Obligations even if they carry stated maturities in
excess of thirteen months, upon certain conditions contained in Rule 2a-7 of the
Investment Company Act of 1940, as amended. It is the present position of the
Securities and Exchange Commission that, in most such cases, the maturity of the
instrument is deemed to be the earlier of the stated maturity or the date at
which the principal can be obtained through the exercise of the demand or put
feature. The New York Tax-Free Fund will limit their purchases of floating and
variable rate Municipal Obligations to those meeting the quality standards set
forth above. The New York Tax-Free Fund's investment adviser will monitor on an
ongoing basis the earning power, cash flow and other liquidity ratios of the
issuers of such obligations, and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand. The New York
Tax-Free Fund's right to obtain payment at par on a demand instrument could be
affected by events occurring between the date the Tax-Free Fund elects to demand
payment and the date payment is due, which may affect the ability of the issuer
of the instrument to make payment when due.
Taxable Securities
The New York Tax-Free Fund may invest up to 20% of the current value of its
total assets in securities subject to the Federal alternative minimum tax. In
addition, the New York Tax-Free Fund may invest up to 100% of its total assets
in these and other taxable securities to maintain a temporary "defensive"
posture when, in the opinion of the New York Tax-Free Fund's investment adviser,
it is advisable to do so. The conditions for which such a posture would be
undertaken include adverse market conditions or the unavailability of suitable
tax-exempt securities. During these times when the New York Tax-Free Fund is
maintaining a temporary "defensive" posture, it may be unable to achieve fully
its investment objective.
The types of taxable securities (in addition to "alternative minimum tax"
securities) in which the New York Tax-Free Fund may invest are limited to the
following money market instruments which have remaining maturities not exceeding
thirteen months: (i) obligations of the United States Government, its agencies
or instrumentalities; (ii) negotiable certificates of deposit, bankers'
acceptances, time deposits and other obligations issued or supported by United
States banks which have more than $1 billion in total assets at the time of
investment and are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the Federal Deposit
Insurance Corporation; (iii) domestic and foreign commercial paper rated in
accordance with the standards set forth above under "Cash Management
Fund-Commercial Paper" and (iv) repurchase agreements. The Tax-Free Fund also
has the right to hold cash reserves of up to 100% of their total assets when the
Tax-Free Fund's investment adviser deems it necessary for temporary defensive
purposes.
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Repurchase Agreements
Securities held by the Funds may be subject to repurchase agreements. A
repurchase agreement is a transaction in which the seller of a security commits
itself at the time of the sale to repurchase that security from the buyer at a
mutually agreed upon time and price. Each Fund will enter into repurchase
agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the Adviser, present minimal credit risks.
Where the securities underlying a repurchase agreement are not U.S. Government
securities, they must be of the highest quality at the time the repurchase
agreement is entered into (e.g., a long-term debt security would be required to
be rated by S & P as "AAA" or its equivalent). While the maturity of the
underlying securities in a repurchase agreement transaction may be more than one
year, the term of the repurchase agreement is always less than thirteen months.
The maturities of the underlying securities will have to be taken into account
in calculating the Fund's dollar-weighted average portfolio maturities if the
seller of the repurchase agreement fails to perform under such agreement. In
these transactions, the securities acquired by each Fund are held by the Fund's
custodian bank until they are repurchased. The Funds' investment adviser will
continually monitor the value of the underlying securities to ensure that their
value always equals or exceeds the repurchase price plus accrued interest.
Repurchase agreements are considered to be loans collateralized by the
underlying securities under the Investment Company Act of 1940, as amended.
In the event of default by the seller under the repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities.
Repurchase agreements may involve certain risks. If the seller in the
transaction becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code, recent amendments to the Code permit the Funds to exercise
a contractual right to liquidate the underlying securities. However, if the
seller is a stockbroker or other entity not afforded protection under the Code,
an agency having jurisdiction over the insolvent entity may determine that a
Fund does not have the immediate right to liquidate the underlying securities.
If the seller defaults, a Fund might incur a loss if the value of the underlying
securities declines. A Fund may also incur disposition costs in connection with
the liquidation of the securities. While the Funds' management acknowledges
these risks, it is expected that they can be controlled through selection
criteria established by the Board of Trustees and careful monitoring procedures.
Income from repurchase agreements is taxable.
Other Investment Activities: The New York Tax-Free Fund
When-Issued Securities. The New York Tax-Free Fund may, without
restriction, purchase Municipal Obligations on a when-issued basis, in which
case delivery and payment normally take place 15 to 45 days after the date of
the commitment to purchase. The New York Tax-Free Fund will make commitments
only to purchase Municipal Obligations on a when-issued basis with the intention
of actually acquiring the securities but may sell them before the settlement
date if it is deemed advisable. The when-issued securities are subject to market
fluctuation and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself, in
which case there could be an unrealized loss at the time of delivery.
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The New York Tax-Free Fund will maintain liquid assets in segregated
accounts in an amount at least equal in value to the Fund's commitments to
purchase when-issued securities. If the value of these assets declines, the Fund
will place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.
Securities with Put Rights. The New York Tax-Free Fund may, without
restriction, enter into put transactions, sometimes referred to as stand-by
commitments, with respect to Municipal Obligations held in their portfolios. The
amount payable to the Fund by the seller upon its exercise of a put will
normally be (i) the Fund's acquisition cost of the securities (excluding any
accrued interest which the Fund paid on their acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the securities
were owned by the Fund. Absent unusual circumstances, the Fund values the
underlying securities at their amortized cost. Accordingly, the amount payable
by a broker-dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
If necessary and advisable, the Fund may pay for certain puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a put (thus reducing the yield to maturity
otherwise available for the same securities).
The Fund's ability to exercise a put will depend on the ability of the
broker-dealer or bank to pay for the underlying securities at the time the put
is exercised. In the event that a broker-dealer or bank should default on its
obligation to repurchase an underlying security, the Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. For a more detailed description of put transactions, see "Investment
Policies-Securities with Put Rights" in the SAI.
The foregoing investment objectives and related policies and activities
(other than the policy of the Cash Management Fund to invest at least 25% of its
assets in bank obligations) are not fundamental and may be changed by the Board
of Trustees of the Trust without the approval of shareholders.
INVESTMENT RESTRICTIONS
Neither the U.S. Treasury Fund nor the Government Fund may invest an amount
equal to 10% or more of the value of its net assets in investments which are not
readily marketable (including repurchase agreements having maturities of more
than seven calendar days). The Cash Management Fund may not invest an amount
equal to 10% or more of the value of its net assets in investments which are not
readily marketable (including repurchase agreements and fixed time deposits not
subject to withdrawal penalties having maturities, in either case, of more than
seven calendar days). None of the Funds may (1) issue senior securities, borrow
money or pledge or mortgage its assets, except that each Fund may borrow from
banks up to 10% of the current value of the total net assets of that Fund for
temporary purposes only in order to meet redemptions, and those borrowings may
be secured by the pledge of not more than 10% of the current value of the total
net assets of that Fund (but investments may not be purchased by that Fund while
such borrowings exceed 5% of the Fund's net assets); (2) make loans, except that
the Cash Management, Government and New York Tax-Free Fund may make loans of
portfolio securities, and each Fund may purchase or hold a portion of an issue
of publicly-distributed bonds, debentures or other obligations, make deposits
with banks and
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enter into repurchase agreements with respect to its portfolio securities;
or (3) invest more than 5% of the current value of its total assets in the
securities of any one issuer, other than obligations of the United States
Government, its agencies or instrumentalities or securities which are backed by
the full faith and credit of the United States, except that up to 25% of the
value of the New York Tax-Free Fund's net assets may be invested without regard
to this limitation consistent with its investment objectives and policies. In
addition, the New York Tax-Free Fund may not (1) invest an amount equal to 10%
or more of the current value of the Fund's net assets in illiquid securities,
including those securities which do not have readily available market quotations
and repurchase agreements having maturities of more than seven days; or (2)
invest less than 80% of its net assets in New York Municipal Obligations in the
case of the New York Money Market Fund except when, in the opinion of the
Adviser, it is advisable for the Fund to invest temporarily up to 100% of its
total assets in taxable securities to maintain a "defensive" posture because of
market conditions.
For each Fund, the foregoing investment restrictions and those described in
the SAI are fundamental policies which may be changed only when permitted by law
and approved by the holders of a majority of the outstanding voting securities
of that Fund, as described under "Shares of Beneficial Interest" in the SAI.
MANAGEMENT OF THE FUNDS
The property, affairs and business of the Funds are managed by the Board of
Trustees. The Trustees elect officers who are charged with the responsibility
for the day-to-day operations of the Funds and the execution of policies
formulated by the Trustees. Information about the Trustees, as well as the
Trust's executive officers, may be found in the SAI under the heading
"Management -- Trustees and Officers."
Investment Adviser
The Trust retains HSBC Asset Management Americas Inc. ("HSBC Americas") to
act as the investment adviser for each of the Funds (the "Adviser"). HSBC
Americas is the North American investment affiliate of HSBC Holdings plc
(Hongkong and Shanghai Banking Corporation) and Marine Midland Bank and is
located at 250 Park Avenue, New York, New York 10177. At December 31, 1995, HSBC
Americas managed over $3.7 billion of assets of individuals, pension plans,
corporations and institutions.
Pursuant to the Advisory Contract, the Adviser furnishes continuous
investment guidance to the Trust consistent with each Fund's investment
objective and policies and provides administrative assistance in connection with
the operation of each Fund.
Banking Laws
Counsel to the Trust and special counsel to the Adviser, have advised the
Adviser that the Adviser may perform the services for the Trust contemplated by
the Advisory Contract without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Such counsel has pointed out, however,
that this question has not been authoritatively determined and that judicial or
administrative decisions or interpretations of present Federal or state statutes
and regulations relating to the permissible activities of banks or trust
companies and their subsidiaries or affiliates, as well as future changes in
Federal or state statutes and regulations and judicial or administrative
decisions or interpretations thereof, could prevent the Adviser from continuing
to perform such services for the Trust.
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If the Adviser was prohibited from performing any of its services for the
Trust, it is expected that the Board of Trustees would recommend to the Trust's
shareholders that they approve new agreements with another entity or entities
qualified to perform such services and selected by the Board.
Distributor
BISYS Fund Services, the Distributor (the "Distributor"), has its principal
office at 3435 Stelzer Road, Columbus, Ohio 43219. As the Distributor, BISYS
Fund Services will receive orders for, sell and distribute shares of the Funds.
Shareholder Servicing Agent
The Trust retains HSBC Americas to act as Shareholder Servicing Agent of
the Fund in accordance with the terms of the Shareholder Servicing Agreement.
Pursuant to the Shareholder Servicing Agreement, HSBC Americas (i) assists and
trains third parties who deliver prospectuses and Fund applications, (ii)
assists and trains third parties who assist customers with Fund applications,
(iii) conducts customer education programs, reviews Fund written communications
and assists third parties who answer customer questions, (iv) organizes and
conducts investment seminars to enhance understanding of each Fund and its
objectives, (v) assists third parties who effect customer purchases and
redemptions and (vi) assists and supervises the activities of Participating
Organizations.
For its services as Shareholder Servicing Agent, HSBC Americas is paid an
annual fee equal to 0.04% of the Trust's average daily net assets.
Administrator
The Trust retains BISYS Fund Services ("BISYS") to act as the Administrator
of the Funds in accordance with the terms of an Administration and Accounting
Services Agreement. BISYS has its principal office at 3435 Stelzer Road,
Columbus, Ohio 43219. Pursuant to the Administration and Accounting Services
Agreement, the Administrator, at its expense, generally supervises the operation
of the Trust and the Funds by reviewing the expenses of the Funds monthly and by
providing personnel, office space and administrative and fund accounting
services reasonably necessary for the operation of the Trust and the Funds,
other than those provided by HSBC Americas pursuant to the Advisory contract.
BISYS's annual administration and accounting fee is an asset-based fee of
0.15% of each Fund's first $200 million of average net assets; 0.125% of each
Fund's next $200 million of average net assets; 0.10% of each Fund's next $200
million of average net assets; and 0.08% of each Fund's average net assets in
excess of $600 million. The asset-based administration and accounting fee paid
to BISYS does not include out-of-pocket expenses which shall be borne by the
Trust.
The Trust also retains HSBC Americas to act as Co-Administrator of the Fund
in accordance with terms of a Co-Administration Services Contract. Pursuant to
the Co-Administration Services Contract, HSBC Americas (i) manages the Funds'
relationship with service providers, (ii) assists with negotiation of contracts
with service providers and supervises the activities of those service providers,
(iii) serves as a liaison with Board of Trustees, and (iv) assists with general
product management and oversight. For its services as Co-Administrator, HSBC
Americas is paid an annual fee equal to 0.03% of Trust's average daily net
assets.
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Servicing Agreements
The Funds may enter into agreements (the "Servicing Agreement") with
certain banks, financial institutions and corporations (the "Participating
Organizations") so that each Participating Organization handles recordkeeping
and provides certain administrative services for its customers who invest in the
Funds through accounts maintained at that Participating Organization. In such
cases, the Participating Organization or one of its nominees will be the
shareholder of record as nominee for its customers and will maintain subaccounts
for its customers. In addition, the Participating Organization will credit cash
distributions to each customer account, process purchase and redemption
requests, mail statements of all transactions with respect to each customer and,
if required by law, distribute the Trust's shareholder reports and proxy
statements. However, any customer of a Participating Organization may become the
shareholder of record upon written request to its Participating Organization or
transfer agent. Each Participating Organization will receive monthly payments
which in some cases may be based upon expenses that the Participating
Organization has incurred in the performance of its services under the Servicing
Agreement. The payments will not exceed, on an annualized basis, an amount equal
to 0.25% of the average daily net asset value during the month of Fund shares in
the subaccount of which the Participating Organization is record owner as
nominee for its customers. Such payments will be separately negotiated with each
Participating Organization and will vary depending upon such factors as the
services provided and the costs incurred by each Participating Organization. The
payments may be more or less than the fees payable to BISYS Fund Services for
the services it provides pursuant to the Transfer Agency Agreement for similar
services.
The payments will be made by the Fund to the Participating Organizations
pursuant to the Servicing Agreements. BISYS Fund Services will not receive any
compensation as transfer or dividend disbursing agent with respect to the
subaccounts maintained by Participating Organizations. The Board of Trustees
will review, at least quarterly, the amounts paid and the purposes for which
such expenditures were made pursuant to the Servicing Agreements.
Under separate agreements, the Adviser (not the Funds) may make
supplementary payments from its own revenues to a Participating Organization
that agrees to perform services such as advising customers about the status of
their subaccounts, the current yield and dividends declared to date and
providing related services a shareholder may request. Such payments will vary
depending upon such factors as the services provided and the costs incurred by
each Participating Organization.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Participating Organization may be charged one or more of
the following types of fees, as agreed upon by the Participating Organization
and the investor, with respect to the customer services provided by the
Participating Organization: account fees (a fixed amount per month or per year);
transaction fees (a fixed amount per transaction processed); compensating
balance requirements (a minimum dollar amount a customer must maintain in order
to obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets).
Distribution Plan and Agreement
The Board of Trustees of the Trust has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of
1940, as amended, after having concluded that there is a reasonable likelihood
that the Plan will benefit each Fund and its shareholders. The Plan provides for
a monthly payment by
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each Fund to reimburse the Distributor in such amounts that they may request for
expenses such as the printing and distribution of prospectuses sent to
prospective investors, the preparation, printing and distribution of sales
literature and expenses associated with media advertisements and telephone
services and other direct and indirect distribution-related expenses including
the payment of a monthly fee to broker-dealers for providing services with
respect to promoting the sale and maintaining the assets of the Funds. The Funds
may also make payments to other broker-dealers or financial institutions for
their assistance in distributing shares of each Fund and otherwise promoting the
sale of each Fund's shares. The total of each monthly payment is based on each
Fund's average daily net asset value during the preceding month and is
calculated at an annual rate not to exceed 0.20%.
The Plan provides for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plan and the purpose for which such expenditures were made. The Plan may
not be amended to increase materially the amount spent for distribution expenses
without approval by a majority of each Fund's outstanding shares and approval of
a majority of the non-interested Trustees. Distribution expenses incurred in one
year will not be carried forward into and reimbursed in the next year for actual
expenses incurred in the previous year.
Fees and Expenses
As compensation for its advisory and management services, HSBC Americas is
paid a monthly fee with respect to each Fund at an annual rate of 0.350% of
average daily net assets up to $500 million. For each Fund, this fee is reduced
at several breakpoints for average daily net assets in excess of $500 million up
to $1.5 billion, at which point it becomes 0.245% of average daily net assets in
excess of $1.5 billion.
As compensation for its co-administrative and shareholders services, HSBC
Americas is paid a monthly fee with respect to each Fund at an annual rate of
0.07% of average daily net assets. HSBC Americas reserves the right to waive in
advance a portion of its advisory, management, co-administrative and shareholder
service fees at any time.
TRANSACTIONS WITH AFFILIATES
Broker-dealers which are affiliates of the Adviser may act as brokers for
the Funds. At all times, however, their commissions, fees or other charges must
be reasonable and fair in comparison with those that would be paid to
unaffiliated firms for comparable transactions. The Funds will not do business
with nor pay commissions to affiliates of the Adviser in any portfolio
transaction where they act as principal. In placing orders for the purchase and
sale of portfolio securities, the Funds seek the best execution at the most
favorable price, considering all of the circumstances.
DETERMINATION OF NET ASSET VALUE
Each Fund's net asset value per share for the purpose of pricing purchase
and redemption orders is determined at 12:00 Noon (Eastern time) on each day the
Funds' transfer agent is open for business. The net asset value will not be
computed on the following holidays: New Year's Day, Martin Luther King, Jr.'s
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and
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Christmas. The net asset value per share of each Fund is computed by
dividing the value of the net assets of that Fund (i.e. the value of the assets
less the liabilities) by the total number of shares outstanding. All expenses,
including the advisory and administrative fees, are accrued daily and taken into
account for the purpose of determining the net asset value.
The Funds use the amortized cost method to value their portfolio securities
and seek to maintain a constant net asset value of $1.00 per share. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, regardless of the impact of
fluctuating interest rates on the market value of the security. There can be no
assurance that at all times the price per share can be maintained. However, the
Board of Trustees has established procedures designed to stabilize, to the
extent reasonably possible, the $1.00 price per share of each Fund. See the SAI
for more details.
PURCHASE OF SHARES
Shares of each Fund are offered at net asset value by the Distributor as an
investment vehicle for institutions, corporations, fiduciaries and individuals.
Prospectuses and accompanying sales material can be obtained from the Transfer
Agent or Distributor.
The minimum initial investment requirement for each Fund is $1,000. The
minimum subsequent investment requirement for each Fund is $50. There are no
minimum investment requirements with respect to investments effected through
certain automatic purchase and redemption arrangements on behalf of customer
accounts maintained at Participating Organizations. The minimum investment
requirements may be waived or lowered for investments effected on a group basis
by certain other institutions and their employees, such as pursuant to a payroll
deduction plan. All funds will be invested in full and fractional shares. The
Trust reserves the right to reject any purchase order.
The Funds' shares are sold on a continuous basis without a sales charge at
the net asset value per share next determined after an order has become
effective. Orders will become effective when Federal funds are available to the
Trust's custodian for investment. If payment is transmitted by wire (which may
take two or more hours to complete), the order will become effective upon
receipt of Federal funds. In order for a wire purchase to be effective on the
same day it is received, both the trading instructions and the wire must be
received before 4 p.m. Eastern time. Payments transmitted by a bank wire other
than the Federal Reserve Wire System may take longer to be converted into
Federal funds. Checks must be payable in United States dollars and will be
accepted subject to collection at full face value.
Stock certificates will not be issued with respect to shares of each Fund.
The Transfer Agent shall keep accounts upon the books of the Trust for the
recordholders of such Shares.
The distributor or selected broker-dealers, at its expense, may provide
additional promotional incentives to dealers. In some instances, these
incentives may be limited to certain dealers who have sold or may sell
significant numbers of shares of any of the Funds of the Trust or HSBC Mutual
Funds Trust.
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Prospective investors who wish to obtain additional information concerning
investment procedures should contact the Transfer Agent at: (800) 634-2536.
New Account Purchase by Wire
1. Telephone the Transfer Agent at: (800) 634-2536 for instructions. Please
note your bank will normally charge you a fee for handling this transaction.
New Account Purchase By Mail
1. Complete a Purchase Application.
2. Mail the Purchase Application and a check for $1,000 or more, payable to
the HSBC Family of Funds to the Transfer Agent at:
HSBC Funds Trust, c/o BISYS, P.O. Box 163850, Columbus, Ohio 43216-3850.
Third-party checks will not be accepted. Check payments must be in U.S.
dollars. Please include the Fund name and your account number on all checks.
Additional Purchases by Wire and Mail
Additional purchases of shares may be made by wire by telephoning the
Transfer Agent at 800-634-2536 and then instructing the wiring bank to transmit
the amount ($50 or more) of any additional purchase in Federal funds. Wiring
instructions will be provided by the Transfer Agent. Additional purchases may
also be made by mail by making a check ($50 or more) payable to the HSBC Family
of Funds indicating your fund account number on the check and mailing it to the
Transfer Agent at the address set forth above. Please note your bank will
normally charge you a fee for handling that transaction.
Purchase Through Customer Accounts
Purchases of shares also may be made through customer accounts maintained
at Participating Organizations, including qualified Individual Retirement and
Keogh Plan accounts. Purchases will be made through a customer's account only as
directed by or on behalf of the customer on a direction form executed prior to
the customer's first purchase of shares of any Fund. For example, a customer
with an account at a Participating Organization may instruct the Participating
Organization to invest money in excess of a level agreed upon between the
customer and the Participating Organization in shares of one of the Funds
periodically or give other instructions to the Participating Organization within
limits prescribed by that Participating Organization.
Automatic Investment Plan
Investors may make regular monthly investments of $50 or more in shares
automatically from a checking or savings account if their bank is a member of
automated clearing house (ACH). Upon written authorization, the Transfer Agent
will electronically debit investor's checking or savings account each month and
use the proceeds to purchase shares for the investor's account.
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Approval by the investor's bank is required, so that establishment of a
program may require at least 30 days. The authorized amount and/or bank
information may be changed or the program terminated at any time by writing to
the Transfer Agent. A reasonable period (usually up to 15 days) may be required
after receipt of such instructions to implement them. The purchase application
contains the requirements applicable to this plan. The Trust reserves the right
to amend, suspend or cease offering this program at any time without prior
notice.
REDEMPTION OF SHARES
Upon receipt by the Trust's transfer agent of a redemption request in
proper form ($50 minimum), shares of a Fund will be redeemed at their next
determined net asset value. See "Determination of Net Asset Value" in this
Prospectus. For the shareholder's convenience, the Trust has established several
different direct redemption procedures. Redemptions of shares purchased by check
will be effected immediately upon clearance of the purchase check, which may
take up to 15 days after those shares have been credited to the shareholder's
account. A redemption of shares is a taxable transaction, although gain or loss
will not ordinarily be recognized for tax purposes if the Funds maintain a
constant net asset value per share.
The Funds reserve the right to redeem (on 30 days' notice) accounts whose
values shareholders have reduced to $500 or less.
Redemption by Mail
1. Complete a letter of instruction indicating the Fund, the account number
and either the dollar amount or number of shares to be redeemed.
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $5,000 or more, the
signature(s) must be guaranteed by a bank, trust company, broker, dealer, credit
union, securities exchange or association, clearing agency or savings
association. Signature guarantees by notaries public are not acceptable. Further
documentation, such as copies of corporate resolutions and instruments of
authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.
4. Mail the letter to the Transfer Agent at the address set forth under
"Purchase of Shares" in this Prospectus.
Checks for redemption proceeds will normally be mailed within seven days to
the shareholder's address of record.
Upon request, the proceeds of a redemption amounting to $1,000 or more will
be sent by wire to the shareholder's predesignated bank account. Please note a
wire transfer fee will normally be charged. When proceeds of a redemption are to
be paid to someone other than the shareholder, either by wire or check, the
signature(s) on the letter of instruction must be guaranteed regardless of the
amount of the redemption.
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Redemption By Expedited Redemption Service
If shares are held in book credit form and the Expedited Redemption Service
has been elected on the Purchase Application on file with the Transfer Agent,
redemption of shares may be requested on any day the Transfer Agent is open for
business by telephone or letter. A signature guarantee is not required.
1. Telephone the request to the Transfer Agent toll free: (800) 634-2536; or
2. Mail the request to the Transfer Agent at the address set forth under
"Purchase of Shares" in this Prospectus.
Proceeds of Expedited Redemptions of $1,000 or more can be wired to the
shareholder's bank indicated in the Purchase Application. If an Expedited
Redemption request is received by the Transfer Agent by 12:00 Noon (Eastern
time) on a day the transfer agent is open for business, the redemption proceeds
will be transmitted to the shareholder's bank that same day. A check for
proceeds of less than $1,000 will be mailed to the shareholder's address of
record.
The Transfer Agent employs reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Transfer Agent fails
to employ such reasonable procedures, the transfer agent may be liable for any
loss, damage or expense arising out of any telephone transactions purporting to
be on a shareholder's behalf. In order to assure the accuracy of instructions
received by telephone, the transfer agent requires some form of personal
identification prior to acting upon instructions received by telephone, records
telephone instructions and provides written confirmation to investors of such
transactions.
Redemption By Check
If shares are held in book credit form and the Check Redemption Service has
been elected on the Purchase Application on file with the transfer agent,
redemptions of shares may be made by using redemption checks provided by the
Trust. Checks must be written for amounts of $500 or more, may be payable to
anyone and negotiated in the normal way. If more than one shareholder owns the
shares, all must sign the check unless an election has been made to require only
one signature on checks and that election has been filed with the transfer
agent.
Shares represented by a redemption check will continue to earn daily income
until the check clears the banking system. When honoring a redemption check, the
transfer agent will cause the Trust to redeem exactly enough full and fractional
shares from an account to cover the amount of the check. The Check Redemption
Service may be terminated at any time by the transfer agent or the Trust.
Because of the difficulty of determining in advance the exact value of a Fund
account, a Shareholder may not use a check to close his or her account.
Systematic Withdrawal Plan
An owner of $10,000 or more of shares of a Fund may elect to have periodic
redemptions from his account to be paid on a monthly basis. The minimum periodic
payment is $50. A sufficient number of shares to make the scheduled redemption
will be redeemed on the first or fifteenth day of the month. Redemptions for the
purpose of making such payments may reduce or even exhaust the account if your
monthly checks exceed the dividends,
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interest and capital appreciation, if any, on your Shares. A shareholder
may request that these payments be sent to a predesignated bank or other
designated party.
Redemption Through Customer Accounts
Investors who purchase shares through customer accounts maintained at
Participating Organizations may redeem those shares only through the
Participating Organization. In some cases, a customer may instruct the
Participating Organization which maintains the account through which the
customer purchases shares to redeem shares periodically as required to bring the
customer's account balance up to a level agreed upon between the customer and
the Participating Organization. If a redemption request with respect to such an
automatic redemption arrangement is received by the transfer agent by 12:00 Noon
(Eastern time) on a day the transfer agent is open for business, the redemption
proceeds will be transmitted that same day to the investor's customer account
(unless otherwise specified by the Participating Organization).
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in a Fund for at
least seven days may exchange shares of that Fund for shares of any of the other
investment portfolios of the Trust or any of the portfolios of HSBC Mutual Funds
Trust which are available for sale in their state. The Trust reserves the right
to modify or terminate the exchange privilege upon 60 days written notice to
shareholders. Shareholders exchanging shares of the Funds for shares of the
portfolios of HSBC Mutual Funds Trust will be subject to a sales load. Before
making an exchange, shareholders should review the prospectus of the Fund into
which the exchange is being made. See the SAI for further details. The Trust
reserves the right to change the terms of or terminate the Exchange Privilege at
any time upon at least 60 days prior written notice to Shareholders.
DIVIDENDS AND DISTRIBUTIONS
The Trust intends to declare as a dividend on shares of each Fund
substantially all of the net investment income for such Fund at the close of
each business day to the shareholders of record of such Fund at 12:00 Noon
(Eastern time) on that day. Shares purchased will begin earning dividends on the
day the purchase order is executed and shares redeemed will earn dividends
through the previous day. Net investment income for a Saturday, Sunday or
holiday will be declared as a dividend on the previous business day.
Dividends declared in, and attributable to, the preceding month will be
paid within five business days after the end of each month. Dividends will be
invested automatically in additional shares of the Fund from which they were
paid at net asset value and credited to the shareholder's account on the payment
date or, at the shareholder's election, paid in cash. For all investments
effected through customer accounts maintained at Participating Organizations
(see "Purchase of Shares -- Purchase through Customer Accounts"), dividend
payments in cash will be transmitted to the investor's bank account through
which the shares were purchased or, if a Participating Organization so
specifies, to it for crediting to its customer's account. Dividend checks will
be mailed to all other shareholders who elect to be paid in cash within five
business days after the end of each month. Dividends declared by a Fund in
October, November or December of any calendar year (as of a record date in such
a month) will be
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treated for Federal income tax purposes as having been received by
Shareholders on December 31 of the year they are declared, if they are paid
during January of the following year.
FEDERAL INCOME TAXES
Each Fund is treated as a separate entity for Federal income tax purposes.
Each Fund has elected to be treated and has qualified as a regulated investment
company of 1986, as amended and intends to continue to so qualify each year by
complying in the future with the provisions of the Internal Revenue Code (the
"Code") applicable to regulated investment companies so that it will not be
liable for Federal income tax with respect to its net investment income and net
realized capital gains distributed to shareholders in accordance with the timing
requirements of the Code. Each Fund intends to distribute annually substantially
all of its net investment income and net realized capital gains to its
shareholders for each taxable year.
Most of the New York Tax-Free Fund's income is expected to be derived from
tax-exempt interest from Municipal Obligations rather than taxable interest.
Dividends derived from interest on Municipal Obligations will constitute
exempt-interest dividends if the Fund complies with certain requirements of the
Code and, except as discussed below, will not be subject to Federal income tax.
Some portion of the exempt-interest dividends paid by the Fund will be treated
as an item of "tax preference" for purposes of the alternative minimum tax if
the Fund invests in certain types of Municipal Obligations and New York
Municipal Obligations (see discussion below).
Dividends derived from the Fund's taxable net investment income and any
excess of its net short-term capital gain over its net long-term capital loss
will be taxable to shareholders as ordinary income, whether such dividends are
invested in additional shares or received in cash.
Distributions of the excess of net long-term capital gain over net
short-term capital loss designated by a Fund as capital gain dividends will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, whether invested in additional shares or
received in cash. The Funds do not, however, anticipate realizing a substantial
amount of net long-term capital gains. Dividends and distributions will not
qualify for the dividends-received deduction for corporations.
The Tax Reform Act of 1986 and subsequent restrictive legislation may
significantly affect the supply and yields of Municipal Obligations and New York
Municipal Obligations. The Act imposed new restrictions on the issuance of
Municipal Obligations and New York Municipal Obligations that limit the purposes
for which such Obligations may be issued. Under the Code, interest on certain
types of Municipal Obligations and New York Municipal Obligations is designated
as an item of tax preference for purposes of the alternative minimum tax on
individuals and corporations. Therefore, if the New York Tax-Free Fund were to
invest in such types of obligations, shareholders would be required to treat as
an item of tax preference that part of the distributions by the Fund that is
derived from interest income on such obligations.
Entities or persons who are "substantial users" (or persons related to
"substantial users"), as defined in the Code, of facilities financed by
Municipal Obligations and New York Municipal Obligations issued for certain
private activities should consult their tax advisers before purchasing shares of
the New York Tax-Free Fund.
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Exempt-interest dividends and other distributions paid by the Funds are
includable in the tax base for determining taxability of social security or
railroad retirement benefits. Interest on debt incurred to purchase or carry
shares of the New York Tax-Free Fund is not deductible for Federal income tax
purposes.
Each year the Funds will notify shareholders of the character of
distributions for federal income tax purposes and the percentage of interest
income received by the New York Tax-Free Fund during the preceding year on
Municipal Obligations, indicating on a state-by-state basis the source of that
income. Shareholders are required to report the amount of tax-exempt interest
received each year, including exempt-interest dividends received from a Fund, on
their Federal tax returns. Shareholders should consult their tax advisers as to
the Federal, state, local or foreign tax consequences of ownership of Fund
shares in their particular circumstances. Shareholders who are not U.S. persons
under the Code should also consult their tax advisers as to the possible
application of U.S. taxes, including a 30% U.S. withholding tax (or lower treaty
rate) on taxable dividends.
NEW YORK TAXES
Exempt-interest dividends paid by the New York Tax-Free Fund will be exempt
from New York State and City personal income taxes to the extent they are
derived from interest on New York Municipal Obligations. For New York State and
City personal income tax purposes, whether invested in additional shares of the
New York Money Tax-Free or received in cash, dividends derived from the interest
on the New York Tax-Free Fund's investments other than New York Municipal
Obligations (including interest on Municipal Obligations), and the excess of net
short-term capital gain over net long-term capital loss will be taxed as
ordinary income, and dividends treated as long-term capital gains for Federal
tax purposes will be taxed as long-term capital gains, regardless of how long a
shareholder has held his shares.
Dividends paid by the New York Tax-Free Fund, including exempt-interest
dividends derived from interest on New York Municipal Obligations, may be
subject to the New York State franchise tax and to the New York City General
Corporation Tax if they are received by a corporation subject to those taxes.
Such dividends may also be subject to state taxes in states other than New York
and to local taxes in cities other than New York City.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder, which will be mailed at least once each month. In those
cases where a Participating Organization or its nominee is shareholder of record
for shares purchased for its customer, the Trust has been advised that the
statement may be transmitted to the customer in the discretion of the
Participating Organization. Shareholders can write or call the Transfer Agent at
P.O. Box 163850, Columbus, OH 43216-3850, telephone: (800) 634-2536 with any
questions relating to their investments in shares of the Funds.
Participating Organizations or their nominees may be the shareholders of
record as nominees for their customers, and may maintain subaccounts for those
customers. Any such customer may become the shareholder of record upon written
request to the Participating Organization or Transfer Agent.
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The Transfer Agent will transmit promptly to each of its customers for whom
it processes purchases and redemptions of shares and to each Participating
Organization copies of all reports to shareholders, proxy statements and other
Trust communications. The Trust's arrangements with the transfer agent and the
subtransfer agent arrangements require Participating Organizations to grant
investors who purchase shares through customer accounts the opportunity to vote
their shares by proxy at all shareholder meetings of the Trust. In certain
cases, a customer of a Participating Organization may have given his
Participating Organization the power to vote shares on his behalf. Customers
with accounts at Participating Organizations should consult their Participating
Organization for information concerning their rights to vote shares.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Pursuant to an Agency Agreement, BISYS Fund Services ("Transfer Agent")
acts as the Funds' transfer and divided disbursing agent and is responsible for
maintaining account records detailing ownership of Fund shares and for crediting
income, capital gains and other changes in share ownership to investors'
accounts. For its services, the Transfer Agent receives from the Funds an annual
base fee of $21 per shareholder account plus additional transaction costs. The
Bank of New York is the Trust's custodian. Pursuant to the Custodian Agreement,
The Bank of New York is responsible for holding each Fund's cash and portfolio
securities. The Bank of New York may enter into sub-custodian agreements with
certain qualified banks.
YIELD INFORMATION
From time to time, the Funds may make available information as to their
"yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
each Fund refers to the income generated by an investment in that Fund over a
seven-day period. This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The New York Tax-Free Fund may make available information as to its "tax
equivalent yield." The "tax equivalent yield" refers to the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's tax free
yield, and is calculated by increasing the annualized yield shown for the Fund
to the extent necessary to reflect the payment of specified tax rates. Thus the
tax equivalent yield for the Fund will always exceed such Fund's yield.
The yields of the Cash Management Fund, the Government Fund, the U.S.
Treasury Fund, and the New York Tax-Free Fund for the seven-day period ended
December 31, 1995, calculated in the manner described in the SAI, were 5.17%,
4.81%, 4.36%, and 3.50%, respectively. The effective yields (i.e., on a
compounded basis, assuming the daily reinvestment of dividends) of each of the
Funds for the same period were 5.31%, 4.93%, 4.45% and 3.56%, respectively. The
yields for the Funds may fluctuate daily and do not provide a basis for
determining future yields. The yields on shares of the Funds may be included in
advertisements or mailings to prospective investors.
29
<PAGE>
The Funds may occasionally cite statistical reports which concern the
Funds' performances. Investors who purchase and redeem shares of the Funds
through a customer account at a Participating Organization may be charged
additional fees by the Participating Organization which will have the effect of
reducing the yield for those investors. See "Management of the Funds-Servicing
Agreements" in this Prospectus.
SHARES OF BENEFICIAL INTEREST
The authorized capital stock of the Trust consists of an unlimited number
of shares of beneficial interest having a par value of $0.001 per share. The
Trust's Board of Trustees has authorized the issuance of four classes
representing shares in four investment portfolios of the Trust. All shares of
the Trust have equal voting rights and will be voted in the aggregate, and not
by class, except where voting by class is required by law or where the matter
involved affects only one class. All shares of the Trust issued and outstanding
are fully paid and nonassessable. The Trust is not required by law to hold
annual shareholder meetings and does not intend to hold such meetings. Each Fund
will be treated as a separate entity for Federal income tax purposes. For more
details concerning the voting rights of shareholders see the Statement of
Additional Information.
Vacancies on the Board of Trustees shall be filled by the Board of Trustees
if immediately after filling any such vacancy at least two-thirds of the
Trustees then holding office shall have been elected to such office by
shareholders at an annual or special meeting. In the event that at any time less
than a majority of Trustees holding office were elected by shareholders, the
Board of Trustees shall cause to be held within 60 days a shareholders' meeting
for the purpose of electing Trustees to fill any existing vacancies. Trustees
are subject to removal with cause by two-thirds of the remaining Trustees or by
a vote of a majority of the outstanding shares of the Trust. The Trustees are
required to promptly call a shareholders' meeting for voting on the question of
removal of any Trustee when requested to do so in writing by not less than 10%
of the outstanding shares of the Trust. In connection with the calling of such
shareholders' meetings, shareholders will be provided with communication
assistance.
Under Massachusetts law, it is possible that shareholders of a
Massachusetts business trust might, under certain circumstances, be held
personally liable for acts or obligations of the Trust. The Trust's Declaration
of Trust contains an express disclaimer of shareholder liability for acts,
obligations or affairs of the Trust. The Declaration of Trust also provides for
indemnification out of the Trust's assets for all loss and expense of any
shareholder held personally liable by reason of being or having been a
shareholder of the Trust. Thus, the risk that a shareholder of the Fund could
incur financial loss on account of shareholder liability is considered remote
since it is limited to circumstances in which the disclaimer is inoperative and
the Fund itself would be unable to meet its obligations.
30
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31
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HSBC Funds Trust
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HSBC Funds Group
- --------------------------------------------------------------------------------
HSBC Asset Management[ART]
- --------------------------------------------------------------------------------
Prospectus April 24, 1996
- -------------------------------------
Funds:
Cash Management Fund
Government Money Market Fund
U.S. Treasury Money Market Fund
New York Tax-Free Money Market Fund
- -------------------------------------
Managed by:
HSBC Asset Management Americas Inc.
- -------------------------------------
Sponsored and Distributed by:
BISYS Funds Services
HSBC(SM) Funds Trust
3435 Stelzer Road
Columbus, Ohio 43219
Information:
(800) 634-2536
Investment Adviser and Co-administrator
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10177
Distributor, Administrator, Transfer
and Dividend Disbursing Agent
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Custodian
Bank of New York
90 Washington Street
New York, New York 10286
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
Legal Counsel
Baker & McKenzie
805 Third Avenue
New York, New York 10022
No dealer, salesman, or other person has been authorized to give any information
or to make any representations, other than those contained in the Prospectus, in
connection with the offer contained in this Prospectus, and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Trust, the Distributor or the Investment Adviser. This
Prospectus does not constitute an offering in any state in which such offering
may not lawfully be made.
<PAGE>
HSBC FUNDS TRUST
HSBC Money Market Funds
3435 Stelzer Road
Columbus, Ohio 43219
Information: (800) 634-2536
STATEMENT OF ADDITIONAL INFORMATION
HSBC Funds Trust, formerly known as Mariner Funds Trust (the "Trust"), is
an open-end, diversified management investment company organized in
Massachusetts on October 31, 1985, with multiple investment portfolios,
including the following, each having its own investment objective and policies:
Cash Management Fund, Government Money Market Fund, U.S. Treasury Money Market
Fund, and New York Tax-Free Money Market Fund.
Cash Management Fund, Government Money Market Fund and U.S. Treasury
Money Market Fund are herein collectively, the "Money Market Funds". New York
Tax-Free Money Market Fund is herein the "New York Tax-Free Fund".
Cash Management Fund invests in a variety of high-quality, short-term money
market instruments, with remaining maturities of thirteen months or less,
including obligations in which the Government Money Market Fund invests.
Government Money Market Fund invests exclusively in short-term obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities, with remaining maturities of thirteen months or less, and
repurchase agreements.
U.S. Treasury Money Market Fund invests exclusively in short-term, direct
obligations of the United States Treasury, with remaining maturities of thirteen
months or less, and repurchase agreements.
New York Tax-Free Money Market Fund invests primarily in high quality New
York tax-exempt securities ("New York Obligations") with remaining maturities of
thirteen months or less.
Shares of each Fund are primarily offered for sale by BISYS Fund Services,
the Sponsor and Distributor, as an investment vehicle for institutions,
corporations, fiduciaries and individuals. Certain banks, broker-dealers,
financial institutions and corporations ("Participating Organizations") have
agreed to act as shareholder servicing agents for investors who maintain
accounts at the Participating Organizations and to perform certain services for
the Funds.
This Statement of Additional Information (the "SAI") is not a prospectus
and is only authorized for distribution when preceded or accompanied by the
Trust's Prospectus for the Funds, dated April 18, 1996 (the "Money Funds
Prospectus"). This SAI contains additional and more detailed information than
that set forth in the Money Funds Prospectus and should be read in conjunction
with the Money Funds Prospectus, additional copies of which may be obtained
without charge from the Trust by writing to the address above.
April 18, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
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INVESTMENT POLICIES...................................... 2
INVESTMENT RESTRICTIONS.................................. 19
MANAGEMENT............................................... 20
CALCULATION OF YIELDS AND PERFORMANCE INFORMATION........ 25
DETERMINATION OF NET ASSET VALUE......................... 27
PORTFOLIO TRANSACTIONS................................... 27
EXCHANGE PRIVILEGE....................................... 28
REDEMPTIONS.............................................. 28
FEDERAL INCOME TAXES..................................... 29
SHARES OF BENEFICIAL INTEREST............................ 31
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.. 32
INDEPENDENT AUDITORS..................................... 33
EXPERTS.................................................. 33
INVESTMENT POLICIES
The following information supplements the discussion of the investment
objective and policies of the Funds found under "Investment Objective and
Policies" in the Funds' Prospectus.
CASH MANAGEMENT FUND
The Cash Management Fund ("Cash Management Fund") invests in a broad range
of short-term money market instruments which have remaining maturities not
exceeding thirteen months and certain repurchase agreements. These money market
instruments may include obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities and the following other kinds of
investments:
BANK OBLIGATIONS. These obligations include negotiable certificates of
deposit, bankers' acceptances and fixed time deposits and other obligations
issued or supported by banks. The Cash Management Fund's policy on
concentration in bank obligations and a description of the banks the obligations
of which the Fund may purchase are set forth in the Fund's Prospectus. A
certificate of deposit is a short-term, interest-bearing negotiable certificate
issued by a commercial bank against funds deposited in the bank. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. The
borrower is liable for payment as is the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date. Fixed time deposits
are obligations of foreign branches of United States banks or foreign banks
which are payable on a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. See "Investment Objective and Policies - Cash Management Fund -
Bank Obligations" in the Fund's Prospectus with respect to certain limitations
on investments by the Cash Management Fund in fixed time deposits.
COMMERCIAL PAPER. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations,
financial institutions and government agencies and instrumentalities (but only
in the case of taxable securities). All commercial paper purchased by the Cash
Management Fund is, at the time of investment, required to be rated by two of
the following four rating agencies as follows: "P-1" or better by Moody's
Investors Service, Inc. ("Moody's"); "A-1" or better by Standard & Poor's
Corporation ("Standard & Poor's"); "A-1" or better by IBCA Limited and its
affiliate, IBCA Inc. ("IBCA"); or "F-1" or better by Fitch Investors Services,
Inc. ("Fitch"). Standard & Poor's and Moody's are considered by the Cash
Management Fund's investment adviser to be the primary rating agencies. If the
commercial paper is rated by only one rating agency, it must be rated, at the
time of purchase, in one of the categories set forth above. Unrated commercial
paper must be deemed, in the opinion of the Cash Management Fund's investment
adviser,
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to be of an investment quality comparable to rated commercial paper in which the
Cash Management Fund may invest to be eligible for purchase by the Cash
Management Fund. Because variable rate master demand notes are direct lending
arrangements between the lender and the borrower, it is not generally
contemplated that they will be traded. There is no secondary market for variable
rate master demand notes, although they are redeemable, and thus immediately
repayable by the borrower, at principal amount, plus accrued interest, at any
time. See "Variable Rate Master Demand Notes" below.
CORPORATE DEBT SECURITIES. Cash Management Fund's investments in these
securities are limited to non-convertible corporate debt securities such as
bonds and debentures which have thirteen months or less remaining to maturity
and which are rated "AA" or better by Standard & Poor's and "Aa" or better by
Moody's and of comparable high quality ratings by other nationally recognized
statistical rating agencies that have rated such securities.
The rating "P-1" is the highest commercial paper rating assigned by Moody's
and the ratings "A-1" and "A-1+" are the highest commercial paper ratings
assigned by Standard & Poor's. Debt securities rated "Aa" or better by Moody's
or "AA" or better by Standard & Poor's are generally regarded as high-grade
obligations. Those rated "Aaa" by Moody's or "AAA" by Standard & Poor's are
judged to be of the highest quality and exhibit an extremely strong ability to
pay interest and repay principal. Those rated "Aa" by Moody's or "AA" by
Standard & Poor's are judged to be of high quality by all standards and differ
from higher rated issues only in a small degree with respect to their ability to
pay interest and repay principal.
After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Fund's
investment adviser must report such event to the Board of Trustees as soon as
possible to permit the Board to reassess the security promptly to determine
whether it may be retained as an eligible investment for the Fund. To the
extent the ratings given by a nationally recognized statistical rating
organization may change as a result of changes in such organizations or their
rating systems, the Cash Management Fund will attempt to use comparable ratings
as standards for investments in accordance with the investment policies
contained in the Money Funds Prospectus and in this SAI.
GOVERNMENT MONEY MARKET FUND
The Government Money Market Fund ("Government Fund") invests exclusively in
obligations issued or guaranteed by the United States Government or its agencies
or instrumentalities which have remaining maturities not exceeding thirteen
months and certain repurchase agreements. Agencies and instrumentalities which
issue or guarantee debt securities and which have been established or sponsored
by the United States Government include the Banks for Cooperatives, the Export-
Import Bank, the Federal Farm Credit System, the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation, the Federal Intermediate Credit Banks,
the Federal Land Banks, the Federal National Mortgage Association and the
Student Loan Marketing Association. United States Government agency and
instrumentality obligations include master notes issued by these entities but do
not include obligations of the World Bank, The Inter-American Development Bank
or the Asian Development Bank.
U.S. TREASURY MONEY MARKET FUND
The U.S. Treasury Money Market Fund ("U.S. Treasury Fund") invests
exclusively in direct obligations of the United States Treasury which have
remaining maturities not exceeding thirteen months and certain repurchase
agreements. The United States Treasury issues various types of marketable
securities consisting of bills, notes, bonds and other debt securities. They
are direct obligations of the United States Government and differ primarily in
the length of their maturity. Treasury bills, the most frequently issued
marketable United States Government security, have a maturity of up to one year
and are issued on a discount basis. The U.S. Treasury Fund may not enter into
loans of its portfolio securities.
NEW YORK TAX-FREE MONEY MARKET FUND
To attain its objective, the New York Tax-Free Money Market Fund ("New York
Tax-Free Fund") invests primarily in a broad range of Municipal Obligations
which meet the rating standards described in the Fund's Prospectus. The tax-
exempt status of a Municipal Obligation is determined by the issuer's bond
counsel at the time of
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the issuance of the security. Municipal Obligations, which pay interest that is
excludable from gross income for Federal income tax purposes and which are debt
obligations issued by or on behalf of states, cities, municipalities and other
public authorities, include:
MUNICIPAL BONDS. Municipal bonds are issued to obtain funds for various
public purposes, including the construction of schools, highways and other
public facilities, for general operating expenses and for making loans to other
public institutions. Industrial development and pollution control bonds are
municipal bonds which are issued by or on behalf of public authorities to
provide funding for the construction, equipment, repair and improvement of
various privately-operated facilities.
Municipal bonds may be categorized as "general obligation" or "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are secured by the net revenue derived from a particular facility
or group of facilities or, in some cases, the proceeds of a special excise or
other specific revenue source, but not by the general taxing power. Industrial
development and pollution control bonds (now generally referred to as "private
activity bonds") are, in most cases, revenue bonds and do not generally carry
the pledge of the credit of the issuing municipality or public authority.
MUNICIPAL NOTES. Municipal notes include, but are not limited to, tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and project notes. Notes sold as interim financing in
anticipation of collection of taxes, a bond sale or receipt of other revenues
are usually general obligations of the issuer. Project notes are issued by local
housing authorities to finance urban renewal and public housing projects and are
secured by the full faith and credit of the United States Government.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is issued to
finance seasonal working capital needs or as short-term financing in
anticipation of longer-term debt. It is paid from the general revenues of the
issuer or refinanced with additional issuances of commercial paper or long-term
debt.
For purposes of diversification under the Investment Company Act of 1940,
the identification of the issuer of Municipal Obligations depends on the terms
and conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision would be
regarded as the sole issuer. Similarly, in the case of an industrial
development bond or pollution control bond, if the bond is backed only by the
assets and revenues of the non-governmental user, the non-governmental user
would be deemed to be the sole issuer. If in either case the creating
government or another entity guarantees an obligation, the guarantee would be
considered a separate security and be treated as an issue of such government or
entity.
As described in the Fund's Prospectus, the New York Tax-Free Fund may,
under limited circumstances, elect to invest in certain taxable securities and
repurchase agreements with respect to those securities. The New York Tax-Free
Fund will enter into repurchase agreements only with dealers, domestic banks or
recognized financial institutions which, in the opinion of the New York Tax-Free
Fund's investment adviser, present minimal credit risks. In the event of default
by the seller under a repurchase agreement, the New York Tax-Free Fund may have
problems in exercising their rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities. In such event, the New York Tax-Free Fund will also have to take
into account the maturities of the underlying securities in calculating the
Fund's dollar-weighted average portfolio maturities. The New York Tax-Free
Fund's investment adviser will monitor the value of the underlying security at
the time the transaction is entered into and at all times during the term of the
repurchase agreement to ensure that the value of the security always equals or
exceeds the agreed upon repurchase price. Repurchase agreements are considered
to be loans under the Investment Company Act of 1940, collateralized by the
underlying securities.
The New York Tax-Free Fund may engage in the following investment
activities:
SECURITIES WITH PUT RIGHTS. When the New York Tax-Free Fund purchases
municipal obligations they may obtain the right to resell them, or "put" them,
to the seller at an agreed upon price within a specific period prior to their
maturity date.
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The amount payable to the New York Tax-Free Fund by the seller upon its
exercise of a put will normally be (i) the New York Tax-Free Fund's acquisition
cost of the securities (excluding any accrued interest which the New York Tax-
Free Fund paid on their acquisition), less any amortized market premium or plus
any amortized market or original issue discount during the period the New York
Tax-Free Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the securities
were owned by the New York Tax-Free Fund. Absent unusual circumstances, the New
York Tax-Free Fund values the underlying securities at their amortized cost.
Accordingly, the amount payable by a broker-dealer or bank during the time a put
is exercisable will be substantially the same as the value of the underlying
securities.
The New York Tax-Free Fund's right to exercise a put is unconditional and
unqualified. A put is not transferable by the New York Tax-Free Fund, although
the New York Tax-Free Fund may sell the underlying securities to a third party
at any time. The New York Tax-Free Fund expects that puts will generally be
available without the payment of any direct or indirect consideration. However,
if necessary and advisable, the New York Tax-Free Fund may pay for certain puts
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to such a put (thus reducing the yield to maturity
otherwise available for the same securities).
The New York Tax-Free Fund may enter into put transactions only with
broker-dealers and banks which, in the opinion of the New York Tax-Free Fund's
investment adviser, present minimal credit risks. The New York Tax-Free Fund's
ability to exercise a put will depend on the ability of the broker-dealer or
bank to pay for the underlying securities at the time the put is exercised. In
the event that a broker-dealer or bank should default on its obligation to
repurchase an underlying security, the New York Tax-Free Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere.
The New York Tax-Free Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise their rights
thereunder for trading purposes. The acquisition of a put will not affect the
valuation of the underlying security which will continue to be valued in
accordance with the amortized cost method. The actual put will be valued at zero
in determining net asset value. Where the New York Tax-Free Fund pays directly
or indirectly for a put, its cost will be reflected as an unrealized loss for
the period during which the put is held by the New York Tax-Free Fund and will
be reflected in realized gain or loss when the put is exercised or expires. If
the value of the underlying security increases, the potential for unrealized or
realized gain is reduced by the cost of the put.
The value of municipal securities may be affected by uncertainties in the
municipal market related to legislation or litigation involving the taxation of
municipal securities or the rights of municipal securities holders in the event
of a bankruptcy. Municipal bankruptcies are relatively rare, and certain
provisions of the U.S. Bankruptcy Code governing such bankruptcies are unclear
and remain untested. Further, the application of state law to municipal issuers
could produce varying results among the states or among municipal securities
issuers within a state. These legal uncertainties could affect the municipal
securities market generally, certain specific segments of the market, or the
relative credit quality of particular securities. Any of these effects could
have a significant impact on the prices of some or all of the municipal
securities held by the Fund, making it more difficult for the Fund to maintain a
stable net asset value per share.
RISK FACTORS FOR THE NEW YORK TAX-FREE FUND
The following information as to certain New York risk factors is given to
investors in view of the New York Tax-Free Fund's policy of concentrating its
investments in New York Municipal Obligation issuers. The factors affecting the
financial conditions of the State of New York (the "State") are complex, and the
following description constitutes only a brief summary; it does not purport to
be a complete description and is based on information from official statements
relating to general obligation bonds issued by the State of New York.
General. The economy of the State (the "State") is diverse with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a comparatively small share of the
nation's farming and mining activity. The State has a declining portion of its
work force engaged in manufacturing, and an increasing portion engaged in
service industries, reflecting the national trend.
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New York has a very high state and local tax burden relative to other
states. The State and its localities have used these taxes to develop and
maintain their transportation networks, public schools and colleges, public
health systems, and social services and recreational facilities. Despite these
benefits, the burden of state and local taxation may have contributed to the
decisions of some businesses and individuals to relocate outside, or not locate
within, the State.
The national economy began the current expansion in 1991 and has added over
7 million jobs since early 1992. However, the recession lasted longer in the
State and the State's economic recovery has lagged behind the nation's. Although
the State has added approximately 185,000 jobs since November 1992, employment
growth in the State has been hindered during recent years by significant
cutbacks in the computer and instrument manufacturing, utility, defense, and
banking industries.
The State Budget Process. The requirements of the State budget process are
set forth in Article VII of the State Constitution and the State Finance law.
The process begins with the Governor's submission of the Executive Budget to the
Legislature each January, in preparation for the start of the fiscal year on
April 1. (The submission date is February 1 following a gubernatorial
election.) The budget must contain a complete plan of available receipts and
projected disbursements for the ensuing fiscal year ("State Financial Plan").
That proposed State Financial Plan must be balanced on a cash basis, and must be
accompanied by bills which: (i) set forth all proposed appropriations and
reappropriations, (ii) provide for any new or modified revenue measures, and
(iii) make any other changes to existing law necessary to implement the budget
recommended by the Governor.
In acting on the bills submitted by the Governor, the Legislature has the
power to alter both recommended appropriations and proposed changes to
substantive law. The Legislature may strike out or reduce an item of
appropriation recommended by the Governor. The Legislature may add items of
appropriation provided such additions are stated separately. These additional
items are then subject to line-item veto by the Governor. If the Governor
vetoes an appropriation or a bill related to the budget, these can be
reconsidered in accordance with the rules of each house of the Legislature. If
approved by two-thirds of the members of each house, the measure will become law
notwithstanding the Governor's veto.
Once the appropriation and other bills become law, the State's Division of
the Budget ("DOB") revises the State Financial Plan based on the Legislatures's
action, and begins the process of implementing the budget. Throughout the
fiscal year, DOB monitors actual receipts and disbursements, and may adjust the
estimates in the State Financial Plan. Adjustments may also be made to the State
Financial Plan to reflect changes in the economy, as well as new actions taken
by the Governor or the Legislature.
The Governor is required to submit to the Legislature quarterly budget
updates which include a revised cash-basis State Financial Plan, and an
explanation of any changes from the previous State Financial Plan. As required
by the State Finance law, the Governor updates the State Financial Plan within
30 days of the close of each quarter of the fiscal year, generally issuing
reports by July 30, October 30, and as part of the Executive Budget.
Financial Accounting. New York utilizes the fund method of accounting to
report on its financial position and the results of its operations.
Substantially all State non-pension financial operations are accounted for in
the State's governmental funds group ("Governmental Funds"). The Governmental
Funds include the General Fund, which receives all income not required by law to
be deposited in another fund and which for the State's 1995-1996 fiscal year
("Fiscal Year 1995-96") comprises approximately 50% of total projected
Governmental Funds receipts; the Special Revenue Funds, which receive a
preponderance of money received by the State from the federal government and
other income the use of which is legally restricted to certain purposes and
which comprises approximately 40% of total projected Governmental Funds receipts
in the Fiscal Year 1995-96; the Capital Projects Funds, used to finance the
acquisition and construction of major capital facilities by the State and to aid
in certain of such projects conducted by local governments or public
authorities; and the Debt Service Funds, which are used for the accumulation of
monies for the payment of principal of and interest on long term debt and other
contractual commitments. Receipts in the Capital Projects and Debt Service Funds
comprise an aggregate of approximately 10% of total projected Governmental Funds
receipts in the Fiscal Year 1995-96.
Financial information for the governmental funds during each fiscal year is
maintained on a cash basis of accounting ("Cash Basis"). New York also prepares
financial statements in accordance with generally accepted
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accounting principles ("GAAP"). The GAAP statements differ in format from the
Cash Basis statements in that, among other things, they are prepared on an
accrual basis, include a combined balance sheet, and report on the activities of
all funds. The Cash Basis financial information is adjusted at fiscal year end
by an independent public accounting firm to reflect financial reporting in
conformity with GAAP. The State maintains a March 31st fiscal year end.
Revenues and Expenditures. New York's Governmental Funds receive over 54%
of their revenues from taxes levied by the State. Investment income, fees and
assessments, abandoned property collections, and other varied sources supply the
balance of the receipts for these funds. Revenues not required to be deposited
in another fund are deposited in the General Fund. The major tax sources for the
General Fund are the personal income tax (53% of General Fund tax receipts in
Fiscal Year 1994-95, and 52% of the Fiscal Year 1995-96 budgeted figure), the 4%
user taxes and fees (20% in Fiscal Year 1994-95, 20% of the Fiscal Year 1995-96
budget), business taxes (15% of the fiscal 1994 budget and 14% of the Fiscal
1995 budget), and other taxes. The majority of Special Revenue Funds receipts
come from federal grants (78% of receipts in Fiscal Year 1994-95, 75% of the
Fiscal Year 1995-96 budget). Generally, approximately 87% of the federal funds
received by the Special Revenue Funds are on account of Medicaid, income
maintenance and associated social services, education and health programs.
New York's major expenditures are grants to local governments, which are
projected to account for 69% of all Governmental Funds expenditures in Fiscal
Year 1995-96. These grants include disbursements for elementary, secondary and
higher education, social services, drug abuse control, and mass transportation
programs.
Fiscal 1994-95 Financial Results (Cash Basis). New York State ended its
1994-95 fiscal year with the General Fund in balance. The closing fund balance
of $158 million reflects $157 million in the Tax Stabilization Reserve Fund and
$1 million in the Contingency Reserve Fund ("CRF"). The CRF was established in
State fiscal year 1993-94, funded partly with surplus moneys, to assist the
State in financing the 1994-95 fiscal year costs of extraordinary litigation
known or anticipated at that time; the opening fund balance in State fiscal year
1994-95 was $265 million. The $241 million change in the fund balance reflects
the use of $264 million in the CRF as planned, as well as the required deposit
of $23 million to the Tax Stabilization Reserve Fund. In addition, $278 million
was on deposit in the tax refund reserve account, $250 million of which was
deposited at the end of the State's 1994-95 fiscal year to continue the process
of restructuring the State's cash flow as part of the New York Local Government
Assistance Corporation (LGAC) program.
Compared to the State Financial Plan for 1994-95 as formulated on June 16,
1994, reported receipts fell short of original projections by $1.163 billion,
primarily in the categories of personal income and business taxes. Of this
amount, the personal income tax accounts for $800 million, reflecting weak
estimated tax collections and lower withholding due to reduced wage and salary
growth, more severe reductions in brokerage industry bonuses than projected
earlier, and deferral of capital gains realizations in anticipation of potential
Federal tax changes. Business taxes fell short by $373 million, primarily
reflecting lower payments from banks as substantial overpayments of 1993
liability depressed net collections in the 1994-95 fiscal year. These
shortfalls were offset by better performance in the remaining taxes,
particularly the user taxes and fees, which exceeded projections by $210
million. Of this amount, $227 million was attributable to certain restatements
for accounting treatment purposes pertaining to the CRF and LGAC; these
restatements had no impact on balance in the General Fund.
Disbursements were also reduced from original projections by $848 million.
After adjusting for the net impact of restatements relating to the CRF and LGAC
which raised disbursements by $38 million, the variance is $886 million. Well
over two-thirds of this variance is in the category of grants to local
governments, primarily reflecting the conservative nature of the original
estimates of projected costs for social services and other programs. Lower
education costs are attributable to the availability of $110 million in
additional lottery proceeds and the use of LGAC bond proceeds.
The spending reductions also reflect $188 million in actions initiated in
January 1995 by the Governor to reduce spending to avert a potential gap in the
1994-95 State Financial Plan. These actions included savings from a hiring
freeze, halting the development of certain services, and the suspension of non-
essential capital projects. These actions, together with $71 million in other
measures comprised the Governor's $259 million gap-closing plan, submitted to
the Legislature in connection with the 1995-96 Executive Budget.
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1995-96 State Financial Plan (Cash Basis). The State issued the first of
the three required quarterly updates to the 1995-96 cash-basis State Financial
Plan on July 28, 1995 (the "First Quarter Update"). The First Quarter Update
projected continued balance in the State's 1995-96 Financial Plan, and
incorporated few revisions to the initial State Financial Plan of June 20, 1995.
The economic forecast was unchanged. A number of small, offsetting changes were
made to the annual receipts and disbursements estimates. The First Quarter
Update also incorporated the restatement of three transactions within the budget
so that these transactions conformed with accounting treatments utilized by the
Office of the State Comptroller. These restatements had the net effect of
reducing both General Fund receipts and disbursements by $251 million;
therefore, they had no impact on the closing balance of the General Fund.
The State issued its second quarterly update to the cash-basis 1995-96
State Financial Plan (the "Mid-Year Update") on October 26, 1995. The Mid-Year
Update projected continued balance in the State's 1995-1996 Financial Plan, with
estimated receipts reduced by a net $71 million and estimated disbursements
reduced by a net $30 million as compared to the First Quarter Update. The
resulting General Fund balance decreased from $213 million in the First Quarter
Update to $172 million in the Mid-Year Update, reflecting the expected use of
$41 million from the Contingency Reserve Fund for payments of litigation and
disallowance expenses. The Mid-Year Update also incorporated changes resulting
from implementation of the Governor's Management Review Plan which was released
on October 12, 1995. The Management Review Plan is expected to produce savings
of $148 million in State fiscal year 1995-96, primarily through Medicaid
utilization controls, consolidation of State agency staffing and office space,
controls on staffing, overtime and contractual expenses, and increased
productivity. Of the $148 million in savings attributable to the Management
Review Plan, $146 million was reflected in lower spending from the General Fund
and $2 million was reflected in increased General Fund receipts.
The State also updated its forecast of national and State economic activity
through the end of calendar year 1996. The national economic forecast remained
basically unchanged from the initial forecast on which the original 1995-96
State Financial Plan was based, while the State economic forecast was marginally
weaker.
Receipts through the first two quarters of the 1995-96 State fiscal year
fell short of expectations by $101 million. Much of this shortfall was due to
time-related delays in sources other than taxes. Based on the revised economic
outlook and actual receipts for the first six months of 1995-96, projected
General Food receipts for the 1995-96 State fiscal year were reduced by $73
million, offset by $2 million in increased revenues and transfers associated
with actions taken in the Management Review Plan.
Disbursements through the first six months of the fiscal year were $89
million less than projected, primarily because of delays in processing payments
following delayed enactment of the State budget. No savings were included in
the Mid-Year Update from this slower-than-expected spending. Projected
disbursements for the 1995-96 State fiscal year were reduced by $30 million
because spending increases in local assistance and State operations was more
than offset by debt service savings and the reductions from the Management
Review Plan.
Financial Plan Update. The State revised the cash-basis 1995-96 State
Financial Plan on December 15, 1995, in conjunction with the release of the
Executive Budget for the 1996-97 fiscal year.
The 1995-96 General Fund Financial Plan continues to be balanced, with
reductions in projected receipts offset by an equivalent reduction in projected
disbursements. Modest changes were made to the Mid-Year Update, reflecting two
more months of actual results, deficiency requests by State agencies (the
largest of which is for school aid resulting from revisions to data submitted by
school districts), and administrative efficiencies achieved by State agencies.
Total General Fund receipts are expected to be approximately $73 million lower
than estimated at the time of the Mid-Year Update. Tax receipts are now
projected to be $29.57 billion, $8 million less than in the earlier plan.
Miscellaneous receipts and transfers from other funds are estimated at $3.15
billion, $65 million lower than in the Mid-Year Update. The largest single
change in these estimates is attributable to the lag in achieving $50 million in
proceeds from sales of State assets, which are unlikely to be completed prior to
the end of the fiscal year.
Projected General Fund disbursements are reduced by a total of $73 million,
with changes made in most major categories of the 1995-96 State Financial Plan.
The reduction in overall spending masks the impact of deficiency requests
totaling more than $140 million, primarily for school aid and tuition assistance
to college students. Offsetting reductions in spending are attributable to the
continued maintenance of strict controls on spending through the fiscal
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year by State agencies, yielding savings of $50 million. Reductions of $49
million in support for capital projects reflect a stringent review of all
capital spending. Reductions of $30 million in debt service costs reflect
savings from refundings undertaken in the current fiscal year, as well as
savings from lower interest rates in the financial market. Finally, the 1995-96
Financial Plan reflects reestimates based on actual results through November,
the largest of which is a reduction of $70 million in projected costs for income
maintenance. This reduction is consistent with declining caseload projects.
The balance in the General Fund at the close of the 1995-96 fiscal year is
expected to be $172 million, entirely attributable to monies in the Tax
Stabilization Reserve Fund following the required $15 million payment into that
Fund. A $40 million deposit to the Contingency Reserve Fund included as part of
the enacted 1995-96 budget will not be made, and the minor balance of $1 million
currently in the Fund will be transferred to the General Fund. These
Contingency Reserve Fund monies are expected to support payments from the
General Fund for litigation related to the State's Medicaid program, and for
federal disallowances.
CHANGES IN FEDERAL AID PROGRAMS CURRENTLY PENDING IN CONGRESS ARE NOT
EXPECTED TO HAVE A MATERIAL IMPACT ON THE STATE'S 1995-96 FINANCIAL PLAN,
ALTHOUGH PROLONGED INTERRUPTIONS IN THE RECEIPT OF FEDERAL GRANTS COULD CREATE
ADVERSE DEVELOPMENTS, THE SCOPE OF WHICH CAN NOT BE ESTIMATED AT THIS TIME. THE
MAJOR REMAINING UNCERTAINTIES IN THE 1995-96 STATE FINANCIAL PLAN CONTINUE TO BE
THOSE RELATED TO THE ECONOMY AND TAX COLLECTIONS, WHICH COULD PRODUCE EITHER
FAVORABLE OR UNFAVORABLE VARIANCES DURING THE BALANCE OF THE YEAR.
State Financial Plan--GAAP-Basis Results--1995-96 Update. The State issued
its first update to the GAAP-basis Financial Plan for the State's 1995-96 fiscal
year on September 1, 1995. The September GAAP-basis update projected a General
Fund operating surplus of $401 million. The prior projection of the 1995-96
GAAP-basis State Financial Plan, issued in March 1995 as part of the 1995-96
Executive Budget, projected an operating surplus in the General Fund of $800
million. The change to the projection primarily reflects the impact of
legislative changes to the 1995-96 Executive Budget, as well as increases in
projected accruals for certain local assistance programs (primarily Medicaid).
Total revenues in the General Fund are projected at $31.871 billion,
consisting of $29.625 billion in tax revenues and $2.246 billion in
miscellaneous revenue. Total expenditures in the General Fund are projected at
$32.444 billion, including $22.678 billion for grants to local governments,
$8.037 billion for State operations, $1.711 billion for general State charges,
and $18 million for debt service. Compared to the projections made in March,
expenditures for grants to local governments are substantially increased,
primarily because of legislative changes to the 1995-96 Executive Budget and
increased projected accruals for Medicaid.
For all governmental funds, the summary GAAP-basis Financial Plan shows an
excess of revenues and other financing sources over expenditures and other
financing uses of $359 million.
1996-97 State Financial Plan. The Governor presented his 1996-97 Executive
Budget to the Legislature on December 15, 1995, one month before the legal
deadline. As provided by the State Constitution, the Governor submitted
amendments to this 1996-97 Executive Budget within 30 days following submission.
See "Amendments to 1996-97 Executive Budget" below.
The 1996-97 Financial Plan projects balance on a cash basis in the General
Fund. It reflects a continuing strategy of substantially reduced State
spending, including program restructurings, reductions in social welfare
spending, and efficiency and productivity initiatives. Total General Fund
receipts and transfers from other funds are projected to be $31.32 billion, a
decrease of $1.4 billion from total receipts projected in the current fiscal
year. Total General Fund disbursements and transfers to other funds are
projected to be $31.22 billion, a decrease of $1.5 billion from spending totals
projected for the current fiscal year. After adjustments and transfers for
comparability between the 1995-96 and 1996-97 State Financial Plans, the
Executive Budget proposes an absolute year-to-year decline in General Fund
spending of 5.8 percent. Spending from all funding sources (including federal
aid) is proposed to increase by 0.4 percent from the prior fiscal year after
adjustments and transfers for comparability.
The Executive Budget proposes $3.9 billion in actions to balance the 1996-
97 Financial Plan. Before reflecting any actions proposed by the Governor to
restrain spending, General Fund disbursements for 1996-97 were projected
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at $35 billion, an increase of $2.3 billion or 7 percent from 1995-96. This
increase would have resulted from growth in Medicaid, inflationary increases in
school aid, higher fixed costs such as pensions and debt service, collective
bargaining agreements, inflation, and the loss of non-recurring resources that
offset spending in 1995-96. Receipts would have been expected to fall by $1.6
billion. This reduction would have been attainable to modest growth in the
State's economy and underlying tax base, the loss of non-recurring revenues
available in 1995-96 and implementation of previously enacted tax reduction
programs.
The Executive Budget proposes to close this gap primarily through a series
of spending reductions and cost containment measures. The Executive Budget
projects (i) over $1.8 billion in savings from cost containment and other
actions in social welfare programs, including Medicaid, welfare and various
health and mental health programs; (ii) $1.3 billion in savings from a reduced
State General Fund share of Medicaid made available from anticipated changes in
the federal Medicaid program, including an increase in the federal share of
Medicaid; (iii) over $450 million in savings from reforms and cost avoidance in
educational services (including school aid and higher education), while
providing fiscal relief from certain State mandates that increase local
spending; and (iv) $350 million in savings from efficiencies and reductions in
other State programs.
The 1996-97 Financial Plan projects receipts of $31.32 billion and spending
of $31.22 billion, allowing for a deposit of $85 million to the Contingency
Reserve Fund and a required repayment of $15 million to the Tax Stabilization
Reserve Fund. Detailed explanations of the 1996-97 Financial Plan follow a
discussion of the economic outlook.
A SIGNIFICANT RISK TO THE 1996-97 STATE FINANCIAL PLAN PROJECTIONS ARISES
FROM TAX LEGISLATION UNDER CONSIDERATION BY CONGRESS AND THE PRESIDENT.
CONGRESSIONALLY-ADOPTED RETROACTIVE CHANGES TO FEDERAL TAX TREATMENT OF CAPITAL
GAINS WOULD FLOW THROUGH AUTOMATICALLY TO THE STATE PERSONAL INCOME TAX. SUCH
CHANGES, IF ULTIMATELY ENACTED, COULD PRODUCE REVENUE LOSSES IN THE 1996-97
FISCAL YEAR.
UNCERTAINTIES WITH REGARD TO BOTH THE ECONOMY AND POTENTIAL DECISIONS AT
THE FEDERAL LEVEL ADD FURTHER PRESSURE ON FUTURE BUDGET BALANCE IN NEW YORK
STATE. FOR EXAMPLE, VARIOUS PROPOSALS RELATING TO FEDERAL TAX AND SPENDING
POLICIES COULD, IF ENACTED, HAVE A SIGNIFICANT IMPACT ON THE STATE'S FINANCIAL
CONDITION IN 1996-97 AND IN FUTURE FISCAL YEARS. SPECIFICALLY, THE ASSUMPTION
OF $1.3 BILLION IN 1996-97 FINANCIAL PLAN SAVINGS FROM A REDUCED STATE GENERAL
FUND SHARE OF MEDICAID IS CONTINGENT UPON ANTICIPATED CHANGES TO FEDERAL
PROVISIONS WHICH WOULD INCREASE THE FEDERAL SHARE OF MEDICAID FROM 50 TO 60
PERCENT. OTHER BUDGET AND TAX PROPOSALS UNDER CONSIDERATION AT THE FEDERAL
LEVEL BUT NOT INCLUDED IN THE STATE'S 1996-97 EXECUTIVE BUDGET FORECAST COULD
ALSO HAVE A DISPROPORTIONATELY NEGATIVE IMPACT ON THE LONGER-TERM OUTLOOK FOR
THE STATE'S ECONOMY AS COMPARED TO OTHER STATES. MOREOVER, THERE CAN BE NO
ASSURANCE THAT THE LEGISLATURE WILL ENACT THE EXECUTIVE BUDGET AS PROPOSED BY
THE GOVERNOR INTO LAW, OR THAT THE STATE'S ADOPTED BUDGET PROJECTIONS WILL NOT
DIFFER MATERIALLY AND ADVERSELY FROM THE PROJECTIONS SET FORTH IN THIS UPDATE.
Amendments to the 1996-97 Executive Budget. The Governor has submitted
several amendments to the Executive Budget. These amendments have a nominal
impact on the State's Financial Plan for 1996-97 and the subsequent years. The
net impact of the amendments leaves unchanged the total estimated amount of
General Fund spending in 1996-97, which continues to be projected at $31.22
billion. All funds spending in 1996-97 is increased by $68 million, primarily
reflecting adjustments to projections of federal funds, and now totals $63.87
billion.
The budget amendments advanced by the Governor involve largely technical
revisions, with General Fund spending increases fully offset by spending
decreases. Reductions in estimated 1996-97 disbursements are recommended
primarily for welfare (associated with updated projections showing a declining
caseload) and debt service (reflecting lower interest rates and recent bond
sales). Disbursement increases are projected for snow and ice control, the AIDS
Institute, Health Department utilization review programs and other items.
Estimated disbursements for other funds are increased to accommodate updated
projections of federal funding in certain categorical grant programs and reduced
for welfare as noted for the General Fund.
State Debt. Under the State Constitution, the State may not, with limited
exceptions for emergencies, undertake long term borrowing (i.e., borrowing for
more than one year) unless the borrowing is authorized in a specific amount for
a single work or purpose by the Legislature and approved by the voters. There
is no limitation on the amount of long
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term debt that may be so authorized and subsequently incurred by the State. With
the exception of housing bonds (which must be paid in equal annual installments,
within 50 years after issuance, commencing no more than three years after
issuance), general obligation bonds must be paid in equal annual installments,
within 40 years after issuance, beginning not more than one year after issuance
of such bonds. The total amount of long term State general obligation debt
outstanding as of March 31, 1995, was approximately $5.181 billion.
The State may undertake short term borrowings without voter approval (i) in
the anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds
from the sale of duly authorized but unissued bonds, by issuing bond
anticipation notes. Tax and revenue anticipation notes must mature within one
year from their dates of issuance and may not be refunded or refinanced beyond
such period. The amount of tax and revenue anticipation notes issued may not
exceed either the amount of appropriations in force or the amount of taxes and
revenues reasonably expected, at the time the notes are issued, to be available
to pay such notes. The State may issue bond anticipation notes only for the
purposes and within the amounts for which bonds may be issued. Such notes must
be paid from the proceeds of the sale of bonds in anticipation of which they
were issued or from other sources within two years of the date of issuance or,
in the case of notes for housing purposes, within five years from the date of
issuance.
In 1990, as part of a State fiscal reform program, legislation was enacted
creating the New York Local Government Assistance Corporation ("LGAC"), a public
benefit corporation empowered to issue long term obligations to fund certain
payments to local governments traditionally funded through the State's annual
seasonal borrowing. The legislation empowered LGAC to issue its bonds and notes
in an amount not in excess of $4.7 billion. Over a period of years, the issuance
of those long term obligations, which will be amortized over no more than 30
years, is expected to result in eliminating the need for continuing short term
seasonal borrowing for those purposes. As of June 30, 1995, LGAC has issued its
bonds to provide net proceeds of $4.7 billion, completing the program. The
impact of LGAC's borrowing is that the State is able to meet its cash flow needs
in the first quarter of the fiscal year without relying on short-term seasonal
borrowings. The 1995-96 State Financial Plan includes no spring borrowing nor
did the 1994-95 State Financial Plan, which was the first time in 35 years there
was no short-term seasonable borrowing. This reflects the success of the LGAC
program in permitting the State to accelerate local aid payments from the first
quarter of the current fiscal year to the fourth quarter of the previous fiscal
year.
Long-term Debt Reform. In June 1994, the Legislature passed a proposed
constitutional amendment that would significantly change the long-term financing
practices of the State and its public authorities. The proposed amendment would
permit the State, within a formula-based cap, to issue revenue bonds, which
would be debt of the State secured solely by a pledge of certain State tax
receipts (including those allocated to State funds dedicated for transportation
purposes), and not by the full faith and credit of the State. In addition, the
proposed constitutional amendment would (i) permit multiple purpose general
obligation bond proposals to be proposed on the same ballot, (ii) require that
State debt be incurred only for capital projects included in a multi-year
capital financing plan, and (iii) prohibit, after its effective date, lease-
purchase and contractual-obligation financing mechanisms for State
facilities.
Before the approved constitutional amendment can be presented to the voters
for their consideration, it must be passed again by a separately elected
Legislature. The amendment must therefore be passed by the newly elected
Legislature in 1995 prior to presentation to the voters in November 1995. The
amendment was passed by the Senate in June 1995, and the Assembly is expected to
pass the amendment shortly. If approved by the voters, the amendment would
become effective January 1, 1996.
1995-96 Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1995-96 fiscal year. The State expects to issue $248 million
in general obligation bonds (including $70 million for purposes of redeeming
outstanding Bond Anticipation Notes) and $186 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up to $33
million in COPs during the State's 1995-96 fiscal year for equipment purchases
and $14 million for capital purposes. The projection of the State regarding its
borrowings for the 1995-96 fiscal year may change if circumstances require.
LGAC is authorized to provide net proceeds of up to $529 million during the
State's 1995-96 fiscal year, to redeem notes sold in June 1995, completing its
financing program as discussed above.
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Borrowings by other public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total $2.7 billion, including costs of issuances, reserve funds,
and other costs, net of anticipated refundings and other adjustments for 1994-95
capital projects. Included therein are borrowings by (i) the Dormitory
Authority of the State of New York ("DA") for SUNY, the City University of New
York ("CUNY"), and health facilities, (ii) MCFFA for mental health facilities;
(iii) Thruway Authority for the Dedicated Highway and Bridge Trust Fund and
Consolidated Highway Improvement Program; (iv) UDC for prison and youth
facilities and economic development programs; (v) the Housing Finance Agency
("HFA") for housing programs; and (vi) other borrowings by the Environmental
Facilities Corporation ("EFC") and the Energy Research and Development Authority
("ERDA").
State-Guaranteed Debt. The State Constitution provides that the State may
guarantee the repayment of certain borrowings to carry out designated projects
by the New York State Thruway Authority, the Job Development Authority and the
Port Authority of New York and New Jersey. As of March 31, 1995, a total of $358
million in such State-guaranteed debt was outstanding. In the case of the Job
Development Authority and the Port Authority of New York and New Jersey,
additional debt may be issued as debt is retired. The State has never been
called upon to make any direct payments pursuant to such guarantees.
Lease-Purchase and Contractual-Obligation Financing Arrangements. Lease
Purchase arrangements have been used to finance the construction of State office
buildings, State University and City University buildings, health and mental
hygiene facilities, to reconstruct and preserve the State's highways, to
construct and rehabilitate prison facilities, and to finance various other State
capital projects. In addition, the State has entered into certain contractual-
obligation financing arrangements with numerous public authorities in connection
with the financing of capital facilities or in the furtherance of certain State
programs.
Moral Obligation Financing. Moral obligation indebtedness, to the extent
authorized by legislation, may be incurred by vote of the governing board of an
authority accompanied, in most cases, with the approval of the public
authority's control board. As of March 31, 1995, approximately $7.009 billion in
moral obligation bonds were outstanding. In fiscal 1987, the State was called
upon to appropriate a total of $162.8 million to make up deficiencies in the
debt service reserve funds of the Housing Finance Agency pursuant to moral
obligation provisions. The State has not been called to make such payments since
fiscal 1987 and no payments are anticipated during Fiscal Year 1995-96.
Debt Ratings. Due primarily to the deteriorating economy and recurring
deficits, Moody's lowered its ratings on New York State general obligations in
1990 from A1 to A. In January 1992, Moody's lowered the ratings on a substantial
number of the State's appropriation-backed debt from A to Baal, and stated that
it had put the State's general obligations under review for possible downgrade
in the future. S&P lowered its rating on the State's general obligations in
March 1990 from AA- to A, and in January 1992, S&P further lowered the rating to
A-. In January 1992, S&P also downgraded to A- various agency debt, State moral
obligations, contractual obligations, lease purchase obligations, guarantees and
school district debt. S&P currently assesses the rating outlook for New York
obligations as "negative."
Litigation. The legal proceedings noted below involve State finances,
State programs and miscellaneous tort, real property and contract claims in
which the State is a defendant and the monetary damages sought are substantial.
These proceedings could affect adversely the financial condition of the State in
the 1995-96 fiscal year or thereafter.
Adverse developments in these proceedings or the initiation of new
proceedings could affect the ability of the State to maintain a balanced 1995-96
State Financial Plan. The State believes that the 1995-96 State Financial Plan
includes sufficient reserves for the payment of judgments that may be required
during the 1995-96 fiscal year. There can be no assurance, however, that an
adverse decision in any of these proceedings would not exceed the amount of the
1995-96 State Financial Plan reserves for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced 1995-96
State Financial Plan. In its General Purpose Financial Statements, the State
reports its estimated liability in subsequent fiscal years for awarded and
anticipated unfavorable judgments.
Although other litigation is pending against the State, except as described
below, no current litigation involves the State's authority, as a matter of law,
to contract indebtedness, issue its obligation, or pay such indebtedness when
its matures, or affects the State's power or ability, as a matter of law, to
impose or collect significant amounts of taxes and revenues.
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In addition to the proceedings noted below, the State is party to other
claims and litigation which its legal counsel has advised are not probable of
adverse court decisions. Although the amounts of potential losses, if any, are
not presently determinable, it is the State's opinion that its ultimate
liability in these cases is not expected to have a material adverse effect on
the State's financial position in the 1995-96 fiscal year or thereafter.
Insurance Law. Two cases challenge provisions of Section 2807-c of the
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Public Health Law, which impose a 13 percent surcharge on inpatient hospital
bills paid by commercial insurers and employee welfare benefit plans, and
portions of Chapter 55 of the Laws of 1992 which require hospitals to impose and
remit to the State an 11 percent surcharge on hospital bills paid by commercial
insurers and which require health maintenance organizations to remit to the
State a surcharge of up to 9 percent. In The Travelers Insurance Company v.
----------------------------------
Cuomo, et al., commenced June 2, 1992, and The Health Insurance Association of
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America, et al. v. Chassin, et al., commenced July 20, 1992, both in the United
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States District Court for the Southern District of New York and consolidated,
plaintiffs allege that the surcharges are preempted by Federal law. By decision
dated April 26, 1995, the United States Supreme Court upheld the surcharges as
not preempted by Federal law.
In Trustees of and The Pension, Hospitalization Benefit Plan of the
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Electrical Industry, et al. v. Cuomo, et al., commenced November 25, 1992 in the
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United States District Court for the Eastern District of New York, plaintiff
employee welfare benefit plans seek a declaratory judgment nullifying on the
ground of Federal preemption provisions of Section 2807-c of the Public Health
Law and implementing regulations which impose a bad debt and charity care
allowance on all hospital bills and a 13 percent surcharge on inpatient bills
paid by employee welfare benefit plans.
Tax Law. Aspects of petroleum business taxes are the subject of
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administrative claims and litigation (e.g., Tug Buster Bouchard, et al. v.
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Wetzler, Supreme Court, Albany County, commenced November 13, 1992). In Tug
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Buster Bouchard, petitioner corporations, which purchase fuel out of State and
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consume such fuel within State, contend that the assessment of the petroleum
business tax pursuant to Tax Law (S)301 to such fuel violates the Commerce
Clause of the United States Constitution. Petitioners contend that the
application of Section 301 to the interstate transaction but not to purchasers
who purchase and consume fuel within the State discriminates against interstate
commerce.
Medicaid Cases. Several cases challenge the rationality and the
--------------
retroactive application of State regulations recalibrating nursing home Medicaid
rates. Following invalidation of such previous regulations by the Court of
Appeals, the State Department of Health in 1991 promulgated new recalibration
regulations, 10 NYCRR (S)86-2.31(a) and (b), for 1989-1991 and 1992 and
subsequent rate years, respectively. In Matter of New York Association of Homes
---------------------------------------
and Services for the Aging, Inc. v. Commissioner (Supreme Court, Albany County;
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Index No. 4885-92), by decision dated June 30, 1994, the Court of Appeals held
invalid the Department's retroactive application to rate years 1989 through 1991
of the nursing home Medicaid reimbursement rate recalibration adjustment set
forth in 10 NYCRR (S)86-2.31(a). Matter of New York Association of Homes and
-------------------------------------------
Services for the Aging, Inc. v. Commissioner (Supreme Court Albany County; Index
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No. 4370-92), challenges the new recalibration regulations for rate years
commencing 1992, and is pending.
In Matter of New York State Health Facilities Association, Inc. et al. v.
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Axelrod, Supreme Court, Albany County, commenced 1990, petitioner nursing homes
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challenge regulations of the State Department of Health, 10 NYCRR (S)86-2.10 (c)
and (d), which reduce base prices for the direct and indirect components of
Medicaid reimbursement for rate years commencing 1989.
In a consolidated action commenced in 1992, Medicaid recipients and home
health care providers and organizations challenge promulgation by the State
Department of Social Services ("DSS") in June 1992 of a home assessment resource
review instrument ("HARRI"), which is to be used by DSS to determine eligibility
for and the nature of home care services for Medicaid recipients, and challenge
the policy of DSS of limiting reimbursable hours of service until a patient is
assessed using the HARRI (Dowd, et al. v. Bane, Supreme Court, New York County).
--------------------
Office of Mental Health Patient-Care Costs. Two actions, Balzi, et al. v.
------------------------------------------ ----------------
Surles, et al., commenced in November 1985 in the United States District Court
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for the Southern District of New York, and Brogan, et al. v. Sullivan, et al.,
----------------------------------
commenced in May 1990 in the United States District Court for the Western
District of New York, now consolidated, challenge the practice of using
patients' Social Security benefits for the costs of care of patients of State
Office of Mental Health facilities.
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Shelter Allowance. In an action commenced in March 1987 against State and
-----------------
New York City officials (Jiggetts, et al. v. Bane, et al.), plaintiffs allege
-------------------------------
that the shelter allowance granted to recipients of public assistance is not
adequate for proper housing.
In an action commenced in 1985 (United States, et al. v. Yonkers Board of
-----------------------------------------
Education, et al.), the United States District Court for the Southern District
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of New York found that Yonkers and its public schools were intentionally
segregated. Yonkers enacted an "education improvement plan" which was adopted
in 1986. Plaintiffs allege that defendants have not fulfilled their
responsibility to alleviate the segregation. On January 19, 1989 the State, the
State Education Department and the New York State Urban Development Corporation
were added as defendants.
Indian Land Claims. On March 4, 1985 in Oneida Indian Nation of New York,
------------------ ---------------------------------
et al. v. County of Oneida, the United States Supreme Court affirmed a judgment
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of the United States Court of Appeals for the Second Circuit holding that the
Oneida Indians have a common-law right of action against Madison and Oneida
Counties for wrongful possession of 872 acres of land illegally sold to the
State in 1795. At the same time, however, the Court reversed the Second Circuit
by holding that a third-party claim by the counties against the State for
indemnification was not properly before the Federal courts. The case was
remanded to the District Court for an assessment of damages, which action is
still pending. The counties may still seek indemnification in the State courts.
Several other actions involving Indian claims to land in upstate New York
are also pending. Included are Cayuga Indian Nation of New York v. Cuomo, et
---------------------------------------------
al., and Canadian St. Regis Band of Mohawk Indians, et al. v. State of New York,
- --- -----------------------------------------------------------------------
et al., both in the United States District Court for the Northern District of
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New York. The Supreme Court's holding in Oneida Indian Nation of New York may
--------------------------------
impair or eliminate certain of the State's defenses to these actions but may
enhance others.
Cogeneration Facility. In Inter-Power of New York, Inc. v. State of New
--------------------- ---------------------------------------------
York, commenced November 16, 1994 in the Court of Claims, plaintiff alleges that
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by reason of the failure of the State's Department of Environmental Conservation
to provide in a timely manner accurate and complete data, plaintiff was unable
to complete by the projected completion date a cogeneration facility, and
thereby suffered damages.
New York City. The fiscal health of the State is closely related to the
fiscal health of its localities, particularly the City, which has required and
continues to require significant financial assistance from the State. The City's
independently audited operating results for each of its 1981 through 1992 fiscal
years, which end on June 30, show a General Fund surplus reported in accordance
with GAAP. The City has eliminated the cumulative deficit in its net General
Fund position. In addition, the City's financial statements for fiscal 1992
received an unqualified opinion from the City's independent auditors, the tenth
consecutive year the City has received such an opinion.
The City, with a population of approximately 7.3 million, is an
international center of business and culture. Its non-manufacturing economy is
broadly based, with the banking and securities, life insurance, communications,
publishing, fashion design, retailing and construction industries accounting for
a significant portion of the City's total employment earnings. Additionally,
the City is the nation's leading tourist destination. Manufacturing activity in
the City is conducted primarily in apparel and printing.
The national economic downturn which began in July 1990 adversely affected
the local economy, which had been declining since late 1989. As a result, the
City experienced job losses in 1990 and 1991 and real Gross City Product ("GCP")
fell in those two years. Beginning in calendar year 1992, the improvement in
the national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
However, after noticeable improvements in the City's economy during calendar
year 1994, economic growth slowed in calendar year 1995, and the City's current
four-year financial plan assumes that economic growth will continue to slow in
calendar year 1996, with local employment increasing modestly.
For each of the 1981 through 1995 fiscal years, the City achieved balanced
operating results as reported in accordance with then applicable generally
accepted accounting principles ("GAAP"). The City was required to close
substantial budget gaps in recent years in order to maintain balanced operating
results. For fiscal year 1995, the City adopted a budget which halted the trend
in recent years of substantial increases in City-funded spending from one year
to the next. There can be no assurance that the City will continue to maintain
a balanced budget as required by State
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law without additional tax or other revenue increases or additional reductions
in City services or entitlement programs, which could adversely affect the
City's economic base.
Pursuant to the laws of the State, the City prepares a four-year annual
financial plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections and outlines
proposed gap-closing programs for years with projected budget gaps. The City's
current four-year financial plan projects substantial budget gaps for each of
the 1997 through 1999 fiscal years, before implementation of the proposed gap-
closing program contained in the current financial plan. The City is required
to submit its financial plans to review bodies, including the New York State
Financial Control Board ("Control Board").
The City depends on State aid both to enable the City to balance its budget
and to meet its cash requirements. The State's 1995-96 Financial Plan projects a
balanced General Fund. There can be no assurance that there will not be
reductions in State aid to the City from amounts currently projected or that
State budgets in future fiscal years will be adopted by the April 1 statutory
deadline or that any such reductions or delays will not have adverse effects on
the City's cash flow or expenditures. In addition, the Federal budget
negotiation process could result in a reduction in or a delay in the receipt of
Federal grants in the City's 1996 fiscal year which could have additional
adverse effects on the City's cash flow or revenues.
The Mayor is responsible for preparing the City's four-year financial plan,
including the City's current financial plan for the 1996 through 1999 fiscal
years (the "1996-1999 Financial Plan" or "Financial Plan"). The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and to meet its annual cash flow and financing
requirements. Such assumptions and contingencies include the condition of the
regional and local economies, the impact on real estate tax revenues of the real
estate market, wage increases for City employees consistent with those assumed
in the Financial Plan, employment growth, the ability to implement proposed
reductions in City personnel and other cost reduction initiatives, which may
require in certain cases the cooperation of the City's municipal unions, the
ability of the New York City Health and Hospitals Corporation ("HHC") and the
Board of Education ("BOE") to take actions to offset reduced revenues, the
ability to complete revenue generating transactions, provision of State and
Federal aid and mandate relief and the impact on City revenues of proposals for
Federal and State welfare reform.
Implementation of the Financial Plan is also dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 1996 through 1999 contemplates the issuance of $11.8 billion of
general obligation bonds primarily to reconstruct and rehabilitate the City's
infrastructure and physical assets and to make other capital investments. In
addition, the City issues revenue and tax anticipation notes to finance its
seasonal working capital requirements. The success of projected public sales of
City bonds and notes will be subject to prevailing market conditions, and no
assurance can be given that such sales will be completed. If the City were
unable to sell its general obligation bonds and notes, it would be prevented
from meeting its planned capital and operating expenditures. Future developments
concerning the City and public discussion of such developments, as well as
prevailing market conditions, may affect the market for outstanding City general
obligation bonds and notes.
The City Comptroller and other agencies and public officials have issued
reports and made public statements which, among other things, state that
projected revenues and expenditures may be different from those forecast in the
City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
On January 31, 1996, the City published the Financial Plan for the 1996-
1999 fiscal years, which is a modification to a financial plan submitted to the
Control Board on July 11, 1995 (the "July Financial Plan") and which relates to
the City, BOE and the City University of New York ("CUNY"). The Financial Plan
sets forth proposed actions by the City for the 1996 fiscal year to close
substantial projected budget gaps resulting from lower than projected tax
receipts and other revenues and greater than projected expenditures. In
addition to substantial proposed agency expenditure reductions, the Financial
Plan reflects a strategy to substantially reduce spending for entitlements for
the 1996 and subsequent fiscal years, and to decrease the City's costs for
Medicaid in the 1997 fiscal year and thereafter by increasing the Federal share
of Medicaid costs otherwise paid by the City. This strategy is the subject of
substantial debate, and implementation of this strategy will be significantly
affected by State and Federal budget proposals currently
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being considered. The Financial Plan, which is consistent with the City's
preliminary budget for the 1997 fiscal year, may be changed significantly by the
time the budget for the 1997 fiscal year is adopted.
1996 Fiscal Year. The July Financial Plan set forth proposed actions to
----------------
close a previously projected gap of approximately $3.1 billion for the 1996
fiscal year. The proposed actions in the July Financial Plan for the 1996
fiscal year included (i) a reduction in spending of $400 million, primarily
affecting public assistance and Medicaid payments by the City; (ii) agency
reduction programs, totaling $1.2 billion; (iii) transitional labor savings,
totaling $600 million; and (iv) the phase-in of the increased annual pension
funding cost due to revisions resulting from an actuarial audit of the City
pension systems, which would reduce such costs in the 1996 fiscal year. A
modification to the July Financial Plan published on November 29, 1995 (the
"November Financial Plan") included savings from a proposed refunding of
outstanding debt and other expenditure reductions to offset a $129 million
increase in projected expenditures.
The 1996-1999 Financial Plan published on January 31, 1996 reflects actual
receipts and expenditures and changes in forecast revenues and expenditures
since the November Financial Plan, and projects revenues and expenditures for
the 1996 fiscal year balanced in accordance with GAAP. For the 1996 fiscal year,
the Financial Plan includes actions to offset an additional $759 million budget
gap resulting primarily from (i) the failure of the Port Authority of New York
and New Jersey (the "Port Authority") to pay disputed back rent for the City's
airports in the amount included in the November Financial Plan, (ii) shortfalls
in Federal and State aid included in the November Financial Plan, (iii)
shortfalls in revenues and in amounts to be saved through gap-closing actions at
BOE, (iv) shortfalls in projected savings from cost containment initiatives
proposed in the July Financial Plan affecting public assistance and Medicaid,
and (v) the failure of the City and its labor unions to identify assumed savings
in the City's health benefits system. The gap-closing measures for the 1996
fiscal year set forth in the Financial Plan include (i) additional proposed
agency actions aggregating $207 million, (ii) the receipt of $150 million from
the Municipal Assistance Corporation for the City of New York ("MAC"), and (iii)
the receipt of $120 million from the proposed sale of mortgages, $75 million
from increased revenues from the proposed sale of City tax liens on real
property and $207 million from the proposed sale of the City's television
station.
The receipt of funds from MAC is subject to approval of MAC, the sale of
the tax liens requires adoption of a local law by the City Council and the
proposed sale of the City's television station is subject to Federal regulatory
approval. In addition, the Federal budget negotiation process for the 1996
Federal fiscal year could result in a reduction in, or a delay in the receipt
of, Federal grants in the City's 1996 fiscal year. If such approvals are not
received on a timely basis, the City may be required to identify alternative
measures to balance its 1996 fiscal year budget. For additional information
concerning changes since the July Financial Plan, which are reflected in the
Financial Plan.
1997-1999 Fiscal Years. The Financial Plan also sets forth projections for
----------------------
the 1997 through 1999 fiscal years and outlines a proposed gap-closing program
to eliminate a projected gap of $2.0 billion for the 1997 fiscal year, and to
reduce projected gaps of $3.3 billion and $4.1 billion for the 1998 and 1999
fiscal years, respectively, assuming successful implementation of the gap-
closing program for the 1996 fiscal year. The projected gaps for the 1997
through 1999 fiscal years have increased from the gaps projected in the November
Financial Plan to reflect (i) reductions in projected property taxes of $177
million, $294 million and $421 million in the 1997, 1998 and 1999 fiscal years,
respectively, due to a lower than forecast increase in the tentative assessment
roll published by the New York City Department of Finance, (ii) reductions in
other forecast tax revenues of $114 million, $216 million and $261 million in
the 1997, 1998 and 1999 fiscal years, respectively, (iii) reductions in tax
revenues of $79 million, $224 million and $341 million in the 1997, 1998 and
1999 fiscal years, respectively, as a result of new tax reduction initiatives,
including a proposed sales tax exemption on clothing items under $500, and (iv)
increased agency expenditures.
The proposed gap-closing actions for the 1997 through 1999 fiscal years
include (i) additional agency actions, totaling between $643 million and $691
million in each of the 1997 through 1999 fiscal years; (ii) additional savings
resulting from State and Federal aid and cost containment in entitlement
programs to reduce City expenditures and increase revenues by $650 million in
the 1997 fiscal year and by $727 million in each of the 1998 and 1999 fiscal
years; (iii) additional proposed Federal aid of $50 million in the 1997 fiscal
year and State aid of $100 million in each of the 1997 through 1999 fiscal
years; (iv) the receipt of $300 million in the 1997 fiscal year from
privatization or other initiatives, including the sale of the City's parking
meters and associated revenues, which may require legislative action
by the City Council, or the sale of other assets; and (v) the assumed receipt of
revenues relating to rent payments for the City's airports, totaling $244
million, $226 million and $70 million in the 1997 through 1999 fiscal
years,
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respectively, which are currently the subject of a dispute with the Port
Authority and the collection of which may depend on the successful completion of
negotiations with the Port Authority or the enforcement of the City's remedies
under the leases through pending legal actions. The City is also preparing an
additional contingency gap-closing program for the 1997 fiscal year to be
comprised of $200 million in additional agency actions.
The Governor has released the 1996-1997 Executive Budget, which will be
considered for adoption by the State Legislature. The City estimates that the
1996-1997 Executive Budget provides the City with $173 million of savings from
Medicaid cost containment proposals and $127 million of savings from proposed
reductions in welfare spending in the 1997 fiscal year. The Financial Plan
assumes that the remaining $350 million of the $650 million of entitlement
reform benefits included in the Financial Plan for the 1997 fiscal year will be
generated by the State providing the City with a portion of the additional funds
received by the State as a result of the increased Federal share of Medicaid
costs proposed in the State Executive Budget. However, the State Executive
Budget does not currently contemplate sharing such funds with the City. In
addition, the President and Congress are currently considering budget proposals
for the 1996 Federal fiscal year. The Federal budget or other factors may cause
substantial amendments to the State Executive Budget.
The Federal and State budgets, when adopted, may result in substantial
reductions in revenues for the City, as well as a reduction in projected
expenditures in entitlement programs, including Medicare, Medicaid and welfare
programs. The Federal and State aid projected in the Financial Plan, and the
substantial savings assumed from cost containment in entitlement programs
included in the Financial Plan gap-dosing program for the 1997 through 1999
fiscal years, will be significantly affected both by the outcome of the current
Federal budget negotiations and by the State budget proposals made by the
Governor and to be considered by the State Legislature. The nature and extent of
the impact on the City of the Federal and State budgets, when adopted, is
uncertain, and no assurance can be given that Federal or State actions included
in the Federal and State adopted budgets may not have a significant adverse
impact on the City's budget and its Financial Plan.
The projections for the 1996 through 1999 fiscal years reflect the costs of
the proposed settlement with the United Federation of Teachers ("UFT") and the
recent settlement with a coalition of unions headed by District Council 37 of
the American Federation of State, County and Municipal Employees, and assume
that the City will reach agreement with its remaining municipal unions under
terms which are generally consistent with such settlements. For further
information concerning the labor settlements, including the rejection by certain
UFT members of the tentative settlement. The projections for the 1996 through
1999 fiscal years also assume that BOE will be able to identify actions to
offset possible substantial shortfalls in Federal, State and City revenues.
The City's financial plans have been the subject of extensive public
comment and criticism. The City Comptroller has issued a report identifying
risks ranging between $408 million and $528 million in the 1996 fiscal year
before taking into account the availability of $160 million in the General
Reserve, and between $2.05 billion and $2.15 billion in the 1997 fiscal year
after implementation of the City's proposed gap-closing actions.
In addition, Moody's and S&P have on several occasions lowered their
ratings of New York State and City debt obligations. On July 10, 1995, S&P
revised its rating of the City's General Obligation Bonds downward softness in
the City's economy, highlighted by weak job growth and a growing dependence on
the historically volatile financial services sector." Other factors identified
by S&P in lowering its rating on City bonds included a trend of using one-time
measures, including debt refinancing, to close projected budget gaps, dependence
on unratified labor savings to help balance the Financial Plan, optimistic
projections on additional Federal and State aid or mandate relief, a history of
cash flow difficulties caused by State budget delays and continued high debt
levels. Moody's ratings on New York City's bonds currently are Baa1. On March
1, 1996, Moody's stated that the rating for City General Obligation Bonds
remains under review pending the outcome of the adoption of the City's budget
for the 1997 fiscal year and in light of he status of the debate on public
assistance and Medicaid are dependent, which may be extensively delayed; and the
seasoning of the City's economy with regard to its strength and direction in the
face of a potential national economic slowdown.
Ratings reflect only the respective views of such organizations, and an
explanation of the significance of such ratings must be obtained from the rating
agency furnishing the same. There is no assurance that a particular rating will
continue for any given period of time or that any such rating will not be
revised downward or withdraw entirely if, in
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the judgment of the agency originally establishing the rating, circumstances so
warrant. A downward revision or withdrawal of such ratings, or either of them,
may have an effect on the market price of the Bonds.
REPURCHASE AGREEMENTS
Securities held by the Funds may be subject to repurchase agreements. A
repurchase agreement is a transaction in which the seller of a security commits
itself at the time of the sale to repurchase that security from the buyer at a
mutually agreed upon time and price. The repurchase price exceeds the sale
price, reflecting an agreed upon interest rate effective for the period the
buyer owns the security subject to repurchase. The agreed upon rate is
unrelated to the interest rate on that security. The investment adviser will
monitor the value of the underlying security at the time the transaction is
entered into and at all times during the term of the repurchase agreement to
ensure that the value of the security always equals or exceeds the repurchase
price. In the event of default by the seller under the repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities. Repurchase agreements are considered to be loans under the
Investment Company Act of 1940, as amended, collateralized by the underlying
securities.
LOANS OF PORTFOLIO SECURITIES
Portfolio securities of the Cash Management, Government and New York Tax-
Free Funds may be lent to brokers, dealers and financial institutions if
collateral, in the form of cash, U.S. Government securities, or other liquid
high grade debt obligations, including letters of credit, equal to at least 100%
of the current market value of the securities loaned (including accrued
dividends and interest thereon) plus the interest payable with respect to the
loan is maintained by the borrower with the lending Fund in a segregated account
maintained by a custodian. The U.S. Treasury Fund is not authorized to lend its
portfolio securities. In determining whether to lend a security to a particular
broker, dealer or financial institution, the investment adviser will consider
all relevant facts and circumstances, including the creditworthiness of the
broker, dealer or financial institution. No Fund will enter into any portfolio
security lending arrangement having a duration of longer than one year. Any
securities which the lending Fund may receive as collateral will not become part
of the Fund's portfolio at the time of the loan and, in the event of a default
by the borrower, the Fund will, if permitted by law, dispose of such collateral
except for such part thereof which is a security in which the Fund is permitted
to invest. During the time securities are on loan, the borrower will pay the
lending Fund an amount equal to any accrued income on those securities, and that
Fund may invest the cash collateral and earn additional income or receive an
agreed upon fee from a borrower which has delivered cash equivalent collateral.
No Fund will lend securities having a value which exceeds 10% of the current
value of its total assets. Loans of securities will be subject to termination
at the lender's or the borrower's option. Each Fund may pay reasonable
administrative and custodial fees in connection with a securities loan and may
pay a negotiated portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers and placing brokers
may not be affiliated, directly or indirectly, with the Trust, its investment
adviser or distributor.
VARIABLE RATE DEMAND NOTES
The Cash Management Fund may from time to time buy variable rate demand
notes issued by corporations, bank holding companies, financial institutions and
government agencies and instrumentalities (but only in the case of taxable
securities). These securities will typically have a maturity in the 5-20 year
range but carry with them the right of the holder to put the securities to a
remarketing agent or other entity on short notice, typically 30 days or less.
The obligation of the issuer of the put to repurchase the securities is backed
up by a letter of credit or other obligation issued by a bank. The purchase
price is ordinarily par plus accrued and unpaid interest. Ordinarily, the
remarketing agent will adjust the interest rate every seven days (or at other
intervals corresponding to the notice period for the put), in order to maintain
the interest rate at the prevailing market rate for securities with a 7-day
maturity.
VARIABLE RATE MASTER DEMAND NOTES
The obligations which the Cash Management Fund and Government Fund may buy
include variable rate master demand notes. The terms of these obligations
permit the investment of fluctuating amounts by these Funds at varying rates of
interest pursuant to direct arrangements between the Funds, as lenders, and the
borrower. They permit weekly, and in some instances, daily, changes in the
amounts borrowed. The Funds have the right to increase the amount under
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the note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may prepay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the lender
and borrower, it is not generally contemplated that they will be traded, and
there is no secondary market for them, although they are redeemable (and thus
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. The Funds have no limitations on the type of issuer from
which the notes will be purchased, except that in the case of the Government
Fund the issuer must be a Federal agency or instrumentality. However, in
connection with such purchases and on an ongoing basis, the investment adviser
will continually monitor the earning power, cash flow and other liquidity ratios
of the issuer, and its ability to pay principal and interest on demand,
including a situation in which all holders of such notes made demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, if not so rated, the Funds may, under their minimum
rating standards, invest in them only if at the time of an investment the issuer
meets the criteria set forth in the Funds' Prospectus for all other debt
obligations.
The New York Tax-Free Fund's assets will be invested primarily in Municipal
Obligations that are exempt from regular Federal, New York State and New York
City income tax in the opinion of bond counsel to the issuers.
The investment objective of each of the Funds and related policies and
activities are not fundamental and may be changed by the Board of Trustees of
the Trust without the approval of shareholders. See "Shares of Beneficial
Interest" in this SAI.
INVESTMENT RESTRICTIONS
The following restrictions are in addition to those described under
"Investment Restrictions" in the Funds' Prospectus.
The U.S. Treasury Fund may not purchase securities other than direct
obligations of the United States Treasury or repurchase agreements pertaining
thereto (there being no limit on the amount of the assets of the U.S. Treasury
Fund which may be invested in the securities of any one issuer of such
obligations).
The Government Fund may not purchase securities other than obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or repurchase agreements pertaining thereto (there being no
limit on the amount of the assets of the Government Fund which may be invested
in the securities of any one issuer of such obligations).
The Cash Management Fund may not:
(1) invest less than 25% of the current value of the total assets of the
Cash Management Fund in bank obligations (including bank obligations subject to
repurchase agreements), provided that if at some future date adverse economic
conditions prevail in the banking industry, the Cash Management Fund may, for
defensive purposes, temporarily invest less than 25% of its assets in bank
obligations;
(2) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the investments of the Cash Management Fund in that
industry would exceed 25% of the current value of the total assets of the Cash
Management Fund, except as required in the immediately preceding investment
restriction and except that there is no limitation with respect to investments
in obligations of the United States Government, its agencies or
instrumentalities;
(3) invest more than 5% of the current value of the total assets of the
Cash Management Fund in the securities of any one issuer (including securities
subject to repurchase agreements), other than obligations of the United States
Government or its agencies or instrumentalities; or
(4) write, purchase or sell puts, calls, warrants or options or any
combination thereof.
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The New York Tax-Free Fund may not:
(1) purchase equity securities or other securities convertible into equity
securities;
(2) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Fund's investments in that industry would exceed 25%
of the current value of the Fund's total assets, provided that there is no
limitation with respect to investments in Municipal Obligations (for the purpose
of this restriction, industrial development and pollution control bonds shall
not be deemed Municipal Obligations if the payment of principal and interest on
such bonds is the ultimate responsibility of nongovernmental users), obligations
of the United States Government, its agencies or instrumentalities, negotiable
certificates of deposit or bankers' acceptances;
(3) purchase or sell real estate (other than municipal obligations or other
money market securities secured by real estate or interests therein or money
market securities issued by companies which invest in real estate or interests
therein), commodities or commodity contracts;
(4) invest more than 5% of the current value of the Fund's total assets in
the securities of any one issuer, other than obligations of the United States
Government, its agencies or instrumentalities or securities which are backed by
the full faith and credit of the United States, except that up to 25% of the
value of the New York Tax-Free Fund's total assets may be invested without
regard to this 5% limitation; or
(5) write, purchase or sell puts, calls, warrants or options or any
combination thereof, except that the New York Tax-Free Fund may enter into
stand-by commitments.
None of the Funds may:
(1) purchase securities on margin (except for short-term credits necessary
for the clearance of transactions) or make short sales of securities (the
deposit or payment by the Funds of initial or maintenance margin in connection
with futures contracts or related options transactions is not considered the
purchase of a security on margin);
(2) underwrite securities of other issuers, except with respect to the New
York Tax-Free Fund and to the extent that the purchase of municipal obligations,
or other permitted investments, directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with a Fund's investment program may be deemed to be an underwriting;
or
(3) purchase restricted securities, which are securities that must be
registered under the Securities Act of 1933 before they may be offered or sold
to the public.
For each Fund, the investment restrictions described above and in the
Funds' Prospectus are fundamental policies which may be changed only when
permitted by law and approved by the holders of a majority of the outstanding
voting securities of that Fund, as described under "Shares of Beneficial
Interest" in this SAI. The definition of issuer for purposes of these
investment restrictions is the same as that described under "Investment
Policies" in this SAI for the purpose of diversification under the Investment
Company Act of 1940.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in the market value of an investment, in the net
or total assets of a Fund, in the securities rating of the investment, or any
other later change.
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MANAGEMENT
TRUSTEES AND OFFICERS
The principal occupations for the past five years of the Trustees and
executive officers of the Trust are listed below. The address of each, unless
otherwise indicated, is 3435 Stelzer Road, Columbus, Ohio 43219. The Trustees
deemed to be "interested persons" of the Trust for purposes of the Investment
Company Act of 1940, as amended, are indicated by an asterisk.
WILLIAM B. BLUNDIN, Chief Executive Officer and Trustee* - Executive Vice
President of BISYS Fund Services, Inc., March 1995 to Present; Vice Chairman of
Concord Holding Corporation, July 1993 to March 1995; Director and President of
Concord Holding Corporation, February 1987 to July 1993; Trustee, HSBC Mutual
Funds Trust.
JOHN P. PFANN, Chairman and Trustee - 43 Captains Walk, Marina Cove, Palm Coast,
Florida 32137. Chairman and President, JPP Equities, Inc.1982 to 1995; Trustee,
HSBC Mutual Funds Trust.
ROBERT A. ROBINSON, Trustee - 251 Laurel Road, New Canaan, Connecticut 06840.
Trustee, Henrietta and E. Frederick H. Bugher Foundation; Trustee, U.S.T. Master
Funds, Inc. and U.S.T. Master Tax-Exempt Funds, Inc. (mutual funds); Trustee,
HSBC Mutual Funds Trust.
WOLFE J. FRANKL, Trustee - 40 Gooseneck Lane, Charlottesville, Virginia 22901.
Trustee, Excelsior Funds, Inc. and Excelsior Tax-Exempt Funds, Inc., and
Excelsior Institutional Funds, Inc. (mutual funds); Director, Deutsche Bank
Financial, Inc.; Director, The Harbus Corporation; Trustee, HSBC Mutual Funds
Trust.
WILLIAM L. KUFTA, Trustee - 97 Main Street, Chatham, New Jersey 07928. Chief
Investment Officer, Beacon Trust Company. Formerly, Senior Vice President,
Rorer Asset Management; Senior Vice President, Pitcairn Financial Management
Group from 1987 to 1991; Trustee, HSBC Mutual Funds Trust.
HARALD PAUMGARTEN, Trustee -330 Madison Avenue, New York, NY 10017. Director,
Corporate Finance, Auerbach and Grayson; President, Paumgarten and Company since
1991; Advisory Managing Director, Lepercq de Neuflize & Co. Incorporated 1993
to1995; Director, Price Waterhouse AG 1992 to 1993; Trustee, HSBC Mutual Funds
Trust.
ANN E. BERGIN, President - First Vice President of BISYS Fund Services, Inc.,
March 1995 to Present; Senior Vice President, Administration, Concord Financial
Group, August 1991 to March 1995; Assistance Vice President, Dreyfus Service
Corporation, 1982 to August 1991.
WILLIAM J. TOMKO, Vice President - Vice President, BISYS Fund Services, Inc.
since 1987.
MARK E. NAGLE, Treasurer - Senior Vice President, Fund Accounting Services,
BISYS Fund Services, Inc., September 1995 to present; Senior Vice President,
Fidelity Institutional Retirement Services 1993 to September 1995; Senior Vice
President, Fidelity Accounting & Custody Services 1981 to 1993.
MARTIN R. DEAN, Assistant Treasurer - Manager, Mutual Fund Accounting, BISYS
Fund Services, Inc. since 1994; Senior Manager, KPMG Peat Marwick 1989 to 1994.
STEVEN R. HOWARD, Secretary - 805 Third Avenue, New York, New York 10022.
Partner, Baker & McKenzie since April, 1991; Partner, Gaston & Snow from 1988 to
1991; Secretary, HSBC Mutual Funds Trust.
ROBERT L. TUCH, Assistant Secretary - Senior Counsel of BISYS Fund Services,
Inc., June 1991 to Present; Vice President and Associate General Counsel with
National Securities Research Corp., July 1990 to June 1991.
-21-
<PAGE>
ALAINA V. METZ, Assistant Secretary - Chief Administrator, Administration
and Regulatory Services of BISYS Fund Services, Inc., June 1995 to Present;
Supervisor of Mutual Fund Legal Department, Alliance Capital Management, May
1989 to June 1995.
Trustees of the Funds receive from the Funds an annual fee and a fee for
attending each meeting of the Trustees and each committee meeting and are
reimbursed for all out-of-pocket expenses relating to attendance at meetings.
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------
Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
from the Funds Benefits Accrued Benefits Upon from the Fund
as Part of Fund Retirement Complex *
Expenses
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wolfe J. Frankl, Trustee $6,590 0.00 N/A $22,000
- -------------------------------------------------------------------------------------------------------
William L. Kufta, Trustee $5,927 0.00 N/A $20,000
- -------------------------------------------------------------------------------------------------------
Harald Paumgarten, 0 0.00 N/A 0
Trustee
- -------------------------------------------------------------------------------------------------------
John P. Pfann, Trustee $6,590 0.00 N/A $22,000
- -------------------------------------------------------------------------------------------------------
Robert A. Robinson, $6,590 0.00 N/A $22,000
Trustee
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Represents the total compensation paid to such persons during the calendar
year ended December 31, 1995 (and with respect to the Funds estimated to be paid
during a full calendar year). Mr. Paumgarten was appointed as a new Trustee
subsequent to December 31, 1995, and, therefore, did not receive any
compensation from the Trust. Trustees that are "interested persons" do not
receive compensation from the Trust in connection with their role as Trustee.
As of the date of this SAI, the Trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares of each Fund.
INVESTMENT ADVISER
The Funds retain HSBC Asset Management Americas Inc. ("HSBC Americas") to
act as the adviser for the Funds. HSBC Americas is the North American
investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking
Corporation) and Marine Midland Bank and is located at 250 Park Avenue, New
York, New York 10177.
The Advisory Contract provides that HSBC Americas shall provide over-all
investment guidance and policy direction in connection with the management of
the Funds. HSBC Americas has agreed to provide to the Trust among other things,
information relating to money market portfolio composition, credit conditions
and average maturity of the portfolio of each Fund. Pursuant to the Advisory
Contract, HSBC Americas also furnishes to the Trust's Board of Trustees periodic
reports on the investment performance of each Fund.
HSBC Americas has also agreed in the Advisory Contract to provide
administrative assistance in connection with the operation of the Funds.
Administrative services provided by HSBC Americas include, among other things
(i) data processing, clerical and bookkeeping services required in connection
with maintaining the financial accounts and records for the Funds, (ii)
compiling statistical and research data required for the preparation of reports
and statements which are periodically distributed to the Funds' officers and
Trustees, (iii) handling general shareholder relations with
-22-
<PAGE>
Fund investors, such as advice as to the status of their accounts, the current
yield and dividends declared to date and assistance with other questions related
to their accounts, and (iv) compiling information required in connection with
the Funds' filings with the Securities and Exchange Commission.
Effective February 1, 1996 the Board of Trustees of HSBC Mutual Funds Trust
approved a Co-Administration Services Contract between the Funds and HSBC
Americas. Pursuant to the Co-Administration Services Contract, HSBC Americas
(i) manages each Fund's relationship with BISYS Fund Services, the
Administrator to the Funds, (ii) assists with negotiation of contracts with
service providers and supervises the activities of those service providers,
(iii) serves as liaison with the Board of Trustees, and (iv) assists with
general product management and oversight. HSBC is paid an annual fee equal to
0.03% of each Fund's average daily net assets pursuant to the Co-Administration
Services Contract.
DISTRIBUTOR
Shares of each of the Funds are offered on a continuous basis and without
sales charges through BISYS Fund Services, the Distributor. The Distributor is
not obligated to sell any specific amount of shares.
SHAREHOLDER SERVICING AGENT
The Trust retains HBSC Americas to act as Shareholder Servicing Agent of
the Funds in accordance with the terms of the Shareholder Servicing Agreement.
Pursuant to the Shareholder Servicing Agreement, HSBC Americas (i) assists and
trains third-parties who deliver prospectuses and Fund applications, (ii)
assists and trains third-parties who assist customers with deliver out Fund
applications, (iii) conducts customer education, reviews Fund written
communications and assists third-parties who answer customer questions, (iv)
organizes and conducts investment seminars to enhance understanding of the Fund
and its objectives, (v) assists personnel who effect customer purchases and
redemptions and (vi) assists and supervises the activities of Participating
Organizations. For its services as Shareholder Servicing Agent, HSBC Americas
is paid an annual fee equal to 0.04% of the Trust's average Trust assets.
ADMINISTRATOR
In accordance with resolutions adopted by the Board of Trustees of the
Trust, as of March 1, 1996, BISYS Fund Services became Administrator of the
Funds pursuant to the terms of an Administration and Accounting Services
Agreement (the "Administrative Services Agreement"), replacing PFPC, Inc.
Pursuant to the Administrative Services Agreement, BISYS Fund Services, (i)
provides administrative and fund accounting services reasonably necessary for
the operation of the Trust and the Funds, other than those services which are
provided by HSBC Americas pursuant to the Advisory Contract, (ii) provides the
Trust with office space and office facilities reasonably necessary for the
operation of the Trust and the Funds, and (iii) employs or associates with
itself such persons as it believes appropriate to assist it in performing its
obligations under the Administrative Services Contract.
The Trust also retains HSBC Americas to act as Co-Administrator of the Fund
in accordance with terms of a Co-Administration Services Contract. Pursuant to
the Co-Administration Services Contract, HSBC Americas (i) manages the Funds'
relationship with service providers, (ii) assists with negotiation of contracts
with service providers and supervises the activities of those service providers,
(iii) serves as a liaison with Board of Trustees, and (iv) assists with general
product management and oversight. For its services as Co-Administrator, HSBC
Americas is paid an annual fee equal to 0.03% of Trust's average daily net
assets.
DISTRIBUTION PLAN AND EXPENSES
Each Fund has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended, after
having concluded that there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders. Each Plan authorizes payments through
BISYS Fund Services to broker-dealers or financial institutions for their
assistance in distributing Fund shares and otherwise promoting the sale of Fund
shares. In addition, each Plan authorizes payments through BISYS Fund Services
for the printing and distribution of prospectuses sent to prospective investors,
the preparation, printing and distribution of sales literature and expenses
associated with media advertisements and telephone services.
-23-
<PAGE>
Each Plan provides for a monthly payment by each Fund not to exceed an
annual rate of 0.20%.
For the year ended December 31, 1995, the Funds incurred the following
amounts in distribution-related fees under the Rule 12b-1 Distribution Plan:
<TABLE>
<CAPTION>
Compensation Printing of
to Prospectuses Retail Postage and
Broker- and Shareholder Marketing Miscellaneous
Fund Dealers Advertising Reports Program Expenses Total
- --------------- --------------- ----------- ---------------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash $184,312 $0 $0 $0 $0 $184,312
Management
- ----------------------------------------------------------------------------------------------------
Government $ 96,545 $0 $0 $0 $0 $ 96,545
- ----------------------------------------------------------------------------------------------------
U.S. Treasury $ 61,751 $0 $0 $0 $0 $ 61,751
- ----------------------------------------------------------------------------------------------------
New York $ 60,753 $0 $0 $0 $0 $ 60,753
- ----------------------------------------------------------------------------------------------------
For the year ended December 31, 1994, the Funds incurred the following
amounts in distribution-related fees under the Rule 12b-1 Distribution Plan:
<CAPTION>
Compensation Printing of
to Prospectuses Retail Postage and
Broker- and Shareholder Marketing Miscellaneous
Fund Dealers Advertising Reports Program Expenses Total
- --------------- --------------- ----------- ---------------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash $135,182 $0 $0 $0 $0 $135,182
Management
- -------------------------------------------------------------------------------------------------------
Government $ 89,193 $0 $0 $0 $0 $ 89,193
- -------------------------------------------------------------------------------------------------------
U.S. Treasury $ 85,359 $0 $0 $0 $0 $ 85,359
- -------------------------------------------------------------------------------------------------------
New York $ 42,401 $0 $0 $0 $0 $ 42,401
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
For the year ended December 31, 1993, the Funds incurred the following
amounts in distribution-related fees under the Rule 12b-1 Distribution Plan:
<CAPTION>
Compensation Printing of
to Prospectuses Retail Postage and
Broker- and Shareholder Marketing Miscellaneous
Fund Dealers Advertising Reports Program Expenses Total
- --------------- --------------- ----------- ---------------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash $165,088 $0 $0 $0 $0 $165,088
Management
- -------------------------------------------------------------------------------------------------------
Government $104,548 $0 $0 $0 $0 $104,548
- -------------------------------------------------------------------------------------------------------
U.S. Treasury $119,552 $0 $0 $0 $0 $119,552
- -------------------------------------------------------------------------------------------------------
New York $ 38,014 $0 $0 $0 $0 $ 38,014
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Plan will continue in effect with respect to the Funds from year to
year provided such continuance is approved annually by a vote of the Board of
Trustees of the Trust and of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to
-24-
<PAGE>
the Plan ("disinterested" Trustees), cast in person at a meeting called for the
purpose of voting on such Plan. The Board of Trustees of the Trust and
"disinterested" Trustees of the Trust approved the continuance of the Plan at a
meeting of the Board of Trustees on January 23, 1996.
ADVISORY AND ADMINISTRATIVE FEES AND EXPENSES
As compensation for its advisory and administrative services, HSBC Americas
is paid a monthly fee with respect to each Fund at the following annual rates:
<TABLE>
<CAPTION>
Portion of average daily
value of net assets of
each Fund Advisory Administrative Total
------------------------ -------- -------------- -----
<S> <C> <C> <C>
Not exceeding $500 million..... 0.350% 0.070% 0.420%
In excess of $500 million but
not exceeding $1 billion...... 0.315% 0.070% 0.385%
In excess of $1 billion but
not exceeding $1.5 billion.... 0.280% 0.070% 0.350%
In excess of $1.5 billion ..... 0.245% 0.070% 0.315%
</TABLE>
For the year ended December 31, 1995, HSBC Americas earned approximately
$744,800, $245,900 and $428,900, in advisory fees for Cash Management, U.S.
Treasury, and Government Funds, respectively. For the same period, HSBC Americas
earned approximately $125,000, net of fee waivers of approximately $93,800, from
the New York Tax-Free Fund. For the year ended December 31, 1994, HSBC Americas
earned $790,398, $440,777, $498,475, and $118,154, in advisory fees for Cash
Management, U.S. Treasury, Government, and New York Tax-Free Funds,
respectively.
For the year ended December 31, 1995, PFPC earned approximately $193,100,
$64,400, $112,900, and $57,900 in administrative fees, net of fee waivers of
approximately $16,000, $5,900, $9,400 and $4,700 for Cash Management, U.S.
Treasury, Government, and New York Tax-Free Funds, respectively. For the six
months ended June 30, 1994, HSBC Americas earned $82,433, $45,568, $48,446, and
$20,757, for Cash Management, U.S. Treasury, Government, and New York Tax-Free
Funds, respectively, in administrative service fees. For the period July 1, 1994
through December 31, 1994, PFPC Inc. earned $96,297, $55,329, $66,170, and
$26,775, net of fee waivers of $10,914, $6,148, $7,397, and $2,975, for Cash
Management, U.S. Treasury, Government and New York Tax-Free Funds, respectively,
in administrative services fees.
For the year ended December 31, 1993, HSBC Americas received advisory and
administrative services fees of $1,200,607, $759,967, $897,481, and $145,961
from the Cash Management, Government, U.S. Treasury, and New York Tax-Free
Funds, respectively. For the same period, HSBC Americas waived fees of $95,805
for the New York Tax-Free Fund.
For the year ended December 31, 1995, HSBC Americas earned co-
administration and shareholder servicing fees of approximately $149,000,
$49,200, $85,700 and $43,800, for the Cash Management, U.S. Treasury, Government
and New York Tax-Free Funds, respectively. Of that total, HSBC Americas waived
approximately $12,500, $6,900, $8,700 and $3,600 for the Cash Management, U.S.
Treasury, Government and New York Tax-Free Funds, respectively.
HSBC Americas may agree in advance not to impose a portion of its fees in
the future.
One of the states in which the shares of the Funds are qualified for sale
imposes limitations on the expenses of the Funds. The Advisory Contract and the
Administrative Services Contract provide that if, in any fiscal year, the total
expenses of a Fund (excluding taxes, interest, brokerage commissions and other
portfolio expenses, other expenditures which are capitalized in accordance with
generally accepted accounting principles and extraordinary expenses, but
including the advisory and administrative and management fees) exceed the
expense limitations applicable to that Fund imposed by the securities
regulations of such state, HSBC Americas will pay or reimburse that Fund in an
amount equal to 100% of that excess. Although there is no certainty that the
state limitation will be in effect in the
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<PAGE>
future, currently the amount, on an annual basis with respect to each Fund, is
equal to 2.5% of the first $30 million of average daily net assets, 2% of the
next $70 million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. For the year ended December 31, 1995, HSBC
Americas was not required to reimburse any of the Funds as a result of these
expense limitations. The New York Tax-Free Fund currently is not subject to any
state expense limitations.
Except for the expenses paid by HSBC Americas and PFPC, Inc. under the
respective contracts, the Trust bears all costs of its operations. Expenses
directly attributable to each Fund are charged to that Fund. Other expenses of
the Trust are allocated among the Funds by the Board of Trustees in a manner
which may, but need not, be proportionate in relation to the net assets of each
Fund.
The Advisory Contract, the Distribution Contract and the Administrative
Services Contract will continue in effect with respect to each Fund from year to
year provided such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of that Fund or by the Trust's
Board of Trustees and (ii) by a majority of the Trustees of the Trust who are
not parties to such contracts or "interested persons" (as defined in the
Investment Company Act of 1940) ("disinterested" Trustees) of any such party.
Each contract may be terminated with respect to the Trust at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of the Trust (as defined in the Investment Company Act of 1940) or by
a vote of a majority of the Trust's entire Board of Trustees on 60 days' written
notice. The Contracts shall terminate automatically in the event of their
assignment (as defined in the Investment Company Act of 1940).
The Board of Trustees of the Trust and the "disinterested" Trustees of the
Trust approved the continuance of each Fund's Advisory Contract, the
Distribution Contract and the Administrative Services Agreement at a meeting of
the Board of Trustees on January 23, 1996.
CALCULATION OF YIELDS
AND PERFORMANCE INFORMATION
From time to time, the Funds quote current yield based on a specific seven
calendar day period. The yield may be used in advertisements and marketing
material. Each of the Money Market Funds calculates a seven day yield by
determining the "net change in value" (exclusive of capital changes) of a
hypothetical account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by 365/7, with the resulting yield figure
carried to the nearest hundredth of one percent.
The Money Market Funds may also advertise an effective yield based on a
specific seven-day period, carried to the nearest hundredth of one percent,
which is calculated by determining the net change, exclusive of capital changes,
in the value of a hypothetical account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then compounding the base period return by adding one, raising the sum to a
power equal to 365 divided by seven, and subtracting one from the result.
For calculating yield and effective yield, "net change in value" of an
account will consist of the value of additional shares purchased with dividends
from the original share and dividends declared on both the original share and
any such additional shares (not including realized gains or losses and
unrealized appreciation or depreciation), less applicable expenses.
The New York Tax-Free Fund may from time to time advertise tax equivalent
yields. Tax equivalent yield is the net annualized taxable yield needed to
produce a specified tax-exempt yield at a given tax rate based on a specified
seven-day period assuming a reinvestment of all dividends paid during such
period. The equivalent yield is calculated by dividing that portion of the New
York Tax-Free Fund's effective yield (calculated in the manner described above)
which is tax-exempt by one minus a stated income tax rate and adding the product
to that portion, if any, of the yield of the Fund that is not tax-exempt.
-26-
<PAGE>
Thirty-day yields for the Funds may also be advertised from time to time
and are calculated by using a method known as "semi-annual compounding." Yield
is calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
Where: yield = 2[(a-b) +1)/6/ -1]
---
cd
a = dividends and interest earned during the period, including the
amortization of market premium or accretion of market discount.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
From time to time, in marketing pieces and other Fund literature, each
Fund's or the Funds' total performance may be compared to the performance of
broad groups of comparable funds or unmanaged indices of comparable securities.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Funds. Sources for Fund performance information
may include, but are not limited to, the following:
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports
the performance rankings and ratings of a variety of mutual funds investing
abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity, and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."
Financial Times, Europe's business newspaper, which features from time
to time articles on international or country-specific funds.
Forbes, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds. Global Investor, a European
publication that periodically reviews the performance of U.S. mutual funds
investing internationally.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.
New York Times, a nationally distributed newspaper which regularly
covers financial news.
-27-
<PAGE>
Personal Investor, a monthly investment advisory publication that
includes a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
DETERMINATION OF NET ASSET VALUE
As indicated under "Determination of Net Asset Value" in the Funds'
Prospectus, the Funds use the amortized cost method to determine the value of
their portfolio securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940. The amortized cost method involves valuing a security at its cost
and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which the value, as determined by amortized cost, is higher or
lower than the price which a Fund would receive if the security were sold.
During these periods the yield to a shareholder may differ somewhat from that
which could be obtained from a similar fund which utilizes a method of valuation
based upon market prices. Thus, during periods of declining interest rates, if
the use of the amortized cost method resulted in lower value of a Fund's
portfolio on a particular day, a prospective investor in that Fund would be able
to obtain a somewhat higher yield than would result from an investment in a fund
utilizing solely market values, and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, each Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities of
thirteen months or less and invest only in securities determined by the Trust's
Board of Trustees to be "eligible securities" as defined by Rule 2a-7 and to
present minimal credit risks. Pursuant to Rule 2a-7, the Board is required to
establish procedures designed to stabilize, to the extent reasonably possible,
the price per share of each Fund, as computed for the purpose of sales and
redemptions, at $1.00. Such procedures include review of the Funds' portfolio
holdings by the Board of Trustees, at such intervals as it may deem appropriate,
to determine whether the net asset value of each Fund calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board of Trustees. If
such deviation exceeds 1/2 of 1%, the Board will promptly consider what action,
if any, will be initiated. In the event the Board determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, the Board will take such corrective action
as it regards as necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or establishing a net asset
value per share by using available market quotations.
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policy
established by the Trust's Board of Trustees, HSBC Americas is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Trust to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While HSBC Americas generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available. The policy of each Fund of
investing in securities with short maturities has resulted in high portfolio
turnover.
Purchases and sales of securities will usually be principal transactions.
Portfolio securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price. Generally, money market securities and Municipal Obligations retraded on
a net basis and do not involve brokerage
-28-
<PAGE>
commissions. The cost of executing portfolio securities transactions for the
Funds primarily consists of dealer spreads and underwriting commissions and,
since June 4, 1982 (commencement of operations), the Trust has paid no brokerage
commissions. Under the Investment Company Act of 1940, persons affiliated with
the Trust or Mariner Funds Services are prohibited from dealing with the Trust
as a principal in the purchase and sale of securities unless a permissive order
allowing such transactions is obtained from the Securities and Exchange
Commission. The Funds may purchase Municipal Obligations from underwriting
syndicates of which an affiliate is a member under certain conditions in
accordance with the provisions of a rule adopted under the Investment Company
Act of 1940.
HSBC Americas may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to HSBC Americas. By allocating
transactions in this manner, HSBC Americas is able to supplement its research
and analysis with the views and information of securities firms.
EXCHANGE PRIVILEGE
Shareholders who have held all or part of their shares in a Fund for at
least seven days may exchange those shares for shares of any of the other
portfolios of the Trust and HSBC Mutual Funds Trust which are available for sale
in their state. Shareholders who exchange shares of any Fund for shares of any
HSBC Mutual Fund will be subject to a sales load. For further information about
the sales load, please see a prospectus for any of the HSBC Mutual Funds.
Before effecting an exchange, shareholders should review the Prospectus for
the portfolio in which they intend to invest. Exercise of the exchange
privilege is treated as a redemption for Federal and New York State and City
income tax purposes and, depending on the circumstances, a gain or loss may be
recognized in the case of a Fund that has not maintained a constant net asset
value per share.
The exchange privilege may be modified or terminated upon sixty (60) days'
prior written notice to shareholders. Although initially there will be no limit
on the number of times a shareholder may exercise the exchange privilege, the
Trust reserves the right to impose such a limitation. Call or write the Trust
for further details.
REDEMPTIONS
Payment of redemption proceeds may be made in securities, subject to
regulation by some state securities commissions. The Trust may suspend the
right of redemption during any period when (i) trading on the New York Stock
Exchange is restricted or that Exchange is closed, other than customary weekend
and holiday closings, (ii) the Securities and Exchange Commission has by order
permitted such suspension or (iii) an emergency exists making disposal of
portfolio securities or determination of the value of the net assets of the
Trust not reasonably practicable.
If a Fund does not maintain a constant net asset value per share, the
proceeds of redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for Federal and New York
State and City income tax purposes.
A shareholder's account with a Fund remains open for at least one year
following complete redemption and all costs during the period will be borne by
the Trust. This permits an investor to resume investments in that Fund during
the period in an amount of $50 or more.
To be in a position to eliminate excessive stockholder expense burdens, the
Trust reserves the right to adopt a policy pursuant to which it may redeem upon
not less than 30 days' notice shares of a Fund in an account which has a value
below a designated amount. However, any shareholder affected by the exercise of
this right will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
The Trust may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that Exchange is closed,
other than customary weekend and holiday closings, (ii) the Securities
-29-
<PAGE>
and Exchange Commission has by order permitted such suspension or (iii) an
emergency exists making disposal of portfolio securities or determination of the
value of the net assets of the Funds not reasonably practicable.
Although it would not normally do so, the Trust has the right to pay the
redemption price in whole or in part in securities of the Funds' portfolio as
prescribed by the Trustees. When a shareholder sells portfolio securities
received in this fashion he would incur a brokerage charge. The Trust has,
however, elected to be governed by Rule 18f-1 under the Investment Company Act
of 1940, as amended. Under that rule, the Trust must redeem its shares for cash
except to the extent that the redemption payments to any shareholder during any
90-day period would exceed the lesser of $250,000 or 1% of a Fund's net asset
value at the beginning of such period.
FEDERAL INCOME TAXES
Each Fund has elected and qualified to be treated as a regulated investment
company during 1995 and intends to continue to so qualify by complying with the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to regulated investment companies so that it will not be subject to
Federal income tax on its net investment income and net realized capital gains
that are distributed to shareholders in accordance with the timing requirements
of the Code.
In order to so qualify, each Fund must, among other things, (a) derive at
least 90% of its annual gross income from dividends, interest, payments with
respect to loans of stock and securities and gains from the sale or other
disposition of stock or securities or foreign currency gains related to
investments in stock or securities or other income (including gains from
options, futures or forward contracts) derived with respect to the business of
investing in stock, securities or currency; (b) derive less than 30% of its
annual gross income from the sale or other disposition of certain investments
held less than three months (excluding some amounts otherwise includable in
income as a result of certain hedging transactions); and (c) diversify its
holdings so that, at the end of each fiscal quarter of its taxable year, (i) at
least 50% of the market value of its assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies
and other stocks and securities limited, in the case of other stocks or
securities for purposes of this calculation, in respect of any one issuer, to an
amount not greater than 5% of its assets or 10% of the voting stocks or
securities of the issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
stocks or securities and securities of other regulated investment companies).
Each portfolio within the Trust will be separate for investment and
accounting purposes and will be treated as a separate taxable entity for Federal
income tax purposes. Provided that each Fund qualifies as a regulated
investment company under the Code, it will not be required to pay Massachusetts
income or excise taxes.
Each Fund will be subject to a 4% non-deductible excise tax to the extent
that it fails to distribute to its shareholders during each calendar year an
amount equal to (a) at least 98% of its taxable ordinary income (excluding long
and short-term capital gain income) for the calendar year; plus (b) at least 98%
of its capital gain net income for the one year period ending on October 31 of
such calendar year; plus (c) any ordinary income or capital gain net income from
the preceding calendar year which was neither distributed to shareholders nor
taxed to the Fund during such year. Each Fund intends to distribute to its
shareholders each year an amount sufficient to avoid the imposition of such
excise tax.
Dividends are not expected to qualify for the dividends-received deduction
available to corporations. As to the tax treatment of redemptions, see
"Redemptions" above.
Each Fund is required to report to the Internal Revenue Service (the "IRS")
all distributions of taxable dividends and of capital gains. Each Fund may be
required to withhold Federal income tax at a rate of 31% ("backup withholding")
from dividends (including capital gain dividends) paid to non-corporate
shareholders who have not furnished the Fund with a correct taxpayer
identification number and made certain required certifications or who have been
notified by the IRS that they are subject to backup withholding. In addition,
the Trust may be required to withhold Federal income tax at a rate of 31% if it
is notified by the IRS or a broker that the taxpayer identification number is
incorrect or that backup withholding applies because of underreporting of
interest or dividend income.
-30-
<PAGE>
Distributions of taxable net investment income and net realized capital
gains will be taxable as described in the Prospectus whether made in shares or
in cash. In determining amounts of net realized capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains. Shareholders electing to receive distributions in the
form of additional shares will have a cost basis for Federal income tax purposes
in each share so received equal to the net asset value of a share of a Fund on
the reinvestment date. Fund distributions will also be included in individual
and corporate shareholders' income on which the alternative minimum tax may be
imposed.
Different tax treatment is accorded to accounts maintained as IRAs,
including a penalty on early distributions. Investors should consult their tax
advisers for more information.
Under the laws of certain states, distributions of net investment income
are taxable to shareholders as dividend income even though a substantial portion
of such distributions may be derived from interest on U.S. Government
obligations which, if received directly by the resident of such state, would be
exempt from such state's income tax.
The amount of capital gains, if any, realized in any given year will result
from sales of securities made with a view to the maintenance of a portfolio
believed by each Fund's management to be most likely to attain such Fund's
objective. Such sales, and any resulting gains or losses, may therefore vary
considerably from year to year.
A Fund's use of equalization accounting, if such method of tax accounting
is used for any taxable year, may affect the amount, timing and character of its
distributions to shareholders.
SPECIAL TAX CONSIDERATIONS FOR THE NEW YORK TAX-FREE FUND
The New York Tax-Free Fund also intends to qualify to pay "exempt-interest
dividends" within the meaning of the Code by holding at the end of each quarter
of its taxable year at least 50% of the value of its total assets in the form of
Municipal Obligations. Dividends derived from interest on Municipal Obligations
that constitute exempt-interest dividends will not be includable in gross income
for Federal income tax purposes and exempt interest dividends derived from
interest on New York Municipal Obligations will not be includable in gross
income for Federal income tax purposes or subject to New York State or City
personal income tax.
However, as described in the Fund's Prospectus, if the New York Tax-Free
Fund invested in Municipal Obligations and New York Municipal Obligations that
are private activity bonds, some portion of exempt-interest dividends paid by
the New York Tax-Free Fund would be treated as an item of tax preference for
purposes of the Federal alternative minimum tax on individuals and corporations.
In addition, a portion of original issue discount relating to stripped Municipal
Obligations and their coupons may be treated as taxable income under certain
circumstances, as will income from repurchase agreements and securities
loans.
Exempt-interest dividends received by corporations which hold shares of the
New York Tax-Free Fund will be part of the "adjusted current earnings" of such
corporations, and will increase the "alternative minimum taxable income" of such
corporations for purposes of the alternative minimum tax on corporations.
Interest on debt incurred to purchase or carry shares in the New York Tax-
Free Fund may not be deductible for federal income tax purposes. Property and
casualty insurance companies will be required to reduce their deductions for
"losses incurred" by a portion of the exempt-interest dividends they receive
from the New York Tax-Free Fund.
The portion of the income from the New York Tax-Free Fund derived from
bonds with respect to which a holder is a "substantial user" will not be tax-
exempt in the hands of such user.
The New York Tax-Free Fund will determine the portion of any distribution
that will qualify as an exempt-interest dividend based on the proportion of its
gross income derived from interest on Municipal Obligations over the course of
the Fund's taxable year. Therefore, the percentage of any particular
distribution designated as an exempt-interest dividend may be substantially
different from the percentage of the New York Tax-Free Fund's gross income
derived from interest on Municipal Obligations for the period covered by the
distribution.
-31-
<PAGE>
Opinions relating to the validity of Municipal Obligations (including New
York Municipal Obligations) and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel for each issue at the time of
issuance. Neither the Trust nor its investment adviser will review the
proceedings relating to the issuance of Municipal Obligations or the basis for
such opinions.
The New York Tax-Free Fund may obtain put rights with respect to certain of
their Municipal Obligations. The Internal Revenue Service has issued published
and private rulings concerning the treatment of such put transactions for
Federal income tax purposes. Since these rulings are ambiguous in certain
respects, there can be no assurance that the Fund will be treated as the owner
of the Municipal Obligations subject to the puts or that the interest on such
obligations received by the Fund will be exempt from Federal income tax (and New
York State and City personal income tax in the case of New York Municipal
Obligations). If the Fund is not treated as the owner of the Municipal
Obligations subject to the puts, distributions of income derived from such
obligations will be taxed as ordinary income. The Fund anticipates that, in any
event, it will remain qualified to pay exempt-interest dividends with respect to
interest derived from other obligations in its portfolio.
Shareholders should consult their own tax advisers with respect to the tax
status of distributions from the New York Tax-Free Fund, and redemptions of Fund
shares, in their own states and localities. Shareholders who are not United
States persons should also consult their tax advisers as to the potential
application of foreign and U.S. taxes, including a 30% U.S. withholding tax (or
lower treaty rate) on dividends representing ordinary income to them.
SHARES OF BENEFICIAL INTEREST
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest having a par value of $0.001 per share. The
Trust's Declaration of Trust authorizes the Board of Trustees to classify or
reclassify any unissued shares of beneficial interest. Pursuant to that
authority, the Board of Trustees has authorized the issuance of four series
representing four portfolios of the Trust.
All shares of the Trust have equal voting rights and will be voted in the
aggregate, and not by class or series, except where voting by class is required
by law or where the matter involved affects only one class. As used in the
Money Funds Prospectus and in this Statement of Additional Information, the term
"majority", when referring to the approvals to be obtained from shareholders in
connection with general matters affecting all of the Funds (e.g., election of
trustees and ratification of independent auditors), means the vote of a majority
of each Fund's outstanding shares represented at a meeting. The term
"majority", when referring to the approvals to be obtained from shareholders in
connection with matters affecting a single Fund (e.g., approval of investment
advisory contracts or changing the fundamental policies of a Fund), means the
vote of the lesser of (i) 67% of the shares of a Fund represented at a meeting
if the holders of more than 50% of the outstanding shares of a Fund are present
in person or by proxy, or (ii) more than 50% of the outstanding shares of a
Fund. Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held.
Each share of a Fund represents an equal proportionate interest in that
Fund with each other share of the same Fund and is entitled to such dividends
and distributions out of the income earned on the assets belonging to that Fund
as are declared in the discretion of the Trust's Board of Trustees. In the
event of the liquidation or dissolution of the Trust, shares of a Fund are
entitled to receive the assets belonging to that Fund which are available for
distribution, and a proportionate distribution, based upon the relative net
assets of the Funds, of any general assets not belonging to a Fund which are
available for distribution.
Shareholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and non-assessable by the Trust.
At March 31, 1996, no person owned of record or, to the knowledge of
management, beneficially owned more than 5% of the outstanding shares of any
Fund, except as set forth below:
SHARES HELD & PERCENT OF CLASS
-32-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NAME & ADDRESS OF CASH GOVERNMENT U.S. TREASURY NEW YORK
HOLDER OF RECORD MANAGEMENT FUND FUND TAX-FREE FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANK OF OKLAHOMA 10,755,872
TULSA, OK 74192 9.42%
- -------------------------------------------------------------------------------------
MARINE MIDLAND BANK 124,257,691 39,945,066 14,745,484 24,958,841
BUFFALO, NY 61.3% 56.1% 41.8% 35.8%
- -------------------------------------------------------------------------------------
CHEMICAL BANK 6,959,984
NEW YORK, NY 10017 9.8%
- -------------------------------------------------------------------------------------
JLS GROUP INC. 1,849,969
NEW YORK, NY 0.2%
- -------------------------------------------------------------------------------------
MORRISON COHEN SINGER & 4,205,978
WEINSTEIN 6.5%
- -------------------------------------------------------------------------------------
TOTAL SHARES OUTSTANDING 202,787,470 71,195,573 35,265,955 64,376,133
=========== ========== ========== ==========
- -------------------------------------------------------------------------------------
</TABLE>
The aforementioned shares were held on behalf of various customer accounts
of the holders of record. Marine Midland, has informed the Trust that it was
not the beneficial owner of any of the shares it held of record. The Trust does
not know the extent to which the other holders of record were beneficial owners
of the shares indicated.
CUSTODIAN, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Bank of New York has been retained to act as custodian for the Money Market
and New York Tax-Free Funds pursuant to a Custodian Agreement. Bank of New
York's address is 90 Washington Street, New York, New York 10286. Under the
Custodian Agreement, the Custodian maintains a custody account or accounts in
the name of each Fund; receives and delivers all assets for each such Fund upon
purchase and upon sale or maturity; collects and receives all income and other
payments and distributions on account of the assets of each such Fund; pays all
expenses of the Funds; receives and pays out cash for purchases and redemptions
of shares of each such Fund and pays out cash if requested for dividends on
shares of each such Fund. Under the Custodian Agreement, the Trust has agreed
to pay the Custodian for furnishing custodian services a fee with respect to
each Fund for certain transaction charges and out-of-pocket expenses.
For the period from January 1, 1995 through September 25, 1995, Marine
Midland earned fees under the Custodian Agreement of approximately $149,000,
$49,200, $85,700, and $7,000, net of fee waivers of approximately $12,500,
$6,900, $8,700 and $0 for Cash Management, U.S. Treasury, Government, and New
York Tax-Free Funds, respectively.
For the year ended December 31, 1994, Marine Midland received fees under
the Custodian Agreement of $44,410, $31,365, $28,952, and $11,242 for Cash
Management, U.S. Treasury, Government, and New York Tax-Free Funds,
respectively.
-33-
<PAGE>
For the year ended December 31, 1993, Marine Midland received fees under
the Custodian Agreement of $50,205, $31,186, $40,031, and $12,772 from the Cash
Management, Government, U.S. Treasury, and New York Tax-Free Funds,
respectively.
The Board of Trustees has authorized the Bank of New York in its capacity
as custodian of the Funds to enter into Subcustodian Agreements with banks that
qualify under the Investment Company Act of 1940 to act as subcustodians with
respect to certain variable rate short-term tax-exempt obligations in each
Fund's portfolio.
BISYS Fund Services has been retained by the Trust to act as transfer agent
and dividend disbursing agent for the Funds. Under the Agency Agreement, BISYS
Fund Services maintains an account in the name of each stockholder of record in
each Fund reflecting purchases, redemptions, daily dividend accruals and monthly
dividend disbursements, processes purchase and redemption requests, issues and
redeems shares of each Fund, addresses and mails all communications by the Trust
to its shareholders, including financial reports, other reports to shareholders,
dividend and distribution notices, tax notices and proxy material for its
shareholder meetings, and maintains records for the foregoing services. Under
the Agency Agreement, each Fund has agreed to pay BISYS Fund Services $15.00 per
account and subaccount (whether maintained by BISYS Fund Services or a
correspondent bank) per annum. In addition, the Funds have agreed to pay BISYS
Fund Services certain transaction charges, wire charges and out-of-pocket
expenses incurred by BISYS Fund Services.
For the years ended December 31, 1995 and 1994 the Funds paid the following
amounts in transfer agent fees to PFPC Inc. and HSBC Americas, BISYS Fund
Services' predecessor, respectively:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------
FUND PFPC HSBC PFPC
- ----------------------------------------------
<S> <C> <C> <C>
Cash Management $190,614 $37,705 $23,922
- ----------------------------------------------
Government 74,111 18,985 21,190
- ----------------------------------------------
U.S. Treasury 46,129 14,861 20,937
- ----------------------------------------------
New York 43,050 14,446 12,017
- ----------------------------------------------
</TABLE>
For the year ended December 31, 1993, HSBC Americas received fees under the
Agency Agreement of $56,396, $30,378, $26,353, and $24,715 from the Cash
Management, Government, U.S. Treasury, and New York Tax-Free Funds,
respectively.
INDEPENDENT AUDITORS
The Board of Trustees of the Trust approved the continuation of Ernst &
Young LLP as the Trust's independent auditors on January 23, 1996. Ernst &
Young LLP provides audit services, tax return preparation and assistance and
consultation in connection with review of Securities and Exchange Commission
filings. Ernst & Young LLP's address is 787 Seventh Avenue, New York, New York
10019.
EXPERTS
-34-
<PAGE>
The financial statements audited by Ernst & Young LLP have been included in
this SAI in reliance on their report, given on the authority of that firm as
experts in auditing and accounting.
-35-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
EXHIBITS
to
POST-EFFECTIVE AMENDMENT NO. 17
to
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
HSBC FUNDS TRUST
<PAGE>
EXHIBIT INDEX - HSBC FUNDS TRUST
Exhibit 1 Amended and Restated Declaration of Trust
Exhibit 2 By-Laws
Exhibit 5(b) Management and Administration Agreement between Registrant and
BISYS Fund Services
Exhibit 5(d) Co-Administration Services Contract between HSBC Asset
Management Americas Inc. and Registrant, dated November 1, 1994
Exhibit 6 Distribution Agreement between Registrant and BISYS Fund
Services
Exhibit 9(a) Transfer Agency Agreement between Registrant and BISYS Fund
Services
Exhibit 9(b) Shareholder Servicing Agreement between Registrant and HSBC
Asset Management Americas Inc. dated November 1, 1994
Exhibit 9(c) Service Organization Agreement between Bank of Oklahoma and
Registrant, dated October 25, 1994
Exhibit 9(d) Fund Accounting Agreement between Registrant and BISYS Fund
Services
Exhibit 10 Consent of Baker & McKenzie, counsel to Registrant
Exhibit 11 Consent of Ernst & Young LLP, independent auditors
Exhibit 15(a) Rule 12b-1 Distribution Plan and Agreement between Registrant
and BISYS Fund Services
Exhibit 17 Financial Data Schedule
Other Exhibits
(a) Powers of Attorney for William B. Blundin, John P. Pfann, Robert
A. Robinson, Wolfe J. Frankl, William L. Kufta, and Harald
Paumgarten
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements
--------------------
(a) Financial Statements:
Financial Statement included in Part A:
--------------------------------------
All Funds
Financial Highlights
Financial Information included in Part B:
----------------------------------------
All Funds
Statements of Net Assets at December 31, 1995
Statements of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for each of the two years ended
December 31, 1994 and December 31, 1995
Notes to Financial Statements
Financial Highlights
Reports of Independent Auditors, dated February 5, 1996
(b) Exhibits:
Exhibit
Number Description
------- -----------
1 -- Amended and Restated
Declaration of Trust.
2 -- By-Laws of Registrant.
3 -- None.
*4 -- Form of Specimen Certificates
of Shares.
*5(a) -- Advisory Contract between Registrant and HSBC Asset
Management Americas, Inc.
II-1
<PAGE>
5(b) -- Management and Administration Agreement between Registrant
and BISYS Fund Services.
**5(c) -- Administration and Accounting Services Agreement between
Registrant and BISYS Fund Services.
5(d) -- Co-Administration Services Contract between HSBC Asset
Management Americas Inc. and Registrant, dated November 1,
1994
6 -- Distribution Agreement between Registrant and BISYS Fund
Services
7 -- None.
**8 -- Custodian Agreement between Registrant and The Bank of New
York
9(a) -- Transfer Agency Agreement between Registrant and BISYS
Fund Services
9(b) -- Shareholder Servicing Agreement between Registrant and
HSBC Asset Management Americas Inc. dated November 1, 1994
9(c) -- Service Organization Agreement between Registrant and Bank
of Oklahoma, dated October 25, 1994
9(d) -- Fund Accounting Agreement between Registrant and BISYS
Fund Services
10 -- Consent of Baker & McKenzie, counsel to Registrant.
11 -- Consent of Ernst & Young LLP, independent auditors.
12 -- None.
13 -- None.
14 -- None.
II-2
<PAGE>
l5(a) -- Rule l2b-l Distribution Plan and Agreement between
Registrant and BISYS Funds Services
*15(b) -- Distributor's Selected Dealer Agreement.
*l6 -- Schedule for Computation of Performance Quotations.
17 -- Financial Data Schedule.
Other Exhibits
(a) -- Powers of Attorney for William B. Blundin, John
P.Pfann, Robert A. Robinson, Wolfe J. Frankl, William L.
Kufta, and Harald Paumgarten.
- -----------------------
* Previously filed.
** To be filed by amendment.
Item 25.Persons Controlled by or under Common Control with Registrant.
-------------------------------------------------------------
None.
Item 26.Number of Holders of Securities at March 31, 1996.
-------------------------------------------------
Cash Management Fund 1,365
Government Fund 332
U.S. Treasury Fund 151
New York Tax-Free Money Market Fund 514
Item 27. Indemnification.
----------------
Reference is made to Article IV of Registrants By-Laws and paragraphs 9 and 10
of the Distribution Contract.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the 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, the Registrant will, unless in
the opinion of its counsel
II-3
<PAGE>
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 Securities Act and will be governed by
the final adjudication of such issue.
The Registrant has in force a National Union Fire Insurance Company Directors
and Officers Liability Policy which covers all present and future directors and
officers of Registrant against loss arising from any civil claim or claims by
reason of "any breach of duty, neglect, error, misstatement, misleading
statement, omission or act done or wrongfully attempted" while acting as
trustees or officers of the Registrant. The period of insurance under the
present policy is for the one-year period ending August 1, 1996. The policy
covers 100% of the excess of $100,000 up to an annual aggregate limit of
$10,000,000 of any losses including legal and other expenses in connection with
any claim.
Item 28. Business and Other Connections
of Investment Adviser
------------------------------
HSBC Asset Management Americas Inc. also serves as the investment adviser to
HSBC Mutual Funds Trust.
Item 29. Principal Underwriter
---------------------
(a) BISYS Fund Services is Sponsor and Distributor for HSBC Mutual Funds Trust.
BISYS also acts as Distributor to a number of other registered investment
companies not affiliated with HSBC Mutual Funds Trust.
II-4
<PAGE>
(b) Officers and Directors
Positions
Name and and Positions and
Principal Business Offices with Offices with
Address Registrant Underwriter
- -------------------------- ---------------- -----------------------
BISYS Fund Service, Inc. None Sole General Partner
3435 Stelzer Road
Columbus, OH 43219
WC Subsidiary Corporation None Sole Limited Partner
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. None Sole Shareholder
150 Clove Road
Little Falls, New Jersey 07424
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder are
maintained at the offices of HSBC Asset Management Americas, Inc., the
Registrant's Investment Adviser and Co-Administrator, and at the offices of
BISYS Fund Services, the Registrant's Administrator, Distributor, Transfer Agent
and Dividend Disbursing Agent, at 3435 Stelzer Road, Columbus, OH 43219.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the removal of a Trustee if requested to do
so by the holders of at least 10% of the Registrant's outstanding
shares.
(b) Registrant undertakes to provide the support to shareholders
specified in Section 16(c) of the 1940 Act as though that Section
applied to the Registrant.
II-5
<PAGE>
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
Shareholders upon request without charge.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on April 24, 1996
HSBC FUNDS TRUST
(Registrant)
By /s/ Ann E. Bergin
------------------------------
Ann E. Bergin, President
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Trustee, Chief Executive April 24, 1996
-------------------------- Officer
William B. Blundin
President April 24, 1996
--------------------------
Ann E. Bergin
Vice President April 24, 1996
--------------------------
William J. Tomko
Treasurer (Principal Finan- April 24, 1996
-------------------------- cial & Accounting Officer)
Mark E. Nagle
* WOLFE J. FRANKL Trustee April 24, 1996
--------------------------
Wolfe J. Frankl
* WILLIAM L. KUFTA Trustee April 24, 1996
--------------------------
William L. Kufta
* HARALD PAUMGARTEN Trustee April 24, 1996
--------------------------
Harald Paumgarten
* JOHN P. PFANN Trustee and April 24, 1996
-------------------------- Chairman
John P. Pfann
* ROBERT A. ROBINSON Trustee April 24, 1996
--------------------------
Robert A. Robinson
</TABLE>
II-8
<PAGE>
* Pursuant to Power of Attorney filed with this Post-Effective Amendment 17
to Registration Statement Nos. 33-1312 and 811-4453.
II-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000781905
<NAME> HSBC FUNDS TRUST
<SERIES>
<NUMBER> 1
<NAME> CASH MANAGEMENT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 169795843
<INVESTMENTS-AT-VALUE> 169795843
<RECEIVABLES> 2080403
<ASSETS-OTHER> 16504
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171892555
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1023707
<TOTAL-LIABILITIES> 1023707
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 170871076
<SHARES-COMMON-STOCK> 170871076
<SHARES-COMMON-PRIOR> 200491575
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<PAGE>
Exhibit 1
Amended and Restated Declaration of Trust
<PAGE>
MARINER FUNDS TRUST
________________________________________________________________
THIRD RESTATED AND AMENDED DECLARATION OF TRUST
DATED as of APRIL 3, 1996
________________________________________________________________
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I NAME AND DEFINITIONS.................................. 2
Section 1.1 Name.................................................. 2
Section 1.2 Definitions........................................... 2
ARTICLE II TRUSTEES.............................................. 4
Section 2.1 Powers................................................ 4
Section 2.2 Legal Title........................................... 8
Section 2.3 Number of Trustees; Term of Office.................... 8
Section 2.4 Qualification of Trustees............................. 8
Section 2.5 Election of Trustees.................................. 8
Section 2.6 Resignation and Removal............................... 9
Section 2.7 Vacancies............................................. 9
Section 2.8 Committees; Delegation................................ 9
Section 2.9 Action Without a Meeting; Participation by Conference
Telephone........................................... 10
Section 2.10 By-Laws............................................... 10
Section 2.11 No Bond Required...................................... 11
Section 2.12 Reliance on Experts, Etc.............................. 11
ARTICLE III CONTRACTS............................................. 12
Section 3.1 Distribution Contract................................. 12
Section 3.2 Advisory or Management Contract....................... 12
Section 3.3 Affiliations of Trustees or Officers, Etc............. 12
ARTICLE IV LIMITATION OF LIABILITY; INDEMNIFICATION.............. 13
Section 4.1 No Personal Liability of Shareholders, Trustees, Etc.. 13
Section 4.2 Execution of Documents; Notice; Apparent Authority.... 13
Section 4.3 Indemnification of Trustees, Officers, Etc............ 13
Section 4.4 Indemnification of Shareholders....................... 14
ARTICLE V SHARES OF BENEFICIAL INTEREST......................... 16
Section 5.1 Beneficial Interest................................... 16
Section 5.2 Rights of Shareholders................................ 16
Section 5.3 Trust Only............................................ 16
Section 5.4 Issuance of Shares.................................... 16
i
<PAGE>
Section 5.4.1 General.........................................16
Section 5.4.2 Price...........................................17
Section 5.4.3 On Merger or Consolidation......................17
Section 5.4.4 Fractional Shares...............................17
Section 5.5 Register of Shares.....................................17
Section 5.6 Share Certificates.....................................17
Section 5.6.1 General.........................................17
Section 5.6.2 Loss of Certificates............................18
Section 5.6.3 Issuance of New Certificates to Pledgee.........18
Section 5.6.4 Discontinuance of Issuance of Certificates......18
Section 5.7 Transfer of Shares.....................................18
Section 5.8 Voting Powers..........................................18
Section 5.9 Meetings of Shareholders...............................19
Section 5.10 Action Without a Meeting...............................19
ARTICLE VI REDEMPTION AND REPURCHASE OF SHARES....................20
Section 6.1 Redemption of Shares...................................20
Section 6.2 Price..................................................20
Section 6.3 Payment................................................20
Section 6.4 Effect of Suspension of Right of Redemption............20
Section 6.5 Repurchase by Agreement................................20
Section 6.6 Suspension of Right of Redemption......................21
Section 6.7 Involuntary Redemption of Shares; Disclosure of
Holding..............................................21
ARTICLE VII DETERMINATION OF NET ASSET VALUE; DISTRIBUTIONS........23
Section 7.1 By Whom Determined.....................................23
Section 7.2 When Determined........................................23
Section 7.3 Computation of Per Share Net Asset Value...............23
Section 7.3.1 Net Asset Value Per Share.....................23
Section 7.3.2 Value of the Net Assets of the Trust..........23
Section 7.4 Interim Determinations.................................25
Section 7.5 Outstanding Shares.....................................25
Section 7.6 Distributions to Shareholders..........................25
Section 7.7 Power to Modify Foregoing Procedures...................26
ii
<PAGE>
ARTICLE VIII CUSTODIAN 27
Section 8.1 Appointment and Duties.................................27
Section 8.2 Action Upon Termination of Custodian Agreement.........27
Section 8.3 Central Certificate System, Etc........................28
Section 8.4 Acceptance of Receipts in Lieu of Certificates.........28
ARTICLE IX DURATION: TERMINATION OF TRUST:
AMENDMENT; MERGERS, ETC................................29
Section 9.1 Duration and Termination...............................29
Section 9.2 Amendment Procedure....................................29
Section 9.3 Merger, Consolidation and Sale of Assets...............30
Section 9.4 Incorporation..........................................30
Section 9.5 Series Vote............................................30
ARTICLE X REPORTS TO SHAREHOLDERS................................31
ARTICLE XI MISCELLANEOUS..........................................32
Section 11.1 Filing.................................................32
Section 11.2 Governing Law..........................................32
Section 11.3 Counterparts...........................................32
Section 11.4 Reliance by Third Parties..............................32
Section 11.5 Provisions in Conflict with Law or Regulations.........32
Section 11.6 Section Headings; Interpretation.......................33
iii
<PAGE>
THIRD RESTATED AND AMENDED
DECLARATION OF TRUST
OF
MARINER FUNDS TRUST
-------------------
DATED AS OF APRIL 3, 1996
THIRD RESTATED AND AMENDED DECLARATION OF TRUST dated as of April 3,
1996 by the Trustees (the "Trustees") of the Mariner Funds Trust (the "Trust").
WHEREAS, there has heretofore been established a trust for the
investment and reinvestment of funds contributed thereto; and
WHEREAS, there was originally filed with the Secretary of State of the
Commonwealth of Massachusetts and the Clerk of the City of Boston a Declaration
of Trust, dated October 31, 1985, creating the Trust; and
WHEREAS, there was filed with the Secretary of State of the
Commonwealth of Massachusetts and the Clerk of the City of Boston a Restated and
Amended Declaration of Trust, dated March 1, 1986, restating and amending such
Declaration of Trust; and
WHEREAS, there was filed with the Secretary of State of the
Commonwealth of Massachusetts and the Clerk of the City of Boston a Restated and
Amended Declaration of Trust, dated May 1, 1988, restating and amending such
Declaration of Trust; and
WHEREAS, the Trustees desire to once again restate and amend the
Declaration of Trust, dated October 31, 1985, and to file such Third Restated
and Amended Declaration of Trust with the Secretary of State of the Commonwealth
of Massachusetts and with the Clerk of the City of Boston; and
WHEREAS, pursuant to Section 9.2(c) of the Declaration of Trust, dated
October 31, 1985, the Trustees have resolved and unanimously voted to restate
and amend such Declaration as herein provided; and
WHEREAS, the Trustees desire the Mariner Funds Trust to be renamed
HSBC Funds Trust;
<PAGE>
NOW THEREFORE, the Trustees hereby declare that the Declaration of
Trust of this Trust be restated and amended as herein provided and that all
money and property contributed to the Trust establishment hereunder and all
proceeds thereof shall be held and managed in trust for the pro rata benefit of
the holders, from time to time, of the shares of beneficial interest issued
hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
--------------------
Section 1.1 Name. The name of the trust created hereby is the
----
"Mariner Funds Trust," and as far as may be practicable the Trustees shall
conduct the business and activities of the trust created hereby and execute all
documents and take all actions under that name or any other name they may from
time to time determine, which name (and the word "Trust" whenever used in this
Declaration, except where the context requires otherwise) shall refer to the
Trustees in their capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents, employees or shareholders of the trust
created hereby or of such Trustees.
Section 1.2 Definitions. Wherever they are used herein, the
-----------
following terms have the following meanings:
"Affiliated Person" shall have the meaning set forth in Section
2(a)(3) of the 1940 Act.
"By-Laws" shall mean the By-Laws, if any, adopted pursuant to Section
2.10 hereof, as from time to time amended.
"Commission" shall mean the Securities and Exchange Commission.
"Custodian" shall mean any Person other than the Trustees who has
custody of any Trust Property as required by Section 17(f) of the 1940 Act.
"Declaration" shall mean this Second Restated and Amended Declaration
of Trust as amended from time to time.
"Distributor" shall have the meaning set forth in Section 3.1 hereof.
"Interested Person" shall have the meaning set forth in Section
2(a)(19) of the 1940 Act.
"Investment Adviser" shall have the meaning set forth in Section 3.2
hereof.
"Investment Sub-Adviser" shall have the meaning set forth in Section
3.2 hereof.
- 2 -
<PAGE>
"Majority Shareholder Vote" shall mean the vote of a majority of the
outstanding voting securities, as defined in Section 2(a)(42) of the 1940 Act.
"1940 Act" shall mean the Investment Company Act of 1940, as amended
from time to time.
"Person" shall mean an individual, a company, a corporation,
partnership, trust, or association, a joint venture, an organization, a
business, a firm or other entity, whether or not a legal entity, or a country,
state, municipality or other political subdivision of any governmental agency or
instrumentality.
"Portfolio" shall mean the assets and liabilities of the Trust which
relate to a Series of Shares.
"Principal Underwriter" shall have the meaning set forth in Section
2(a)(29) of the 1940 Act.
"Series" shall mean a class of Shares.
"Series Majority Shareholder Vote" shall mean the vote of a majority
of the outstanding voting securities of a Series, as defined in Section 2(a)(42)
of the 1940 Act.
"Shareholder" shall mean a record owner of Shares.
"Shares" shall mean the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided from
time to time and includes fractions of Shares as well as whole Shares.
"Transfer Agent" shall mean any Person other than the Trustees who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
"Trust" shall mean the Massachusetts business trust (the "Mariner
Bond Trust") established by this Declaration of Trust, as from time to time
amended.
"Trust Property" shall mean any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
"Trustees" shall mean the individuals who have signed this
Declaration of Trust, so long as they shall continue in office in accordance
with the terms hereof, and all other individuals who may from time to time be
duly elected or appointed, qualified and serving as Trustees in accordance with
the provisions of Article II hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in his or her capacity or their
capacities as trustees hereunder.
- 3 -
<PAGE>
ARTICLE II
TRUSTEES
--------
Section 2.1 Powers. The Trustees, subject only to the specific
------
limitations contained in this Declaration, shall have exclusive and absolute
power, control and authority over the Trust Property and over the business of
the Trust to the same extent as if the Trustees were the sole owners of the
Trust Property and business in their own right, including such power, control
and authority to do all such acts and things as in their sole judgment and
discretion are necessary, incidental, convenient or desirable for the carrying
out of or conducting of the business of the Trust or in order to promote the
interests of the Trust, but with such powers of delegation as may be permitted
by this Declaration. The enumeration of any specific power, control or
authority herein shall not be construed as limiting the aforesaid power, control
and authority or any other specific power, control or authority. The Trustees
shall have power to conduct and carry on the business of the Trust, or any part
thereof, to have one or more offices and to exercise any or all of its trust
powers and rights, in the Commonwealth of Massachusetts, in any other states,
territories, districts, colonies and dependencies of the United States and in
any foreign countries. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. Such powers
of the Trustees may be exercised without order of or resort to any court.
Without limiting the foregoing, the Trustees shall have the power:
(a) To operate as and to carry on the business of an investment
company, and to exercise all the powers necessary and appropriate to the
conduct of such operations.
(b) To subscribe for and to invest and reinvest funds in, and
hold for investment, the securities (including but not limited to bonds,
debentures, time notes, certificates of deposit, commercial paper, bankers'
acceptances and all other evidences of indebtedness and shares, stock,
subscription rights, profit-sharing interests or participations and all
other contracts for or evidences or equity interests) of any Person and to
hold cash uninvested.
(c) To acquire (by purchase, subscription or otherwise), to trade
in and deal in, to sell or otherwise dispose of, to enter into repurchase
agreements and firm commitment agreements with respect to, and to lend and
to pledge any such securities.
(d) To acquire (by purchase, subscription or otherwise), to trade
in and deal in, to sell or otherwise dispose of, options or futures.
- 4 -
<PAGE>
(e) To exercise all rights, powers and privileges of ownership or
interest in all securities included in the Trust Property, including the
right to vote, give assent, execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem proper and
otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such securities and
to delegate, assign, waive or otherwise dispose of any of such rights,
powers or privileges.
(f) To exercise powers and rights of subscription or otherwise
which in any manner arise out of the Trust's ownership of securities.
(g) To declare (from interest, dividends or other income received
or accrued, from accruals of original issue or other discounts on
obligations held, from capital or other profits whether realized or
unrealized and from any other lawful sources) dividends and distributions
on the Shares and to credit the same to the account of Shareholders, or at
the election of the Trustees to accrue income to the account of
Shareholders, on such dates (which may be as frequently as every day) as
the Trustees may determine. Such dividends, distributions or accruals
shall be payable in cash, property or Shares at such intervals as the
Trustees may determine at any time in advance of such payment, whether or
not the amount of such dividend, distribution or accrual can at the time of
declaration or accrual be determined or must be calculated subsequent to
declaration or accrual and prior to payment by reference to amounts or
other factors not yet determined at the time of declaration or accrual
(including but not limited to the amount of a dividend or distribution to
be determined by reference to what is sufficient to enable the Trust to
qualify as a regulated investment company under the United States Internal
Revenue Code or to avoid liability for Federal income tax).
The power granted by this Subsection (g) shall include, without
limitation, and if otherwise lawful, the power (A) to declare dividends or
-
distributions or to accrue income to the account of Shareholders by means
of a formula or other similar method of determination whether or not the
amount of such dividend or distribution can be calculated at the time of
such declaration; (B) to establish record or payment dates for dividends or
-
distributions on any basis, including the power to establish a number of
record or payment dates subsequent to the declaration of any dividend or
distribution; (C) to establish the same payment date for any number of
-
dividends or distributions declared prior to such date; (D)to provide for
-
payment of dividends or distributions declared and as yet unpaid, or unpaid
accrued income, to Shareholders redeeming Shares prior to the
- 5 -
<PAGE>
payment date otherwise applicable; and (E) to provide in advance for
-
conditions under which any dividend or distribution may be payable in
Shares to all or less than all of the Shareholders.
(h) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale, lease or otherwise) any
property, real or personal, and any interest therein.
(i) To borrow money, and in this connection to issue notes or
other evidences of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting to security interests the Trust Property;
and to lend Trust Property.
(j) To aid further investment any Person, if any obligation of or
interest in such Person is included in the Trust Property or if the
Trustees have any direct or indirect interest in the affairs of such
Person; to do anything designed to preserve, protect, improve or enhance
the value of such obligation or interest; and to endorse or guarantee or
become surety on any or all of the contracts, stocks, bonds, notes,
debentures and other obligations of any such Person; and to mortgage the
Trust Property or any part thereof to secure any of or all such
obligations.
(k) To promote or aid the incorporation of any organization or
enterprise under the law of any country, state, municipality or other
political subdivision, and to cause the same to be dissolved, wound up,
liquidated, merged or consolidated.
(l) To enter into joint ventures, general or limited partnerships
and any other combinations or associations.
(m) To purchase and pay for entirely out of Trust Property
insurance policies insuring the Shareholders, Trustees, officers, employees
and agents of the Trust, the Investment Adviser, the Distributor and
dealers or independent contractors of the Trust against all claims and
liabilities of every nature arising by reason of holding or having held any
such position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence, to the
extent the Trust would have the power, under provisions of applicable law,
to indemnify such Person against such liability.
(n) To establish and carry out pension, profit-sharing, share
purchase, share bonus, savings, thrift and other retirement, incentive and
benefit plans for any Trustees, officers, employees or agents of the Trust.
- 6 -
<PAGE>
(o) To the extent permitted by law and determined by the
Trustees, to indemnify any Person with whom the Trust has dealings,
including, without limitation, the Shareholders, the Trustees, the
officers, employees and agents of the Trust, the Investment Adviser, the
Distributor, the Transfer Agent, the Custodian and dealers.
(p) To incur and pay any charges, taxes and expenses which in the
opinion of the Trustees are necessary or incidental to or proper for
carrying out any of the purposes of this Declaration, and to pay from the
funds of the Trust Property to themselves as Trustees reasonable
compensation and reimbursement for expenses.
(q) To prosecute or abandon and to compromise, arbitrate or
otherwise adjust claims in favor of or against the Trust or any matter in
controversy, including but not limited to claims for taxes.
(r) To foreclose any security interest securing any obligations
owed to the Trust.
(s) To exercise the right to consent, and to enter into releases,
agreements and other instruments, including, but not limited to, the right
to consent or participate in any plan for the reorganization, consolidation
or merger of any corporation or issuer any security of which is or was held
by the Trust; to consent to any contract, lease, mortgage, purchase or sale
of such property by said corporation or issuer, and to pay calls or
subscriptions with respect to securities held by the Trust.
(t) To employ or contract with such Persons as the Trustees may
deem desirable for the transaction of the business of the Trust.
(u) To determine and change the fiscal year of the Trust and the
method in which its accounts shall be kept.
(v) To adopt a seal for the Trust, but the absence of such seal
shall not impair the validity of any instrument executed on behalf of the
Trust.
(w) To take such actions as are authorized or required to be
taken by the Trustees pursuant to other provisions of this Declaration.
(x) In general to carry on any other business in connection with
or incidental to any of the objects and purposes of the Trust, to do
everything necessary, suitable or proper for the accomplishment of any
purpose or the attainment of any object or the furtherance of any power
- 7 -
<PAGE>
herein set forth, either alone or in association with others, and to take
any action incidental or appurtenant to or growing out of or connected with
the business, purposes, objects or powers of the Trustees.
The foregoing clauses shall be construed both as objects and as
powers, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited by any law now or hereafter in
effect limiting the investments which may be made or retained by fiduciaries,
but they shall have full power and authority to make any and all investments
within the limitation of this Declaration that they, in their sole and absolute
discretion, shall determine, and without liability for loss even though such
investments do not or may not produce income or are of a character or in an
amount not considered proper for the investment of trust funds.
Section 2.2 Legal Title. Legal title to all the Trust Property
-----------
shall as far as may be practicable be vested in the name of the Trust, which
name shall refer to the Trustees in their capacity as Trustees, and not
individually or personally, and shall not refer to the officers, agents,
employees or Shareholders of the Trust or of the Trustees, provided that the
--------
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees with suitable reference to
their Trustee status, or in the name of the Trust, or in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form, or in the
name of a custodian or sub-custodian or a nominees or otherwise. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee, whether upon such Trustee's
resignation or removal, or upon the due election and qualification of his
successor or upon the occurrence of any of the events specified in the first
sentence of Section 2.7 hereof or otherwise, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing of documents have been executed
and delivered.
Section 2.3 Number of Trustees; Term of Office. The number of
----------------------------------
Trustees shall be six, which number may be increased and thereafter decreased
from time to time by a written instrument signed by a majority of the Trustees,
provided, that the number of Trustees shall not be less than two nor more than
- --------
15. The Trustees shall hold office until the next Shareholders' meeting and
until their successors are elected and qualified or until the earlier occurrence
of any events specified in the first sentence of Section 2.7 hereof.
Section 2.4 Qualification of Trustees. Of the total number of
-------------------------
Trustees, at least 40% shall be persons who are not Interested Persons of the
Trust or of the Distributor.
Section 2.5 Election of Trustees. Except as otherwise provided in
--------------------
Section 2.7 hereof, the Trustees shall be elected at a special Shareholders'
meeting. Trustees may
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<PAGE>
succeed themselves in office. Trustees shall be elected by a plurality of the
votes validly cast. The election of any Trustee (other than an individual who
was serving as a Trustee immediately prior thereto) shall not become effective,
however, until the individual named shall have accepted in writing such election
and agreed in writing to be bound by the terms of this Declaration. Trustees
need not own Shares.
Section 2.6 Resignation and Removal. Any Trustee may resign his
-----------------------
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the Chairman of the Board, or the
Secretary or any Assistant Secretary, and such resignation shall be effective
upon such delivery, or at any later date specified in the instrument. The
Trustees shall promptly call a special Shareholders' meeting for voting on the
question of removal of any Trustee when requested in writing to do so by not
less than 10% of the outstanding shares of the Trust. Any of the Trustees may
be removed (provided the aggregate number of Trustees after such removal shall
not be less than two) with cause by the affirmative vote of two-thirds of the
remaining Trustees. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
Section 2.7 Vacancies. The term of office of a Trustee shall
---------
terminate and a vacancy shall occur in the event of the death, retirement,
resignation or removal (whether pursuant to Section 2.6 hereof or otherwise),
bankruptcy, adjudication of incompetence or other incapacity to perform the
duties of the office of a Trustee. No vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the authorized number of Trustees, the
remaining Trustees shall, subject to the requirement of Section 2.4 hereof, fill
such vacancy by the appointment of such individual as they in their sole and
absolute discretion shall see fit, made by a written instrument signed by a
majority of the Trustees then in office, provided that immediately after filling
--------
any such vacancy at least two-thirds of the Trustees then holding office shall
have been elected to such office by the Shareholders. In the event that at any
time, less than a majority of the Trustees holding office at that time were
elected by the Shareholders, a meeting of the Shareholders shall be held
promptly and in any event within 60 days (unless the Commission shall be order
extend such period) for the purpose of electing Trustees to fill any existing
vacancies. No such appointment or election shall become effective, however,
until the person named shall have accepted in writing such appointment or
election and agreed in writing to be bound by the terms of this Declaration.
Whenever a vacancy is filled as provided in this Section 2.7, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration.
Section 2.8 Committees; Delegation. The Trustees shall have the
----------------------
power to appoint from their own number, and terminate, any one or more
committees consisting of two or
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<PAGE>
more Trustees, including an executive committee which may exercise some or all
of the power and authority of the Trustees as the Trustees may determine
(including but not limited to the power to determine net asset value and net
income), subject to any limitations contained in the By-Laws, and in general to
delegate from time to time to one or more of their number or to officers,
employees or agents of the Trust such power an authority and the doing of such
things and the execution of such instruments, either in the name of the Trust or
the names of the Trustees or otherwise, as the Trustees may deem expedient,
provided, that no committee shall have the power
- --------
(a) to change the principal office of the Trust;
(b) to amend the By-Laws;
(c) to issue Shares;
(d) to elect or remove from office any Trustee or the Chairman of the
Board, the President, the Treasurer, or the Secretary of Trust;
(e) to increase or decrease the number of Trustees;
(f) to declare a dividend or other distribution of the Shares;
(g) to authorize the repurchase of Shares; or
(h) to authorize any merger, consolidation or sale, lease or exchange
of all or substantially all of the Trust Property.
Section 2.9 Action Without a Meeting; Participation by Conference
-----------------------------------------------------
Telephone. Unless the 1940 Act requires that a particular action must be taken
- ---------
only at a meeting of Trustees, any action required or permitted to be taken at
any meeting of the Trustees (or of any committee of the Trustees) may be taken
without a meeting if written consents thereto are signed by a majority of the
Trustees then in office (or by a majority of the members of such committees) and
such written consents are filed with the records of the meetings. Unless the
1940 Act requires that Trustees must be present in person at a meeting of
Trustees, Trustees may participate in a meeting of the Trustees (or of any
committee of the Trustees) by means of a conference telephone or similar
communications equipment if all individuals participating can hear each other at
the same time. Participation in a meeting by these means shall constitute
presence in person at the meeting.
Section 2.10 By-Laws. The Trustees may adopt By-Laws not
-------
inconsistent with this Declaration or law to provide for the conduct of the
business of the Trust, and may amend or repeal such By-Laws.
- 10 -
<PAGE>
Section 2.11 No Bond Required. No Trustee shall be obligated to give
----------------
any bond or other security for the performance of any of his duties hereunder.
Section 2.12 Reliance on Experts, Etc. Each Trustee, officer, agent
-------------------------
and employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected in relying in good faith upon the books of
account or other records of the Trust, or upon reports made to the Trustees (a)
-
by any of the officers or employees of the Trust, (b) by the Investment Adviser,
-
the Investment Sub-Adviser, the Distributor, the Custodian or the Transfer
Agent, or (c) by any accountants, selected dealers or appraisers or other
-
agents, experts or consultants selected with reasonable care by the Trustees,
regardless of whether such agent, expert of consultant may also be a Trustee.
The Trustees, officers, agents and employees of the Trust may take advise of
counsel with respect to the meaning and operation of this Declaration, and shall
be under no liability for any act or omission in accordance with such advice or
for failing to follow such advice. The exercise by the Trustees of their powers
and discretion hereunder and the construction in good faith by the Trustees of
the meaning or effect of any provision of this Declaration shall be binding upon
everyone interested. A Trustee, officer, agent or employee shall be liable for
his own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law.
- 11 -
<PAGE>
ARTICLE III
CONTRACTS
---------
Section 3.1 Distribution Contract. The Trustees may from time to
---------------------
time enter into a distribution contract with another Person (the "Distributor")
providing for the sale of Shares, pursuant to which the Trustees may agree to
sell the Shares to the Distributor or appoint the Distributor their sales agent
for the Shares. Such contract may also provide for the repurchase of Shares by
the Distributor as agent of the Trustees and shall contain such terms and
conditions, if any, as may be prescribed in the By-Laws and such further terms
and conditions not inconsistent with the provisions of this Article III or of
the By-Laws as the Trustees may in their discretion determine.
Section 3.2 Advisory or Management Contract. Subject to the
-------------------------------
approval by a Series Majority Shareholder Vote, the Trustees may from time to
time enter into an investment advisory or management contract with other Persons
(the "Investment Advisers") pursuant to which such Investment Advisers shall
agree to furnish to the Trustees management, investment advisory, statistical
and research facilities and services, with respect to one or more of the
Porfolios of the Trust, such contracts to contain such other terms and
conditions, if any, as may be prescribed in the By-Laws and such further terms
and conditions not inconsistent with the provisions of this Article III, the By-
Laws or applicable law as the Trustees may in their discretion determine,
including the grant of authority to the Investment Adviser to determine what
securities shall be purchased or sold by the Porfolios of the Trust and what
portion of its assets shall be uninvested and to implement its determinations by
making changes in the Portfolio's investments. Such contracts may also provide
for the Trust and such Investment Advisers to enter into contracts with Persons
("Investment Sub-Advisers") pursuant to which management, investment, advisory,
statistical and research facilities may be supplied to the Trust and Investment
Adviser.
Section 3.3 Affiliations of Trustees or Officers, Etc. The fact
------------------------------------------
that any Shareholder, Trustee, officer, agent or employee of the Trust is a
shareholder, member, director, officer, partner, trustee, employee, manager,
adviser or distributor of or for any Person or of or for any parent or affiliate
of any Person with which an investment advisory or management contract,
principal underwriter or distributor contract or custodian, transfer agent,
disbursing agent or similar agency contract may have been or may hereafter be
made, or that any such Person, or any parent or affiliate thereof, is a
Shareholder of or has any other interest in the Trust, or that any such Person
also has any one or more similar contracts with one or more other such Persons,
or has other businesses or interests, shall not affect the validity of any such
contract made or that may hereafter be made with Trustees or disqualify any
Shareholder, Trustee, officer, agent or employee of the Trust from voting upon
or executing the same or create any liability or accountability to the Trustees,
the Trust or the Shareholders.
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<PAGE>
ARTICLE IV
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
Section 4.1 No Personal Liability of Shareholders, Trustees, Etc.
-----------------------------------------------------
No Shareholder shall be subject to any personal liability whatsoever in
connection with Trust Property or the acts, obligations or affairs of the Trust.
All Persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim, and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
employee or agent (including, without limitation, the Investment Adviser, any
Investment Sub-Adviser, The Distributor, the Custodian and the Transfer Agent)
of the Trust, nor shall any Trustee be responsible or liable for the act or
omission of any other Trustee. Nothing in this Declaration shall, however,
protect any Trustee, officer, employee or agent of the Trust against any
liability to which such Person 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.
Section 4.2 Execution of Documents; Notice; Apparent Authority.
--------------------------------------------------
Every note, bond, contract, instrument, certificate or undertaking any every
other act or thing whatsoever 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 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. Every note, bond, contract, instrument, certificate
or undertaking made or issued by the Trustees or by any officers or officer
shall give notice that this Declaration of Trust is on file with the Secretary
of State of the Commonwealth of Massachusetts and shall recite that the
obligations of such instruments are not binding upon any of the Trustees,
Shareholders, officers, employees or agent of the Trust individually but are
binding only upon the assets and property of the Trust, but the omission thereof
shall not operate to bind any Trustees, Shareholders or officers, employees and
agents of the Trust individually. No purchaser, lender, Transfer Agent or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by such officer, employee or agent or
make inquiry concerning or be liable for the application of money or property
paid, loaned or delivered to or on the order of the Trustees or of such officer,
employee or agent.
Section 4.3 Indemnification of Trustees, Officers, Etc. The Trust
-------------------------------------------
shall indemnify each of its Trustees, officers, employees and agents (including
any individual who serves at its request as director, officer, partner, trustee
or the like of another organization in which it has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties and counsel fees reasonably incurred by him
or her in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal,
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<PAGE>
before any court or administrative or legislative body in which he or she may be
or may have been involved as a party or otherwise or with which he or she may be
or may have been threatened, while acting as Trustee or as an officer, employee
or agent of the Trust or the Trustees, as the case may be, or thereafter, by
reason of his or her being or having been such a Trustee, officer, employee or
agent, except with respect to any matter as to which he or she shall have been
adjudicated not to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Trust, provided that no individual
--------
shall be indemnified hereunder against any liability to the Trust or the
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
and provided further that as to any matter disposed of by settlement or a
----------------
compromise payment by such Trustee, officer, employee or agent, pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless there has been a determination that
such compromise is in the best interests of the Trust and that such Person
appears to have acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. All determinations that the
applicable standards of conduct have been met for indemnification hereunder
shall be made by (a) a majority vote of a quorum consisting of disinterested
-
Trustees who are not parties to the proceeding relating to indemnification, or
(b) if such a quorum is not obtainable or, even if obtainable, if a majority
- --
vote of such quorum so directs, by independent legal counsel in a written
opinion, or (c) a Majority Shareholder Vote (excluding Shares owned of record or
-
beneficially by such individual); and provided that as to any matter disposed of
--------
without a court determination (i) on the merits that such Trustees, officer,
-
employee or agent was not liable or (ii) that such Person was not guilty of
--
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, no indemnification shall be
provided hereunder unless there has been a determination by independent legal
counsel in a written opinion that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. The Trustees may make advance
payments in connection with the expense of defending any action with respect to
which indemnification might be sought under this Section 4.3; provided that the
--------
indemnified Trustee, officer, employee or agent shall have given a written
undertaking to reimburse the Trust in the event it is subsequently determined
that he or she is not entitled to such indemnification and provided further that
----------------
(a) the indemnified Trustee, officer, employee or agent shall provide security
-
for his or her undertaking or (b) the Trust shall be insured against losses
-
arising by reason of lawful advances or (c) a majority of a quorum of
-
disinterested Trustees or an independent legal counsel in a written opinion
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that an indemnitee
ultimately will be found entitled to indemnification. The rights accruing to
any Trustee, officer, employee or agent under these provisions shall not exclude
any other right to which he or she may be lawfully entitled and shall inure to
the benefit of his or her heirs, executors, administrators or other legal
representatives.
Section 4.4 Indemnification of Shareholders. In case any
-------------------------------
Shareholder or former Shareholder shall be held to be personally liable solely
by reason of his or her being or
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<PAGE>
having been a Shareholder and not because of acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Trust to be held harmless from and indemnified against all
loss and expense, including legal expense reasonably incurred, arising from such
liability. The rights accruing to a Shareholder under this Section 4.4 shall
not exclude any other right to which such Shareholder may be lawfully entitled,
nor shall anything contained herein restrict the right of the Trust to indemnify
or reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
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<PAGE>
ARTICLE V
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 5.1 Beneficial Interest. The interest of the beneficiaries
-------------------
hereunder shall be divided into transferable shares of beneficial interest, of
$0.001 par value per share ("Shares"). The Trustees shall have the power to
classify and reclassify, as the case may be, any unissued Shares into Series
relating to portfolios (the "Portfolios") of assets in which the Trust may
invest. Each Series of Shares shall be one class, none having preference or
priority with each other Share of that Series, and shall represent an equal
proportionate interest in the Portfolio to which the Shares relate. The
Trustees may from time to time divide or combine the Shares in each Series into
a greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. The number of shares of beneficial interest authorized
hereunder is unlimited.
Section 5.2 Rights of Shareholders. Shares shall be deemed to be
----------------------
personal property giving only the rights provided in this Declaration. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto. The ownership of the Trust Property and the right to conduct any
business hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any loses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The death of
a Shareholder during the continuance of the Trust shall not operate to terminate
the same nor to entitle the legal representative of such Shareholder to an
accounting or to take any action in any court or otherwise against other
Shareholders or the Trustees or the Trust Property, but only to the rights of
such Shareholder hereunder. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights.
Section 5.3 Trust Only. The Trust shall be of the type commonly
----------
termed a Massachusetts business trust. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder form time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 5.4 Issuance of Shares.
------------------
Section 5.4.1 General. The Trustees may from time to time without
-------
vote of the Shareholders issue and sell or cause to be issued and sold Shares,
except that only Shares previously contracted to be sold may be issued during
any period when the right of
- 16 -
<PAGE>
redemption is suspended pursuant to the provisions of Section 6.6 hereof. All
such Shares, when issued in accordance with the terms of this Section 5.4, shall
be fully paid and nonassessable.
Section 5.4.2 Price. No Shares shall be issued or sold by the
-----
Trustees for less than an amount which would result in proceeds to the Trust,
before taxes and other expenses payable by the Trust in connection with such
transaction, of at least the net asset value per share next determined as set
forth in Article VII hereof after receipt of a purchase order for such Shares.
For this purpose, the time of receipt of an order shall be the time it is first
received in proper form at such office or agency as may be designated for the
purpose.
Section 5.4.3 On Merger or Consolidation. In connection with the
--------------------------
acquisition of assets (including the acquisition of assets subject to, and in
connection with the assumption of, liabilities), businesses or stock of another
person, the Trustees may issue or cause to be issued Shares and accept in
payment therefore, in lieu of cash, such assets or businesses at their market
value (as determined by the Trustees) or such stock at the market value (as
determined by the Trustees) of the assets held by such other Person, either with
or without adjustment for contingent costs or liabilities, provided that the
--------
funds of the Trust are permitted by law to be invested in such assets,
businesses or stock.
Section 5.4.4 Fractional Shares. The Trustees may issue and sell
-----------------
fractions of Shares, to two decimal places, having pro rata all the rights of
full Shares, including, without limitation, the right to vote and to receive
dividends and distributions.
Section 5.5 Register of Shares. A register shall be kept at the
------------------
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions or otherwise to exercise or enjoy
the rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or in
the By-Laws provided, until he has given his address to the Transfer Agent or
such other officer or agent of the Trust as shall keep the said register for
entry thereon.
Section 5.6 Share Certificates.
------------------
Section 5.6.1 General. Each shareholder shall be entitled to a
-------
certificate stating the number of Shares he or she owns, in such form as shall
be prescribed from time to time by the Trustees. Such certificates shall be
signed by the Chairman of the Board, President or Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be facsimile if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he or she were such officer at the time of its issue.
- 17 -
<PAGE>
In lieu of issuing certificates for shares, the Trustees or the
transfer agent may either issue receipts therefor or may keep accounts upon the
books of the Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of certificates
for such shares as if they had accepted such certificates and shall be held to
have expressly assented and agreed to the terms hereof.
Section 5.6.2 Loss of Certificates. In case of the alleged loss or
--------------------
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees shall prescribe.
Section 5.6.3 Issuance of New Certificates to Pledgee. A pledgee of
---------------------------------------
shares transferred as collateral security shall be entitled to a new certificate
if the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the pledgor shall be
stated thereon, who alone shall be liable as a shareholder and entitled to vote
thereon.
Section 5.6.4 Discontinuance of Issuance of Certificates. The
------------------------------------------
Trustees may at any time discontinue the issuance of share certificates and may,
by written notice to each shareholder, require the surrender of share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in the Trust.
Section 5.7 Transfer of Shares. Shares shall be transferable on
------------------
the records of the Trust upon delivery to the Trust or the Transfer Agent or
Agents of appropriate evidence of assignment, transfer, succession or authority
to transfer accompanied by any certificate or certificates representing such
Shares previously issued to the transferor. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Trustees, the Transfer Agent, and the officers, employees and agents of the
Trust shall not be entitled or required to treat the assignee or transferee of
any Share as the absolute owner thereof for any purpose, and accordingly shall
not be bound to recognize any legal, equitable or other claim or interest in
such Share on the part of any Person, other than the holder of record, whether
or not any of them shall have express or other notice of such claim or interest.
Section 5.8 Voting Powers. The Shareholders shall have power to
-------------
vote only: (a) for the election of Trustees as provided in Sections 2.5 and 2.7
hereof; (b) with respect to any investment advisory or management contract
entered into pursuant to Section 3.2 hereof; (c) with respect to any termination
of the Trust, as provided in Section 9.1 hereof; (d) with respect to any
amendment of this Declaration to the extent and as provided in Section 9.2
hereof; (e) with respect to any merger, consolidation or sale of assets of the
Trust as provided in Section 9.3 hereof; (f) with respect to incorporation of
the Trust to the extent and as provided in Section 9.4 hereof; (g) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
shareholders; and (h) with respect to such additional matters relating to the
Trust as may be required by this Declaration or the By-
- 18 -
<PAGE>
laws or by reason of the registration of the Trust or the Shares with the
Commission or any State or by any applicable law or any regulation or order of
the Commission or any State or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to any matter on
which Shareholders are entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote. On any matter submitted to a vote
of Shareholders, all Shares issued and outstanding shall be voted in the
aggregate and not by Series except (i) when required by the 1940 Act or (ii)
when the matter does not affect any interest of a particular Series, only
Shareholders of affected Series shall be entitled to vote thereon. A majority of
the Shares voted shall decide any questions, except when a different vote is
specified by applicable law, any provision of the By-Laws or this Declaration.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by Proxy. Until Shares are issued, the Trustees may exercise
all rights of Shareholders (including the right to authorize an amendment to
this Declaration under Section 9.2 hereof) and may take any action required by
law, the By-Laws or this Declaration to be taken by Shareholders. The By-Laws
may include further provisions for Shareholders' votes and related matters.
Section 5.9 Meetings of Shareholders. A special meeting of the
------------------------
Shareholders shall be held for the purpose of reelecting Trustees or electing
new Trustees in place of and to succeed those in office at that time or to fill
vacancies and for such other purposes as may be specified by the Trustees.
Special meetings of the Shareholders may be called at any time by the Chairman
of the Board, the President or any Vice President of the Trust, or by a majority
of the Trustees for the purpose of taking action upon any matter requiring the
vote or authority of the Shareholders as herein provided or upon any other
matters deemed to be necessary or desirable. A special meeting of Shareholders
may also be called at any time upon the written request of a holder or the
holders of not less than 25% of all of the Shares entitled to be voted at such
meeting, provided that the Shareholder or Shareholders requesting such meeting
--------
shall have paid to the Trust the reasonably estimated cost of preparing and
mailing the notice thereof, which the Secretary shall determine and specify to
such Shareholder or Shareholders.
Section 5.10 Action Without a Meeting. Any action which may be
------------------------
taken by Shareholders may be taken without a meeting if such proportion of
Shareholders as is required to vote for approval of the matter by law, the
Declaration or the By-Laws consents to the action in writing and the written
consents are filed with the records of Shareholders' meeting. Such consents
shall be treated for all purposes as a vote taken at a Shareholders' meeting.
- 19 -
<PAGE>
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
Section 6.1 Redemption of Shares. The Trustees shall redeem
--------------------
Shares, subject to the conditions and at the price determined as herein set
forth, upon proper application of the record holder thereof at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees shall have power to determine from time to time the form and the
other accompanying documents which shall be necessary to constitute a proper
application for redemption.
Section 6.2 Price. Such Shares shall be redeemed for an amount not
-----
exceeding the net asset value of such Shares next determined as set forth in
Article VII hereof after receipt of a proper application for redemption.
Section 6.3 Payment. Payment for such Shares redeemed shall be
-------
made to the Shareholder of record within 7 days after the date upon which proper
application is received, subject to the Trustees or their designated agent being
satisfied that the purchase price of such Shares has been collected and to the
provisions of Section 6.4 hereof. Such payment shall be made in cash or other
assets of the Trust or both, as the Trustees shall prescribe. For the purposes
of such payment for Shares redeemed, the value of assets delivered shall be
determined as set forth in Article VII hereof as of the same time as of which
the per share net asset value of such Shares is determined.
Section 6.4 Effect of Suspension of Right of Redemption. If,
-------------------------------------------
pursuant to Section 6.6 hereof, the Trustees shall declare a suspension of the
right of redemption, the rights of Shareholders (including those who shall have
applied for redemption pursuant to Section 6.1 hereof but who shall not yet have
received payment) to have Shares redeemed and paid for by the Trust shall be
suspended until the time specified in Section 6.6. Any record holder who shall
have his redemption right so suspended may, during the period of such
suspension, by appropriate written notice of revocation at the office or agency
where application was made, revoke any application for redemption not honored.
The redemption price of Shares for which redemption applications have not been
revoked shall not exceed the net asset value of such Shares next determined as
set forth in Article VII hereof after the termination of such suspension, and
payment shall be made within 7 days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 6.5 Repurchase by Agreement. The Trust may repurchase
-----------------------
Shares directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share next determined as set forth in Article VII hereof after
the time when the contract of purchase is made.
- 20 -
<PAGE>
Section 6.6 Suspension of Right of Redemption. The Trustees may
---------------------------------
declare a suspension of the right of redemption or postpone the date of payment
or redemption for the whole or any part of any period (a) during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, (b) during which trading on the New York Stock Exchange is restricted,
(c) during which an emergency exists as a result of which disposal by the
Trustees of securities owned by them is not reasonably practicable or it is not
reasonably practicable for the Trustees fairly to determine the value of the net
assets of the Trust, or (d) during which the Commission may for the protection
of security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption. Such
suspension shall take effect at such time as the Trustees shall specify, which
shall not be later than the close of business on the business day next following
the declaration, and thereafter there shall be no determination of net asset
value until the Trustees shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which (i) the
condition giving rise to the suspension shall have ceased to exist and (ii) no
other condition exists under which suspension is authorized under this Section
6.6. Each declaration by the Trustees pursuant to this Section 6.6 shall be
consistent with such applicable rules and regulations, if any, relating to the
subject matter thereof as shall have been promulgated by the Commission or any
other governmental body having jurisdiction over the Trust and as shall be in
effect at the time. To the extent not inconsistent with such rules and
regulations, the determination of the Trustees shall be conclusive.
Section 6.7 Involuntary Redemption of Shares; Disclosure of
-----------------------------------------------
Holding. (a) If the Trustees shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of Shares or other securities of the
Trust has or may become concentrated in any Person to an extent which would
disqualify the Trust as a regulated investment company under the United States
Internal Revenue Code, then the Trustees shall have the power by lot or other
means deemed equitable by them
(i) to call for redemption a number, or principal amount, of
Shares sufficient in the opinion of the Trustees to maintain or bring
the direct or indirect ownership of Shares into conformity with the
requirements for such qualification and
(ii) to refuse to transfer or issue Shares to any Person whose
acquisition of the Shares in question would in the opinion of the
Trustees result in such disqualification.
Any redemption pursuant to this Section 6.7(a) shall be effected at a redemption
price determined in accordance with Section 6.2 hereof.
(b) The holders of Shares shall upon request disclose to the Trustees
in writing such information with respect to direct and indirect ownership of
Shares as the Trustees deem necessary to comply with the provisions of the
United States Internal Revenue Code, or to comply with the requirements of any
other taxing authority.
- 21 -
<PAGE>
(c) The Trustees shall have the power to redeem Shares in any account
at a redemption price determined in accordance with Section 6.2 hereof if at any
time the total number of Shares held in such account is fewer than 100, in which
event Shareholders shall be notified that the number of their Shares is fewer
than 100 and allowed 30 days to purchase additional Shares before their Shares
are redeemed.
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<PAGE>
ARTICLE VII
DETERMINATION OF NET ASSET VALUE; DISTRIBUTIONS
-----------------------------------------------
Section 7.1 By Whom Determined. The Trustees shall have the power
------------------
and duty to determine from time to time the net asset value per share of the
Shares. They may appoint one or more Persons to assist them in the
determination of the value of securities in the Trust's portfolio and to make
the actual calculations pursuant to their directions. Any determination made
pursuant to this Article VII shall be binding on all parties concerned.
Section 7.2 When Determined. The net asset value shall be
---------------
determined at such times as the Trustees shall prescribe in accordance with the
applicable provisions of the 1940 Act and regulations and orders from time to
time in effect thereunder. The Trustees may suspend the daily determination of
net asset value to the extent permitted by the 1940 Act or the regulations and
orders from time to time in effect thereunder.
Section 7.3 Computation of Per Share Net Asset Value.
----------------------------------------
Section 7.3.1 Net Asset Value Per Share. The net asset value of each
-------------------------
Share as of any particular time shall be the quotient obtained by dividing the
value of the net assets of the Trust (determined in accordance with Section
7.3.2) by the total number of outstanding Shares.
Section 7.3.2 Value of the Net Assets of the Trust. The value of the
------------------------------------
net assets of the Trust as of any particular time shall be the value of the
Trust's assets less its liabilities, determined and computed as follows:
(1) Trust's Assets. The Trust's assets shall be deemed to include: (A) all
--------------
cash on hand or on deposit, including any interest accrued thereon, (B) all
bills and demand notes and accounts receivable, (C) all securities owned or
contracted for by the Trustees, (D) all stock and cash dividends and cash
distributions payable to but not yet received by the Trustees (when the
valuation of the underlying security is being determined ex-dividend), (E) all
interest accrued on any interest-bearing securities owned by the Trustees
(except accrued interest included in the valuation of the underlying security)
and (F) all other property of every kind and nature, including prepaid expenses.
(2) Valuation of Assets. The value of such assets is to be determined as
-------------------
follows:
(i) Cash and Prepaid Expenses. The value of any cash on hand and of any
-------------------------
prepaid expenses shall be deemed to be their full amount.
- 23 -
<PAGE>
(ii) Other Current Assets. The value of any accounts receivable and
--------------------
cash dividends and interest declared or accrued as aforesaid and not yet
received shall be deemed to be the full amount thereof, unless the Trustees
shall determine that any such item is not worth its full amount. In such case
the value of the item shall be deemed to be its reasonable value, as determined
by the Trustees.
(iii) Securities and Other Property. A security for which market
-----------------------------
quotations are readily available which is not subject to restrictions against
sale and has a remaining maturity of more than 60 days from the date of
valuation may be valued on the basis of such quotations. Any security which has
a remaining maturity of 60 days or less may be valued at cost plus earned
discount; if such security was acquired with a remaining maturity of more than
60 days, the cost thereof for purposes of such valuation shall be deemed to be
the value on the sixty-first day prior to maturity. Any security for which
market quotations are not readily available and any other property the valuation
of which is not provided for above, shall be valued at its fair market value as
determined in such manner as the Trustees shall from time to time prescribe by
resolution. For the purposes of this Article VII, market quotations shall not be
deemed to be readily available if in the judgment of the Trustees such
quotations, if any, do not afford a fair and adequate basis for valuing holdings
of securities of a size normally held by the Trust, whether due to the
infrequency or size of the transactions represented by such quotations or
otherwise.
(3) Liabilities. The Trust's liabilities shall not be deemed to include
-----------
any Shares and surplus, but they shall be deemed to include: (A) all bills and
accounts payable, (B) all administrative expenses accrued and unpaid, (C) all
contractual obligations for the payment of money or property, including the
amount of any declared but unpaid dividends upon Shares and the amount of all
income accrued but not paid to Shareholders, (D) all reserves authorized or
approved by the Trustees for taxes or contingencies and (E) all other
liabilities of whatsoever kind and nature except any liabilities represented by
Shares and surplus.
(4) Series of Shares. When the Trust has more than one Series of Shares
----------------
outstanding relating to separate Portfolios of assets and liabilities, the net
asset value of the Shares as determined in Section 7.3.2 hereof shall be
determined as if each such Portfolio were the Trust as referred to in such
computation, but with its assets limited to the assets belonging to such
Portfolio, its liabilities limited to the liabilities belonging to such
Portfolio and the total number of Shares deemed to be outstanding limited to the
outstanding Shares of such Series.
- 24 -
<PAGE>
Section 7.4 Interim Determinations. Any determination of net asset
----------------------
value other than as of the close of trading on the New York Stock Exchange may
be made either by appraisal or by calculation or estimate. Any such calculation
or estimate shall be based on changes in the market value of representative or
selected securities or on changes in recognized market averages since the last
closing appraisal and made in a manner which in the opinion of the Trustees will
fairly reflect the changes in the net asset value.
Section 7.5 Outstanding Shares. For the purpose of this Article
------------------
VII, outstanding Shares shall mean those Shares shown from time to time on the
books of the Trust or the Transfer Agent as then issued and outstanding,
adjusted as follows:
(a) Shares sold shall be deemed to be outstanding Shares from the
time when the sale is reported to the Trustees or their agents for
determining net asset value, but not before (i) an unconditional purchase
order therefor has been received by the Trustees (directly or through one
of their agents) or by the Principal Underwriter of the Shares and the sale
price in currency has been determined and (ii) receipt by the Trustees
(directly or through one of their agents) of Federal funds in the amount of
the sale price; and such sale price (net of commission, if any, and any
stamp or other tax payable by the Trust in connection with the issue and
sale of the Shares sold) shall be thereupon deemed to be an asset of the
Trust.
(b) Shares distributed pursuant to Section 7.6 shall be deemed to
be outstanding as of the time that Shareholders who shall receive the
distribution are determined.
(c) Shares for which a proper application for redemption has been
made or which are subject to repurchase by the Trustees shall be deemed to
be outstanding Shares up to and including the time as of which the
redemption or repurchase price is determined. After such time, they shall
be deemed to be no longer outstanding Shares and the redemption or purchase
price until paid shall be deemed to be a liability of the Trust.
Section 7.6 Distributions to Shareholders. Without limiting the
-----------------------------
powers of the Trustees under Subsection (f) of Section 2.1 of Article II hereof,
the Trustees may at any time and from time to time, as they may determine,
allocate or distribute to Shareholders of each Series such income and capital
gains of the Portfolio related to the Series, accrued or realized, as the
Trustees may determine, after providing for actual, accrued or estimated
expenses and liabilities (including such reserves as the Trustees may establish)
determined in accordance with generally accepted accounting practices. The
Trustees shall have full discretion to determine which items shall be treated as
income and which items as capital and their determination shall be binding upon
the Shareholders. Such distributions shall be made in cash, property or Shares
or any combination thereof as determined by the Trustees. Any such distribution
paid in Shares
- 25 -
<PAGE>
shall be paid at the net asset value thereof as determined pursuant to this
Article VII. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate. Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof on the books
of the Trust, the above provisions shall be interpreted to give the Trustees the
power in their discretion to allocate or distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust to avoid or reduce liability for taxes.
Section 7.7 Power to Modify Foregoing Procedures. Notwithstanding
------------------------------------
any of the foregoing provisions of this Article VII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for the determination
of the per share net asset value of Shares as may be permitted by, or as they
may deem necessary or desirable to enable the Trust to comply with, any
provision of the 1940 Act, any rule or regulation thereunder (including any rule
or regulation adopted pursuant to Section 22 of the 1940 Act by the Commission
or any securities association or exchange registered under the Securities
Exchange Act of 1934, as amended) or any order of exemption issued by the
Commission, all as in effect now or as hereafter amended or modified.
- 26 -
<PAGE>
ARTICLE VIII
CUSTODIAN
---------
Section 8.1 Appointment and Duties. Subject to the 1940 Act and
----------------------
such rules, regulations and orders as the Commission may adopt, the Trustees
shall employ a bank or trust company having a capital, surplus and undivided
profits of at least $2,000,000 as custodian with authority as the agent of the
Trust, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the By-laws of the Trust:
(a) to hold the securities owned by the Trust and deliver the
same upon written order;
(b) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct; and
(c) to disburse such funds upon orders or vouchers.
The Trustees may authorize such custodian as the agent of the Trust (x) to keep
the books and accounts of the Trust and furnish clerical and accounting services
and (y) to compute the net income and the value of the net assets of the Trust.
The Trustees may also authorize the Investment Adviser or an
affiliate of the Investment Adviser to be the custodian.
The acts and services of the custodian shall be performed upon such
basis of compensation as may be agreed upon by the Trustees and the custodian.
If so directed by a Majority Shareholder Vote, the custodian shall deliver and
pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
--------
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States of one of the states thereof and having capital,
surplus and undivided profits of at least $2,000,000.
Section 8.2 Action Upon Termination of Custodian Agreement. Upon
----------------------------------------------
termination of a custodian agreement or inability of any custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special Shareholders' meeting to determine whether the Trust shall
function without a custodian or shall be liquidated. If so directed by vote of
the holders of a
- 27 -
<PAGE>
majority of the Shares outstanding and entitled to vote, the custodian shall
deliver and pay over all Trust Property held by it as specified in such vote.
Section 8.3 Central Certificate System, Etc. Subject to such
--------------------------------
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to deposit all or any part of the securities owned by the
Trust in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
Section 8.4 Acceptance of Receipts in Lieu of Certificates.
----------------------------------------------
Subject to such rules, regulations and orders as the Commission may adopt, the
Trustees may direct the custodian to accept written receipts or other written
evidences indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated by the Board
of Governors of the Federal Reserve System and the local Federal Reserve Banks
in lieu of receipt of certificates representing such securities.
- 28 -
<PAGE>
ARTICLE IX
DURATION: TERMINATION OF TRUST:
AMENDMENT; MERGERS, ETC.
-------------------------------
Section 9.1 Duration and Termination. (a) Unless terminated as
------------------------
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated by the affirmative vote of at least 66 2/3% of the Shares
outstanding or, when authorized by a Majority Shareholder Vote, by an instrument
in writing signed by a majority of the Trustees. Upon the termination of the
Trust,
(i) the Trust shall carry on no business except for the purpose of winding
up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust and all
of the powers of the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business, provided that any sale, conveyance,
--------
assignment, exchange, transfer or other disposition of all or substantially all
the Trust Property that requires Shareholder approval under Section 9.3 hereof
shall receive the approval so required; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
Section 9.2 Amendment Procedure. (1) This Declaration may be
-------------------
amended from time to time by an instrument in writing signed by a majority of
the Trustees when authorized by a Majority Shareholder Vote, provided that any
--------
amendment having the purpose of changing the name of the Trust or of supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision shall not require
- 29 -
<PAGE>
authorization by the Shareholders. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholder.
(b) A certificate signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted as aforesaid, or a copy of
this Declaration as amended, executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
(c) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
Section 9.3 Merger, Consolidation and Sale of Assets. The Trust
----------------------------------------
may merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all of substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any Shareholders' meeting called
for the purpose by a Majority Shareholder Vote.
Section 9.4 Incorporation. With the approval of a Majority
-------------
Shareholder Vote, the Trustees may cause to be organized or assist in organizing
under the laws of any jurisdiction a corporation or corporations or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and may sell, convey and transfer the Trust
Property to any such corporation, trust, partnership, association or other
organization in exchange for the shares or securities thereof or otherwise, and
may lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or other
organization, or any corporation, partnership, trust, association or other
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization. Nothing contained herein shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring less than all or
substantially all of the Trust Property to such organization or entities.
Section 9.5 Series Vote. When the 1940 Act so requires, the
-----------
actions permitted under this Article IX shall be authorized by a Series Majority
Shareholder Vote.
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<PAGE>
ARTICLE X
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be accompanied by a report thereon of
independent public accountants.
- 31 -
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1 Filing. This Declaration and any amendment hereto
------
shall be filed with the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of the Commonwealth of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Unless any such amendment sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing with the Secretary of the Commonwealth of Massachusetts. A restated
Declaration, integrating into a single instrument all of the provisions of this
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may hereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
Section 11.2 Governing Law. This Declaration is executed by the
-------------
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 11.3 Counterparts. This Declaration may be simultaneously
------------
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instruments, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4 Reliance by Third Parties. Any certificate executed by
-------------------------
an individual who, according to the records of the Trust, appears to be a
Trustee hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees or (f) the existence of any fact or facts which
in any manner relate to the affairs of the Trust, shall be conclusive evidence
as to the matters so certified in favor of any Person dealing with the Trustees
and their successors.
Section 11.5 Provisions in Conflict with Law or Regulations. (a)
----------------------------------------------
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with requirements of the 1940 Act, would be inconsistent with any of
the conditions necessary for qualification of the Trust as a regulated
investment company under the United States Internal Code or is inconsistent with
other applicable laws and regulations, such provision shall be deemed never to
have constituted a part of this Declaration, provided that such determination
shall not affect any of the remaining
- 32 -
<PAGE>
provisions of this Declaration or render invalid or improper any action taken or
omitted prior to such determination.
(b) If any provisions of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
Section 11.6 Section Headings; Interpretation. Section headings in
--------------------------------
this Declaration are for convenience of reference only, and shall not limit or
otherwise affect the meaning hereof. References in this Declaration to "this
Declaration" shall be deemed to refer to this Declaration as from time to time
amended, and all expressions such as "hereof," "herein" and "hereunder" shall be
deemed to refer to this Declaration and not exclusively to the article or
Section in which such words appear.
- 33 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument
this ____ day of May, 1988.
ALAN F. BLANCHARD*
------------------------------------
Alan F. Blanchard
S.J. COZZOLINO*
------------------------------------
S.J. Cozzolino
WOLFE J. FRANKL*
------------------------------------
Wolfe J. Frankl
WILLIAM L. KUFTA*
------------------------------------
William L. Kufta
JOHN P. PFANN*
------------------------------------
John P. Pfann
ROBERT A. ROBINSON*
------------------------------------
Robert A. Robinson
*By:
---------------------------------
Steven R. Howard
(Attorney-in-Fact)
- 34 -
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, MARINER FUNDS
TRUST, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), and certain Trustees and officers of the Trust, do
hereby constitute and appoint Edmund A. Hajim, James M. Balassi, John J.
Pileggi, Stephen J. Friedman and Steven R. Howard, and each of them
individually, his true and lawful attorneys and agents to take any and all
action and execute any and all instruments which said attorneys and agents may
deem necessary or advisable
(i) to enable the Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under such Securities Act of 1933 of shares of beneficial
interest of the Trust to be offered by the Trust, and
(ii) in connection with the registration of the Trust under the
Investment Company Act of 1940, as amended,
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the names of each of such Trustees and officers in his behalf as such
Trustee or officer as indicated below opposite his signature hereto, to any
amendment or supplement (including post-effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Trust has caused these presents to be signed
by its Chairman and the same attested by its Secretary, each thereunto duly
authorized by its Trustees, and each of the undersigned sets his hand hereto as
of the date set opposite his name.
MARINER FUNDS TRUST
BY:
-------------------------------
Chairman of the Board
and President
DATE: December 17, 1985
- 35 -
<PAGE>
Attest:
- --------------------------
Secretary
Chairman of the Board December 17, 1985
- -------------------------- President and Trustee
Edmund A. Hajim (principal executive officer
and chief operating officer)
Senior Vice President and December 17, 1985
- -------------------------- Treasurer (principal
John J. Pileggi financial and accounting
officer)
Trustee December 17, 1985
- --------------------------
S.J. Cozzolino
Trustee December 17, 1985
- --------------------------
John E. Heilmann
Trustee December 17, 1985
- --------------------------
Frederick V. Malek
Trustee December 17, 1985
- --------------------------
Lee J. Moran
Trustee December 17, 1985
- --------------------------
Donald A. Pels
Trustee December 17, 1985
- --------------------------
John R. Pfann
Trustee December 17, 1985
- --------------------------
Robert A. Robinson
- 36 -
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, MARINER FUNDS
TRUST, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), and ALAN F. BLANCHARD, a Trustee of the Trust, do
hereby constitute and appoint Edmund A. Hajim, Thomas H. Elwood, John J.
Pileggi, David V. Smalley and Steven R. Howard, and each of them individually,
their true and lawful attorneys and agents to take any and all action and
execute any and all instruments which said attorneys and agents may deem
necessary or advisable
(i) to enable the Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under such Securities Act of 1933 of shares of beneficial
interest of the Trust to be offered by the Trust, and
(ii) in connection with the registration of the Trust under the
Investment Company Act of 1940, as amended,
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the names of each of such Trustees and officers in his behalf as such
Trustee or officer as indicated below opposite his signature hereto, to any
amendment or supplement (including post-effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Trust has caused these presents to be signed
by its Secretary, as of the date set forth below.
MARINER FUNDS TRUST
BY: /s/ Edmund A. Hajim
--------------------------
Chairman of the Board
and President
DATE: February 24, 1987
- 37 -
<PAGE>
Attest:
/s/ Thomas H. Elwood
- --------------------------
Thomas H. Elwood
/s/ Edmund A. Hajim Chairman of the Board February 24, 1987
- -------------------------- President and Trustee
Edmund A. Hajim (principal executive officer
and chief operating officer)
/s/s John J. Pileggi Senior Vice President and February 24, 1987
- -------------------------- Treasurer (principal
John J. Pileggi financial and accounting
officer)
/s/ Alan F. Blanchard Trustee February 24, 1987
- --------------------------
Alan F. Blanchard
- 38 -
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, MARINER FUNDS
TRUST, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), and certain Trustees and officers of the Trust, do
hereby constitute and appoint John C. Thompson, Brad E. Frye, Jeffrey A. Laine
and Steven R. Howard, and each of them individually, their true and lawful
attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable
(i) to enable the Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under such Securities Act of 1933 of shares of beneficial
interest of the Trust to be offered by the Trust, and
(ii) to enable the Trust to comply with the Investment Company Act of
1940, as amended, and any rules, regulations, orders or other requirements
of the Securities and Exchange Commission thereunder, in connection with
the registration of the Trust under the Investment Company Act of 1940, as
amended,
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the names of each of such Trustees and officers in his behalf as such
Trustee or officer as indicated below opposite his signature hereto, to any
amendment or supplement (including post-effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
- 39 -
<PAGE>
IN WITNESS WHEREOF, the Trust has caused these presents to be signed
by its Secretary, as of the date set forth below.
----------------------------------
William L. Kufta
Trustee
Dated as of February 15, 1988
- ----------------------------
Steven R. Howard
Secretary
- 40 -
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, MARINER FUNDS
TRUST, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust"), and WOLFE J. FRANKL, a Trustee of the Trust, do
hereby constitute and appoint John C. Thompson, Brad E. Frye, Jeffrey A. Laine
and Steven R. Howard, and each of them individually, their true and lawful
attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable
(i) to enable the Trust to comply with the Securities Act of 1933, as
amended, and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under such Securities Act of 1933 of shares of beneficial
interest of the Trust to be offered by the Trust, and
(ii) to enable the Trust to comply with the Investment Company Act of
1940, as amended, and any rules, regulations, orders or other requirements
of the Securities and Exchange Commission thereunder, in connection with
the registration of the Trust under the Investment Company Act of 1940, as
amended,
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the name of such Trustee in his behalf as such Trustee as indicated
below opposite his signature hereto, to any amendment or supplement (including
post-effective amendments) to the registration statement or statements filed
with the Securities and Exchange Commission under such Securities Act of 1933
and such Investment Company Act of 1940, and to execute any instruments or
documents filed or to be filed as a part of or in connection with such
registration statement or statements; and each of the undersigned hereby
ratifies and confirms all that said attorneys and agents shall do or cause to be
done by virtue hereof.
- 41 -
<PAGE>
IN WITNESS WHEREOF, the Trust has caused these presents to be signed
by its Secretary as of the date set forth below.
--------------------------
Wolfe J. Frankl
Trustee
Dated as of February 15, 1988
- ------------------------
Steven R. Howard
Secretary
- 42 -
<PAGE>
Exhibit 2
By-Laws
<PAGE>
BY-LAWS
OF
MARINER FUNDS TRUST
As adopted on October 31, 1985
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I -- Definitions.............................................. 1
ARTICLE II -- Offices and Seal........................................ 1
Section 2.1 Principal Office.............................. 1
Section 2.2 Registered Office............................. 1
Section 2.3 Other Offices................................. 1
Section 2.4 Seal.......................................... 1
ARTICLE III -- Shareholders........................................... 2
Section 3.1 Meetings...................................... 2
Section 3.2 Place of Meeting.............................. 2
Section 3.3 Notice of Meetings............................ 2
Section 3.4 Shareholders Entitled to Vote................. 3
Section 3.5 Quorum........................................ 3
Section 3.6 Adjournment................................... 3
Section 3.7 Proxies....................................... 4
Section 3.8 Inspection of Records......................... 4
Section 3.9 Record Dates.................................. 4
ARTICLE IV -- Meetings of Trustees.................................... 5
Section 4.1 Regular Meetings.............................. 5
Section 4.2 Special Meetings.............................. 5
Section 4.3 Notice........................................ 5
Section 4.4 Waiver of Notice.............................. 5
Section 4.5 Quorum, Adjournment and Voting................ 6
Section 4.6 Compensation.................................. 6
ARTICLE V -- Executive Committee and Other Committees................. 6
Section 5.1 How Constituted............................... 6
Section 5.2 Powers of the Executive Committee............. 6
Section 5.3 Other Committees of Trustees.................. 7
Section 5.4 Proceedings, Quorum and Manner of Acting...... 7
Section 5.5 Other Committees.............................. 7
i
<PAGE>
ARTICLE VI -- Officers............................................. 8
Section 6.1 General.................................... 8
Section 6.2 Election, Term of Office and Qualifications. 8
Section 6.3 Resignations and Removals.................. 8
Section 6.4 Vacancies and Newly Created Offices........ 9
Section 6.5 Chairman of the Board...................... 9
Section 6.6 President.................................. 9
Section 6.7 Vice President............................. 10
Section 6.8 Treasurer and Assistant Treasurers......... 10
Section 6.9 Secretary and Assistant Secretaries........ 10
Section 6.10 Subordinate Officers....................... 11
Section 6.11 Remuneration............................... 11
Section 6.12 Surety Bonds............................... 11
ARTICLE VII -- Execution of Instruments, Voting of Securities...... 12
Section 7.1 Execution of Instruments................... 12
Section 7.2 Voting of Securities....................... 12
ARTICLE VIII -- Fiscal Year, Accountants........................... 13
Section 8.1 Fiscal Year................................ 13
Section 8.2 Accountants................................ 13
ARTICLE IX -- Amendments........................................... 14
Section 9.1 General.................................... 14
ii
<PAGE>
BY-LAWS
OF
MARINER FUNDS TRUST
ARTICLE I
Definitions
-----------
The terms "Affiliated Person", "Commission", "Declaration",
"Interested Person", "Investment Adviser", "Majority Shareholder Vote", "1940
Act", "Principal Underwriter", "Series", "Series Majority Shareholder Vote",
"Shareholder", "Shares", "Trust", "Trust Property" and "Trustees" have the
meanings given them in the Declaration of Trust (the "Declaration") of Mariner
Funds Trust (the "Trust"), dated October 31, 1985, amended from time to time.
ARTICLE II
Offices and Seal
----------------
Section 2.1 Principal Office. The principal office of the Trust shall
----------------
be located in the City of New York, State of New York.
Section 2.2 Registered Office. The Trust shall maintain a registered
-----------------
office in the City of Boston, Commonwealth of Massachusetts.
Section 2.3 Other Offices. The Trust may establish and maintain such
-------------
other offices and places of business within or without the Commonwealth of
Massachusetts as the Trustees may from, time to time determine.
Section 2.4 Seal. The seal of the Trust shall be circular in form and
----
shall bear the name of the Trust, the year of its organization, and the words
"Common Seal" and "A Massachusetts Voluntary Association". The form of the seal
shall be subject to alteration by the Trustees and the seal may be used by
causing it or a facsimile to be impressed or affixed or
<PAGE>
printed or otherwise reproduced. Any officer or Trustee of the Trust shall have
authority to affix the seal of the Trust to any document requiring the same but,
unless otherwise required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity, of any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE III
Shareholders
------------
Section 3.1 Meetings. A Shareholders' meeting for the election of
--------
Trustees and the transaction of other proper business shall be held when
authorized under or required by the Declaration.
Section 3.2 Place of Meeting. All Shareholders' meetings shall be
----------------
held at such place within or without the Commonwealth of Massachusetts as the
Trustees shall designate.
Section 3.3 Notice of Meetings. Notice of all Shareholders'
------------------
meetings, stating the time, place and purpose of the meeting, shall be given by
the Secretary or an Assistant Secretary of the Trust by mail to each Shareholder
entitled to notice of and to vote at such meeting at his address as recorded on
the register of the Trust mailed at least 10 days and not more than 60 days
before the meeting. Such notice shall be deemed to be given when deposited in
the United States mail, with postage thereon prepaid. Any adjourned meeting may
be held as adjourned without further notice. No notice need be given (a) to any
Shareholder if a written waiver of notice, executed before or after the meeting
by such Shareholder or his attorney thereunto duly authorized, is filed with the
records of the meeting, or (b) to any Shareholder who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him. A waiver of notice need not specify the purposes of the meeting.
-2-
<PAGE>
Section 3.4 Shareholders Entitled to Vote. If, pursuant to
-----------------------------
Section 3.9 hereof, a record date has been fixed for the determination of
Shareholders entitled to notice of and to vote at any Shareholders' meeting,
each Shareholder of the Trust shall be entitled to vote, in person or by proxy,
each Share or fraction thereof standing in his name on the register of the Trust
at the time of determining net asset value on such record date. If the
Declaration or the 1940 Act require that Shares be voted by Series, each
Shareholder shall only be entitled to vote, in person or by proxy, each Share or
fraction thereof of such Series standing in his name on the register of the
Trust at the time of determining net asset value on such record date. If no
record date has been fixed for the determination of Shareholders so entitled,
the record date for the determination of Shareholders entitled to notice of and
to vote at a Shareholders' meeting shall be at the close of business on the day
on which notice of the meeting is mailed or, if notice is waived by all
Shareholders, at the close of business on the tenth day next preceding the day
on which the meeting is held.
Section 3.5 Quorum. The presence at any Shareholders' meeting in
------
person or by proxy, of Shareholders entitled to cast a majority of the votes
thereat shall be a quorum for the transaction of business.
Section 3.6 Adjournment. The holders of a majority of the Shares
-----------
entitled to vote at the meeting and present thereat in person or by proxy,
whether or not constituting a quorum, or, if no Shareholder entitled to vote is
present thereat in person or by proxy, any Trustee or officer present thereat
entitled to preside or act as Secretary of such meeting, may adjourn the meeting
sine die or from time to time. Any business that might have been
- ---- ---
transacted at the meeting originally called may be transacted at any such
adjourned meeting at which a quorum is present.
-3-
<PAGE>
Section 3.7 Proxies. Shares may be voted in person or by proxy.
-------
When any Share is held jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such Share unless at or prior to
exercise of the vote the trustees receive a specific written notice to the
contrary from any one of them, but if more than one of them shall be present at
such meeting in person or by proxy, and such joint owners or their proxies so
present disagree as to any vote cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
Section 3.8 Inspection of Records. The records of the Trust shall be
---------------------
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 3.9 Record Dates. The Trustees may fix in advance a date as
------------
a record date for the purpose of determining the Shareholders who are entitled
to notice of and to vote at any meeting or any adjournment thereof, or to
express consent in writing without a meeting to any action of the Trustees, or
who shall receive payment of any dividend or of any other distribution, or for
the purpose of any other lawful action, provided that such record date shall be
not more than 60 days before the date on which the particular action requiring
such determination of Shareholders is to be taken. In such case, subject to the
provisions of Section 3.4, each eligible Shareholder of record on such record
date shall be entitled to notice of, and to vote at, such meeting or
adjournment, or to express such consent, or to receive payment of such dividend
or distribution or to take such other action, as the case may be,
notwithstanding any transfer of Shares on the register of the Trust after the
record date.
-4-
<PAGE>
ARTICLE IV
Meetings of Trustees
--------------------
Section 4.1 Regular Meetings. The Trustees from time to time shall
----------------
provide by resolution for the holding of regular meetings for the election of
officers and the transaction of other proper business and fix their time and
place within or without the Commonwealth of Massachusetts.
Section 4.2 Special Meetings. Special meetings of the Trustees shall
----------------
be held whenever called by the Chairman of the Board, the President (or, in the
absence or disability of the President, by any Vice President), the Treasurer,
the Secretary or two or more Trustees, at the time and place within or without
the Commonwealth of Massachusetts specified in the respective notices or waivers
of notice of such meetings.
Section 4.3 Notice. Notice of regular and special meetings, stating
------
the time and place, shall be (a) mailed to each Trustee at his residence or
regular place of business at least five days before the day on which the meeting
is to be held or (b) caused to be delivered to him personally or to be
transmitted to him by telegraph, cable or wireless at least two days before the
day on which the meeting is to be held. Unless otherwise required by law, such
notice need not include a statement of the business to be transacted at, or the
purpose of, the meeting. No notice of adjournment of a meeting of the Trustees
to another time or place need be given if such time and place are announced at
such meeting.
Section 4.4 Waiver of Notice. Notice of a meeting need not be given
----------------
to any Trustee if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior
-5-
<PAGE>
thereto or at its commencement the lack of notice to him. A waiver of notice
need not specify the purposes of the meeting.
Section 4.5 Quorum, Adjournment and Voting. At all meetings of the
------------------------------
Trustees, the presence of a majority of the total number of Trustees authorized,
but not less than two, shall constitute a quorum for the transaction of
business. A majority of the Trustees present, whether or not constituting a
quorum, may adjourn the meeting, from time to time. The action of a majority of
the Trustees present at a meeting at which a quorum is present shall be the
action of the Trustees unless the concurrence of a greater proportion is
required for such action by law, by the Declaration or by these By-Laws.
Section 4.6 Compensation. Each Trustee may receive such remuneration
------------
for his services as such as shall be fixed from time to time by resolution of
the Trustees.
ARTICLE V
Executive Committee and Other Committees
----------------------------------------
Section 5.1 How Constituted. The Trustees may, by resolution,
---------------
designate one or more committees, including an Executive Committee, an Audit
Committee, a Nominating Committee and a Committee on Administration, each
consisting of at least two Trustees. The Trustees may, by resolution, designate
one or more alternate members of any committee to serve in the absence of any
member or other alternate member of such committee. Each member and alternate
member of a committee shall be a Trustee and shall hold office at the pleasure
of the Trustees. The Chairman of the Board and the President shall be members of
the Executive Committee.
Section 5.2 Powers of the Executive Committee. Unless otherwise
---------------------------------
provided by resolution of the Trustees, the Executive Committee shall have and
may exercise all of the
-6-
<PAGE>
power and authority of the Trustees, provided that the power and authority of
the Executive Committee shall be subject to the limitations contained in the
Declaration.
Section 5.3 Other Committees of Trustees. To the extent provided by
----------------------------
resolution of the Trustees, other committees shall have and may exercise any of
the power and authority that may lawfully be granted to the Executive Committee.
Section 5.4 Proceedings, Quorum and Manner of Acting. In the absence
----------------------------------------
of appropriate resolution of the Trustees' each committee may adopt such rules
and regulations governing its proceedings, quorum and manner of acting as it
shall deem proper and desirable, provided that the quorum shall not be less than
two Trustees. In the absence of any member or alternate member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a Trustee to act in the place of such absent
member or alternate member. Members and alternate members of a committee may
participate in a meeting of such committee by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5.5 Other Committees. The Trustees may appoint other
----------------
committees, each consisting of one or more persons who need not be Trustees.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Trustees, but shall not exercise any
power which may lawfully be exercised only by the Trustees or a committee
thereof.
-7-
<PAGE>
ARTICLE VI
Officers
--------
Section 6.1 General. The officers of the Trust shall be a Chairman
-------
of the Board, a President, a Secretary, and a Treasurer, and may include one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 6.10 of this Article VI.
Section 6.2 Election, Term of Office and Qualifications. The officers
-------------------------------------------
of the Trust (except those appointed pursuant to Section 6.10) shall be elected
by the Trustees at their first meeting. If any officer or officers are not
elected at any such meeting, such officer or officers may be elected at any
subsequent regular or special meeting of the Trustees. Each officer elected by
the Trustees shall hold office subject to Sections 6.3 and 6.4 of this Article
VI and until his successor shall have been chosen and qualified. No person shall
hold more than one office of the Trust, except that the President may hold the
office of Chairman of the Board and any Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary of the Trust may also hold the office of Vice
President. The Chairman of the Board and the President shall be selected from
among the Trustees of the Trust and may hold such offices only so long as they
continue to be Trustees. Any Trustee or officer may be but need not be a
Shareholder of the Trust.
Section 6.3 Resignations and Removals. Any officer may resign his
-------------------------
office at any time by delivering a written resignation to the Trustees, the
President, the Secretary or any Assistant Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery. Any officer may be
removed from office with or without cause by the vote of a majority of the
Trustees at any regular meeting or any special meeting. Except to the extent
expressly provided in a written agreement with the Trust, no officer resigning
and no officer
-8-
<PAGE>
removed shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.
Section 6.4 Vacancies and Newly Created Offices. If any vacancy shall
-----------------------------------
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
or, in the case of any office created pursuant to Section 6.10 of this Article
VI, by any officer upon whom such power shall have been conferred by the
Trustees.
Section 6.5 Chairman of the Board. The Chairman of the Board shall be
---------------------
the chief executive officer of the Trust, shall preside at all Shareholders'
meetings and at all meetings of the Trustees and shall be ex officio a member of
-- -------
all committees of the Trustees, except the Audit Committee. Subject to the
supervision of the Trustees, he shall have general charge of the business of the
Trust, the Trust Property and the officers, employees and agents of the Trust.
He shall have such other powers and perform such other duties as may be assigned
to him from time to time by the Trustees.
Section 6.6 President. The President shall be the chief operating
---------
officer of the Trust and, at the request of or in the absence or disability of
the Chairman of the Board, he shall preside at all Shareholders' meetings and at
all meetings of the Trustees and shall in general exercise the powers and
perform the duties of the Chairman of the Board. Subject to the supervision of
the Trustees and such direction and control as the Chairman of the Board may
exercise, he shall have general charge of the operations of the Trust and its
officers, employees and agents. He shall exercise such other powers and perform
such other duties as from time to time may be assigned to him by the Trustees.
-9-
<PAGE>
Section 6.7 Vice President. The Trustees may, from time to time,
--------------
designate and elect one or more Vice Presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the Trustees
or the President. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice Presidents, the
Vice President designated by the Trustees) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 6.8 Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
be the principal financial and accounting officer of the Trust and shall have
general charge of the finances and books of account of the Trust. Except as
otherwise provided by the Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the Custodian
appointed pursuant to Section 8.1 of the Declaration of its duties with respect
thereto. The Treasurer shall render a statement of condition of the finances of
the Trust to the Trustees as often as they shall require the same and he shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Any Assistant Treasurer may perform such duties of the Treasurer as
the Treasurer or the Trustees may assign, and, in the absence of the Treasurer,
he may perform all the duties of the Treasurer.
Section 6.9 Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
attend to the giving and serving of all notices of the Trust and shall record
all proceedings of the meetings of the Shareholders and Trustees in one or more
books to be kept for that purpose. He shall keep in safe custody the seal of the
Trust, and shall have charge of the records of the Trust, including
-10-
<PAGE>
the register of shares and such other books and papers as the Trustees may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Trustee. He shall perform such other duties as appertain to his office or as
may be required by the Trustee.
Any Assistant Secretary may perform such duties of the Secretary as
the Secretary or the Trustees may assign, and, in the absence of the Secretary,
he may perform all the duties of the Secretary.
Section 6.10 Subordinate Officers. The Trustees from time to time
--------------------
may appoint such other subordinate officers or agents as they may deem
advisable, each of whom shall have such title, hold office for such period, have
such authority and perform such duties as the Trustees may determine. The
Trustees from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 6.11 Remuneration. The salaries or other compensation of the
------------
officers of the Trust shall be fixed from time to time by resolution of the
Trustees, except that the Trustees may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 6.10 hereof.
Section 6.12 Surety Bonds. The Trustees may require any officer or
------------
agent of the Trust to execute a bond (including, without limitation, any bond
required by the 1940 Act and the rules and regulations of the Commission) to the
Trustees in such sum and with such surety or sureties as the Trustees may
determine, conditioned, upon the faithful performance of his duties to the
Trust, including responsibility for negligence and for the accounting of any of
-11-
<PAGE>
the Trust Property that may come into his hands. In any such case, a new bond of
like character shall be given at least every six years, so that the date of the
new bond shall not be more than six years subsequent to the date of the bond
immediately preceding.
ARTICLE VII
Execution of Instruments, Voting of Securities
-----------------------------------------------
Section 7.1 Execution of Instruments. All deeds, documents,
------------------------
transfers, contracts, agreements, requisitions or orders, promissory notes,
assignments, endorsements, checks and drafts for the payment of money by the
Trust, and other instruments requiring execution either in the name of the Trust
or the names of the Trustees or otherwise may be signed by the Chairman, the
President, a Vice President or the Secretary and by the Treasurer or an
Assistant Treasurer, or as the Trustees may otherwise, from time to time,
authorize, provided that instructions in connection with the execution of
portfolio securities transactions may be signed by one such officer. Any such
authorization may be general or confined to specific instances.
Section 7.2 Voting of Securities. Unless otherwise ordered by the
--------------------
Trustees, the Chairman, the President or any Vice President shall have full
power and authority on behalf of the Trustees to attend and to act and to vote,
or in the name of the Trustees to execute proxies to vote, at any meeting of
stockholders of any company in which the Trust may hold stock. At any such
meeting such officer shall possess and may exercise (in person or by proxy) any
and all rights, powers and privileges incident to the ownership of such stock.
The Trustees may by resolution from time to time confer like powers upon any
other person or persons.
-12-
<PAGE>
ARTICLE VIII
Fiscal Year, Accountants
------------------------
Section 8.1 Fiscal Year. The fiscal year of the Trust shall be
-----------
established by resolution of the Trustees.
Section 8.2 Accountants.
-----------
(a) The Trustees shall employ an independent public accountant or firm
of independent public accountants as their accountant to examine the accounts of
the Trust and to sign and certify at least annually financial statements filed
by the Trust. The accountant's certificates and reports shall be addressed both
to the Trustees and to the Shareholders.
(b) A majority of the Trustees who are not Interested Persons of the
Trust shall select the accountant at any meeting held before the first
Shareholders' meeting, and thereafter shall select the accountant annually by
votes, cast in person, at a meeting held within 30 days before or after the
beginning of the fiscal year of the Trust. Such selection shall be submitted for
ratification or rejection at the next succeeding Shareholders' meeting. If such
meeting shall reject such selection, the accountant shall be selected by a
Majority Shareholder Vote, either at the meeting at which the rejection occurred
or at a subsequent Shareholders' meeting called for the purpose.
(c) Any vacancy occurring due to the death or resignation of the
accountant, may be filled at a meeting called for the purpose by the vote, cast
in person, of a majority of those Trustees who are not Interested Persons of the
Trust.
-13-
<PAGE>
ARTICLE IX
Amendments
----------
Section 9.1 General. These By-Laws may be amended or repealed, in
-------
whole or in part, by a majority of the Trustees then in office at any meeting of
the Trustees, or by one or more writings signed by such a majority.
-14-
<PAGE>
Exhibit 5(b)
Management and Administration Agreement between
Registrant and BISYS Fund Services
<PAGE>
MANAGEMENT AND ADMINISTRATION AGREEMENT
AGREEMENT made this __________ day of __________________, 1996, between
MARINER FUNDS TRUST (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES
("Administrator"), having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Trust desires to retain Administrator to furnish management
and administration services to each of the investment portfolios of the Trust
(individually referred to herein as a "Fund" and collectively referred to herein
as the "Funds"); and
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Manager and Administrator
-------------------------------------
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreement, the custodian for the Funds under its
Custodian Agreement, the transfer agent for the Funds under its Transfer Agency
Agreement and the fund accountant for the Funds under its Fund Accounting
Agreement.
Administrator will maintain office facilities (which may be in the
offices of Administrator or an affiliate but shall be in such location as the
Trust shall reasonably determine) and shall perform the services that are set
forth in Schedule A hereto. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Administrator 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.
Administrator further agrees to preserve for the periods prescribed by Rule 31a-
2 under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act. Administrator may delegate some or all of its responsibilities
under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such
<PAGE>
subcontractor and provided further, that Administrator shall be responsible, to
the extent provided in Section 4 hereof, for all acts of such subcontractor as
if such acts were its own.
2. Fees; Expenses; Expense Reimbursement
-------------------------------------
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay Administrator on the first business
day of each month, or at such time(s) as Administrator shall request and the
parties hereto shall agree, a fee computed daily and paid as specified below
calculated at the applicable annual rate set forth on Schedule B hereto. The fee
for the period from the day of the month this Agreement is entered into until
the end of that month shall be prorated according to the proportion which such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the
value of the net assets of a particular Fund shall be computed in the manner
described in the Trust's Declaration of Trust or in the Prospectus or Statement
of Additional Information respecting that Fund as from time to time is in effect
for the computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such Fund.
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust. The compensation of such person or persons shall be paid by
Administrator and no obligation may be incurred on behalf of the Funds in such
respect. Other expenses to be incurred in the operation of the Funds including
taxes, interest, brokerage fees and commissions, if any, fees of Trustees who
are not partners, officers, directors, shareholders or employees of
Administrator or the investment adviser or distributor for the Funds, Commission
fees and state Blue Sky qualification and renewal fees and expenses, investment
advisory fees, custodian fees, transfer and dividend disbursing agents' fees,
fund accounting fees including pricing of portfolio securities, service
organization fees, certain insurance premiums, outside and, to the extent
authorized by the Trust, inside auditing and legal fees and expenses, costs of
maintenance of corporate existence, typesetting and printing prospectuses for
regulatory purposes and for distribution to current shareholders of the Funds,
costs of shareholders' and Trustees' reports and meetings and any extraordinary
expenses will be borne by the Funds; provided, however, that the Funds will not
bear, directly or indirectly, the cost of any activity which is primarily
intended to result in the distribution of shares of the Funds, except for
expenses incurred pursuant to a Rule 12b-1 plan adopted by the Trust.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such State, Administrator will
reimburse such Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees respecting such Fund otherwise payable to
2
<PAGE>
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to HSBC Asset Management Americas, Inc.
("the Adviser") under the Investment Advisory Agreements between the Adviser
and the Trust. The expense reimbursement obligation of Administrator is limited
to the amount of its fees hereunder for such fiscal year, provided, however,
that notwithstanding the foregoing, Administrator shall reimburse a particular
Fund for such proportion of such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Trust so require. Such
expense reimbursement, if any, will be estimated daily and reconciled and paid
on a monthly basis.
3. Proprietary and Confidential Information
----------------------------------------
Administrator agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and prior, present, or
potential shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
4. Limitation of Liability
-----------------------
Administrator shall not be liable for any loss suffered by the Funds
in connection with the matters to which this Agreement relates, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also a
partner, employee, or agent of Administrator, who may be or become an officer,
Trustee, employee, or agent of the Trust or the Funds shall be deemed, when
rendering services to the Trust or the Funds, or acting on any business of that
party, to be rendering such services to or acting solely for that party and not
as a partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
5. Term
----
5.01 Initial Term; Renewal Terms
---------------------------
This Agreement shall become effective as of the date first written
above and shall continue until March 1, 1999, and thereafter shall be renewed
automatically for successive one-year terms, unless (i) it is terminated for
cause pursuant to paragraph 5.03 below, (ii) it is terminated pursuant to
paragraph 5.04 below, or (iii) written notice not to renew is given by the non-
renewing party to the other party at least 120 days prior to the expiration of
the then-current term; provided that such continuance is specifically reviewed
and approved at least annually (i) by the vote of a
3
<PAGE>
majority of the Trust's Board of Trustees or by the vote of a majority of the
outstanding voting securities of the Trust and (ii) by the majority of the
Trust's Trustees who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. The scope of
such review shall be whether there is any "cause" (as defined below) that would
justify terminating the Agreement.
5.02 Termination of Agreement
------------------------
This Agreement is terminable with respect to a particular Fund (i)
upon provision of written notice not to renew in accordance with paragraph 5.01,
(ii) upon mutual agreement of the parties hereto, (iii) for cause by the party
alleging cause pursuant to paragraph 5.03, or (iv) upon provision of written
notice to terminate in accordance with paragraph 5.04. Written notice not to
renew may be given for any reason, with or without "cause" (as defined in
paragraph 5.03). Upon termination of this Agreement, if Administrator, with the
written consent of the Trust, in fact continues to perform any one or more of
the services contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect.
Compensation due and payable to Administrator and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Administrator shall be entitled to collect from the Trust, in
addition to the compensation described under Section 2 hereof, the amount of
all of Administrator's cash disbursements for services in connection with
Administrator's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination, for a reasonable fee, Administrator will provide the Trust
with reasonable access to any Trust documents or records remaining in its
possession.
5.03 Termination for Cause
---------------------
This Agreement may be terminated for cause in accordance with this
paragraph 5.03. In the event cause, as defined below, is alleged, the party
alleging cause shall provide written notice to the other party specifying the
event or events constituting cause and demanding that such other party cure the
same. If appropriate corrective action is not taken within 30 days following
receipt of such notice, the party alleging cause may terminate this Agreement by
the provision of 60 days' written notice. For purposes of this Agreement,
"cause" shall mean (a) willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the party to be terminated with respect to its
obligations and duties set forth herein; (b) a final, unappealable judicial,
regulatory or administrative ruling or order in which the party to be terminated
has been found guilty of criminal or unethical behavior in the conduct of its
business; or (c) financial difficulties on the part of the party to be
terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
4
<PAGE>
modification or alteration of the rights of creditors. Notwithstanding the
foregoing, the absence of either or both an annual review or ratification of
this Agreement by the Board of Trustees shall not, in and of itself, constitute
"cause" as used herein.
5
<PAGE>
5.04 Termination in the Event of a
-----------------------------
Fund Liquidation or Fund Merger,
--------------------------------
or an Assignment of the Investment Advisory Contract
----------------------------------------------------
If, during the initial term of this Agreement (as set forth in
paragraph 5.01), (i) a Fund is liquidated or is merged into a mutual fund
portfolio that is not part of the Trust or Mariner Mutual Funds Trust, or (ii)
the investment advisory agreement between HSBC Asset Management Americas, Inc.
("HSBC") and the Trust is assigned (excluding any technical assignment based
solely upon a change in control of HSBC) such that HSBC ceases to be the
investment adviser to the Trust, this Agreement may be terminated by the Trust
with respect to each liquidated or merged Fund (or, in the case of the
assignment of the investment advisory agreement as described above, with respect
to all of the Funds) by the provision of 60 days' written notice; provided,
however, that upon such termination, the Trust shall make a one-time cash
payment, as liquidated damages, to Administrator equal to the fees payable to
Administrator hereunder for the shorter of (i) the eighteen-month period
commencing on the termination date or (ii) the remainder of the initial term of
this Agreement, assuming for purposes of calculation of the payment that the
asset level of the Trust on the termination date will remain constant for the
balance of such initial term.
5.05 Termination Without Cause
-------------------------
In the event (i) the Trust terminates this Agreement for any reason
other than (A) "cause" pursuant to paragraph 5.03 or (B) the reasons described
in paragraph 5.04, (ii) Administrator is otherwise replaced as fund manager and
administrator or (iii) a third party is added to perform all or a part of the
services provided by Administrator under this Agreement (excluding any sub-
administrator appointed by Administrator as provided in Section 1 hereof), then
the Trust shall make a one-time cash payment, as liquidated damages, to
Administrator equal to the balance due Administrator for the remainder of the
term of this Agreement, assuming for purposes of calculation of the payment that
the asset level of the Trust on the date Administrator is replaced, or a third
party is added will remain constant for the balance of the contract term.
6. Governing Law and Matters Relating to the Trust as a Massachusetts Business
---------------------------------------------------------------------------
Trust
- -----
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
MARINER FUNDS TRUST BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ________________________ By: _______________________________
Title: _____________________ Title: ____________________________
Date: ______________________ Date: _____________________________
7
<PAGE>
SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN MARINER FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
MANAGEMENT AND ADMINISTRATION SERVICES
--------------------------------------
ADMINISTRATION
1. Maintain calendar and files of all Board and shareholder meeting materials
2. Maintain and manage annual regulatory filing calendar and follow up with
responsible parties
3. Obtain insurance coverage (i.e., fidelity bonds and professional liability
policies), including annual insurance renewals, on behalf of the Trust
4. Maintain insurance files for the Trust
5. Review registration statements, including prospectuses, SAIs and proxy
statements prepared by counsel to the Trust
6. Review periodic supplements to prospectuses, as prepared by counsel to the
Trust (Administrator may, from time to time, prepare certain prospectus
supplements that require limited disclosure, with the consent of counsel to
the Trust)
7. Prepare portfolio compliance training manual for the Trust
8. Review materials and reports prepared by Fund auditors and materials
prepared by counsel to the Trust that are submitted to BISYS
9. Communicate all income breakdown data to client services and transfer agent
and coordinate printing/mailing of state income letters
10. Review and coordinate all registration statement filings
11. Coordinate printing and distribution of prospectuses, annual reports, semi-
annual reports and prospectus supplements
12. Coordinate printing, distribution and tabulation of proxies
13. Review and file Form N-SAR
14. Prepare and file Rule 24f-2 Notices (subject to review by counsel to the
Trust) within 60 days following fiscal year-end
15. Coordinate Rule 17f-2 audits with custodians (if applicable)
16. Apply for all portfolio tax identification numbers
17. Coordinate all Fund NRSRO rating meetings
18. Coordinate NASDAQ Fund registration
19. Coordinate distribution of trustee/officer questionnaires prepared by Fund
Counsel and respond to Trustees'/officers' questions relating thereto
20. Coordinate seed money and establish control accounts for new Funds
21. Maintain open file summary, authorized signers list and Fund compliance
calendars
A-1
<PAGE>
COMPLIANCE
1. Review monthly compliance reports prepared by the Adviser
2. Perform independent monthly portfolio compliance testing
3. Prepare quarterly tax compliance letters to assist Fund portfolio managers
4. Notify appropriate officers of mark-to-market issues
5. Monitor compliance by the Funds with various conditions imposed by
exemptive order, if applicable, relating to multiple classes of shares
6. Quarterly review of securities transactions by persons designated as access
persons by the investment adviser for purposes of determining compliance
with the Trust's Code of Ethics
7. Respond to SEC Fund audits and coordinate SEC inspections
8. Respond to Fund audit requests from independent fund accountants
9. Consult with and provide compliance advice to portfolio managers
10. Coordinate brokerage allocation reports
11. Monitor fidelity bond coverage for the Funds
12. Perform initial on-site compliance training based on Fund-specific
compliance manuals prepared by BISYS
BOARD PROCESS AND MEETINGS
1. Prepare quarterly Board meeting responsibility chart
2. Provide at least one person to attend Board meetings
3. Prepare Board agendas and BISYS sections of Board materials
4. Review all Board minutes and agendas
5. Prepare special Board meeting materials (including Lipper information that
may be appropriate for annual contract renewals)
6. Review, as requested, investment adviser's reports to be submitted to the
Board pursuant to applicable Fund procedures
7. Coordinate Board book production and distribution
LEGAL SERVICES
1. Provide support to Fund Administration, broker/dealer compliance and blue
sky personnel
2. Review broker/dealer agreements, bank agreements and service agreements
3. Review Fund agreements to which BISYS is a party
4. Maintain files of registration statements, Fund contracts, Fund proxies and
other Fund documents
5. Prepare for and manage shareholder meetings
6. Assist in preparing for and complying with any regulatory examinations of
or involving the Trust
7. Provide advice concerning product development issues
8. Conduct research and provide advice concerning applicable Federal and state
securities laws, Internal Revenue Code provisions and related regulations,
and bank regulatory issues
9. Prepare Fund Serv/NSCC reporting
10. Respond to state registration comment letters when necessary
11. Respond to regulatory agency (i.e. NASD, SEC, IRS, bank regulatory)
proposals
A-2
<PAGE>
FUND OFFICERS
1. Make available personnel to serve as officers for the Trust
BLUE SKY
1. Register the Funds and their shares with appropriate state blue sky
authorities
2. Respond to state comments during the registration process
3. Obtain all sales permits required by relevant state authorities
4. Amend and renew sales permits, as required from time to time
5. Monitor the sales of shares in individual states on a daily basis and
report required sales to appropriate states
6. File all registration statements, prospectuses, proxy statements, Rule 24f-
2 Notices and other Fund reports and documents as required by applicable
state laws and regulations
7. Maintain Fund blue sky calendars
8. Respond to all blue sky audit and examination issues
9. File all renewal registrations for the Funds
10. Conduct requested blue sky fee analysis
11. Implement SRD electronic filings
A-3
<PAGE>
Dated: ________________________
SCHEDULE B
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN MARINER FUNDS TRUST
AND BISYS FUND SERVICES LIMITED PARTNERSHIP
Compensation/*/
------------------------------------------
Annual Rate of:
Fifteen one-hundredths of one percent (.15%) of each such Fund's average
daily net assets up to $200,000,000
Twelve and one-half one-hundredths of one percent (.125%) of each such
Fund's average daily net assets in excess of $200,000,000 up to
$400,000,000
Ten one-hundredths of one percent (.10%) of each such Fund's average daily
net assets in excess of $400,000,000 up to 600,000,000
Eight one-hundredths of one percent (.08%) of each such Fund's average
daily net assets in excess of $600,000,000
MARINER FUNDS TRUST
By:____________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
- --------------------
* All fees are computed daily and paid periodically. All Funds that are created
after the date set forth above shall be subject to a per Fund annual minimum
of $60,000. The compensation set forth above represents (i) compensation
payable to Administrator for services rendered and expenses assumed pursuant
to the Management and Administration Agreement to which this Schedule B is
attached and (ii) compensation payable to BISYS Fund Services, Inc. ("BFSI"),
an affiliate of Administrator, for services rendered and expenses assumed
pursuant to the Fund Accounting Agreement between BFSI and the Trust dated
March 1, 1996. Administrator has agreed to receive the compensation payable
under the Fund Accounting Agreement on behalf of BFSI and to remit such
compensation to BFSI immediately upon receipt.
B-1
<PAGE>
By:____________________________
B-2
<PAGE>
EXHIBIT 5(d)
Co-Administration Services Contract between HSBC Asset
Management Americas Inc. and Registrant, dated November 1, 1994
<PAGE>
CO-ADMINISTRATION SERVICES CONTRACT
MARINER FUNDS TRUST
370 17TH STREET
DENVER,COLORADO
November 1, 1994
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10017
Dear Sirs or Madams:
This will confirm the agreement between the undersigned (the "Trust")
and you (the "Co-Administrator") as follows:
1. The Trust is an open-end investment company organized as a
Massachusetts business trust, and consists of one or more separate investment
portfolios, as may be established and designated by the Trustees from time to
time (the "Funds"). This contract shall pertain to any Fund currently in
existence and any additional Funds as shall be designated in a Supplement to
this contract ("Supplement"), as further agreed by the Trust and the Co-
Administrator. A separate class of shares of beneficial interest in the Trust is
offered to investors with respect to each Fund. The Trust engages in the
business of investing and reinvesting the assets of the Funds in the manner and
in accordance with the investment objective and restrictions specified in the
Prospectus or Prospectuses (the "Prospectus") relating to the Trust and the Fund
included in the Registration Statement, as amended from time to time (the
"Registration Statement"), filed by the Trust under the Investment Company Act
of 1940 (the "1940 Act") and the Securities Act of 1933 (the "1933 Act"). The
Fund has retained PFPC, Inc. to act as Fund administrator. Copies of the
documents referred to in the preceding sentence have been furnished to the Co-
Administrator.
<PAGE>
Any amendments to those documents shall be furnished to the Co-Administrator
promptly.
2. (a) The Co-Administrator shall (i) manage the Funds' relationship
with PFPC Inc. or any successor administrator, (ii) assist with negotiation of
contracts with Fund service providers and supervise the activities of those
service providers, (iii) serve as a liaison with Fund trustees, and (iv) provide
general product management and oversight. The Co-Administrator shall make
periodic reports to the Trust's Board of Trustees on the performance of its
obligations under this Contract.
(b) The Co-Administrator shall, at its expense, employ or associate
with itself such persons as it believes appropriate to assist it in performing
its obligations under this contract.
3. The Co-Administrator shall give the Trust the benefit of the Co-
Administrator's best judgment and efforts in rendering services under this
contract. As an inducement to the Co-Administrator's undertaking to render these
services, the Trust agrees that the Co-Administrator shall not be liable under
this contract for any mistake in judgment or in any other event whatsoever
except for lack of good faith, provided that nothing in this contract shall be
deemed to protect or purport to protect the Co-Administrator against any
liability to the Trust or its shareholders to which the Co-Administrator would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Co-Administrator's duties under this
contract or by reason of the Co-Administrator's reckless disregard of its
obligations and duties hereunder.
4. In consideration of the services to be rendered by the Co-
Administrator under this contract, the Trust shall pay the Co-Administrator a
monthly fee with respect to each Fund on the first business day of each month,
at an annual rate of 0.03% of the average daily value of the net assets of the
Fund during the preceding month.
If the fees payable to the Co-Administrator pursuant to this paragraph
4 begin to accrue before the end of any month or if this contract terminates
before the end of any month, the fees
-2-
<PAGE>
for the period from that date to the end of that month or from the beginning of
that month to the date of termination, as the case may be, shall be prorated
according to the proportion that the period bears to the full month in which the
effectiveness or termination occurs. For purposes of calculating the monthly
fees, the value of the net assets of the Fund shall be computed in the manner
specified in the Prospectus for the computation of net asset value. For
purposes of this contract, "business day" means each weekday except those
holidays on which the Federal Reserve Bank of New York, the New York Stock
Exchange (the "Exchange") or the investment adviser is closed. Currently, those
holidays include: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.
5. This contract and any Supplement shall become effective with
respect to a Fund only if they have been approved by vote of a majority of (i)
the Board of Trustees of the Trust, and (ii) the trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in this contract, cast in person at a
meeting called for the purpose of voting on such approval. This contract, and
any Supplement, shall continue in effect with respect to a Fund until the last
day of the calendar year next following the date of effectiveness specified in a
Supplement to the contract, and thereafter shall continue automatically for
successive annual periods ending on the last day of each calendar year, subject
to the immediately following sentence, and provided such continuance is
specifically approved at least annually by a vote of a majority of (i) the
Trust's Board of Trustees and (ii) the trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the contract, by vote cast in person at a meeting called
for the purpose of voting on such approval. This contract may be terminated with
respect to a Fund at any time, without payment of any penalty, by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a vote of a majority of the Trust's Board of Trustees on 60
days' written notice to the Co-Administrator or by the Co-Administrator on 60
days' written notice to the Trust. If this contract is terminated with respect
to any Fund, it shall nonetheless remain in effect with respect to any remaining
Funds.
-3-
<PAGE>
This contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
6. Except to the extent necessary to perform the Co-Administrator's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Co-Administrator, or any affiliate of the Co-
Administrator, or any employee of the Co-Administrator, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or association.
7. The Certificate of Trust, establishing the Trust, dated as of May
1, 1988, together with all amendments thereto (the "Certificate"), is on file in
the Office of the Secretary of the State of Massachusetts. The obligations of
the Trust are not personally binding upon, nor shall resort be had to the
private property of, any of the Trustees, shareholders, officers, employees, or
agents of the Trust, but only the Trust's property shall be bound.
8. This contract shall be construed and its provisions interpreted in
accordance with the laws of the State of New York.
If the foregoing correctly sets forth the agreement between the Trust
and the Co-Administrator, please so indicate by signing and returning to the
Trust the enclosed copy hereof.
Very truly yours,
MARINER FUNDS TRUST
By _____________________
Title:
ACCEPTED:
HSBC ASSET MANAGEMENT AMERICAS INC.
By _______________________
Title:
-4-
<PAGE>
Exhibit 6
Distribution Agreement between Registrant
and BISYS Fund Services
<PAGE>
DISTRIBUTION AGREEMENT
----------------------
AGREEMENT made this _____ day of __________________, 1996, between MARINER
FUNDS TRUST (the "Trust"), a Massachusetts business trust having its principal
place of business at 125 West 55th Street, New York, New York 10019, and BISYS
FUND SERVICES LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("Distributor"),
having its principal place of business at 3435 Stelzer Road, Columbus, Ohio
43219.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
------------------------
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act"). As used in
this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and may in the future be the distributor of
the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Trust.
The Trust further understands that investors and potential investors in the
Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
<PAGE>
Distributor shall, at its own expense, finance appropriate activities
which it deems reasonable, which are primarily intended to result in the sale of
the Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and
2
<PAGE>
regulations of the Commission thereunder. The registration statement and
prospectus contain all statements required to be stated therein in conformity
with said Act and the rules and regulations of said Commission and all
statements of fact contained in any such registration statement and prospectus
are true and correct. Furthermore, neither any registration statement nor any
prospectus includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Shares. The Trust may, but shall
not be obligated to, propose from time to time such amendment or amendments to
any registration statement and such supplement or supplements to any prospectus
as, in the light of future developments, may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
without giving Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust shall indemnify, defend and hold harmless Distributor,
its partners and employees and any person who controls Distributor within the
meaning of the Securities Act, from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which Distributor, its partners and employees or any such
controlling person, may incur under the Securities Act, the 1940 Act, the common
law or otherwise arising out of or based upon any alleged untrue statement of a
material fact contained in the registration statement or any prospectus or
arising out of or based upon any alleged omission by the Trust to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished in writing to the Trust by
or on behalf of Distributor for use in the preparation of the registration
statement or the prospectuses. Notwithstanding the foregoing, this indemnity
agreement, to the extent that it might require indemnity of any person who is a
partner or employee of Distributor and who is also a Trustee of the Trust, shall
not inure to the benefit of such partner or employee unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in
the Securities Act or the 1940 Act. This Agreement shall not be construed to
protect Distributor against any liability to the Trust or its shareholders to
which Distributor would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under this Agreement. This
indemnity agreement shall not inure to the benefit of Distributor, its partners
or employees or any controlling person as aforesaid if any untrue statement or
omission made in any prospectus delivered to a purchaser of shares is corrected
in any amendment or supplement to such prospectus and such amended or
supplemented prospectus shall
3
<PAGE>
not have been delivered or sent to such purchaser within the time required by
the Securities Act and the rules promulgated thereunder, provided that the Trust
has delivered such amended or supplemented prospectus to Distributor in
requisite quantity on a timely basis to permit such delivery or sending. This
indemnity agreement is expressly conditioned upon the Trust's being notified of
any action brought against Distributor, its partners or employees or any such
controlling person, which notification shall be given by letter or by telegram
addressed to the Trust at its principal office in New York, New York and sent to
the Trust by the person against whom such action is brought within 10 days after
the summons or other first legal process shall have been served. The failure to
notify the Trust of any such action shall not relieve the Trust from any
liability which it may have to the person against whom such action is brought by
reason of any such alleged untrue statement or omission otherwise than on
account of the indemnity agreement contained in this paragraph. The Trust shall
be entitled to assume the defense of any suit brought to enforce any such
claims, demand or liability, but, in such case, the defense shall be conducted
by counsel chosen by the Trust and reasonably approved by Distributor. If the
Trust elects to assume the defense of any such suit and retain counsel approved
by Distributor, Distributor, its partners and employees and controlling persons
named as the defendant, or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them, but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor does not approve of counsel chosen by the Trust, the Trust will
reimburse such person or persons named as defendant or defendants in such suit,
for the reasonable fees and expenses of any counsel retained by Distributor or
such other persons. In addition, Distributor shall have the right to employ
counsel to represent it, its partners and employees and any such controlling
person who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by Distributor against the Trust hereunder if any
such indemnified party shall have been advised by its counsel that
representation of such indemnified party and the Trust by the same counsel would
be inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them, in which event the
reasonable fees and expenses of such separate counsel shall be borne by the
Trust. Notwithstanding the preceding two sentences, the Trust shall, in
connection with any such suit and any separate but substantially similar or
related suits, actions or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all persons entitled to indemnity under this paragraph.
The Trust shall not be liable to indemnify any person for any settlement of any
suit or claim effected without the Trust's written consent. This indemnity
agreement and the Trust's representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of Distributor, its partners and employees or any such
controlling person. This indemnity agreement shall inure exclusively to the
benefit of Distributor, its partners and employees and any such controlling
persons and their respective successors and estates. The Trust shall promptly
notify Distributor of the commencement of any litigation or proceedings against
it in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold harmless the
Trust, its officers and Trustees and any person who controls the Trust within
the meaning of the Securities
4
<PAGE>
Act, from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in connection therewith)
which the Trust, its officers or Trustees or any such controlling person may
incur under the Securities Act, the 1940 Act, the common law or otherwise, but
only to the extent that such liability or expense incurred by the Trust, its
officers or Trustees or such controlling person results from such claims or
demands as shall arise out of or be based upon (a) any alleged untrue statement
of a material fact contained in information furnished in writing by Distributor
to the Trust specifically for use in the registration statement or any
prospectus or shall arise out of or be based upon any alleged omission to state
a material fact required to be stated therein or necessary to make such
statement therein not misleading and (b) any alleged act or omission on
Distributor's part as the Trust's agent that has not been expressly authorized
by the Trust in writing. This indemnity agreement is expressly conditioned upon
Distributor's being notified of any action brought against the Trust, its
officers or Trustees or any such controlling person, which notification shall be
given by letter or telegram addressed to Distributor at its principal office in
Columbus, Ohio, and sent to Distributor by the person against whom such action
is brought, within 10 days after the summons or other first legal process shall
have been served. The failure to notify Distributor of any such action shall not
relieve Distributor from any liability which it may have to the Trust, its
officers or Trustees or such controlling person by reason of any such alleged
misstatement, act or omission on Distributor's part otherwise than on account of
the indemnity agreement contained in this paragraph. Distributor shall have a
right to control the defense of such action with counsel of its own choosing and
reasonably approved by the Trust if such action is based solely upon such
alleged misstatement, act or omission on Distributor's part, in which event
(except as stated below) the Trust, its officers and Trustees or such
controlling person shall each have the right to participate in the preparation
of the defense of such action at their own expense. If the Trust does not
approve of counsel chosen by Distributor, and therefore Distributor does not
control the defense of such action, Distributor will reimburse the Trust, its
officers and Trustees and controlling person named as defendant or defendants in
such action, for the reasonable fees and expenses of any counsel retained by the
Trust or such other persons. In addition, the Trust shall have the right to
employ counsel to represent it, its officers and Trustees and any such
controlling person who may be the subject of liability arising out of any claim
in respect of which indemnity may be sought by the Trust or any such other
person against Distributor hereunder if any such indemnified party shall have
been advised by its counsel that representation of such indemnified party and
Distributor by the same counsel would be inappropriate under applicable
standards of professional conduct due to actual or potential differing interests
between them, in which event the reasonable fees and expenses of such separate
counsel shall be borne by Distributor. Notwithstanding the preceding two
sentences, Distributor shall, in connection with any such action and any
separate but substantially similar or related suits, actions or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all persons entitled to indemnity under this paragraph. This indemnity
agreement and Distributor's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Trust, its officers and Trustees or
any such controlling person. This indemnity agreement shall inure exclusively
to the benefit of the Trust, its officers and
5
<PAGE>
Trustees and any such controlling persons and their respective successors and
estates. Distributor shall promptly notify the Trust of the commencement of any
litigation or proceedings against it in connection with the issue and sale of
any shares.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for additional
information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or prospectus then in
effect or the initiation by service of process on the Trust of any proceeding
for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then in effect or
which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to
any registration statement or prospectus which may from time to time be filed
with the Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be
6
<PAGE>
unreasonably withheld and may not be withheld where Distributor may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Trust.
1.16 This Agreement shall be governed by the laws of the Commonwealth
of Massachusetts.
2. Appointment of Agent.
--------------------
Distributor may enter into a written agreement with another party
qualified to perform distribution services to carry out some or all of its
responsibilities under this Agreement, provided, however, that the Trust agrees
in writing to the retention of the party chosen and the written agreement
related thereto; and provided further, that the party chosen shall be the agent
of Distributor and not the agent of the Trust, and that Distributor shall be
fully responsible for the acts of such party and shall not be relieved of any of
its responsibilities hereunder.
3. Fee.
----
Distributor shall receive from the Funds identified in the
Distribution and Shareholder Service Plan attached as Schedule A hereto (the
"Distribution Plan Funds"), and as amended from time to time a distribution fee
at the rate and upon the terms and conditions set forth in such Plan. The
distribution fee shall be accrued daily and shall be paid on the first business
day of each month, or at such time(s) as the Distributor shall reasonably
request.
4. Sale and Payment.
-----------------
Shares of a Fund may be subject to a sales load and may be subject to
the imposition of a distribution fee pursuant to the Distribution and Service
Plan referred to above. To the extent that Shares of a Fund are sold at an
offering price which includes a sales load or at net asset value subject to a
contingent deferred sales load with respect to certain redemptions (either
within a single class of Shares or pursuant to two or more classes of Shares),
such Shares shall hereinafter be referred to collectively as "Load Shares" (in
the case of Shares that are sold with a front-end sales load or Shares that are
sold subject to a contingent deferred sales load), "Front-End Load Shares" or
"CDSL Shares" and individually as a "Load Share," a "Front-End Load Share" or a
"CDSL Share." A Fund that contains Front-End Load Shares shall hereinafter be
referred to collectively as "Load Funds" or "Front-End Load Funds" and
individually as a "Load Fund" or a "Front-end Load Fund." A Fund that contains
CDSL Shares shall hereinafter be referred to collectively as "Load Funds" or
"CDSL Funds" and individually as a "Load Fund" or a "CDSL Fund." Under this
Agreement, the following provisions shall apply with respect to the sale of, and
payment for, Load Shares of the Funds subject to a sales load.
4.1 Distributor shall have the right to purchase Load Shares at their
net asset value and to sell such Load Shares to the public against orders
therefor at the applicable public offering
7
<PAGE>
price, as defined in Section 4 hereof. Distributor shall also have the right to
sell Load Shares to dealers against orders therefor at the public offering price
less a concession determined by Distributor, which concession shall not exceed
the amount of the sales charge or underwriting discount, if any, referred to in
Section 4 below.
4.2 Prior to the time of delivery of any Load Shares by a Load Fund
to, or on the order of, Distributor, Distributor shall pay or cause to be paid
to the Load Fund or to its order an amount in Boston or New York clearing house
funds equal to the applicable net asset value of such Shares. Distributor may
retain so much of any sales charge or underwriting discount as is not allowed by
Distributor as a concession to dealers.
5. Public Offering Price.
----------------------
The public offering price of a Load Share shall be the net asset value
of such Load Share, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the then-current prospectus of the Load Fund.
6. Issuance of Shares.
-------------------
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current prospectus of the Load Fund.
7. Term, Duration and Termination.
-------------------------------
This Agreement shall become effective with respect to each Fund as of
the date first written above and, unless sooner terminated as provided herein,
shall continue with respect to a particular Fund automatically for successive
one-year terms, provided that such continuance is specifically approved at least
annually by (a) by the vote of a majority of those members of the Trust's Board
of Trustees who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting for the purpose of voting on such
approval and (b) by the vote of the Trust's Board of Trustees or the vote of a
majority of the outstanding voting securities of such Fund. This Agreement is
terminable without penalty, on not less than sixty days' prior written notice,
by the Trust's Board of Trustees, by vote of a majority of the outstanding
voting securities of the Trust or by the Distributor. This Agreement will also
terminate automatically in the event of
8
<PAGE>
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meanings as ascribed to such terms in the 1940 Act.)
8. Limitation of Liability of the Trustees and Shareholders.
---------------------------------------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
MARINER FUNDS TRUST BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: _____________________ By:
Title: __________________ Title:
Date: ___________________ Date:
9
<PAGE>
Dated: ________________________
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
------------
Mariner U.S. Government Securities Fund
Mariner New York Tax-Free Bond Fund
Mariner Total Return Equity Fund
Mariner Small Cap Fund
Mariner Short-Term Fixed Income Fund
Mariner Fixed Income Fund
Mariner International Equity Fund
MARINER FUNDS TRUST
By:________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: _________________________
A-1
<PAGE>
Dated: ________________________
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF DISTRIBUTION PLAN FUND
- ------------------------------
Mariner U.S. Government Securities Fund
Mariner New York Tax-Free Bond Fund
Mariner Total Return Equity Fund
Mariner Small Cap Fund
Mariner Short-Term Fixed Income Fund
Mariner Fixed Income Fund
Mariner International Equity Fund
MARINER FUNDS TRUST
By:________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ________________________
B-1
<PAGE>
Dated: ________________________
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
C-1
<PAGE>
Dated: ________________________
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF LOAD FUND
-----------------
Mariner U.S. Government Securities Fund
Mariner New York Tax-Free Bond Fund
Mariner Total Return Equity Fund
Mariner Small Cap Fund
Mariner Short-Term Fixed Income Fund
Mariner Fixed Income Fund
Mariner International Equity Fund
MARINER FUNDS TRUST
By:________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ________________________
D-1
<PAGE>
Exhibit 9(a)
Transfer Agency Agreement between Registrant
and BISYS Fund Services
<PAGE>
TRANSFER AGENCY AGREEMENT
-------------------------
AGREEMENT made this _____ day of __________________, _________, between
MARINER FUNDS TRUST (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES, INC. ("BISYS"), an Ohio corporation having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each of
the investment portfolios of the Trust (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
--------
BISYS shall perform for the Trust the transfer agent services set
forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
-----
The Trust shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. BISYS may increase the fees it charges pursuant to the fee
schedule; provided, however, that BISYS may not increase such fees until the
expiration of the Initial Term of this Agreement (as defined below), unless the
Trust otherwise agrees to such change in writing. Fees for any additional
services to be provided by BISYS pursuant to an amendment to Schedule A hereto
shall be subject to mutual agreement at the time such amendment to Schedule A is
proposed.
<PAGE>
3. Reimbursement of Expenses.
--------------------------
In addition to paying BISYS the fees described in Section 2 hereof,
the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Trust and in delivering all
materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by BISYS in communication with the
Trust, the Trust's investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms, proxies, notices or
other form of printed material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other materials;
and
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Trust thereunto duly authorized.
4. Effective Date.
---------------
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. Term
----
5.01 Initial Term; Renewal Terms
---------------------------
This Agreement shall become effective as of the date first written
above and shall continue until March 1, 1999, and unless sooner terminated as
provided herein, thereafter shall be renewed automatically for successive one-
year terms, unless (i) it is terminated for cause pursuant to paragraph 5.03
below, (ii) it is terminated pursuant to paragraph 5.04 below, or (iii) written
notice not to renew is given by the non-renewing party to the other party at
least 120 days prior to the expiration of the then-current term; provided that
such continuance is specifically reviewed and approved at least annually (i) by
the vote of a majority of the Trust's Board of Trustees or by the vote of a
majority of the outstanding voting securities of such Fund and (ii) by the
majority of the Trust's Trustees who are not parties to this Agreement or
interested persons (as defined in the 1940
2
<PAGE>
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. The scope of such review shall be
whether there is any "cause" (as defined below) that would justify terminating
the Agreement.
5.02 Termination of Agreement
------------------------
This Agreement is terminable with respect to a particular Fund (i)
upon provision of written notice not to renew in accordance with paragraph 5.01,
(ii) upon mutual agreement of the parties hereto, (iii) for cause by the party
alleging cause pursuant to paragraph 5.03, or (iv) upon provision of written
notice to terminate in accordance with paragraph 5.04. Written notice not to
renew may be given for any reason, with or without "cause" (as defined in
paragraph 5.03). Upon termination of this Agreement, if BISYS, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect.
Compensation due and payable to BISYS and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the compensation described under Section 2 hereof, the amount of all of BISYS'
cash disbursements for services in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for a
reasonable fee, BISYS will provide the Trust with reasonable access to any Trust
documents or records remaining in its possession.
5.03 Termination for Cause
---------------------
This Agreement may be terminated for cause in accordance with this
paragraph 5.03. In the event cause, as defined below, is alleged, the party
alleging cause shall provide written notice to the other party specifying the
event or events constituting cause and demanding that such other party cure the
same. If appropriate corrective action is not taken within 30 days following
receipt of such notice, the party alleging cause may terminate this Agreement by
the provision of 60 days' written notice. For purposes of this Agreement,
"cause" shall mean (a) willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the party to be terminated with respect to its
obligations and duties set forth herein; (b) a final, unappealable judicial,
regulatory or administrative ruling or order in which the party to be terminated
has been found guilty of criminal or unethical behavior in the conduct of its
business; or (c) financial difficulties on the part of the party to be
terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors. Notwithstanding the
foregoing, the absence of either or both an annual review or ratification of
this Agreement by the Board of Trustees shall not, in and of itself, constitute
"cause" as used herein.
3
<PAGE>
5.04 Termination in the Event of a
-----------------------------
Fund Liquidation or Fund Merger,
--------------------------------
or an Assignment of the Investment Advisory Contract
---------------------------------------------------
If, during the initial term of this Agreement (as set forth in
paragraph 5.01), (i) a Fund is liquidated or is merged into a mutual fund
portfolio that is not part of the Trust or Mariner Mutual Funds Trust, or (ii)
the investment advisory agreement between HSBC Asset Management Americas, Inc.
("HSBC") and the Trust is assigned (excluding any technical assignment based
solely upon a change in control of HSBC) such that HSBC ceases to be the
investment adviser to the Trust, this Agreement may be terminated by the Trust
with respect to each liquidated or merged Fund (or, in the case of the
assignment of the investment advisory agreement as described above, with respect
to all of the Funds) by the provision of 60 days' written notice; provided,
however, that upon such termination, the Trust shall make a one-time cash
payment, as liquidated damages, to BISYS equal to the fees payable to BISYS
hereunder for the shorter of (i) the eighteen-month period commencing on the
termination date or (ii) the remainder of the initial term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the termination date will remain constant for the balance of such
initial term.
5.05 Termination Without Cause
-------------------------
In the event (i) the Trust terminates this Agreement for any reason
other than (A) "cause" pursuant to paragraph 5.03 or (B) the reasons described
in paragraph 5.04, (ii) BISYS is otherwise replaced as fund manager and
administrator or (iii) a third party is added to perform all or a part of the
services provided by BISYS under this Agreement (excluding any sub-administrator
appointed by BISYS as provided in Section 1 hereof), then the Trust shall make a
one-time cash payment, as liquidated damages, to BISYS equal to the balance due
BISYS for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Trust on the date BISYS
is replaced, or a third party is added will remain constant for the balance of
the contract term.
6. Uncontrollable Events.
----------------------
BISYS assumes no responsibility hereunder, and shall not be liable for
any damage, loss of data, delay or any other loss whatsoever caused by events
beyond its reasonable control.
7. Legal Advice.
-------------
BISYS shall notify the Trust at any time BISYS believes that it is in
need of the advice of counsel (other than counsel in the regular employ of BISYS
or any affiliated companies) with regard to BISYS' responsibilities and duties
pursuant to this Agreement; and after so notifying the Trust, BISYS, at its
discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with
4
<PAGE>
respect to BISYS' responsibilities and duties hereunder and BISYS shall in no
event be liable to the Trust or any Fund or any shareholder or beneficial owner
of the Trust for any action reasonably taken pursuant to such advice.
8. Instructions.
-------------
Whenever BISYS is requested or authorized to take action hereunder
pursuant to instructions from a properly authorized agent of the Trust, a
shareholder, or a properly authorized agent of a shareholder ("shareholder's
agent"), concerning an account in a Fund, BISYS shall be entitled to rely upon
any certificate, letter or other instrument or communication, believed by BISYS
to be genuine and to have been properly made, signed or authorized by an officer
or other authorized agent of the Trust or by the shareholder or shareholder's
agent, as the case may be, and shall be entitled to receive as conclusive proof
of any fact or matter required to be ascertained by it hereunder a certificate
signed by an officer of the Trust or any other person authorized by the Trust's
Board of Trustees or by the shareholder or shareholder's agent, as the case may
be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions; Indemnification.
-----------------------------------------------------------------------
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties. The Trust agrees to indemnify and hold harmless BISYS,
its employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to BISYS by the Trust, the investment adviser and on any records
provided by any fund accountant or custodian thereof; provided that this
indemnification shall not apply to actions or omissions of BISYS in cases of its
own bad faith, willful misfeasance, gross negligence or from reckless disregard
by it of its obligations and duties; and further provided that prior to
confessing any claim against it which may be the subject of this
indemnification, BISYS shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
BISYS.
5
<PAGE>
10. Record Retention and Confidentiality.
-------------------------------------
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees
that all such books and records shall be the property of the Trust and to make
such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. Reports.
--------
BISYS shall prepare the reports set forth in Schedule C hereto and
shall furnish them to appropriate persons designated by the Trust.
12. Rights of Ownership.
--------------------
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. Return of Records.
------------------
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
14. Bank Accounts.
--------------
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the
6
<PAGE>
services required to be performed hereunder. To the extent that the performance
of such services shall require BISYS directly to disburse amounts for payment of
dividends, redemption proceeds or other purposes, the Trust and Funds shall
provide such bank or banks with all instructions and authorizations necessary
for BISYS to effect such disbursements.
15. Representations of the Trust.
-----------------------------
The Trust certifies to BISYS that: (a) as of the close of business on
the Effective Date, each Fund which is in existence as of the Effective Date has
authorized unlimited shares, and (b) by virtue of its Declaration of Trust,
shares of each Fund which are redeemed by the Trust may be sold by the Trust
from its treasury, and (c) this Agreement has been duly authorized by the Trust
and, when executed and delivered by the Trust, will constitute a legal, valid
and binding obligation of the Trust, enforceable against the Trust in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and secured parties.
16. Representations of BISYS.
-------------------------
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; (b) the various procedures and systems which BISYS has implemented
with regard to safekeeping from loss or damage attributable to fire, theft or
any other cause of the blank checks, records, and other data of the Trust and
BISYS' records, data, equipment, facilities and other property used in the
performance of its obligations hereunder are adequate and that it will make such
changes therein from time to time as are required for the secure performance of
its obligations hereunder, and (c) this Agreement has been duly authorized by
BISYS and, when executed and delivered by BISYS, will constitute a legal, valid
and binding obligation of BISYS, enforceable against BISYS in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of creditors
and secured parties.
17. Insurance.
----------
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
7
<PAGE>
18. Information to be Furnished by the Trust and Funds.
---------------------------------------------------
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the state in which such
Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of Trustees
covering the following matters:
A. Approval of this Agreement and authorization of a specified
officer of the Trust to execute and deliver this Agreement and authorization for
specified officers of the Trust to instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer Agent for the
Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with specimen
signatures of those officers, who are authorized to instruct BISYS in all
matters.
(d) Two copies of the following (if such documents are employed by the
Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its Distributor
with regard to their relationships and transactions with shareholders of the
Funds.
(e) A certificate as to shares of beneficial interest of the Trust
authorized, issued, and outstanding as of the Effective Date of BISYS'
appointment as Transfer Agent (or as of the date on which BISYS' services are
commenced, whichever is the later date) and as to receipt of full consideration
by the Trust for all shares outstanding, such statement to be certified by the
Treasurer of the Trust.
8
<PAGE>
19. Information Furnished by BISYS.
-------------------------------
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a specified
officer of BISYS to execute and deliver this Agreement;
2. Authorization of BISYS to act as Transfer Agent for the Trust.
(d) A copy of the most recent independent accountants' report relating
to internal accounting control systems as filed with the Commission pursuant to
Rule 17Ad-13 under the Exchange Act.
Copies of reports described in paragraph (d) directly above that are produced
after the Effective Date will be furnished to the Trust upon request.
20. Amendments to Documents.
------------------------
The Trust shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Trust agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Trust which might have the effect of changing the procedures
employed by BISYS in providing the services agreed to hereunder or which
amendment might affect the duties of BISYS hereunder unless the Trust first
obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
-----------------------
BISYS may rely on any amendments to or changes in any of the documents
and other items to be provided by the Trust pursuant to Sections 18 and 20 of
this Agreement and the Trust hereby indemnifies and holds harmless BISYS from
and against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every nature
and character which may result from actions or omissions on the part of BISYS in
reasonable reliance upon such amendments and/or changes. Although BISYS is
authorized to rely on the above-mentioned amendments to and changes in the
documents and other items to be provided pursuant to Sections 18 and 20 hereof,
BISYS shall be under no duty to comply with or
9
<PAGE>
take any action as a result of any of such amendments or changes unless the
Trust first obtains BISYS' written consent to and approval of such amendments or
changes.
22. Compliance with Law.
--------------------
Except for the obligations of BISYS set forth in Section 10 hereof,
the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
--------
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
24. Headings.
---------
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
25. Assignment.
----------
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way
affect BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1
hereof.
26. Governing Law and Matters Relating to the Trust as a Massachusetts
------------------------------------------------------------------
Business Trust.
- ---------------
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the Commonwealth of Massachusetts. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust property of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees, and this Agreement has been signed and delivered by an authorized
officer of the Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally,
10
<PAGE>
but shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MARINER FUNDS TRUST
By:________________________________
BISYS FUND SERVICES, INC.
By:________________________________
11
<PAGE>
Dated: ________________________
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
- ------------------------
RECORD KEEPING
1. Produce monthly shareholder statements by the fifth business day
2. Post shareholder transactions
3. Produce and mail daily confirmations to shareholders
4. Produce and mail dividend and redemption checks
5. Balance daily transaction activity
6. Disburse dividends and capital gains
7. Maintain shareholder information files
8. Manage daily ACH transmissions
9. Monitor NSCC activity
10. Complete cash settlement between funds, custodians, NSCC and shareholders
11. Reconcile deposit, redemption, wire, check writing, dividend and DDAs
12. Microfiche all source documentation
13. Prepare daily open items report
14. Distribute new account welcome kits and all forms necessary for
shareholders to transact business with the Trust (e.g., change-of-address
forms, power-of-attorney forms, letter of intent forms)
15. Calculate and produce shareholder tax records
16. Coordinate development of systematic enhancements
17. Communicate and coordinate corporate action events
18. Generate user defined reports from the shareholder system
19. Perform legal review on all incoming transactions
20. Acquire fund CUSIPs
21. Complete quality assurance review of transactions
22. Calculate and distribute sales commissions
23. Track and report sales activity
24. Accept and track incoming retirement rollover subscriptions
A-1
<PAGE>
RETAIL FEATURES
1. Process previously-authorized purchases
2. Process systematic withdrawals
3. Complete gross dividend reinvestment
4. Process payments to multiple payees
5. Manage FundServ linkage
6. Support full NSCC networking support
7. Establish account relationship linking
8. Maintain 401(k) interface
9. Provide an automated voice response unit (scripts to be provided by HSBC
following NASD approval)
SYSTEMS (charges will vary)
1. Research/Feasibility Studies
2. Systems specifications and implementation plans
3. Design and Testing
4. Implementation/conversion
MISCELLANEOUS
1. Coordinate use of outside vendors by Fund
2. Provide a designated project manager for routine ongoing projects
3. Institutional trade facilitation
4. Asset-related conversions
5. Provide proxy support by furnishing shareholder lists and mailing labels
A-2
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
-------------------
Annual Per Fund Fee:
- --------------------
$16,000
<TABLE>
<CAPTION>
Annual Per Account Fee:
- -------------------------
Retail/Load Retail/No-Load Institutional
----------- -------------- -------------
<S> <C> <C> <C>
Daily Dividend $25.00 $21.00 $17.00
Periodic Dividend $23.00 $19.00 $15.00
Closed Accounts $ 5.00 $ 5.00 $ 5.00
</TABLE>
Multiple Classes of Shares:
- ---------------------------
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Additional Services:
- --------------------
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
Out-of-pocket Expenses:
- -----------------------
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule C is attached.
B-1
<PAGE>
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MARINER FUNDS TRUST
AND
BISYS FUND SERVICES, INC.
REPORTS
-------
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed with
the Securities and Exchange Commission pursuant to Rule 17Ad-13 of the
Securities Exchange Act of 1934, as amended.
C-1
<PAGE>
Exhibit 9(c)
Shareholder Servicing Agreement between Registrant and HSBC
Asset Management Americas Inc. dated November 1, 1994
<PAGE>
SHAREHOLDER SERVICING AGREEMENT
SHAREHOLDER SERVICING AGREEMENT, dated as of November 1, 1994, by and
between Mariner Funds Trust (the "Trust"), a Massachusetts business trust, and
HSBC Asset Management Americas Inc. (the "Financial Institution"), as a
shareholder servicing agent hereunder (the "Agent") relating to transactions in
shares of capital stock, $.001 par value (the "Shares"), of any of the existing
investment portfolios offered by the Trust (the "Funds"). In the event that the
Trust establishes one or more portfolios other than the Funds with respect to
which it decides to retain the Financial Institution hereunder, the Trust shall
promptly notify the Financial Institution in writing. If the Financial
Institution is willing to render such services, it shall notify the Trust in
writing whereupon such portfolio shall become a Fund hereunder.
The Trust and the Financial Institution hereby agree as follows:
1. Appointment. The Financial Institution, as Agent, hereby agrees to perform
-----------
certain services for its customers (the "Customers") as hereinafter set forth.
The Agent's appointment hereunder is non-exclusive, and the parties recognize
and agree that, from time to time, the Trust may enter into other shareholder
servicing agreements, in writing, with other financial institutions.
2. Services to be Performed. The Agent, as agent for its Customers,
------------------------
shall be responsible for performing shareholder administrative support services,
which will include the following: (i) assist, train and monitor personnel who
hand out prospectuses and Fund applications, (ii) assist, train and monitor
personnel who assist customers with filling out Fund applications, (iii) provide
customer education, review Fund written communications and assist, train and
monitor personnel who answer customer questions, (iv) assist, train and monitor
personnel who effect customer purchases and redemptions, (v) organize and
conduct investment seminars to enhance understanding of the Funds and their
investment objectives and (vi) assist and supervise the activities of
Participating Organizations (as defined in the Fund's Prospectus).
The Agent shall provide all personnel and facilities necessary in
order for it to perform the functions described in this paragraph with respect
to its Customers.
<PAGE>
3. Fees.
----
3.1. Fees from the Trust. In consideration for the services
-------------------
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Agent shall receive a fee, computed daily and payable monthly, at
the annual rate of 0.04% of 1% of the average daily net asset value of Shares of
each Fund for which the Agent from time to time performs services under this
Agreement on behalf of Customers. Fees with respect to Customers' Shares in any
one Fund will be paid exclusively from the assets of that Fund in which such
Customer's assets are invested. For purposes of determining the fees payable to
the Agent hereunder, the value of the Trust's net assets shall be computed in
the manner specified in the Trust's then-current prospectus and statement of
additional information (the "Prospectus") for computation of the net asset value
of the Trust's Shares.
3.2. Fees from Customers. It is agreed that the
-------------------
Financial Institution may impose certain conditions on Customers, in addition to
or different from those imposed by the Trust, such as requiring a minimum
initial investment or imposing limitations on the amounts of transactions. It
is also understood that the Financial Institution may directly credit or charge
fees to Customers in connection with an investment in the Funds. The Financial
Institution shall credit or bill Customers directly for such credits or fees.
In the event the Financial Institution charges Customers such fees, it shall
make appropriate prior written disclosure (such disclosure to be in accordance
with all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2.
4. Approval of Materials to be Circulated. Advance
--------------------------------------
copies or proofs of all materials which are to be generally circulated or
disseminated by the Agent to Customers or prospective Customers which identify
or describe the Trust shall be provided to the Trust at least 10 days prior to
such circulation or dissemination (unless the Trust consents in writing to a
shorter period), and such materials shall not be circulated or disseminated or
further circulated or disseminated
-2-
<PAGE>
at any time after the Trust shall have given written notice to the Agent of any
objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use of any information about the Trust which is disseminated by the
Agent.
5. Compliance with Laws, etc. The Agent shall comply
--------------------------
with all applicable federal and state laws and regulations in the performance of
its duties under this Agreement, including securities laws.
6. Limitation of Agent's Liability. In consideration
-------------------------------
of the Agent's undertaking to render the services described in this Agreement,
the Trust agrees that the Agent shall not be liable under this Agreement for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of this Agreement, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Agent against any
liability to the Trust or its stockholders to which the Agent would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Agent's duties under this Agreement or by reason of the
Agent's reckless disregard of its obligations and duties hereunder.
7. Indemnification. The Trust agrees to indemnify
---------------
and hold harmless the Agent from all taxes, charges, expenses, assessments,
claims and liabilities (including, without limitation, liabilities arising under
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Trust Act of 1940, as amended, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including attorneys' fees and disbursements arising directly or
indirectly from (i) any misstatements or omissions in the Trust's Prospectus, or
(ii) any action or thing which the Agent takes or does or omits to take or do
reasonably believed by the Agent to be at the request or direction or in
reliance on the advice or instructions, whether oral or written, of the Trust
provided, that the Agent shall not be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of the Agent's own willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. In order that the
indemnification provision contained in this paragraph shall apply, it is
understood that if in any case the Trust may be asked to indemnify or save the
Agent harmless, the Trust shall be fully and promptly advised of all
-3-
<PAGE>
pertinent facts concerning the situation in question, and it is further
understood that the Agent will use all reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Trust.
The Trust shall have the option to defend the Agent against any claim which may
be the subject of this indemnification and, in the event that the Trust so
elects, it will so notify the Agent and thereupon the Trust shall take over
complete defense for the claim, and the Agent shall in such situation incur no
further legal or other expenses for which it shall seek indemnification under
this paragraph. The Agent shall in no case confess any claim or make any
compromise or settlement in any case in which the Trust will be asked to
indemnify the Agent, except with the Trust's prior written consent.
8. Limitation of Shareholder Liability, etc. The
-----------------------------------------
Agent hereby agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the Trust and its assets and that the
Agent shall not seek satisfaction of any such obligation from the shareholders
or any shareholder of the Trust. It is further agreed that the Agent shall not
seek satisfaction of any such obligations from the Board of Trustees or any
individual Trustee of the Trust.
9. Notices. All notices or other communications
-------
hereunder to either party shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to the
Trust, at the address of the Trust, or (b) if to the Agent, at 250 Park Avenue,
New York, New York 10017, Attention: Stanley Vyner.
10. Further Assurances. Each party agrees to perform
------------------
such further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
11. Termination. This Agreement will continue in
-----------
effect until two years from the date hereof and thereafter for successive annual
periods, provided that such continuance is specifically approved at least
annually (a) by the Trust's Board of Trustees and (b) by the vote, cast in
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. This Agreement may be terminated at
any time, without the payment of any penalty, by a vote of a majority of the
Trust's outstanding voting securities (as defined in the 1940 Act) or by a vote
of a majority of the Trust's entire Board of Trustees on 60 days' written notice
to the Agent or by the Agent on (60) days' written notice to the
-4-
<PAGE>
Trust. Notice of termination of the Shareholder Servicing Plan by the Board of
Trustees, pursuant to which this Agreement has been entered, shall constitute a
notice of termination of this Agreement.
12. Changes; Amendments. This Agreement may be changed or amended only
-------------------
by written instrument signed by both parties.
13. Reports. The Agent will provide the Trust or its designees such
-------
information as the Trust or its designees may reasonably request (including,
without limitation, periodic certifications confirming the provision to
Customers of the services described herein), and will otherwise cooperate with
the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to its
Board of Trustees concerning this Agreement and the monies paid or payable under
this Agreement, as well as any other reports or filings that may be required by
law.
14. Subcontracting by Agent. The Agent may subcontract for the
-----------------------
performance of the Agent's obligations hereunder with any one or more persons,
including but not limited to any one or more persons which is an affiliate of
the Agent; provided, however, that the Agent shall be as
-------- -------
fully responsible to the Trust for the acts and omissions of any subcontractor
as it would be for its own acts or omissions. The Agent shall notify the Trust
of any such arrangements no later than the next meeting of the Trust's Board of
Trustees following the entry by the Agent into such arrangements.
Notwithstanding this paragraph or paragraph 11 of this Agreement, the Trust
reserves the right to terminate this Agreement immediately or upon such notice
as the Trust, in its sole discretion, determines to give, and without payment of
any penalty, if the Trust notifies the Agent that any subcontractor of the Agent
is unacceptable to the Trust for any reason and the Agent does not terminate its
arrangements with such subcontractor as promptly as reasonably practicable.
15. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of New York.
16. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Trust by the undersigned not
individually, but in the capacity indicated.
-5-
<PAGE>
MARINER FUNDS TRUST
By:_________________
Title: Secretary
HSBC ASSET MANAGEMENT AMERICAS INC.
By:_________________________
Title:
-6-
<PAGE>
Exhibit 9(d)
Service Organization Agreement between Bank of
Oklahoma and Registrant, dated October 25, 1994
<PAGE>
October 25, 1994
SERVICE ORGANIZATION AGREEMENT
MARINER FUNDS TRUST
---------------------------
Dear Sirs:
You have advised us that you are authorized and intend to invest shares of
beneficial interest of the Trust ("Mariner Shares") on behalf of certain
customers (the "Customers"), that you will be the shareholder of record, as
nominee for the Customers, and that you intend to maintain subaccounts and
handle investor relation services for the Customers. This letter sets forth the
terms on which these services will be provided.
You will perform shareholder services for Customers in a manner consistent with
the Prospectus. Shareholder services include (a) maintenance of a separate
subaccount for each Customer in which each transaction with respect to the
Customer's interest in Mariner Shares will be promptly reflected; (b) prompt
crediting of cash distributions to the customer account through which a
Customer's interest in the Mariner Shares was acquired; (c) maintenance of
records for each subaccount containing substantially the same information as
referred to above; (d) processing purchase and redemption requests; (e) mailing
to each Customer periodically a statement reflecting all transactions with
respect to the Customer's interest in Mariner Shares; and (f) if required by
law, distribution of the Trust's shareholder reports and proxy statements to
Customers. If requested by a Customer, you will promptly request that Mariner
Shares held on the Customer's behalf be registered in the Customer's name. In
connection with these services, you will furnish us, or our auditors with such
information as we or they may reasonably request with respect to such services,
including, without limitation, confirmation of the provision of such services,
information required for preparation of reports of the Trust or the
determination of amounts payable by the Trust to us or by us to you.
In consideration of the Shareholder services provided by you hereunder, we will
reimburse you for your costs involved in providing these services, and you will
accept as full payment therefor, an amount payable monthly not to exceed the
maximum
<PAGE>
rate of twenty-five basis points per annum of the average daily value during the
month of Mariner Shares held of record by you from time to time on behalf of
Customers ("Customers' Mariner Shares"). For purposes of determining the fees
payable under this paragraph, the daily value of the Customers' Mariner Shares
will be computed in the manner specified in the Prospectus and the Trust's
registration statement (as the same are in effect from time to time) in
connection with the computation of the net asset value of Mariner Shares for
purposes of purchases and redemptions. The fee rate stated above may be
prospectively increased or decreased by us, in our sole discretion, at any time
upon notice to you.
Reimbursement will be paid as indicated below:
. By direct payment to you of the amount equal to such costs.
. By crediting the amount equal to such costs against other amounts
due from you to us as agreed upon from time to time
You will indemnify and hold us harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by us resulting from any
claim, demand, action or suit arising out of this Agreement, which does not
arise out of our negligence or willful misconduct.
Please acknowledge this Agreement by signing and returning a copy of this
letter. This Agreement will become effective upon receipt by us of a signed
copy. This Agreement shall replace and terminate a similar agreement between
you and HSBC Asset Management Americas Inc.
Very truly yours,
MARINER FUNDS TRUST
Acknowledged: By:______________________
Name:
BANK OF OKLAHOMA
Title:
By:_________________________
Title:
-2-
<PAGE>
Exhibit 9(e)
Fund Accounting Agreement between Registrant
and BISYS Fund Services
<PAGE>
FUND ACCOUNTING AGREEMENT
-------------------------
AGREEMENT made this _____ day of __________________, _________, between
MARINER FUNDS TRUST (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES, INC. ("BISYS"), a corporation organized under the laws of
the State of Ohio and having its principal place of business at 3435 Stelzer
Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain fund accounting
services for each investment portfolio of the Trust (individually referred to
herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
---------------------------
(a) Maintenance of Books and Records. BISYS will keep and maintain the
--------------------------------
following books and records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail of all
purchases and sales of securities, all receipts and disbursements of cash and
all other debits and credits, as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, as required by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection (b)(2)(ii) and
(iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition to the
-----------------------------------------
maintenance of the books and records specified above, BISYS shall perform the
following accounting services daily for each Fund:
<PAGE>
(i) Calculate the net asset value per share utilizing prices obtained from
the sources described in subsection 1(b)(ii) below;
(ii) Obtain security prices from independent pricing services, or if such
quotes are unavailable, then obtain such prices from each Fund's
investment adviser or its designee, as approved by the Trust's Board of
Trustees;
(iii) Verify and reconcile with the Funds' custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net income and capital gains,
dividend payables, dividend factors, 7-day yields, 7-day effective
yields, 30-day yields, and weighted average portfolio maturity;
(v) Review daily the net asset value calculation and dividend factor (if
any) for each Fund prior to release to shareholders, check and confirm
the net asset values and dividend factors for reasonableness and
deviations, and distribute net asset values and yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of securities in any money
market Funds, with the comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on securities held in
variable net asset value Funds;
(viii) Upon receipt of timely instructions from each Fund's investment adviser,
amortize premiums and accrete discounts on securities purchased at a
price other than face value;
(ix) Update fund accounting system to reflect rate changes, as received from
a Fund's investment adviser, on variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions received from the
Trust's Administrator;
(xii) Determine the outstanding receivables and payables for all (1) security
trades, (2) Fund share transactions and (3) income and expense accounts;
2
<PAGE>
(xiii) Provide accounting reports in connection with the Trust's regular annual
audit and other audits and examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall agree upon, as set
forth in a separate schedule.
(c) Special Reports and Services.
-----------------------------
(i) BISYS may provide additional special reports upon the request of the
Trust or a Fund's investment adviser, which may result in an additional
charge, the amount of which shall be agreed upon between the parties.
(ii) BISYS may provide such other similar services with respect to a Fund as
may be reasonably requested by the Trust, which may result in an
additional charge, the amount of which shall be agreed upon between the
parties.
(d) Additional Accounting Services. BISYS shall also perform the
-------------------------------
following additional accounting services for each Fund:
(i) Provide monthly a download (and hard copy thereof) of the financial
statements described below, within ten (10) business days of month-end.
The download will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise tax returns;
(B) the Trust's semi-annual reports with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if any) shareholder
reports;
(D) registration statements on Form N-1A and other filings relating to
the registration of shares;
3
<PAGE>
(E) the Administrator's monitoring of the Trust's status as a
regulated investment company under Subchapter M of the Internal
Revenue Code, as amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
--------------
BISYS may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder; provided,
however, that BISYS shall not be relieved of any of its obligations under this
Agreement by the appointment of such subcontractor and provided further, that
BISYS shall be responsible, to the extent provided in Section 7 hereof, for all
acts of such subcontractor as if such acts were its own.
3. Compensation.
------------
BISYS shall be entitled to receive compensation for the services
provided herein in such amounts as the parties may agree upon. Such
compensation shall be paid to BISYS Fund Services Limited Partnership ("BFSLP")
by the Trust along with fees that are payable to BFSLP for services provided
under its Management and Administration Agreement with the Trust. BFSLP has
agreed to remit the compensation payable to BISYS hereunder that it receives
pursuant to this payment arrangement.
4. Reimbursement of Expenses.
-------------------------
In addition to paying BISYS the fees described in Section 3
hereof, the Trust agrees to reimburse BISYS for its out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by BISYS in
delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by BISYS in communication with the
Trust, the Trust's investment advisor or custodian, dealers or others as
required for BISYS to perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to Section
l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other materials;
(e) Any expenses BISYS shall incur at the written direction of an officer
of the Trust thereunto duly authorized; and
4
<PAGE>
(f) Any additional expenses reasonably incurred by BISYS in the performance
of its duties and obligations under this Agreement.
5. Effective Date.
--------------
This Agreement shall become effective with respect to a Fund as of the
date first written above (or, if a particular Fund is not in existence on that
date, on the date an amendment to Schedule A to this Agreement relating to the
Fund is executed) (the "Effective Date").
6. Term
----
6.01 Initial Term; Renewal Terms
---------------------------
This Agreement shall become effective as of the date first written
above and shall continue until March 1, 1999, and unless sooner terminated as
provided herein, thereafter shall be renewed automatically for successive one-
year terms, unless (i) it is terminated for cause pursuant to paragraph 6.03
below, (ii) it is terminated pursuant to paragraph 6.04 below, or (iii) written
notice not to renew is given by the non-renewing party to the other party at
least 120 days prior to the expiration of the then-current term; provided that
such continuance is specifically reviewed and approved at least annually (i) by
the vote of a majority of the Trust's Board of Trustees or by the vote of a
majority of the outstanding voting securities of such Fund and (ii) by the
majority of the Trust's Trustees who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. The scope of such review shall be whether there is any "cause" (as
defined below) that would justify terminating the Agreement.
6.02 Termination of Agreement
------------------------
This Agreement is terminable with respect to a particular Fund (i)
upon provision of written notice not to renew in accordance with paragraph 6.01,
(ii) upon mutual agreement of the parties hereto, (iii) for cause by the party
alleging cause pursuant to paragraph 6.03, or (iv) upon provision of written
notice to terminate in accordance with paragraph 6.04. Written notice not to
renew may be given for any reason, with or without "cause" (as defined in
paragraph 6.03). Upon termination of this Agreement, if BISYS, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect.
Compensation due and payable to BISYS and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the compensation described under Section 3 hereof, the amount of all of BISYS'
cash disbursements for services in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for a
reasonable fee, BISYS
5
<PAGE>
will provide the Trust with reasonable access to any Trust documents or records
remaining in its possession.
6.03 Termination for Cause
---------------------
This Agreement may be terminated for cause in accordance with this
paragraph 6.03. In the event cause, as defined below, is alleged, the party
alleging cause shall provide written notice to the other party specifying the
event or events constituting cause and demanding that such other party cure the
same. If appropriate corrective action is not taken within 30 days following
receipt of such notice, the party alleging cause may terminate this Agreement by
the provision of 60 days' written notice. For purposes of this Agreement,
"cause" shall mean (a) willful misfeasance, bad faith, gross negligence or
reckless disregard on the part of the party to be terminated with respect to its
obligations and duties set forth herein; (b) a final, unappealable judicial,
regulatory or administrative ruling or order in which the party to be terminated
has been found guilty of criminal or unethical behavior in the conduct of its
business; or (c) financial difficulties on the part of the party to be
terminated which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from time to
time is in effect, or any applicable law, other than said Title 11, of any
jurisdiction relating to the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors. Notwithstanding the
foregoing, the absence of either or both an annual review or ratification of
this Agreement by the Board of Trustees shall not, in and of itself, constitute
"cause" as used herein.
6.04 Termination in the Event of a
-----------------------------
Fund Liquidation or Fund Merger,
--------------------------------
or an Assignment of the Investment Advisory Contract
---------------------------------------------------
If, during the initial term of this Agreement (as set forth in
paragraph 6.01), (i) a Fund is liquidated or is merged into a mutual fund
portfolio that is not part of the Trust or Mariner Mutual Funds Trust, or (ii)
the investment advisory agreement between HSBC Asset Management Americas, Inc.
("HSBC") and the Trust is assigned (excluding any technical assignment based
solely upon a change in control of HSBC) such that HSBC ceases to be the
investment adviser to the Trust, this Agreement may be terminated by the Trust
with respect to each liquidated or merged Fund (or, in the case of the
assignment of the investment advisory agreement as described above, with respect
to all of the Funds) by the provision of 60 days' written notice; provided,
however, that upon such termination, the Trust shall make a one-time cash
payment, as liquidated damages, to BISYS equal to the fees payable to BISYS
hereunder for the shorter of (i) the eighteen-month period commencing on the
termination date or (ii) the remainder of the initial term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the termination date will remain constant for the balance of such
initial term.
6
<PAGE>
6.05 Termination Without Cause
-------------------------
In the event (i) the Trust terminates this Agreement for any reason
other than (A) "cause" pursuant to paragraph 6.03 or (B) the reasons described
in paragraph 6.04, (ii) BISYS is otherwise replaced as fund manager and
administrator or (iii) a third party is added to perform all or a part of the
services provided by BISYS under this Agreement (excluding any sub-administrator
appointed by BISYS as provided in Section 1 hereof), then the Trust shall make a
one-time cash payment, as liquidated damages, to BISYS equal to the balance due
BISYS for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Trust on the date BISYS
is replaced, or a third party is added will remain constant for the balance of
the contract term.
7. Standard of Care; Reliance on Records and Instructions;
-------------------------------------------------------
Indemnification.
BISYS shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement with respect to such Fund or based,
if applicable, upon reasonable reliance on information, records, instructions or
requests with respect to such Fund given or made to BISYS by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
8. Record Retention and Confidentiality.
------------------------------------
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust and BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees
that all such books and records shall be the property of the Trust and to make
such books and records available for inspection by the Trust or by the
Securities and Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders; except when requested to divulge such information by duly-
constituted authorities or court process.
7
<PAGE>
9. Uncontrollable Events.
---------------------
BISYS assumes no responsibility hereunder, and shall not be liable,
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control.
10. Reports.
-------
BISYS shall furnish the reports prepared under this Agreement to
appropriate persons designated by the Trust.
11. Rights of Ownership.
-------------------
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
12. Return of Records.
-----------------
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
13. Representations of the Trust.
----------------------------
The Trust certifies to BISYS that: (1) as of the close of business on
the Effective Date, each Fund that is in existence as of the Effective Date has
authorized unlimited shares, and (2) this Agreement has been duly authorized by
the Trust and, when executed and delivered by the Trust, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the Trust
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties.
14. Representations of BISYS.
------------------------
BISYS represents and warrants that: (1) the various procedures and
systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Trust and BISYS' records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
8
<PAGE>
that it will make such changes therein from time to time as are required for the
secure performance of its obligations hereunder, and (2) this Agreement has been
duly authorized by BISYS and, when executed and delivered by BISYS, will
constitute a legal, valid and binding obligation of BISYS, enforceable against
BISYS in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. Insurance.
---------
BISYS shall notify the Trust should any of its insurance coverage be
canceled or reduced. Such notification shall include the date of change and the
reasons therefor. BISYS shall notify the Trust of any material claims against
it with respect to services performed under this Agreement, whether or not they
may be covered by insurance, and shall notify the Trust from time to time as may
be appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
16. Information to be Furnished by the Trust and Funds.
--------------------------------------------------
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the state in which such
Declaration has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of Trustees
covering the approval of this Agreement, authorization of a specified officer of
the Trust to execute and deliver this Agreement and authorization for specified
officers of the Trust to instruct BISYS thereunder.
(c) A list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct BISYS in all
matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
9
<PAGE>
17. Information Furnished by BISYS.
------------------------------
(a) BISYS has furnished to the Trust the following:
(i) BISYS' Articles of Incorporation; and
(ii) BISYS' Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of corporate
actions covering the following matters:
(i) Approval of this Agreement, and authorization of a specified
officer of BISYS to execute and deliver this Agreement; and
(ii) Authorization of BISYS to act as fund accountant for the
Trust and to provide accounting services for the Trust.
18. Amendments to Documents.
-----------------------
The Trust shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 16 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Trust agrees
that no amendments will be made to the Prospectuses or Statements of Additional
Information of the Trust which might have the effect of changing the procedures
employed by BISYS in providing the services agreed to hereunder or which
amendment might affect the duties of BISYS hereunder unless the Trust first
obtains BISYS' approval of such amendments or changes.
19. Compliance with Law.
-------------------
Except for the obligations of BISYS set forth in Section 8 hereof, the
Trust assumes full responsibility for the preparation, contents and distribution
of each prospectus of the Trust as to compliance with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the 1940 Act and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the Securities Act and the
1940 Act has been declared or becomes effective.
20. Notices.
-------
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such
notice, at the following address:
10
<PAGE>
3435 Stelzer Road, Columbus, Ohio 43219, or at such other address as such party
may from time to time specify in writing to the other party pursuant to this
Section.
21. Headings.
--------
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
22. Assignment.
----------
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party.
23. Governing Law.
-------------
This Agreement shall be governed by and provisions shall be construed
in accordance with the laws of the Commonwealth of Massachusetts.
24. Limitation of Liability of the Trustees and Shareholders.
--------------------------------------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
MARINER FUNDS TRUST
By:________________________________
BISYS FUND SERVICES, INC.
By:________________________________
11
<PAGE>
Exhibit 10
Consent of Baker & McKenzie, counsel to Registrant
<PAGE>
April 24, 1996
HSBC Funds Trust
3435 Stelzer Road
Columbus, Ohio 43219
RE: HSBC Funds Trust
Registration No. 33-1312
------------------------
Dear Sir or Madam:
It is our opinion that the securities being registered hereunder will, when
sold, be legally issued, fully paid and non-assessable, and we hereby consent to
the reference to our firm as Counsel in Post-Effective Amendment No. 17 to
Registration No. 33-1312.
Very truly yours,
BAKER & McKENZIE
<PAGE>
Exhibit 11
Consent of Ernst & Young
independent auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" "Independent Auditors" and "Experts" and to the use of our reports
dated February 5, 1996, in this Registration Statement (Form N-1A No. 33-1312)
of HSBC Funds Trust, formerly Mariner Funds Trust.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
April 23, 1996
<PAGE>
Exhibit 15(a)
Rule 12b-1 Distribution Plan and Agreement between
Registrant and BISYS Fund Services
<PAGE>
HSBC MUTUAL FUNDS TRUST
HSBC FUNDS TRUST
(together, the "Trust")
RULE 12b-1 DISTRIBUTION PLAN
1. Definitions. (a) The Trust is an open-end management investment
------------
company organized under the laws of the Commonwealth of Massachusetts. The Trust
is registered under the Investment Company Act of 1940, as amended (the "Act").
The Trust's shares of beneficial interest may be classified into series in which
each series represents the entire undivided interests of a separate portfolio of
assets. For all purposes of this Agreement, a "Fund" shall mean a separate
portfolio of assets of the Trust and a "Series" shall mean the series of shares
of beneficial interest representing undivided interests in a Fund.
(b) As permitted by Rule 12b-1 (the "Rule") under the Act, the Trust has
adopted a Distribution Plan (the "Plan") for each Fund (except Premium
Institutional Class Shares) pursuant to which the Trust may make certain
payments to the Distributor for expenses incurred in connection with the
distribution of shares of the Funds. The Trust's Board of Trustees has
determined that there is a reasonable likelihood that the Plan will benefit the
Funds and their shareholders
2. Adoption of Plan. The Trust hereby adopts this Plan, and the parties
----------------
hereto enter into this Plan, on the terms and conditions specified herein.
3. Distribution-Related Fee. (a) The Trust shall pay the Distributor a
------------------------
monthly distribution-related fee on the first business day of each month in such
an amount as the Distributor may request, provided that each such payment shall
be based upon the average daily value of a Fund's net assets (as determined on
each business day at the time set forth in the Trust's currently effective
prospectus for determining net asset value per share) during the preceding month
and shall be calculated at an annual rate not in excess of 0.35% (0.50% for
Growth and Income Fund and Money Market Funds).
(b) For purposes of calculating each such monthly fee, the value of a
Fund's net assets shall be computed in the manner specified in the Trust's
currently effective Prospectus and Restated and Amended Declaration of Trust.
All expenses incurred by the Trust hereunder shall be charged against such
Fund's assets. For purposes of this Plan, a "business day" is any day the Trust
is open for business.
4. Purposes of Payments. The Distributor shall be obligated to use all
--------------------
amounts received under this Plan for (i) payments to broker/dealers and other
financial intermediaries including the Distributor for their assistance in the
distribution of Fund shares, and (ii) payments to broker/dealers and other
financial intermediaries including the Distributor for promoting the sale of
such Fund shares, such as by paying for the printing and distribution of
prospectuses sent to prospective investors, the preparation, printing and
distribution of sales literature and the
<PAGE>
expenses associated with media advertisements and telephone correspondents. The
services rendered by the Distributor hereunder are in addition to the
administrative services reasonably necessary for the operation of the Trust and
the Funds pursuant to the Administrative Services Contract between the Trust and
BISYS Fund Services Limited Partnership, dated as of March 9, 1996.
5. Related Agreements. All other agreements relating to the implementation of
-------------------
this Plan (the "related agreements") shall be in writing, and such related
agreements shall be subject to termination, without penalty, on not more than
sixty days' written notice to any other party to the agreement, in accordance
with the provisions of clauses (a) and (b) of paragraph 9 hereof.
6. Approvals by Trustees and Shareholders. This Plan shall become effective
---------------------------------------
upon approval by (a) a majority of the Board of Trustees of the Trust for each
Fund, including a majority of the Trustees who are not "interested persons" (as
defined in the Act) of the Trust and who have not direct or indirect financial
interest in the operation of the plan or in any related agreements (the "Plan
Trustees"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on the Plan, and (b) the holders of a majority of the
outstanding securities of a Fund (as defined in the Act). Related agreements
shall be subject to approval by the Trustees in the manner provided in clause
(a) of the preceding sentence.
7. Duration and Annual Approval by Trustees. This Plan and any related
-----------------------------------------
agreements shall continue in effect for a period of more than one year from the
date of their adoption by a majority of the Board of Trustees, including a
majority of the Plan Trustees, pursuant to a vote cast in person at a meeting
called for the purpose of voting on the continuance of this Plan or any related
agreement.
8. Amendments. This Plan may be amended at any time with the approval of a
-----------
majority of the Board of Trustees, provided that (a) any material amendment of
this Plan must be approved by the Trustees, and (b) any amendment to increase
materially the amount to be expended by the Fund pursuant to this Plan must also
be approved by the vote of the holders of a majority of the outstanding voting
securities of the Fund (as defined in the Act).
9. Termination. This Plan may be terminated at any time, without the payment
------------
of any penalty, by (a) the vote of a majority of the Plan Trustees, or (b) the
vote of the holders of a majority of the outstanding voting securities of a Fund
(as defined in the Act). If this plan is terminated with respect to any Funds,
it shall nonetheless remain in effect with respect to any remaining Funds.
10. Selection and Nomination of Trustees. While this Plan is in effect, the
-------------------------------------
selection and nomination of the Trustees who are not "interested persons" of the
Trust (as defined in the Act) shall be committed to the discretion of the
Trustees then in office who are not "interested persons" of the Trust.
<PAGE>
11. Effect of Assignment. To the extent that this Plan constitutes a plan of
---------------------
distribution adopted pursuant to the Rule, it shall remain in effect as such so
as to authorize the use of the Fund's assets in the amounts and for the purposes
set forth herein, notwithstanding the occurrence of an assignment (as defined in
the Act). To the extent this Plan concurrently constitutes an agreement relating
to implementation of the plan of distribution, it shall terminate automatically
in the event of its assignment, and the Trust may continue to make payments
pursuant to this Plan only (a) upon the approval of the Board of Trustees, and
(b) if the obligations of the Distributor under this Plan are to be performed by
any organization other than the Distributor, upon such organization's adoption
and assumption in writing of all provisions of this Plan as party hereto.
12. Ouarterlv Reports to Trustees. The Distributor shall prepare and furnish
------------------------------
to the Board of Trustees, at least quarterly, a written report setting forth all
amounts expended pursuant to this Plan and any related agreements and the
purposes for which such expenditures were made. The written report shall include
a detailed description of the continuing services provided by broker/dealers and
other financial intermediaries pursuant to paragraph 4 of this Plan.
13. Preservation of Records. The Trust shall preserve copies of this Plan, any
------------------------
related agreements and any reports made pursuant to this Plan for a period of
not less than six years from the date of this Plan or any such related agreement
or report. For the first two years, copies of such documents shall be preserved
in an easily accessible place.
14. Limitations on Liabilitv of Distributor. The Distributor shall give the
----------------------------------------
Trust the benefit of the Distributor's best judgment and efforts in rendering
services under this Plan. As an inducement to the Distributor's undertaking to
render these services, the Trust agrees that the Distributor shall not be liable
under this Plan for any mistake in judgment or in any other event whatsoever
except for lack of good faith, provided that nothing in this Plan shall be
deemed to protect or purport to protect the Distributor against any liability to
the Trust or its shareholders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Distributor's duties under this Plan, or by reason of the
Distributor's reckless disregard of its obligations and duties hereunder.
15. Other distribution-Related Expenditures. Nothing in this Plan shall
----------------------------------------
operate or be construed to limit the extent to which the Distributor or any
other person other than the Trust may incur costs and pay expenses associated
with the distribution of Fund shares.
16. Miscellaneous. The Trust's Amended and Restated Declaration of Trust is on
--------------
file with the Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Trust are not personally binding upon, nor shall resort be
had to the private property of, any of the Trustees, shareholders, of ficers,
employees or agents of the Trust, but only the Trust's property shall be bound.
<PAGE>
Other Exhibits (a)
Power of Attorney for William B. Blundin, Wolfe J. Frankl, William L.
Kufta, John P. Pfann, Robert A. Robinson, and Harald Paumgarten
<PAGE>
POWER OF ATTORNEY
-----------------
We, the undersigned Trustees of HSBC Funds Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts (the "Trust"), do hereby
constitute and appoint William B. Blundin, Ann E. Bergin, William J. Tomko, Mark
E. Nagle, Steven R. Howard, Martin R. Dean, Robert L. Tuch, and Alaina V. Metz,
and each of them individually, our true and lawful attorneys and agents to take
any and all action and execute any and all instruments which said attorneys and
agents may deem necessary or advisable:
(i) to enable the Trust to comply with the Securities Act of 1933, as amended,
and any rules, regulations, orders or other requirements of the Securities and
Exchange Commission thereunder, in connection with the registration under such
Securities Act of 1933 of shares of beneficial interest of the Trust to be
offered by the Trust,
(ii) to enable the Trust to comply with the Investment Company Act of 1940, as
amended, and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration of the Trust under the Investment Company Act of 1940, as amended,
and
(iii) to enable the Trust to comply with state securities laws and any rules,
regulations, orders or other requirements of state securities commissions, in
connection with the registration under state securities laws of the Trust and
with the registration under state securities laws of the shares of beneficial
interest of the Trust to be offered by the Trust,
including specifically, but without limitation of the foregoing, power and
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the name of such Trustee in his behalf as such Trustee as indicated
below, to any amendment or supplement (including post-effective amendments) to
the registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and to
execute any instruments or documents filed or to be filed as part of or in
connection with compliance with state securities laws, including, but not
limited to, all state filings for any purpose, state filings in connection with
corporate or trust organization or amending corporate or trust documentation,
filings for purposes of state tax laws and filings in connection with blue sky
regulations; and the undersigned hereby ratifies and confirms all that said
attorneys and agents shall do or cause to be done by virtue hereof.
<PAGE>
IN WITNESS WHEREOF, the undersigned place their hands this 7th day March, 1996.
-----------------------------
William B. Blundin
-----------------------------
Wolfe J. Frankl
-----------------------------
William L. Kufta
-----------------------------
Harald Paumgarten
-----------------------------
John P. Pfann
-----------------------------
Robert A Robinson
-2-
