As filed with the Securities and Exchange Commission on April 30, 1998
Registration Nos. 33-8214
811-4813
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. 88 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 92 |X|
(Check appropriate box or boxes.)
---------------
Standish, Ayer & Wood Investment Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
--------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 375-1760
ERNEST V. KLEIN, Esq.
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
---------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
|X| Immediately upon filing pursuant to Rule 485(b)
|_| On [Date] pursuant to Rule 485(b)
|_| 60 days after filing pursuant to Rule 485(a)(1)
|_| On [Date] pursuant to Rule 485(a)(1)
|_| 75 days after filing pursuant to Rule 485(a)(2)
|_| On [Date] pursuant to Rule 485(a)(2)
----------------------
This Post-Effective Amendment has been executed by Standish, Ayer & Wood
Master Portfolio.
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST*
Cross-Reference Sheet Pursuant to Rule 495(a)
Part A Prospectus
Form Item Cross-Reference
- --------- ---------------
Item 1. Cover Page Cover Page
Item 2. Synopsis "Expense Information"
Item 3. Condensed Financial Not Applicable
Item 4. General Description Cover Page, "The Funds and Their
of Registrant Shares", "Investment Objective and
Policies", "Description of Securities and
Related Risks", "Investment Techniques
and Related Risks" and "Information
about the Master-Feeder Structure"
Item 5. Management of the Fund "Management" and "Custodian,
Transfer Agent and Dividend
Disbursing Agent"
Item 6. Capital Stock and "The Funds and Their Shares",
Other Securities "Purchase of Shares", "Redemption of
Shares", "Dividends and Distributions"
and "Federal Income Taxes"
Item 7. Purchase of Securities Cover Page and "Purchase of
Being Offered Shares"
Item 8. Redemption or Repurchase "Redemption of Shares"
Item 9. Pending Legal Proceedings Not Applicable
- --------
*This Post-Effective Amendment to the Registrant's Registration
Statement is being filed with respect to the following series of the Registrant:
Standish Fixed Income Fund, Standish Diversified Income Fund, Standish Fixed
Income Fund II, Standish Short-Term Asset Reserve Fund, Standish Controlled
Maturity Fund, Standish Securitized Fund, Standish International Fixed Income
Fund and Standish Global Fixed Income Fund. The Prospectuses and Statements of
Additional Information for the other series of the Registrant are not effected
hereby and, therefore, are not included herewith.
<PAGE>
Statement of Additional
Part B Information Cross-
Form Item Reference
- --------- -----------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents "Contents"
Item 12. General Information
and History Not Applicable
Item 13. Investment Objectives "Investment Objective and
and Policies and Policies" and "Investment
Restrictions"
Item 14. Management of the Fund "Management"
Item 15. Control Persons and "Management"
Principal Holders
of Securities
Item 16. Investment Advisory and "Management"
Other Services
Item 17. Brokerage Allocation "Portfolio Transactions"
Item 18. Capital Stock and "The Funds and Their Shares"
Other Securities
Item 19. Purchase, Redemption "Redemption of Shares" and
and Pricing of Securities "Determination of Net Asset
Being Offered Value"
Item 20. Tax Status "Taxation"
Item 21. Underwriters Not Applicable
Item 22. Calculation of "Calculation of Performance
Performance Data Data"
Item 23. Financial Statements "Experts and Financial Statements"
<PAGE>
[LOGO] STANDISH FUNDS
The Standish Group of
Fixed Income Funds
Prospectus
..........
Standish Fixed
Income Fund
Standish Diversified
Income Fund
Standish Fixed
Income Fund II
Standish Short-Term
Asset Reserve Fund
Standish Controlled Maturity Fund
Standish Securitized Fund
April 30, 1998
<PAGE>
Standish Group of Fixed Income Funds
- --------------------------------------------------------------------------------
The Standish Group of Fixed Income Funds includes the Standish Fixed Income
Fund, Standish Diversified Income Fund, Standish Fixed Income Fund II, Standish
Short-Term Asset Reserve Fund, Standish Controlled Maturity Fund and Standish
Securitized Fund. Each Fund is organized as a separate diversified investment
series of Standish, Ayer & Wood Investment Trust, an open end investment company
(the "Trust"). The Fixed Income Fund, Diversified Income Fund and Short-Term
Asset Reserve Fund invest exclusively in the Standish Fixed Income Portfolio,
Standish Diversified Income Portfolio and the Short-Term Asset Reserve
Portfolio, respectively, each an open-end investment company. Standish, Ayer &
Wood, Inc. ("Standish"), Boston, Massachusetts, is the investment adviser to the
Fixed Income Portfolio, the Fixed Income Fund II, the Short-Term Asset Reserve
Portfolio, the Controlled Maturity Fund and the Securitized Fund. Standish
International Management Company, L.P. ("SIMCO"), Boston, Massachusetts, is the
investment adviser to the Diversified Income Portfolio. Standish and SIMCO are
referred to in the Prospectus as the "Adviser" or the "Advisers."
Prospective investors can obtain more information about the Funds, including
an application and Investor Guide, by calling Standish Fund Distributors, L.P.
at (800) 729-0066, or by visiting our Website at www.standishfunds.com.
Standish's primary investment management and research focus is at the security
and industry/sector level. Standish seeks to add value to each Fund's portfolio
by selecting undervalued investments, rather than by varying the average
maturity of a Fund's portfolio to reflect interest rate forecasts. Standish
utilizes fundamental credit and sector valuation techniques to evaluate what it
considers to be less efficient markets and sectors of the fixed income
marketplace in an attempt to select securities with the potential for the
highest return. SIMCO serves as Standish's international research and investment
arm for both debt and equity securities in all countries outside of the United
States. SIMCO emphasizes intermediate term economic fundamentals relating to
foreign countries and emerging markets, rather than focusing on day-to-day
fluctuations in a particular currency or in the fixed income markets. Standish
has been providing investment counseling to mutual funds, other institutional
investors and high net worth individuals for more than sixty years. Standish
offers a broad array of investment services that includes U.S., international
and global management of fixed income and equity securities for mutual funds and
separate accounts. Privately held by twenty-four employee/directors and
headquartered in Boston, Massachusetts, the firm employs over eighty investment
professionals with a total staff of more than two hundred.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing and should be retained for
future reference. Additional information has been filed with the Securities and
Exchange Commission ("SEC") in a Statement of Additional Information ("SAI")
dated April 30, 1998, as amended or supplemented from time to time. The SAI is
incorporated by reference into this Prospectus and is available without charge
upon request from (800) 729-0066. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI and other information regarding the
Funds and the Portfolios.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. An investment in shares of the Funds involves
investment risks, including possible loss of principal.
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 THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Standish Group of Fixed Income Funds 2 April 30, 1998
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Fund Comparison Highlights...................................4
Expense Information..........................................5
Financial Highlights.........................................6
Investment Objectives and Policies..........................12
Investment Strategy.........................................12
The Fixed Income Fund...................................13
The Diversified Income Fund.............................13
The Fixed Income Fund II................................13
The Short-Term Asset Reserve Fund.......................14
The Controlled Maturity Fund............................14
The Securitized Fund....................................14
Description of Securities and Related Risks.................15
General Risks...........................................15
Specific Risks..........................................15
Investment Techniques and Related Risks.....................20
Information about the Master-Feeder Structure...............23
Calculation of Performance Data.............................23
Dividends and Distributions.................................25
Purchase of Shares..........................................25
Net Asset Value.............................................25
Exchange of Shares..........................................26
Redemption of Shares........................................26
Management..................................................27
Federal Income Taxes........................................29
The Funds and Their Shares..................................30
Custodian, Transfer Agent and Dividend Disbursing Agent ....30
Independent Accountants.....................................30
Legal Counsel...............................................30
Tax Certification Instructions..............................30
Standish Group of Fixed Income Funds 3 April 30, 1998
<PAGE>
Fund Comparison Highlights
- --------------------------------------------------------------------------------
The following table highlights information contained in this Prospectus and is
qualified in its entirety by the more detailed information that follows. For a
complete description of each Fund's distinct investment objective and policies,
see "Investment Objectives and Policies," "Description of Securities and Related
Risks" and "Investment Techniques and Related Risks." There can be no assurance
that a Fund's investment objective will be achieved.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term
Fixed Income Diversified Fixed Income Asset Reserve Controlled
Fund Income Fund Fund II Fund Maturity Fund Securitized Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Primary Types Fixed income Fixed income Fixed income Money market Fixed income Mortgage-related
of Obligations securities of securities of securities of U.S. instruments and securities of U.S. and asset-backed
U.S. and U.S. and companies and short-term fixed companies and securities of U.S.
foreign foreign U.S. government income securities U.S. government and foreign
governments governments, of U.S. and foreign governments and
and companies banks and governments, banks companies
companies and companies
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Quality Primarily Up to 65% of Exclusively Exclusively Exclusively Exclusively
investment total assets investment investment investment investment
grade; up to below grade; grade; at least grade; grade; up to
15% of total investment emphasis on 85% of total emphasis on 15% fo total
assets below grade obligations assets in high obligations assets in medium
investment likely to be grade likely to be grade
grade upgraded upgraded
- ------------------------------------------------------------------------------------------------------------------------------------
Investment No No Yes Yes Yes Yes
Grade Only
- -----------------------------------------------------------------------------------------------------------------------------------
Average Aa/AA Ba/BB Aa/AA Aa/AA Aa/AA Aa/AA
Portfolio
Quality
- -----------------------------------------------------------------------------------------------------------------------------------
Average 5 - 13 years 5-13 years 5 - 13 years 6 - 15 months Not more than 3-15 years; varies
Effective maximum of 18 5 years due to prepayment
Portfolio months rate
Maturity
(Dollar-
Weighted)
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Yes; up to 20% Yes; no more No No; limited No Yes; up to 10%
Securities of total than 7% of exception for total assets
( assets; no more total assets in money market
than 10% of any one obligations of
total assets in emerging market foreign banks
emerging country; no and prime
markets more than 15% commercial
generally; no of total assets paper of
more than 3% of in any one foreign
total assets in developed companies
any one country (except
emerging market U.S.); at least
country; no 80% of total
more than 10% assets are
of total assets denominated in
not subject to or hedged to
currency hedging the U.S. dollar
- ----------------------------------------------------------------------------------------------------------------------------------
Benchmark Lehman Brothers Lehman Brothers Lehman Brothers IBC/Donohue All Merrill Lynch 1-3 Lehman Brothers
Aggregate Bond Aggregate Bond Aggregate Bond Taxable Money year Treasury Aggregate Index
Index and Index Index and Market Index Index and Lehman
Lehman Brothers Lehman Brothers Brothers Mortgage
Goverment/ Government/ Index
Corporate Index Corporate Index
====================================================================================================================================
</TABLE>
Standish Group of Fixed Income Funds 4 April 30, 1998
<PAGE>
Expense Information
- --------------------------------------------------------------------------------
Total operating expenses are based on expenses for each Fund's fiscal year
ended December 31, 1997. Total operating expenses for the Fixed Income Fund,
Diversified Income Fund and Short-Term Asset Reserve Fund include expenses of
the applicable Fund and corresponding Portfolio. The Trust's Trustees believe
that the total operating expenses of the Fixed Income Fund and Short-Term Asset
Reserve Fund are approximately equal to or less than what would be the case if
the Funds did not invest all of their investable assets in their corresponding
Portfolios.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term
Fixed Diversified Fixed Asset Controlled
Income Income Income Reserve Maturity Securitized
Fund Fund Fund II Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None None None None None
Maximum Sales Load Imposed on Reinvested
Dividends None None None None None None
Deferred Sales Load None None None None None None
Redemption Fees None None None None None None
Annual Operating Expenses
(as a percentage of average net assets)
Management Fees (after applicable limitation) 0.31% 0.00%* 0.06%* 0.25% 0.00%* 0.13%*
12b-1 Fees None None None None None None
Other Expenses (after applicable expense
limitation)+ 0.06% 0.00%* 0.34%* 0.11% 0.30%* 0.32%*
---------- ------------ ---------- ---------- ---------- -----------
Total Operating Expenses (after applicable
expense imitation) 0.37% 0.00%* 0.40%* 0.36% 0.30%* 0.45%*
========== ============ ========== ========== ========== ===========
</TABLE>
* The Advisers have voluntarily and temporarily agreed to limit certain
expenses of the Diversified Income Fund, Fixed Income Fund II, Controlled
Maturity Fund and Securitized Fund. In the absence of such agreements, the
Management Fees, Other Expenses and Total Operating Expenses (as a
percentage of average net assets) for the fiscal year ended December 31,
1997 would have been: Diversified Income Fund--0.50%, 1.46% and 1.96%;
Fixed Income Fund II--0.40%, 0.34% and 0.74%; Controlled Maturity
Fund--0.35%, 0.93% and 1.28%; and Securitized Fund--0.25%, 0.32% and
0.57%, respectively. The Advisers may revise or terminate these agreements
at any time although they have no current intention to do so. The Total
Operating Expenses of the Controlled Maturity Fund have been restated to
reflect current expense limitations.
+ Other Expenses include custodian and transfer agent fees, registration
costs, payments for insurance, and audit and legal services.
Example
Hypothetically assume that each Fund's annual return is 5% and that its total
operating expenses are exactly as described. For every $1,000 invested, an
investor would have paid the following expenses if an account were closed after
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Fixed Short-Term Controlled
Fixed Diversified Income Asset Maturity Securitized
Income Fund Income Fund Fund II Reserve Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
After 1 Year $4 $0 $4 $4 $3 $5
After 3 Years 12 0 13 12 10 14
After 5 Years 20 0 22 20 17 25
After 10 Years 46 0 51 46 38 57
</TABLE>
The purpose of the table is to assist investors in understanding the various
costs and expenses that an investor in each Fund will bear directly or
indirectly. The example is included solely for illustrative purposes and should
not be considered a representation of future performance or expenses. Actual
expenses may be more or less than those shown. See "Management" for additional
information about each Fund's expenses.
Standish Group of Fixed Income Funds 5 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights for periods after 1992 have been audited by Coopers &
Lybrand L.L.P., independent accountants, whose reports, together with the
Financial Statements of the Funds, are incorporated into the SAI. Financial
highlights for prior periods were audited by other independent accountants. The
Funds' annual reports, which contain additional information about Fund
performance, may be obtained from Standish Fund Distributors without charge.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Fixed Income Fund Year Ended December 31,
1997 1996(4) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of
period $20.53 $20.92 $18.91 $21.25 $20.55
------- ------- ------- ------- -------
Income from investment operations
Net investment income $1.46 $1.46 $1.35 $1.25 $1.50
Net realized and unrealized gain
(loss) 0.45 (0.37) 2.08 (2.29) 1.45
------- ------- ------- ------- -------
Total from investment
operations $1.91 $1.09 $3.43 ( $1.04) $2.95
Less distributions declared
to shareholders
From net investment income ( $1.52) ( $1.48) ( $1.42) ( $1.10) ( $1.51)
In excess of net investment
income -- -- -- -- (0.04)
From net realized gain on
investments (0.12) -- -- (0.04) (0.70)
Tax return of capital -- -- -- (0.16) --
------- ------- ------- ------- -------
Total distributions declared
to shareholders ( $1.64) ( $1.48) ( $1.42) ( $1.30) ( $2.25)
------- ------- ------- ------- -------
Net asset value - end of
period $20.80 $20.53 $20.92 $18.91 $21.25
======= ======= ======= ======= =======
Total return(5) 9.54% 5.48% 18.54% (4.86)% 14.64%
Ratios (to average daily net assets)/
Supplemental Data
Net assets at end of period
(000's omitted) $3,288,318 $2,603,628 $2,267,107 $1,642,933 $1,307,099
Expenses(1) 0.37% 0.38% 0.38% 0.38% 0.40%
Net investment income 6.76% 7.13% 7.80% 7.25% 7.07%
Portfolio turnover 89%(3) 118%(2) 132% 122% 150%
<CAPTION>
- -----------------------------------------------------------------------------------------------
Fixed Income Fund Year Ended December 31,
1992* 1991* 1990* 1989* 1988*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of
period $20.96 $19.56 $19.54 $18.84 $18.99
------- ------- ------- ------- -------
Income from investment operations
Net investment income $1.59 $1.68 $1.76 $1.81 $1.72
Net realized and unrealized gain
(loss) (0.18) 1.66 (0.05) 0.69 (0.13)
------- ------- ------- ------- -------
Total from investment
operations $1.41 $3.34 $1.71 $2.50 $1.59
Less distributions declared
to shareholders
From net investment income ( $1.52) ( $1.49) ( $1.69) ( $1.80) ( $1.74)
In excess of net investment
income -- -- -- -- --
From net realized gain on
investments (0.30) (0.45) -- -- --
Tax return of capital -- -- -- -- --
------- ------- ------- ------- -------
Total distributions declared
to shareholders ( $1.82) ( $1.94) ( $1.69) ( $1.80) ( $1.74)
------- ------- ------- ------- -------
Net asset value - end of
period $20.55 $20.96 $19.56 $19.54 $18.84
====== ====== ====== ====== ======
Total return(5) 6.88% 17.65% 9.23% 13.75% 8.53%
Ratios (to average daily net assets)/
Supplemental Data
Net assets at end of period
(000's omitted) $919,909 $631,457 $397,267 $264,874 $198,836
Expenses(1) 0.41% 0.46% 0.49% 0.53% 0.54%
Net investment income 7.61% 8.28% 9.07% 9.26% 8.94%
Portfolio turnover 217% 176% 107% 106% 119%
</TABLE>
- ----------
* Audited by other auditors.
(1) Includes the Fund's share of the Standish Fixed Income Portfolio's
allocated expenses for the period from May 3, 1996 to December 31, 1996.
(2) Represents the theoretical unaudited portfolio turnover rate of the Fund
for the year ended December 31, 1996 had the Fund not contributed its
assets to the Standish Fixed Income Portfolio on May 3, 1996. The
portfolio turnover rate of the Fund for the period from January 1, 1996 to
May 2, 1996 was 49%. The portfolio turnover rate of the Standish Fixed
Income Portfolio for the period from May 3, 1996 to December 31, 1996 was
69%.
(3) For periods after December 31, 1996, information is for the Standish Fixed
Income Portfolio.
(4) Calculated based on average shares outstanding.
(5) The Fund's performance benchmark is the Lehman Brothers Aggregate Index.
See "Calculation of Performance Data" for a description of the index. The
average annual total return of this index for each year since the Fund's
inception was as follows (this total return information is not audited):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return:
Lehman Brothers Aggregate Index 9.68% 3.61% 18.47% (2.92)% 9.75% 7.40% 16.00% 8.95% 14.53% 7.89%
</TABLE>
Standish Group of Fixed Income Funds 6 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
For the period June 2, 1997
(commencement of operations)
Diversified Income Fund to December 31, 1997(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 20.00
--------
Income from operations:
Net investment income* 0.98
Net realized and unrealized gain on investments 0.26
--------
Total from investment operations 1.24
--------
Less distributions declared to shareholders:
From net investment income (0.63)
From net realized gain on investments (0.10)
--------
Total distributions (0.73)
--------
Net asset value, end of period $ 20.51
========
Total return(4) 6.20%
Ratios (to average daily net assets)/Supplemental Data
Net assets, end of period (000's omitted) $27,398
Expenses*(2) 0.00+
Net investment income* 8.07%+
Portfolio Turnover(3) 25%
- ----------
* For the period June 2, 1997 (commencement of operations) to December 31,
1997, the Adviser voluntarily agreed not to impose its advisory fee on the
Portfolio and reimbursed the Fund and the Portfolio for their operating
expenses. Had these actions not been taken, the net investment income per
share and the ratios would have been:
<S> <C>
Net investment income per share $ 0.74
Ratios (to average daily net assets):
Expenses(2) 1.96%+
Net investment income 6.11%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's shares of Standish Diversified Income Portfolio's
allocated expenses for the period from June 2, 1997 to December 31, 1997.
+ Computed on an annualized basis.
(3) The portfolio turnover rate listed is for the Standish Diversified Income
Portfolio. Because the Fund does not make investments directly in
securities, the Fund does not have any portfolio turnover activity.
(4) The Fund's performance benchmark is the Lehman Brothers Aggregate Index.
See "Calculation of Performance Data" for a description of the index. The
average annual total return of this index for a portion of the initial year
since inception was as follows (this total return information is not
audited):
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
Total Return
Lehman Brothers Aggregate Index 7.64%
Standish Group of Fixed Income Funds 7 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For the Period
July 3, 1995
Year Ended (commencement of operations)
Fixed Income Fund II December 31, to December 31, 1995
1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value - beginning of period $18.73 $20.52 $20.00
--------------- --------------- ---------------
Income from investment operations
Net investment income* $1.11 $1.16 $0.53
Net realized and unrealized gain (loss) 0.46 (0.52) 0.64
--------------- --------------- ---------------
Total from investment operations $1.57 $0.64 $1.17
Less distributions declared to shareholders
From net investment income ($1.11) ($1.15) ($0.53)
In excess of net investment income -- -- (0.12)
From net realized gains on investments (0.02) (1.28) --
--------------- --------------- ---------------
Total distributions declared to shareholders ($1.13) ($2.43) $0.65
--------------- --------------- ---------------
Net asset value - end of period $19.17 $18.73 $20.52
=============== =============== ===============
Total return(1) 8.59% 3.77% 5.79%
Ratios (to average daily net assets)/
Supplemental Data
Net assets at end of period (000's omitted) $74,580 $35,485 $8,046
Expenses* 0.40% 0.40% 0.40%t
Net investment income* 6.58% 6.57% 6.64%t
Portfolio turnover 103% 124% 389%
- ----------
* The Adviser voluntarily waived its investment advisory fee and reimbursed the
Fund for a portion of its operating expenses. Had these actions not been
taken, the net investment income per share ratios would have been:
<S> <C> <C> <C>
Net investment income per share $1.06 $1.04 $0.29
Ratios (to average daily net assets):
Expenses 0.74% 1.06% 1.29%t
Net investment income 6.24% 5.91% 5.75%t
</TABLE>
t Computed on an annualized basis.
(1)The Fund's performance benchmark is the Lehman Brothers Aggregate Index. See
"Calculation of Performance Data" for a description of the index. The average
annual total return of the index for each year since the Fund's inception and
for a portion of the initial year since inception was as follows (this total
return information is not audited):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------
Total Return:
<S> <C> <C> <C>
Lehman Brothers Aggregate Index 9.68% 3.61% 6.31%
</TABLE>
Standish Group of Fixed Income Funds 8 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Asset Reserve Fund Year Ended December 31,
1997 1996 1995 1994 1993 1992* 1991* 1990* 1989*@
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of
period $19.50 $19.55 $19.22 $19.79 $19.96 $20.46 $20.20 $20.14 $20.00
-------- -------- -------- -------- -------- -------- -------- -------- -------
Income from investment
operations
Net investment income $1.15 $1.11 $1.13 $1.01 $1.31 $1.35 $1.47 $1.66 $1.69
Net realized and unrealized
gain (loss) on investments (0.02) (0.04) 0.33 (0.57) (0.17) (0.48) 0.37 0.07 0.14
-------- -------- -------- -------- -------- -------- -------- -------- -------
Total from investment
operations $1.13 $1.07 $1.46 $0.44 $1.14 $0.87 $1.84 $1.73 $1.83
Less distributions declared
to shareholders
From net investment income ($1.15) ($1.12) ($1.12) ($1.01) ($1.31) ($1.35) ($1.47) ($1.66) ($1.69)
In excess of net investment
income -- -- (0.01) -- -- -- -- -- --
From net realized gain on
investments -- -- -- -- -- (0.02) (0.11) 0.01 --
-------- -------- -------- -------- -------- -------- -------- -------- -------
Total distributions declared
to shareholders ($1.15) ($1.12) ($1.13) ($1.01) ($1.31) ($1.37) ($1.58) ($1.67) ($1.69)
-------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value - end of
period $19.48 $19.50 $19.55 $19.22 $19.79 $19.96 $20.46 $20.20 $20.14
======== ======== ======== ======== ======== ======== ======== ======== =======
Total return(1) 5.94% 5.62% 7.85% 2.27% 5.08% 4.33% 9.41% 8.96% 9.54%t
Ratios (to average daily net
assets)/Supplemental Data
Net assets at end of period $245,757 $194,074 $243,500 $277,017 $275,080 $289,969 $266,256 $105,303 $66,167
(000's omitted)
Expenses 0.36% 0.35% 0.33% 0.33% 0.33% 0.37% 0.38% 0.45% 0.50%t
Net investment income 5.89% 5.75% 5.95% 5.24% 5.82% 6.60% 7.17% 8.17% 8.52%t
Portfolio turnover 119% 156% 208% 154% 182% 167% 134% 128% 132%
</TABLE>
- ----------
t Computed on an annualized basis.
* Audited by other auditors.
@ For the period from January 3, 1989 (commencement of operations) to
December 31, 1989.
(1) The Fund's performance benchmark is the IBC/Donoghue Money Market
Average/All Taxable Index. See "Calculation of Performance Data" for a
description of the benchmark. The average annual total return of this
benchmark for each year since the Fund's inception was as follows (this
total return information is not audited):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IBC/Donoghue 5.07% 4.90% 5.50% 3.74% 2.71% 3.39% 5.79% 7.82% 8.90%
Money Market
Average/All Taxable Index
</TABLE>
Standish Group of Fixed Income Funds 9 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Controlled Maturity Fund For the Period
July 3, 1995
(commencement
Year Ended Year Ended of operations) to
December 31, 1997 December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value - beginning of period $19.99 $20.24 $20.00
--------------- --------------- ------------------
Income from investment operations
Net investment income* $1.34 $1.27 $0.57
Net realized and unrealized gain (loss) (0.04) (0.27) 0.24
--------------- --------------- ------------------
Total from investment operations $1.30 $1.00 $0.81
Less distributions declared to shareholders
From net investment income ($1.34) ($1.24) ($0.57)
From net realized gains on investments -- (0.01) --
--------------- --------------- ------------------
Total distributions declared to shareholders ($1.34) ($1.25) ($0.57)
--------------- --------------- ------------------
Net asset value - end of period $19.95 $19.99 $20.24
=============== =============== ==================
Total return(1) 6.66% 5.13% 4.20%
Ratios (to average daily net assets)/Supplemental Data
Net assets at end of period (000's omitted) $13,916 $12,525 $8,868
Expenses* 0.37% 0.40% 0.40%t
Net investment income* 6.60% 6.60% 6.29%t
Portfolio turnover 94% 107% 127%
- ----------
* The Adviser voluntarily waived its investment advisory fee and reimbursed
the Fund for a portion of its operating expenses. Had these actions not
been taken, the net investment income per share and the ratios would have
been:
Net investment income per share $1.18 $1.11 $0.38
Ratios (to average daily net assets):
Expenses 1.28% 1.25% 2.51%t
Net investment income 5.69% 5.75% 4.18%t
</TABLE>
t Computed on an annualized basis
(1) The Fund's performance benchmark is the Merrill Lynch 1-3 Year U.S.
Treasury Index. See "Calculation of Performance Data" for a description of
the index. The average annual total return of the Index for each year since
the Fund's inception and for a portion of the initial year since inception
was as follows (this total return information is not audited):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
Total Return:
<S> <C> <C> <C>
Merrill Lynch 1-3 Year U.S. Treasury Index 6.65% 4.98% 4.06%
</TABLE>
Standish Group of Fixed Income Funds 10 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Securitized Fund Year Ended December 31,
1997 1996 1995 1994 1993 1992* 1991* 1990* 1989*@
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - beginning of period $19.70 $20.25 $18.61 $20.24 $20.14 $20.97 $20.48 $20.15 $20.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations
Net investment income# $1.46 $1.43 $1.32 $1.42 $1.45 $1.43 $1.71 $1.80 $0.60
Net realized and unrealized gain
(loss) on investments 0.37 (0.57) 1.66 (1.86) 0.54 (0.61) 1.37 0.40 0.20
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations $1.83 $0.86 $2.98 ($0.44) $1.99 $0.82 $3.08 $2.20 $0.80
Less distributions declared
to shareholders
From net investment income ($1.43) ($1.41) ($1.34) ($1.19) ($1.48) ($1.57) ($1.55) ($1.70) $0.60
In excess of net investment income -- -- -- -- (0.05) -- -- -- --
From net realized gain on investments -- -- -- -- (0.36) (0.07) (1.04) (0.17) --
In excess of net realized
gain on investments -- -- -- -- (0.01) -- -- (0.05)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions declared
to shareholders ($1.43) ($1.41) ($1.34) ($1.19) ($1.89) ($1.65) ($2.59) ($1.87) $0.55
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value - end of period $20.10 $19.70 $20.25 $18.61 $20.24 $20.14 $20.97 $20.48 $21.35
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return(1) 9.50% 4.41% 16.32% (2.16)% 10.02% 4.07% 15.57% 11.47% 11.90%
Ratios (to average net assets)/
Supplemental Data
Net assets at end of period $40,125 $50,617 $55,201 $53,779 $78,054 $90,460 $78,570 $67,278 $31,427
(000's omitted)
Expenses# 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%t
Net investment income# 6.47% 6.99% 6.78% 6.79% 6.75% 6.94% 8.03% 8.88% 8.46%t
Portfolio turnover 100% 212% 225% 138% 130% 301% 324% 146% 1%
</TABLE>
- ----------
+ Computed on an annualized basis.
* Audited by other auditors.
@ For the period from August 31, 1989 (commencement of operations) to
December 31, 1989.
# The Adviser did not impose a portion of its advisory fee. If this voluntary
reduction had not been undertaken, the net investment income per share and
the ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment income per share $1.43 $1.40 $1.22 $1.41 $1.44 $1.42 $1.70 $1.79 $0.59
Ratios (to average net assets):
Expenses 0.57% 0.51% 0.51% 0.49% 0.48% 0.51% 0.49% 0.51% 0.59%
Net investment income 6.35% 6.93% 6.72% 6.76% 6.72% 6.88% 7.99% 8.82% 8.32%
</TABLE>
(1) The Fund's performance benchmarks are the Lehman Brothers Mortgage Index
and the Lehman Brothers Aggregate Index. See "Calculation of Performance
Data" for a description of these indices. The average annual total return
of these indices for each year since the Fund's inception and for a portion
of the initial year since inception was as follows (this total return
information is not audited):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return:
Lehman Brothers Mortgage Index 9.48% 5.36% 16.79% (1.61)% 6.84% 6.95% 15.71% 10.73% 4.73%
Lehman Brothers Aggregate Index 9.68% 3.61% 18.47% (2.92)% 9.75% 7.40% 16.00% 8.95% 4.24%
</TABLE>
Standish Group of Fixed Income Funds 11 April 30, 1998
<PAGE>
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Investment Strategy
Each Fund is an actively managed diversified mutual fund consisting primarily
of fixed income securities. The Diversified Income Fund is managed to maximize
total return consisting primarily of a high level of income. The Fixed Income
Fund II, Controlled Maturity Fund and Securitized Fund are managed to maximize
total return consistent with preserving principal and liquidity. The Fixed
Income Fund and Short-Term Asset Reserve Fund are managed primarily to achieve a
high level of current income consistent with preservation of principal and
liquidity. The Fixed Income Fund, Diversified Income Fund and Short-Term Asset
Reserve Fund each invests all of its investable assets in a corresponding
Portfolio. These Funds are sometimes referred to in this Prospectus as the
Standish Feeder Funds. This structure, where one fund invests all of its
investable assets in another investment company, is described below under the
caption "Information About the Master-Feeder Structure."
The Advisers' primary investment management and research focus is at the
security and industry/sector level. The Advisers seek to add value to each
Fund's portfolio by selecting undervalued investments, rather than by varying
the average maturity of a Fund's portfolio to reflect interest rate forecasts.
The Advisers utilize fundamental credit and sector valuation techniques to
evaluate what they consider to be less efficient markets and sectors of the
fixed income marketplace in an attempt to select securities with the potential
for the highest return.
Securities. The Funds may invest in all types of fixed income securities
including bonds, notes (including structured or hybrid notes), mortgage-backed
securities, asset-backed securities, convertible securities, Eurodollar and
Yankee Dollar instruments, preferred stocks and money market instruments (such
as negotiable certificates of deposit, non-negotiable fixed time deposits,
bankers' acceptances and commercial paper). These fixed income securities may be
issued by U.S. and foreign companies, U.S. and foreign banks, the U.S.
Government, its agencies, authorities, instrumentalities or sponsored
enterprises, and foreign governments and their political subdivisions, although
not all Funds invest in securities of foreign issuers. Each Fund may purchase
securities that pay interest on a fixed, variable, floating, inverse floating,
contingent, in-kind or deferred basis. Each Fund may enter into repurchase
agreements and forward dollar roll transactions, may purchase zero coupon and
deferred payment securities and may buy securities on a when-issued or delayed
delivery basis. Each Fund may also purchase shares of other investment companies
and real estate investment trusts ("REITs"). Please refer to each Fund's
specific investment objective and policies and "Description of Securities and
Related Risks" for a more comprehensive list of permissible securities and
investments.
Credit Quality. Each Fund, except the Fixed Income Portfolio and Diversified
Income Portfolio, invests exclusively in fixed income securities that are
considered investment grade at the time of purchase. The Short-Term Asset
Reserve Portfolio invests primarily in fixed income securities considered high
grade at the time of purchase. The Fixed Income Portfolio invests primarily in
fixed income securities considered investment grade at the time of purchase and
the Diversified Income Portfolio may invest significantly in fixed income
securities considered below investment grade at the time of purchase. Investment
grade securities are those that are rated at Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by Standard & Poor's Ratings Group
("Standard & Poors"), Duff & Phelps, Inc. ("Duff") or Fitch IBCA, Inc. ("Fitch")
or, if unrated, determined by the Advisers to be of comparable credit quality.
High grade securities are those that are rated within the top three investment
grade ratings (i.e., Aaa, Aa, A or P-1 by Moody's or AAA, AA, A, A-1 or Duff-1
by Standard & Poor's, Duff or Fitch).
Securities rated Baa or P-2 by Moody's or BBB, A-2 or Duff-2 by Standard &
Poor's, Duff or Fitch are generally considered medium grade obligations and have
some speculative characteristics. Adverse changes in economic conditions or
other circumstances are more likely to weaken the medium grade issuer's
capability to pay interest and repay principal than is the case for high grade
securities.
Fixed income securities rated Ba and below by Moody's or BB and below by
Standard & Poor's, Duff or Fitch, or, if unrated, determined by the Advisers to
be of comparable credit quality are considered below investment grade
obligations. Below investment grade securities, commonly referred to as "junk
bonds," carry a higher degree of risk than medium grade securities and are
considered speculative by the rating agencies. To the extent a Fund invests in
medium grade or non-investment grade fixed income securities, the Advisers
attempt to select those fixed income securities that have the potential for
upgrade.
If a security is rated differently by two or more rating agencies, the
Advisers use the highest rating to compute a Fund's credit quality and also to
determine the security's rating category. In the case of unrated sovereign and
subnational debt of foreign countries, the Advisers may take into account, but
will not rely entirely on, the ratings assigned to the issuers of such
securities. If the rating of a security held by a Fund is downgraded below the
minimum rating required for the particular Fund, the Advisers will determine
whether to retain that security in the Fund's portfolio.
Maturity. Each Fund generally invests in securities with final maturities,
average lives or interest rate reset frequencies of 15 years (10 years for the
Controlled Maturity Fund) or less. Up to 90% of Short-Term Asset Reserve
Portfolio's portfolio securities will have an average life of 3.25 years or
less. However, each Fund may purchase individual securities with effective
maturities that are outside of these ranges.
* * *
Standish Group of Fixed Income Funds 12 April 30, 1998
<PAGE>
Each Fund's specific investment objective and policies are set forth below and
will assist the investor in differentiating each Fund's unique characteristics.
Because of the uncertainty inherent in all investments, no assurance can be
given that a Fund will achieve its investment objective. See "Description of
Securities and Related Risks" and "Investment Techniques and Related Risks"
below for additional information.
The Fixed Income Fund
The investment objective and characteristics of the Fixed Income Fund
correspond directly to those of the Standish Fixed Income Portfolio in which the
Fund invests all of its investable assets. The following is a discussion of the
investment objectives and policies of the Fixed Income Portfolio.
Investment Objective. The Portfolio's investment objective is primarily to
achieve a high level of current income, consistent with conserving principal and
liquidity, and secondarily to seek capital appreciation when changes in interest
rates or other economic conditions indicate that capital appreciation may be
available without significant risk to principal.
Securities. Under normal market conditions, substantially all, and at least
65%, of the Portfolio's total assets are invested in investment grade fixed
income securities. The Portfolio may invest up to 20% of its total assets in
fixed income securities of foreign companies and foreign governments and their
political subdivisions, including securities of issuers located in emerging
markets. No more than 10% of the Portfolio's total assets will be invested in
foreign securities not subject to currency hedging transactions back into U.S.
dollars. The Portfolio may also engage in short sales.
Credit Quality. The Portfolio invests primarily in investment grade fixed
income securities. The Portfolio may, however, invest up to 15% of its total
assets in securities rated Ba or below by Moody's or BB or below by Standard &
Poor's, Duff or Fitch, or, if unrated, determined by Standish to be of
comparable credit quality. The average dollar-weighted credit quality of the
Portfolio's portfolio is expected to be Aa according to Moody's or AA according
to Standard & Poor's, Duff or Fitch.
Maturity. Under normal market conditions, the Portfolio's average
dollar-weighted effective portfolio maturity will vary from five to thirteen
years.
The Diversified Income Fund
The investment objective and characteristics of the Diversified Income Fund
correspond directly to those of the Standish Diversified Income Portfolio in
which the Fund invests all of its investable assets. The following is a
discussion of the investment objectives and policies of the Diversified Income
Portfolio.
Investment Objective. The Portfolio's investment objective is to maximize
total return, consisting primarily of a high level of income. The Portfolio
seeks to achieve its objective by investing in the following three market
sectors: U.S. domestic, high yield, and international and emerging markets.
Securities. Under normal market conditions, the Portfolio invests at least 80%
of its net assets in income producing securities. Income producing securities
include all types of fixed income securities as well as tax- exempt securities
and warrants. The Portfolio may also invest up to 10% of its total assets in
common stock and engage in short sales.
Country Selection. Although there is no limit on the number of countries in
which issuers of the Portfolio's investments are located, the Portfolio intends
to invest in no fewer than three different countries, including the United
States. The Portfolio limits its investments in securities of issuers located in
any one developed country (excluding the U.S.) to 15% of its total assets and
limits its investments in securities of issuers located in any one emerging
market country to 7% of its total assets.
Under normal market conditions, at least 80% of the Portfolio's total assets,
adjusted to reflect the Portfolio's net currency exposure after giving effect to
currency transactions and positions, are denominated in or hedged (including
cross-hedged) to the U.S. dollar. It is expected that the Portfolio will employ
currency management techniques to seek to manage its foreign currency exposure
within this limit. These techniques include, but are not limited to, options,
futures, options on futures, forward foreign currency exchange contracts and
currency swaps.
The Portfolio's investments in securities of foreign and emerging market
issuers entail certain risks not customarily associated with investing in
securities of U.S. issuers. In particular, the securities markets in emerging
markets are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less governmental regulations and are not subject
to as extensive and frequent accounting, financial and other reporting
requirements as the securities markets of more developed countries. See
"Descriptions of Securities and Related Risks" for a further description of the
risks associated with the Portfolio's investments.
Credit Quality. The Portfolio's portfolio average dollar-weighted credit
quality is expected to be Ba according to Moody's or BB according to Standard &
Poor's, Duff or Fitch, but in no event will be lower than B2 according to
Moody's or B according to Standard & Poor's, Duff or Fitch. Up to 65% of the
Portfolio's total assets may be invested in securities rated, at the time of
investment, below investment grade. Although the Portfolio does not generally
invest in securities that are in default, it may from time to time so invest up
to 10% of its total assets, including in defaulted bank loans. Non-investment
grade securities, commonly referred to as "junk bonds," are considered
speculative by the rating agencies and generally carry a higher degree of risk
(greater price volatility and greater risk of loss of principal and interest)
than higher rated securities.
Maturity. Under normal market conditions, the Portfolio's average
dollar-weighted effective portfolio maturity will vary from five to thirteen
years.
The Fixed Income Fund II
Investment Objective. The Fixed Income Fund II's investment objective is to
maximize total return, consistent with preserving principal and liquidity. As a
component of this objective, the Fund seeks a relatively high level of current
income.
Standish Group of Fixed Income Funds 13 April 30, 1998
<PAGE>
Securities. Under normal market conditions, substantially all and at least 65%
of the Fund's total assets are invested in investment grade fixed income
securities.
Credit Quality. The Fund invests exclusively in investment grade fixed income
securities. The average dollar-weighted credit quality of the Fund's portfolio
is expected to be Aa according to Moody's or AA according to Standard & Poor's,
Duff or Fitch.
Maturity. Under normal market conditions, the Fund's average dollar-weighted
effective portfolio maturity will vary from five to thirteen years.
The Short-Term Asset Reserve Fund
The investment objective and characteristics of the Short-Term Asset Reserve
Fund corresponded directly to those of the Standish Short-Term Asset Reserve
Portfolio in which the Fund invests all of its investable assets. The following
is a discussion of the investment objectives and policies of the Short-Term
Asset Reserve Portfolio.
Investment Objective. The Portfolio's investment objective is to achieve a
high level of current income consistent with preserving principal and liquidity.
Securities. The Portfolio invests in a broad range of investment grade money
market instruments and short-term fixed income securities. The Portfolio may
also invest in tax-exempt securities and prime commercial paper of U.S. and
foreign companies, and may enter into reverse repurchase agreements. The
Portfolio limits its investments in preferred stock to 10% of its total assets.
Credit Quality. The Portfolio invests primarily in high grade securities, cash
and cash equivalents. The Portfolio may also invest up to 15% of its total
assets in medium grade obligations rated Baa or P-2 by Moody's or BBB, A-2 or
Duff-2 by Standard & Poor's, Duff or Fitch, or, if unrated, determined by
Standish to be of comparable credit quality. The average dollar-weighted credit
quality of the Portfolio's portfolio is expected to be at least Aa according to
Moody's or AA according to Standard & Poor's, Duff or Fitch.
Maturity. All securities held by the Portfolio will have an effective or
remaining maturity of 3.25 years or less from the date of settlement, except
that up to 10% of the Portfolio's total assets may be represented by securities
with effective maturities or redemption dates, put dates or coupon dates of
between 3.25 and five years. The maturity limitation does not apply to U.S.
Treasury notes or bonds with maturities of longer than 3.25 years, which may be
purchased by the Portfolio in conjunction with the sale of note or bond futures
contracts or with certain equivalent options positions which are designed to
hedge the notes or bonds in such a way as to create a synthetic short-term
instrument. The Portfolio's average dollar-weighted effective portfolio maturity
will not exceed 18 months.
The Controlled Maturity Fund
Investment Objective. The Controlled Maturity Fund's investment objective is
to maximize total return, consistent with preserving principal and liquidity. As
a component of this objective, the Fund seeks a relatively high level of current
income.
Securities. Under normal market conditions, substantially all and at least 65%
of the Fund's total assets are invested in investment grade fixed income
securities.
Credit Quality. The Fund invests exclusively in investment grade fixed income
securities. The average dollar-weighted credit quality of the Fund's portfolio
is expected to be Aa according to Moody's or AA according to Standard & Poor's,
Duff or Fitch.
Maturity. Under normal market conditions, the Fund's average dollar-weighted
effective portfolio maturity will not exceed five years. The Fund generally
invests in securities with final maturities, average lives or interest rate
frequencies of 10 years or less.
The Securitized Fund
Investment Objective. The Securitized Fund's investment objective is to
maximize total return, consistent with preserving principal and liquidity,
through both capital appreciation and the generation of current income. The Fund
seeks capital appreciation when market factors such as declining interest rates
indicate that capital appreciation may be available without significant risk to
principal.
Securities. Under normal market conditions, at least 65% of the Fund's total
assets are invested in mortgage-related and asset-backed securities.
Mortgage-related securities include directly placed mortgages, mortgage-backed
securities, collateralized mortgage obligations and other pass-through
securities, and mortgage derivatives. Asset-backed securities represent
participations in, or are secured by and payable from, assets such as motor
vehicle installment sales contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. In order to
preserve principal and liquidity, up to 35% of the Fund's total assets may,
under normal market conditions, be invested in U.S. Treasury and government
agency notes and bonds, certificates of deposit, money market instruments and
repurchase agreements.
Up to 10% of the Fund's total assets may be invested in mortgage-related and
other securities of foreign governments or companies denominated in currencies
other than the U.S. dollar. The Fund may enter into forward foreign currency
exchange contracts and cross currency forward contracts to seek to hedge against
changes in foreign currency exchange rates. See "Strategic Transactions" below.
Credit Quality. The Fund invests primarily in high grade mortgage-related and
asset-backed securities. The Fund may, however, invest up to 15% of its total
assets in securities rated Baa by Moody's or BBB by Standard & Poor's, Duff or
Fitch, or, if unrated, determined by Standish to be of comparable credit
quality. The average dollar-weighted credit quality of the Fund's portfolio is
expected to be Aa according to Moody's or AA according to Standard & Poor's,
Duff or Fitch.
Maturity. The Fund's average dollar-weighted effective portfolio maturity will
vary depending upon the maturity of its investments. Mortgage-related
securities, when they are issued, have stated maturities of up to 40 years,
depending on the length of the mortgages underlying the securities. In practice,
Standish Group of Fixed Income Funds 14 April 30, 1998
<PAGE>
scheduled and unscheduled early prepayments of principal and interest on the
underlying mortgages will make the effective maturity of the securities shorter.
A security based on a pool of 40 year mortgages may have an average life as
short as two years. The relationship between mortgage repayments and interest
rates may give some high-yielding mortgage-related securities less potential for
return and value than conventional bonds with comparable maturities. The Fund
expects that the average life of securities held by it will be from three to
fifteen years.
Description of Securities and Related Risks
For purposes of the discussion in this section and in the "Investment
Techniques and Related Risks" section of this Prospectus, the use of the term
"Funds" also refers to the Fixed Income Portfolio, Diversified Income Portfolio
and Short-Term Asset Reserve Portfolio unless otherwise noted.
General Risks
Investments in the Funds involve certain risks. Each Fund invests primarily in
the fixed income securities described above and is subject to risks associated
with investments in such securities. These risks include interest rate risk,
default risk and call and extension risk. The Fixed Income Portfolio,
Diversified Income Portfolio and the Securitized Fund are also subject to risks
associated with direct investments in foreign securities as described under the
"Specific Risks" section.
Interest Rate Risk. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates increase,
the market value of fixed income securities tends to decline. The volatility of
a security's market value will differ depending upon the security's duration,
the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income securities are subject
to the risk that the issuer of the security could default on its obligations
causing a Fund to sustain losses on such investments. A default could impact
both interest and principal payments.
Call Risk and Extension Risk. Fixed income securities may be subject to both
call risk and extension risk. Call risk exists when the issuer may exercise its
right to pay principal on an obligation earlier than scheduled which would cause
cash flows to be returned earlier than expected. This typically results when
interest rates have declined and a Fund will suffer from having to reinvest in
lower yielding securities. Extension risk exists when the issuer may exercise
its right to pay principal on an obligation later than scheduled which would
cause cash flows to be returned later than expected. This typically results when
interest rates have increased and a Fund will suffer from the inability to
invest in higher yield securities.
Specific Risks
The following sections include descriptions of specific risks that are
associated with a Fund's purchase of a particular type of security or the
utilization of a specific investment technique.
Corporate Debt Obligations. Each Fund may invest in corporate debt obligations
and zero coupon securities issued by financial institutions and companies,
including obligations of industrial, utility, banking and other financial
issuers. Corporate debt obligations are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations and may
also be subject to price volatility due to such factors as market interest
rates, market perception of the creditworthiness of the issuer and general
market liquidity.
U.S. Government Securities. Each Fund may invest in U.S. Government
securities. Generally, these securities include U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies, instrumentalities
or sponsored enterprises which are supported by (a) the full faith and credit of
the U.S. Treasury (such as the Government National Mortgage Association
("GNMA")), (b) the right of the issuer to borrow from the U.S. Treasury (such as
securities of the Student Loan Marketing Association ("SLMA")), (c) the
discretionary authority of the U.S. Government to purchase certain obligations
of the issuer (such as the Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC")), or (d) only the credit of the
agency. No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies, instrumentalities or sponsored
enterprises in the future. U.S. Government securities also include Treasury
receipts, zero coupon bonds, U.S. Treasury inflation-indexed bonds, deferred
interest securities and other stripped U.S. Government securities, where the
interest and principal components of stripped U.S. Government securities are
traded independently ("STRIPs").
Mortgage-Backed Securities. Each Fund may invest in privately issued
mortgage-backed securities and mortgage-backed securities issued or guaranteed
by the U.S. Government or any of its agencies, instrumentalities or sponsored
enterprises, including, but not limited to, GNMA, FNMA or FHLMC. Mortgage-backed
securities represent direct or indirect participations in, or are collateralized
by and payable from, mortgage loans secured by real property. Mortgagors can
generally prepay interest or principal on their mortgages whenever they choose.
Therefore, mortgage-backed securities are often subject to more rapid repayment
than their stated maturity date would indicate as a result of principal
prepayments on the underlying loans. This can result in significantly greater
price and yield volatility than is the case with traditional fixed income
securities. During periods of declining interest rates, prepayments can be
expected to accelerate, and thus impair a Fund's ability to reinvest the returns
of principal at comparable yields. Conversely, in a rising interest rate
environment, a declining prepayment rate will extend the average life of many
mortgage-backed securities, increase a Fund's exposure to rising interest rates
and prevent a Fund from taking advantage of such higher yields.
GNMA securities are backed by the full faith and credit of the U.S.
Government, which means that the U.S. Government guarantees that the interest
and principal will be paid when due. FNMA securities and FHLMC securities are
not backed by the full faith and credit of the U.S. Government; however, these
enterprises have the ability to obtain financing from the U.S. Treasury. See the
SAI for additional descriptions of GNMA, FNMA and FHLMC certificates.
Standish Group of Fixed Income Funds 15 April 30, 1998
<PAGE>
Multiple class securities include collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates. CMOs provide an investor with a specified interest
in the cash flow from a pool of underlying mortgages or other mortgage-backed
securities. CMOs are issued in multiple classes, each with a specified fixed or
floating interest rate and a final scheduled distribution date. In most cases,
payments of principal are applied to the CMO classes in the order of their
respective stated maturities, so that no principal payments will be made on a
CMO class until all other classes having an earlier stated maturity date are
paid in full. A REMIC is a CMO that qualifies for special tax treatment under
the Internal Revenue Code of 1986, as amended (the "Code"), and invests in
certain mortgages principally secured by interests in real property and other
permitted investments. The Funds do not intend to purchase residual interests in
REMICs.
Stripped mortgage-backed securities ("SMBS") are derivative multiple class
mortgage-backed securities. SMBS are usually structured with two different
classes; one that receives 100% of the interest payments and the other that
receives 100% of the principal payments from a pool of mortgage loans. If the
underlying mortgage loans experience prepayments of principal at a rate
different from what was anticipated, a Fund may fail to recoup fully its initial
investment in these securities. Although the markets for SMBS and CMOs are
increasingly liquid, certain SMBS and CMOs may not be readily marketable and
will be considered illiquid for purposes of each Fund's limitation on
investments in illiquid securities. The market value of the class consisting
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest from mortgage loans are generally higher than prevailing
market yields on other mortgage-backed securities because their cash flow
patterns are more volatile and there is a greater risk that the initial
investment will not be fully recouped. The Short-Term Asset Reserve Portfolio
does not invest in SMBS.
Direct Investment in Mortgage Loans. The Securitized Fund may invest directly
in mortgage loans securing commercial and residential real estate. When the Fund
invests directly in mortgage loans, the Fund, rather than a financial
intermediary, becomes the mortgagee with respect to such mortgage loans. Direct
investments in mortgage loans are available from lending institutions which
group together a number of mortgages for resale (usually from 10 to 50
mortgages) and which act as servicing agents for the purchaser with respect to,
among other things, the receipt of principal and interest payments. The seller
generally does not provide any insurance covering the payment of interest on or
repayment of principal of the mortgages, but such insurance may be purchased by
the mortgagor. Investing directly in mortgage loans may involve certain risks
and characteristics not applicable to investments in other securities. Such
risks include delays and difficulties in recovering and reselling the collateral
securing the mortgage loan during foreclosure proceedings, limitations pursuant
to Federal bankruptcy and state insolvency laws and other state laws enforcing a
personal judgment against a borrower following foreclosure to make up any
deficiency not realized on sale of the collateral, and the application of
Federal and state laws limiting interest rates that may be charged by the lender
and the lender's ability to accelerate the maturity of the mortgage loan.
Unlike mortgage-backed securities which generally represent an interest in a
pool of mortgages, direct investment in a mortgage loan involves pre-payment and
credit risk of an individual issuer and real property, and, consequentially,
requires different investment and credit analysis by the Adviser. Direct
investments in mortgage loans are illiquid and subject to the Securitized Fund's
policy of not investing more than 15% of its net assets in illiquid investments.
Asset-Backed Securities. Each Fund may invest in asset-backed securities. The
principal and interest payments on asset-backed securities are collateralized by
pools of assets such as auto loans, credit card receivables, leases, installment
contracts and personal property. Such asset pools are securitized through the
use of special purpose trusts or corporations. Payments or distributions of
principal and interest on asset-backed securities may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution; however, privately issued
obligations collateralized by a portfolio of privately issued asset-backed
securities do not involve any government-related guaranty or insurance. Like
mortgage-backed securities, asset-backed securities are subject to more rapid
prepayment of principal than indicated by their stated maturity which may
greatly increase price and yield volatility. Asset-backed securities generally
do not have the benefit of a security interest in collateral that is comparable
to mortgage assets and there is the possibility that recoveries on repossessed
collateral may not be available to support payments on these securities.
Convertible Securities. Each Fund, other than Securitized Fund, may invest in
convertible securities consisting of bonds, notes, debentures and preferred
stocks. The Short-Term Asset Reserve Portfolio's investments in preferred stock
are limited to no more than 10% of its total assets. Convertible debt securities
and preferred stock acquired by a Fund entitle the Fund to exchange such
instruments for common stock of the issuer at a predetermined rate. Convertible
securities are subject both to the credit and interest rate risks associated
with debt obligations and to the stock market risk associated with equity
securities.
Below Investment Grade Fixed Income Securities. The Fixed Income Portfolio and
Diversified Income Portfolio may invest up to 15% and 65%, respectively, of
their total assets in non-investment grade securities. Non-investment grade
fixed income securities are considered predominantly speculative by traditional
investment standards. In some cases, these securities may be highly speculative
and have poor prospects for reaching investment grade standing. Non-investment
grade fixed income securities and unrated securities of comparable credit
quality are subject to the increased risk of an issuer's inability to meet
principal and interest obligations. These securities, also referred to as high
yield securities, may be subject to greater price volatility due to such factors
as specific corporate developments, interest rate sensitivity, negative
perceptions of the high yield markets generally and less secondary market
liquidity.
Standish Group of Fixed Income Funds 16 April 30, 1998
<PAGE>
Non-investment grade fixed income securities are often issued in connection
with a corporate reorganization or restructuring or as part of a merger,
acquisition, takeover or similar event. They are also issued by less established
companies seeking to expand. Such issuers are often highly leveraged and
generally less able than more established or less leveraged entities to make
scheduled payments of principal and interest in the event of adverse
developments or business conditions.
The market value of below investment grade fixed income securities tends to
reflect individual corporate developments to a greater extent than that of
higher rated securities which react primarily to fluctuations in the general
level of interest rates. As a result, a Portfolio's ability to achieve its
investment objective may depend to a greater extent on the Advisers' judgment
concerning the creditworthiness of issuers than funds which invest in
higher-rated securities. Issuers of non-investment grade fixed income securities
may not be able to make use of more traditional methods of financing and their
ability to service debt obligations may be more adversely affected than issuers
of higher rated securities by economic downturns, specific corporate
developments or the issuer's inability to meet specific projected business
forecasts. Negative publicity about the high yield market and investor
perceptions regarding lower rated securities, whether or not based on
fundamental analysis, may depress the prices for such securities.
A holder's risk of loss from default is significantly greater for
non-investment grade fixed income securities than is the case for holders of
debt securities of higher credit qualities because non-investment grade
securities are generally unsecured and are often subordinated to the rights of
other creditors of the issuers of such securities. Investment by the Diversified
Income Portfolio in defaulted securities poses additional risk of loss should
nonpayment of principal and interest continue in respect of such securities.
Even if such securities are held to maturity, recovery by the Diversified Income
Portfolio of its initial investment and any anticipated income or appreciation
is uncertain.
The secondary market for non-investment grade fixed income securities is
dominated by institutional investors, including mutual funds, insurance
companies and other financial institutions. Accordingly, the secondary market
for such securities is not as liquid as, and is more volatile than, the
secondary market for higher rated securities. In addition, market trading volume
for high yield fixed income securities is generally lower and the secondary
market for such securities could contract under adverse market or economic
conditions, independent of any specific adverse changes in the condition of a
particular issuer. These factors may have an adverse effect on the market price
and the Portfolio's ability to dispose of particular portfolio investments. A
less liquid secondary market also may make it more difficult for the Portfolio
to obtain precise valuations of the high yield securities in its portfolio.
Changes in federal and state laws and industry initiatives could adversely
affect the secondary market for non-investment grade fixed income securities and
the financial condition of issuers of these securities.
Non-investment grade fixed income securities also present risks based on
payment expectations. Such securities frequently contain call or redemption
features which permit the issuer to call or repurchase the security from its
holder. If an issuer exercises such a "call option" and redeems the security, a
Portfolio may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. Similarly, to the extent that the
Diversified Income Portfolio invests a significant part of its assets in non-
investment grade securities, if the Portfolio experiences unexpected net
withdrawals, it may be forced to sell its higher rated more liquid securities.
This could result in a decline in the overall credit quality of the Portfolio
and increase the exposure of the Portfolio to the risks of non-investment grade
fixed income securities.
Credit ratings issued by credit rating agencies are designed to evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Investments in non-investment grade and comparable
unrated obligations will be more dependent on the Advisers' credit analysis than
would be the case with investments in investment grade debt obligations. See the
SAI for a detailed description of the ratings assigned to fixed income
securities by Moody's, Standard & Poor's, Duff or Fitch.
For the fiscal year ended December 31, 1997, the Fixed Income Portfolio's and
the Diversified Income Portfolio's investments, on an average dollar-weighted
basis, calculated at the end of each month, had the following credit quality
characteristics:
Fixed Income Portfolio
Investments Percentage
U.S. Governmental securities 26.7%
U.S. Government Agency securities 15.4%
Corporate Bonds:
Aaa or AAA 9.4%
Aa or AA 3.2%
A 10.5%
Baa or BBB 34.8%
Ba or BB 0.0%
B 0.0%
Below B 0.0%
------
100.0%
Diversified Income Portfolio
Investments Percentage
U.S. Governmental securities 9.5%
U.S. Government Agency securities 7.8%
Corporate Bonds:
Aaa or AAA 1.0%
Aa or AA 0.7%
A 1.0%
Baa or BBB 11.3%
Ba or BB 40.0%
B 25.5%
Below B 3.2%
------
100.0%
Standish Group of Fixed Income Funds 17 April 30, 1998
<PAGE>
Foreign Securities. The Diversified Income Portfolio may invest a significant
portion of its assets, and the Fixed Income Portfolio and Securitized Fund may
invest to a limited degree, in securities of foreign governments and companies.
Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in U.S. dollar-denominated securities of
domestic issuers. Investments in foreign issuers may be affected by changes in
currency rates, changes in foreign or U.S. laws or restrictions applicable to
such investments and in exchange control regulations (i.e., currency blockage).
A decline in the exchange rate of the currency (i.e., weakening of the currency
against the U.S. dollar) in which a portfolio security is quoted or denominated
relative to the U.S. dollar would reduce the value of the portfolio security. In
addition, if the exchange rate for the currency in which a Fund receives
interest payments declines against the U.S. dollar before such income is
distributed as dividends to shareholders, the Fund may have to sell portfolio
securities to obtain sufficient cash to enable the Fund to pay such dividends.
Commissions on transactions in foreign securities may be higher than those for
similar transactions on domestic stock markets and foreign custodial costs are
higher than domestic custodial costs. In addition, clearance and settlement
procedures may be different in foreign countries and, in certain markets, such
procedures have on occasion been unable to keep pace with the volume of
securities transactions, thus making it difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the U.S. Most
foreign securities markets may have substantially less trading volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other taxes
on dividend or interest payments (or, in some cases, capital gains), limitations
on the removal of funds or other assets, political or social instability or
diplomatic developments which could affect investments in those countries.
Investing in Emerging Markets. Although the Fixed Income Portfolio and
Diversified Income Portfolio invest primarily in securities of established
issuers based in developed foreign countries, each may also invest in securities
of issuers in emerging markets, including issuers in Asia (including Russia),
Eastern Europe, Latin and South America, the Mediterranean and Africa. The Fixed
Income Portfolio may invest up to 10% of its total assets in issuers located in
emerging markets, generally with a limit of 3% of total assets invested in
issuers located in any one emerging market. Although the Diversified Income
Portfolio places no limit on the amount of its assets that may be invested in
emerging markets in the aggregate, the Diversified Income Portfolio may only
invest up to 7% of its total assets in issuers located in any one emerging
market. These Portfolios may also invest in currencies of such countries and may
engage in strategic transactions in the markets of such countries. Investing in
securities of issuers in emerging markets involves exposure to significantly
higher risk than investing in foreign countries with developed markets and may
be considered speculative. These heightened risks include: (i) greater risks of
expropriation, confiscatory taxation, nationalization and less social, political
and economic stability; (ii) the small current size of the markets for
securities of emerging market issuers and the currently low or nonexistent
volume of trading and frequent limits on daily price movements, resulting in
lack of liquidity and in price uncertainty; (iii) certain national policies
which may restrict a Portfolio's investment opportunities, including limitations
on aggregate holdings by foreign investors and restrictions on investing in
issuers or industries deemed sensitive to relevant national interests; (iv) the
absence of developed legal structures governing private or foreign investment in
private property which may adversely affect a Portfolio's ability to retain
ownership of its securities during periods of economic, social or political
turmoil; and (v) high rates of inflation and rapid fluctuations in interest
rates that have had and may continue to have negative effects on the economies
and securities markets of certain emerging market countries.
The economies of emerging market countries may be predominantly based on only
a small number of industries or dependent on revenues from the sale of
particular commodities or on international aid or development assistance. As a
result, these economies may be significantly more vulnerable to changes in local
or global trade conditions, and may suffer from volatile or extreme fluctuations
in currency exchange rates, inflation and deflation rates as well as debt
burdens. Many emerging market countries have experienced and will continue to
experience periods of rapid inflation, resulting in significant market
uncertainty and sharp drops in the U.S. dollar value of the country's assets.
The currencies of emerging market countries may also be devalued as a result of
governmental action in addition to market factors. Recently, the economies of
certain emerging market countries have experienced deflation which has
diminished the demand for goods and services resulting in excess capacity in
factories that were built upon the forecast of continuing strong demand for such
goods and services. All of these risks may adversely affect a Portfolio's
investments in emerging market countries. See the SAI for a further description
of the risks associated with investing in emerging market countries.
Currency Risks. The U.S. dollar value of foreign securities denominated in a
foreign currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of these currencies against the U.S.
dollar will result in corresponding changes in the U.S. dollar value of a Fund's
assets quoted in those currencies. However, under normal market conditions, at
least 80% of the Diversified Income Portfolio's total assets, adjusted to
reflect the Portfolio's net currency exposure after giving effect to currency
transactions and positions, are denominated in or hedged (including
cross-hedged) to the U.S. dollar. No more than 10% of the Fixed Income
Portfolio's total assets will be invested in foreign securi-
Standish Group of Fixed Income Funds 18 April 30, 1998
<PAGE>
ties not subject to hedging transactions back into U.S. dollars. Exchange rates
are generally affected by the forces of supply and demand in the international
currency markets, the relative merits of investing in different countries and
the intervention or failure to intervene of U.S. or foreign governments and
central banks. Some emerging market countries also may have managed currencies,
which are not free floating against the U.S. dollar. In addition, emerging
markets may restrict the free conversion of their currencies into other
currencies. Any devaluations in the currencies in which a Portfolio's securities
are denominated may have a detrimental impact on the Portfolio's net asset value
except to the extent such foreign currency exposure is subject to hedging
transactions. The Fixed Income Portfolio and Diversified Income Portfolio
utilize various investment strategies to seek to minimize the currency risks
described above. These strategies include the use of currency transactions such
as currency forward and futures contracts, cross currency forward and futures
contracts, currency swaps and currency options. Each Portfolio's use of currency
transactions may expose it to risks independent of its securities positions. See
"Strategic Transactions" within the "Investment Techniques and Related Risks"
section for a discussion of the risks associated with such strategies.
Sovereign Debt Obligations. The Fixed Income Portfolio, Diversified Income
Portfolio and Securitized Fund may invest in sovereign debt obligations, which
involve special risks that are not present in corporate debt obligations. The
foreign issuer of the sovereign debt or the foreign governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due, and a Fund may have limited recourse in the
event of a default. During periods of economic uncertainty, the market prices of
sovereign debt, and the Fund's net asset value, to the extent it invests in such
securities, may be more volatile than prices of debt obligations of U.S.
issuers. In the past, certain foreign countries have encountered difficulties in
servicing their debt obligations, withheld payments of principal and interest
and declared moratoria on the payment of principal and interest on their
sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearages on their debt. The failure of a
sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.
Brady Bonds. The Fixed Income Portfolio and Diversified Income Portfolio may
invest in Brady Bonds. Brady Bonds are securities created through the exchange
of existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings. In light
of the history of defaults of countries issuing Brady Bonds on their commercial
bank loans, investments in Brady Bonds may be viewed as speculative. Brady Bonds
may be fully or partially collateralized or uncollateralized, are issued in
various currencies (but primarily in U.S. dollars) and are actively traded in
OTC secondary markets. Incomplete collateralization of interest or principal
payment obligations results in increased credit risk. U.S. dollar-denominated
collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate
bonds, are generally collateralized by U.S. Treasury zero coupon bonds having
the same maturity as the Brady Bonds.
Obligations of Supranational Entities. The Fixed Income and Diversified Income
Portfolios may invest in obligations of supranational entities designated or
supported by governmental entities to promote economic reconstruction or
development and of international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the Inter-American Development Bank. Each supranational
entity's lending activities are limited to a percentage of its total capital
(including "callable capital" contributed by its governmental members at the
entity's call), reserves and net income. There is no assurance that
participating governments will be able or willing to honor their commitments to
make capital contributions to a supranational entity.
Eurodollar and Yankee Dollar Investments. Each Fund may invest in Eurodollar
and Yankee Dollar instruments. Eurodollar instruments are bonds of foreign
corporate and government issuers that pay interest and principal in U.S. dollars
generally held in banks outside the United States, primarily in Europe. Yankee
Dollar instruments are U.S. dollar denominated bonds typically issued in the
U.S. by foreign governments and their agencies and foreign banks and
corporations. The Short-Term Asset Reserve Portfolio may invest in Eurodollar
Certificates of Deposit ("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee
Certificates of Deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks; ETDs are
U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or in a
foreign bank; and Yankee CDs are U.S. dollar-denominated certificates of deposit
issued by a U.S. branch of a foreign bank and held in the U.S. These investments
involve risks that are different from investments in securities issued by U.S.
issuers, including potential unfavorable political and economic developments,
foreign withholding or other taxes, seizure of foreign deposits, currency
controls, interest limitations or other governmental restrictions which might
affect payment of principal or interest.
Warrants. Warrants acquired by the Diversified Income Portfolio entitle it to
buy common stock from the issuer at a specified price and time. Warrants are
subject to the same market risks as stocks, but may be more volatile in price.
The Diversified Income Portfolio's investment in warrants will not entitle it to
receive dividends or exercise voting rights and will become worthless if the
warrants cannot be profitably exercised before their expiration dates.
Standish Group of Fixed Income Funds 19 April 30, 1998
<PAGE>
Common Stocks. The Diversified Income Portfolio may invest up to 10% of its
total assets in common stocks. Common stocks are shares of a corporation or
other entity that entitle the holder to a pro rata share of the profits of the
corporation, if any, without preference over any other shareholder or class of
shareholders, including holders of the entity's preferred stock and other senior
equity. Common stock usually carries with it the right to vote and frequently an
exclusive right to do so.
Investments in Other Investment Companies. Each Fund is permitted to invest up
to 10% of its total assets in shares of investment companies and up to 5% of its
total assets in any one investment company as long as that investment does not
represent more than 3% of the total voting stock of the acquired investment
company. Investments in the securities of other investment companies may involve
duplication of advisory fees and other expenses. Because certain emerging
markets are closed to investment by foreigners, a Portfolio may invest in
issuers in those markets primarily through specifically authorized investment
funds. In addition, a Portfolio may invest in investment companies that are
designed to replicate the composition and performance of a particular index. For
example, World Equity Benchmark Series ("WEBS") are exchange traded shares of
open-end investment companies designed to replicate the composition and
performance of publicly traded issuers in particular countries. Investments in
index baskets involve the same risks associated with a direct investment in the
types of securities included in the baskets.
Real Estate Investment Trusts. Each Fund may invest in REITs. REITs are pooled
investment vehicles that invest in real estate or real estate loans or
interests. Investing in REITs involves risks similar to those associated with
investing in equity securities of small capitalization companies. REITs are
dependent upon management skills, are not diversified, and are subject to risks
of project financing, default by borrowers, self-liquidation, and the
possibility of failing to qualify for the exemption from taxation on distributed
amounts under the Code.
Inverse Floating Rate Securities. Each Fund may invest in inverse floating
rate securities. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.
Zero Coupon and Deferred Payment Securities. Each Fund may invest in zero
coupon and deferred payment securities. Zero coupon securities are securities
sold at a discount to par value and on which interest payments are not made
during the life of the security. Upon maturity, the holder is entitled to
receive the par value of the security. A Fund is required to accrue income with
respect to these securities prior to the receipt of cash payments. Because a
Fund will distribute this accrued income to shareholders, to the extent that
shareholders elect to receive dividends in cash rather than reinvesting such
dividends in additional shares, the Fund will have fewer assets with which to
purchase income producing securities. Deferred payment securities are securities
that remain zero coupon securities until a predetermined date, at which time the
stated coupon rate becomes effective and interest becomes payable at regular
intervals. Zero coupon and deferred payment securities may be subject to greater
fluctuation in value and may have less liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods.
Structured or Hybrid Notes. Each Fund may invest in structured or hybrid
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the note is based on the
performance of a benchmark asset or market other than fixed income securities or
interest rates. Examples of these benchmarks include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows the Fund to gain exposure to the benchmark asset while fixing the maximum
loss that it may experience in the event that the security does not perform as
expected. Depending on the terms of the note, the Fund may forego all or part of
the interest and principal that would be payable on a comparable conventional
note; the Fund's loss cannot exceed this foregone interest and/or principal. An
investment in structured or hybrid notes involves risks similar to those
associated with a direct investment in the benchmark asset.
Tax-Exempt Securities. Each Fund is managed without regard to potential tax
consequences. If an Adviser believes that tax-exempt securities will provide
competitive returns, the Fixed Income Portfolio, Diversified Income Portfolio
and Short-Term Asset Reserve Portfolio may invest up to 10% of their total
assets in tax-exempt securities. The Fixed Income II and Controlled Maturity
Funds may invest up to 5% of their net assets in tax-exempt securities. A Fund's
distributions of interest earned from these investments will be taxable. The
Securitized Fund does not generally invest in tax-exempt securities.
Investment Techniques and Related Risks
Strategic Transactions. Each Fund may, but is not required to, utilize various
investment strategies to seek to hedge market risks (such as interest rates,
currency exchange rates and broad or specific fixed income market movements), to
manage the effective maturity or duration of fixed income securities, or to
enhance potential gain. Such strategies are generally accepted as part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments used by each Fund may change
over time as new instruments and strategies are developed or regulatory changes
occur.
In the course of pursuing its investment objective, each Fund may purchase and
sell (write) exchange-listed and over-the-counter ("OTC") put and call options
on securities, indices and other financial instruments; purchase and sell
financial futures contracts and options thereon; enter into various interest
rate transactions such as swaps, caps, floors or collars; and, to the extent a
Fund invests in foreign securities, enter into currency transactions such as
forward foreign currency exchange contracts, cross-currency forward contracts,
currency futures contracts, currency swaps and options on currencies or currency
futures (collectively, all the above are called "Strategic
Standish Group of Fixed Income Funds 20 April 30, 1998
<PAGE>
Transactions"). Strategic Transactions may be used to seek to protect against
possible changes in the market value of securities held in or to be purchased
for a Fund's portfolio resulting from securities markets, currency exchange rate
or interest rate fluctuations, to seek to protect a Fund's unrealized gains in
the value of portfolio securities, to facilitate the sale of such securities for
investment purposes, to seek to manage the effective maturity or duration of a
Fund's portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. In
addition to the hedging transactions referred to in the preceding sentence,
Strategic Transactions may also be used to enhance potential gain in
circumstances where hedging is not involved.
The ability of a Fund to utilize Strategic Transactions successfully will
depend on the Adviser's ability to predict pertinent market, currency exchange
rate and interest rate movements, which cannot be assured. Each Fund will comply
with applicable regulatory requirements when implementing these strategies,
techniques and instruments. The Funds' activities involving Strategic
Transactions may be limited by the requirements of the Code for qualification as
a regulated investment company.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market, interest rate or currency movements is
incorrect, the risk that the use of such Strategic Transactions could result in
losses greater than if they had not been used. The writing of put and call
options may result in losses to a Fund, force the purchase or sale,
respectively, of portfolio securities at inopportune times or for prices higher
than (in the case of purchases due to the exercise of put options) or lower than
(in the case of sales due to the exercise of call options) current market
values, limit the amount of appreciation a Fund can realize on its investments
or cause a Fund to hold a security it might otherwise sell or sell a security it
might otherwise hold.
The use of options and futures transactions entails certain other risks.
Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's net asset value. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of a Fund creates the possibility that losses on
the hedging instrument may be greater than gains in the value of the Fund's
position. The writing of options could significantly increase a Fund's portfolio
turnover rate and associated brokerage commissions or spreads. In addition,
futures and options markets may not be liquid in all circumstances and certain
OTC options may have no markets. As a result, in certain markets, a Fund might
not be able to close out a transaction without incurring substantial losses, if
at all. Losses resulting from the use of Strategic Transactions could reduce a
Fund's net asset value and the net result may be less favorable than if the
Strategic Transactions had not been utilized. Although the use of futures and
options transactions for hedging and managing effective maturity and duration
should tend to minimize the risk of loss due to a decline in the value of the
position, at the same time, such transactions can limit any potential gain which
might result from an increase in value of such position. The loss incurred by a
Fund in writing options and entering into futures transactions is potentially
unlimited.
The use of currency transactions can result in a Fund incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency.
Each Fund will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for non-hedging purposes. The Fixed Income Portfolio,
Fixed Income Fund II, Diversified Income Portfolio, Short-Term Asset Reserve
Portfolio, Controlled Maturity Fund and Securitized Fund will attempt to limit
net loss exposure from Strategic Transactions entered into for non-hedging
purposes to 3%, 1%, 3%, 1%, 1% and 3%, respectively, of net assets. See the SAI
for further information regarding the use of Strategic Transactions.
When-Issued and Delayed Delivery Securities. The Fixed Income Portfolio, Fixed
Income Fund II, Short-Term Asset Reserve Portfolio and Controlled Maturity Fund
may invest up to 15%, 15%, 10% and 15%, respectively, of net assets in
when-issued and delayed delivery securities. The Diversified Income Portfolio
places no limit on investments in when-issued or delayed delivery securities.
The Securitized Fund may invest up to 25% of its net assets, collectively, in
when-issued and delayed delivery securities and forward roll transactions.
Although a Fund will generally purchase securities on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, the
Funds may dispose of these securities prior to settlement if the Adviser deems
it appropriate to do so. The payment obligation and interest rate on these
securities is fixed at the time a Fund enters into the commitment, but no income
will accrue to the Fund until they are delivered and paid for. Unless a Fund has
entered into an offsetting agreement to sell the securities, cash or liquid
assets equal to the amount of the Fund's commitment must be segregated to secure
the Fund's obligation and to partially offset the leverage inherent in these
securities. The market value of the securities when they are delivered may be
less than the amount paid by the Fund.
Repurchase Agreements. The Fixed Income Portfolio, Fixed Income Fund II,
Short-Term Asset Reserve Portfolio, Controlled Maturity Fund and Securitized
Fund may invest up to 5%, 15%, 25%, 25% and 15%, respectively, of net assets in
repurchase agreements. The Diversified Income Portfolio places no limit on
investments in repurchase agreements. In a repurchase agreement, a Fund buys a
security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent. Repurchase agreements acquired by a Fund will
always be fully collateralized as to principal and interest by U.S. Government
securities and money market instruments and will be entered into only with
commercial banks, brokers and dealers considered creditworthy by the Adviser.
Reverse Repurchase Agreements. The Short-Term Asset Reserve Portfolio may
enter into reverse repurchase agreements with respect to 15% of its total
assets. In a reverse repurchase agreement the Portfolio sells securities and
agrees to repurchase them at a mutually agreed upon date and price. At the time
the
Standish Group of Fixed Income Funds 21 April 30, 1998
<PAGE>
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account containing cash or liquid assets having a value not less than
the repurchase price (including accrued interest) that is marked to market
daily. Reverse repurchase agreements involve the risks that the market value of
the securities which the Portfolio is obligated to repurchase may decline below
the repurchase price or that the counterparty may default on its obligation to
repurchase the securities. The staff of the SEC considers reverse repurchase
agreements to be borrowings by the Portfolio under the Investment Company Act of
1940 ("1940 Act"). The Portfolio intends to enter into reverse repurchase
agreements to provide cash to satisfy redemption requests and avoid liquidating
securities during unfavorable market conditions.
Forward Roll Transactions. To seek to enhance current income, the Fixed Income
Portfolio, Fixed Income Fund II, Short-Term Asset Reserve Portfolio and
Controlled Maturity Fund may each invest up to 10% of its net assets in forward
roll transactions involving mortgage- backed securities. The Securitized Fund
may invest up to 25% of its net assets, collectively, in forward roll
transaction, when-issued securities and forward commitments. The Diversified
Income Portfolio places no limit on investments in forward roll transactions. In
a forward roll transaction, a Fund sells a mortgage-backed security to a
financial institution, such as a bank or broker-dealer, and simultaneously
agrees to repurchase a similar security from the institution at a later date at
an agreed-upon price. The mortgage-backed securities that are repurchased will
bear the same interest rate as those sold, but generally will be collateralized
by different pools of mortgages with different prepayment histories than those
sold. During the period between the sale and repurchase, the Fund will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale will be invested in short-term instruments, such as
repurchase agreements or other short-term securities, and the income from these
investments, together with any additional fee income received on the sale and
the amount gained by repurchasing the securities in the future at a lower price,
will generate income and gain for the Fund which is intended to exceed the yield
on the securities sold. Forward roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. At the time that a Fund enters into a forward roll
transaction, it will place cash or liquid assets in a segregated account that is
marked to market daily having a value equal to the repurchase price (including
accrued interest).
Leverage. The use of forward roll transactions and reverse repurchase
agreements involves leverage. Leverage allows any investment gains made with the
additional monies received (in excess of the costs of the forward roll
transaction or reverse repurchase agreement) to increase the net asset value of
a Fund faster than would otherwise be the case. On the other hand, if the
additional monies received are invested in ways that do not fully recover the
costs of such transactions to a Fund, the net asset value of the Fund would fall
faster than would otherwise be the case.
Short Sales. The Fixed Income Portfolio, Diversified Income Portfolio and
Securitized Fund may engage in short sales and short sales against the box. In a
short sale, a Fund sells a security it does not own in anticipation of a decline
in the market value of that security. In a short sale against the box, a Fund
either owns or has the right to obtain at no extra cost the security sold short.
The broker holds the proceeds of the short sale until the settlement date, at
which time the Fund delivers the security (or an identical security) to cover
the short position. The Fund receives the net proceeds from the short sale. When
a Fund enters into a short sale other than against the box, the Fund must first
borrow the security to make delivery to the buyer and must segregate cash or
liquid assets on its records or in a segregated account with the Fund's
custodian that is marked to market daily. Short sales other than against the box
involve unlimited exposure to loss. No securities will be sold short if, after
giving effect to any such short sale, the total market value of all securities
sold short would exceed 5% of the value of net assets for the Fixed Income
Portfolio and Securitized Fund and 10% of the value of total assets for the
Diversified Income Portfolio.
Restricted and Illiquid Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities, except the Short-Term Asset Reserve Portfolio,
which is limited to 10% of its net assets. Illiquid securities are those that
are not readily marketable, repurchase agreements maturing in more than seven
days, time deposits with a notice or demand period of more than seven days,
certain SMBS, swap transactions, certain OTC options and certain restricted
securities. Based upon continuing review of the trading markets for a specific
restricted security, the security may be determined to be eligible for resale to
qualified institutional buyers pursuant to Rule 144A under the Securities Act of
1933 and, therefore, to be liquid. Also, certain illiquid securities may be
determined to be liquid if they are found to satisfy relevant liquidity
requirements.
The Boards of Trustees have adopted guidelines and delegated to the Advisers
the daily function of determining and monitoring the liquidity of portfolio
securities, including restricted and illiquid securities. The Boards of
Trustees, however, retain oversight and are ultimately responsible for such
determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.
Portfolio Turnover. A high rate of portfolio turnover (100% or more) involves
correspondingly higher transaction costs which must be borne directly by a Fund
and thus indirectly by its shareholders. It may also result in a Fund's
realization of larger amounts of short-term capital gains. Distributions of
short-term capital gains are taxable to shareholders as ordinary income. See
"Financial Highlights" for each Fund's portfolio turnover rates.
Short-Term Trading. Each Fund will sell a portfolio security without regard to
the length of time such security has been held if, in the Adviser's view, the
security meets the criteria for disposal.
Temporary Defensive Investments. Each Fund may maintain cash balances and
purchase money market instruments for cash management and liquidity purposes.
Each Fund may adopt a temporary defensive position during adverse market
conditions by investing without limit in high quality money market instru-
Standish Group of Fixed Income Funds 22 April 30, 1998
<PAGE>
ments, including short-term U.S. Government securities, negotiable certificates
of deposit, non-negotiable fixed time deposits, bankers' acceptances, commercial
paper, floating-rate notes and repurchase agreements. The Short-Term Asset
Reserve Portfolio may also invest in commercial paper rated A-2 by Moody's or
P-2 or Duff-2 by Standard & Poor's, Duff, Fitch or IBCA. The Fixed Income
Portfolio and Securitized Fund may purchase commercial paper of foreign issuers
rated P-1 or its equivalent.
Investment Restrictions. The investment objectives of the Portfolios and the
Funds are not fundamental and may be changed by the applicable Board of Trustees
without the approval of shareholders except that the investment objective of the
Fixed Income Fund is a fundamental policy which may not be changed without a
vote of the Fund's shareholders. If there is a change in a Fund's investment
objective, shareholders should consider whether the Fund remains an appropriate
investment in light of their current financial situation. Each Fund's and
Portfolio's investment policies set forth in this Prospectus are non-fundamental
and may be changed without shareholder approval, except that the Securitized
Fund's 15% limit on repurchase agreements is fundamental. Each Fund and each
Portfolio has adopted fundamental policies which may not be changed without the
approval of the applicable Fund's shareholders. See "Investment Restrictions" in
the Statement of Additional Information. If any percentage restriction is
adhered to at the time of investment, a subsequent increase or decrease in the
percentage resulting from a change in the value of a Fund's assets will not
constitute a violation of the restriction.
Information About the Master-Feeder Structure
The Fixed Income Fund, Diversified Income Fund and Short-Term Asset Reserve
Fund seek to achieve their investment objectives by investing all of their
investable assets in their corresponding Portfolios, which have identical
investment objectives. Each of these Standish Feeder Funds is a feeder fund and
its corresponding Portfolio is the master fund in a so-called master-feeder
structure. The other Funds described in this Prospectus purchase securities
directly and maintain their own individual portfolios.
In addition to the Standish Feeder Funds, other feeder funds may invest in
these Portfolios, and information about these other feeder funds is available
from Standish Fund Distributors. The other feeder funds invest in the Portfolios
on the same terms as the Funds and bear a proportionate share of the Portfolios'
expenses. The other feeder funds may sell shares on different terms and under a
different pricing structure than the Funds, which may produce different
investment results.
There are certain risks associated with an investment in a master-feeder
structure. Large scale redemptions by other feeder funds in a Portfolio may
reduce the diversification of the Portfolio's investments, reduce economies of
scale and increase the Portfolio's operating expenses. If the Portfolio Trust's
Board of Trustees approves a change to the investment objective of a Portfolio
that is not approved by the Trust's Board of Trustees, the Fund would be
required to withdraw its investment in the Portfolio and engage the services of
an investment adviser or find a substitute master fund. Withdrawal of the Fund's
interest in its Portfolio, which may be required by the Trust's Board of
Trustees without shareholder approval, might cause the Fund to incur expenses it
would not otherwise be required to pay.
If a Fund is requested to vote on a matter affecting the Portfolio, the Fund
will call a meeting of its shareholders to vote on the matter. The Fund will
then vote on the matter at the meeting of the Portfolio's investors in the same
proportion that the Fund's shareholders voted on the matter. The Fund will vote
those shares held by its shareholders who did not vote in the same proportion as
those Fund shareholders who did vote on the matter.
A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio Trust, as the case may be, have adopted
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that the same individuals are trustees of the Trust and of
the Portfolio Trust.
Calculation of Performance Data
From time to time each Fund may advertise its yield and total return
information. Average annual total return is determined by computing the average
annual percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods ending with the most recent calendar
quarter, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the
investment at the end of the relevant period. Each Fund may also from time to
time advertise total return on a cumulative, average, year-by-year or other
basis for various specified periods by means of quotations, charts, graphs or
schedules.
The "yield" of a Fund is computed by dividing the net investment income per
share earned during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of the period (using the average number
of shares entitled to receive dividends). For the purpose of determining net
investment income, the calculation includes among expenses of the Fund all
recurring fees that are charged to all shareholder accounts and any nonrecurring
charges for the period stated.
From time to time, a Fund may compare its performance in publications with
that of other mutual funds and separate accounts with similar investment
objectives, to stock, bond and other relevant indices, and to performance
rankings prepared by recognized mutual fund statistical services. In addition, a
Fund's performance may be compared to alternative investment or savings vehicles
or to indices or indicators of economic activity.
Lehman Brothers Government/Corporate Index. This index is considered to be
representative of the performance of all domestic, dollar denominated, fixed
rate investment grade bonds.
Lehman Brothers Aggregate Index. This index is composed of securities from the
Lehman Brothers Government/Corporate Bond Index, the Mortgage Backed Securities
Index and the Yankee Bond Index, and is generally considered to be
representative of all unmanaged, domestic, dollar denominated, fixed rate
investment grade bonds.
IBC/Donoghue Money Market Average/All Taxable Index. This index is generally
considered to be representative of the performance of domestic, taxable money
market funds.
Standish Group of Fixed Income Funds 23 April 30, 1998
<PAGE>
Merrill Lynch 1-3 Year and 1-5 Year U.S. Treasury Indices and the 1 Year
Treasury Bill Index. These indices are considered to be representative of the
performance of Treasury Bills and Notes with specific lengths of time to
repayment.
Lehman Brothers Mortgage Index. This index is considered to be representative
of the performance of fixed rate securitized mortgage pools of GNMA, FNMA and
FHLMC securities.
The following tables set forth the historical total return performance of (i)
all fee paying, domestic investment grade bond portfolios under discretionary
management by Standish that have substantially similar investment objectives,
policies and strategies as the Fixed Income Fund II (the "Investment Grade Bond
Accounts") as measured by the Standish, Ayer & Wood Active Domestic Bond
Investment Grade Composite (the "Active Domestic Bond Composite") and (ii) all
fee paying, controlled maturity bond portfolios under discretionary management
by Standish that have substantially similar investment objectives, policies and
strategies as the Controlled Maturity Fund (the "Controlled Maturity Accounts")
as measured by the Standish, Ayer & Wood Controlled Maturity Bond Composite (the
"Controlled Maturity Bond Composite"). As of December 31, 1997, the Active
Domestic Bond Composite was composed of three Investment Grade Bond Accounts
with approximately $310 million in assets and the Controlled Maturity Bond
Composite was composed of 10 Controlled Maturity Accounts with approximately
$332 million in assets. The performance data of the Investment Grade Bond
Accounts and the Controlled Maturity Accounts, as represented by the
corresponding Composite, has been computed in accordance with the SEC's
standardized formula. Because the gross performance data does not reflect the
deduction of investment advisory fees paid by the Investment Grade Bond Accounts
or the Controlled Maturity Accounts, the net performance data may be more
relevant to potential investors in the Funds in their analysis of the historical
experience of Standish in managing fixed-income portfolios with investment
objectives, policies and strategies substantially similar to those of each Fund.
Standish, Ayer & Wood Active Domestic Bond Investment Grade
Composite Performance
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Average Annual Total
Return For the Periods
Ended December 31, 1997 Cumulative Total Return
The Composite 3 Years 5 Years since January 1, 1990
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Size Weighted Gross 10.88% 8.21% 105.4%
Size Weighted Net 10.71% 8.02% 102.8%
<CAPTION>
- ----------------------------------------------------------------------------------------------------
The Composite 1990 1991 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equal weighted gross total return 9.95% 18.09% 6.68% 14.02% (4.16)% 18.68% 4.48% 9.54%
Equal weighted net total return 9.90% 17.94% 6.48% 13.79% (4.36)% 18.50% 4.38% 9.33%
Size weighted gross total return 9.83% 18.12% 6.69% 13.45% (4.07)% 18.67% 4.78% 9.63%
Size weighted net total return 9.78% 17.97% 6.49% 13.20% (4.26)% 18.55% 4.60% 9.43%
</TABLE>
Standish, Ayer & Wood Controlled Maturity Bond Composite Performance
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Average Annual Total
Return For the Periods
Ended December 31, 1997 Cumulative Total Return
The Composite 3 Years 5 Years since January 1, 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Size Weighted Gross 8.07% 6.59% 82.69%
Size Weighted Net 7.87% 6.39% 80.37%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Composite 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equal weighted gross
total return 16.40% 10.60% 4.90% 7.60% 11.80% 9.08% 14.45% 6.80% 9.80% (0.61%) 12.21% 5.39% 7.02%
Equal weighted net
total return 16.13% 10.29% 4.05% 6.85% 11.10% 8.74% 14.10% 6.53% 9.52% (0.87%) 12.06% 5.17% 6.83%
Size weighted gross
total return 9.03% 14.18% 6.65% 9.23% (0.21%) 11.75% 5.51% 7.06%
Size weighted net
total return 8.89% 14.06% 6.54% 9.09% (0.46%) 11.55% 5.28% 6.88%
</TABLE>
The performance of the Investment Grade Bond Accounts and the Controlled
Maturity Accounts, as represented by the corresponding Composite, is not that of
any of the Funds, including the Fixed Income Fund II and Controlled Maturity
Fund, and is not necessarily indicative of any Fund's future results. Each
Fund's actual total return may vary significantly from the past and future
performance of these Accounts. While the Accounts incur inflows and outflows of
cash from clients, there can be no assurance that the continuous offering of a
Fund's shares and a Fund's obligation to redeem its shares will not impact the
Fund's performance. In the opinion of Standish, so long as the Fixed Income Fund
II has at least $67 million in net assets and the Controlled Maturity Fund has
at least $16 million in net assets, the relative difference in size between the
Standish Group of Fixed Income Funds 24 April 30, 1998
<PAGE>
Funds and the corresponding Accounts should not affect the relevance of the
performance of the Accounts to potential investors in either Fund. Investment
returns and the net asset value of shares of each Fund will fluctuate in
response to market and economic conditions as well as other factors and an
investment in a Fund involves the risk of loss.
Total Return
- ----------------------------------------------------------------
Cumulative
One Year July 3, 1995
Period Ended (inception) through
December 31, 1997 December 31, 1997
- ----------------------------------------------------------------
Fixed Income Fund II 8.59%(1) 19.20%(1)
Controlled Maturity Fund 6.66%(1) 16.83%(1)
- ----------
(1) The Adviser voluntarily agreed not to impose its advisory fee and
reimbursed the Funds for a portion of their operating expenses during the
periods indicated. Had these arrangements not been in effect, each Fund's total
return would be lower.
Performance data is based on historical results and is not intended to
indicate future performance.
Dividends and Distributions
Dividends from net investment income for the Fixed Income, Fixed Income II,
Diversified Income, Controlled Maturity and Securitized Funds will be declared
and distributed quarterly. Dividends on shares of the Short-Term Asset Reserve
Fund will be declared daily from net investment income and distributed monthly.
The Funds' dividends from realized capital gains, if any, after reduction by
capital losses, will be declared and distributed at least annually. In
determining the amounts of its dividends, the Fixed Income Fund, Diversified
Income Fund and the Short-Term Asset Reserve Fund will take into account their
share of the income, gain or loss, expense, and any other tax items of their
corresponding Portfolios. Dividends from net investment income and capital gains
distributions, if any, are automatically reinvested in additional shares of the
applicable Fund unless the shareholder elects to receive them in cash.
Purchase of Shares
Shares of the Funds may be purchased from Standish Fund Distributors, which
offers the Funds' shares to the public on a continuous basis. Shares are sold at
the net asset value per share next computed after the purchase order is received
in good order by Standish Fund Distributors and payment for the shares is
received by Investors Bank & Trust Company, the Funds' Custodian. Please see
each Fund's account application or call (800) 221-4795 for instructions on how
to make payment for shares to the Custodian. The Fixed Income, Fixed Income II,
Diversified Income and Controlled Maturity Funds require minimum initial
investments of $100,000. Additional investments must be in amounts of at least
$5,000. The Short-Term Asset Reserve and Securitized Funds require minimum
initial investments of $1,000,000. The Short-Term Asset Reserve Fund requires
additional investments of at least $100,000. The Securitized Fund requires
additional investments of at least $50,000. Certificates for Fund shares are
generally not issued.
Shares of the Funds may also be purchased through securities brokers and
dealers. Orders for the purchase of Fund shares received by broker-dealers by
the close of regular trading on the New York Stock Exchange ("NYSE") (normally
4:00 p.m., New York City time) on any business day and transmitted to Standish
Fund Distributors or another authorized representative of the Trust by specified
times will be effected as of the close of regular trading on the NYSE on that
day. Otherwise, orders will be effected at the net asset value per share
determined on the next business day. It is the responsibility of broker-dealers
to transmit orders so they will be received by Standish Fund Distributors or
another authorized representative of the Trust before the close of its business
day. Shares of a Fund purchased through broker-dealers may be subject to
transaction fees on purchase or redemption, no part of which will be received by
the Funds, Standish Fund Distributors, Standish or SIMCO.
In the sole discretion of the Trust, each Fund may accept securities instead
of cash for the purchase of shares. The Trust will ask the applicable Adviser to
determine that any securities acquired by the Funds in this manner are
consistent with the investment objective, policies and restrictions of the
applicable Fund. The securities will be valued in the manner stated below. The
purchase of Fund shares for securities instead of cash may cause an investor who
contributed them to realize a taxable gain or loss with respect to the
securities transferred to the Fund.
The Trust reserves the right in its sole discretion (i) to suspend the
offering of a Fund's shares, (ii) to reject purchase orders when in the best
interest of a Fund, (iii) to modify or eliminate the minimum initial or
subsequent investment in Fund shares and (iv) to eliminate duplicate mailings of
Fund material to shareholders who reside at the same address. A Fund's
investment minimums do not apply to accounts for which Standish or any of its
affiliates serves as investment adviser or to employees of Standish or any of
its affiliates or to members of such persons' immediate families. A Fund's
investment minimums apply to the aggregate value invested in omnibus accounts
rather than to the investments of the underlying participants in the omnibus
accounts.
Net Asset Value
Each Fund's net asset value per share is computed each day on which the NYSE
is open as of the close of regular trading on the NYSE (normally 4:00 p.m., New
York City time). The net asset value per share is calculated by determining the
value of all of a Fund's assets (which, in the case of each Standish Feeder
Fund, would be the value of its investment in the corresponding Portfolio plus
the value of any other assets owned by the Fund directly), subtracting all
liabilities and dividing the result by the total number of shares outstanding.
Fixed income securities (other than money market instruments) for which
accurate market prices are readily available are valued at their current market
value on the basis of quotations, which may be furnished by a pricing service or
provided by dealers in such securities. Securities not listed on an exchange or
national securities market, certain mortgage-backed and asset-backed securities
and securities for which there were no reported transactions are valued at the
last quoted bid prices. Fixed
Standish Group of Fixed Income Funds 25 April 30, 1998
<PAGE>
income securities for which accurate market prices are not readily available and
all other assets are valued at fair value as determined in good faith by the
applicable Adviser in accordance with procedures approved by the Trustees, which
may include the use of yield equivalents or matrix pricing.
Money market instruments with less than sixty days remaining to maturity when
acquired by a Fund are valued on an amortized cost basis unless the Trustees
determine that amortized cost does not represent fair value. If a Fund acquires
a money market instrument with more than sixty days remaining to its maturity,
it is valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized cost based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized cost
does not represent fair value.
Portfolio securities traded on more than one U.S. national securities exchange
or on a U.S. exchange and a foreign securities exchange are valued at the last
sale price from the exchange representing the principal market for such
securities on the business day when such value is determined. The value of all
assets and liabilities expressed in foreign currencies are converted into U.S.
dollar values at currency exchange rates determined by Investors Bank & Trust
Company, the Funds' transfer agent, to be representative of fair rates of
exchange at times prior to the close of trading on the NYSE. If such rates are
not available, the rate of exchange will be determined in good faith under
procedures established by the Trustees. Trading in securities on European and
Asian securities exchanges and OTC markets is normally completed well before the
close of business on the NYSE and may not take place on all business days that
the NYSE is open and may take place on days when the NYSE is closed. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of regular trading on the NYSE will not be
reflected in a Fund's calculation of its net asset value unless the Adviser
determines that the particular event would materially affect net asset value, in
which case an adjustment may be made.
Exchange of Shares
Shares of the Funds may be exchanged for shares of one or more other funds in
the Standish fund family subject to the terms and restrictions imposed on the
purchase of shares of such funds. Shares of a fund redeemed in an exchange
transaction are valued at the net asset value next determined after the exchange
request is received by Standish Fund Distributors or another authorized
representative of the Trust. Shares of a fund purchased in an exchange
transaction are valued at the net asset value next determined after the exchange
request is received by Standish Fund Distributors or another authorized
representative of the Trust and payment for the shares is received by the fund
into which shares are to be exchanged. Until receipt of the purchase price by
the fund into which shares are to be exchanged (which may take up to three
business days), your money will not be invested. To obtain a current prospectus
for any of the other funds in the Standish fund family, please call (800)
221-4795. Please consider the differences in investment objectives and expenses
of a fund as described in its prospectus before making an exchange.
Written Exchanges. Shares of the Funds may be exchanged by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written exchange request must (a) state the name of the current Fund, (b) state
the name of the fund into which the current Fund shares will be exchanged, (c)
state the number of shares or the dollar amount to be exchanged, (d) identify
the shareholder's account numbers in both funds and (e) be signed by each
registered owner exactly as the shares are registered. Signature(s) must be
guaranteed as described under "Written Redemption" below.
Telephone Exchanges. Shareholders who elect telephone privileges may exchange
shares by calling Standish Fund Distributors at (800) 221-4795. Telephone
privileges are not available to shareholders automatically. Proper
identification will be required for each telephone exchange. Please see
"Telephone Transactions" below for more information regarding telephone
transactions.
General Exchange Information. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be lawfully available for sale in your state; (ii) exchanges may be made only
between funds that are registered in the same name, address and, if applicable,
taxpayer identification number; and (iii) unless waived by the Trust, the amount
to be exchanged must satisfy the minimum account size of the fund to be
exchanged into. Exchange requests will not be processed until payment for the
shares of the current Fund has been received by Standish Fund Distributors. The
exchange privilege may be changed or discontinued and may be subject to addition
allimitations upon sixty (60) days' notice to shareholders, including certain
restrictions on purchases by market-timer accounts.
Redemption of Shares
Shares of the Funds may be redeemed or repurchased by the methods described
below at the net asset value per share next determined after receipt by Standish
Fund Distributors or another authorized representative of the Trust of a
redemption or repurchase request in proper form. Redemptions will not be
processed until a completed account application and payment for the shares to be
redeemed have been received.
Written Redemption. Shares of each Fund may be redeemed by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written redemption request must (a) state the name of the Fund and the number of
shares or the dollar amount to be redeemed, (b) identify the shareholder's
account number and (c) be signed by each registered owner exactly as the shares
are registered. Signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the NYSE's Medallion
Signature Program or by any one of the following institutions, provided that the
institution meets credit standards established by the Funds' transfer agent: (i)
a bank; (ii) a securities broker or dealer, including a government or municipal
securities broker or dealer, that is a member of a clearing corporation or has
net capital of at least $100,000; (iii) a credit union having authority to issue
signature guarantees; (iv) a savings
Standish Group of Fixed Income Funds 26 April 30, 1998
<PAGE>
and loan association, a building and loan association, a cooperative bank, or a
federal savings bank or association; or (v) a national securities exchange, a
registered securities exchange or a clearing agency. Standish Fund Distributors
reserves the right to waive the requirement that signatures be guaranteed.
Additional supporting documents may be required in the case of estates, trusts,
corporations, partnerships and other shareholders that are not individuals.
Redemption proceeds will normally be paid by check mailed within three business
days of receipt by Standish Fund Distributors of a written redemption request in
proper form. If shares to be redeemed were recently purchased by check, the
Funds may delay transmittal of redemption proceeds until such time as they are
assured that good funds have been collected for the purchase of the shares. This
may take up to fifteen (15) days in the case of payments made by check.
Telephone Redemption. Shareholders who elect telephone privileges may redeem
shares by calling Standish Fund Distributors at (800) 221-4795. Telephone
privileges are not available to shareholders automatically. Redemption proceeds
will be mailed or wired in accordance with the shareholder's instruction on the
account application to a pre-designated account. Redemption proceeds will
normally be paid promptly after receipt of telephone instructions, but no later
than three business days thereafter, except as described above for shares
purchased by check. Redemption proceeds will be sent only by check payable to
the shareholder of record at the address of record, unless the shareholder has
indicated, in the initial application for the purchase of shares, a commercial
bank to which redemption proceeds may be sent by wire. These instructions may be
changed subsequently only in writing, accompanied by a signature guarantee, and
additional documentation in the case of shares held by a corporation or other
entity or by a fiduciary such as a trustee or executor. Wire charges, if any,
will be deducted from redemption proceeds. Proper identification will be
required for each telephone redemption.
Repurchase Order. In addition to written redemption of Fund shares, Standish
Fund Distributors may accept telephone orders from brokers or dealers for the
repurchase of Fund shares. Brokers and dealers are obligated to transmit
repurchase orders to Standish Fund Distributors promptly prior to the close of
Standish Fund Distributors' business day (normally 4:00 p.m.). Brokers or
dealers may charge for their services in connection with a repurchase of Fund
shares, but neither the Trust nor Standish Fund Distributors imposes a charge
for share repurchases.
Telephone Transactions. By maintaining an account that is eligible for
telephonic exchange and redemption privileges, the shareholder authorizes the
Advisers, Standish Fund Distributors, the Trust and the Funds' custodian to act
upon instructions of any person to redeem and/or exchange shares from the
shareholder's account. Further, the shareholder acknowledges that, as long as
the Funds employ reasonable procedures to confirm that telephone instructions
are genuine and follow telephone instructions that they reasonably believe to be
genuine neither Standish Fund Distributors, the Trust, the applicable Fund, the
applicable Adviser, the Funds' custodian, nor their respective officers or
employees, will be liable for any loss, expense or cost arising out of any
request for a telephone redemption or exchange, even if such transaction results
from any fraudulent or unauthorized instructions.
Depending upon the circumstances, the Funds intend to employ personal
identification or written confirmation of transaction procedures, and if they do
not, a Fund may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone transaction requests will be recorded. Shareholders
may experience delays in exercising telephone transaction privileges during
periods of abnormal market activity. During these periods, shareholders should
transmit redemption and exchange requests in writing.
* * * *
The proceeds paid upon redemption or repurchase may be more or less than the
cost of the shares, depending upon the market value of the applicable Fund's or
Portfolio's portfolio investments at the time of redemption or repurchase. The
Funds intend to pay cash for all shares redeemed, but under certain conditions,
the Funds may, in their discretion, make payments wholly or partially in
securities for this purpose. Please see the SAI for further information.
Each Fund may redeem, at net asset value, the shares in any account which has
a value of less than $50,000 ($250,000 in the case of the Short-Term Asset
Reserve Fund) as a result of redemptions or transfers. Before doing so, the Fund
will notify the shareholder that the value of the shares in the account is less
than the specified minimum and will allow the shareholder 30 days to make an
additional investment to increase the value of the account to an amount at least
equal to the stated minimums.
Management
Trustees. Each Fund is a separate investment series of the Trust, a
Massachusetts business trust. Under the terms of the Agreement and Declaration
of Trust establishing the Trust, the Trustees of the Trust are ultimately
responsible for the management of its business and affairs. Each Portfolio is a
separate investment series of the Standish, Ayer & Wood Master Portfolio
("Portfolio Trust"), a master trust fund organized under the laws of the State
of New York. Under the terms of the Declaration of Trust, each Portfolio's
affairs are managed under the supervision of the Portfolio Trust's Trustees. See
"Management" in the SAI for more information about the Trustees and officers of
the Trust and the Portfolio Trust.
Investment Advisers. Standish, One Financial Center, Boston, Massachusetts
02111, serves as investment adviser to the Fixed Income Portfolio, Short-Term
Asset Reserve Portfolio, Fixed Income Fund II, Controlled Maturity Fund and
Securitized Fund pursuant to separate investment advisory agreements. Standish
is a Massachusetts corporation incorporated in 1933 and is a registered
investment adviser under the Investment Advisers Act of 1940.
SIMCO, One Financial Center, Boston, Massachusetts 02111, serves as investment
adviser to the Diversified Income Portfolio pursuant to an investment advisory
agreement. SIMCO is a Delaware limited partnership which was organized in 1991
and is a registered investment adviser under the
Standish Group of Fixed Income Funds 27 April 30, 1998
<PAGE>
Investment Advisers Act of 1940. The general partner of SIMCO is Standish, which
holds a 99.98% partnership interest. The limited partners, who each hold a 0.01%
interest in SIMCO, are Walter M. Cabot, Sr., Senior Adviser to Standish, and D.
Barr Clayson, Chairman of the Board and Vice President of SIMCO, a Managing
Director and Vice President of Standish, and a Trustee and Vice President of the
Trust and Portfolio Trust. Ralph S. Tate, a Managing Director of Standish, is
President and a Director of SIMCO. Richard S. Wood, Vice President and a
Managing Director and Vice President of Standish and the President and a Trustee
of the Trust and Portfolio Trust, is the Executive Vice President and a Director
of SIMCO.
Standish and SIMCO provide fully discretionary management services and
counseling and advisory services to a broad range of clients throughout the
United States and abroad. As of March 31, 1998, Standish and SIMCO managed
approximately $[ ] billion of assets.
The Fixed Income Portfolio's portfolio manager is Caleb F. Aldrich. Mr.
Aldrich has been primarily responsible for the day-to-day management of the
Fixed Income Fund's portfolio since January 1, 1993 and of the Fixed Income
Portfolio's portfolio since the Fixed Income Fund's conversion to the
master-feeder structure on May 3, 1996. During the past five years, Mr. Aldrich
has served as a Director and Vice President of Standish.
The Diversified Income Portfolio's portfolio manager is Dolores S. Driscoll.
During the past five years, Ms. Driscoll has served as a Director of SIMCO and
Managing Director of Standish.
The Fixed Income Fund II's portfolio managers are Caleb F. Aldrich and David
C. Stuehr. During the past five years, Mr. Aldrich has served as a Director and
Vice President of Standish. Mr. Stuehr has served as a Director of Standish
since January 1995 and, prior thereto, served as a Vice President (since 1992)
and an Assistant Vice President of Standish.
The Short-Term Asset Reserve Portfolio has two portfolio managers--Ms.
Jennifer Pline and Ms. Barbara J. McKenna. Ms. Pline was a portfolio manager of
the Short-Term Asset Reserve Fund's portfolio since 1991 and has been a
portfolio manager of the Portfolio's portfolio since the Short-Term Asset
Reserve Fund's conversion to the master-feeder structure on January 1, 1998.
During the past five years, Ms. Pline has served as a Vice President of
Standish. Ms. McKenna has been a portfolio manager of the Portfolio's portfolio
since January 1998. Ms. McKenna has served as a Vice President of Standish since
1996. Prior to joining Standish, from 1993-1996, Ms. McKenna managed
institutional fixed income accounts at BayBank.
The Controlled Maturity Fund's portfolio managers are Howard B. Rubin and
Barbara J. McKenna. During the past five years, Mr. Rubin has served as Director
and Vice President of Standish. Ms. McKenna has been a portfolio manager of the
Fund's portfolio since January 1998. Ms. McKenna has served as a Vice President
of Standish since 1996. Prior to joining Standish, from 1993-1996, Ms. McKenna
managed institutional fixed income accounts at BayBank.
The Securitized Fund's portfolio manager is also Dolores S. Driscoll, who has
been primarily responsible for the day-to-day management of the Fund's portfolio
since its inception in August, 1989.
Subject to the supervision and direction of the Trustees of the Trust and the
Portfolio Trust, the Advisers manage the Funds and the Portfolios in accordance
with their respective investment objectives and policies, recommend investment
decisions, place orders to purchase and sell securities and permit the
Portfolios and the Funds (except the Fixed Income, Diversified Income and
Short-Term Asset Reserve Funds) to use the name "Standish." For these services,
each Fund (except the Fixed Income, Diversified Income and Short-Term Asset
Reserve Funds) and the Portfolios pay a monthly fee at a stated annual
percentage rate of such Fund's (or Portfolio's) average daily net asset value:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Actual Rate
Contractual Paid for the
Net Asset Advisory Fee Year Ended
Value Annual Rate December 31, 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Portfolio First $250 million 0.40% 0.31%
Next $250 million 0.35%
Amount over $500 million 0.30%
Diversified Income Portfolio All assets 0.50% 0.00%*
Fixed Income Fund II All assets 0.40% 0.06%*
Short-Term Asset Reserve Portfolio All assets 0.25% 0.25%
Controlled Maturity Fund All assets 0.35% 0.00%*
Securitized Fund First $500,000,000 0.25% 0.13%*
Amount over $500,000,000 0.20%
</TABLE>
*Standish has voluntarily and temporarily agreed to limit total expenses
(excluding brokerage commissions, taxes and extraordinary expenses) of the
Diversified Income Portfolio, Fixed Income Fund II, Controlled Maturity Fund and
Securitized Fund to 0.00%, 0.40%, 0.30% and 0.45%, respectively, of average
daily net assets. The Advisers may terminate or revise these agreements at any
time although they have no current intention to do so. If an expense limit is
exceeded, the compensation due to Standish shall be proportionately reduced by
the amount of such excess by a reduction or refund thereof, subject to
readjustment during the period during which such limit is in place.
Standish Group of Fixed Income Funds 28 April 30, 1998
<PAGE>
Administrator. Standish serves as administrator to the Fixed Income,
Diversified Income and Short-Term Asset Reserve Funds. As administrator,
Standish manages the affairs of the Funds, provides all necessary office space
and services of executive personnel for administering the affairs of these
Funds, and allows the Funds to use the name "Standish." For these services,
Standish currently does not receive any additional compensation. The Trustees of
the Trust may determine in the future to compensate Standish for its
administrative services.
Expenses. Each Portfolio and each Fund bears the expenses of its respective
operations other than those incurred by the applicable Adviser under the
investment advisory agreement or the administration agreement.
Each Portfolio pays investment advisory fees; bookkeeping, share pricing and
custodian fees and expenses; expenses of notices and reports to interest
holders; and expenses of the Portfolio's administrator. Each Standish Feeder
Fund pays shareholder servicing fees and expenses, expenses of prospectuses,
statements of additional information and shareholder reports which are furnished
to existing shareholders. Each Standish Feeder Fund and its corresponding
Portfolio pays legal and auditing fees; registration and reporting fees and
expenses. The Fixed Income Fund II, the Controlled Maturity Fund and Securitized
Fund, since they do not invest in a corresponding portfolio, bear all of the
expenses listed above for both the Portfolios and the Funds. Expenses of the
Trust which relate to more than one series are allocated among such series by
Standish in an equitable manner.
Standish Fund Distributors bears the distribution expenses attributable to the
offering and sale of Fund shares without subsequent reimbursement.
Each Fund's total annual operating expenses for the fiscal year ended December
31, 1997 are described above under the caption "Financial Highlights."
Portfolio Transactions. Subject to the supervision of the Trustees of the
Trust and the Portfolio Trust, the Advisers select the brokers and dealers that
execute orders to purchase and sell portfolio securities for the Funds and the
Portfolios. The Advisers will generally seek to obtain the best available price
and most favorable execution with respect to all transactions for the Portfolios
and the Funds. The Advisers may also consider the extent to which a broker or
dealer provides research to the Advisers and the number of Fund shares sold by
the broker or dealer in making its selection.
Year 2000 Issue. The Funds' and the Portfolios' operations depend on the
seamless functioning of computer systems in the financial service industry,
including those of the Advisers, the Custodian and the Transfer Agent. Many
computer software systems in use today cannot properly process date-related
information after December 31, 1999 because of the method by which dates are
encoded and calculated. This failure, commonly referred to as the "Year 2000
Issue," could adversely affect the handling of securities trades, pricing and
account servicing for the Funds and Portfolios. The Advisers have made
compliance with the Year 2000 Issue a high priority and are taking steps that
they believe are reasonably designed to address the Year 2000 Issue with respect
to their computer systems. The Advisers have also been informed that comparable
steps are being taken by the Funds' and Portfolios' other major service
providers. The Advisers do not currently anticipate that the Year 2000 Issue
will have a material impact on their ability to continue to fulfill their duties
as investment advisers.
Federal Income Taxes
Each Fund is a separate entity for federal tax purposes and intends to qualify
for each taxable year for taxation as a "regulated investment company" under the
Code. If it qualifies as a regulated investment company, each Fund will not be
subject to federal income tax on income (including capital gains) distributed to
shareholders in accordance with certain timing and other requirements of the
Code.
Shareholders which are taxable entities or persons will be subject to federal
income tax on dividends and capital gain distributions made by the Funds.
Dividends paid by a Fund from net investment income, certain net foreign
currency gains, and any excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income, whether
received in cash or reinvested in Fund shares. Only a small portion, if any, of
such dividends may qualify for the corporate dividends received deduction under
the Code. Dividends paid by a Fund from net capital gain (the excess of net
long-term capital gain over net capital loss), called "capital gain
distributions," will be taxable to shareholders as capital gains, whether
received in cash or reinvested in Fund shares and without regard to how long the
shareholder has held shares of the Fund. Capital gain distributions are taxable
for noncorporate shareholders at maximum federal income tax rates of 28% or 20%,
or in unusual cases 25%, depending upon the source. Capital gain distributions
do not qualify for the corporate dividends received deduction. Dividends and
capital gain distributions may also be subject to state and local or foreign
taxes. Redemptions (including exchanges) and repurchases of shares are taxable
events for shareholders that are subject to tax.
The Fixed Income Portfolio, Diversified Income Portfolio and Securitized Fund
may be subject to foreign taxes with respect to income or gains from certain
foreign investments, which will reduce the yield or return from such
investments. The Diversified Income Fund may, but the Fixed Income Fund and
Securitized Fund will not, qualify to elect to pass certain qualifying foreign
taxes through to shareholders. If this election is made by the Diversified
Income Fund, its shareholders would include their shares of qualified foreign
taxes in their gross incomes (in addition to any actual dividends and
distributions) and might be entitled to a corresponding federal income tax
credit or deduction. Shareholders will receive appropriate information if this
election is made for any year.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on dividends, capital gain
distributions, and the proceeds of redemptions or repurchases of shares, if they
fail to furnish the applicable Fund with their correct taxpayer identification
number and certain certifications or if they are otherwise subject to backup
withholding. Individuals, corporations and other shareholders that are not U.S.
persons under the Code are subject to different tax rules and may be
Standish Group of Fixed Income Funds 29 April 30, 1998
<PAGE>
subject to nonresident alien withholding tax at the rate of 30% (or a lower rate
provided by an applicable tax treaty) on amounts treated as ordinary dividends
from the Funds and, unless a current IRS Form W-8 or an acceptable substitute is
furnished to the applicable Fund, to backup withholding on certain payments from
that Fund.
After the close of each calendar year, the Funds will send a notice to
shareholders that provides information about the federal tax status of
distributions to shareholders for such calendar year.
The Funds and Their Shares
The Trust was organized on August 13, 1986 as a Massachusetts business trust.
In addition to the Funds offered in this Prospectus, the Trust offers other
series to the public. Shareholders of each Fund are entitled to one full or
fractional vote for each share of that Fund. There is no cumulative voting and
shares have no preemption or conversion rights. All series of the Trust vote
together except as provided in the 1940 Act or the Declaration of Trust. The
Trust does not intend to hold annual meetings of shareholders. The Trustees will
call special meetings of shareholders to the extent required by the Trust's
Declaration of Trust or the 1940 Act. The 1940 Act requires the Trustees, under
certain circumstances, to call a meeting to allow shareholders to vote on the
removal of a Trustee and to assist shareholders in communicating with each
other. Certificates for Fund shares are not issued.
The Portfolio Trust was organized on January 18, 1996 as a New York trust. In
addition to the Portfolios, the Portfolio Trust offers interests in other series
to certain qualified investors. See "Information about the Master-Feeder
Structure" above for additional information about the Portfolio Trust.
At April 1, 1998, The Cummins Foundation, 529 East South Temple, Salt Lake
City, UT 84102 had sole voting and investment power with respect to more than
25% of the then outstanding shares of the Controlled Maturity Fund, Exeter
Health Resources, Inc., 10 Buzell Avenue, Exeter, NH 03833, had sole voting and
investment power with respect to more than 25% of the then outstanding shares of
the Fixed Income Fund II, and Allendale Mutual Insurance Company, Allendale
Park, Johnston, Rhode Island 02919, had sole voting and investment power with
respect to more than 25% of the then outstanding shares of the Securitized Fund
and the Diversified Income Fund. Accordingly, each such shareholder was deemed
to control the applicable Fund.
Inquiries concerning the Funds should be made by contacting Standish Fund
Distributors at the address and telephone number listed on the back cover of
this Prospectus.
Custodian, Transfer Agent and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, serves as the Funds' transfer agent, dividend disbursing agent and as
custodian for all cash and securities of the Funds and the Portfolios. Investors
Bank & Trust, Boston and Toronto, Canada, also provides accounting services to
the Funds.
Independent Accountants
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109
and Coopers & Lybrand, P.O. Box 219, Grand Cayman, Cayman Islands, BWI, serve as
independent accountants for the Trust and the Portfolio Trust, respectively, and
will audit the Funds' and the Portfolios' financial statements annually.
Legal Counsel
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust, the Portfolio Trust, Standish, SIMCO and their affiliates.
Tax Certification Instructions
Federal law requires that taxable distributions and proceeds of redemptions
and exchanges be reported to the IRS and that 31% be withheld if you fail to
provide your correct Taxpayer Identification Number ("TIN") and the TIN-related
certifications contained in the Account Purchase Application ("Application")or
you are otherwise subject to backup withholding. A Fund will not impose backup
withholding as a result of your failure to make any certification, except the
certifications in the Application that directly relate to your TIN and backup
withholding status. Amounts withheld and forwarded to the IRS can be credited as
a payment of tax when completing your Federal income tax return.
For most individual taxpayers, the TIN is the social security number. Special
rules apply for certain accounts. For example, for an account established under
the Uniform Gift to Minors Act, the TIN of the minor should be furnished. If you
do not have a TIN, you may apply for one using forms available at local offices
of the Social Security Administration or the IRS, and you should write "Applied
For" in the space for a TIN on the Application.
Recipients exempt from backup withholding, including corporations and certain
other entities, should provide their TIN and underline "exempt" in section 2(a)
of the TIN section of the Application to avoid possible erroneous withholding.
Non-resident aliens and foreign entities may be subject to withholding of up to
30% on certain distributions received from the Funds and must provide certain
certifications on IRS Form W-8 to avoid backup withholding with respect to other
payments. For further information, see Code Sections 1441, 1442 and 3406 and/or
consult your tax adviser.
Standish Group of Fixed Income Funds 30 April 30, 1998
<PAGE>
Standish Group of Fixed Income Funds
- --------------------------------------------------------------------------------
Investment Adviser
Standish, Ayer & Wood, Inc.
One Financial Center
Boston, Massachusetts 02111
(Fixed Income Portfolio, Fixed Income Fund II,
Standish Short-Term Asset Reserve Portfolio,
Standish Controlled Maturity Fund
and Standish Securitized Fund)
Standish International Management Company, L.P.
One Financial Center
Boston, Massachusetts 02111
(Diversified Income Portfolio)
Principal Underwriter Independent Accountants
Standish Fund Distributors, L.P. Coopers & Lybrand L.L.P.
One Financial Center One Post Office Square
Boston, Massachusetts 02111 Boston, Massachusetts 02109
Custodian Coopers & Lybrand
Investors Bank & Trust Company P.O. Box 219
200 Clarendon Street Grand Cayman, Cayman Islands, BWI
Boston, Massachusetts 02116 (Standish Diversified Income Portfolio and
Standish Fixed Income Portfolio)
Legal Counsel
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus or
in the Statement of Additional Information, and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Trust. This Prospectus does not constitute an offering in any
jurisdiction in which such offering may not be lawfully made.
Standish Group of Fixed Income Funds 31 April 30, 1998
<PAGE>
[LOGO] STANDISH FUNDS(SM)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066
www.standishfunds.com 98-106
<PAGE>
April 30, 1998
STANDISH GROUP OF FIXED INCOME FUNDS
STANDISH FIXED INCOME FUND
STANDISH DIVERSIFIED INCOME FUND
STANDISH FIXED INCOME FUND II
STANDISH SHORT-TERM ASSET RESERVE FUND
STANDISH CONTROLLED MATURITY FUND
STANDISH SECURITIZED FUND
One Financial Center
Boston, Massachusetts 02111
(800) 729-0066
STATEMENT OF ADDITIONAL INFORMATION
This combined Statement of Additional Information is not a prospectus, but
expands upon and supplements the information contained in the combined
Prospectus dated April 30, 1998, as amended and/or supplemented from time to
time (the "Prospectus"), of the Standish Fixed Income Fund ("Fixed Income
Fund"), the Standish Diversified Income Fund ("Diversified Income Fund"), the
Standish Fixed Income Fund II ("Fixed Income Fund II"), the Standish Short-Term
Asset Reserve Fund ("Short-Term Asset Reserve Fund"), the Standish Controlled
Maturity Fund ("Controlled Maturity Fund") and the Standish Securitized Fund
("Securitized Fund"), each a separate investment series of Standish, Ayer & Wood
Investment Trust (the "Trust"). These six funds are sometimes referred to herein
individually as the "Fund" and collectively as the "Funds". This Statement of
Additional Information ("SAI") should be read in conjunction with the
Prospectus, a copy of which may be obtained without charge by writing or calling
the Trust's principal underwriter, Standish Fund Distributors, L.P. (the
"Principal Underwriter"), at the address and phone number set forth above.
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
-------------------------------------------------------------------
CONTENTS
Investment Objectives and Policies ........................................ 2
Investment Restrictions ................................................... 17
Calculation of Performance Data ........................................... 24
Management ................................................................ 27
Redemption of Shares ...................................................... 34
Portfolio Transactions .................................................... 34
Determination of Net Asset Value .......................................... 35
The Funds and Their Shares ................................................ 36
The Portfolios and Their Investors ........................................ 37
Taxation .................................................................. 37
Additional Information .................................................... 41
Experts and Financial Statements .......................................... 41
<PAGE>
INVESTMENT OBJECTIVES
AND POLICIES
The Prospectus describes the investment objectives and policies of each
Fund. The following discussion supplements the description of the Funds'
investment policies in the Prospectus. The Fixed Income Fund invests all of its
assets in the Standish Fixed Income Portfolio, the Diversified Income Fund
invests all of its assets in the Standish Diversified Income Portfolio and the
Short-Term Asset Reserve Fund invests all of its assets in the Short-Term Asset
Reserve Portfolio (the "Short-Term Asset Reserve Portfolio"). These three Funds
are sometimes referred to in this SAI as Standish Feeder Funds.
Each Portfolio is a series of the Standish, Ayer and Wood Master Portfolio
(the "Portfolio Trust"), an open -end management investment company. Each
Portfolio has the same investment objective and restrictions as its
corresponding Fund. Standish, Ayer and Wood, Inc. ("Standish") is the investment
adviser to the Fixed Income Portfolio, the Fixed Income Fund II, the Short-Term
Asset Reserve Portfolio, the Controlled Maturity Fund and the Securitized Fund.
Standish International Management Company, L.P. ("SIMCO") is the investment
adviser to the Diversified Income Portfolio. Both Standish and SIMCO are
sometimes referred to herein as the "Adviser" or together as the "Adviser".
The Prospectus describes the investment objective of the Standish Feeder
Funds and the Portfolios and summarizes the investment policies they will
follow. Since the investment characteristics of the Standish Feeder Funds
correspond directly to those of their respective Portfolios, the following
discusses the various investment techniques employed by the Portfolios. See the
Prospectus for a more complete description of each Fund's and each Portfolio's
investment objective, policies and restrictions. For the purposes of discussion
in this section of this SAI, the use of the term "Fund" or "Funds" includes
references to each of the Fixed Income Portfolio, Diversified Income Portfolio
and Short-Term Asset Reserve Portfolio, unless otherwise noted.
Effective July 1, 1995, the Short-Term Asset Reserve Fund changed its name
from the Consolidated Standish Short-Term Asset Reserve Fund to the Standish
Short-Term Asset Reserve Fund.
Maturity and Duration. The effective maturity of an individual portfolio
security in which a Fund invests is defined as the period remaining until the
earliest date when the Fund can recover the principal amount of such security
through mandatory redemption or prepayment by the issuer, the exercise by the
Fund of a put option, demand feature or tender option granted by the issuer or a
third party or the payment of the principal on the stated maturity date. The
effective maturity of variable rate securities is calculated by reference to
their coupon reset dates. Thus, the effective maturity of a security may be
substantially shorter than its final stated maturity. Unscheduled prepayments of
principal have the effect of shortening the effective maturities of securities
in general and mortgage-backed securities in particular. Prepayment rates are
influenced by changes in current interest rates and a variety of economic,
geographic, social and other factors and cannot be predicted with certainty. In
general, securities, such as mortgage-backed securities, may be subject to
greater prepayment rates in a declining interest rate environment. Conversely,
in an increasing interest rate environment, the rate of prepayment may be
expected to decrease. A higher than anticipated rate of unscheduled principal
prepayments on securities purchased at a premium or a lower than anticipated
rate of unscheduled payments on securities purchased at a discount may result in
a lower yield (and total return) to a Fund than was anticipated at the time the
securities were purchased. A Fund's reinvestment of unscheduled prepayments may
be made at rates higher or lower than the rate payable on such security, thus
affecting the return realized by the Fund.
Under normal market conditions, the Fixed Income Fund II will maintain an
option-adjusted duration in the range of plus or minus 15% of the duration of
the Lehman Government/Corporate Index. Duration of an individual portfolio
security is a measure of the security's price sensitivity taking into account
expected cash flow and prepayments under a wide range of interest rate
scenarios. In computing the duration of its portfolio, a Fund will have to
estimate the duration of obligations that are subject to prepayment or
redemption by the issuer taking into account the influence of interest rates on
prepayments and coupon flows. Each Fund may use various techniques to shorten or
lengthen the option-adjusted duration of its portfolio, including the
acquisition of debt obligations at a premium or discount, and the use of
mortgage swaps and interest rate swaps, caps, floors and collars.
Below Investment Grade Securities. The Diversified Income Portfolio may make a
variety of investments, including investment in long-term, intermediate-term
and short-term senior and subordinated corporate debt and other fixed income
obligations. Such securities may be unrated or rated in the non-investment grade
rating categories of Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&Ps") or another rating
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organization. The Fixed Income Portfolio may also invest, to a much more limited
extent, in non-investment grade fixed income securities rated BB or B by S&Ps
and Ba or B by Moody's. Bonds rated BB or below by Standard & Poor's or Ba or
below by Moody's (or comparable rated and unrated securities) are commonly
referred to as "junk bonds" and are considered speculative; the ability of their
issuers to make principal and interest payments may be questionable. In some
cases, such bonds may be highly speculative, have poor prospects for reaching
investment grade standing and be in default. As a result, investment in such
bonds will entail greater risks than those associated with investment grade
bonds (i.e., bonds rated AAA, AA, A or BBB by Standard & Poor's or Aaa, Aa, A or
Baa by Moody's). Analysis of the creditworthiness of issuers of high yield
securities may be more complex than for issuers of higher quality debt
securities, and the ability of a Portfolio to achieve its investment objective
may, to the extent of its investments in high yield securities, be more
dependent upon such creditworthiness analysis than would be the case if the
Portfolio were investing in higher quality securities.
The amount of high yield, fixed income securities proliferated in the
1980s and early 1990s as a result of increased merger and acquisition and
leveraged buyout activity. Such securities are also issued by less-established
corporations desiring to expand. Risks associated with acquiring the securities
of such issuers generally are greater than is the case with higher rated
securities because such issuers are often less creditworthy companies or are
highly leveraged and generally less able than more established or less leveraged
entities to make scheduled payments of principal and interest.
The market values of high yield, fixed income securities tends to reflect
individual corporate developments to a greater extent than do those of higher
rated securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of such high yield securities may not be able to make
use of more traditional methods of financing and their ability to service debt
obligations may be more adversely affected than issuers of higher rated
securities by economic downturns, specific corporate developments or the
issuers' inability to meet specific projected business forecasts. These
non-investment grade securities also tend to be more sensitive to economic
conditions than higher-rated securities. Negative publicity about the high yield
bond market and investor perceptions regarding lower rated securities, whether
or not based on the Portfolios' fundamental analysis, may depress the prices for
such securities.
Since investors generally perceive that there are greater risks associated
with non-investment grade securities of the type in which the Portfolios invest,
the yields and prices of such securities may tend to fluctuate more than those
for higher rated securities. In the lower quality segments of the fixed-income
securities market, changes in perceptions of issuers' creditworthiness tend to
occur more frequently and in a more pronounced manner than do changes in higher
quality segments of the fixed-income securities market, resulting in greater
yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a Fund's net asset value.
The risk of loss from default for the holders of high yield, fixed-income
securities is significantly greater than is the case for holders of other debt
securities because such high yield, fixed-income securities are generally
unsecured and are often subordinated to the rights of other creditors of the
issuers of such securities. The Diversified Income Portfolio may be required to
liquidate other portfolio securities in order to enable certain of its interest
holders to satisfy their annual distribution obligations in respect of accrued
interest income on securities which are subsequently written off, even though
the Diversified Income Portfolio has not received any cash payments of such
interest.
The secondary market for high yield, fixed-income securities is dominated
by institutional investors, including mutual fund portfolios, insurance
companies and other financial institutions. Accordingly, the secondary market
for such securities is not as liquid as and is more volatile than the secondary
market for higher-rated securities. In addition, the trading volume for high
yield, fixed-income securities is generally lower than that of higher rated
securities and the secondary market for high yield, fixed-income securities
could contract under adverse market or economic conditions independent of any
specific adverse changes in the condition of a particular issuer. These factors
may have an adverse effect on the Portfolios' ability to dispose of particular
portfolio investments. Prices realized upon the sale of such lower rated or
unrated securities, under these circumstances, may be less than the prices used
in calculating a Portfolio's net asset value. A less liquid secondary market
also may make it more difficult for either Portfolio to obtain
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precise valuations of the high yield securities in its portfolio.
Proposed federal legislation could adversely affect the secondary market
for high yield securities and the financial condition of issuers of these
securities. The form of any proposed legislation and the probability of such
legislation being enacted is uncertain.
Non-investment grade or high yield, fixed-income securities also present
risks based on payment expectations. High yield, fixed-income securities
frequently contain "call" or buy-back features which permit the issuer to call
or repurchase the security from its holder. If an issuer exercises such a "call
option" and redeems the security, a Portfolio may have to replace such security
with a lower yielding security, resulting in a decreased return for investors.
In addition, if the Diversified Income Portfolio experiences unexpected net
redemptions of its shares, it may be forced to sell its higher rated securities,
resulting in a decline in the overall credit quality of the Diversified Income
Portfolio's portfolio and increasing the exposure of the Diversified Income
Portfolio to the risks of high yield securities. The Diversified Income
Portfolio and Fixed Income Portfolio may also incur additional expenses to the
extent that either is required to seek recovery upon a default in the payment of
principal or interest on a portfolio security.
Credit ratings issued by credit rating agencies are designed to evaluate
the safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality. Investments in non-investment grade
and comparable unrated obligations will be more dependent on the Adviser's
credit analysis than would be the case with investments in investment-grade debt
obligations. The Adviser employs its own credit research and analysis, which
includes a study of existing debt, capital structure, ability to service debt
and to pay dividends, the issuer's sensitivity to economic conditions, its
operating history and the current trend of earnings. The Adviser continually
monitors the investments in each Portfolio's portfolio and evaluates whether to
dispose of or to retain non-investment grade and comparable unrated securities
whose credit ratings or credit quality may have changed.
Investing in Securities of Emerging Market Countries. Investing in the
securities of emerging market countries involves considerations and potential
risks not typically associated with investing in the securities of U.S. issuers
whose securities are principally traded in the United States. These risks may be
related to (i) restrictions on foreign investment and repatriation of capital;
(ii) differences in size, liquidity and volatility of, and the degree and manner
of regulation of, the securities markets of the Asian countries compared to the
U.S. securities markets; (iii) economic, political and social factors; and (iv)
foreign exchange matters such as fluctuations in exchange rates between the U.S.
dollar and the currencies in which a Fund's portfolio securities are quoted or
denominated, exchange control regulations and costs associated with currency
exchange. A Fund's purchase and sale of portfolio securities in certain emerging
market countries may be constrained by limitations as to daily changes in the
prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. In certain cases, such
limitations may be computed based upon the aggregate trading by or holdings of
the Funds, the Adviser and its affiliates and their respective clients and other
service providers. The Fund may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached. These
limitations may have a negative impact on the Fund's performance and may
adversely affect the liquidity of the Fund's investments to the extent that it
invests in emerging market countries.
The Fixed Income Portfolio may invest up to 10% of its total assets in
issuers located in emerging markets generally, with a limit of 3% of total
assets invested in issuers located in any one emerging market country. The
Diversified Income Portfolio limits its investments in securities of issuers
located in any one developed country (excluding the U.S.) to 15% of its total
assets and limits its investments in securities of issuers located in any one
emerging market country to 7% of its total assets. These limitations do not
apply to investments denominated or quoted in the European Monetary Unit.
Investment and Repatriation Restrictions. Foreign investment in the securities
markets of several emerging market countries is restricted or controlled to
varying degrees. These restrictions may limit a Portfolio's investment in
certain emerging market countries, require governmental approval prior to
investments by foreign persons or limit investment by foreign persons to only a
specified percentage of an issuer's outstanding securities or a specific class
of securities which may have less advantageous terms (including price) than
securities of such company
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available for purchase by nationals. In certain countries, a Portfolio may be
limited by government regulation or a company's charter to a maximum percentage
of equity ownership in any one company. Such restrictions may affect the market
price, liquidity and rights of securities that may be purchased by the
Portfolio. From time to time, the Adviser may determine that investment and
repatriation restrictions in certain emerging market countries negate the
advantages of investing in such countries. Neither Portfolio is required to
invest in any emerging market country.
In addition, certain countries may restrict or prohibit investment
opportunities in issuers or industries deemed important to national interests.
The Adviser may determine from time to time to invest in the securities of
emerging market countries which may impose restrictions on foreign investment
and repatriation that cannot currently be predicted. Due to restrictions on
direct investment in equity securities in certain emerging market countries,
such as Taiwan, a Portfolio may invest only through investment funds in such
emerging market countries.
The repatriation of both investment income and capital from several
emerging market countries is subject to restrictions such as the need for
certain governmental consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operation of the Portfolios to the extent that they invest in
emerging market countries.
Market Characteristics. All of the securities markets of emerging market
countries have substantially less volume than the New York Stock Exchange
("NYSE"). Equity securities of most emerging market companies are generally less
liquid and subject to greater price volatility than equity securities of U.S.
companies of comparable size. Some of the stock exchanges in the emerging market
countries are in the earliest stages of their development.
Certain of the securities markets of emerging market countries are marked
by high concentrations of market capitalization and trading volume in a small
number of issuers representing a limited number of industries, as well as a high
concentration of ownership of such securities by a limited number of investors.
Even the market for relatively widely traded securities in the emerging markets
may not be able to absorb, without price disruptions, a significant increase in
trading volume or trades of a size customarily undertaken by institutional
investors in volume or trades of a size customarily undertaken by institutional
investors in the United States. Additionally, market making and arbitrage
activities are generally less extensive in such markets, which may contribute to
increased volatility and reduced liquidity of such markets. Accordingly, each of
these markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. The less liquid the market, the
more difficult it may be for a Fund to accurately price its portfolio securities
or to dispose of such securities at the times determined by the Adviser to be
appropriate. The risks associated with the liquidity of a market may be
particularly acute in situations in which a Fund's operations require cash, such
as the need to meet redemption requests for its shares, to pay dividends and
other distributions and to pay its expenses. To the extent that any emerging
market country experiences rapid increases in its money supply and investment in
equity securities is made for speculative purposes, the equity securities traded
in any such country may trade at price-earnings ratios higher than those of
comparable companies trading on securities markets in the United States. Such
price-earnings ratios may not be sustainable.
Settlement procedures in emerging market countries are less developed and
reliable than those in the United States and in other developed markets, and a
Fund may experience settlement delays or other material difficulties. In
addition, significant delays are common in registering transfers of securities,
and a Portfolio may be unable to sell such securities until the registration
process is completed and may experience delays in receipt of dividends and other
entitlements.
Brokerage commissions and other transactions costs on securities exchanges
in emerging market countries are generally higher than in the United States.
There is also less government supervision and regulation of foreign securities
exchanges, brokers and listed companies in emerging market countries than exists
in the United States. Brokers in emerging market countries may not be as well
capitalized as those in the United States, so that they are more susceptible to
financial failure in times of market, political or economic stress. In addition,
existing laws and regulations are often inconsistently applied. As legal systems
in emerging market countries develop, foreign investors may be adversely
affected by new or amended laws and regulations. In circumstances where adequate
laws exist, it may not be possible to obtain swift and equitable enforcement of
the law.
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Financial Information and Standards. Issuers in emerging market countries
generally are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of an emerging market company may not reflect its financial position
or results of operations in the same manner as financial statements for U.S.
companies. Substantially less information may be publicly available about
issuers in emerging market countries than is available about issuers in the
United States.
Economic, Political and Social Factors. Many emerging market countries may be
subject to a greater degree of economic, political and social instability than
is the case in the United States and Western European countries. Such
instability may result from, among other things: (i) authoritarian governments
or military involvement in political and economic decision-making, including
changes or attempted changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved economic, political and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection and
conflict. Such economic, political and social instability could significantly
disrupt financial markets of emerging market countries and adversely affect the
value of a Portfolio's assets so invested.
Few emerging market countries have fully democratic governments. Some
governments in the region are authoritarian in nature or are influenced by armed
forces which have been used to control civil unrest. During the course of the
last 25 years, governments of certain emerging market countries have been
installed or removed as a result of military coups, while governments in other
emerging market countries have periodically used force to suppress civil
dissent. Disparities of wealth, the pace and success of democratization, and
ethnic, religions and racial disaffection, among other factors, have also led to
social unrest, violence and/or labor unrest in some emerging market countries.
Several emerging market countries have or in the past have had hostile
relationships with neighboring nations or have experienced internal
insurrections.
The economies of most emerging market countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Union. The enactment by the United States
or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the emerging securities markets. In addition, the economies of some
emerging market countries are vulnerable to weakness in world prices for their
commodity exports.
There may be the possibility of expropriations, confiscatory taxation,
political, economic or social instability or diplomatic developments which would
adversely affect assets of a Portfolio held in emerging market or other foreign
countries. Governments in certain emerging market countries participate to a
significant degree, through ownership interests or regulation, in their
respective economies. Actions by these governments could have a significant
adverse effect on market prices of securities and payment of dividends.
Money Market Instruments and Repurchase Agreements. Money market instruments
include short-term U.S. and foreign (except the Fixed Income Fund II and
Controlled Maturity Fund) Government securities, commercial paper (promissory
notes issued by corporations to finance their short-term credit needs),
negotiable certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances and repurchase agreements.
U.S. Government securities include securities which are direct obligations
of the U.S. Government backed by the full faith and credit of the United States
and securities issued by agencies and instrumentalities of the U.S. Government
which may be guaranteed by the U.S. Treasury or supported by the issuer's right
to borrow from the U.S. Treasury or may be backed by the credit of the federal
agency or instrumentality itself. Agencies and instrumentalities of the U.S.
Government include, but are not limited to, Federal Land Banks, the Federal Farm
Credit Bank, the Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks and the Federal National Mortgage Association.
The Diversified Income Portfolio may invest in commercial paper rated
"P-1" or "P-2" by Moody's, "A- 1" or "A-2" by S&P, Duff-1 or Duff-2 by Duff &
Phelps ("Duff"), or in commercial paper that is unrated. Investments in
commercial paper by the Fixed Income Portfolio, Fixed Income Fund II and
Securitized Fund will be rated P-1 by Moody's or A-1 by S&P or Duff-1 by Duff,
which are the highest ratings assigned by these rating services (even if rated
lower by one or more of the other agencies), or which, if not rated or rated
lower by one or more of the agencies and not rated by the other agency or
agencies,
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are judged by the Adviser to be of equivalent quality to the securities so
rated.
A repurchase agreement is an agreement under which a Fund acquires money
market instruments (generally U.S. Government securities) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed-upon price
and date (normally the next business day). The resale price reflects an
agreed-upon interest rate effective for the period the instruments are held by
the Fund and is unrelated to the interest rate on the instruments. The
instruments acquired by a Fund (including accrued interest) must have an
aggregate market value in excess of the resale price and will be held by the
Fund's custodian bank until they are repurchased. In evaluating whether to enter
into a repurchase agreement, the Adviser will carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Board of Trustees of the Trust or the Portfolio Trust, as the case may be.
The use of repurchase agreements involves certain risks. For example, if
the seller defaults on its obligation to repurchase the instruments acquired by
a Fund at a time when their market value has declined, the Fund may incur a
loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by a Fund are collateral for a loan by the Fund and
therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that a Fund may not be able to substantiate its interest in the
instruments it acquires. While the Trustees acknowledge these risks, it is
expected that they can be controlled through careful documentation and
monitoring.
Structured or Hybrid Notes. As more fully described in the Prospectus, each Fund
may invest in structured or hybrid notes. It is expected that not more than 5%
of each Fund's net assets, except for the Diversified Income Portfolio, will be
at risk as a result of such investments. The Diversified Income Portfolio places
no limit on investments in structured or hybrid notes. In addition to the risks
associated with a direct investment in the benchmark asset, investments in
structured and hybrid notes involve the risk that the issuer or counterparty to
the obligation will fail to perform its contractual obligations. Certain
structured or hybrid notes may also be leveraged to the extent that the
magnitude of any change in the interest rate or principal payable on the
benchmark asset is a multiple of the change in the reference price. Leverage
enhances the price volatility of the security and, therefore, a Fund's net asset
value. Further, certain structured or hybrid notes may be illiquid for purposes
of the Funds' limitations on investments in illiquid securities.
Mortgage-Related Obligations. Some of the characteristics of mortgage-related
obligations and the issuers or guarantors of such securities are described
below.
Life of Mortgage-Related Obligations. The average life of mortgage-related
obligations is likely to be substantially less than the stated maturities of the
mortgages in the mortgage pools underlying such securities. Prepayments or
refinancing of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal invested long before the
maturity of the mortgages in the pool.
As prepayment rates of individual mortgage pools will vary widely, it is
not possible to predict accurately the average life of a particular issue of
mortgage-related obligations. However, with respect to GNMA Certificates,
statistics published by the FHA are normally used as an indicator of the
expected average life of an issue. The actual life of a particular issue of GNMA
Certificates, however, will depend on the coupon rate of the financing.
GNMA Certificates. The Government National Mortgage Association ("GNMA") was
established in 1968 when the Federal National Mortgage Association ("FNMA") was
separated into two organizations, GNMA and FNMA. GNMA is a wholly-owned
government corporation within the Department of Housing and Urban Development.
GNMA developed the first mortgage-backed pass-through instruments in 1970 for
Farmers Home Administration-FHMA-insured, Federal Housing
Administration-FHA-insured and for Veterans Administration-or VA-guaranteed
mortgages ("government mortgages").
GNMA purchases government mortgages and occasionally conventional
mortgages to support the housing market. GNMA is known primarily, however, for
its role as guarantor of pass-through securities collateralized by government
mortgages. Under the GNMA securities guarantee program, government mortgages
that are pooled must be less than one year old by the date GNMA issues its
commitment. Loans in a single pool must be of the same type in terms of interest
rate and maturity. The minimum size of a pool is $1 million for single-family
mortgages and $500,000 for manufactured housing and project loans.
Under the GNMA II program, loans with different interest rates can be
included in a single pool and mortgages originated by more than one lender can
be assembled in a pool. In addition, loans made by a
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single lender can be packaged in a custom pool (a pool containing loans with
specific characteristics or requirements).
GNMA Guarantee. The National Housing Act authorizes GNMA to guarantee the timely
payment of principal of and interest on securities backed by a pool of mortgages
insured by FHA or FHMA, or guaranteed by VA. The GNMA guarantee is backed by the
full faith and credit of the United States. GNMA is also empowered to borrow
without limitation from the U.S. Treasury if necessary to make any payments
required under its guarantee.
Yield Characteristics of GNMA Certificates. The coupon rate of interest on GNMA
Certificates is lower than the interest rate paid on the VA-guaranteed,
FHMA-insured or FHA-insured mortgages underlying the Certificates, but only by
the amount of the fees paid to GNMA and the issuer. For the most common type of
mortgage pool, containing single-family dwelling mortgages, GNMA receives an
annual fee of 0.06% of the outstanding principal for providing its guarantee,
and the issuer is paid an annual fee of 0.44% for assembling the mortgage pool
and for passing through monthly payments of interest and principal to GNMA
Certificate holders.
The coupon rate by itself, however, does not indicate the yield which will
be earned on the GNMA Certificates for several reasons. First, GNMA Certificates
may be issued at a premium or discount, rather than at par, and, after issuance,
GNMA Certificates may trade in the secondary market at a premium or discount.
Second, interest is paid monthly, rather than semi-annually as with traditional
bonds. Monthly compounding has the effect of raising the effective yield earned
on GNMA Certificates. Finally, the actual yield of each GNMA Certificate is
influenced by the prepayment experience of the mortgage pool underlying the GNMA
Certificate. If mortgagors prepay their mortgages, the principal returned to
GNMA Certificate holders may be reinvested at higher or lower rates.
Market for GNMA Certificates. Since the inception of the GNMA mortgage-backed
securities program in 1970, the amount of GNMA Certificates outstanding has
grown rapidly. The size of the market and the active participation in the
secondary market by securities dealers and many types of investors make the GNMA
Certificates a highly liquid instrument. Prices of GNMA Certificates are readily
available from securities dealers and depend on, among other things, the level
of market rates, the GNMA Certificate's coupon rate and the prepayment
experience of the pools of mortgages backing each GNMA Certificate.
FHLMC Participation Certificates. The Federal Home Loan Mortgage Corporation
("FHLMC") was created by the Emergency Home Finance Act of 1970. It is a private
corporation, initially capitalized by the Federal Home Loan Bank System, charged
with supporting the mortgage lending activities of savings and loan associations
by providing an active secondary market for conventional mortgages. To finance
its mortgage purchases, FHLMC issues FHLMC Participation Certificates and
Collateralized Mortgage Obligations ("CMOs").
Participation Certificates represent an undivided interest in a pool of
mortgage loans. FHLMC purchases whole loans or participations on 30-year and
15-year fixed-rate mortgages, adjustable-rate mortgages ("ARMs") and home
improvement loans. Under certain programs, it will also purchase FHA and VA
mortgages.
Loans pooled for FHLMC must have a minimum coupon rate equal to the
Participation Certificate rate specified at delivery, plus a required spread for
the corporation and a minimum servicing fee, generally 0.375% (37.5 basis
points). The maximum coupon rate on loans is 2% (200 basis points) in excess of
the minimum eligible coupon rate for Participation Certificates. FHLMC requires
a minimum commitment of $1 million in mortgages but imposes no maximum amount.
Negotiated deals require a minimum commitment of $10 million. FHLMC guarantees
timely payment of the interest and the ultimate payment of principal of its
Participation Certificates. This guarantee is backed by reserves set aside to
protect against losses due to default. The FHLMC CMO is divided into varying
maturities with prepayment set specifically for holders of the shorter term
securities. The CMO is designed to respond to investor concerns about early
repayment of mortgages.
FHLMC's CMOs are general obligations, and FHLMC will be required to use
its general funds to make principal and interest payments on CMOs if payments
generated by the underlying pool of mortgages are insufficient to pay principal
and interest on the CMO.
A CMO is a cash-flow bond in which mortgage payments from underlying
mortgage pools pay principal and interest to CMO bondholders. The CMO is
structured to address two major shortcomings associated with traditional
pass-through securities: payment frequency and prepayment risk. Traditional
pass-through securities pay interest and amortized principal on a monthly basis
whereas CMOs normally pay principal and interest semi-annually. In addition,
mortgage-backed securities carry the risk that individual mortgagors in the
mortgage pool may
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exercise their prepayment privileges, leading to irregular cash flow and
uncertain average lives, durations and yields.
A typical CMO structure contains four tranches, which are generally
referred to as classes A, B, C and Z. Each tranche is identified by its coupon
and maturity. The first three classes are usually current interest-bearing bonds
paying interest on a quarterly or semi-annual basis, while the fourth, Class Z,
is an accrual bond. Amortized principal payments and prepayments from the
underlying mortgage collateral redeem principal of the CMO sequentially;
payments from the mortgages first redeem principal on the Class A bonds. When
principal of the Class A bonds has been redeemed, the payments then redeem
principal on the Class B bonds. This pattern of using principal payments to
redeem each bond sequentially continues until the Class C bonds have been
retired. At this point, Class Z bonds begin paying interest and amortized
principal on their accrued value.
The final tranche of a CMO is usually a deferred interest bond, commonly
referred to as the Z bond. This bond accrues interest at its coupon rate but
does not pay this interest until all previous tranches have been fully retired.
While earlier classes remain outstanding, interest accrued on the Z bond is
compounded and added to the outstanding principal. The deferred interest period
ends when all previous tranches are retired, at which point the Z bond pays
periodic interest and principal until it matures. The Adviser would purchase a Z
bond for the Fund if it expected interest rates to decline.
FNMA Securities. FNMA was created by the National Housing Act of 1938. In 1968,
the agency was separated into two organizations, GNMA to support a secondary
market for government mortgages and FNMA to act as a private corporation
supporting the housing market.
FNMA pools may contain fixed-rate conventional loans on one-to-four-family
properties. Seasoned FHA and VA loans, as well as conventional growing equity
mortgages, are eligible for separate pools. FNMA will consider other types of
loans for securities pooling on a negotiated basis. A single pool may include
mortgages with different loan-to-value ratios and interest rates, though rates
may not vary beyond two percentage points.
Privately-Issued Mortgage Loan Pools. Savings associations, commercial banks and
investment bankers issue pass-through securities secured by a pool of mortgages.
Generally, only conventional mortgages on single-family properties are
included in private issues, though seasoned loans and variable rate mortgages
are sometimes included. Private placements allow purchasers to negotiate terms
of transactions. Maximum amounts for individual loans may exceed the loan limit
set for government agency purchases. Pool size may vary, but the minimum is
usually $20 million for public offerings and $10 million for private placements.
Privately-issued mortgage-related obligations do not carry government or
quasi-government guarantees. Rather, mortgage pool insurance generally is used
to insure against credit losses that may occur in the mortgage pool. Pool
insurance protects against credit losses to the extent of the coverage in force.
Each mortgage, regardless of original loan-to-value ratio, is insured to 100% of
principal, interest and other expenses, to a total aggregate loss limit stated
on the policy. The aggregate loss limit of the policy generally is 5% to 7% of
the original aggregate principal of the mortgages included in the pool.
In addition to the insurance coverage to protect against defaults on the
underlying mortgages, mortgage-backed securities can be protected against the
nonperformance or poor performance of servicers. Performance bonding of
obligations such as those of the servicers under the origination, servicing or
other contractual agreement will protect the value of the pool of insured
mortgages and enhance the marketability.
The rating received by a mortgage security will be a major factor in its
marketability. For public issues, a rating is always required, but it may be
optional for private placements depending on the demands of the marketplace and
investors. Before rating an issue, a rating agency such as Standard & Poor's or
Moody's will consider several factors, including: the creditworthiness of the
issuer; the issuer's track record as an originator and servicer; the type, term
and characteristics of the mortgages, as well as loan-to-value ratio and loan
amounts; the insurer and the level of mortgage insurance and hazard insurance
provided. Where an equity reserve account or letter of credit is offered, the
rating agency will also examine the adequacy of the reserve and the strength of
the issuer of the letter of credit.
Strategic Transactions. Each Fund may, but is not required to, utilize various
other investment strategies as described below to seek to hedge various market
risks (such as interest rates, currency exchange rates, and broad or specific
fixed income market movements), to manage the effective maturity or duration of
fixed-income securities, or to seek to enhance potential gain. Such strategies
are generally
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accepted as part of modern portfolio management and are regularly utilized by
many mutual funds and other institutional investors. Techniques and instruments
used by the Funds may change over time as new instruments and strategies are
developed or regulatory changes occur.
In the course of pursuing its investment objectives, each Fund may
purchase and sell (write) exchange-listed and OTC put and call options on
securities, equity and fixed-income indices and other financial instruments;
purchase and sell financial futures contracts and options thereon; enter into
various interest rate transactions such as swaps, caps, floors or collars; and
enter into various currency transactions such as currency forward contracts,
cross-currency future contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (the Fixed Income Portfolio,
Diversified Income Portfolio and Securitized Fund only) (collectively, all the
above are called "Strategic Transactions"). Strategic Transactions may be used
to seek to protect against possible changes in the market value of securities
held in or to be purchased for the Funds' portfolios resulting from general
market, interest rate or currency exchange rate fluctuations, to seek to protect
the Funds' unrealized gains in the value of their portfolio securities, to
facilitate the sale of such securities for investment purposes, to seek to
manage effective maturity or duration, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. In addition to the hedging transactions referred to in
the preceding sentence, Strategic Transactions may also be used to enhance
potential gain in circumstances where hedging is not involved although each Fund
will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for such purposes. The Fixed Income Portfolio,
Diversified Income Portfolio, Fixed Income Fund II, Short-Term Asset Reserve
Portfolio, Controlled Maturity Fund and Securitized Fund will attempt to limit
net loss exposure from Strategic Transaction entered into for non-hedging
purposes to 3%, 3%, 1%, 1%, 1% and 3% respectively, of net assets at any one
time. To the extent necessary, each Fund will close out transactions in order to
comply with this limitation. (Transactions such as writing covered call options
are considered to involve hedging for the purposes of this limitation.) In
calculating each Fund's net loss exposure from such Strategic Transactions, an
unrealized gain from a particular Strategic Transaction position would be netted
against an unrealized loss from a related Strategic Transaction position. For
example, if the Adviser believes that short-term interest rates as indicated in
the forward yield curve are too high, a Fund may take a short position in a
near-term Eurodollar futures contract and a long position in a longer-dated
Eurodollar futures contract. Under such circumstances, any unrealized loss in
the near-term Eurodollar futures position would be netted against any unrealized
gain in the longer-dated Eurodollar futures position (and vice versa) for
purposes of calculating the Fund's net loss exposure. The ability of a Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market and interest rate movements, which cannot be
assured. Each Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments. The Funds' activities
involving Strategic Transactions may be limited in order to allow the applicable
Fund to satisfy the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated investment
company.
Risks of Strategic Transactions. Strategic Transactions have risks associated
with them including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market or
interest rate movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. The
writing of put and call options may result in losses to a Fund, force the
purchase or sale, respectively, of portfolio securities at inopportune times or
for prices higher than (in the case of purchases due to the exercise of put
options) or lower than (in the case of sales due to the exercise of call
options) current market values, limit the amount of appreciation a Fund can
realize on its investments or cause a Fund to hold a security it might otherwise
sell or sell a security it might otherwise hold. The use of currency
transactions can result in a Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency (the
Fixed Income Portfolio , Diversified Income Portfolio and Securitized Fund
only). The use of options and futures transactions entails certain other risks.
In particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. The writing of options
could significantly increase the Fund's portfolio turnover rate and, therefore,
associated brokerage commissions or spreads. In addition, futures and options
markets may not be liquid in all circumstances and certain OTC options may have
no markets. As a result, in certain markets, a Fund might not be able to close
out a transaction without incurring substantial losses, if at all. Although the
use of futures and options transactions for hedging should tend to minimize the
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risk of loss due to a decline in the value of the hedged position, at the same
time, in certain circumstances, they tend to limit any potential gain which
might result from an increase in value of such position. The loss incurred by a
Fund in writing options on futures and entering into futures transactions is
potentially unlimited; however, as described above, each Fund will attempt to
limit its net loss exposure resulting from Strategic Transactions entered into
for non-hedging purposes. Futures markets are highly volatile and the use of
futures may increase the volatility of a Fund's net asset value. Finally,
entering into futures contracts would create a greater ongoing potential
financial risk than would purchases of options where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value and the net result may be less
favorable than if the Strategic Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of a Fund's assets in special accounts, as described
below under "Use of Segregated Accounts."
A put option gives the purchaser of the option, in consideration for the
payment of a premium, the right to sell, and the writer the obligation to buy
(if the option is exercised), the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, a Fund's
purchase of a put option on a security might be designed to protect its holdings
in the underlying instrument (or, in some cases, a similar instrument) against a
substantial decline in the market value by giving the Fund the right to sell
such instrument at the option exercise price. A call option, in consideration
for the payment of a premium, gives the purchaser of the option the right to
buy, and the seller the obligation to sell (if the option is exercised), the
underlying instrument at the exercise price. A Fund may purchase a call option
on a security, futures contract, index, currency or other instrument to seek to
protect the Fund against an increase in the price of the underlying instrument
that it intends to purchase in the future by fixing the price at which it may
purchase such instrument. An American style put or call option may be exercised
at any time during the option period while a European style put or call option
may be exercised only upon expiration or during a fixed period prior thereto.
Each Fund is authorized to purchase and sell exchange listed options and OTC
options. Exchange listed options are issued by a regulated intermediary such as
the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses the
OCC as an example, but is also applicable to other financial intermediaries.
With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options and Eurodollar instruments
are cash settled for the net amount, if any, by which the option is in-the-money
(i.e., where the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price of
the option) at the time the option is exercised. Frequently, rather than taking
or making delivery of the underlying instrument through the process of
exercising the option, listed options are closed by entering into offsetting
purchase or sale transactions that do not result in ownership of the new option.
A Fund's ability to close out its position as a purchaser or seller of an
exchange listed put or call option is dependent, in part, upon the liquidity of
the option market. There is no assurance that a liquid option market on an
exchange will exist. In the event that the relevant market for an option on an
exchange ceases to exist, outstanding options on that exchange would generally
continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct agreement with
the Counterparty. In contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price, premium,
guarantees and security, are set by negotiation of the parties. A Fund will
generally sell (write) OTC options that are subject to a buy-back provision
permitting the Fund to require the Counterparty to sell the option back to the
Fund at a formula price within seven days. OTC options purchased by a Fund, and
portfolio securities "covering" the amount of a Fund's obligation pursuant to an
OTC option sold by it (the cost of the sell-back plus the in-the-money amount,
if any) are subject to
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each Fund's restriction on illiquid securities, unless determined to be liquid
in accordance with procedures adopted by the Boards of Trustees. For OTC options
written with "primary dealers" pursuant to an agreement requiring a closing
purchase transaction at a formula price, the amount which is considered to be
illiquid may be calculated by reference to a formula price. The Funds expect
generally to enter into OTC options that have cash settlement provisions,
although they are not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make delivery of the security, currency or other instrument underlying an OTC
option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. A Fund will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers," or broker-dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from S&P or Moody's or an equivalent
rating from any other nationally recognized statistical rating organization
("NRSRO") or the debt of which is determined to be of equivalent credit quality
by the Adviser.
If a Fund sells (writes) a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase the Fund's income. The sale (writing) of put options
can also provide income.
The Funds, except for the Short-Term Asset Reserve Portfolio, may purchase
and sell (write) call options on securities including U.S. Treasury and agency
securities, mortgage-backed securities, asset backed securities, foreign
sovereign debt (Fixed Income Portfolio, Diversified Income Portfolio and
Securitized Fund only) corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments that are traded on U.S. and
foreign securities exchanges and in the OTC markets, and on securities indices,
currencies (Fixed Income Portfolio, Diversified Income Portfolio and Securitized
Fund only) and futures contracts. The Short-Term Asset Reserve Portfolio may
purchase and sell call options on securities, including U.S. Treasury and agency
securities and Eurodollar instruments that are traded on U.S. and foreign
securities exchanges and in OTC markets, and on securities indices and futures
contracts. All calls sold by a Fund must be covered (i.e., the Fund must own the
securities or the futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding. In
addition, each Fund may cover a written call option or put option by entering
into an offsetting forward contract and/or by purchasing an offsetting option or
any other option which, by virtue of its exercise price or otherwise, reduces
the Fund's net exposure on its written option position. Even though the Fund
will receive the option premium to help offset any loss, the Fund may incur a
loss if the exercise price is below the market price for the security subject to
the call at the time of exercise. A call sold by a Fund also exposes the Fund
during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security or instrument and
may require the Fund to hold a security or instrument which it might otherwise
have sold.
A Fund may purchase and sell (write) put options on securities including
U.S. Treasury and agency securities, mortgage backed securities, asset backed
securities, foreign sovereign debt (Fixed Income Portfolio, Diversified Income
Portfolio and Securitized Fund only), corporate debt securities, equity
securities (including convertible securities) and Eurodollar instruments
(whether or not it holds the above securities in its portfolio), and on
securities indices, currencies and futures contracts. The Short-Term Asset
Reserve Portfolio may purchase and sell put options on securities including U.S.
Treasury and agency securities and Eurodollar instruments (whether or not it
holds the above securities in its portfolio), and on securities indices and
futures contracts. A Fund will not sell put options if, as a result, more than
50% of the Fund's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that a Fund
may be required to buy the underlying security at a price above the market
price.
Options on Securities Indices and Other Financial Indices. Each Fund may also
purchase and sell (write) call and put options on securities indices and other
financial indices. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement. For example, an option on an index gives the holder the right to
receive, upon exercise of the option, an amount
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of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the differential between
the closing price of the index and the exercise price of the option, which also
may be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount upon exercise
of the option. In addition to the methods described above, each Fund may cover
call options on a securities index by owning securities whose price changes are
expected to be similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities in its
portfolio.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures. Futures are
generally bought and sold on the commodities exchanges where they are listed and
involve payment of initial and variation margin as described below. All futures
contracts entered into by a Fund are traded on U.S. exchanges or boards of trade
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC") or on certain foreign exchanges.
The sale of futures contracts creates a firm obligation by a Fund, as
seller, to deliver to the buyer the specific type of financial instrument called
for in the contract at a specific future time for a specified price (or, with
respect to index futures and Eurodollar instruments, the net cash amount). The
purchase of futures contracts creates a corresponding obligation by a Fund, as
purchaser to purchase a financial instrument at a specific time and price.
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract and obligates the seller
to deliver such position, if the option is exercised.
A Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the
regulations of the CFTC relating to exclusions from regulation as a commodity
pool operator. Those regulations currently provide that a Fund may use commodity
futures and option positions (i) for bona fide hedging purposes without regard
to the percentage of assets committed to margin and option premiums, or (ii) for
other purposes permitted by the CFTC to the extent that the aggregate initial
margin and option premiums required to establish such non-hedging positions (net
of the amount that the positions were "in the money" at the time of purchase) do
not exceed 5% of the net asset value of a Fund's portfolio, after taking into
account unrealized profits and losses on such positions. Typically, maintaining
a futures contract or selling an option thereon requires the Fund to deposit,
with its custodian for the benefit of a futures commission merchant, or directly
with the futures commission merchant, as security for its obligations an amount
of cash or other specified assets (initial margin) which initially is typically
1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited directly with the futures commission merchant thereafter on a daily
basis as the value of the contract fluctuates. The purchase of an option on
financial futures involves payment of a premium for the option without any
further obligation on the part of the Fund. If a Fund exercises an option on a
futures contract it will be obligated to post initial margin (and potential
subsequent variation margin) for the resulting futures position just as it would
for any position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur. The segregation requirements with respect to futures
contracts and options thereon are described below.
Currency Transactions. The Fixed Income Portfolio, Diversified Income Portfolio
and Securitized Fund may engage in currency transactions with Counterparties to
seek to hedge the value of portfolio holdings denominated in particular
currencies against fluctuations in relative value or to enhance potential gain.
Currency transactions include currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional (agreed upon)
difference among two or more currencies and operates similarly to an interest
rate swap, which is described below. The Fixed Income Portfolio , Diversified
Income Portfolio and Securitized Fund may enter into OTC currency transactions
with Counterparties which have received, combined with any credit enhancements,
a long term debt rating of A by S&P or Moody's, respectively, or that have an
equivalent rating from a NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the Adviser.
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The Fixed Income Portfolio, Diversified Income Portfolio and Securitized
Fund's transactions in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will
generally be limited to hedging involving either specific transactions or
portfolio positions. See "Strategic Transactions." Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a Portfolio or a Fund, which will generally arise in connection
with the purchase or sale of its portfolio securities or the receipt of income
therefrom. Position hedging is entering into a currency transaction with respect
to portfolio security positions denominated or generally quoted in that
currency.
Each of the Fixed Income Portfolio, Diversified Income Portfolio and
Securitized Fund will not enter into a transaction to hedge currency exposure to
an extent greater, after netting all transactions intended wholly or partially
to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to non-hedging transactions or proxy hedging as
described below.
The Fixed Income Portfolio , Diversified Income Portfolio and Securitized
Fund may also cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value in relation
to other currencies to which the Fixed Income Portfolio, Diversified Income
Portfolio or Securitized Fund has or in which the Portfolio or Securitized Fund
expects to have portfolio exposure. For example, a Portfolio may hold a French
government bond and the Adviser may believe that French francs will deteriorate
against German marks. The Portfolio would sell French francs to reduce its
exposure to that currency and buy German marks. This strategy would be a hedge
against a decline in the value of French francs, although it would expose the
Portfolio to declines in the value of the German mark relative to the U.S.
dollar.
To seek to reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, the Fixed Income
Portfolio, Diversified Income Portfolio and Securitized Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the U.S. dollar.
Proxy hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which certain of a Fund's portfolio securities are or are expected
to be denominated, and to buy U.S. dollars. The amount of the contract would not
exceed the value of the portfolio securities denominated in linked currencies.
For example, if the Adviser considers that the Austrian schilling is linked to
the German mark, and a portfolio contains securities denominated in schillings
and the Adviser believes that the value of schillings will decline against the
U.S. dollar, the Adviser may enter into a contract to sell marks and buy
dollars. Proxy hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to the Fixed Income Portfolio , Diversified Income Portfolio or
Securitized Fund if the currency being hedged fluctuates in value to a degree or
in a direction that is not anticipated. Further, there is the risk that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Fixed Income Portfolio , Diversified
Income Portfolio or Securitized Fund is engaging in proxy hedging. If the Fixed
Income Portfolio, Diversified Income Portfolio or Securitized Fund enters into a
currency hedging transaction, it will comply with the asset segregation
requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fixed Income Portfolio , Diversified Income Portfolio and
Securitized Fund if they are unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges they have entered into to
be rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions including forward currency
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contracts (the Fixed Income Portfolio, Diversified Income Portfolio and
Securitized Fund only) and multiple interest rate transactions, structured notes
and any combination of futures, options, currency (the Fixed Income Portfolio,
Diversified Income Portfolio and Securitized Fund only) and interest rate
transactions ("component transactions"), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Funds to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Funds may enter are interest rate, currency (the Fixed Income Portfolio,
Diversified Income Portfolio and Securitized Fund only) and index swaps and the
purchase or sale of related caps, floors and collars. The Funds expect to enter
into these transactions primarily for hedging purposes, including, but not
limited to, preserving a return or spread on a particular investment or portion
of a Fund's portfolio, protecting against currency fluctuations (the Fixed
Income Portfolio, Diversified Income Portfolio and Securitized Fund only), as a
duration management technique or protecting against an increase in the price of
securities a Fund anticipates purchasing at a later date. Swaps, caps, floors
and collars may also be used to enhance potential gain in circumstances where
hedging is not involved although, as described above, each Fund will attempt to
limit its net loss exposure resulting from swaps, caps, floors and collars and
other Strategic Transactions entered into for such purposes. The Fixed Income
Portfolio, the Diversified Income Portfolio, the Fixed Income Fund II, the
Short-Term Asset Reserve Portfolio, the Controlled Maturity Fund and the
Securitized Fund will attempt to limit net loss exposure from Strategic
Transactions entered into for non-hedging purposes to not more than 3%, 3%, 1%,
1%, 1% and 3% respectively, of net assets.
A Fund will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest (i.e.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal). A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain rate of return within a predetermined range of
interest rates or values.
Each Fund will usually enter into swaps on a net basis (i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument) with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. A Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from an NRSRO or the Counterparty issues debt that is determined to be of
equivalent credit quality by the Adviser. If there is a default by the
Counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed. Swaps, caps, floors and collars are considered illiquid for purposes
of a Fund's policy regarding illiquid securities, unless it is determined, based
upon continuing review of the trading markets for the specific security, that
such security is liquid. The Boards of Trustees of the Portfolio Trust and the
Trust have adopted guidelines and delegated to the Adviser the daily function of
determining and monitoring the liquidity of swaps, caps, floors and collars. The
Boards of Trustees, however, retain oversight focusing on factors such as
valuation, liquidity and availability of information and are ultimately
responsible for such determinations. The Staff of the SEC currently takes the
position that swaps, caps, floors and collars are illiquid, and are subject to
each Fund's limitation on investing in illiquid securities.
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Eurodollar Contracts. Each Fund may make investments in Eurodollar contracts.
Eurodollar contracts are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LlBOR"),
although foreign currency-denominated contracts are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might
use Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income instruments are
linked.
Risks of Strategic Transactions Outside the United States. The Fixed Income
Portfolio, Diversified Income Portfolio and Securitized Fund may use strategic
transactions to seek to hedge against currency exchange rate risks. When
conducted outside the United States, Strategic Transactions may not be regulated
as rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) lesser availability than in the United States of data on which to make
trading decisions, (ii) delays in the Fixed Income Portfolio, Diversified Income
Portfolio and Securitized Fund's ability to act upon economic events occurring
in foreign markets during non-business hours in the United States, (iii) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, (iv) lower trading volume and liquidity,
and (v) other complex foreign political, legal and economic factors. At the same
time, Strategic Transactions may offer advantages such as trading in instruments
that are not currently traded in the United States or arbitrage possibilities
not available in the United States.
Use of Segregated Accounts. Each Fund will hold securities or other instruments
whose values are expected to offset its obligations under the Strategic
Transactions. Each Fund will cover Strategic Transactions as required by
interpretive positions of the SEC. A Fund will not enter into Strategic
Transactions that expose the Fund to an obligation to another party unless it
owns either (i) an offsetting position in securities or other options, futures
contracts or other instruments or (ii) cash, receivables or liquid securities
with a value sufficient to cover its potential obligations. A Fund may have to
comply with any applicable regulatory requirements for Strategic Transactions,
and if required, will set aside cash and other liquid assets on the Fund's
records or in a segregated account in the amount prescribed. If the market value
of these securities declines or the Fund's obligations on the underlying
Strategic Transaction increases, additional cash or liquid securities will be
segregated daily so that the aggregate market value of the segregated securities
is at least equal to the amount of the Fund's obligations on the underlying
Strategic Transactions. Segregated assets would not be sold while the Strategic
Transaction is outstanding, unless they are replaced with similar assets. As a
result, there is a possibility that segregation of a large percentage of a
Fund's assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
"When-Issued", "Delayed Delivery Securities" and "Forward Commitment"
Securities. The Fixed Income Portfolio, Fixed Income II and Controlled Maturity
Funds may invest up to 15% of their net assets in securities purchased on a
when-issued or delayed delivery basis. The Short-Term Asset Reserve Portfolio
may commit up to 10% of its net assets to purchase such securities. The
Securitized Fund may invest up to 25% of its net assets in securities purchased
on a when-issued basis, forward rolls and forward commitments. The Diversified
Income Portfolio places no limit on investments in when-issued and delayed
delivery securities. Delivery and payment for securities purchased on a
when-issued or delayed delivery basis will normally take place 15 to 45 days
after the date of the transaction. The payment obligation and interest rate on
the securities are fixed at the time that a Fund enters into the commitment, but
interest will not accrue to the Fund until delivery of and payment for the
securities. Although a Fund will only make commitments to purchase "when-issued"
and "delayed delivery" securities with the intention of actually acquiring the
securities, each Fund may sell the securities before the settlement date if
deemed advisable by the Adviser. The Short-Term Asset Reserve Fund may also,
with respect to up to 25% of its net assets, enter into contracts to purchase
securities for a fixed price at a future date beyond customary settlement time.
Unless a Fund has entered into an offsetting agreement to sell the
securities purchased on a when-issued or forward commitment basis, the Fund will
segregate, on its records or with its custodian, cash or liquid obligations with
a market value at least equal to the amount of the Fund's commitment . If the
market value of these securities declines, additional cash or securities will be
segregated daily so that the aggregate market value of the segregated securities
is at least equal to the amount of the Fund's commitment.
Securities purchased on a "when-issued", "delayed delivery" or "forward
commitment" basis
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may have a market value on delivery which is less than the amount paid by a
Fund. Changes in market value may be based upon the public's perception of the
creditworthiness of the issuer or changes in the level of interest rates.
Generally, the value of "when-issued", "delayed delivery" and "forward
commitment" securities will fluctuate inversely to changes in interest rates,
i.e., they will appreciate in value when interest rates fall and will depreciate
in value when interest rates rise.
Short-Term Debt Securities. For defensive or temporary purposes, each Fund or
Portfolio may invest in investment grade money market instruments and short-term
interest-bearing securities. Such securities may be used to invest uncommitted
cash balances, to maintain liquidity to meet shareholder redemptions, or to take
a defensive position against potential stock market declines. These investments
will include U.S. Government obligations and obligations issued or guaranteed by
any U.S. Government agencies or instrumentalities, instruments of U.S. and
foreign banks (including negotiable certificates of deposit, non-negotiable
fixed time deposits and bankers' acceptances), repurchase agreements, prime
commercial paper of U.S. and foreign companies, and debt securities that make
periodic interest payments at variable or floating rates.
Portfolio Turnover. It is not the policy of any of the Funds to purchase or sell
securities for trading purposes. However, each Fund places no restrictions on
portfolio turnover and it may sell any portfolio security without regard to the
period of time it has been held. A Fund may therefore generally change its
portfolio investments at any time in accordance with the Adviser's appraisal of
factors affecting any particular issuer or market, or the economy in general. A
rate of turnover of 100% would occur if the value of the lesser of purchases and
sales of portfolio securities for a particular year equaled the average monthly
value of portfolio securities owned during the year (excluding short-term
securities). A high rate of portfolio turnover (100% or more) involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by a Fund and thus indirectly by its shareholders. It may
also result in the realization of larger amounts of net short-term capital
gains, distributions of which are taxable to shareholders as ordinary income .
INVESTMENT RESTRICTIONS
The Funds and the Portfolios have adopted the following fundamental
policies. Each Fund's and Portfolio's fundamental policies cannot be changed
unless the change is approved by the "vote of a majority of the outstanding
voting securities" of the Fund or the Portfolio, as the case may be, which
phrase as used herein means the lesser of (i) 67% or more of the voting
securities of the Fund or the Portfolio present at a meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund or the Portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund or the Portfolio.
Standish Fixed Income Fund and Portfolio
As a matter of fundamental policy, the Fixed Income Portfolio (Fixed
Income Fund) may not:
1. Invest, with respect to at least 75% of its total assets, more than 5% in
the securities of any one issuer (other than the U.S. Government, its
agencies or instrumentalities) or acquire more than 10% of the outstanding
voting securities of any issuer.
2. Issue senior securities, borrow money or securities or pledge or mortgage
its assets, except that the Portfolio (Fixed Income Fund) may (a) borrow
money from banks as a temporary measure for extraordinary or emergency
purposes (but not for investment purposes) in an amount up to 15% of the
current value of its total assets, (b) enter into forward roll
transactions, and (c) pledge its assets to an extent not greater than 15%
of the current value of its total assets to secure such borrowings;
however, the Fixed Income Fund may not make any additional investments
while its outstanding bank borrowings exceed 5% of the current value of
its total assets.
3. Lend portfolio securities except that the Portfolio (i) may lend portfolio
securities in accordance with the Portfolio's investment policies up to 33
1/3% of the Portfolio's total assets taken at market value, (ii) enter
into repurchase agreements, and (iii) purchase all or a portion of an
issue of debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities, and except that the Fixed Income Fund may enter into
repurchase agreements with respect to 5% of the value of its net assets.
4. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to U.S.
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Government securities, including mortgage pass-through securities
(GNMAs).
5. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Portfolio
(Fund) may be deemed to be an underwriter under the Securities Act of
1933.
6. Purchase real estate or real estate mortgage loans, although the Portfolio
(Fund) may purchase marketable securities of companies which deal in real
estate, real estate mortgage loans or interests therein.
7. Purchase securities on margin (except that the Portfolio (Fund) may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities).
8. Purchase or sell commodities or commodity contracts except that the
Portfolio (Fund) may purchase and sell financial futures contracts and
options on financial futures contracts and engage in foreign currency
exchange transactions.
The following restrictions are not fundamental policies and may be changed
by the Trustees of the Portfolio Trust (Trust) without investor approval in
accordance with applicable laws, regulations or regulatory policy. The Portfolio
(Fund) may not:
A. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
B. Purchase securities of any other investment company except to the extent
permitted by the 1940 Act.
C. Invest more than 15% of its net assets in illiquid securities.
D. Invest more than 5% of its net assets in repurchase agreements (this
restriction is fundamental with respect to the Fixed Income Fund, but not
the Portfolio).
E. Purchase additional securities if the Portfolio's bank borrowings exceed
5% of its net assets. (This policy is fundamental with respect to the Fund
but not the Portfolio.)
Notwithstanding any fundamental or non fundamental policy, the Fixed
Income Fund may invest all of its assets (other than assets which are not
"investment securities" (as defined in the 1940 Act) or are excepted by the SEC)
in an open end management investment company with substantially the same
investment objective as the Fixed Income Fund.
Diversified Income Fund and Portfolio
As a matter of fundamental policy, the Diversified Income Portfolio
(Diversified Income Fund) may not:
1. Issue senior securities. For purposes of this restriction, borrowing money
in accordance with paragraph 3 below, making loans in accordance with
paragraph 7 below, the issuance of shares of beneficial interest in
multiple classes or series, the deferral of trustees' fees, the purchase
or sale of options, futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies or within the meaning of paragraph 5 below, are not
deemed to be senior securities.
2. Borrow money, except in amounts not to exceed 33 1/3% of the value of the
Portfolio's (Fund's) total assets (including the amount borrowed) taken at
market value (i) from banks for temporary or short-term purposes or for
the clearance of transactions, (ii) in connection with the redemption of
portfolio shares or to finance failed settlements of portfolio trades
without immediately liquidating portfolio securities or other assets,
(iii) in order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio securities or
assets and (iv) the Portfolio (Fund) may enter into reverse repurchase
agreements and forward roll transactions. For purposes of this investment
restriction, investments in short sales, futures contracts, options on
futures contracts, securities or indices and forward commitments shall not
constitute borrowing.
3. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Portfolio
(Fund) may be deemed to be an underwriter under the Securities Act of
1933.
4. Purchase or sell real estate except that the Portfolio (Fund) may (i)
acquire or lease office
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<PAGE>
space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in
securities that are secured by real estate or interests therein,
(iv) purchase and sell mortgage-related securities and (v) hold and
sell real estate acquired by the Portfolio (Fund) as a result of the
ownership of securities.
5. Purchase or sell commodities or commodity contracts, except the Portfolio
(Fund) may purchase and sell options on securities, securities indices and
currency, futures contracts on securities, securities indices and currency
and options on such futures, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies.
6. Make loans, except that the Portfolio (Fund) (1) may lend portfolio
securities in accordance with the Portfolio's (Fund's) investment policies
up to 33 1/3% of the Portfolio's (Fund's) total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase all or a
portion of an issue of debt securities, bank loan participation interests,
bank certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities.
7. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or
authorities or repurchase agreements collateralized by U.S. Government
securities and other investment companies), if: (a) such purchase would
cause more than 5% of the Portfolio's (Fund's) total assets taken at
market value to be invested in the securities of such issuer; or (b) such
purchase would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Portfolio (Fund).
8. Invest more than 25% of its total assets in the securities of one or more
issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or its agencies or
instrumentalities). For the purposes of this restriction, state and
municipal governments and their agencies, authorities and
instrumentalities are not deemed to be industries; telephone companies are
considered to be a separate industry from water, gas or electric
utilities; personal credit finance companies and business credit finance
companies are deemed to be separate industries; and wholly-owned finance
companies are considered to be in the industry of their parents if their
activities are primarily related to financing the activities of their
parents. This restriction does not apply to investments in municipal
securities which have been pre-refunded by the use of obligations of the
U.S. Government or any of its agencies or instrumentalities.
The following restrictions are not fundamental policies and may be
changed by the Trustees of the Portfolio Trust (Trust) without investor approval
in accordance with applicable laws, regulations or regulatory policy. The
Portfolio (Fund) may not:
a. Purchase securities on margin (except that the Portfolio (Fund) may
obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities).
b. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable
to protect or enhance the value of an existing investment.
c. Purchase the securities of any other investment company except to
the extent permitted by the 1940 Act.
d. Invest more than 15% of its net assets in securities which are
illiquid.
e. Purchase additional securities if the Portfolio's (Fund's)
borrowings exceed 5% of its net assets.
Notwithstanding any fundamental or non-fundamental policy, the Fund may
invest all of its assets (other than assets which are not "investment
securities" (as defined in the 1940 Act) or are excepted by the SEC) in an open
end investment company with substantially the same investment objective as the
Fund.
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<PAGE>
Standish Fixed Income Fund II
As a matter of fundamental policy, the Fixed Income Fund II may not:
1. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to U.S.
Government securities or mortgage-backed securities issued or guaranteed
as to principal or interest by the U.S. Government, its agencies or
instrumentalities.
2. Issue senior securities, except as permitted by paragraphs 3, 7 and 8
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in accordance
with the Fund's investment policies or within the meaning of paragraph 6
below, are not deemed to be senior securities.
3. Borrow money, except (i) from banks for temporary or short-term purposes
or for the clearance of transactions in amounts not to exceed 33 1/3% of
the value of the Fund's total assets (including the amount borrowed) taken
at market value, (ii) in connection with the redemption of Fund shares or
to finance failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; (iii) in order to
fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv) the Fund
may enter into reverse repurchase agreements and forward roll
transactions. For purposes of this investment restriction, investments in
short sales, futures contracts, options on futures contracts, securities
or indices and forward commitments shall not constitute borrowing.
4. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed to be an underwriter under the Securities Act of 1933.
5. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities
that are secured by real estate or interests therein, (iv) purchase and
sell mortgage-related securities and (v) hold and sell real estate
acquired by the Fund as a result of the ownership of securities.
6. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities).
7. Purchase or sell commodities or commodity contracts, except the Fund may
purchase and sell options on securities, securities indices and currency,
futures contracts on securities, securities indices and currency and
options on such futures, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.
8. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's
total assets taken at market value, (2) enter into repurchase agreements,
and (3) purchase all or a portion of an issue of debt securities, bank
loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase
is made upon the original issuance of the securities.
For purposes of the fundamental investment restriction (1) regarding
industry concentration, the Adviser generally classifies issuers by industry in
accordance with classifications set forth in the Directory of Companies Filing
Annual Reports With The Securities and Exchange Commission. In the absence of
such classification or if the Adviser determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Adviser may classify an issuer according to its own sources. For instance,
personal credit finance companies and business credit finance companies are
deemed to be separate industries and wholly-owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents.
The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:
A. Invest in the securities of an issuer for the purpose of exercising
control or management,
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<PAGE>
but it may do so where it is deemed advisable to protect or enhance
the value of an existing investment.
B. Purchase securities of any other investment company except to the extent
permitted by the 1940 Act.
C. Invest more than 15% of its net assets in securities which are illiquid.
D. Purchase additional securities if the Fund's borrowings exceed 5% of its
net assets.
Short-Term Asset Reserve Fund and Portfolio
As a matter of fundamental policy, the Short- Term Asset Reserve Portfolio
(Short-Term Asset Reserve Fund) may not:
1. Issue senior securities. For purposes of this restriction, borrowing money
in accordance with paragraph 2 below, making loans in accordance with
paragraph 6 below, the issuance of shares of beneficial interest in
multiple classes or series, the deferral of trustees' fees, the purchase
or sale of options, futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies or within the meaning of paragraph 5 below, are not
deemed to be senior securities.
2. Borrow money, except (i) in amounts not to exceed 33 1/3% of the value of
the Portfolio's (Fund's) total assets (including the amount borrowed)
taken at market value from banks or through reverse repurchase agreements
or forward roll transactions, (ii) up to an additional 5% of its total
assets for temporary purposes, (iii) in connection with short-term credits
as may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) the Portfolio (Fund) may purchase securities on margin
to the extent permitted by applicable law. For purposes of this investment
restriction, investments in short sales, roll transactions, futures
contracts, options on futures contracts, securities or indices and forward
commitments, entered into in accordance with the Portfolio's (Fund's)
investment policies, shall not constitute borrowing.
3. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Portfolio
(Fund) may be deemed to be an underwriter under the Securities Act of
1933.
4. Purchase or sell real estate except that the Portfolio (Fund) may (i)
acquire or lease office space for its own use, (ii) invest in securities
of issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein, (iv)
purchase and sell mortgage-related securities and (v) hold and sell real
estate acquired by the Portfolio (Fund) as a result of the ownership of
securities.
5. Purchase or sell commodities or commodity contracts, except the Portfolio
(Fund) may purchase and sell options on securities, securities indices and
currency, futures contracts on securities, securities indices and currency
and options on such futures, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies.
6. Make loans, except that the Portfolio (Fund) (1) may lend portfolio
securities in accordance with the Portfolio's (Fund's) investment policies
up to 33 1/3% of the Portfolio's (Fund's) total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase all or a
portion of an issue of debt securities, bank loan participation interests,
bank certificates of deposit, banker's acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities.
7. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or
authorities or repurchase agreements collateralized by U.S. Government
securities and other investment companies), if: (a) such purchase would
cause more than 5% of the Portfolio's (Fund's) total assets taken at
market value to be invested in the securities of such issuer; or (b) such
purchase would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Portfolio (Fund).
8. Invest more than 25% of its total assets in the securities of one or more
issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or its agencies or
instrumentalities).
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<PAGE>
The following restrictions are not fundamental policies and may be changed
by the Trustees of the Portfolio Trust (Trust) without investor approval in
accordance with applicable laws, regulations or regulatory policy. The Portfolio
(Fund) may not:
a. Purchase securities on margin (except that the Portfolio (Fund) may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities).
b. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
c. Purchase the securities of any other investment company except to the
extent permitted by the 1940 Act.
d. Invest more than 15% of its net assets in securities which are illiquid.
e. Purchase additional securities if the Portfolio's (Fund's) borrowings
exceed 5% of its net assets. Notwithstanding any fundamental or
non-fundamental policy, the Fund may invest all of its assets (other than
assets which are not"investment securities" (as defined in the 1940 Act)
or are excepted by the SEC) in an open-end investment company with
substantially the same investment objective as the Fund.
For the purposes of fundamental restriction 8, state and municipal
governments and their agencies, authorities and instrumentalities are not deemed
to be industries; telephone companies are considered to be a separate industry
from water, gas or electric utilities; personal credit finance companies and
business credit finance companies are deemed to be separate industries; and
wholly-owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the activities of
their parents. Fundamental restriction 8 does not apply to investments in
municipal securities which have been pre-refunded by the use of obligations of
the U.S. Government or any of its agencies or instrumentalities. For purposes of
fundamental restriction 8, the industry classification of an asset-backed
security is determined by its underlying assets. For example, certificates for
automobile receivables and certificates for amortizing revolving debts
constitute two different industries.
Controlled Maturity Fund
As a matter of fundamental policy, the Controlled Maturity Fund may not:
1. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to U.S.
Government securities or mortgage-backed securities issued or guaranteed
as to principal or interest by the U.S. Government, its agencies or
instrumentalities.
2. Issue senior securities, except as permitted by paragraphs 3, 7 and 8
below. For purposes of this restriction, the issuance of shares of
beneficial interest in multiple classes or series, the deferral of
trustees' fees, the purchase or sale of options, futures contracts,
forward commitments and repurchase agreements entered into in accordance
with the Fund's investment policies or within the meaning of paragraph 6
below, are not deemed to be senior securities.
3. Borrow money, except (i) from banks for temporary or short-term purposes
or for the clearance of transactions in amounts not to exceed 33 1/3% of
the value of the Fund's total assets (including the amount borrowed) taken
at market value, (ii) in connection with the redemption of Fund shares or
to finance failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; (iii) in order to
fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv) the Fund
may enter into reverse repurchase agreements and forward roll
transactions. For purposes of this investment restriction, investments in
short sales, futures contracts, options on futures contracts, securities
or indices and forward commitments shall not constitute borrowing.
4. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed to be an underwriter under the Securities Act of 1933.
5. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities
that are secured by real estate or interests therein, (iv) purchase and
sell mortgage-related securities and (v) hold and
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<PAGE>
sell real estate acquired by the Fund as a result of the ownership
of securities.
6. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities).
7. Purchase or sell commodities or commodity contracts, except the Fund may
purchase and sell options on securities, securities indices and currency,
futures contracts on securities, securities indices and currency and
options on such futures, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies.
8. Make loans, except that the Fund (1) may lend portfolio securities in
accordance with the Fund's investment policies up to 33 1/3% of the Fund's
total assets taken at market value, (2) enter into repurchase agreements,
and (3) purchase all or a portion of an issue of debt securities, bank
loan participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the purchase
is made upon the original issuance of the securities.
See the discussion following the Fixed Income Fund II's fundamental
investment restrictions for additional information on industry concentration.
The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:
A. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
B. Purchase securities of any other investment company except to the extent
permitted by the 1940 Act.
C. Invest more than 15% of its net assets in securities which are illiquid.
D. Purchase additional securities if the Fund's borrowings exceed 5% of its
net assets.
Securitized Fund
As a matter of fundamental policy, the Securitized Fund may not:
1. Invest, with respect to at least 75% of its total assets, more than 5% in
the securities of any one issuer (other than the U.S. Government, its
agencies or instrumentalities) or acquire more than 10% of the outstanding
voting securities of any issuer.
2. Issue senior securities, borrow money or securities or pledge or mortgage
its assets, except that the Fund may (a) borrow money from banks as a
temporary measure for extraordinary or emergency purposes (but not for
investment purposes) in an amount up to 15% of the current value of its
total assets, (b) enter into forward roll transactions and (c) pledge its
assets to an extent not greater than 15% of the current value of its total
assets to secure such borrowings; however, the Fund may not make any
additional investments while its outstanding bank borrowings exceed 5% of
the current value of its total assets. 3. Lend portfolio securities,
except that the Fund may enter into repurchase agreements with respect to
15% of the value of its net assets.
4. Invest more than 25% of the current value of its total assets in any
single industry except the real estate industry.
5. Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of portfolio securities the Fund may be
deemed to be an underwriter under the Securities Act of 1933.
6. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities).
7. Purchase or sell commodities, commodity contracts, or real estate, except
that the Fund may purchase and sell obligations which are secured by real
estate or by mortgages on real estate, securities of issuers which invest
or deal in real estate, or have a call on real estate or are convertible
into real estate, and the Fund may purchase and sell financial futures
contracts and options on financial futures contracts and engage in foreign
currency exchange transactions.
8. Purchase the securities of other investment companies, except that the
Fund may make
23
<PAGE>
such a purchase (a) in the open market involving no commission or
profit to a sponsor or dealer (other than the customary broker's
commission), provided that immediately thereafter (i) not more than
10% of the Fund's total assets would be invested in such securities,
(ii) not more than 5% of the Fund's total assets would be invested
in the securities of any one investment company and (iii) not more
than 3% of the voting stock of any one investment company would be
owned by the Fund, or (b) as part of a merger, consolidation, or
acquisition of assets.
The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:
A. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
B. Invest more than 15% of its net assets in securities which are illiquid.
If any percentage restriction described above is adhered to at the time of
investment, a subsequent increase or decrease in the percentage resulting from a
change in the value of the Portfolio's or a Fund's assets will not constitute a
violation of the restriction.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, each Fund may, from time to time,
advertise certain total return and yield information. The average annual total
return of a Fund for a period is computed by subtracting the net asset value per
share at the beginning of the period from the net asset value per share at the
end of the period (after adjusting for the reinvestment of any income dividends
and capital gain distributions), and dividing the result by the net asset value
per share at the beginning of the period. In particular, the Funds' average
annual total return ("T") is computed by using the redeemable value at the end
of a specified period of time ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula P(1+T)n=ERV.
The Funds' yield is computed by dividing the net investment income per
share earned during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of the period. For the purpose of
determining net investment income, the calculation includes, among expenses of
the Funds, all recurring fees that are charged to all shareholder accounts and
any non-recurring charges for the period stated. In particular, yield is
determined according to the following formula:
Yield = 2[(A - B + 1)^6 - 1]
-----
CD
Where:
A=interest earned during the period; B=net expenses accrued for the
period; C=the average daily number of shares outstanding during the period that
were entitled to receive dividends; D=the maximum offering price per share (net
asset value) on the last day of the period.
The Funds may also quote non-standardized yield, such as yield-to-maturity
("YTM"). YTM represents the rate of return an investor will receive if a
long-term, interest bearing investment, such as a bond, is held to its maturity
date. YTM does not take into account purchase price, redemption value, time to
maturity, coupon yield and the time between interest payments.
With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Funds account for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, each Fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the discount or premium
remaining on a security.
The Funds' average annual total return for the one-, five- and ten-year
(or life-of-the-Fund, if shorter) periods ended December 31, 1997 and average
annualized yield for the 30-day period ended December 31, 1997 were as follows:
24
<PAGE>
Average Annual Total Return
Fund 1-Year 5-Year 10-Year Yield
- ---- ------ ------ ------- -----
Fixed Income Fund 9.54% 8.35% 9.74% 6.50%
Diversified Income Fund 10.86%(1) N/A N/A 9.21%
Fixed Income Fund II 8.59% 7.28%(2) N/A 6.34%
Controlled Maturity Fund 6.66% 6.42%(2) N/A 6.62%
Securitized Fund 9.50% 7.44% 8.65%(3) 6.67%
Short-Term Asset Reserve Fund 5.94% 5.34% 6.53%(4) 5.91%
- ----------
1 Diversified Income Fund commenced operations on June 2, 1997.
2 Fixed Income Fund II and Controlled Maturity Fund commenced operations on
July 3, 1995.
3 Securitized Fund commenced operations on September 30, 1989.
4 Short-Term Asset Reserve Fund commenced operations on January 3, 1989.
These performance quotations should not be considered as representative of
any Fund's performance for any specified period in the future.
In addition to average annual return quotations, the Funds may quote
quarterly and annual performance on a net (with management and administration
fees deducted) and gross basis as follows:
Fixed Income Fund
Quarter/Year Net Gross
- --------------------------------------------------------------
1987 0.74 1.20%
1Q88 4.36 4.52
2Q88 1.18 1.29
3Q88 1.98 2.11
4Q88 0.78 0.91
1988 8.53 9.09
1Q89 1.23 1.37
2Q89 7.57 7.70
3Q89 1.13 1.26
4Q89 3.30 3.42
1989 13.76 14.33
1Q90 (0.50) (0.38)
2Q90 3.69 3.84
3Q90 0.89 1.00
4Q90 4.95 5.06
1990 9.23 9.77
1Q91 3.16 3.28
2Q91 1.71 1.84
3Q91 6.19 6.29
4Q91 5.58 5.68
1991 17.65 18.15
1Q92 (0.95) (0.84)
2Q92 4.95 5.4
3Q92 3.43 3.53
4Q92 (0.58) (0.47)
1992 6.88 7.33
1Q93 5.88 5.98
2Q93 3.42 3.52
3Q93 3.42 3.52
4Q93 1.23 1.33
1993 14.64 15.08
1Q94 (3.99) (3.90)
2Q94 (1.88) (1.78)
3Q94 0.67 0.77
4Q94 0.32 0.42
1994 (4.86) (4.48)
1Q95 4.39 4.48
2Q95 5.91 6.01
3Q95 2.46 2.56
4Q95 4.64 4.73
1995 18.54 18.9
1Q96 (1.58) (1.49)
2Q96 0.84 0.93
3Q96 2.58 2.67
4Q96 3.60 3.70
1996 5.48 5.86
1Q97 (0.16) (0.07)
2Q97 3.76 3.85
3Q97 3.44 3.53
4Q97 2.23 2.33
1997 9.54 9.95
Diversified Income Fund
Quarter/Year Net Gross
- --------------------------------------------------------------
3Q97 6.05 6.05
4Q97 0.14 0.14
1997 6.20 6.20
Fixed Income Fund II
Quarter/Year Net Gross
- --------------------------------------------------------------
3Q95 1.35 1.44
4Q95 4.38 4.48
1995 5.79 5.97
1Q96 (1.90) (1.81)
2Q96 0.39 0.48
3Q96 2.18 2.28
4Q96 3.12 3.21
1996 3.77 4.15
1Q97 (0.49) (0.40)
2Q97 3.65 3.74
3Q97 3.30 3.39
25
<PAGE>
4Q97 1.92 2.01
1997 8.59 8.97
Short-Term Asset Reserve Fund
Quarter/Year Net Gross
- --------------------------------------------------------------
1Q89 1.58% 1.70%
2Q89 3.52 3.64
3Q89 1.71 1.82
4Q89 2.38 2.51
1989 9.50 10.01
1Q90 1.34 1.45
2Q90 2.56 2.69
3Q90 2.17 2.27
4Q90 2.62 2.73
1990 8.97 9.45
1Q91 2.10 2.20
2Q91 1.97 2.07
3Q91 2.62 2.71
4Q91 2.39 2.47
1991 9.41 9.79
1Q92 0.84 0.91
2Q91 2.08 2.17
3Q92 1.18 1.28
4Q92 0.17 0.27
1992 4.33 4.70
1Q93 1.90 1.98
2Q93 1.10 1.19
3Q93 1.20 1.28
4Q93 0.78 0.86
1993 5.08 5.41
1Q94 0.06 0.14
2Q91 0.06 0.14
3Q94 1.31 1.39
4Q94 0.83 0.91
1994 2.27 2.60
1Q95 2.08 2.16
2Q95 2.14 2.22
3Q95 1.55 1.62
4Q95 1.89 1.97
1995 7.85 8.20
1Q96 1.08 1.17
2Q96 1.31 1.40
3Q96 1.51 1.60
4Q96 1.60 1.69
1996 5.62 5.99
1Q97 0.98 1.07
2Q97 1.80 1.89
3Q97 1.69 1.78
4Q97 1.33 1.45
1997 5.94 6.34
Controlled Maturity Fund
Quarter/Year Net Gross
- --------------------------------------------------------------
3Q95 1.55% 1.64%
4Q95 2.61 2.70
1995 4.20 4.38
1Q96 0.25 0.35
2Q96 1.05 1.14
3Q96 1.71 1.80
4Q96 2.03 2.12
1996 5.13 5.51
1Q97 0.65 0.74
2Q97 2.22 2.31
3Q97 2.10 2.20
4Q97 1.92 2.01
1997 8.59 8.97
Securitized Funds
Quarter/Year Net Gross
- --------------------------------------------------------------
3Q89 0.00% (0.04)%
4Q89 4.01 4.17
1989 4.01 4.21
1Q90 0.45 0.57
2Q90 3.58 3.69
3Q90 1.29 1.40
4Q90 5.79 5.91
1990 11.49 11.99
1Q91 2.89 3.00
2Q91 1.84 1.95
3Q91 5.16 5.27
4Q91 4.90 5.03
1991 15.57 16.10
1Q92 (1.58) (1.47)
2Q92 4.38 4.49
3Q92 1.80 1.91
4Q92 (.49) (.38)
1992 4.07 4.52
1Q93 4.37 4.48
2Q93 2.56 2.67
3Q93 2.38 2.49
4Q93 0.38 0.49
1993 10.02 10.48
1Q94 (2.53) (2.42)
2Q94 (0.83) (0.72)
3Q94 0.89 1.00
4Q94 0.338) 0.447)
1994 (2.16) (1.72)
1Q95 4.78 4.89
2Q95 5.31 5.43
3Q95 2.16 2.27
4Q95 3.19 3.32
1995 16.32 16.85
1Q96 (1.23) (1.11)
2Q96 0.51 0.62
3Q96 2.09 2.22
4Q96 3.03 3.14
1996 4.41 4.91
1Q97 (0.57) (0.46)
2Q97 3.72 3.85
3Q97 3.48 3.61
4Q97 2.60 2.72
1997 9.50 10.01
26
<PAGE>
These performance quotations should not be considered as representative of
a Fund's performance for any specified period in the future. Each Fund's
performance may be compared in sales literature and advertisements to the
performance of other mutual funds and separately managed discretionary accounts
(including private investment companies) having similar objectives or to
standardized indices or other measures of investment performance. In particular,
the Fixed Income Portfolio, Fixed Income Fund and Fixed Income Fund II may
compare their performance to the Lehman Government/Corporate Index, which is
generally considered to be representative of the performance of all domestic,
dollar denominated, fixed rate, investment grade bonds, and the Lehman Brothers
Aggregate Index which is composed of securities from the Lehman Brothers
Government/Corporate Bond Index, Mortgage Backed Securities Index and Yankee
Bond Index, and is generally considered to be representative of all unmanaged,
domestic, dollar denominated, fixed rate investment grade bonds. The Diversified
Income Portfolio and Diversified Income Fund may also compare their performance
to the Lehman Brothers Aggregate Index. The Short-Term Asset Reserve Portfolio
and Short-Term Asset Reserve Fund may compare their performance to The
IBC/Donoghue Money Market Average/All Taxable Index, which is generally
considered to be representative of the performance of domestic, taxable money
market funds. However, the average maturity of the Short-Term Asset Reserve
Portfolio is longer than that of a money market fund 's portfolio and, unlike a
money market fund, the net asset value of the Short-Term Asset Reserve Fund's
shares may fluctuate. The Controlled Maturity Fund may compare its performance
to the Merrill Lynch 1-3 Year U.S. Treasury Index, the Merrill Lynch 1-5 Year
U.S. Treasury Index and the Merrill Lynch 1 Year Treasury Bill Index. The
Securitized Fund may compare its performance to the Lehman Brothers Aggregate
Index and the Lehman Brothers Mortgage Index. The Lehman Brothers Mortgage Index
is considered to be representative of the performance of fixed rate securitized
mortgage pools of GNMA, FNMA and FHLNC securities. Comparative performance may
also be expressed by reference to a ranking prepared by a mutual fund monitoring
service or by one or more newspapers, newsletters or financial periodicals.
Performance comparisons may be useful to investors who wish to compare a Fund's
past performance to that of other mutual funds and investment products. Of
course, past performance is not a guarantee of future results.
MANAGEMENT
Trustees and Officers of the Trust and Portfolio Trust
The Trustees and executive officers of the Trust are listed below. The
Trustees of the Portfolio Trust are identical to the Trustees of the Trust. The
officers of the Portfolio Trust are Messrs. Clayson, Ladd, Wood, Hollis, Hanlon,
Stuer and Martin, and Mdmes. Banfield, Herrmann, Broccoli, Walcott-Abramson and
Kneeland, who hold the same office with the Portfolio Trust as with the Trust.
All executive officers of the Trust and the Portfolio Trust are affiliates of
Standish, Ayer & Wood, Inc.
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Trust Principal Occupation During Past 5 Years
- -------------------------------------------- ------------------------------ ---------------------------------------------
<S> <C> <C>
*D. Barr Clayson, 7/29/35 Vice President and Trustee Vice President and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Chairman and Director, Standish
Boston, MA 02111 International Management Company,
L.P.; Director, CareGroup Inc.
Samuel C. Fleming, 9/30/40 Trustee Chairman of the Board
c/o Decision Resources, Inc. and Chief Executive Officer,
1100 Winter Street Decision Resources, Inc.;
Waltham, MA 02154 Trustee, Cornell University; Director,
CareGroup Inc.
Benjamin M. Friedman, 8/5/44 Trustee William Joseph Maier
c/o Harvard University Professor of Political Economy,
Cambridge, MA 02138 Harvard University
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Trust Principal Occupation During Past 5 Years
- -------------------------------------------- ------------------------------- -----------------------------------------------------
<S> <C> <C>
John H. Hewitt, 4/11/35 Trustee Trustee, The Peabody Foundation;
P.O. Box 307 Trustee, Visiting Nurse Alliance of
So. Woodstock, VT 05071 Vermont
and New Hampshire; Trustee, Mertens
House, Inc.
*Edward H. Ladd, 1/3/38 Vice President and Trustee Chairman of the Board and
c/o Standish, Ayer & Wood, Inc. Managing Director, Standish, Ayer &
One Financial Center Wood, Inc.
Boston, MA 02111 Director of Standish International
Management Company, L.P.
Caleb Loring III, 11/14/43 Trustee Trustee, Essex Street Associates
c/o Essex Street Associates (family investment trust office);
400 Essex Street Director, Holyoke Mutual Insurance
Beverly , MA 01915 Company; Director, Carter Family
Corporation; Board Member, Gordon-
Conwell Theological Seminary; Chairman
of the Advisory Board, Salvation Army;
Chairman, Vision New England
*Richard S. Wood, 5/21/54 President and Trustee Vice President, and Managing Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.;
One Financial Center Executive Vice President and Director,
Boston, MA 02111 Standish International Management
Company, L.P.
James E. Hollis III, 11/21/48 Executive Vice President Vice President and Director, Standish,
c/o Standish, Ayer & Wood, Inc. Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Anne P. Herrmann, 1/26/56 Vice President and Secretary Senior Fund Administration Manager,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Paul G. Martins, 3/10/56 Vice President and Treasurer Vice President of Finance, Standish, Ayer
c/o Standish, Ayer & Wood, Inc. & Wood, Inc. since October 1996;
One Financial Center formerly Senior Vice President, Treasurer
Boston, MA 02111 and Chief Financial Officer of Liberty
Financial Bank Group
Beverly E. Banfield, 7/6/56 Vice President Vice President, Associate Director and
c/o Standish, Ayer & Wood, Inc. Compliance Officer, Standish, Ayer &
One Financial Center Wood, Inc.
Boston, MA 02111
Lavinia B. Chase, 6/4/46 Vice President Vice President and Associate Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Denise B. Kneeland, 8/19/51 Vice President Vice President and Manager, Mutual
c/o Standish, Ayer & Wood, Inc. Fund Operations
One Financial Center Standish, Ayer & Wood, Inc.
Boston, MA 02111 since December 1995; formerly Vice
President, Scudder, Stevens and Clark
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Trust Principal Occupation During Past 5 Years
- --------------------------------------------- --------------------------- ---------------------------------------------
<S> <C> <C>
David C. Stuehr, 3/1/58 Vice President Vice President and Director, Standish,
c/o Standish, Ayer & Wood, Inc. Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Sarah Walcott-Abramson, 12/9/65 Vice President Compliance Administrator, Standish,
c/o Standish, Ayer & Wood, Inc. Ayer & Wood, Inc. since October 1993;
One Financial Center formerly Compliance Specialist, Scudder,
Boston, MA 02111 Stevens and Clark
Kathleen M. Broccoli, 4/13/65 Vice President Vice President and Manager,
c/o Standish, Ayer & Wood, Inc. Portfolio Accounting
One Financial Center Standish, Ayer & Wood, Inc.
Boston, MA 02111
Thomas J. Hanlon, 9/25/60 Vice President Vice President and Manager, Trade
c/o Standish, Ayer & Wood, Inc. Settlement and Pricing
One Financial Center Standish, Ayer & Wood, Inc.
Boston, MA 02111
Rosalind J. Lillo, 2/6/38 Vice President Broker/Dealer Administrator
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since
One Financial Center October 1995; formerly Compliance
Boston, MA 02111 Administrator, New England Securities
Corp.
Gigi K. Szekely, 5/8/67
c/o Standish, Ayer & Wood, Inc. Manager, Mutual Fund Client
One Financial Center Communications,
Boston, MA 02111 Vice President Standish, Ayer & Wood, Inc.
</TABLE>
* Indicates that Trustee is an interested person of the Trust for purposes of
the 1940 Act.
Compensation of Trustees and Officers.
Neither the Trust nor the Portfolio Trust pays compensation to the
Trustees of the Trust or the Portfolio Trust that are affiliated with Standish
or to the Trust's and Portfolio Trust's officers. None of the Trustees or
officers have engaged in any financial transactions (other than the purchase or
redemption of the Funds' shares) with the Trust, the Portfolio Trust or the
Advisers during the year ended December 31, 1997, except that certain Trustees
and officers who are directors and shareholders of Standish, may from time to
time, purchase additional shares of common stock of Standish.
The following table sets forth all compensation paid to the Trust's and
the Portfolio Trust's Trustees as of the Funds' fiscal years ended December 31,
1997:
29
<PAGE>
Aggregate Compensation from the Funds
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Short-Term Benefits from Funds
Fixed Diversified Fixed Controlled Asset Accrued as and Portfolio
Income Income Income Securitized Maturity Reserve Part of Funds' & Other Funds
Name of Trustee Fund** Fund** Fund II Fund Fund Fund** Expenses in Complex*
- ------------------ --------- ----------- --------- ----------- ---------- ------------ -------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. Barr Clayson $0 $ 0 $0 $0 $0 $0 $0 $0
Samuel C. Fleming $28,391 $247 $642 $346 $99 $2,123 $0 $49,375
Benjamin M. $28,391 $247 $642 $346 $99 $2,123 $0 $49,375
Friedman
John H. Hewitt $31,266 $272 $707 $381 $109 $2,338 $0 $54,375
Edward H. Ladd $0 $ 0 $0 $0 $0 $0 $0 $0
Caleb Loring, III $28,391 $247 $642 $346 $99 $2,123 $0 $49,375
Richard S. Wood $0 $ 0 $0 $0 $0 $0 $0 $0
</TABLE>
* As of the date of this SAI there were 22 funds in the fund complex. Total
compensation is presented for the calendar year ended December 31, 1997.
** The Fund bears its pro rata allocation of Trustees' fees paid by its
corresponding Portfolio to the Trustees of the Portfolio Trust.
Certain Shareholders
At April 1, 1998, Trustees and officers of the Trust and the Portfolio
Trust as a group beneficially owned (i.e., had voting and/or investment power)
less than 1% of the then outstanding shares of each Fund. Also at that date, no
person owned beneficially or of record 5% or more of the then outstanding shares
of any Fund except:
Diversified Income Fund
Percentage of
Outstanding
Name and Address Shares
- ------------------------------------------------------
Allendale Mutual Insurance
Company 31%*
Allendale Park
P.O. Box 7500
Johnston, RI 02919
Corning Incorporated 21%
One Riverfront Plaza HQ-E2
Corning, NY 14831
Wellesley College 14%
Wellesley, MA 02181
Fitchburg Mutual Inc. Co. 8%
c/o Fleet Bank
P.O. Box 92800
Rochester, NY 14692
Cumming Foundation 8%
c/o Investors Bank & Trust Co.
P.O. Box 1537
Boston, MA 02205
Davis Family Foundation 6%
c/o Investors Bank and Trust Co.
P.O. Box 1537
Boston, MA 02205
Fixed Income Fund II
Percentage of
Outstanding
Name and Address Shares
- --------------------------------------------------------------
Exeter Health Resources, Inc. 49%*
10 Buzell Avenue
Exeter, NH 03833
Richard W. Hansen as TTEE 12%
25502 Heaton Drive
Batavia, IL 60510
Milton Hospital Funded
Depreciation Acct 7%
92 Highland Street
Milton, MA 02186
Miss Porter's School 6%
60 Main Street
Farmington, CT 06032
1952 Trust/SCR 5%
John D. Rockefeller Trust
First Union National Bank
1525 West WT Harris Boulevard
Charlotte, NC 28288
Houston General Insurance Empl. 5%
30
<PAGE>
P.O. Box 2932
Fort Worth, TX 76113
Short-Term Asset Reserve Fund
Percentage of
Outstanding
Name and Address Shares
- --------------------------------------------------------------
The Nature Conservancy 17%
Endowment Fund
1815 N. Lynn Street
Arlington, VA 22209
The Metropolitan Museum of Art 13%
1000 Fifth Avenue
New York, NY 10028
Virginia Portfolio 10%
c/o Peregrin Financial
84 State Street, Suite 900
Boston, MA 02109
University of Rochester 8%
Administration Bldg. 263
Rochester, NY 14627
The Controlled Maturity Fund
Percentage of
Outstanding Name
and Address Shares
- --------------------------------------------------------------
Cumming Foundation 34%*
c/o Investors Bank & Trust Co.
P.O. Box 1537
Boston, MA 02205
Essex County Gas and Company 23%
7 North Hunt Road
Amesbury, MA 01913
San Francisco Opera Association 21%
301 Van Ness Avenue
San Francisco, CA 94102
Securitized Fund
Percentage of
Outstanding
Name and Address Shares
- --------------------------------------------------------------
Allendale Mutual Insurance
Company 77%*
Allendale Park
P.O. Box 7500
Johnston, RI 02919
Colonial Williamsburg Pension 9%
The Colonial Williamsburg Foundation
P.O. Box C
Williamsburg, VA 23187
Potter & Co./Allendale Ins. Co. 8%
Bank of Boston
150 Royall Way
Canton, MA
*Because the shareholder beneficially owned more than 25% of the then
outstanding shares of the indicated Fund, the shareholder was considered to
control such Fund. As a controlling person, the shareholder may be able to
determine whether a proposal submitted to the shareholders of such Fund will be
approved or disapproved.
Investment Adviser.
Standish serves as the Adviser to the Fixed Income Portfolio, Fixed Income
Fund II, Short-Term Asset Reserve Portfolio, Securitized Fund and Controlled
Maturity Fund pursuant to written investment advisory agreements. Standish is a
Massachusetts corporation organized in 1933 and is registered under the
Investment Advisers Act of 1940.
The following, constituting all of the Directors and all of the
shareholders of Standish, are Standish's controlling persons: Caleb F. Aldrich,
Nicholas S. Battelle, David H. Cameron, Karen K. Chandor, D. Barr Clayson, W.
Charles Cook, Joseph M. Corrado, Richard C. Doll, Dolores S. Driscoll, Mark A.
Flaherty, Maria D. Furman, James E. Hollis III, Raymond J. Kubiak, Edward H.
Ladd, Laurence A. Manchester, George W. Noyes, Arthur H. Parker, Howard B.
Rubin, Austin C. Smith, Thomas P. Sorbo, David C. Stuehr, Ralph S. Tate, Michael
W. Thompson and Richard S. Wood.
SIMCO serves as investment adviser to the Diversified Income
Portfolio pursuant to an investment advisory agreement. SIMCO is a Delaware
limited partnership which was organized in 1991 and is a registered investment
adviser under the Investment Adviser Act of 1940. The general partner of SIMCO
is Standish, which holds a 99.98% partnership interest. The limited partners who
each hold a 0.01% interest in SIMCO, are: Walter M. Cabot, Sr., Senior Adviser
to SIMCO and Standish, and D. Barr Clayson, Chairman of the Board and Vice
President of SIMCO, a Managing Director and Vice President of Standish and a
Trustee and Vice President of the Trust and Portfolio Trust. Ralph S.
31
<PAGE>
Tate, Managing Director of Standish, is President and a Director of SIMCO.
Richard S. Wood, Vice President and a Managing Director of Standish and the
President and a Trustee of the Trust and Portfolio Trust, is the Executive Vice
President and a Director of SIMCO.
Certain services provided by the Adviser under the advisory agreements are
described in the Prospectus. These services are provided without reimbursement
by the Portfolios for any costs incurred. In addition to those services, the
Adviser provides the Funds (but not the Portfolios) with office space for
managing their affairs, with the services of required executive personnel, and
with certain clerical services and facilities. Under the investment advisory
agreements, the Adviser is paid a fee based upon a percentage of the applicable
Fund's or Portfolio's average daily net asset value computed as set forth below.
The advisory fees are payable monthly.
Contractual Advisory Fee Rate
(as a percentage of
Fund average daily net assets)
- --------------------------------------------------------------
Fixed Income 0.40% of the first $250
Portfolio million
0.35% of the next $250
million
0.30% of over $500
million
Diversified Income 0.50%
Portfolio
Fixed Income Fund II 0.40%
Controlled Maturity 0.35%
Fund
Securitized Fund 0.25%
Short-Term Asset
Reserve Portfolio 0.25%
During the last three fiscal years ended December 31, the Funds and the
Portfolios paid advisory fees in the following amounts:
Fund 1995 1996 1997
- ---------------- -------------- -------------- -----------------
Fixed $6,321,967 2,493,743(1) N/A
Income
Fund
Fixed N/A 5,121,756(1) $9,043,263
Income
Portfolio
Diversified N/A N/A 0(2)
Income
Portfolio
Fixed 0(3) 0(3) $200,481(3)
Income
Fund II
Controlled 0(4) 0(4) 0(4)
Maturity
Fund
Securitized 107,892(5) 102,981(5) $118,095(5)
Fund
Short-Term 705,129(6) 643,488 $582,254
Asset
Reserve
Fund
Short-Term N/A(7) N/A(7) N/A(7)
Asset
Reserve
Portfolio
1 Fixed Income Fund was converted to the master/feeder fund structure on May
3, 1996 and does not pay directly advisory fees after that date. The Fund
bears its pro rata allocation of the Portfolio's expenses, including
advisory fees. The Fixed Income Portfolio commenced operations on May 3,
1996.
2 The Diversified Income Portfolio commenced operations on June 2, 1997. The
Adviser voluntarily agreed not to impose its advisory fee for the period
June 2, 1997 to December 31, 1997 in the amount of $45,742.
3 The Fixed Income Fund II commenced operations on July 3, 1995. The Adviser
voluntarily agreed not to impose all or a portion of its advisory fee for
the period July 3, 1995 through December 31, 1995 and for the fiscal years
ended December 31, 1996 and December 31, 1997, in the amounts of $42,628,
$61,291 and $172,825, respectively.
4 The Controlled Maturity Fund commenced operations on July 3, 1995. The
Adviser voluntarily agreed not to impose its advisory fee for the period
July 3, 1995 through December 31, 1995 and for the fiscal years ended
December 31, 1996 and December 31, 1997, which would otherwise have been
$11,617 , $35,907 and $43,478, respectively.
5 For the fiscal years ended December 31, 1995 , 1996 and 1997, the Adviser
voluntarily agreed not to impose a portion of its fee in the amount of
$31,998 , $29,535 and $55,412.
6 Prior to July 1, 1995, Standish and Consolidated Investment Corporation
("Consolidated") served as the Short-Term Asset Reserve Fund's
co-investment advisers and each received 50% of the advisory fees paid by
the Fund. For the period January 1, 1995 through June 30, 1995, Standish
and Consolidated received fees in the aggregate of $345,111. For the
period July 1, 1995 through December 31, 1995, Standish received fees of
$360,018.
7 The Short-Term Asset Reserve Portfolio commenced operation on January 2,
1998.
Pursuant to the investment advisory agreements, each Fund and each
Portfolio bears expenses of its operations other than those incurred by the
Adviser pursuant to the investment advisory
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agreement. Among other expenses, the Funds and the Portfolios will pay share
pricing and shareholder servicing fees and expenses; custodian fees and
expenses; legal and auditing fees and expenses; expenses of prospectuses,
statements of additional information and shareholder reports; registration and
reporting fees and expenses; and Trustees' fees and expenses.
Unless terminated as provided below, the investment advisory agreements
continue in full force and effect from year to year but only so long as each
such continuance is approved annually (i) by either the Trustees of the Trust or
the Portfolio Trust (as applicable) or by the "vote of a majority of the
outstanding voting securities" of the applicable Fund or Portfolio, and, in
either event (ii) by vote of a majority of the Trustees of the Trust or the
Portfolio Trust (as applicable) who are not parties to the investment advisory
agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Each investment advisory agreement may be terminated at any time
without the payment of any penalty by vote of the Trustees of the Trust or the
Portfolio Trust or by the "vote of a majority of the outstanding voting
securities" of the applicable Fund or the Portfolio or by the Adviser, on sixty
days' written notice to the other parties. The investment advisory agreements
terminate in the event of their assignment as defined in the 1940 Act.
In an attempt to avoid any potential conflict with portfolio transactions
for the Funds and the Portfolios, the Advisers, the Principal Underwriter, the
Trust and the Portfolio Trust have each adopted extensive restrictions on
personal securities trading by personnel of the Adviser and its affiliates.
These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the Funds and their shareholders, and the Portfolios and their
investors, come before those of the Adviser and its employees.
Administrator of the Fund.
Standish also serves as the administrator (the "Fund Administrator") to
the Fixed Income Fund, Diversified Income Fund and Short-Term Asset Reserve Fund
pursuant to written administration agreements with the Trust on behalf of these
Funds. Certain services provided by the Fund Administrator under the
administration agreement are described in the Prospectus. For these services,
the Fund Administrator currently does not receive any additional compensation.
The Trustees of the Trust may, however, determine in the future to compensate
the Fund Administrator for its administrative services. The Fixed Income Fund's,
Diversified Income Fund's and Short-Term Asset Reserve Fund's administration
agreements can be terminated by either party on not more than sixty days'
written notice.
Administrator of the Portfolio.
IBT Trust Company (Cayman) Ltd., P.O. Box 501, Grand Cayman, Cayman
Islands, BWI, serves as the administrator to the Fixed Income Portfolio and the
Diversified Income Portfolio (the "Portfolio Administrator") pursuant to a
written administration agreement with the Portfolio Trust on behalf of each
Portfolio. The Portfolio Administrator provides the Portfolio Trust with office
space for managing its affairs, and with certain clerical services and
facilities. For its services to the Portfolio Trust, the Portfolio Administrator
currently receives a fee from each of the two Portfolios in the amount of $7,500
annually. The Portfolios' administration agreements can be terminated by either
party on not more than sixty days' written notice.
Distributor of the Funds.
Standish Fund Distributors, L.P. (the "Principal Underwriter"), an
affiliate of the Adviser, serves as the Trust's exclusive principal underwriter
and holds itself available to receive purchase orders for each Fund's shares. In
that capacity, the Principal Underwriter has been granted the right, as agent of
the Trust, to solicit and accept orders for the purchase of each Fund's shares
in accordance with the terms of the Underwriting Agreement between the Trust and
the Principal Underwriter. Pursuant to the Underwriting Agreement, the Principal
Underwriter has agreed to use its best efforts to obtain orders for the
continuous offering of each Fund's shares. The Principal Underwriter receives no
commissions or other compensation for its services, and has not received any
such amounts in any prior year. The Underwriting Agreement shall continue in
effect with respect to each Fund until two years after its execution and for
successive periods of one year thereafter only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding shares or by the Trustees of the Trust or (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Underwriting Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Underwriting Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested
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<PAGE>
persons" of the Trust, or, with respect to a Fund, by a vote of the holders of a
majority of the Fund's outstanding shares, in any case without payment of any
penalty on not more than 60 days' written notice to the other party. The offices
of the Principal Underwriter are located at One Financial Center, 26th Floor,
Boston, Massachusetts 02111.
REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the
Prospectus. In addition to Standish Fund Distributors and other agents of the
Trust, each Fund has authorized one or more brokers and dealers to accept on its
behalf orders for the purchase and redemption of Fund shares. Under certain
conditions, such authorized brokers and dealers may designate other
intermediaries to accept orders for the purchase and redemption of Fund shares.
In accordance with a position taken by the staff of the SEC, such purchase and
redemption orders are considered to have been received by a Fund when accepted
by the authorized broker or dealer or, if applicable, the authorized broker's or
dealer's designee. Also in accordance with the position taken by the staff of
the SEC, such purchase and redemption orders will receive the appropriate Fund's
net asset value per share next computed after the purchase or redemption order
is accepted by the authorized broker or dealer or, if applicable, the authorized
broker's or dealer's designee.
The Trust may suspend the right to redeem Fund shares or postpone the date
of payment upon redemption for more than seven days (i) for any period during
which the NYSE is closed (other than customary weekend or holiday closings) or
trading on the exchange is restricted; (ii) for any period during which an
emergency exists as a result of which disposal by a Fund of securities owned by
it or determination by a Fund of the value of its net assets is not reasonably
practicable; or (iii) for such other periods as the SEC may permit for the
protection of shareholders of a Fund.
The Trust intends to pay redemption proceeds in cash for all Fund shares
redeemed but, under certain conditions, the Trust may make payment wholly or
partly in portfolio securities, in conformity with a rule of the SEC. Portfolio
securities paid upon redemption of Fund shares will be valued at their then
current market value. The Trust, on behalf of each of its series, has elected to
be governed by the provisions of Rule 18f-1 under the 1940 Act which limits each
Fund's obligation to make cash redemption payments to any shareholder during any
90-day period to the lesser of $250,000 or 1% of the Fund's net asset value at
the beginning of such period. An investor may incur brokerage costs in
converting portfolio securities received upon redemption to cash. Each Portfolio
has advised the Trust that the Portfolio will not redeem in-kind except in
circumstances in which the applicable Fund is permitted to redeem in-kind or
except in the event the applicable Fund completely withdraws its interest from
the Portfolio.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for placing each Fund's and each Portfolio's
portfolio transactions and will do so in a manner deemed fair and reasonable to
the Funds and the Portfolios and not according to any formula. The primary
consideration in all portfolio transactions will be prompt execution of orders
in an efficient manner at the most favorable price. In selecting broker-dealers
and in negotiating commissions, the Adviser will consider the firm's
reliability, the quality of its execution services on a continuing basis and its
financial condition. When more than one firm is believed to meet these criteria,
preference may be given to firms which also sell shares of the Funds. In
addition, if the Adviser determines in good faith that the amount of commissions
charged by a broker is reasonable in relation to the value of the brokerage and
research services provided by such broker, the Funds and the Portfolios may pay
commissions to such broker in an amount greater than the amount another firm may
charge. Research services may include (i) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, (ii)
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends, portfolio
strategy, access to research analysts, corporate management personnel, industry
experts and economists, comparative performance evaluation and technical
measurement services and quotation services, and products and other services
(such as third party publications, reports and analysis, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) that assist the Adviser in carrying out its responsibilities
and (iii) effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research services furnished by firms
through which the Funds and the Portfolios effect their securities transactions
may be used by the Adviser in servicing other accounts; not all of these
services may be used by the Adviser in connection with the Funds or the
Portfolios generating the soft dollar credits. The
34
<PAGE>
investment advisory fee paid by the Funds and the Portfolios under the
investment advisory agreements will not be reduced as a result of the Adviser's
receipt of research services.
The Adviser also places portfolio transactions for other advisory
accounts. The Adviser will seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities for a Fund
or a Portfolio and another advisory account. In some cases, this procedure could
have an adverse effect on the price or the amount of securities available to a
Fund or a Portfolio. In making such allocations, the main factors considered by
the Adviser will be the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held, and
opinions of the persons responsible for recommending the investment.
Because most of the Funds' and the Portfolio's securities transactions are
effected on a principal basis involving a "spread" or "dealer mark-up," the
Funds and the Portfolios have not paid any brokerage commissions during the past
three years.
DETERMINATION OF NET ASSET VALUE
Each Fund's net asset value is calculated each day on which the NYSE is
open (a "Business Day"). Currently, the NYSE is not open on weekends, New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value of each Fund's shares is determined as of the close of regular trading on
the NYSE (normally 4:00 p.m., New York City time) and is computed by dividing
the value of all securities and other assets of a Fund (substantially all of
which, in the case of the Fixed Income Fund, Diversified Income Fund and
Short-Term Asset Reserve Fund, will be represented by the Fund's interest in its
corresponding Portfolio) less all liabilities by the number of Fund shares
outstanding, and adjusting to the nearest cent per share. Expenses and fees of
each Fund are accrued daily and taken into account for the purpose of
determining net asset value.
The value of a Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of the Fixed Income Fund, Diversified Income Fund and Short-Term Asset
Reserve Fund is determined. Each investor in a Portfolio may add to or reduce
its investment in the Portfolio on each Business Day. As of the close of regular
trading on the NYSE on each Business Day, the value of each investor's interest
in a Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage representing that investor's share of the aggregate
beneficial interests in a Portfolio. Any additions or reductions which are to be
effected on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in a Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of regular trading on the
NYSE on such day plus or minus, as the case may be, the amount of net additions
to or reductions in the investor's investment in the Portfolio effected on such
day, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the close of regular trading on the NYSE on such day plus or
minus, as the case may be, the amount of the net additions to or reductions in
the aggregate investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
NYSE on the following Business Day.
Portfolio securities are valued at the last sales prices on the exchange
or national securities market on which they are primarily traded. Securities not
listed on an exchange or national securities market, or securities for which
there were no reported transactions, are valued at the last quoted bid price.
Securities for which quotations are not readily available and all other assets
are valued at fair value as determined in good faith at the direction of the
Trustees.
Portfolio securities that are fixed income securities (other than money
market instruments) for which accurate market prices are readily available are
valued at their current market value on the basis of quotations, which may be
furnished by a pricing service or provided by dealers in such securities. Fixed
income securities for which accurate market prices are not readily available and
other assets are valued at fair value as determined in good faith by the Adviser
in accordance with procedures approved by the Trustees, which may include the
use of yield equivalents or matrix pricing.
Money market instruments with less than sixty days remaining to maturity
when acquired by a Fund or a Portfolio are valued on an amortized cost basis. If
a Fund or Portfolio acquires a money market instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized cost based
upon the value on such date
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<PAGE>
unless the Trustees determine during such sixty-day period that amortized cost
does not represent fair value.
Generally, trading in securities on foreign exchanges is substantially
completed each day at various times prior to the close of regular trading on the
NYSE. If a security's primary exchange is outside the U.S., the value of such
security used in computing the net value of a Fund's shares is determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of regular trading on the NYSE. Occasionally, events which affect
the values of such securities and such exchange rates may occur between the
times at which they are determined and the close of regular trading on the NYSE
and will therefore not be reflected in the computation of the Funds' net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities may be valued at their fair value as
determined in good faith by the Trustees of the Trust or the Portfolio Trust.
With respect to Short-Term Asset Reserve Portfolio, the Board of Trustees
of the Trust has approved determining the current market value of securities
with one year or less remaining to maturity on a spread basis which will be
employed in conjunction with the periodic use of market quotations. Under the
spread process, the Adviser determines in good faith the current market value of
these portfolio securities by comparing their quality, maturity and liquidity
characteristics to those of United States Treasury bills.
THE FUNDS AND THEIR SHARES
Each Fund is an investment series of the Trust, an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated August 13, 1986. Under the Agreement
and Declaration of Trust, the Trustees of the Trust have authority to issue an
unlimited number of shares of beneficial interest, par value $.01 per share, of
each Fund. Each share of a Fund represents an equal proportionate interest in
the Fund with each other share and is entitled to such dividends and
distributions as are declared by the Trustees. Shareholders are not entitled to
any preemptive, conversion or subscription rights. All shares, when issued, will
be fully paid and non-assessable by the Trust. Upon any liquidation of a Fund,
shareholders of that Fund are entitled to share pro rata in the net assets
available for distribution.
Pursuant to the Declaration, the Trustees may create additional funds by
establishing additional series of shares in the Trust. The establishment of
additional series would not affect the interests of current shareholders in any
Fund. The Trustees have established other series of the Trust. Pursuant to the
Declaration, the Board may establish and issue multiple classes of shares for
each series of the Trust. As of the date of this SAI, the Trustees do not have
any plan to establish multiple classes of shares for the Funds. Pursuant to the
Declaration of Trust and subject to shareholder approval (if then required by
applicable law), the Trustees may authorize each Fund to invest all of its
investable assets in a single open-end investment company that has substantially
the same investment objectives, policies and restrictions as the Fund. As of the
date of this SAI, the Fixed Income Fund , Diversified Income Fund and Short-Term
Asset Reserve Fund invest all of their investible assets in other open-end
investment companies.
All Fund shares have equal rights with regard to voting, and shareholders
of a Fund have the right to vote as a separate class with respect to matters as
to which their interests are not identical to those of shareholders of other
classes of the Trust, including the approval of an investment advisory contract
and any change of investment policy requiring the approval of shareholders.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration also provides for indemnification from the assets
of the Trust for all losses and expenses of any Trust shareholder held liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring a
financial loss on account of his or its liability as a shareholder of the Trust
is limited to circumstances in which the Trust would be unable to meet its
obligations. The possibility that these circumstances would occur is remote.
Upon payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Trust. The Declaration also provides that no series of the Trust is liable for
the obligations of any other series. The Trustees intend to conduct the
operations of the Trust to avoid, to the extent possible, ultimate liability of
shareholders for liabilities of the Trust.
Except as described below, whenever the Trust is requested to vote on a
fundamental policy of
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<PAGE>
or matters pertaining to a Portfolio, the Trust will hold a meeting of the
associated Fund's shareholders and will cast its vote proportionately as
instructed by the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Subject to applicable statutory and regulatory requirements, a Fund
would not request a vote of its shareholders with respect to (a) any proposal
relating to the Portfolio, which proposal, if made with respect to the Fund,
would not require the vote of the shareholders of the Fund, or (b) any proposal
with respect to the Portfolio that is identical in all material respects to a
proposal that has previously been approved by shareholders of the Fund. Any
proposal submitted to holders in a Portfolio, and that is not required to be
voted on by shareholders of the associated Fund, would nonetheless be voted on
by the Trustees of the Trust.
THE PORTFOLIOS AND THEIR INVESTORS
Each Portfolio is a series of Standish, Ayer & Wood Master Portfolio, a
trust which, like the Trust, is an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Portfolio
Trust was organized as a master trust fund under the laws of the State of New
York on January 18, 1996.
Interests in a Portfolio have no preemptive or conversion rights, and are
fully paid and non-assessable, except as set forth in the Prospectus. A
Portfolio normally will not hold meetings of holders of such interests except as
required under the 1940 Act. A Portfolio would be required to hold a meeting of
holders in the event that at any time less than a majority of its Trustees
holding office had been elected by holders. The Trustees of the Portfolios
continue to hold office until their successors are elected and have qualified.
Holders holding a specified percentage of interests in a Portfolio may call a
meeting of holders in the Portfolio for the purpose of removing any Trustee. A
Trustee of the Portfolio may be removed upon a majority vote of the interests
held by holders in the Portfolio qualified to vote in the election. The 1940 Act
requires a Portfolio to assist its holders in calling such a meeting. Upon
liquidation of a Portfolio, holders in the Portfolio would be entitled to share
pro rata in the net assets of the Portfolio available for distribution to
holders. Each holder in the Portfolio is entitled to a vote in proportion to its
percentage interest in the Portfolio.
TAXATION
Each series of the Trust, including each Fund, is treated as a separate
entity for accounting and tax purposes. Each Fund has qualified and elected or
intends to elect to be treated as a "regulated investment company" ("RIC") under
Subchapter M of the Code, and intends to continue to so qualify in the future.
As such and by complying with the applicable provisions of the Code regarding
the sources of its income, the timing of its distributions, and the
diversification of its assets, each Fund will not be subject to Federal income
tax on its investment company taxable income (i.e., all taxable income, after
reduction by deductible expenses, other than its "net capital gain," which is
the excess, if any, of its net long-term capital gain over its net short-term
capital loss) and net capital gain which are distributed to shareholders in
accordance with the timing and other requirements of the Code.
Each Portfolio is treated as a partnership for federal income tax
purposes. As such, a Portfolio is not subject to federal income taxation.
Instead, the corresponding Fund must take into account, in computing its federal
income tax liability (if any), its share of the Portfolio's income, gains,
losses, deductions, credits and tax preference items, without regard to whether
it has received any cash distributions from the Portfolio. Because the Fixed
Income Fund , Diversified Income Fund and Short- Term Asset Reserve Fund invest
their assets in the Fixed Income Portfolio, Diversified Income Portfolio and
Short-Term Asset Reserve Portfolio, respectively, each Portfolio normally must
satisfy the applicable source of income and diversification requirements in
order for the corresponding Fund to satisfy them. Each Portfolio will allocate
at least annually among its investors, including the corresponding Fund, each
investor's distributive share of that Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction or
credit. Each Portfolio will make allocations to the corresponding Fund in a
manner intended to comply with the Code and applicable regulations and will make
moneys available for withdrawal at appropriate times and in sufficient amounts
to enable the corresponding Fund to satisfy the tax distribution requirements
that apply to it and that must be satisfied in order for the Fund to avoid
Federal income and/or excise tax . For purposes of applying the requirements of
the Code regarding qualification as a RIC, the Fixed Income Fund, Diversified
Income Fund and Short- Term Asset Reserve Fund each will be deemed (i) to own
its proportionate share of each of the assets of the corresponding Portfolio and
(ii) to be entitled to the gross income of the corresponding Portfolio
attributable to such share.
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<PAGE>
Each Fund will be subject to a 4% non-deductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. Each
Fund intends under normal circumstances to seek to avoid liability for such tax
by satisfying such distribution requirements. Certain distributions made in
order to satisfy the Code's distribution requirements may be declared by the
Funds during October, November or December of the year but paid during the
following January. Such distributions will be taxable to taxable shareholders as
if received on December 31 of the year the distributions are declared, rather
than the year in which the distributions are received.
Each Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Funds qualify as regulated investment companies under
the applicable provisions of federal law incorporated in Massachusetts law, they
will also not be required to pay any Massachusetts income tax.
Each Fund will not distribute net capital gains realized in any year to
the extent that a capital loss is carried forward from prior years against such
gain. For federal income tax purposes, a Fund is permitted to carry forward a
net capital loss in any year to offset its own net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in federal income
tax liability to the Fund . The Short-Term Asset Reserve Fund has accumulated
capital loss carryforwards in the amounts of $3,071,161, $1,512,610, $5,263,400,
$568,968 , $277,757 and $381,998 which expire on December 31 of 2000, 2001,
2002, 2003, 2004 and 2005, respectively. The Controlled Maturity Fund has
accumulated capital loss carryforwards in the amounts of$10,860 and $88,604
which expire on December 31 of 2004 and 2005, respectively. The Securitized Fund
has accumulated capital loss carryforwards in the amounts of $1,636,907 and
$234,501 which expire on December 31 of 2002 and 2004, respectively.
If a Fund or a Portfolio invests in zero coupon securities, certain
increasing rate or deferred interest securities or, in general, other securities
with original issue discount (or with market discount if a Fund elects to
include market discount in income currently), the Fund or the Portfolio must
accrue income on such investments prior to the receipt of the corresponding cash
payments. However, a Fund must distribute, at least annually, all or
substantially all of its net income, including its distributive share of such
income accrued by the corresponding Portfolio, to shareholders to qualify as a
regulated investment company under the Code and avoid federal income and excise
taxes. Therefore, a Fund or Portfolio may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or may have to
leverage itself by borrowing the cash, to allow satisfaction of the distribution
requirements.
Limitations imposed by the Code on regulated investment companies like the
Funds may restrict a Fund's or a Portfolio's ability to enter into futures,
options or currency forward transactions. Only the Fixed Income Portfolio,
Diversified Income Portfolio and Securitized Fund may engage in currency forward
transactions.
Certain options, futures or currency forward transactions undertaken by a
Fund or Portfolio may cause the Fund or Portfolio to recognize gains or losses
from marking to market even though the Fund's or Portfolio's positions have not
been sold or terminated and affect the character as long-term or short-term (or,
in the case of certain options, futures or forward contracts relating to foreign
currency, as ordinary income or loss) and timing of some capital gains and
losses realized by a Fund or realized by a Portfolio and allocable to the
corresponding Fund. Additionally, a Fund or Portfolio may be required to
recognize gain if an option, future, forward contract, short sale, swap or other
Strategic Transaction that is not subject to the mark to market rules is treated
as a "constructive sale" of an "appreciated financial position" held by the Fund
or Portfolio under Section 1259 of the Code. Any net mark to market gains and/or
gains from constructive sales may also have to be distributed by a Fund to
satisfy the distribution requirements referred to above even though no
corresponding cash amounts may concurrently be received, possibly requiring the
disposition of portfolio securities or borrowing to obtain the necessary cash.
Also, certain losses on transactions involving options, futures or forward
contracts and/or offsetting or successor positions may be deferred rather than
being taken into account currently in calculating the Funds' taxable income or
gain. Certain of the applicable tax rules may be modified if a Fund or a
Portfolio is eligible and chooses to make one or more of certain tax elections
that may be available. These transactions may therefore affect the amount,
timing and character of a Fund's distributions to shareholders. Each Fund will
take into account the special tax rules applicable to options, futures , forward
contracts and constructive sales in order to minimize any potential adverse tax
consequences.
The Federal income tax rules applicable to certain structured or hybrid
securities, dollar rolls, currency swaps, and interest rate swaps, caps, floors
38
<PAGE>
and collars are unclear in certain respects, and a Fund or Portfolio will
account for these instruments in a manner that is intended to allow the Funds to
continue to qualify as regulated investment companies. Due to possible
unfavorable consequences under present tax law, each Fund and Portfolio does not
currently intend to acquire "residual" interests in real estate mortgage
investment conduits ("REMICs"), although the Funds or the Portfolios may acquire
"regular" interests in REMICs.
Foreign exchange gains and losses realized by the Fixed Income Portfolio ,
Diversified Income Portfolio and Securitized Fund in connection with certain
transactions, if any, involving foreign currency-denominated debt securities,
certain foreign currency futures and options, foreign currency forward
contracts, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of Fund distributions to shareholders. In some
cases, elections may be available that would alter this treatment. Any such
transactions that are not directly related to the Fixed Income Portfolio,
Diversified Income Portfolio or Securitized Fund's investment in stock or
securities, possibly including speculative currency positions or currency
derivatives not used for hedging purposes, could under future Treasury
regulations produce income not among the types of "qualifying income" from which
each Fund must derive at least 90% of its gross income for its taxable year.
In some countries, restrictions on repatriation may make it difficult or
impossible for a Fund or Portfolio to obtain cash corresponding to its earnings
from such countries, which may cause a Fund to have difficulty obtaining cash
necessary to satisfy tax distribution requirements.
The Fixed Income Portfolio, Diversified Income Portfolio or Securitized
Fund may be subject to withholding and other taxes imposed by foreign countries
with respect to their investments in foreign securities. Tax conventions between
certain countries and the U.S. may reduce or eliminate such taxes in some cases.
Investors in the Fixed Income Fund , Diversified Income Fund or Securitized Fund
would be entitled to claim U.S. foreign tax credits or deductions with respect
to such taxes, subject to certain holding period requirements and other
provisions and limitations contained in the Code, only if more than 50% of the
value of the applicable Fund's total assets (in the case of a Fund that invests
in a Portfolio, taking into account its allocable share of the Portfolio's
assets) at the close of any taxable year were to consist of stock or securities
of foreign corporations and the Fund were to file an election with the Internal
Revenue Service. Because the investments of the Fixed Income Portfolio and
Securitized Fund are such that each Fund expects that it will not meet this 50%
requirement, shareholders of each Fund generally will not directly take into
account the foreign taxes, if any, paid by the Fixed Income Portfolio and
allocable to the Fixed Income Fund or paid by the Securitized Fund, and will not
be entitled to any related tax deductions or credits. Such taxes will reduce the
amounts each Fund would otherwise have available to distribute.
Taking into account its share of the investments of the Diversified Income
Portfolio, the Diversified Income Fund may meet the 50% threshold referred to in
the previous paragraph for a year and, if it does, may file an election with the
Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends actually received) their pro rata shares of qualified foreign taxes
paid by the Portfolio and allocated to the Fund even though not actually
received by them and (ii) treat such respective pro rata portions as foreign
taxes paid by them.
If the Diversified Income Fund makes this election, shareholders may then
deduct such pro rata portions of qualified foreign taxes in computing their
taxable incomes, or, alternatively, use them as foreign tax credits, subject to
applicable holding period requirements and other limitations, against their U.S.
federal income taxes. Shareholders who do not itemize deductions for federal
income tax purposes will not, however, be able to deduct their pro rata portion
of qualified foreign taxes paid by the Diversified Income Portfolio, although
such shareholders will be required to include their share of such taxes in gross
income. Shareholders who claim a foreign tax credit for such foreign taxes may
be required to treat a portion of dividends received from the Diversified Income
Fund as a separate category of income for purposes of computing the limitations
on the foreign tax credit. Tax exempt shareholders will ordinarily not benefit
from this election. Each year (if any) that the Diversified Income Fund files
the election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of qualified foreign taxes paid by the
Portfolio and (ii) the portion of Fund dividends which represents income from
each foreign country.
If the Fixed Income Portfolio, Diversified Income Portfolio or Securitized
Fund acquires stock (including, under proposed regulations, an option to
39
<PAGE>
acquire stock such as is inherent in a convertible bond) in certain foreign
corporations that receive at least 75% of their annual gross income from passive
sources (such as interest, dividends, certain rents and royalties, or capital
gains) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fixed Income ,
Securitized and Diversified Income Funds could be subject to Federal income tax
and additional interest charges on "excess distributions" actually or
constructively received from such companies or gain from the actual or deemed
sale of stock in such companies, even if all income or gain actually realized is
timely distributed to its shareholders. They would not be able to pass through
to their shareholders any credit or deduction for such a tax. Certain elections
may, if available, ameliorate these adverse tax consequences, but any such
election would require them to recognize taxable income or gain (subject to tax
distribution requirements) without the concurrent receipt of cash. These
investments could also result in the treatment of associated capital gains as
ordinary income. The Fixed Income Portfolio, Diversified Income Portfolio and
Securitized Fund may limit and/or manage stock holdings, if any, in passive
foreign investment companies to minimize each Fund's tax liability or maximize
its return from these investments.
Investment in debt obligations by the Fixed Income Portfolio and
Diversified Income Portfolio that are at risk of or in default presents special
tax issues for the applicable Fund. Tax rules are not entirely clear about
issues such as when the Portfolio may cease to accrue interest, original issue
discount, or market discount, when and to what extent deductions may be taken
for bad debts or worthless securities, how payments received on obligations in
default should be allocated between principal and income, and whether exchanges
of debt obligations in a workout context are taxable. These and other issues
will be addressed by a Portfolio, in the event that it holds such obligations,
in order to reduce the risk of the corresponding Fund, or any other RIC
investing in the Portfolio, distributing insufficient income to preserve its
status as a RIC or becoming subject to Federal income or excise tax.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Funds' Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to 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 amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received. As a result
of the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on August
5, 1997, gain recognized after May 6, 1997 from the sale of a capital asset is
taxable to individual (noncorporate) investors at different maximum federal
income tax rates, depending generally upon the tax holding period for the asset,
the federal income tax bracket of the taxpayer, and the dates the asset was
acquired and/or sold. The Treasury Department has issued guidance under the 1997
TRA that (subject to possible modification by future "technical corrections"
legislation) enables each Fund to pass through to its shareholders the benefits
of the capital gains tax rates enacted in the 1997 TRA. Each Fund will provide
appropriate information to its shareholders about the tax rate(s) applicable to
its distributions from its long-term capital gains in accordance with this and
any future guidance. Shareholders should consult their own tax advisers on the
correct application of these new rules in their particular circumstances.
A Fund's distributions to its corporate shareholders would potentially
qualify in their hands for the corporate dividends received deduction, subject
to certain holding period requirements and limitations on debt financing under
the Code, only to the extent a Fund earned dividend income (or, in the case of a
Standish Feeder Fund, was allocated dividend income of the applicable Portfolio)
from stock investments in U.S. domestic corporations. The Funds and the
Portfolios are permitted to acquire preferred stocks of U.S. domestic
corporations, and it is therefore possible that a portion of a Fund's
distributions, from the dividends attributable to such preferred stocks, may
qualify for the dividends received deduction. Such qualifying portion, if any,
may affect a corporate shareholder's liability for alternative minimum tax
and/or result in basis reductions and other consequences in certain
circumstances.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to undistributed net investment income and/or
realized or unrealized appreciation in the Fund's portfolio (or share of the
Portfolio's portfolio in the case of the Standish Feeder Funds). Consequently,
subsequent distributions by a Fund on such shares from such income and/or
appreciation may be taxable to such investor even if the net asset value of the
investor's shares is, as a result of the distributions, reduced below the
investor's cost for such shares, and the distributions economically represent a
return of a portion of the purchase price.
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<PAGE>
Upon a redemption or other disposition of shares of a Fund in a
transaction that is treated as a sale for tax purposes, a shareholder may
realize a taxable gain or loss, depending upon the difference between the
redemption proceeds and the shareholder's tax basis in his shares. Such gain or
loss will generally be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands . Any loss realized on a redemption or other
disposition may be disallowed to the extent the shares disposed of are replaced
with other shares of the same Fund within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of, such as pursuant to
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized upon
the redemption of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
Shareholders should consult their own tax advisers regarding their particular
circumstances to determine whether a disposition of Fund shares is properly
treated as a sale for tax purposes, as is assumed in the foregoing discussion.
Also, future Treasury Department regulations, announcements or other guidance
issued to implement the 1997 TRA may contain rules for determining different tax
rates applicable to sales of Fund shares held for more than one year, more than
18 months, and (for certain sales after the year 2000 or the year 2005) more
than five years. Those regulations may also modify some of the provisions
described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
adviser for more information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. A state income (and possibly local income
and/or intangible property) tax exemption is generally available to the extent,
if any, a Fund's distributions are derived from interest on (or, in the case of
intangible property taxes, the value of its assets is attributable to)
investments in certain U.S. Government obligations, provided in some states that
certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Shareholders should consult their tax advisers
regarding the applicable requirements in their particular states, including the
effect, if any, of any Standish Feeder Fund's indirect ownership (through the
corresponding Portfolio) of any such obligations, as well as the Federal, and
any other state or local, tax consequences of ownership of shares of, and
receipt of distributions from, a Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in a Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax adviser regarding such
treatment and the application of foreign taxes to an investment in the Fund.
ADDITIONAL INFORMATION
The Prospectus and this SAI omit certain information contained in the
registration statement filed with the SEC, which may be obtained from the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment
of the fee prescribed by the rules and regulations promulgated by the Commission
or by accessing the SEC's Web site at http://www.sec.gov.
EXPERTS AND FINANCIAL STATEMENTS
Except as noted in the next sentence, each Fund's financial statements
contained in the 1997 Annual Reports of the Funds have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are incorporated by reference into
this SAI. Financial highlights of the Fixed Income Fund, Securitized Fund and
Short-Term Asset Reserve Fund for periods from commencement of operations
through December 31, 1992 were audited by other auditors. The Portfolios'
financial statements contained in the Fixed Income Fund's and Diversified Income
Fund's 1997 Annual Report have been audited by Coopers & Lybrand, P.O. Box 219,
Grand Cayman, Grand Cayman Islands, BWI, an affiliate of Coopers & Lybrand
L.L.P.
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The financial statements for the year ended December 31, 1997 are
incorporated by reference from the 1997 Annual Reports, which were previously
sent to shareholders and were filed with the SEC on March 9, 1998, 1940 Act File
No. 811-04813.
APPENDIX
MOODY'S RATINGS DEFINITIONS FOR
CORPORATE BONDS AND SOVEREIGN,
SUBNATIONAL AND SOVEREIGN
RELATED ISSUES
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
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STANDARD & POOR'S RATINGS
DEFINITIONS
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB - Debt rated BB is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
STANDARD & POOR'S
CHARACTERISTICS OF SOVEREIGN DEBT
OF FOREIGN COUNTRIES
AAA - Stable, predictable governments with demonstrated track record of
responding flexibly to changing economic and political circumstances
Key players in the global trade and financial system:
- Prosperous and resilient economies, high per capita incomes
- Low fiscal deficits and government debt, low inflation
- Low external debt.
AA - Stable, predictable governments with demonstrated track record of
responding to changing economic and political circumstances
- tightly integrated into global trade and financial system
- Differ from AAAs only to a small degree because:
- Economies are smaller, less prosperous and generally more vulnerable
to adverse external influences (e.g., protection and terms of trade
shocks)
- More variable fiscal deficits, government debt and inflation
- Moderate to high external debt.
A - Politics evolving toward more open, predictable forms of governance in
environment of rapid economic and social change
- Established trend of integration into global trade and financial
system
- Economies are smaller, less prosperous and generally more vulnerable
to adverse external influences (e.g., protection and terms of trade
shocks), but
- Usually rapid growth in output and per capita incomes
- Manageable through variable fiscal deficits, government debt and
inflation
- Usually low but variable debt
- Integration into global trade and financial system growing but
untested
- Low to moderate income developing economies but variable performance
and quite vulnerable to adverse external influences
- Variable to high fiscal deficits, government debt and inflation
- Very high and variable debt, often graduates of Brady plan but track
record not well established.
BBB - Political factors a source of significant uncertainty, either
because system is in transition or due to external threats, or both, often in
environment of rapid economic and social change
- Integration into global trade and financial system growing but
untested
- Economies less prosperous and often more vulnerable to adverse
external influences
- Variable to high fiscal deficits, government debt and inflation
- High and variable external debt.
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BB - Political factors a source of major uncertainty, either because
system is in transition or due to external threats, or both, often in
environment of rapid economic and social change
- Integration into global trade and financial system growing but
untested
- Low to moderate income developing economies, but variable
performance and quite vulnerable to adverse external influences
- Variable to high fiscal deficits, government debt and inflation
- Very high and variable debt, often graduates of Brady Plan but track
record not well established
In the case of sovereign, subnational and sovereign related issuers, a
Fund uses the foreign currency or domestic (local) currency rating depending
upon how a security in the portfolio is denominated. In the case where a Fund
holds a security denominated in a domestic (local) currency and one of the
rating services does not provide a domestic (local) currency rating for the
issuer, the Fund will use the foreign currency rating for the issuer; in the
case where a Fund holds a security denominated in a foreign currency and one of
the rating services does not provide a foreign currency rating for the issuer,
the Fund will treat the security as being unrated.
DESCRIPTION OF DUFF & PHELPS
RATINGS FOR CORPORATE BONDS AND
FOR SOVEREIGN, SUBNATIONAL AND
SOVEREIGN RELATED ISSUERS
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A - Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
BBB - Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB - Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B - Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating guide.
FITCH IBCA INTERNATIONAL
LONG-TERM CREDIT RATING
DEFINITIONS
AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB - Bonds considered to be investment grade and of good credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB - Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B - Bonds are considered highly speculative. The obligor's ability to pay
interest and repay principal are currently being met, but a limited margin
safety remains. However, capacity for
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continued payment is contingent upon a sustained, favorable business and
economic environment.
FITCH IBAC LONG-TERM RATINGS FOR
NATIONAL ISSUES
AAA - Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially.
AA - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk, albeit not very significantly.
A - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories.
BB - Obligations for which capacity for timely repayment of principal and
interest is uncertain relative to other obligors in the same country. Within the
context of the country, these obligations are speculative to some degree and
capacity for timely repayment remains susceptible over time to adverse changes
in business, financial or economic conditions.
B - Obligations for which capacity for timely repayment of principal and
interest is uncertain relative to other obligors in the same country. Timely
repayment of principal and interest is not sufficiently protected against
adverse changes in business, economic or financial conditions and these
obligations are more speculative than those in higher rated categories.
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mccain/105061.100/fixed98/fixsai8.wpf
46
<PAGE>
The Standish
Group of
Global Fixed
Income Funds
Standish International
Fixed Income Fund
Standish Global Fixed
Income Fund
Standish Diversified
Income Fund
[LOGO] Standish Funds(SM)
Prospectus
----------
April 30, 1998
<PAGE>
Standish Group of Global Fixed Income Funds
- --------------------------------------------------------------------------------
The Standish Group of Global Fixed Income Funds includes the Standish
International Fixed Income Fund, Standish Global Fixed Income Fund and Standish
Diversified Income Fund. Each Fund is organized as separate investment series of
the Standish, Ayer & Wood Investment Trust, an open end investment company (the
"Trust"). The Diversified Income Fund is a diversified mutual fund and the
Global Fixed Income Fund and International Fixed Income Fund are non-diversified
mutual funds. The Global Fixed Income Fund and Diversified Income Fund invest
exclusively in the Standish Global Fixed Income Portfolio and Standish
Diversified Income Portfolio, respectively, each an open end investment company.
Standish International Management Company, L.P. ("SIMCO"), Boston, Massachusetts
is the investment adviser to the Portfolios and the International Fixed Income
Fund.
Prospective investors can obtain more information about the Funds, including
an application and Investor Guide, by calling Standish Fund Distributors, L.P.
at (800) 729-0066, or by visiting our Website at www.standishfunds.com.
The primary investment management and research focus of SIMCO is at the
security and industry/sector level. SIMCO seeks to add value to each Fund's
portfolio by selecting undervalued investments, rather than by varying the
average maturity of a Fund's portfolio to reflect interest rate forecasts. SIMCO
utilizes fundamental credit and sector valuation techniques to evaluate what it
considers to be less efficient markets and sectors of the fixed income
marketplace in an attempt to select securities with the potential for the
highest return. SIMCO emphasizes intermediate term economic fundamentals
relating to foreign countries and emerging markets, rather than focusing on
day-to-day fluctuations in a particular currency or in the fixed income markets.
SIMCO serves as the international research and investment arm of Standish, Ayer
& Wood, Inc. ("Standish") for both debt and equity securities in all countries
outside of the United States. Standish has been providing investment counseling
to mutual funds, other institutional investors and high net worth individuals
for more than sixty years. Standish offers a broad array of investment services
that includes U.S., international and global management of fixed income and
equity securities for mutual funds and separate accounts. Privately held by
twenty-four employee/directors and headquartered in Boston, Massachusetts, the
firm employs over eighty investment professionals with a total staff of more
than two hundred.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing and should be retained for
future reference. Additional information has been filed with the Securities and
Exchange Commission ("SEC") in a Statement of Additional Information ("SAI")
dated April 30, 1998, as amended or supplemented from time to time. The SAI is
incorporated by reference into this Prospectus and is available without charge
upon request from (800) 729-0066. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI and other information regarding the
Funds and the Portfolios.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other government agency. An investment in shares of the Funds involves
investment risks, including possible loss of principal.
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 THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Shares of the Funds are not available for sale in every state. This Prospectus
is not intended to be an offer to sell shares, nor may an offer to purchase
shares be accepted from investors, in those states where shares of the Funds may
not legally be sold. Contact Standish Fund Distributors to determine whether the
Funds are available for sale in your state.
Standish Group of Global Fixed Income Funds 2 April 30, 1998
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Fund Comparison Highlights..........................................4
Expense Information.................................................5
Financial Highlights................................................6
Investment Objectives and Policies..................................9
Investment Strategy.................................................9
The International Fixed Income Fund............................10
The Global Fixed Income Fund...................................10
The Diversified Income Fund....................................10
Description of Securities and Related Risks........................11
General Risks..................................................11
Specific Risks.................................................12
Investment Techniques and Related Risks............................16
Information about the Master-Feeder Structure......................18
Calculation of Performance Data....................................18
Dividends and Distributions........................................19
Purchase of Shares.................................................19
Net Asset Value....................................................19
Exchange of Shares.................................................20
Redemption of Shares...............................................20
Management.........................................................21
Federal Income Taxes...............................................23
The Funds and Their Shares.........................................23
Custodian, Transfer Agent and Dividend Disbursing Agent............23
Independent Accountants............................................23
Legal Counsel......................................................24
Tax Certification Instructions.....................................24
Standish Group of Global Fixed Income Funds 3 April 30, 1998
<PAGE>
Fund Comparison Highlights
- --------------------------------------------------------------------------------
The following table highlights information contained in this Prospectus and is
qualified in its entirety by the more detailed information that follows. For a
complete description of each Fund's distinct investment objective and policies,
see "Investment Objectives and Policies," "Description of Securities and Related
Risks" and "Investment Techniques and Related Risks." There can be no assurance
that a Fund's investment objective will be achieved.
<TABLE>
<CAPTION>
International Fixed Diversified Income
Income Fund Global Fixed Income Fund Fund
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Maximize total return Maximize total return Maximize total
Objective while realizing a while realizing a market return, consisting
market level of level of income consistent primarily of a high
income consistent with preserving principal level of income
with preserving and liquidity
principal and
liquidity
Foreign Under normal market Under normal market Yes; no more than 15%
Securities conditions, 65% or conditions, 65% or more of of total assets in
Selected more of total assets total assets in fixed any one developed
in fixed income income securities of country (except U.S.)
securities of issuers issuers located in at and no more than 7%
located in at least least three countries, of total assets in
three countries, including the U.S. any one emerging
excluding the U.S. market country
U.S. Generally will not Generally will consider Will consider fixed
Securities consider fixed income fixed income securities of income securities of
Selected securities of U.S. U.S. issuers in its U.S. issuers in its
issuers in its investment strategy investment strategy
investment strategy
Intended No fewer than five No fewer than three No fewer than three
Country different countries different countries different countries
Diversification
Currency Will hedge currencies Will hedge currencies to Will hedge currencies
Strategy to seek to protect seek to protect the U.S. to seek to protect
the U.S. dollar value dollar value of the Fund's the U.S. dollar value
of the Fund's assets assets of the Fund's assets;
at least 80% of total
assets are
denominated in or
hedged to the U.S.
dollar
Below Yes, up to 10% of Yes, up to 15% of total Yes, up to 65% of
Investment total assets in below assets in below investment total assets in below
Grade investment grade grade securities investment grade
securities securities
Average Aa/AA In range of AA/Aa to A/A Ba/BB
Portfolio
Quality
Benchmark J.P. Morgan Non-U.S. J.P. Morgan Global Lehman Brothers
Government Bond Index Government Bond Index Aggregate Bond Index
(Hedged) and Lehman (Hedged)
Brothers Aggregate
Bond Index
</TABLE>
Standish Group of Global Fixed Income Funds 4 April 30, 1998
<PAGE>
Expense Information
- --------------------------------------------------------------------------------
Total operating expenses are based on expenses for each Fund's fiscal year
ended December 31, 1997. Total operating expenses for the Global Fixed Income
Fund include expenses of the Fund and the Standish Global Fixed Income Portfolio
and for the Diversified Income Fund include expenses of the Fund and the
Diversified Income Portfolio. The Trust's Trustees believe that the total
operating expenses of the Global Fixed Income Fund are approximately equal to or
less than what would be the case if the Fund did not invest all of its
investable assets in the Global Fixed Income Portfolio.
<TABLE>
<CAPTION>
International Global Fixed Diversified
Fixed Income Fund Income Fund Income Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None None
Maximum Sales Load Imposed on Reinvested
Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Annual Operating Expenses
(as a percentage of average net assets)
Management Fees (after applicable limitation) 0.40% 0.39%* 0.00%*
12b-1 Fees None None None
Other Expenses (after applicable expense
limitation)+ 0.13% 0.26%* 0.00%*
------------------ ----------------- -----------------
Total Operating Expenses (after applicable
expense limitation) 0.53% 0.65%* 0.00%*
================== ================= =================
</TABLE>
* SIMCO has voluntarily and temporarily agreed to limit certain expenses of the
Global Fixed Income Fund and Diversified Income Fund. In the absence of such
agreements, the Management Fees, Other Expenses and Total Operating Expenses
(as a percentage of average net assets) for the fiscal year ended December
31, 1997 would have been: Global Fixed Income Fund 0.40%, 0.26%, and 0.66%;
and Diversified Income Fund 0.50%, 1.46%, and 1.96%. SIMCO may revise or
terminate these agreements at any time although it has no current intention
to do so.
+ Other expenses include custodian and transfer agent fees, registration costs,
payments for insurance, and audit and legal services
Example
Hypothetically assume that each Fund's annual return is 5% and that its total
operating expenses are exactly as described. For every $1,000 invested, an
investor would have paid the followihg expenses if an account were closed after
the number of years indicated:
International Global Fixed Diversified
Fixed Income Fund Income Fund Income Fund
After 1 Year $5 $7 $0
After 3 Years 17 21 0
After 5 Years 30 36 0
After 10 Years 67 81 0
The purpose of the table is to assist investors in understanding the various
costs and expenses that an investor in each Fund will bear directly or
indirectly. The example is included solely for illustrative purposes and should
not be considered a representation of future performance or expenses. Actual
expenses may be more or less than those shown. See "Management" for additional
information about each Fund's expenses.
Standish Group of Global Fixed Income Funds 5 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights for periods after 1992 have been audited by Coopers &
Lybrand L.L.P., independent accountants, whose reports, together with the
Financial Statements of the Funds, are incorporated into the Statement of
Additional Information. Financial highlights for prior periods were audited by
other independent accountants. The Funds' annual reports, which contain
additional information about Fund performance, may be obtained from Standish
Fund Distributors without charge.
<TABLE>
<CAPTION>
International Fixed Income Fund Year Ended December 31,
1997(1) 1996(1) 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $23.25 $23.21 $21.30 $24.22 $21.20
---------- ---------- ---------- ---------- ----------
Income from investment operations
Net investment income $1.54 $1.72 $1.96 $1.71 $2.03
Net realized and unrealized gain
(loss) on Investments 1.16 1.73 1.84 (3.93) 2.90
---------- ---------- ---------- ---------- ----------
Total from investment operations $2.70 $3.45 $3.80 ($2.22) $4.93
---------- ---------- ---------- ---------- ----------
Less distributions declared
to shareholders
From net investment income ($2.86) ($2.64) ($1.89) ($0.20) ($1.53)
From realized gain (0.28) (0.77) -- -- (0.26)
In excess of net realized gain -- -- -- -- --
In excess of net investment income -- -- -- -- (0.12)
Tax return of capital -- -- -- (0.50) --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders ($3.14) ($3.41) ($1.89) ($0.70) ($1.91)
---------- ---------- ---------- ---------- ----------
Net asset value - end of period $22.81 $23.25 $23.21 $21.30 $24.22
========== ========== ========== ========== ==========
Total return(2) 11.86% 15.28% 18.13% (9.22%) 23.77%
Ratios (to average daily net assets)/
Supplemental Data
Net assets at end of period (000's omitted) $1,172,695 $840,133 $803,537 $1,069,416 $1,131,201
Expenses 0.53% 0.53% 0.51% 0.51% 0.51%
Net investment income 6.37% 7.17% 8.09% 7.69% 7.53%
Portfolio turnover 173% 226% 165% 158% 98%
</TABLE>
International Fixed Income Fund
1992* 1991*+
Net asset value - beginning of period $22.05 $20.00
---------- ----------
Income from investment operations
Net investment income $2.01 $1.55
Net realized and unrealized gain
(loss) on Investments (0.25) 1.44
---------- ----------
Total from investment operations $1.76 $2.99
---------- ----------
Less distributions declared
to shareholders
From net investment income ($2.03) ($0.04)
From realized gain (0.54) (0.90)
In excess of net realized gain (0.04) --
In excess of net investment income -- --
Tax return of capital -- --
---------- ----------
Total distributions declared to shareholders ($2.61) ($0.94)
---------- ----------
Net asset value - end of period $21.20 $22.05
========== ==========
Total return(2) 8.07% 15.11%t
Ratios (to average daily net assets)/
Supplemental Data
Net assets at end of period (000's omitted) $384,660 $72,697
Expenses 0.59% 0.80%t
Net investment income 8.37% 8.00%t
Portfolio turnover 175% 319%
- ----------
t Computed on an annualized basis.
* Audited by other auditors.
+ For the period from January 2, 1991 (commencement of operations) to December
31, 1991.
(1) Computed based on average shares outstanding.
(2) The Fund's performance benchmarks are the J.P. Morgan Non-U.S. Government
Bond Index (Hedged) and the Lehman Brothers Aggregate Bond Index. See
"Calculation of Performance Data" for a description of these indices. The
average annual total return of these indices for each year since the Fund's
inception was as follows (this total return information is not audited):
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return
J.P. Morgan Non-U.S. Government Bond Index
(Hedged) 11.32% 12.60% 18.23% (5.07%) 13.90% 5.97% 10.90%
Lehman Brothers Aggregate Bond Index 9.68% 3.61% 18.47% 2.92% 9.75% 7.40% 16.00%
</TABLE>
Standish Group of Global Fixed Income Funds 6 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Fixed Income Fund Year Ended December 31,
1997 1996(4) 1995 1994+
<S> <C> <C> <C> <C>
Net asset value - beginning of period $20.09 $19.53 $17.99 $20.00
-------- -------- -------- --------
Income from investment operations
Net investment income $1.34* $1.42 $1.59 $1.29*
Net realized and unrealized gain (loss) 0.96 1.05 1.60 (2.70)
-------- -------- -------- --------
Total from investment operations $2.30 $2.47 $3.19 ($1.41)
Less distributions declared to shareholders
Tax return of capital -- -- -- ($0.60)
From net realized gain on investments (0.02) -- -- --
From net investment income (1.98) (1.91) (1.65) --
-------- -------- -------- --------
Total distributions declared to shareholders ($2.00) ($1.91) ($1.65) ($0.60)
-------- -------- -------- --------
Net asset value - end of period $20.39 $20.09 $19.53 $17.99
======== ======== ======== ========
Total return(5) 11.68% 13.03% 18.13% (7.06)%
Ratios (to average daily net assets)/Supplemental Data
Net assets at end of period (000's omitted) $255,762 $155,731 $137,899 $135,232
Expenses(1) 0.65%* 0.65% 0.62% 0.65%t*
Net investment income 6.42%* 7.11% 7.69% 7.73%t*
Portfolio turnover 176%(3) 184%(2) 163% 140%
- ----------
<CAPTION>
* The Adviser voluntarily agreed not to impose a portion
of its investment advisory fee. Had these actions not
been taken, the net investment income per share and the
ratios would have been:
<S> <C> <C> <C> <C>
Net investment income per share $1.33 -- -- $1.27
Ratios (to average daily net assets):
Expenses 0.66% -- -- 0.73%t
Net investment income 6.41% -- -- 7.65%t
</TABLE>
t Computed on an annualized basis.
+ For the period from January 3, 1994 (commencement of operations) to December
31, 1994.
(1) Includes the Fund's share of Standish Global Fixed Income Portfolio's
allocated expenses for the period from May 3, 1996 to December 31, 1996.
(2) Represents the theoretical unaudited portfolio turnover rate of the Fund for
the year ended December 31, 1996 had the Fund not contributed its assets to
the Standish Global Fixed Income Portfolio on May 3, 1996. The portfolio
turnover rate of the Fund for the period from January 1, 1996 to May 2, 1996
was 73%. The Portfolio turnover rate of the Standish Global Fixed Income
Portfolio for the period from May 3, 1996 to December 31, 1996 was 111%.
(3) For periods after December 31, 1996, information is for the Standish Global
Fixed Income Portfolio.
(4) Calculated based on average shares outstanding.
(5) The Fund's performance benchmark is the J.P. Morgan Global Index (Hedged).
See "Calculation of Performance Data" for a description of this index. The
average annual total return of this index for each year since the Fund's
inception was as follows (the total return information was not audited):
1997 1996 1995 1994
Total Return
J.P. Morgan Global Government
Bond Index (Hedged) 10.87% 8.60% 17.89% (4.05%)
Standish Group of Global Fixed Income Funds 7 April 30, 1998
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period June 2, 1997
(commencement of operations)
Diversified Income Fund to December 31, 1997(1)
<S> <C>
Net asset value, beginning of period $ 20.00
--------
Income from operations:
Net investment income* 0.98
Net realized and unrealized gain on investments 0.26
--------
Total from investment operations 1.24
--------
Less distributions declared to shareholders:
From net investment income (0.63)
From net realized gain on investments (0.10)
--------
Total distributions (0.73)
--------
Net asset value, end of period $ 20.51
========
Total return(4) 6.20%
Ratios (to average daily net assets)/Supplemental Data
Net assets, end of period (000's omitted) $27,398
Expenses*(2) 0.00+
Net investment income* 8.07%+
Portfolio Turnover(3) 25%
- ----------
* For the period June 2, 1997 (commencement of operations) to December 31,
1997, the Adviser voluntarily agreed not to impose its advisory fee on the
Portfolio and reimbursed the Fund and the Portfolio for their operating
expenses. Had these actions not been taken, the net investment income per
share and the ratios would have been:
<CAPTION>
<S> <C>
Net investment income per share $ 0.74
Ratios (to average daily net assets):
Expenses (2) 1.96%+
Net investment income 6.11%+
</TABLE>
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's shares of Standish Diversified Income Portfolio's
allocated expenses for the period from June 2, 1997 to December 31, 1997.
+ Computed on an annualized basis.
(3) The portfolio turnover rate listed is for the Standish Diversified Income
Portfolio. Because the Fund does not make investments directly in
securities, the Fund does not have any portfolio turnover activity.
(4) The Fund's performance benchmark is the Lehman Brothers Aggregate Index.
See "Calculation of Performance Data" for a description of the index. The
average annual total return of this index for a portion of the initial year
since inception was as follows (this total return information is not
audited):
1997
Total Return
Lehman Brothers Aggregate Index 7.64%
Standish Group of Global Fixed Income Funds 8 April 30, 1998
<PAGE>
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Investment Strategy
The International Fixed Income Fund and Global Fixed Income Fund are actively
managed non-diversified mutual funds consisting primarily of fixed income
securities denominated in foreign currencies and the U.S. dollar. They are
managed to maximize total return while realizing a market level of income
consistent with preserving principal and liquidity. The Diversified Income Fund
is an actively managed diversified mutual fund consisting primarily of income
producing securities. The Diversified Income Fund is managed to maximize total
return consisting primarily of a high level of income. The Global Fixed Income
Fund and the Diversified Income Fund each invests all of its investable assets
in a corresponding Portfolio. These Funds are sometimes referred to in this
Prospectus as the Standish Feeder Funds. This structure, where one fund invests
all of its investable assets in another investment company, is described below
under the caption "Information About The Master-Feeder Structure."
In pursuing each Fund's investment strategy, SIMCO seeks to add value to each
Fund's portfolio by selecting undervalued investments, rather than by varying
the average maturity of a Fund's portfolio to reflect interest rate forecasts.
SIMCO utilizes fundamental credit and sector valuation techniques to evaluate
what it considers to be less efficient markets and sectors of the fixed income
marketplace in an attempt to select securities with the potential for the
highest return. SIMCO emphasizes intermediate term economic fundamentals
relating to foreign countries and emerging markets, rather than focusing on
day-to-day fluctuations in a particular currency or in the fixed income markets.
Securities. The Funds may invest in all types of fixed income securities
including bonds, notes (including structured or hybrid notes), mortgage-backed
securities, asset-backed securities, convertible securities, Eurodollar and
Yankee Dollar instruments, preferred stocks (including convertible preferred
stock), listed and unlisted warrants and money market instruments (such as
negotiable certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances and commercial paper). These fixed income securities may be issued
by foreign and U.S. companies, foreign and U.S. banks, foreign governments and
their political subdivisions, the U.S. government, its agencies, authorities,
instrumentalities or sponsored enterprises and supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development, and international banking institutions and related government
agencies.
Each Fund may purchase securities that pay interest on a fixed, variable,
floating, inverse floating, contingent, in-kind or deferred basis. Each Fund may
enter into repurchase agreements and forward dollar roll transactions, may
purchase zero coupon and deferred payment securities, may buy securities on a
when-issued or delayed delivery basis, may engage in short sales and may lend
portfolio securities. Each Fund may purchase shares of other investment
companies and real estate investment trusts ("REITs"). Each Fund may enter into
various forward foreign currency exchange transactions and foreign currency
futures transactions and utilize over-the-counter ("OTC") options to seek to
manage the Fund's foreign currency exposure. Please refer to each Fund's
specific investment objective and policies and "Description of Securities and
Related Risks" for a more comprehensive list of permissible securities and
investments.
Credit Quality. The International Fixed Income Fund and Global Fixed Income
Fund invest primarily in fixed income securities that are considered investment
grade at the time of purchase. The Diversified Income Portfolio may invest
significantly in fixed income securities considered below investment grade at
the time of purchase. Investment grade securities are those that are rated at
the time of purchase Baa or higher by Moody's Investors Service, Inc.
("Moody's") or BBB or higher by Standard & Poor's Ratings Group ("Standard &
Poor's), Duff & Phelps, Inc. ("Duff") or Fitch IBCA, Inc. ("Fitch"), or, if
unrated, determined by SIMCO to be of comparable credit quality.
Securities rated Baa or P-2 by Moody's or BBB, A-2 or Duff-2 by Standard &
Poor's, Duff or Fitch are generally considered medium grade obligations and have
some speculative characteristics. Adverse changes in economic conditions or
other circumstances are more likely to weaken the medium grade issuer's
capability to pay interest and repay principal than is the case for high grade
securities.
Fixed income securities rated Ba and below by Moody's or BB and below by
Standard & Poor's, Duff or Fitch, or, if unrated, determined by SIMCO to be of
comparable credit quality are considered below investment grade obligations.
Below investment grade securities, commonly referred to as "junk bonds," carry a
higher degree of risk than medium grade securities and are considered
speculative by the rating agencies. To the extent a Fund invests in medium grade
or below investment grade fixed income securities, SIMCO attempts to select
those fixed income securities that have the potential for upgrade.
If a security is rated differently by two or more rating agencies, SIMCO uses
the highest rating to compute a Fund's credit quality and also to determine the
security's rating category. In the case of unrated sovereign and subnational
debt of foreign countries, SIMCO may take into account, but will not rely
entirely on, ratings assigned to the issuers of such securities. If the rating
of a security held by a Fund is downgraded below the minimum rating required for
the particular Fund, SIMCO will determine whether to retain that security in the
Fund's portfolio.
* * *
Each Fund's specific investment objective and policies are set forth below and
will assist the investor in differentiating each Fund's unique characteristics.
Because of the uncertainty
Standish Group of Global Fixed Income Funds 9 April 30, 1998
<PAGE>
inherent in all investments, no assurance can be given that a Fund will achieve
its investment objective. See "Description of Securities and Related Risks" and
"Investment Techniques and Related Risks" below for additional information.
The International Fixed Income Fund
Investment Objective. The Fund's investment objective is to maximize total
return while realizing a market level of income consistent with preserving
principal and liquidity.
Securities. Under normal market conditions, the Fund invests at least 65% of
its total assets in fixed income securities of foreign governments or their
political subdivisions and companies located in foreign countries.
Country Selection. Under normal market conditions, the Fund's assets are
invested in securities of issuers located in at least five countries, not
including the United States. The Fund may invest a substantial portion of its
assets in one or more of those five countries. The Fund may also invest up to
10% of its total assets in emerging markets generally and may invest up to 3% of
its total assets in any one emerging market.
Credit Quality. The Fund invests primarily in investment grade fixed income
securities. The Fund may, however, invest up to 10% of its total assets in
securities rated Ba or below by Moody's or BB or below by Standard and Poor's,
Duff, Fitch or IBCA, or, if not rated, judged by SIMCO to be of equivalent
credit quality. The average dollar-weighted credit quality of the Fund's
portfolio is expected to be Aa according to Moody's or AA according to Standard
& Poor's, Duff, Fitch or IBCA.
The Global Fixed Income Fund
The investment objective and characteristics of the Global Fixed Income Fund
correspond directly to those of the Standish Global Fixed Income Portfolio in
which the Fund invests all of its investable assets. The following discusses the
investment objectives and policies of the Portfolio.
Investment Objective. The Portfolio's investment objective is to maximize
total return while realizing a market level of income consistent with preserving
principal and liquidity.
Securities. Under normal market conditions, the Portfolio invests at least 65%
of its total assets in fixed income securities of foreign governments or their
political subdivisions and companies located in countries around the world,
including the United States.
Country Selection. Under normal market conditions, the Portfolio's assets are
invested in securities of issuers located in at least three different countries,
one of which may be the United States. The Portfolio intends, however, to invest
in no fewer than eight foreign countries. The Portfolio may invest a substantial
portion of its assets in one or more of those eight countries. The Portfolio may
also invest up to 10% of its total assets in emerging markets generally and may
invest up to 3% of its total assets in any one emerging market.
Credit Quality. The Portfolio invests primarily in investment grade fixed
income securities. The Portfolio may, however, invest up to 15% of its total
assets in securities rated Ba or below by Moody's or BB or below by Standard and
Poor's, Duff, Fitch or IBCA or, if not rated, judged by SIMCO to be of
equivalent credit quality. The average dollar-weighted credit quality of the
Portfolio's portfolio is expected to be in a range of Aa to A according to
Moody's or AA to A according to Standard & Poor's, Duff, Fitch or IBCA.
The Diversified Income Fund
The investment objective and characteristics of the Diversified Income Fund
correspond directly to those of the Standish Diversified Income Portfolio in
which the Fund invests all of its investable assets. The following is a
discussion of the investment objectives and policies of the Diversified Income
Portfolio.
Investment Objective. The Portfolio's investment objective is to maximize
total return, consisting primarily of a high level of income. The Portfolio
seeks to achieve its objective by investing in the following three market
sectors: U.S. domestic, high yield, and international and emerging markets.
Securities. Under normal market conditions, the Portfolio invests at least 80%
of its net assets in income producing securities. Income producing securities
include all types of fixed income securities as well as tax-exempt securities.
The Portfolio may also invest up to 10% of its total assets in common stock.
Country Selection. Although there is no limit on the number of countries in
which issuers of the Portfolio's investments are located, the Portfolio intends
to invest in no fewer than three different countries, including the United
States. The Portfolio limits its investments in securities of issuers located in
any one developed country (excluding the U.S.) to 15% of its total assets and
limits its investments in securities of issuers located in any one emerging
market country to 7% of its total assets.
Under normal market conditions, at least 80% of the Portfolio's total assets,
adjusted to reflect the Portfolio's net currency exposure after giving effect to
currency transactions and positions, are denominated in or hedged (including
cross-hedged) to the U.S. dollar. It is expected that the Portfolio will employ
currency management techniques to seek to manage its foreign currency exposure
within this limit. These techniques include options, futures, options on
futures, forward foreign currency exchange contracts and currency swaps.
Credit Quality. Up to 65% of the Portfolio's total assets may be invested in
securities rated, at the time of investment, below investment grade. Although
the Portfolio does not generally invest insecurities that are in default, it may
from time to time so invest up to 10% of its total assets, including in
defaulted bank loans. Below investment grade securities, commonly referred to as
"junk bonds," are considered speculative by the rating agencies and generally
carry a higher degree of risk (greater price volatility and greater risk of loss
of principal and interest) than higher rated securities. The average
dollar-weighted credit quality of the Portfolio's portfolio is expected to be Ba
according to Moody's or BB according to Standard & Poor's, Duff, Fitch or IBCA,
but in no event will be lower than B2 according to Moody's or B according to
Standard & Poors, Duff, Fitch or IBCA.
Standish Group of Global Fixed Income Funds 10 April 30, 1998
<PAGE>
Maturity. Under normal market conditions, the Portfolio's average
dollar-weighted effective portfolio maturity will vary from five to thirteen
years.
Description of Securities and Related Risks
For purposes of the discussion in this section and the "Investment Techniques
and Related Risks" section of this Prospectus, the use of the term "Funds" also
refers to the Global Fixed Income Portfolio and Diversified Income Portfolio,
unless otherwise noted.
General Risks
Investments in the Funds involve certain risks. Each Fund invests primarily in
the fixed income securities described above and is subject to risks associated
with investments in such securities. These risks include interest rate risk,
default risk and call and extension risk. The Funds are also subject to risks
associated with direct investments in foreign securities and below investment
grade fixed income securities.
Interest Rate Risk. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates increase,
the market value of fixed income securities tends to decline. The volatility of
a security's market value will differ depending upon the security's duration,
the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income securities are subject
to the risk that the issuer of the security could default on its obligations
causing a Fund to sustain losses on such investments. A default could impact
both interest and principal payments.
Call Risk and Extension Risk. Fixed income securities may be subject to both
call risk and extension risk. Call risk exists when the issuer may exercise a
right to pay principal on an obligation earlier than scheduled which would cause
cash flows to be returned earlier than expected. This typically results when
interest rates have declined and a Fund will suffer from having to reinvest in
lower yielding securities. Extension risk exists when the issuer may exercise a
right to pay principal on an obligation later than scheduled which would cause
cash flows to be returned later than expected. This typically results when
interest rates have increased and a Fund will suffer from the inability to
invest in higher yield securities.
Investing in Foreign Securities. Investing in the securities of foreign
issuers involves risks that are not typically associated with investing in U.S.
dollar-denominated securities of domestic issuers. Investments in foreign
issuers may be affected by changes in currency rates, changes in foreign or U.S.
laws or restrictions applicable to such investments and in exchange control
regulations (i.e., currency blockage). A decline in the exchange rate of the
currency (i.e., weakening of the currency against the U.S. dollar) in which a
portfolio security is quoted or denominated relative to the U.S. dollar would
reduce the value of the portfolio security. In addition, if the exchange rate
for the currency in which a Fund receives interest payments declines against the
U.S. dollar before such income is distributed as dividends to shareholders, the
Fund may have to sell portfolio securities to obtain sufficient cash to enable
the Fund to pay such dividends. Commissions on transactions in foreign
securities may be higher than those for similar transactions on domestic stock
markets and foreign custodial costs are higher than domestic custodial costs. In
addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, such procedures have on occasion been unable
to keep pace with the volume of securities transactions, thus making it
difficult to conduct such transactions.
Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government regulation
of foreign markets, companies and securities dealers than in the U.S. Most
foreign securities markets may have substantially less trading volume than U.S.
securities markets and securities of many foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Furthermore, with
respect to certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other taxes
on dividend or interest payments (or, in some cases, capital gains), limitations
on the removal of funds or other assets, political or social instability or
diplomatic developments which could affect investments in those countries.
Investing in Emerging Markets. Although each Fund invests primarily in
securities of established issuers based in developed foreign countries, it may
also invest in securities of issuers in emerging markets, including issuers in
Asia, Eastern Europe, Latin and South America, the Mediterranean, Russia and
Africa. The Funds may also invest in currencies of such countries and may engage
in strategic transactions in the markets of such countries. Investing in
securities of issuers in emerging markets involves exposure to significantly
higher risk than investing in foreign countries with developed markets and may
be considered speculative. These heightened risks include (i) greater risks of
expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability; (ii) the small current size of the markets for
securities of emerging market issuers and the currently low or nonexistent
volume of trading and frequent limits on daily price movements, resulting in
lack of liquidity and in price uncertainty; (iii) certain national policies
which may restrict a Fund's investment opportunities, including limitations on
aggregate holdings by foreign investors and restrictions on investing in issuers
or industries deemed sensitive to relevant national interests; and (iv) the
absence of developed legal structures governing private or foreign investment in
private property which may adversely affect a Fund's ability to retain ownership
of its securities during periods of economic, social or political turmoil; and
(v) high rates of inflation and rapid fluctuations in interest rates that have
had and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
The economies of emerging market countries may be predominantly based on only
a small number of industries or dependent on revenues from the sale of
particular commodities
Standish Group of Global Fixed Income Funds 11 April 30, 1998
<PAGE>
or on international aid or development assistance. As a result, these economies
may be significantly more vulnerable to changes in local or global trade
conditions, and may suffer from volatile or extreme fluctuations in currency
exchange rates, inflation and deflation rates as well as debt burdens. Many
emerging market countries have experienced and will continue to experience
periods of rapid inflation, resulting in significant market uncertainty and
sharp drops in the U.S. dollar value of the country's assets. The currencies of
emerging market countries may also be devalued as a result of governmental
action in addition to market factors. Recently, the economies of certain
emerging market countries have experienced deflation which has diminished the
demand for goods and services resulting in excess capacity in factories that
were built upon the forecast of continuing strong demand for such goods and
services. All of these risks may adversely affect the Fund's investments in
emerging market countries. See the SAI for a further description of the risks
associated with investing in emerging market countries.
Currency Risks. The U.S. dollar value of foreign securities denominated in a
foreign currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of these currencies against the U.S.
dollar will result in corresponding changes in the U.S. dollar value of a Fund's
assets quoted in those currencies. Exchange rates are generally affected by the
forces of supply and demand in the international currency markets, the relative
merits of investing in different countries and the intervention or failure to
intervene of U.S. or foreign governments and central banks. Some emerging
markets countries also may have managed currencies, which are not free floating
against the U.S. dollar. In addition, emerging markets may restrict the free
conversion of their currencies into other currencies. Any devaluations in the
currencies in which a Fund's securities are denominated may have a detrimental
impact on the Fund's net asset value except to the extent such foreign currency
exposure is subject to hedging transactions. Each Fund utilizes various
investment strategies to seek to minimize the currency risks described above.
These strategies include the use of currency transactions such as currency
forward and futures contracts, cross currency forward and futures contracts,
currency swaps and options and cross currency options on currencies or currency
futures. Each Fund's use of currency transactions may exposure it to risks
independent of its securities positions. See "Strategic Transactions" within the
"Investment Techniques and Related Risks" section for a discussion of the risks
associated with such strategies.
Specific Risks
The following sections include descriptions of specific risks that are
associated with a Fund's purchase of a particular type of security or the
utilization of a specific investment technique.
Corporate Debt Obligations. Each Fund may invest in corporate debt obligations
and zero coupon securities issued by financial institutions and companies.
Corporate debt obligations are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations and may also be subject
to price volatility due to such factors as market interest rates, market
perception of the creditworthiness of the issuer and general market liquidity.
Sovereign Debt Obligations. Investment in sovereign debt obligations involves
special risks not present in corporate debt obligations. The foreign issuer of
the sovereign debt or the foreign governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due, and a Fund may have limited recourse in the event of a default. During
periods of economic uncertainty, the market prices of sovereign debt, and a
Fund's net asset value, to the extent it invests in such securities, may be more
volatile than prices of U.S. debt issuers. In the past, certain foreign
countries have encountered difficulties in servicing their debt obligations,
withheld payments of principal and interest and declared moratoria on the
payment of principal and interest on their sovereign debt.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
to reduce principal and interest arrearages on their debt. The failure of a
sovereign debtor to implement economic reforms, achieve specified levels of
economic performance or repay principal or interest when due may result in the
cancellation of third party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.
Brady Bonds. Brady Bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings. In light
of the history of defaults of countries issuing Brady Bonds on their commercial
bank loans, investments in Brady Bonds may be viewed as speculative. Brady Bonds
may be fully or partially collateralized or uncollateralized, are issued in
various currencies (but primarily in U.S. dollars) and are actively traded in
OTC secondary markets. Incomplete collateralization of interest or principal
payment obligations results in increased credit risk. U.S. dollar-denominated
collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate
bonds, are generally collateralized by U.S. Treasury zero coupon bonds having
the same maturity as the Brady Bonds.
Obligations of Supranational Entities. Each Fund may invest in obligations of
supranational entities designated or supported by governmental entities to
promote economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the Asian
Development Bank and the Inter-American Development Bank. Each supranational
entity's lending activities are limited to a percentage of its total capital
(including "callable capital" contributed by its governmental members at the
entity's call), reserves and net income. There is no assurance that
participating governments will be able or willing to honor their commitments to
make capital contributions to a supranational entity.
Standish Group of Global Fixed Income Funds 12 April 30, 1998
<PAGE>
Eurodollar and Yankee Dollar Investments. Each Fund may invest in Eurodollar
and Yankee Dollar instruments. Eurodollar instruments are bonds of foreign
corporate and government issuers that pay interest and principal in U.S. dollars
generally held in banks outside the United States, primarily in Europe. Yankee
Dollar instruments are U.S. dollar denominated bonds typically issued in the
U.S. by foreign governments and their agencies and foreign banks and
corporations. The Funds may invest in Eurodollar Certificates of Deposit
("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certbbbificates of deposit
issued by foreign branches of domestic banks; ETDs are U.S. dollar-denominated
deposits in a foreign branch of a U.S. bank or in a foreign bank; and Yankee CDs
are U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a
foreign bank and held in the U.S. These investments involve risks that are
different from investments in securities issued by U.S. issuers, including
potential unfavorable political and economic developments, foreign withholding
or other taxes, seizure of foreign deposits, currency controls, interest
limitations or other governmental restrictions which might affect payment of
principal or interest.
U.S. Government Securities. Each Fund may invest in U.S. Government
securities. Generally, these securities include U.S. Treasury obligations and
obligations issued or guaranteed by U.S. Government agencies, instrumentalities
or sponsored enterprises which are supported by (a) the full faith and credit of
the U.S. Treasury (such as the Government National Mortgage Association), (b)
the right of the issuer to borrow from the U.S. Treasury (such as securities of
the Student Loan Marketing Association), (c) the discretionary authority of the
U.S. Government to purchase certain obligations of the issuer (such as the
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation), or (d) only the credit of the agency. No assurance can be given
that the U.S. Government will provide financial support to U.S. Government
agencies, instrumentalities or sponsored enterprises in the future. U.S.
Government securities also include Treasury receipts, zero coupon bonds, U.S.
Treasury inflation-indexed bonds, deferred interest securities and other
stripped U.S. Government securities, where the interest and principal components
of stripped U.S. Government securities are traded independently ("STRIPs").
Below Investment Grade Fixed Income Securities. The Diversified Income
Portfolio, Global Fixed Income Portfolio and International Fixed Income Fund may
invest up to 65%, 15% and 10%, respectively, of their total assets in
non-investment grade securities. Non-investment grade fixed income securities
are considered predominantly speculative by traditional investment standards. In
some cases, these securities may be highly speculative and have poor prospects
for reaching investment grade standing. Non-investment grade fixed income
securities and unrated securities of comparable credit quality are subject to
the increased risk of an issuer's inability to meet principal and interest
obligations. These securities, also referred to as high yield securities, may be
subject to greater price volatility due to such factors as specific corporate
developments, interest rate sensitivity, negative perceptions of the high yield
markets generally and less secondary market liquidity.
Non-investment grade fixed income securities are often issued in connection
with a corporate reorganization or restructuring or as part of a merger,
acquisition, takeover or similar event. They are also issued by less established
companies seeking to expand. Such issuers are often highly leveraged and
generally less able than more established or less leveraged entities to make
scheduled payments of principal and interest in the event of adverse
developments or business conditions.
The market value of non-investment grade fixed income securities tends to
reflect individual corporate developments to a greater extent than that of
higher rated securities which react primarily to fluctuations in the general
level of interest rates. As a result, a Fund's ability to achieve its investment
objective may depend to a greater extent on SIMCO's judgment concerning the
creditworthiness of issuers than funds which invest in higher-rated securities.
Issuers of non-investment grade fixed income securities may not be able to make
use of more traditional methods of financing and their ability to service debt
obligations may be more adversely affected than issuers of higher rated
securities by economic down turns, specific corporate developments or the
issuer's inability to meet specific projected business forecasts. Negative
publicity about the high yield market and investor perceptions regarding lower
rated securities, whether or not based on fundamental analysis, may depress the
prices for such securities.
A holder's risk of loss from default is significantly greater for
non-investment grade fixed income securities than is the case for holders of
debt securities of higher credit qualities because non-investment grade
securities are generally unsecured and are often subordinated to the rights of
other creditors of the issuers of such securities. The Diversified Income
Portfolio may also invest in fixed income securities which are in default.
Investment by the Diversified Income Portfolio in defaulted securities poses
additional risk of loss should nonpayment of principal and interest continue in
respect of such securities. Even if such securities are held to maturity,
recovery by the Portfolio of its initial investment and any anticipated income
or appreciation is uncertain.
The secondary market for non-investment grade fixed income securities is
dominated by institutional investors, including mutual funds, insurance
companies and other financial institutions. Accordingly, the secondary market
for such securities is not as liquid as, and is more volatile than, the
secondary market for higher rated securities. In addition, market trading volume
for high yield fixed income securities is generally lower and the secondary
market for such securities could contract under adverse market or economic
conditions, independent of any specific adverse changes in the condition of a
particular issuer. These factors may have an adverse effect on the market price
and a Fund's ability to dispose of particular portfolio investments. A less
liquid secondary market also may make it more difficult for a Fund to obtain
precise valuations of the high yield securities in its portfolio. Changes in
federal and
Standish Group of Global Fixed Income Funds 13 April 30, 1998
<PAGE>
state laws and industry initiatives could adversely affect the secondary market
for non-investment grade fixed income securities and the financial condition of
issuers of these securities.
Non-investment grade fixed income securities also present risks based on
payment expectations. Such securities frequently contain call or redemption
features which permit the issuer to call or repurchase the security from its
holder. If an issuer exercises such a "call option" and redeems the security, a
Fund may have to replace the security with a lower yielding security, resulting
in a decreased return for investors. Similarly, to the extent that the
Diversified Income Portfolio invests a significant part of its assets in
non-investment grade securities, if the Fund experiences unexpected net
withdrawals, it may be forced to sell its higher rated more liquid securities
when it experiences unexpected net withdrawals. This could result in a decline
in the overall credit quality of the Portfolio and increasing the exposure of
the Portfolio to the risks of non-investment grade fixed income securities.
Credit ratings issued by credit rating agencies are designed to evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Investments in non-investment grade and comparable
unrated obligations will be more dependent on SIMCO's credit analysis than would
be the case with investments in investment grade debt obligations. See the SAI
for a detailed description of the ratings assigned to fixed income securities by
Moody's, Standard & Poor's, Duff, Fitch and IBCA.
For the fiscal year ended December 31, 1997, the Portfolios' and the
International Equity Fund's investments, on a dollar weighted basis, calculated
at the end of each month, had the following credit quality characteristics:
Global Fixed Income Portfolio
Investments Percentage
U.S. Government Securities 19.5%
U.S. Government Agency Securities 10.0%
Corporate Bonds:
Aaa or AAA 29.1%
Aa or AA 9.4%
A 8.1%
Baa or BBB 12.0%
Ba or BB 7.8%
B 4.1%
Below B 0.0%
------
100.0%
International Fixed Income Fund
Investments Percentage
U.S. Government Securities 14.3%
U.S. Government Agency Securities 6.5%
Corporate Bonds:
Aaa or AAA 40.2%
Aa or AA 18.2%
A 6.5%
Baa or BBB 7.8%
Ba or BB 2.6%
B 3.9%
Below B 0.0%
------
100.0%
Diversified Income Portfolio
Investments Percentage
U.S. Government Securities 9.49%
U.S. Government Agency Securities 7.78%
Corporate Bonds:
Aaa or AAA 0.95%
Aa or AA 0.72%
A 1.02%
Baa or BBB 11.29%
Ba or BB 39.97%
B 25.53%
Below B 3.25%
-------
100.00%
Mortgage-Backed Securities. Each Fund may invest in privately issued
mortgage-backed securities and mortgage-backed securities issued or guaranteed
by foreign entities or the U.S. Government or any of its agencies,
instrumentalities or sponsored enterprises. Mortgage-backed securities represent
direct or indirect participations in, or are collateralized by and payable from,
mortgage loans secured by real property. Mortgagors can generally prepay
interest or principal on their mortgages whenever they choose. Therefore,
mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of principal prepayments on the
underlying loans. This can result in significantly greater price and yield
volatility than is the case with traditional fixed income securities. During
periods of declining interest rates, prepayments can be expected to accelerate,
and thus impair a Fund's ability to reinvest the returns of principal at
comparable yields. Conversely, in a rising interest rate environment, a
declining prepayment rate will extend the average life of many mortgage-backed
securities, increase a Fund's exposure to rising interest rates and prevent a
Fund from taking advantage of such higher yields.
Asset-Backed Securities. Each Fund may invest in asset-backed securities
issued by foreign or U.S. entities. The principal and interest payments on
asset-backed securities are collateralized by pools of assets such as auto
loans, credit card receivables, leases, installment contracts and personal
property. Such asset pools are securitized through the use of special purpose
trusts or corporations. Payments or distributions of principal and interest on
asset-backed securities may be guaranteed up to
Standish Group of Global Fixed Income Funds 14 April 30, 1998
<PAGE>
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution; however, privately issued
obligations collateralized by a portfolio of privately issued asset-backed
securities do not involve any government-related guaranty or insurance. Like
mortgage-backed securities, asset-backed securities are subject to more rapid
prepayment of principal than indicated by their stated maturity which may
greatly increase price and yield volatility. Asset- backed securities generally
do not have the benefit of a security interest in collateral that is comparable
to mortgage assets and there is the possibility that recoveries on repossessed
collateral may not be available to support payments on these securities.
Convertible Securities. Each Fund may invest in convertible securities
consisting of bonds, notes, debentures and preferred stocks. Convertible debt
securities and preferred stock acquired by a Fund entitle the Fund to exchange
such instruments for common stock of the issuer at a predetermined rate.
Convertible securities are subject both to the credit and interest rate risks
associated with debt obligations and to the stock market risk associated with
equity securities.
Zero Coupon and Deferred Payment Securities. Each Fund may invest in zero
coupon and deferred payment securities. Zero coupon securities are securities
sold at a discount to par value and on which interest payments are not made
during the life of the security. Upon maturity, the holder is entitled to
receive the par value of the security. A Fund is required to accrue income with
respect to these securities prior to the receipt of cash payments. Because a
Fund will distribute this accrued income to shareholders, to the extent that
shareholders elect to receive dividends in cash rather than reinvesting such
dividends in additional shares, the Fund will have fewer assets with which to
purchase income producing securities. Deferred payment securities are securities
that remain zero coupon securities until a predetermined date, at which time the
stated coupon rate becomes effective and interest becomes payable at regular
intervals. Zero coupon and deferred payment securities may be subject to greater
fluctuation in value and may have less liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods.
Structured or Hybrid Notes. Each Fund may invest in structured or hybrid
notes. The distinguishing feature of a structured or hybrid note is that the
amount of interest and/or principal payable on the note is based on the
performance of a benchmark asset or market other than fixed income securities or
interest rates. Examples of these benchmarks include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows a Fund to gain exposure to the benchmark asset while fixing the maximum
loss that it may experience in the event that the security does not perform as
expected. Depending on the terms of the note, a Fund may forego all or part of
the interest and principal that would be payable on a comparable conventional
note; the Fund's loss cannot exceed this foregone interest and/or principal. An
investment in structured or hybrid notes involves risks similar to those
associated with a direct investment in the benchmark asset.
Warrants. Each Fund may purchase warrants. Warrants acquired by a Fund entitle
it to buy common stock from the issuer at a specified price and time. Warrants
are subject to the same market risks as stocks, but may be more volatile in
price. A Fund's investment in warrants will not entitle it to receive dividends
or exercise voting rights and will become worthless if the warrants cannot be
profitably exercised before their expiration dates.
Inverse Floating Rate Securities. Each Fund may invest in inverse floating
rate securities. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher the degree of leverage of an inverse
floater, the greater the volatility of its market value.
Tax Exempt Securities. Each Fund is managed without regard to potential tax
consequences. If SIMCO believes that tax-exempt securities will provide
competitive returns, the Diversified Income Portfolio may invest up to 10% of
its total assets in tax-exempt securities. Distributions of interest earned from
these investments will be taxable.
Common Stocks. The Diversified Income Portfolio may invest up to 10% of its
total assets in common stocks. Common stocks are shares of a corporation or
other entity that entitle the holder to a pro rata share of the profits of the
corporation, if any, without preference over any other shareholder or class of
shareholders, including holders of the entity's preferred stock and other senior
equity. Common stock usually carries with it the right to vote and frequently an
exclusive right to do so.
Investments in Other Investment Companies. Each Fund is permitted to invest up
to 10% of its total assets in shares of investment companies and up to 5% of its
total assets in any one investment company as long as that investment does not
represent more than 3% of the total voting stock of the acquired investment
company. Investments in the securities of other investment companies may involve
duplication of advisory fees and other expenses. Because certain emerging
markets are closed to investment by foreigners, a Fund may invest in issuers in
those markets primarily through specifically authorized investment funds. In
addition, a Fund may invest in investment companies that are designed to
replicate the composition and performance of a particular index. For example,
World Equity Benchmark Series ("WEBS") are exchange traded shares of open-end
investment companies designed to replicate the composition and performance of
publicly traded issuers in particular countries. Investments in index baskets
involve the same risks associated with a direct investment in the types of
securities included in the baskets.
Real Estate Investment Trusts. Each Fund may invest in REITs. REITs are pooled
investment vehicles that invest in real estate or real estate loans or
interests. Investing in REITs involves risks similar to those associated with
investing in equity securities of small capitalization companies. REITs are
dependent upon management skills, are not diversified, and are subject to risks
of project financing, default by borrowers, self-liquidation, and the
possibility of failing to qualify for the exemption from taxation on distributed
amounts under the Code.
Standish Group of Global Fixed Income Funds 15 April 30, 1998
<PAGE>
Investment Techniques and Related Risks
Strategic Transactions. Each Fund may, but is not required to, utilize various
investment strategies to seek to hedge market risks (such as interest rates,
currency exchange rates and broad or specific fixed income market movements), to
manage the effective maturity or duration of fixed income securities, or to
enhance potential gain. Such strategies are generally accepted as part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments used by each Fund may change
over time as new instruments and strategies are developed or regulatory changes
occur.
In the course of pursuing its investment objective, each Fund may purchase and
sell (write) exchange-listed and OTC put and call options on securities, indices
and other financial instruments; purchase and sell financial futures contracts
and options thereon; enter into various interest rate transactions such as
swaps, caps, floors or collars; and, enter into currency transactions such as
forward foreign currency exchange contracts, cross-currency contracts, currency
futures contracts, currency swaps and options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). Strategic
Transactions may be used to seek to protect against possible changes in the
market value of securities held in or to be purchased for a Fund's portfolio
resulting from securities markets, currency exchange rate or interest rate
fluctuations, to seek to protect a Fund's unrealized gains in the value of
portfolio securities, to facilitate the sale of such securities for investment
purposes, to seek to manage the effective maturity or duration of a Fund's
portfolio, or to establish a position in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. In addition to the
hedging transactions referred to in the preceding sentence, Strategic
Transactions may also be used to enhance potential gain in circumstances where
hedging is not involved.
The ability of a Fund to utilize Strategic Transactions successfully will
depend on SIMCO's ability to predict pertinent market, currency exchange rate
and interest rate movements, which cannot be assured. Each Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. The Funds' activities involving Strategic
Transactions may be limited by the requirements of the Code for qualification as
a regulated investment company.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
SIMCO's view as to certain market, interest rate or currency movements is
incorrect, the risk that the use of such Strategic Transactions could result in
losses greater than if they had not been used. The writing of put and call
options may result in losses to a Fund, force the purchase or sale,
respectively, of portfolio securities at inopportune times or for prices higher
than (in the case of purchases due to the exercise of put options) or lower than
(in the case of sales due to the exercise of call options) current market
values, limit the amount of appreciation a Fund can realize on its investments
or cause a Fund to hold a security it might otherwise sell or sell a security it
might otherwise hold.
The use of options and futures transactions entails certain other risks.
Futures markets are highly volatile and the use of futures may increase the
volatility of a Fund's net asset value. In particular, the variable degree of
correlation between price movements of futures contracts and price movements in
the related portfolio position of a Fund creates the possibility that losses on
the hedging instrument may be greater than gains in the value of the Fund's
position. The writing of options could significantly increase a Fund's portfolio
turnover rate and associated brokerage commissions or spreads. In addition,
futures and options markets may not be liquid in all circumstances and certain
OTC options may have no markets. As a result, in certain markets, a Fund might
not be able to close out a transaction without incurring substantial losses, if
at all. Losses resulting from the use of Strategic Transactions could reduce a
Fund's net asset value and the net result may be less favorable than if the
Strategic Transactions had not been utilized. Although the use of futures and
options transactions for hedging and managing effective maturity and duration
should tend to minimize the risk of loss due to a decline in the value of the
position, at the same time, such transactions can limit any potential gain which
might result from an increase in value of such position. The loss incurred by a
Fund in writing options and entering into futures transactions is potentially
unlimited.
The use of currency transactions can result in a Fund incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency.
Each Fund will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for non-hedging purposes to no more than 3% of net
assets. In calculating each Fund's net loss exposure from such Strategic
Transactions, an unrealized gain from a particular Strategic Transaction
position would be netted against an unrealized loss from a related position. See
the SAI for further information regarding the use of Strategic Transactions.
When-Issued and Delayed Delivery Securities. The International Fixed Income
Fund and Global Fixed Income Portfolio may invest up to 25% of their total
assets in when-issued and delayed delivery securities. The Diversified Income
Portfolio places no limit on investments in when- issued or delayed delivery
securities. Although a Fund will generally purchase securities on a when-issued
or delayed delivery basis with the intention of actually acquiring the
securities, the Funds may dispose of these securities prior to settlement, if
SIMCO deems it appropriate to do so. The payment obligation and interest rate on
these securities is fixed at the time a Fund enters into the commitment, but no
income will accrue to the Fund until they are delivered and paid for. Unless a
Fund has entered into an offsetting agreement to sell the securities, cash or
liquid assets equal to the amount of the Fund's commitment must be segregated to
secure the Fund's obligation and to partially offset the leverage inherent in
these securities. The market value of the securities when they are delivered may
be less than the amount paid by the Fund.
Standish Group of Global Fixed Income Funds 16 April 30, 1998
<PAGE>
Portfolio Diversification and Concentration. The International Fixed Income
Fund and Global Fixed Income Portfolio are non-diversified which means that they
may, with respect to up to 50% of their total assets, invest more than 5% of
their total assets in the securities of a single issuer. Investing a significant
amount of a Fund's assets in the securities of a small number of foreign issuers
will cause the Fund's net asset value to be more sensitive to events affecting
those issuers. Neither the Funds nor the Diversified Income Portfolio will
concentrate (invest 25% or more of their total assets) in the securities of
issuers in any one industry. For purposes of this limitation, the staff of the
SEC considers (a) all supranational organizations as a group to be a single
industry and (b) each foreign government and its political subdivisions to be a
single industry.
Repurchase Agreements. The International Fixed Income Fund and Global Fixed
Income Portfolio may invest up to 25% of net assets in repurchase agreements.
The Diversified Income Portfolio places no limit on investments in repurchase
agreements. In a repurchase agreement, a Fund buys a security at one price and
simultaneously agrees to sell it back at a higher price. Delays or losses could
result if the other party to the agreement defaults or becomes insolvent.
Repurchase agreements acquired by a Fund will always be fully collateralized as
to principal and interest by U.S. Government securities and money market
instruments and will be entered into only with commercial banks, brokers and
dealers considered creditworthy by SIMCO.
Forward Roll Transactions. To seek to enhance current income, the Global Fixed
Income Portfolio and International Fixed Income Fund may invest up to 5% and
10%, respectively, of their total assets in forward roll transactions involving
mortgage-backed securities. The Diversified Income Portfolio places no limit on
investments in forward roll transactions involving mortgage-backed securities.
In a forward roll transaction, a Fund sells a mortgage-backed security to a
financial institution, such as a bank or broker-dealer, and simultaneously
agrees to repurchase a similar security from the institution at a later date at
an agreed-upon price. The mortgage- backed securities that are repurchased will
bear the same interest rate as those sold, but generally will be collateralized
by different pools of mortgages with different prepayment histories than those
sold. During the period between the sale and repurchase, the Fund will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale will be invested in short-term instruments, such as
repurchase agreements or other short-term securities, and the income from these
investments, together with any additional fee income received on the sale and
the amount gained by repurchasing the securities in the future at a lower price,
will generate income and gain for the Fund which is intended to exceed the yield
on the securities sold. Forward roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. At the time that a Fund enters into a forward roll
transaction, it will place cash or liquid assets in a segregated account that is
marked to market daily having a value equal to the repurchase price (including
accrued interest).
Leverage. The use of forward roll transactions involves leverage. Leverage
allows any investment gains made with the additional monies received (in excess
of the costs of the forward roll transaction), to increase the net asset value
of a Fund faster than would otherwise be the case. On the other hand, if the
additional monies received are invested in ways that do not fully recover the
costs of such transactions to a Fund, the net asset value of the Fund would fall
faster than would otherwise be the case.
Short Sales. Each Fund may engage in short sales and short sales against the
box. In a short sale, a Fund sells a security it does not own in anticipation of
a decline in the market value of that security. In a short sale against the box,
a Fund either owns or has the right to obtain at no extra cost the security sold
short. The broker holds the proceeds of the short sale until the settlement
date, at which time the Fund delivers the security (or an identical security) to
cover the short position. The Fund receives the net proceeds from the short
sale. When a Fund enters into a short sale other than against the box, the Fund
must first borrow the security to make delivery to the buyer and must segregate
cash or liquid assets on its records or in a segregated account with the Fund's
custodian that is marked to market daily. Short sales other than against the box
involve unlimited exposure to loss. No securities will be sold short if, after
giving effect to any such short sale, the total market value of all securities
sold short would exceed 5% of the value of either the International Fixed Income
Fund's or Global Fixed Income Portfolio's net assets or 10% of the value of the
Diversified Income Portfolio's total assets.
Securities Loans. To seek to realize additional income, the International
Fixed Income Fund, Global Fixed Income Portfolio and Diversified Income
Portfolio may lend a portion of the securities in its portfolio to
broker-dealers and financial institutions who are seeking securities to
consummate transactions they are obligated to perform under contract. The market
value of securities loaned by the Diversified Income Portfolio may not exceed 33
1/3% of the value of the Portfolio's total assets. The market value of
securities, loaned by the International Fixed Income Fund and Global Fixed
Income Portfolio may not exceed 20% of the value of each Fund's total assets,
with a 10% limit for any single borrower. In order to secure their obligations
to return securities borrowed from a Fund, borrowers will deposit collateral
equal to at least 100% of the market value of the borrowed securities, which
will be marked to market daily. As is the case with any extension of credit,
lending portfolio securities involves certain risks in the event a borrower
should fail financially, including delays or inability to recover the loaned
securities or foreclose against the collateral. SIMCO, under the supervision of
the Boards of Trustees, monitors the creditworthiness of the parties to whom the
Funds make securities loans.
Restricted and Illiquid Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities. Illiquid securities are those that are not
readily marketable, repurchase agreements maturing in more than seven days, time
deposits with a notice or demand period of more than seven days, certain OTC
options and certain restricted securities. Based upon continuing
Standish Group of Global Fixed Income Funds 17 April 30, 1998
<PAGE>
review of the trading markets for a specific restricted security, the security
may be determined to be eligible for resale to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933 and, therefore, be
liquid. Also, certain illiquid securities may be determined to be liquid if they
are found to satisfy relevant liquidity requirements.
The Boards of Trustees have adopted guidelines and delegated to SIMCO the
daily function of determining and monitoring the liquidity of portfolio
securities, including restricted and illiquid securities. The Boards of
Trustees, however, retain oversight and are ultimately responsible for such
determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.
Portfolio Turnover. A high rate of portfolio turnover (100% or more) involves
correspondingly higher transaction costs which must be borne directly by a Fund
and thus indirectly by its shareholders. It may also result in a Fund's
realization of larger amounts of short-term capital gains. Distributions of
short-term capital gains are taxable to shareholders as ordinary income. See
"Financial Highlights" for each Fund's portfolio turnover rates.
Short-Term Trading. Each Fund will sell a portfolio security without regard to
the length of time such security has been held if, in SIMCO's view, the security
meets the criteria for disposal.
Temporary Defensive Investments. Each Fund may maintain cash balances and
purchase money market instruments for cash management and liquidity purposes.
Each Fund may adopt a temporary defensive position during adverse market
conditions by investing without limit in U.S. and non-U.S. dollar denominated
high quality money market instruments, including short-term U.S. Government
securities, negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, commercial paper, floating-rate notes and
repurchase agreements.
Investment Restrictions. The investment objectives of the Portfolios and the
Diversified Income Fund are not fundamental and may be changed by the applicable
Board of Trustees without the approval of shareholders. The investment
objectives of the Global Fixed Income Fund and International Fixed Income Fund
are fundamental and may not be changed without a vote of the respective Funds'
shareholders. Each of the Fund's and Portfolio's investment policies set forth
in this Prospectus are non-fundamental and may be changed without shareholder
approval except that the Global Fixed Income Portfolio's and the International
Fixed Income Fund's 20% limit on securities loans (10% limit for any single
borrower) and the International Fixed Income Fund's 25% limit on repurchase
agreements are fundamental. The Funds and the Portfolios have adopted other
fundamental policies which may not be changed without the approval of the
applicable Fund's shareholders. See "Investment Restrictions" in the SAI. If any
percentage restriction is adhered to at the time of investment, a subsequent
increase or decrease in the percentage resulting from a change in the value of
the respective Fund's or Portfolio's assets will not constitute a violation of
the restriction. If there is a change in a Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their current financial situation.
Information About the Master-Feeder Structure
Each Standish Feeder Fund seeks to achieve its investment objective by
investing all of its investable assets in its corresponding Portfolio, which has
an identical investment objective. Each of the Standish Feeder Funds is a feeder
fund and its corresponding Portfolio is the master fund in a so-called
master-feeder structure. The International fixed income Fund purchases
securities directly and maintains its own individual portfolio.
In addition to the Standish Feeder Funds, other feeder funds may invest in
these Portfolios, and information about these other feeder funds is available
from Standish Fund Distributors. The other feeder funds invest in the Portfolios
on the same terms as the Funds and bear a proportionate share of the Portfolios'
expenses. The other feeder funds may sell shares on different terms and under a
different pricing structure than the Funds, which may produce different
investment results.
There are certain risks associated with an investment in a master- feeder
structure. Large scale redemptions by other feeder funds in a Portfolio may
reduce the diversification of the Portfolio's investments, reduce economies of
scale and increase the Portfolio's operating expenses. If the Portfolio Trust's
Board of Trustees approves a change to the investment objective of the Portfolio
that is not approved by the Trust's Board of Trustees, the Fund would be
required to withdraw its investment in the Portfolio and engage the services of
an investment adviser or find a substitute master fund. Withdrawal of the Fund's
interest in its Portfolio, which may be required by the Trust's Board of
Trustees without shareholder approval, might cause the Fund to incur expenses it
would not otherwise be required to pay.
If a Fund is requested to vote on a matter affecting the Portfolio, the Fund
will call a meeting of its shareholders to vote on the matter. The Fund will
then vote on the matter at the meeting of the Portfolio's investors in the same
proportion that the Fund's shareholders voted on the matter. The Fund will vote
those shares held by its shareholders who did not vote in the same proportion as
those Fund shareholders who did vote on the matter.
A majority of the Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended ("the 1940 Act")) of the Trust or the
Portfolio Trust, as the case may be, have adopted procedures reasonably
appropriate to deal with potential conflicts of interest arising from the fact
that the same individuals are trustees of the Trust and of the Portfolio Trust.
Calculation of Performance Data
From time to time each Fund may advertise its yield and total return
information. Average annual total return is determined by computing the average
annual percentage change in the value of $1,000invested at the maximum public
offering price for specified periods ending with the most recent calendar
quarter, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the
investment at the end of the relevant period.
Standish Group of Global Fixed Income Funds 18 April 30, 1998
<PAGE>
Each Fund may also from time to time advertise total return on a cumulative,
average, year-by-year or other basis for various specified periods by means of
quotations, charts, graphs or schedules.
The "yield" of a Fund is computed by dividing the net investment income per
share earned during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of the period (using the average number
of shares entitled to receive dividends). For the purpose of determining net
investment income, the calculation includes among expenses of the Fund all
recurring fees that are charged to all shareholder accounts and any nonrecurring
charges for the period stated.
From time to time, a Fund may compare its performance in publications with
that of other mutual funds and separate accounts with similar investment
objectives, to bond and other relevant indices, and to performance rankings
prepared by recognized mutual fund statistical services. In addition, a Fund's
performance may be compared to alternative investment or savings vehicles or to
indices or indicators of economic activity.
J.P. Morgan Non-U.S. Government Bond Index (Hedged). This index is generally
considered to be representative of unmanaged government bonds in foreign
markets.
Lehman Brothers Aggregate Index. This index is composed of securities from the
Lehman Brothers Government/Corporate Bond Index, the Mortgage Backed Securities
Index and the Yankee Bond Index, and is generally considered to be
representative of all unmanaged, domestic, dollar denominated, fixed rate
investment grade bonds.
J.P. Morgan Global Index (Hedged). This index is generally considered to be
representative of the performance of fixed rate, domestic government bonds from
eleven countries.
Dividends and Distributions
Dividends from net investment income for the Funds will be declared and
distributed quarterly. The Funds' dividends from realized capital gains, if any,
after reduction by capital losses, will be declared and distributed at least
annually. In determining the amounts of its dividends, the Global Fixed Income
Fund and Diversified Income Fund will take into account their share of the
income, gain or loss, expense, and any other tax items of their corresponding
Portfolios. Dividends from net investment income and capital gains
distributions, if any, are automatically reinvested in additional shares of the
applicable Fund unless the shareholder elects to receive them in cash.
Purchase of Shares
Shares of the Funds may be purchased from Standish Fund Distributors, which
offers the Funds' shares to the public on a continuous basis. Shares are sold at
the net asset value per share next computed after the purchase order is received
in good order by Standish Fund Distributors and payment for the shares is
received by Investors Bank & Trust Company, the Funds' Custodian. Please see
each Fund's account application or call (800) 221-4795 for instructions on how
to make payment for shares to the Custodian. The Funds require minimum initial
investments of $100,000. Additional investments must be in amounts of at least
$5,000. Certificates for Fund shares are generally not issued.
Shares of the Funds may also be purchased through securities dealers. Orders
for the purchase of Fund shares received by brokers and dealers by the close of
regular trading on the New York Stock Exchange ("NYSE") (normally 4:00 p.m., New
York City time) on any business day and transmitted to Standish Fund
Distributors or another authorized representative of the Trust by specified
times will be effected as of the close of regular trading on the NYSE on that
day. Otherwise, orders will be effected at the net asset value per share
determined on the next business day. It is the responsibility of broker- dealers
to transmit orders so they will be received by Standish Fund Distributors or
another authorized representative of the Trust before the close of its business
day. Shares of a Fund purchased through broker-dealers may be subject to
transaction fees on purchase or redemption, no part of which will be received by
the Funds, Standish Fund Distributors or Standish.
In the sole discretion of the Trust, each Fund may accept securities instead
of cash for the purchase of shares. The Trust will ask the Adviser to determine
that any securities acquired by the Funds in this manner are consistent with the
investment objective, policies and restrictions of the applicable Fund. The
securities will be valued in the manner stated below. The purchase of Fund
shares for securities instead of cash may cause an investor who contributed them
to realize a taxable gain or loss with respect to the securities transferred to
the Fund.
The Trust reserves the right in its sole discretion (i) to suspend the
offering of a Fund's shares, (ii) to reject purchase orders when in the best
interest of a Fund, (iii) to modify or eliminate the minimum initial or
subsequent investment in Fund shares and (iv) to eliminate duplicate mailings of
Fund material to shareholders who reside at the same address. A Fund's
investment minimums do not apply to accounts for which the Adviser or any of its
affiliates serves as investment adviser or to employees of the Adviser or any of
its affiliates or to members of such persons' immediate families. A Fund's
investment minimums apply to the aggregate value invested in omnibus accounts
rather than to the investments of the underlying participants in the omnibus
accounts.
Net Asset Value
Each Fund's net asset value per share is computed each day on which the NYSE
is open as of the close of regular trading on the NYSE (normally 4:00 p.m., New
York City time). The net asset value per share is calculated by determining the
value of all a Fund's assets (which, in the case of each Standish Feeder Fund
would be the value of its investment in the corresponding Portfolio, plus the
value of any other assets owned by the Fund directly), subtracting all
liabilities and dividing the result by the total number of shares outstanding.
Fixed income securities (other than money market instruments) for which
accurate market prices are readily available are valued at their current market
value on the basis of quotations, which may be furnished by a pricing service or
provided by dealers in such securities. Securities not listed on an exchange or
national securities market, certain mortgage-backed and asset-backed securities
and securities for which there were no reported transactions are
Standish Group of Global Fixed Income Funds 19 April 30, 1998
<PAGE>
valued at the last quoted bid prices. Fixed income securities for which accurate
market prices are not readily available and all other assets are valued at fair
value as determined in good faith by SIMCO in accordance with procedures
approved by the Trustees, which may include the use of yield equivalents or
matrix pricing.
Money market instruments with less than sixty days remaining to maturity when
acquired by a Fund are valued on an amortized cost basis unless the Trustees
determine that amortized cost does not represent fair value. If a Fund acquires
a money market instrument with more than sixty days remaining to its maturity,
it is valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized cost based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized cost
does not represent fair value.
Portfolio securities traded on more than one U.S. national securities exchange
or on a U.S. exchange and a foreign securities exchange are valued at the last
sale price, from the exchange representing the principal market for such
securities, on the business day when such value is determined. The value of all
assets and liabilities expressed in foreign currencies is converted into U.S.
dollar values at currency exchange rates determined by Investors Bank & Trust
Company, the Funds' transfer agent, to be representative of fair rates of
exchange at times prior to the close of trading on the NYSE. If such rates are
not available, the rate of exchange will be determined in good faith under
procedures established by the Trustees. Trading in securities on European and
Asian securities exchanges and OTC markets is normally completed well before the
close of business on the NYSE and may not take place on all business days that
the NYSE is open and may take place on days when the NYSE is closed. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of regular trading on the NYSE will not be
reflected in the Funds' calculation of net asset values unless SIMCO determines
that the particular event would materially affect net asset value, in which case
an adjustment may be made.
Exchange of Shares
Shares of the Funds may be exchanged for shares of one or more other funds in
the Standish fund family subject to the terms and restrictions imposed on the
purchase of shares of such funds. Shares of a fund redeemed in an exchange
transaction are valued at the net asset value next determined after the exchange
request is received by Standish Fund Distributors or another authorized
representative of the Trust. Shares of a fund purchased in an exchange
transaction are valued at the net asset value next determined after the exchange
request is received by Standish Fund Distributors or another authorized
representative of the Trust and payment for the shares is received by the fund
into which shares are to be exchanged. Until receipt of the purchase price by
the fund into which shares are tobe exchanged (which may take up to three
business days), your money will not be invested. To obtain a current prospectus
for any of the other funds in the Standish fund family, please call (800)
221-4795. Please consider the differences in investment objectives and expenses
of a fund as described in its prospectus before making an exchange.
Written Exchanges. Shares of the Funds may be exchanged by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written exchange request must (a) state the name of the current Fund, (b) state
the name of the fund into which the current Fund shares will be exchanged, (c)
state the number of shares or the dollar amount to be exchanged, (d) identify
the shareholder's account numbers in both funds and (e) be signed by each
registered owner exactly as the shares are registered. Signature(s) must be
guaranteed as described under "Written Redemption" below.
Telephone Exchanges. Shareholders who elect telephone privileges may exchange
shares by calling Standish Fund Distributors at (800) 221- 4795. Telephone
privileges are not available to shareholders automatically. Proper
identification will be required for each telephone exchange. Please see
"Telephone Transactions" below for more information regarding telephone
transactions.
General Exchange Information. All exchanges are subject to the following
exchange restrictions: (i) the fund into which shares are being exchanged must
be lawfully available for sale in your state; (ii) exchanges may be made only
between funds that are registered in the same name, address and, if applicable,
taxpayer identification number; and (iii) unless waived by the Trust, the amount
to be exchanged must satisfy the minimum account size of the fund to be
exchanged into. Exchange requests will not be processed until payment for the
shares of the current Fund has been received by Standish Fund Distributors. The
exchange privilege may be changed or discontinued and may be subject to
additional limitations upon sixty (60) days' notice to shareholders, including
certain restrictions on purchases by market-timer accounts.
Redemption of Shares
Shares of the Funds may be redeemed or repurchased by the methods described
below at the net asset value per share next determined after receipt by Standish
Fund Distributors or another authorized representative of the Trust of a
redemption or repurchase request in proper form.
Written Redemption. Shares of each Fund may be redeemed by written order to
Standish Fund Distributors, P.O. Box 1407, Boston, Massachusetts 02205-1407. A
written redemption request must (a) state the name of the Fund and the number of
shares or the dollar amount to be redeemed, (b) identify the shareholder's
account number and (c) be signed by each registered owner exactly as the shares
are registered. Signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the NYSE's Medallion
Signature Program or by any one of the following institutions, provided that the
institution meets credit standards established by Investors Bank & Trust
Company: (i) a bank; (ii) a securities broker or dealer, including a government
or municipal securities broker or dealer, that is a member of a clearing
corporation or has net capital of at least $100,000; (iii) a credit union having
authority to issue signature guarantees; (iv) a savings and loan association, a
building and loan association, a cooperative bank, or a federal savings bank or
association; or (v)
Standish Group of Global Fixed Income Funds 20 April 30, 1998
<PAGE>
a national securities exchange, a registered securities exchange or a clearing
agency. Standish Fund Distributors reserves the right to waive the requirement
that signatures be guaranteed. Additional supporting documents may be required
in the case of estates, trusts, corporations, partnerships and other
shareholders that are not individuals. Redemption proceeds will normally be paid
by check mailed within three business days of receipt by Standish Fund
Distributors of a written redemption request in proper form. If shares to be
redeemed were recently purchased by check, the Funds may delay transmittal of
redemption proceeds until such time as they are assured that good funds have
been collected for the purchase of the shares. This may take up to fifteen (15)
days in the case of payments made by check.
Telephone Redemption. Shareholders who elect telephone privileges may redeem
shares by calling Standish Fund Distributors at (800) 221- 4795. Telephone
privileges are not available to shareholders automatically. Redemption proceeds
will be mailed or wired in accordance with the shareholder's instruction on the
account application to a pre-designated account. Redemption proceeds will
normally be paid promptly after receipt of telephone instructions, but no later
than three business days thereafter, except as described above for shares
purchased by check. Redemption proceeds will be sent only by check payable to
the shareholder of record at the address of record, unless the shareholder has
indicated, in the initial application for the purchase of shares, a commercial
bank to which redemption proceeds may be sent by wire. These instructions may be
changed subsequently only in writing, accompanied by a signature guarantee, and
additional documentation in the case of shares held by a corporation or other
entity or by a fiduciary such as a trustee or executor. Wire charges, if any,
will be deducted from redemption proceeds. Proper identification will be
required for each telephone redemption.
Repurchase Order. In addition to written redemption of Fund shares, Standish
Fund Distributors may accept telephone orders from brokers or dealers for the
repurchase of Fund shares. Brokers and dealers are obligated to transmit
repurchase orders to Standish Fund Distributors promptly prior to the close of
Standish Fund Distributors' business day (normally 4:00 p.m., New York City
time). Brokers or dealers may charge for their services in connection with a
repurchase of Fund shares, but neither the Trust nor Standish Fund Distributors
imposes a charge for share repurchases.
Telephone Transactions. By maintaining an account that is eligible for
telephonic exchange and redemption privileges, the shareholder authorizes SIMCO,
Standish Fund Distributors, the Trust and the Funds' custodian to act upon
instructions of any person to redeem and/or exchange shares from the
shareholder's account. Further, the shareholder acknowledges that, as long as
the Funds employ reasonable procedures to confirm that telephone instructions
are genuine and follow telephone instructions that they reasonably believe to be
genuine neither SIMCO, Standish Fund Distributors, the Trust, the applicable
Fund, the Funds' custodian, nor their respective officers or employees, will be
liable for any loss, expense or cost arising out of any request for a telephone
redemption or exchange, even if such transaction results from any fraudulent or
unauthorized instructions.
Depending upon the circumstances, the Funds intend to employ personal
identification or written confirmation of transaction procedures, and if they do
not, a Fund may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone transaction requests will be recorded. Shareholders
may experience delays in exercising telephone transaction privileges during
periods of abnormal market activity. During these periods, shareholders should
transmit redemption and exchange requests in writing.
* * *
The proceeds paid upon redemption or repurchase may be more or less than the
cost of the shares, depending upon the market value of the applicable Fund's or
Portfolio's portfolio investments at the time of redemption or repurchase. The
Funds intend to pay cash for all shares redeemed, but under certain conditions,
the Funds may, in their discretion, make payments wholly or partially in
securities for this purpose. Please see the SAI for further information.
Each Fund may redeem, at net asset value, the shares in any account which has
a value of less than $50,000 as a result of redemptions or transfers. Before
doing so, the Fund will notify the shareholder that the value of the shares in
the account is less than the specified minimum and will allow the shareholder 30
days to make an additional investment to increase the value of the account to an
amount at least equal to the stated minimum.
Management
Trustees. Each Fund is a separate investment series of Standish, Ayer & Wood
Trust, a Massachusetts business trust. Under the terms of the Agreement and
Declaration of Trust establishing the Trust, the Trustees of the Trust are
ultimately responsible for the management of its business and affairs. Each
Portfolio is a separate investment series of the Standish, Ayer & Wood Master
Portfolio, a master trust fund organized under the laws of the State of New
York. Under the terms of the Declaration of Trust, each Portfolio's affairs are
managed under the supervision of the Portfolio Trust's Trustees. See
"Management" in the SAI for more information about the Trustees and officers of
the Trust and the Portfolio Trust.
Investment Adviser. SIMCO, One Financial Center, Boston, Massachusetts 02111,
serves as investment adviser to the Global Fixed Income Portfolio, Diversified
Income Portfolio and International Fixed Income Fund pursuant to separate
investment advisory agreements and manages the Portfolios' and the International
Fixed Income Fund's investments and affairs subject to the supervision of the
Trustees of the Portfolio Trust. SIMCO is a Delaware limited partnership
organized in 1991 and is a registered investment adviser under the Investment
Advisers Act of 1940. The general partner of the Adviser is Standish which holds
a 99.98% partnership interest. The limited partners, who each hold a 0.01%
interest in SIMCO, are Walter M. Cabot, Sr., Senior Adviser to SIMCO and
Standish, and D. Barr Clayson, Chairman of the Board and Vice President of
SIMCO, a Managing Director and Vice President of Standish and a Trustee and Vice
President of the Trust and Portfolio Trust. Ralph S. Tate, Managing Director of
Standish Group of Global Fixed Income Funds 21 April 30, 1998
<PAGE>
Standish, is President and a Director of SIMCO. Richard S. Wood, Vice President
and a Managing Director of Standish and the President and a Trustee of the Trust
and the Portfolio Trust, is the Executive Vice President and a Director of
SIMCO.
Standish and SIMCO provide fully discretionary management services and
counseling and advisory services to a broad range of clients throughout the
United States and abroad. As of March 31, 1998, Standish and SIMCO managed
approximately $40 billion of assets.
The Global Fixed Income Portfolio's and the International Fixed Income Fund's
co-portfolio managers are Richard S. Wood and W. Charles Cook II (since June
1997). Mr. Wood has been the portfolio manager of the Funds' portfolios since
their inception and of the Portfolio's portfolio since the Global Fixed Income
Fund's conversion to the master- feeder structure on May 3, 1996. During the
past five years, Mr. Wood has served as a Vice President and a Managing Director
(since 1995) of Standish, Executive Vice President of SIMCO and President of the
Trust and Portfolio Trust (since 1996). During the past five years, Mr. Cook has
served as a Vice President and Associate Director of Standish, a Vice President
of SIMCO, and a Vice President of the Trust (since 1987) and the Portfolio Trust
(since 1996). Prior to serving as co-portfolio manager, Mr. Cook served as an
analyst.
The Diversified Income Portfolio's portfolio manager is Dolores S. Driscoll.
Ms. Driscoll has been primarily responsible for the day-to- day management of
the Portfolio's portfolio since its inception on June 2, 1997. During the past
five years, Ms. Driscoll has served as a Director of SIMCO and Managing Director
of Standish.
Subject to the supervision and direction of the Trustees of the Trust and the
Portfolio Trust, SIMCO manages the Portfolios and the International Fixed Income
Fund in accordance with their respective investment objectives and policies,
recommends investment decisions, places orders to purchase and sell securities
and permits the Portfolios and the International Fixed Income Fund to use the
name "Standish." For these services, each Portfolio and the International Fixed
Income Fund pay a monthly fee at a stated annual percentage rate of such Fund's
or Portfolio's average daily net asset value:
- --------------------------------------------------------------------------------
Contractual Actual Rate Paid
Advisory Fee for the Year Ended
Annual Rate December 31, 1997
- --------------------------------------------------------------------------------
International Fixed
Income Fund 0.40% 0.40%
Global Fixed
Income Portfolio 0.40% 0.39%*
Diversified Income
Portfolio 0.50% 0.00%*
- ----------
*SIMCO has voluntarily and temporarily agreed to limit total expenses (excluding
brokerage commissions, taxes and extraordinary expenses) of the Global Fixed
Income Fund and Diversified Income Fund to 0.65% and 0.00% respectively, of
average daily net assets. SIMCO may terminate or revise these agreements at any
time although it has no current intention to do so. If an expense limit is
exceeded, the compensation due to SIMCO shall be proportionately reduced in the
amount of such excess by a reduction or refund thereof, subject to readjustment
during the period during which such limit is in place.
Administrator. Standish serves as administrator to the Global Fixed Income
Fund and Diversified Income Fund. As administrator, Standish manages the affairs
of these Funds, provides all necessary office space and services of executive
personnel for administering the affairs of the Funds, and allows the Funds to
use the name "Standish." For these services, Standish currently does not receive
any additional compensation. The Trustees of the Trust may determine in the
future to compensate Standish for its administrative services.
Expenses. Each Portfolio and the International Fixed Income Fund bears the
expenses of its respective operations other than those incurred by SIMCO under
the investment advisory agreements or by Standish under the administration
agreement. Each Portfolio pays investment advisory fees; bookkeeping, share
pricing and custodian fees and expenses; expenses of notices and reports to
interest holders; and expenses of the Portfolio's administrator. Each Standish
Feeder Fund pays shareholder servicing fees and expenses, expenses of
prospectuses, statements of additional information and shareholder reports which
are furnished to existing shareholders. Each Standish Feeder Fund and its
corresponding Portfolio pays legal and auditing fees; registration and reporting
fees and expenses. The International Fixed Income Fund, since it does not invest
in a corresponding portfolio,bears all of the expenses listed above for both the
Portfolios and the Fund. Expenses of the Trust which relate to more than one
series are allocated among such series by Standish in an equitable manner.
Each Fund's total annual operating expenses for the fiscal year ended December
31, 1997 are described above under the caption "Financial Highlights." Standish
Fund Distributors bears the distribution expenses attributable to the offering
and sale of Fund shares without subsequent reimbursement.
Portfolio Transactions. Subject to the supervision of the Trustees of the
Trust and the Portfolio Trust, SIMCO selects the brokers and dealers that
execute orders to purchase and sell portfolio securities for the International
Fixed Income Fund and the Portfolios. SIMCO will generally seek to obtain the
best available price and most favorable execution with respect to all
transactions for the Portfolios and the International Fixed Income Fund. SIMCO
may also consider the extent to which a broker or dealer provides research to
SIMCO and the number of Fund shares sold by the broker or dealer in making its
selection.
Year 2000 Issue. The Funds and the Portfolios depend on the seamless
functioning of computer systems in the financial service industry, including
those of SIMCO, the Custodian and the Transfer Agent. Many computer software
systems in use today cannot properly process date-related information after
December 31, 1999 because of the method by which dates are encoded and
calculated. This failure, commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of securities trades, pricing and account
servicing for the Funds and Portfolios. SIMCO has made compliance with the Year
2000 Issue a high priority and is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to its computer systems.
SIMCO has also been informed that comparable steps are being taken by the Funds'
and Portfolios'
Standish Group of Global Fixed Income Funds 22 April 30, 1998
<PAGE>
other major service providers. SIMCO does not currently anticipate that the Year
2000 Issue will have a material impact on its ability to continue to fulfill its
duties as investment adviser.
Federal Income Taxes
Each Fund is a separate entity for federal tax purposes and intends to qualify
for each taxable year for taxation as a "regulated investment company"under the
Code. If it qualifies as a regulated investment company, each Fund will not be
subject to federal income tax on income (including capital gains) distributed to
shareholders in accordance with certain timing and other requirements of the
Code.
Shareholders which are taxable entities or persons will be subject to federal
income tax on dividends and capital gain distributions made by the Funds.
Dividends paid by a Fund from net investment income, certain net foreign
currency gains, and any excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income, whether
received in cash or reinvested in Fund shares. These dividends generally will
not qualify for the corporate dividends received deduction under the Code.
Dividends paid by a Fund from net capital gain (the excess of net long-term
capital gain over net short-term capital loss), called "capital gain
distributions," will be taxable to shareholders as capital gains, whether
received in cash or reinvested in Fund shares and without regard to how long the
shareholder has held shares of the Fund. Capital gain distributions are taxable
for noncorporate shareholders at maximum federal income tax rates of 28% or 20%,
or in unusual cases 25%, depending upon the source. Capital gain distributions
do not qualify for the corporate dividends received deduction. Dividends and
capital gain distributions may also be subject to state and local or foreign
taxes. Redemptions (including exchanges) and repurchases of shares are taxable
events for shareholders that are subject to tax.
The International Fixed Income Fund and the Portfolios may be subject to
foreign taxes with respect to income or gains from certain foreign investments,
which will reduce the yield or return from such investments. The Funds may
qualify to elect to pass certain qualifying foreign taxes through shareholders.
If this election is made by any Fund, shareholders of that Fund would include
their shares of qualified foreign taxes in their gross incomes (in addition to
any actual dividends and distributions) and might be entitled to a corresponding
federal income tax credit or deduction. Shareholders will receive appropriate
information if this election is made for any year.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on dividends, capital gain
distributions, and the proceeds of redemptions or repurchases of shares, if they
fail to furnish the applicable Fund with their correct taxpayer identification
number and certain certifications or if they are otherwise subject to backup
withholding. Individuals, corporations and other shareholders that are not U.S.
persons under the Code are subject to different tax rules and may be subject to
nonresident alien withholding tax at the rate of 30% (or a lower rate provided
by an applicable tax treaty) on amounts treated as ordinary dividends from the
Funds and, unless a current IRS Form W-8 or an acceptable substitute is
furnished to the applicable Fund, to backup withholding on certain payments from
that Fund.
After the close of each calendar year, the Funds will send a notice to
shareholders that provides information about the federal tax status of
distributions to shareholders for such calendar year.
The Funds and Their Shares
The Trust was organized on August 13, 1986 as a Massachusetts business trust.
In addition to the Funds offered in this Prospectus, the Trust offers other
series to the public. Shareholders of each Fund are entitled to one full or
fractional vote for each share or fraction thereof of that Fund. There is no
cumulative voting and shares have no preemption or conversion rights. All series
of the Trust vote together except as provided in the 1940 Act or the Declaration
of Trust. The Trust does not intend to hold annual meetings of shareholders. The
Trustees will call special meetings of shareholders to the extent required by
the Trust's Declaration of Trust or the 1940 Act. The 1940 Act requires the
Trustees, under certain circumstances, to call a meeting to allow shareholders
to vote on the removal of a Trustee and to assist shareholders in communicating
with each other.
The Portfolio Trust was organized on January 18, 1996 as a New York trust. In
addition to the Global Fixed Income Portfolio, the Portfolio Trust offers
interests in other series to certain qualified investors. See "Information about
the Master-Feeder Structure" above for additional information about the
Portfolio Trust.
At April 1, 1998, Allendale Mutual Insurance Co., P.O. Box 7500, Johnston, RI
02919 had sole voting and investment power with respect to more than 25% of the
then outstanding shares of the Diversified Income Fund. Accordingly, it was
deemed to control the Diversified Income Fund.
Inquiries concerning the Funds should be made by contacting Standish Fund
Distributors at the address and telephone number listed on the back cover of
this Prospectus.
Custodian, Transfer Agent and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116, serves as the Funds' transfer agent, dividend disbursing agent and as
custodian for all cash and securities of the Funds and the Portfolios. Investors
Bank & Trust, Boston and Toronto, Canada, also provides accounting services to
the Funds.
Independent Accountants
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109
and Coopers & Lybrand, P.O. Box 219, Grand Cayman, Cayman Islands, BWI, serve as
independent accountants for the Trust and the Portfolio Trust, respectively, and
will audit the Funds' and the Portfolios' financial statements annually.
Standish Group of Global Fixed Income Funds 23 April 30, 1998
<PAGE>
Legal Counsel
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, is legal
counsel to the Trust, the Portfolio Trust, Standish, SIMCO and their affiliates.
Tax Certification Instructions
Federal law requires that taxable distributions and proceeds of redemptions
and exchanges be reported to the IRS and that 31% be withheld if you fail to
provide your correct Taxpayer Identification Number ("TIN") and the TIN-related
certifications contained in the Account Purchase Application ("Application") or
you are otherwise subject to backup withholding. A Fund will not impose backup
withholding as a result of your failure to make any certification, except the
certifications in the Application that directly relate to your TIN and backup
withholding status. Amounts withheld and forwarded to the IRS can be credited as
a payment of tax when completing your Federal income tax return.
For most individual taxpayers, the TIN is the social security number. Special
rules apply for certain accounts. For example, for an account established under
the Uniform Gift to Minors Act, the TIN of the minor should be furnished. If you
do not have a TIN, you may apply for one using forms available at local offices
of the Social Security Administration or the IRS, and you should write"Applied
For" in the space for a TIN on the Application.
Recipients exempt from backup withholding, including corporations and certain
other entities, should provide their TIN and underline "exempt" in section 2(a)
of the TIN section of the Application to avoid possible erroneous withholding.
Non-resident aliens and foreign entities may be subject to withholding of up to
30% on certain distributions received from the Funds and must provide certain
certifications on IRS Form W-8 to avoid backup withholding with respect to other
payments. For further information, see Code Sections 1441, 1442 and 3406 and/or
consult your tax adviser.
Standish Group of Global Fixed Income Funds 24 April 30, 1998
<PAGE>
Standish Group of Global Fixed Income Funds
- --------------------------------------------------------------------------------
Investment Adviser
Standish International Management Company, L.P.
One Financial Center
Boston, Massachusetts 02111
Principal Underwriter Independent Accountants
Standish Fund Distributors, L.P. Coopers & Lybrand L.L.P.
One Financial Center One Post Office Square
Boston, Massachusetts 02111 Boston, Massachusetts 02109
Custodian Coopers & Lybrand
Investors Bank & Trust Company P.O. Box 219
200 Clarendon Street Grand Cayman Island, BWI
Boston, Massachusetts 02116 (Global Fixed Income Portfolio
and Diversified Income Portfolio)
Legal Counsel
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus or
in the Statement of Additional Information, and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Trust. This Prospectus does not constitute an offering in any
jurisdiction in which such offering may not be lawfully made.
Standish Group of Global Fixed Income Funds 25 April 30, 1998
<PAGE>
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Standish Group of Global Fixed Income Funds 26 April 30, 1998
<PAGE>
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Standish Group of Global Fixed Income Funds 27 April 30, 1998
<PAGE>
[LOGO] Standish Funds(SM)
One Financial Center
Boston, MA 02111-2662
(800) 729-0066 98-107
www.standishfunds.com
<PAGE>
April 30, 1998
STANDISH GROUP OF GLOBAL FIXED INCOME FUNDS
STANDISH INTERNATIONAL FIXED INCOME FUND
STANDISH GLOBAL FIXED INCOME FUND
STANDISH DIVERSIFIED INCOME FUND
One Financial Center
Boston, Massachusetts 02111
(800) 729-0066
STATEMENT OF ADDITIONAL INFORMATION
This combined Statement of Additional Information is not a prospectus, but
expands upon and supplements the information contained in the combined
Prospectus dated April 30, 1998, as amended and/or supplemented from time to
time (the "Prospectus"), of the Standish International Fixed Income Fund
("International Fixed Income Fund"), the Standish Global Fixed Income Fund
("Global Fixed Income Fund") and the Standish Diversified Income Fund
("Diversified Income Fund"), each a separate investment series of Standish, Ayer
& Wood Investment Trust (the "Trust"). This Statement of Additional Information
("SAI") should be read in conjunction with the Prospectus, a copy of which may
be obtained without charge by writing or calling the Trust's principal
underwriter, Standish Fund Distributors, L.P. (the "Principal Underwriter"), at
the address and phone number set forth above.
THIS SAI IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
------------------------------------------
CONTENTS
Investment Objective and Policies...........2
Investment Restrictions....................13
Calculation of Performance Data............16
Management.................................19
Redemption of Shares.......................24
Portfolio Transactions.....................25
Determination of Net Asset Value...........26
The Funds and Their Shares.................26
The Portfolios and Their Investors.........27
Taxation...................................28
Additional Information.....................32
Experts and Financial Statements...........32
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Prospectus describes the investment objective and policies of each
Fund. The following discussion supplements the description of the Funds'
investment policies in the Prospectus.
The Global Fixed Income Fund invests all of its investable assets in the
Standish Global Fixed Income Portfolio and the Diversified Income Fund invests
all of its investable assets in the Standish Diversified Income Portfolio. These
two Funds are sometimes referred to in this SAI as Standish Feeder Funds.
Each Portfolio is a series of Standish, Ayer & Wood Master Portfolio (the
"Portfolio Trust"), an open-end management investment company. Each Portfolio
has the same investment objective and restrictions as its corresponding Fund.
Standish International Management Company, L.P. ("SIMCO" or the "Adviser") is
the adviser to the Portfolios and the International Fixed Income Fund.
The Prospectus describes the investment objective of the Standish Feeder
Funds and the Portfolios and summarizes the investment policies they will
follow. Since the investment characteristics of the Standish Feeder Funds
correspond directly to those of their respective Portfolios, the following
discusses the various investment techniques employed by the Portfolios. See the
Prospectus for a more complete description of each Fund's and each Portfolio's
investment objective, policies and restrictions. For the purposes of the
discussion in this section of this SAI, the use of the term "Fund" or "Funds"
includes references to Global Fixed Income Portfolio, the Diversified Income
Portfolio and the International Fixed Income Fund, unless otherwise noted.
Money Market Instruments and Repurchase Agreements. Money market instruments
include short-term U.S. and Foreign Government securities, commercial paper
(promissory notes issued by corporations to finance their short-term credit
needs), negotiable certificates of deposit, non-negotiable fixed time deposits,
bankers' acceptances and repurchase agreements.
U.S. Government securities include securities which are direct obligations
of the U.S. Government backed by the full faith and credit of the United States,
and securities issued by agencies and instrumentalities of the U.S. Government,
which may be guaranteed by the U.S. Treasury or supported by the issuer's right
to borrow from the U.S. Treasury or may be backed by the credit of the federal
agency or instrumentality itself. Agencies and instrumentalities of the U.S.
Government include, but are not limited to, Federal Land Banks, the Federal Farm
Credit Bank, the Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Home Loan Banks and the Federal National Mortgage Association.
The Diversified Income Portfolio may invest in commercial paper rated
"P-1" or "P-2" by Moody's Investors Service, Inc. ("Moody's"), "A-1" or "A-2" by
Standard & Poor's Rating Group ("S&P"), Duff-1 or Duff-2 by Duff & Phelps
("Duff"), or in commercial paper that is unrated. The International Fixed Income
Fund and Global Fixed Income Portfolio may invest in commercial paper rated
"P-1" by Moody's, "A-1" by S&P or Duff-1 by Duff, which are the highest ratings
assigned by these rating services (even if rated lower by one or more of the
other agencies), or which, if not rated or rated lower by one or more of the
agencies and not rated by the other agency or agencies, are judged by SIMCO to
be of equivalent quality to the securities so rated. In determining whether
securities are of equivalent quality, SIMCO may take into account, but will not
rely entirely on, ratings assigned by foreign rating agencies.
A repurchase agreement is an agreement under which a Fund acquires money
market instruments (generally U.S. Government securities) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed-upon price
and date (normally the next business day). The resale price reflects an
agreed-upon interest rate effective for the period the instruments are held by
the Fund and is unrelated to the interest rate on the instruments. The
instruments acquired by each Fund (including accrued interest) must have an
aggregate market value in excess of the resale price and will be held by the
custodian bank for the Fund until they are repurchased. The Trustees will
monitor the standards that SIMCO will use in reviewing the creditworthiness of
any party to a repurchase agreement with the Funds.
The use of repurchase agreements involves certain risks. For example, if
the seller defaults on its obligation to repurchase the instruments acquired by
a Fund at a time when their market value has declined, the Fund may incur a
loss. If the seller becomes insolvent or subject to liquidation or
reorganization under bankruptcy or other laws, a court may determine that the
instruments acquired by a Fund are collateral for a loan by the Fund and
therefore are subject to sale by the trustee in bankruptcy. Finally, it is
possible that a Fund may not be able to substantiate its interest in the
instruments it acquires. While the Trustees acknowledge these risks, it is
expected that they can be controlled through careful documentation and
monitoring.
2
<PAGE>
Foreign Securities. Foreign securities may be purchased and sold on foreign
stock exchanges or in over-the-counter ("OTC") markets (but persons affiliated
with a Fund will not act as principal in such purchases and sales). Foreign
stock markets are generally not as developed or efficient as those in the United
States. While growing in volume, they usually have substantially less volume
than the New York Stock Exchange ("NYSE"), and securities of some foreign
companies are less liquid and more volatile than securities of comparable United
States companies. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on United States exchanges, although each
Fund will endeavor to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies abroad than in the United States.
The dividends and interest payable on certain foreign securities may be
subject to foreign withholding taxes and in some cases capital gains from such
securities may also be subject to foreign tax, thus reducing the net amount of
income or gain allocable to an investor in a Portfolio.
Investors should understand that the expense ratio of each Fund may be
higher than that of investment companies investing exclusively in domestic
securities because of the cost of maintaining the custody of foreign securities.
Investing in Securities of Emerging Market Countries. Investing in the
securities of emerging market countries involves considerations and potential
risks not typically associated with investing in the securities of U.S. issuers
whose securities are principally traded in the United States. These risks may be
related to (i) restrictions on foreign investment and repatriation of capital;
(ii) differences in size, liquidity and volatility of, and the degree and manner
of regulation of, the securities markets of the Asian countries compared to the
U.S. securities markets; (iii) economic, political and social factors; and (iv)
foreign exchange matters such as fluctuations in exchange rates between the U.S.
dollar and the currencies in which a Fund's portfolio securities are quoted or
denominated, exchange control regulations and costs associated with currency
exchange. A Fund's purchase and sale of portfolio securities in certain emerging
market countries may be constrained by limitations as to daily changes in the
prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. In certain cases, such
limitations may be computed based upon the aggregate trading by or holdings of
the Funds, the Adviser and its affiliates and their respective clients and other
service providers. The Funds may not be able to sell securities in circumstances
where price, trading or settlement volume limitations have been reached. These
limitations may have a negative impact on each Fund's performance and may
adversely affect the liquidity of each Fund's investments to the extent that it
invests in emerging market countries.
The Diversified Income Portfolio limits its investments in securities of
issuers located in any one developed country (excluding the U.S.) to 15% of its
total assets and limits its investments in securities of issuers located in any
one emerging market country to 7% of its total assets. These limitations do not
apply to investments denominated or quoted in the European Monetary Unit.
Investment and Repatriation Restrictions. Foreign investment in the securities
markets of several emerging market countries is restricted or controlled to
varying degrees. These restrictions may limit a Fund's investment in certain
emerging market countries, require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of such company available for purchase by nationals. In certain
countries, the Funds may be limited by government regulation or a company's
charter to a maximum percentage of equity ownership in any one company. Such
restrictions may affect the market price, liquidity and rights of securities
that may be purchased by the Funds. From time to time, the Adviser may determine
that investment and repatriation restrictions in certain emerging market
countries negate the advantages of investing in such countries and no Fund is
required to invest in any emerging market country.
In addition, certain countries may restrict or prohibit investment
opportunities in issuers or industries deemed important to national interests.
The Adviser may determine from time to time to invest in the securities of
emerging market countries which may impose restrictions on foreign investment
and repatriation that cannot currently be predicted. Due to restrictions on
direct investment in equity securities in certain emerging market countries,
such as Taiwan, the Funds may invest only through investment funds in such
emerging market countries.
The repatriation of both investment income and capital from several
emerging market countries is subject to restrictions such as the need for
certain governmental consents. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of
3
<PAGE>
the operation of the Funds to the extent that they invest in emerging market
countries.
Market Characteristics. All of the securities markets of emerging market
countries have substantially less volume than the NYSE. Equity securities of
most emerging market companies are generally less liquid and subject to greater
price volatility than equity securities of U.S. companies of comparable size.
Some of the stock exchanges in the emerging market countries are in the earliest
stages of their development.
Certain of the securities markets of emerging market countries are marked
by high concentrations of market capitalization and trading volume in a small
number of issuers representing a limited number of industries, as well as a high
concentration of ownership of such securities by a limited number of investors.
Even the market for relatively widely traded securities in the emerging markets
may not be able to absorb, without price disruptions, a significant increase in
trading volume or trades of a size customarily undertaken by institutional
investors in the United States. Additionally, market making and arbitrage
activities are generally less extensive in such markets, which may contribute to
increased volatility and reduced liquidity of such markets. Accordingly, each of
these markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. The less liquid the market, the
more difficult it may be for a Fund to accurately price its portfolio securities
or to dispose of such securities at the times determined by the Adviser to be
appropriate. The risks associated with the liquidity of a market may be
particularly acute in situations in which a Fund's operations require cash, such
as the need to meet redemption requests for its shares, to pay dividends and
other distributions and to pay its expenses. To the extent that any emerging
market country experiences rapid increases in its money supply and investment in
equity securities is made for speculative purposes, the equity securities traded
in any such country may trade at price-earnings ratios higher than those of
comparable companies trading on securities markets in the United States. Such
price-earnings ratios may not be sustainable.
Settlement procedures in emerging market countries are less developed and
reliable than those in the United States and in other developed markets, and a
Fund may experience settlement delays or other material difficulties. In
addition, significant delays are common in registering transfers of securities,
and a Fund may be unable to sell such securities until the registration process
is completed and may experience delays in receipt of dividends and other
entitlements.
Brokerage commissions and other transactions costs on securities exchanges
in emerging market countries are generally higher than in the United States.
There is also less government supervision and regulation of foreign securities
exchanges, brokers and listed companies in emerging market countries than exists
in the United States. Brokers in emerging market countries may not be as well
capitalized as those in the United States, so that they are more susceptible to
financial failure in times of market, political or economic stress. In addition,
existing laws and regulations are often inconsistently applied. As legal systems
in emerging market countries develop, foreign investors may be adversely
affected by new or amended laws and regulations. In circumstances where adequate
laws exist, it may not be possible to obtain swift and equitable enforcement of
the law.
Financial Information and Standards. Issuers in emerging market countries
generally are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of an emerging market company may not reflect its financial position
or results of operations in the same manner as financial statements for U.S.
companies. Substantially less information may be publicly available about
issuers in emerging market countries than is available about issuers in the
United States.
Economic, Political and Social Factors. Many emerging market countries may be
subject to a greater degree of economic, political and social instability than
is the case in the United States and Western European countries. Such
instability may result from, among other things: (i) authoritarian governments
or military involvement in political and economic decision-making, including
changes or attempted changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved economic, political and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection and
conflict. Such economic, political and social instability could significantly
disrupt financial markets of emerging market countries and adversely affect the
value of a Fund's assets so invested.
Few emerging market countries have fully democratic governments. Some
governments in the region are authoritarian in nature or are influenced by armed
forces which have been used to control civil unrest. During the course of the
last 25 years, governments of certain emerging market countries have been
installed or removed as a result of military coups, while governments in other
emerging market countries have periodically used force to suppress civil
dissent.
4
<PAGE>
Disparities of wealth, the pace and success of democratization, and ethnic,
religious and racial disaffection, among other factors, have also led to social
unrest, violence and/or labor unrest in some emerging market countries. Several
emerging market countries have or in the past have had hostile relationships
with neighboring nations or have experienced internal insurrections.
The economies of most emerging market countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Union. The enactment by the United States
or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the emerging securities markets. In addition, the economies of some
emerging market countries are vulnerable to weakness in world prices for their
commodity exports.
There may be the possibility of expropriations, confiscatory taxation,
political, economic or social instability or diplomatic developments which would
adversely affect assets of a Fund held in emerging market or other foreign
countries. Governments in certain emerging market countries participate to a
significant degree, through ownership interests or regulation, in their
respective economies. Actions by these governments could have a significant
adverse effect on market prices of securities and payment of dividends.
Below Investment Grade Securities. The Diversified Income Portfolio may make a
variety of investments, including investment in long-term, intermediate-term and
short-term senior and subordinated corporate debt and other fixed income
obligations. Such securities may be unrated or rated in the non-investment grade
rating categories of "Moody's", S&Ps or another rating organization. The
International Fixed Income Fund and the Global Fixed Income Portfolio may also
invest, to a much more limited extent, in non-investment grade fixed income
securities rated BB or B by S&P's and Ba or B by Moody's. Bonds rated BB or
below by S&P or Ba or below by Moody's (or comparable rated and unrated
securities) are commonly referred to as "junk bonds" and are considered
speculative; the ability of their issuers to make principal and interest
payments may be questionable. In some cases, such bonds may be highly
speculative, have poor prospects for reaching investment grade standing and be
in default. As a result, investment in such bonds will entail greater risks than
those associated with investment grade bonds (i.e., bonds rated AAA, AA, A or
BBB by S&P or Aaa, Aa, A or Baa by Moody's). Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for issuers of higher
quality debt securities, and the ability of the Diversified Income Portfolio to
achieve its investment objective may, to the extent of its investments in high
yield securities, be more dependent upon such creditworthiness analysis than
would be the case if the Diversified Income Portfolio were investing in higher
quality securities.
The amount of high yield, fixed income securities proliferated in the
1980s and early 1990s as a result of increased merger and acquisition and
leveraged buyout activity. Such securities are also issued by less-established
corporations desiring to expand. Risks associated with acquiring the securities
of such issuers generally are greater than is the case with higher rated
securities because such issuers are often less creditworthy companies or are
highly leveraged and generally less able than more established or less leveraged
entities to make scheduled payments of principal and interest.
The market values of high yield, fixed income securities tend to reflect
individual corporate developments to a greater extent than do those of higher
rated securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of such high yield securities may not be able to make
use of more traditional methods of financing and their ability to service debt
obligations may be more adversely affected than issuers of higher rated
securities by economic downturns, specific corporate developments or the
issuers' inability to meet specific projected business forecasts. These
non-investment grade securities also tend to be more sensitive to economic
conditions than higher-rated securities. Negative publicity about the high yield
bond market and investor perceptions regarding lower rated securities, whether
or not based on the Fund's or the Portfolios' fundamental analysis, may depress
the prices for such securities.
Since investors generally perceive that there are greater risks associated
with non-investment grade securities of the type in which the Fund or Portfolios
invest, the yields and prices of such securities may tend to fluctuate more than
those for higher rated securities. In the lower quality segments of the
fixed-income securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the fixed-income securities
market, resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the
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prices of fixed-income securities fluctuate in response to the general level of
interest rates. Fluctuations in the prices of portfolio securities subsequent to
their acquisition will not affect cash income from such securities but will be
reflected in a fund's net asset value.
The risk of loss from default for the holders of high yield, fixed-income
securities is significantly greater than is the case for holders of other debt
securities because such high yield, fixed-income securities are generally
unsecured and are often subordinated to the rights of other creditors of the
issuers of such securities. The Diversified Income Portfolio may be required to
liquidate other portfolio securities in order to enable certain of its interest
holders to satisfy their annual distribution obligations in respect of accrued
interest income on securities which are subsequently written off, even though
the Diversified Income Portfolio has not received any cash payments of such
interest.
The secondary market for high yield, fixed-income securities is dominated
by institutional investors, including mutual fund portfolios, insurance
companies and other financial institutions. Accordingly, the secondary market
for such securities is not as liquid as and is more volatile than the secondary
market for higher-rated securities. In addition, the trading volume for high
yield, fixed-income securities is generally lower than that of higher rated
securities and the secondary market for high yield, fixed-income securities
could contract under adverse market or economic conditions independent of any
specific adverse changes in the condition of a particular issuer. These factors
may have an adverse effect on the Fund's or a Portfolio's ability to dispose of
particular portfolio investments. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances, may be less than the
prices used in calculating a Fund's net asset value. A less liquid secondary
market also may make it more difficult for the Portfolio to obtain precise
valuations of the high yield securities in its portfolio.
Proposed federal legislation could adversely affect the secondary market
for high yield securities and the financial condition of issuers of these
securities. The form of any proposed legislation and the probability of such
legislation being enacted is uncertain.
Non-investment grade or high yield, fixed-income securities also present
risks based on payment expectations. High yield, fixed-income securities
frequently contain "call" or buy-back features which permit the issuer to call
or repurchase the security from its holder. If an issuer exercises such a "call
option" and redeems the security, the Fund or a Portfolio may have to replace
such security with a lower yielding security, resulting in a decreased return
for investors. In addition, if the Diversified Income Portfolio experiences
unexpected net redemptions of its shares, it may be forced to sell its higher
rated securities, resulting in a decline in the overall credit quality of the
Diversified Income Portfolio's portfolio and increasing the exposure of the
Diversified Income Portfolio to the risks of high yield securities. A Fund may
also incur additional expenses to the extent that it is required to seek
recovery upon a default in the payment of principal or interest on a portfolio
security.
Credit ratings issued by credit rating agencies are designed to evaluate
the safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of non-investment grade securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the conditions of the issuer that affect the market
value of the security. Consequently, credit ratings are used only as a
preliminary indicator of investment quality. Investments in non-investment grade
and comparable unrated obligations will be more dependent on the Adviser's
credit analysis than would be the case with investments in investment-grade debt
obligations. The Adviser employs its own credit research and analysis, which
includes a study of existing debt, capital structure, ability to service debt
and to pay dividends, the issuer's sensitivity to economic conditions, its
operating history and the current trend of earnings. The Adviser continually
monitors the investments in the Fund's and each Portfolio's portfolio and
evaluates whether to dispose of or to retain non-investment grade and comparable
unrated securities whose credit ratings or credit quality may have changed.
Structured or Hybrid Notes. As more fully described in the Prospectus, each Fund
may invest without limit in structured or hybrid notes. In addition to the risks
associated with a direct investment in the benchmark asset, investments in
structured and hybrid notes involve the risk that the issuer or counterparty to
the obligation will fail to perform its contractual obligations. Certain
structured or hybrid notes may also be leveraged to the extent that the
magnitude of any change in the interest rate or principal payable on the
benchmark asset is a multiple of the change in the reference price. Leverage
enhances the price volatility of the security and, therefore, a Fund's net asset
value. Further, certain structured or hybrid notes may be illiquid for purposes
of the Funds' limitations on investments in illiquid securities.
Strategic Transactions. Each Fund may, but is not required to, utilize various
other investment strategies as described below to seek to hedge various market
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risks (such as interest rates, currency exchange rates, and broad or specific
fixed-income market movements), to manage the effective maturity or duration of
fixed-income securities, or to seek to enhance potential gain. Such strategies
are generally accepted as part of modern portfolio management and are regularly
utilized by many mutual funds and other institutional investors. Techniques and
instruments used by the Funds may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing its investment objective, each Fund may purchase
and sell (write) exchange-listed and OTC put and call options on securities,
equity and fixed-income indices and other financial instruments; purchase and
sell financial futures contracts and options thereon; enter into various
interest rate transactions such as swaps, caps, floors or collars; and enter
into various currency transactions such as currency forward contracts,
cross-currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions"). Strategic Transactions may be used to seek to
protect against possible changes in the market value of securities held in or to
be purchased for a Fund's portfolio resulting from securities market, interest
rate or currency exchange rate fluctuations, to seek to protect a Fund's
unrealized gains in the value of its portfolio securities, to facilitate the
sale of such securities for investment purposes, to seek to manage the effective
maturity or duration of a Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. In addition to the hedging transactions referred to in
the preceding sentence, Strategic Transactions may also be used to enhance
potential gain in circumstances where hedging is not involved although each Fund
will attempt to limit its net loss exposure resulting from Strategic
Transactions entered into for such purposes to not more than 3% of its net
assets at any one time. To the extent necessary, each Fund will close out
transactions in order to comply with this limitation. (Transactions such as
writing covered call options are considered to involve hedging for the purposes
of this limitation.) In calculating each Fund's net loss exposure from such
Strategic Transactions, an unrealized gain from a particular Strategic
Transaction position would be netted against an unrealized loss from a related
Strategic Transaction position. For example, if SIMCO anticipates that the
Belgian franc will appreciate relative to the French franc, the Fund may take a
long forward currency position in the Belgian franc and a short foreign currency
position in the French franc. Under such circumstances, any unrealized loss in
the Belgian franc position would be netted against any unrealized gain in the
French franc position (and vice versa) for purposes of calculating the Fund's
net loss exposure. The ability of a Fund to utilize these Strategic Transactions
successfully will depend on SIMCO's ability to predict pertinent market and
interest rate movements, which cannot be assured. Each Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. The Funds' activities involving Strategic
Transactions may be limited in order to allow the applicable Fund to satisfy the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for qualification as a regulated investment company.
Risks of Strategic Transactions. The use of Strategic Transactions has
associated risks including possible default by the other party to the
transaction, illiquidity and, to the extent SIMCO's view as to certain market or
interest rate movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. The
writing of put and call options may result in losses to a Fund, force the
purchase or sale, respectively, of portfolio securities at inopportune times or
for prices higher than (in the case of purchases due to the exercise of put
options) or lower than (in the case of sales due to the exercise of call
options) current market values, limit the amount of appreciation a Fund can
realize on its investments or cause a Fund to hold a security it might otherwise
sell or sell a security it might otherwise hold. The use of currency
transactions can result in a Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. The writing of options
could significantly increase a Fund's portfolio turnover rate and, therefore,
associated brokerage commissions or spreads. In addition, futures and options
markets may not be liquid in all circumstances and certain OTC options may have
no markets. As a result, in certain markets, a Fund might not be able to close
out a transaction without incurring substantial losses, if at all. Although the
use of futures and options transactions for hedging should tend to minimize the
risk of loss due to a decline in the value of the hedged position, at the same
time, in certain circumstances, they tend to limit any potential gain which
might result from an increase in value of such position. The loss incurred by a
Fund in writing options on futures and entering into futures transactions is
potentially unlimited; however, as described above, each Fund will attempt to
limit its net loss exposure resulting from Strategic Transactions
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entered into for non-hedging purposes to not more than 3% of its net assets at
any one time. Futures markets are highly volatile and the use of futures may
increase the volatility of a Fund's net asset value. Finally, entering into
futures contracts would create a greater ongoing potential financial risk than
would purchases of options where the exposure is limited to the cost of the
initial premium. Losses resulting from the use of Strategic Transactions would
reduce net asset value and the net result may be less favorable than if the
Strategic Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of each Fund's assets in special accounts, as
described below under "Use of Segregated Accounts."
A put option gives the purchaser of the option, in consideration for the
payment of a premium, the right to sell, and the writer the obligation to buy
(if the option is exercised), the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, a Fund's
purchase of a put option on a security might be designed to protect its holdings
in the underlying instrument (or, in some cases, a similar instrument) against a
substantial decline in the market value by giving the Fund the right to sell
such instrument at the option exercise price. A call option, in consideration
for the payment of a premium, gives the purchaser of the option the right to
buy, and the seller the obligation to sell (if the option is exercised), the
underlying instrument at the exercise price. Each Fund may purchase a call
option on a security, futures contract, index, currency or other instrument to
seek to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. Each Fund is authorized to purchase and sell exchange listed options
and OTC options. Exchange listed options are issued by a regulated intermediary
such as the Options Clearing Corporation ("OCC"), which guarantees the
performance of the obligations of the parties to such options. The discussion
below uses the OCC as an example, but is also applicable to other financial
intermediaries.
With certain exceptions, exchange listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options and Eurodollar instruments
are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A Fund's ability to close out its position as a purchaser or seller of an
exchange listed put or call option is dependent, in part, upon the liquidity of
the option market. There is no assurance that a liquid option market on an
exchange will exist. In the event that the relevant market for an option on an
exchange ceases to exist, outstanding options on that exchange would generally
continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct agreement with
the Counterparty. In contrast to exchange listed options, which generally have
standardized terms and performance mechanics, all the terms of an OTC option,
including such terms as method of settlement, term, exercise price, premium,
guarantees and security, are set by negotiation of the parties. Each Fund will
generally sell (write) OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. OTC
options purchased by a Fund, and portfolio securities "covering" the amount of a
Fund's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are subject to each Fund's
restriction on illiquid securities, unless determined to be liquid in accordance
with procedures adopted by the Boards of Trustees. For OTC options written with
"primary dealers" pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount which is considered to be
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illiquid may be calculated by reference to a formula price. Each Fund expects
generally to enter into OTC options that have cash settlement provisions,
although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in the OTC option market. As a result, if the Counterparty
fails to make delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, SIMCO must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
Each Fund will engage in OTC option transactions only with U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers" or broker-dealers, domestic or foreign banks or other
financial institutions which have received, combined with any credit
enhancements, a long-term debt rating of A from S&P or Moody's or an equivalent
rating from any other nationally recognized statistical rating organization
("NRSRO") or which issue debt that is determined to be of equivalent credit
quality by the Adviser.
If a Fund sells (writes) a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase the Fund's income. The sale (writing) of put options
can also provide income.
Each Fund may purchase and sell (write) call options on securities
including U.S. Treasury and agency securities, mortgage-backed and asset-backed
securities, foreign sovereign debt, corporate debt securities, equity securities
(including convertible securities) and Eurodollar instruments that are traded on
U.S. and foreign securities exchanges and in the OTC markets, and on securities
indices, currencies and futures contracts. All calls sold by a Fund must be
"covered" (i.e., the Fund must own the securities or the futures contract
subject to the call) or must meet the asset segregation requirements described
below as long as the call is outstanding. In addition, each Fund may cover a
written call option or put option by entering into an offsetting forward
contract and/or by purchasing an offsetting option or any other option which,
but virtue of its exercise price or otherwise, reduces the Fund's net exposure
on its written option position. Even though a Fund will receive the option
premium to help offset any loss, the Fund may incur a loss if the exercise price
is below the market price for the security subject to the call at the time of
exercise. A call sold by a Fund also exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or instrument and may require the Fund to hold
a security or instrument which it might otherwise have sold or sell a security
or instrument which it might otherwise have held.
Each Fund may purchase and sell (write) put options on securities
including U.S. Treasury and agency securities, mortgage-backed and asset-backed
securities, foreign sovereign debt, corporate debt securities, equity securities
(including convertible securities) and Eurodollar instruments (whether or not it
holds the above securities in its portfolio), and on securities indices,
currencies and futures contracts. A Fund will not sell put options if, as a
result, more than 50% of the Fund's assets would be required to be segregated to
cover its potential obligations under such put options other than those with
respect to futures and options thereon. In selling put options, there is a risk
that a Fund may be required to buy the underlying security at a price above the
market price.
Options on Securities Indices and Other Financial Indices. Each Fund may also
purchase and sell (write) call and put options on securities indices and other
financial indices. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement. For example, an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the differential between the closing price of the index and the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount upon exercise of the option. In addition to the
methods described above, each Fund may cover call options on a securities index
by owning securities whose price changes are expected to be similar to those of
the underlying index, or by having an absolute and immediate right to acquire
such securities without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities in its portfolio.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures. Futures are
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generally bought and sold on the commodities exchanges where they are listed and
involve payment of initial and variation margin as described below. All futures
contracts entered into by a Fund are traded on U.S. exchanges or boards of trade
that are licensed and regulated by the Commodity Futures Trading Commission
("CFTC") or on certain foreign exchanges. The sale of futures contracts creates
a firm obligation by a Fund, as seller, to deliver to the buyer the specific
type of financial instrument called for in the contract at a specific future
time for a specified price (or, with respect to index futures and Eurodollar
instruments, the net cash amount). The purchase of futures contracts creates a
corresponding obligation by a Fund, as purchaser, to purchase a financial
instrument at a specific time and price. Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such position
upon exercise of the option.
Each Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
regulations of the CFTC relating to exclusions from regulation as a commodity
pool operator. Those regulations currently provide that a Fund may use commodity
futures and option positions (i) for bona fide hedging purposes without regard
to the percentage of assets committed to margin and option premiums, or (ii) for
other purposes permitted by the CFTC to the extent that the aggregate initial
margin and option premiums required to establish such non-hedging positions (net
of the amount that the positions were "in the money" at the time of purchase) do
not exceed 5% of the net asset value of the Fund's portfolio, after taking into
account unrealized profits and losses on such positions. Typically, maintaining
a futures contract or selling an option thereon requires a Fund to deposit, with
its custodian for the benefit of a futures commission merchant, or directly with
the futures commission merchant, as security for its obligations an amount of
cash or other specified assets (initial margin) which initially is typically 1%
to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets (variation margin) may be required to
be deposited directly with the futures commission merchant thereafter on a daily
basis as the value of the contract fluctuates. The purchase of an option on
financial futures involves payment of a premium for the option without any
further obligation on the part of the Fund. If a Fund exercises an option on a
futures contract it will be obligated to post initial margin (and potential
subsequent variation margin) for the resulting futures position just as it would
for any position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur. The segregation requirements with respect to futures
contracts and options thereon are described below.
Currency Transactions. Each Fund may engage in currency transactions with
Counterparties to seek to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value or to enhance
potential gain. Currency transactions include currency contracts, exchange
listed currency futures, exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional (agreed-upon) difference among two or more currencies and operates
similarly to an interest rate swap, which is described below. A Fund may enter
into OTC currency transactions with Counterparties which have received, combined
with any credit enhancements, a long term debt rating of A by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or (except for OTC
currency options) whose obligations are determined to be of equivalent credit
quality by SIMCO.
Each Fund's transactions in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will
generally be limited to hedging involving either specific transactions or
portfolio positions. See, "Strategic Transactions." Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
Each Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value in
relation to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure. For example, a Fund may hold a French government
bond and SIMCO may believe that French francs will deteriorate against German
marks. The Fund would sell French francs to reduce its exposure to that currency
and buy German marks. This strategy would be a hedge against a decline in the
value of French
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francs, although it would expose the Fund to declines in the value of the German
mark relative to the U.S. dollar.
To seek to reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, each Fund may also
engage in proxy hedging. Proxy hedging is often used when the currency to which
a Fund's portfolio is exposed is difficult to hedge or to hedge against the U.S.
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which certain of a Fund's portfolio securities are or
are expected to be denominated, and to buy U.S. dollars. The amount of the
contract would not exceed the value of the Fund's securities denominated in
linked currencies. For example, if SIMCO considers that the Austrian schilling
is linked to the German mark, and a portfolio contains securities denominated in
schillings and SIMCO believes that the value of schillings will decline against
the U.S. dollar, SIMCO may enter into a contract to sell marks and buy dollars.
Proxy hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to a Fund if the currency being hedged fluctuates in value to a degree or
in a direction that is not anticipated. Further, there is the risk that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that a Fund is engaging in proxy hedging. If
a Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions, structured notes and any combination of futures, options, currency
and interest rate transactions ("component transactions") instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of SIMCO, it is in the best interests of the Funds to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on SIMCO's judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio management goal, it is
possible that the combination will instead increase such risks or hinder
achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily for hedging purposes, including, but not limited
to, preserving a return or spread on a particular investment or portion of its
portfolio, protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities a Fund
anticipates purchasing at a later date. Swaps, caps, floors and collars may also
be used to enhance potential gain in circumstances where hedging is not involved
although, as described above, each Fund will attempt to limit its net loss
exposure resulting from swaps, caps, floors and collars and other Strategic
Transactions entered into for such purposes to not more than 3% of the Fund's
net assets at any one time.
Each Fund will not sell interest rate caps, floors or collars where it does not
own securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, (i.e.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal). A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
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purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain rate of return within a predetermined range of
interest rates or values.
Each Fund will usually enter into swaps on a net basis (i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument), with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Each Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the Counterparty, combined with any
credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from an NRSRO or the Counterparty issues debt that is determined to be of
equivalent credit quality by SIMCO. If there is a default by the Counterparty, a
Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed. Swaps, caps, floors and collars are considered illiquid for purposes
of each Fund's policy regarding illiquid securities, unless it is determined,
based upon continuing review of the trading markets for the specific security,
that such security is liquid. The Boards of Trustees of the Trust and the
Portfolio Trust have adopted guidelines and delegated to SIMCO the daily
function of determining and monitoring the liquidity of swaps, caps, floors and
collars. The Boards of Trustees, however, retain oversight focusing on factors
such as valuation, liquidity and availability of information and they are
ultimately responsible for such determinations. The staff of the SEC currently
takes the position that swaps, caps, floors and collars are illiquid, and are
subject to each Fund's limitation on investing in illiquid securities.
Eurodollar Contracts. Each Fund may make investments in Eurodollar contracts.
Eurodollar contracts are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Euro-dollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. A Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the United States. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) lesser availability than in the United States of data on which to make
trading decisions, (ii) delays in a Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iii) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, (iv) lower trading volume and
liquidity, and (v) other complex foreign political, legal and economic factors.
At the same time, Strategic Transactions may offer advantages such as trading in
instruments that are not currently traded in the United States or arbitrage
possibilities not available in the United States.
Use of Segregated Accounts. Each Fund will hold securities or other instruments
whose values are expected to offset its obligations under the Strategic
Transactions. Each Fund will cover Strategic Transactions as required by
interpretive positions of the staff of the SEC. A Fund will not enter into
Strategic Transactions that expose a Fund to an obligation to another party
unless it owns either (i) an offsetting position in securities or other options,
futures contracts or other instruments or (ii) cash, receivables or liquid
securities with a value sufficient to cover its potential obligations. A Fund
may have to comply with any applicable regulatory requirements for Strategic
Transactions, and if required, will set aside cash and other liquid assets on
the Fund's records or in a segregated account in the amount prescribed. If the
market value of these securities declines or the Fund's obligations on the
underlying Strategic Transactions increases, additional cash or liquid
securities will be segregated daily so that the aggregate market value of the
segregated securities is at least equal to the amount of the Fund's obligations
on the underlying Strategic Transactions. Segregated assets would not be sold
while the Strategic Transaction is outstanding, unless they are replaced with
similar assets. As a result, there is a possibility that segregation of a large
percentage of a Fund's assets could impede portfolio management or
12
<PAGE>
the Fund's ability to meet redemption requests or other current obligations.
"When-Issued" and "Delayed Delivery" Securities. The International Fixed Income
Fund and the Global Fixed Income Portfolio may commit up to 25% of their net
assets to purchase securities on a "when-issued" or "delayed delivery" basis.
The Diversified Income Portfolio places no limits on investments in when- issued
and delayed delivery securities. Delivery and payment for securities purchased
on a when- issued or delayed delivery basis will normally take place 15 to 45
days after the date of the transaction. The payment obligation and interest rate
on the securities are fixed at the time that a Fund enters into the commitment,
but interest will not accrue to the Fund until delivery of and payment for the
securities. Although each Fund will only make commitments to purchase
"when-issued" and "delayed delivery" securities with the intention of actually
acquiring the securities, a Fund may sell the securities before the settlement
date if deemed advisable by SIMCO.
Unless a Fund has entered into an offsetting agreement to sell the
securities purchased on a "when-issued" or "forward commitment" basis, the Fund
will segregate on its records or with its custodian, cash or liquid obligations
with a market value equal to the amount of the Fund's commitment. If the market
value of these securities declines, additional cash or securities will be
segregated daily so that the aggregate market value of the segregated securities
is at least equal to the amount of the Fund's commitment.
Securities purchased on a "when-issued" and "delayed delivery" basis may
have a market value on delivery which is less than the amount paid by a Fund.
Changes in market value may be based upon the public's perception of the
creditworthiness of the issuer or changes in the level of interest rates.
Generally, the value of "when-issued" securities will fluctuate inversely to
changes in interest rates, i.e., they will appreciate in value when interest
rates fall and will decline in value when interest rates rise.
Portfolio Turnover. Each Fund places no restriction on portfolio turnover and
each may sell any portfolio security without regard to the period of time it has
been held. Each Fund may therefore generally change its portfolio investments at
any time in accordance with SIMCO's appraisal of factors affecting any
particular issuer or market, or relevant economic conditions.
INVESTMENT RESTRICTIONS
The Funds and the Portfolios have adopted the following fundamental
policies. Each of the Fund's and Portfolio's fundamental policies cannot be
changed unless the change is approved by a "vote of a majority of the
outstanding voting securities" of a Fund or the Portfolio, as the case may be,
which phrase as used herein means the lesser of (i) 67% or more of the voting
securities of the Fund or Portfolio present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund or Portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund or Portfolio.
International Fixed Income Fund.
As a matter of fundamental policy, the International Fixed Income Fund may
not:
1. Invest, with respect to at least 50% of its total assets, more than 5% in
the securities of any one issuer (other than the U.S. Government, its
agencies or instrumentalities) or acquire more than 10% of the outstanding
voting securities of any issuer.
2. Issue senior securities, borrow money or securities or pledge or mortgage
its assets, except that the Fund may (a) borrow money from banks as a
temporary measure for extraordinary or emergency purposes (but not for
investment purposes) in an amount up to 15% of the current value of its
total assets, (b) enter into forward roll transactions, and (c) pledge its
assets to an extent not greater than 15% of the current value of its total
assets.
3. Lend portfolio securities, except that the Fund may lend its portfolio
securities with a value up to 20% of its total assets (with a 10% limit
for any borrower) and may enter into repurchase agreements with respect to
25% of the value of its net assets.
4. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to debt
securities issued or guaranteed by the United States government or its
agencies or instrumentalities.
5. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed to be an underwriter under the Securities Act of 1933.
6. Purchase real estate or real estate mortgage loans, although the Fund may
purchase marketable securities of companies which deal in real estate,
real estate mortgage loans or interests therein.
13
<PAGE>
7. Purchase securities on margin (except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities).
8. Purchase or sell commodities or commodity contracts except that the Fund
may purchase and sell financial futures contracts and options on financial
futures contracts and engage in foreign currency exchange transactions.
The following restrictions are not fundamental policies and may be changed
by the Trustees without shareholder approval, in accordance with applicable
laws, regulations or regulatory policy. The Fund may not:
a. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
b. Purchase securities of any other investment company except to the extent
permitted by the 1940 Act.
c. Invest more than 15% of its net assets in securities which are illiquid.
d. Purchase additional securities if the Fund's borrowings exceed 5% of its
net assets.
Global Fixed Income Fund and Portfolio.
As a matter of fundamental policy, the Global Fixed Income Portfolio
(Global Fixed Income Fund) may not:
1. Invest more than 25% of the current value of its total assets in any
single industry, provided that this restriction shall not apply to debt
securities issued or guaranteed by the United States government or its
agencies or instrumentalities.
2. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Portfolio
(Fund) may be deemed to be an underwriter under the Securities Act of
1933.
3. Purchase real estate or real estate mortgage loans, although the Portfolio
(Fund) may purchase marketable securities of companies which deal in real
estate, real estate mortgage loans or interests therein.
4. Purchase securities on margin (except that the Portfolio (Fund) may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities).
5. Purchase or sell commodities or commodity contracts except that the
Portfolio (Fund) may purchase and sell financial futures contracts and
options on financial futures contracts and engage in foreign currency
exchange transactions.
6. With respect to at least 50% of its total assets, invest more than 5% in
the securities of any one issuer (other than the U.S. Government, its
agencies or instrumentalities) or acquire more than 10% of the outstanding
voting securities of any issuer.
7. Issue senior securities, borrow money, enter into reverse repurchase
agreements or pledge or mortgage its assets, except that the Portfolio
(Fund) may (a) borrow from banks as a temporary measure for extraordinary
or emergency purposes (but not investment purposes) in an amount up to 15%
of the current value of its total assets to secure such borrowings, (b)
enter into forward roll transactions, and (c) pledge its assets to an
extent not greater than 15% of the current value of its total assets to
secure such borrowings; however, the Fund may not make any additional
investments while its outstanding borrowings exceed 5% of the current
value of its total assets.
8. Lend portfolio securities, except that the Portfolio (Fund) may lend its
portfolio securities with a value up to 20% of its total assets (with a
10% limit for any borrower), except that the Portfolio may enter into
repurchase agreements and except that the Fund may enter into repurchase
agreements with respect to 25% of the value of its net assets.
The following restrictions are not fundamental policies and may be changed
by the Trustees of the Portfolio Trust (Trust) without investor approval, in
accordance with applicable laws, regulations or regulatory policy. The Portfolio
(Fund) may not:
a. Invest in the securities of an issuer for the purpose of exercising
control or management but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
14
<PAGE>
b. Purchase the securities of any other investment company except to the
extent permitted by the 1940 Act.
c. Invest more than 25% of its net assets in repurchase agreements (this
restriction is fundamental with respect to the Fund but not the
Portfolio).
d. Purchase additional securities if the Portfolio's borrowings exceed 5% of
its net assets (this restriction is fundamental with respect to the Fund
but not the Portfolio).
Notwithstanding any fundamental or non-fundamental policy, the Global
Fixed Income Fund may invest all of its assets (other than assets which are not
"investment securities" (as defined in the 1940 Act) or are excepted by the SEC)
in an open end management investment company with substantially the same
investment objective as the Global Fixed Income Fund.
Diversified Income Fund and Portfolio
As a matter of fundamental policy, the Diversified Income Portfolio
(Diversified Income Fund) may not:
1. Issue senior securities. For purposes of this restriction, borrowing money
in accordance with paragraph 2 below, making loans in accordance with
paragraph 6 below, the issuance of shares of beneficial interest in
multiple classes or series, the deferral of trustees' fees, the purchase
or sale of options, futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies or within the meaning of paragraph 5 below, are not
deemed to be senior securities.
2. Borrow money, except in amounts not to exceed 33 1/3% of the value of the
Portfolio's (Fund's) total assets (including the amount borrowed) taken at
market value (i) from banks for temporary or short-term purposes or
for the clearance of transactions, (ii) in connection with the
redemption of portfolio shares or to finance failed settlements of
portfolio trades without immediately liquidating portfolio securities or
other assets, (iii) in order to fulfill commitments or plans to
purchase additional securities pending the anticipated sale of other
portfolio securities or assets and (iv) the Portfolio (Fund) may
enter into reverse repurchase agreements and forward roll transactions.
For purposes of this investment restriction, investments in short sales,
futures contracts, options on futures contracts, securities or indices and
forward commitments shall not constitute borrowing.
3. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Portfolio
(Fund) may be deemed to be an underwriter under the Securities Act of
1933.
4. Purchase or sell real estate except that the Portfolio (Fund) may (i)
acquire or lease office space for its own use, (ii) invest in securities
of issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein, (iv)
purchase and sell mortgage-related securities and (v) hold and sell real
estate acquired by the Portfolio (Fund) as a result of the ownership of
securities.
5. Purchase or sell commodities or commodity contracts, except the Portfolio
(Fund) may purchase and sell options on securities, securities indices and
currency, futures contracts on securities, securities indices and currency
and options on such futures, forward foreign currency exchange contracts,
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Portfolio's (Fund's)
investment policies.
6. Make loans, except that the Portfolio (Fund) (1) may lend portfolio
securities in accordance with the Portfolio's (Fund's) investment policies
up to 33 1/3% of the Portfolio's (Fund's) total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase all or a
portion of an issue of debt securities, bank loan participation interests,
bank certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities.
7. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or
authorities or repurchase agreements collateralized by U.S. Government
securities and other investment companies), if: (a) such purchase would
cause more than 5% of the Portfolio's (Fund's) total assets taken at
market value to be invested in the securities of such issuer; or (b) such
purchase would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Portfolio (Fund).
15
<PAGE>
8. Invest more than 25% of its total assets in the securities of one or more
issuers conducting their principal business activities in the same
industry (excluding the U.S. Government or its agencies or
instrumentalities). For the purposes of this restriction, state and
municipal governments and their agencies, authorities and
instrumentalities are not deemed to be industries; telephone companies are
considered to be a separate industry from water, gas or electric
utilities; personal credit finance companies and business credit finance
companies are deemed to be separate industries; and wholly-owned finance
companies are considered to be in the industry of their parents if their
activities are primarily related to financing the activities of their
parents. This restriction does not apply to investments in municipal
securities which have been pre-refunded by the use of obligations of the
U.S. Government or any of its agencies or instrumentalities.
The following restrictions are not fundamental policies and may be changed
by the Trustees of the Portfolio Trust (Trust) without investor approval in
accordance with applicable laws, regulations or regulatory policy. The Portfolio
(Fund) may not:
a. Purchase securities on margin (except that the Portfolio (Fund) may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
b. Invest in the securities of an issuer for the purpose of exercising
control or management, but it may do so where it is deemed advisable to
protect or enhance the value of an existing investment.
c. Purchase the securities of any other investment company except to the
extent permitted by the 1940 Act.
d. Invest more than 15% of its net assets in securities which are illiquid.
e. Purchase additional securities if the Portfolio's (Fund's) borrowings
exceed 5% of its net assets.
Notwithstanding any fundamental or non-fundamental policy, the Diversified
Income Fund may invest all of its assets (other than assets which are not
"investment securities" (as defined in the 1940 Act) or are excepted by the SEC)
in an open end investment company with substantially the same investment
objective as the Diversified Income Fund.
-------------------
Purchases of securities of other investment companies permitted under the
restrictions above could cause the Funds to pay additional management and
advisory fees and distribution fees. If any percentage restriction described
above is adhered to at the time of investment, a subsequent increase or decrease
in the percentage resulting from a change in the value of a Portfolio's or a
Fund's assets will not constitute a violation of the restriction.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, each Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of a
Fund for a period is computed by subtracting the net asset value per share at
the beginning of the period from the net asset value per share at the end of the
period (after adjusting for the reinvestment of any income dividends and capital
gain distributions), and dividing the result by the net asset value per share at
the beginning of the period. In particular, the Funds' average annual total
return ("T") is computed by using the redeemable value at the end of a specified
period of time ("ERV") of a hypothetical initial investment of $1,000 ("P") over
a period of time ("n") according to the formula P(1 + T)n=ERV.
The Funds' yield is computed by dividing the net investment income per share
earned during a base period of 30 days, or one month, by the maximum offering
price per share on the last day of the period. For the purpose of determining
net investment income, the calculation includes, among expenses of the Funds,
all recurring fees that are charged to all shareholder accounts and any
non-recurring charges for the period stated. In particular, yield is determined
according to the following formula:
Yield = 2[(A - B + 1)6 - 1]
-----
CD
Where:
A=interest earned during the period; B=net expenses accrued for the period;
C=the average daily number of shares outstanding during the period that were
entitled to receive dividends; D=the maximum
16
<PAGE>
offering price (net asset value) per share on the last day of the period.
The Funds may also quote non-standardized yield, such as yield-to-maturity
("YTM"). YTM represents the rate of return an investor will receive if a
long-term, interest bearing investment, such as a bond, is held to its maturity
date. YTM does not take into account purchase price, redemption value, time to
maturity, coupon yield and the time between interest payments.
With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Funds account for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, each Fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is
available or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the discount or premium
remaining on a security.
The Funds' average annual total return for the one-, five- and ten-year (or
life-of-the-Fund, if shorter) periods ended December 31, 1997 and average
annualized yield for the 30-day period ended December 31, 1997 were as follows:
Average Annual Total Return
Fund 1-Year 5-Year 10- Yield
- ---- ------ ------ --- -----
Year
----
International 11.86% 11.35% 11.40%(1) 5.56%
Fixed Income
Fund
Global Fixed 11.68% 8.50%(2) N/A 5.27%
Income Fund
Diversified 10.86%(3) N/A N/A 9.21%
Income Fund
- ------------------------
(1) International Fixed Income Fund commenced operations on January 2,
1991.
(2) Global Fixed Income Fund commenced operations on January 3, 1994.
(3) Diversified Income Fund commenced operations on June 2, 1997.
These performance quotations should not be considered as representative of
any Fund's performance for any specified period in the future.
In addition to average annual return quotations, the Funds may quote
quarterly and annual performance on a net (with management and administration
fees deducted) and gross basis as follows:
International Fixed Income Fund
Quarter/Year Net Gross
- ------------------------------------------------------
1Q91 (2.90)% (2.75)%
2Q91 (1.76) (1.48)
3Q91 9.99 10.18
4Q91 9.69 9.84
1991 15.07 15.95
1Q92 (2.43) 2.26
2Q92 9.45 9.59
3Q92 4.30 4.44
4Q92 (2.97) (2.82)
1992 8.07 8.71
1Q93 6.18 6.31
3Q93 5.26 5.40
4Q93 5.06 5.18
1993 23.77 24.38
1Q94 (5.78) (5.66)
2Q94 (4.48) (4.35)
3Q94 (0.95) (0.82)
4Q94 1.84 1.97
1994 (9.22) (8.74)
1Q95 2.59 2.72
2Q95 4.71 4.84
3Q95 4.01 4.16
4Q95 5.74 5.88
1995 18.13 18.75
1Q96 0.73 0.86
2Q96 3.49 3.63
3Q96 5.36 5.49
4Q96 4.95 5.07
1996 15.28 15.85
1Q97 1.46 1.59
2Q97 3.74 3.89
3Q97 3.78 3.91
Quarter/Year Net Gross
- ------------------------------------------------------
4Q97 2.40 2.53
1997 11.86 12.44
17
<PAGE>
Global Fixed Income Fund
Quarter/Year Net Gross
- ------------------------------------------------------
1Q94 (4.80)% (4.64)%
2Q94 (3.56) (3.40)
3Q94 (0.77) (0.05)
4Q94 1.44 1.60
1994 (7.06) (6.46)
1Q95 2.94 3.10
2Q95 5.21 5.36
3Q95 3.80 3.95
4Q95 5.09 5.26
1995 18.13 18.84
1Q96 0.05 0.21
2Q96 2.59 2.75
3Q96 4.97 5.14
4Q96 4.91 5.08
1996 13.03 13.76
1Q97 0.99 1.14
2Q97 3.99 4.14
3Q97 3.79 3.94
4Q97 2.46 2.65
1997 11.68 12.38
Diversified Income Fund
Quarter/Year Net Gross
- ------------------------------------------------------
3Q97 6.05% 6.05%
4Q97 0.14 0.14
1997 6.20 6.20
These performance quotations should not be considered as representative of
a Fund's performance for any specified period in the future. Each Fund's
performance may be compared in sales literature and advertisements to the
performance of other mutual funds and separately managed discretionary accounts
(including private investment companies) having similar objectives or to
standardized indices or other measures of investment performance. In particular,
the International Fixed Income Fund may compare its performance to the J.P.
Morgan Non-U.S. Government Bond Index, which is generally considered to be
representative of unmanaged government bonds in foreign markets, and the Lehman
Brothers Aggregate Index which is composed of securities from the Lehman
Brothers Government Corporate Bond Index, Mortgage Backed Securities Index and
Yankee Bond Index, and is generally considered to be representative of all
unmanaged, domestic, dollar denominated, fixed rate investment grade bonds. The
Diversified Income Fund and the Diversified Income Portfolio may also compare
their performance to the Lehman Brothers Aggregate Index. The Global Fixed
Income Fund and the Global Fixed Income Portfolio may compare their performance
to the J.P. Morgan Global Index, which is generally considered to be
representative of the performance of fixed rate, domestic government bonds from
eleven countries.
Comparative performance may also be expressed by reference to a ranking
prepared by a mutual fund monitoring service or by one or more newspapers,
newsletters or financial periodicals. Performance comparisons may be useful to
investors who wish to compare a Fund's past performance to that of other mutual
funds and investment products. Of course, past performance is not a guarantee of
future results.
18
<PAGE>
MANAGEMENT
Trustees and Officers of the Trust and Portfolio Trust
The Trustees and executive officers of the Trust are listed below. The
Trustees of the Portfolio Trust are identical to the Trustees of the Trust. The
officers of the Portfolio Trust are Messrs. Clayson, Ladd, Wood, Hollis, Martin,
Hanlon and Stuer and Mdmes. Banfield, Herrmann, Broccoli, Walcott-Abramson and
Kneeland, who hold the same office with the Portfolio Trust as with the Trust.
All executive officers of the Trust and the Portfolio Trust are affiliates of
Standish, Ayer & Wood, Inc.
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Principal Occupation During Past 5
Trust Years
- -------------------------------------------------------------------------------------------
<S> <C> <C>
*D. Barr Clayson, 7/29/35 Vice President and Vice President and Managing
c/o Standish, Ayer & Wood, Inc. Trustee Director,
One Financial Center Standish, Ayer & Wood, Inc.;
Boston, MA 02111 Chairman and Director, Standish
International Management
Company, L.P.; Director, CareGroup Inc.
Samuel C. Fleming, 9/30/40 Trustee Chairman of the Board
c/o Decision Resources, Inc. and Chief Executive Officer,
1100 Winter Street Decision Resources, Inc.;
Waltham, MA 02154 Trustee, Cornell University; Director,
CareGroup Inc.
Benjamin M. Friedman, 8/5/44 Trustee William Joseph Maier
c/o Harvard University Professor of Political Economy,
Cambridge, MA 02138 Harvard University
John H. Hewitt, 4/11/35 Trustee Trustee, The Peabody Foundation;
P.O. Box 307 Trustee, Visiting Nurse Alliance of
So. Woodstock, VT 05071 Vermont and New Hampshire;
Trustee, Mertens House, Inc.
*Edward H. Ladd, 1/3/38 Vice President and Chairman of the Board and
c/o Standish, Ayer & Wood, Inc. Trustee Managing Director, Standish, Ayer
One Financial Center & Wood, Inc.
Boston, MA 02111 Director of Standish International
Management Company, L.P.
Caleb Loring III, 11/14/43 Trustee Trustee, Essex Street Associates
c/o Essex Street Associates (family investment trust office);
400 Essex Street Director, Holyoke Mutual Insurance
Beverly Farms, MA 01915 Company; Director, Carter Family
Corporation; Board Member,
Gordon-Conwell Theological
Seminary; Chairman of the
Advisory Board, Salvation
Army; Chairman, Vision New
England.
*Richard S. Wood, 5/21/54 President and Trustee Vice President and Managing
c/o Standish, Ayer & Wood, Inc. Director, Standish, Ayer & Wood,
One Financial Center Inc.; Executive Vice President and
Boston, MA 02111 Director, Standish International
Management Company, L.P.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Principal Occupation During Past 5
Trust Years
- -------------------------------------------------------------------------------------------
<S> <C> <C>
James E. Hollis III, 11/21/48 Executive Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Anne P. Herrmann, 1/26/56 Vice President and Senior Fund Administration
c/o Standish, Ayer & Wood, Inc. Secretary Manager, Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Paul G. Martins, 3/10/56 Vice President and Vice President of Finance, Standish,
c/o Standish, Ayer & Wood, Inc. Treasurer Ayer & Wood, Inc. since October
One Financial Center 1996; formerly Senior Vice President,
Boston, MA 02111 Treasurer and Chief Financial
Officer of Liberty Financial Bank Group
Beverly E. Banfield, 7/6/56 Vice President Vice President, Associate Director
c/o Standish, Ayer & Wood, Inc. and Compliance Officer, Standish,
One Financial Center Ayer & Wood, Inc.
Boston, MA 02111
Lavinia B. Chase, 6/4/46 Vice President Vice President and Associate
c/o Standish, Ayer & Wood, Inc. Director, Standish, Ayer & Wood,
One Financial Center Inc.
Boston, MA 02111
Denise B. Kneeland, 8/19/51 Vice President Vice President and Manager, Mutual
c/o Standish, Ayer & Wood, Inc. Fund Operations, Standish, Ayer &
One Financial Center Wood, Inc. since December 1995;
Boston, MA 02111 formerly Vice President, Scudder,
Stevens and Clark
David C. Stuehr, 3/1/58 Vice President Vice President and Director,
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc.
One Financial Center
Boston, MA 02111
Sarah Walcott-Abramson, 12/9/65 Vice President Compliance Administrator, Standish,
c/o Standish, Ayer & Wood, Inc. Ayer & Wood, Inc. since October
One Financial Center 1993; formerly, Compliance
Boston, MA 02111 Specialist, Scudder, Stevens and Clark
Kathleen M. Broccoli, 4/13/65 Vice President Vice President and Manager,
c/o Standish, Ayer & Wood, Inc. Portfolio Accounting
One Financial Center Standish, Ayer & Wood, Inc.
Boston, MA 02111
Thomas J. Hanlon, 9/25/60 Vice President Vice President and Manager, Trade
c/o Standish, Ayer & Wood, Inc. Settlement and Pricing
One Financial Center Standish, Ayer & Wood, Inc.
Boston, MA 02111
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Date of Birth Position Held With Principal Occupation During Past 5
Trust Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Rosalind J. Lillo, 2/6/38 Vice President Broker/Dealer Administrator
c/o Standish, Ayer & Wood, Inc. Standish, Ayer & Wood, Inc. since
One Financial Center October 1995; formerly, Compliance
Boston, MA 02111 Administrator, New England
Securities Corp.
Gigi K. Szekely, 5/8/67 Vice President Manager, Mutual Fund Client
c/o Standish, Ayer & Wood, Inc. Communications, Standish, Ayer &
One Financial Center Wood, Inc.
Boston, MA 02111
</TABLE>
* Indicates that Trustee is an interested person of the Trust for purposes of
the 1940 Act.
Compensation of Trustees and Officers
Neither the Trust nor the Portfolio Trust pays compensation to the
Trustees of the Trust or the Portfolio Trust that are affiliated with Standish,
Ayer & Wood, Inc. ("Standish") or to the Trust's and Portfolio Trust's officers.
None of the Trustees or officers have engaged in any financial transactions
(other than the purchase or redemption of the Funds' shares) with the Trust, the
Portfolio Trust or the Adviser during the year ended December 31, 1997, except
that certain Trustees and officers who are directors and shareholders of
Standish may, from time to time, purchase additional shares of common stock of
Standish.
The following table sets forth all compensation paid to the Trust's and
the Portfolio Trust's Trustees as of the Funds' fiscal years ended December 31,
1997:
Aggregate Compensation from the Funds
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Funds
Global Benefits and Portfolio
International Fixed Diversified Accrued as Part and Other
Fixed Income Income of Funds' Funds in
Name of Trustee Income Fund Fund** Fund** Expenses Complex*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
D. Barr Clayson $0 $0 $0 $0 $0
Samuel C. Fleming $10,072 $2,172 $247 $0 $49,375
Benjamin M. Friedman $10,072 $2,172 $247 $0 $49,375
John H. Hewitt $11,092 $2,392 $272 $0 $54,375
Edward H. Ladd $0 $0 $0 $0 $0
Caleb Loring, III $10,072 $2,172 $247 $0 $49,375
Richard S. Wood $0 $0 $0 $0 $0
</TABLE>
* As of the date of this SAI there were 22 funds in the fund complex. Total
compensation is presented for the calendar year ended December 31, 1997.
** The Fund bears its pro rata allocation of Trustees' fees paid by the
Portfolio to the Trustees of the Portfolio Trust.
21
<PAGE>
Certain Shareholders
At April 1, 1998, Trustees and officers of the Trust and the Portfolio
Trust as a group beneficially owned (i.e., had voting and/or investment power)
less than 1% of the then outstanding shares of each Fund. Also at that date, no
person owned beneficially or of record, 5% or more of the then outstanding
shares of any Fund except:
International Fixed Income Fund
Percentage of
Name and Address Outstanding Shares
- ----------------------------------------------------------
Bell Atlantic Master Trust
Boston & Co. 12%
P.O. Box 3198
Pittsburg, PA 15230
Long-term Investment Trust 12%
MAC & Co.
P.O. Box 3198
Pittsburgh, PA 15230
Global Fixed Income Fund
Percentage of
Name and Address Outstanding Shares
- ----------------------------------------------------------
Brown University 22%
164 Angell Street
Investment Office - Box C
Providence, RI 02912
MAC & Co. a/c CLSF 18%
P.O. Box 3198
Pittsburgh, PA 15230
MAC & Co. a/c LNFF 10%
P.O. Box 3198
Pittsburgh, PA 15230
Childrens Medical Center Corp. 8%
1295 Boylston Street
Suite 300
Boston, MA 02215
Lafayette College 6%
234 Markle Hall
Easton, PA 18042-1779
Diversified Income Fund
Percentage of
Name and Address Outstanding Shares
- ----------------------------------------------------------
Allendale Mutual Insurance 31%*
Company
Allendale Park
P.O. Box 7500
Johnston, RI 02919
Corning Incorporated 21%
One Riverfront Plaza HQ-E2
Corning, NY 14831
Wellesley College 14%
Wellesley, MA 02181
Fitchburg Mutual Inc. Co. 8%
c/o Fleet Bank
P.O. Box 92800
Rochester, NY 14692
Cumming Foundation 8%
c/o Investors Bank & Trust Co.
P.O. Box 1537
Boston, MA 02205
Davis Family Foundation 6%
c/o Investors Bank & Trust Co.
P.O. Box 1537
Boston, MA 02205
*Because the shareholder beneficially owned more than 25% of the then
outstanding shares of the indicated Fund, the shareholder was considered to
control such Fund. As a controlling person, the shareholder may be able to
determine whether a proposal submitted to the shareholders of such Fund will be
approved or disapproved.
Investment Adviser
SIMCO serves as investment adviser to the Global Fixed Income Portfolio,
Diversified Income Portfolio and the International Fixed Income Fund pursuant to
written investment advisory agreements. Prior to the close of business on May 3,
1996, SIMCO managed directly the assets of the Global Fixed Income Fund pursuant
to an investment advisory agreement. This agreement was terminated by the Global
Fixed Income Fund on such date subsequent to the approval by the Global Fixed
Income Fund's shareholders on March 29, 1996 to implement certain changes in the
Global Fixed Income Fund's investment restrictions which enable the Global Fixed
Income Fund to invest all of its investable assets in the Portfolio. SIMCO is a
Delaware limited partnership organized in 1991 and is registered under the
Investment Advisers Act of 1940. The general partner of SIMCO is Standish, One
Financial Center, Boston, MA 02111, which holds a 99.98% partnership interest.
The limited partners, who each hold a 0.01% interest in SIMCO, are: Walter M.
Cabot, Sr., Senior Adviser to SIMCO and Standish, and D. Barr Clayson, Chairman
22
<PAGE>
of the Board and Vice President of SIMCO, a Managing Director and Vice President
of Standish and a Trustee and Vice President of the Trust and Portfolio Trust.
Ralph S. Tate, Managing Director of Standish, is President and a Director of
SIMCO. Richard S. Wood, Vice President and a Managing Director of Standish and
the President and a Trustee of the Trust and Portfolio Trust, is the Executive
Vice President and a Director of SIMCO.
The following, constituting all of the Directors and all of the
shareholders of Standish, are Standish's controlling persons: Caleb F Aldrich,
Nicholas S. Battelle, David H. Cameron, Karen K. Chandor, D. Barr Clayson, W.
Charles Cook, Joseph M. Corrado, Richard C. Doll, Dolores S. Driscoll, Mark A.
Flaherty, Maria D. Furman, James E. Hollis III, Raymond J. Kubiak, Edward H.
Ladd, Laurence A. Manchester, George W. Noyes, Arthur H. Parker, Howard B.
Rubin, Austin C. Smith, Thomas P. Sorbo, David C. Stuehr, Ralph S. Tate, Michael
W. Thompson and Richard S. Wood.
Certain services provided by SIMCO under the advisory agreements are
described in the Prospectus. These services are provided without reimbursement
by the Portfolios or the International Fixed Income Fund for any costs incurred.
In addition to those services, SIMCO provides the International Fixed Income
Fund (but not the Portfolios) with office space for managing their affairs, with
the services of required executive personnel, and with certain clerical services
and facilities. Under the investment advisory agreements, SIMCO is paid a fee
based upon a percentage of the International Fixed Income Fund's or the
Portfolios' average daily net asset value computed as set forth below. The
advisory fees are payable monthly.
Fund Contractual Advisory Fee
- ---- Rate (as a percentage of
average daily net assets)
------------------------
Global Fixed 0.40%
Income Portfolio
International Fixed 0.40%
Income Fund
Diversified Income
Fund 0.50%
During the last three fiscal years ended December 31, the Funds and the
Portfolios paid advisory fees in the following amounts:
Fund 1995 1996 1997
---- ---- ---- ----
Global Fixed $535,630 $198,747(1) N/A
Income Fund
Global Fixed N/A $412,216(2) $802,027
Income
Portfolio
International $3,916,500 $3,234,397 $4,012,644
Fixed Income
Fund
Diversified N/A N/A 0(3)
Income
Portfolio
(1) Global Fixed Income Fund was converted to the master/feeder fund structure
on May 3,1996 and does not pay directly advisory fees after that date. The
Fund bears its pro rata allocation of the Portfolio's expenses, including
advisory fees.
(2) The Global Fixed Income Portfolio commenced operations on May 3,1996.
(3) The Diversified Income Portfolio commenced operations on June 2, 1997. The
Adviser voluntarily agreed not to impose its advisory fee for the period
June 2, 1997 to December 31, 1997 in the amount of $45,742.
Pursuant to the investment advisory agreements each of the International
Fixed Income Fund and the Portfolios bear expenses of its operations other than
those incurred by SIMCO pursuant to the investment advisory agreement. Among
other expenses, the International Fixed Income Fund and the Portfolios pay share
pricing and shareholder servicing fees and expenses; custodian fees and
expenses; legal and auditing fees and expenses; expenses of prospectuses,
statements of additional information and shareholder reports; registration and
reporting fees and expenses; and Trustees' fees and expenses.
Unless terminated as provided below, the investment advisory agreements
continue in full force and effect from year to year but only so long as each
such continuance is approved annually (i) by either the Trustees of the Trust or
the Portfolio Trust (as applicable) or by the "vote of a majority of the
outstanding voting securities" of the International Fixed Income Fund or the
applicable Portfolio and, in either event (ii) by vote of a majority of the
Trustees of the Trust or the Portfolio Trust (as applicable) who are not parties
to the investment advisory agreement or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a meeting called for the
23
<PAGE>
purpose of voting on such approval. Each investment advisory agreement may be
terminated at any time without the payment of any penalty by vote of the
Trustees of the Trust or the Portfolio Trust or by the "vote of a majority of
the outstanding voting securities" of the International Fixed Income Fund or the
applicable Portfolio or by SIMCO, on sixty days' written notice to the other
parties. The investment advisory agreements terminate in the event of their
assignment as defined in the 1940 Act.
In an attempt to avoid any potential conflict with portfolio transactions
for the International Fixed Income Fund and the Portfolios, SIMCO, the Principal
Underwriter, the Trust and the Portfolio Trust have each adopted extensive
restrictions on personal securities trading by personnel of the Adviser and its
affiliates. These restrictions include: pre-clearance of all personal securities
transactions and a prohibition of purchasing initial public offerings of
securities. These restrictions are a continuation of the basic principle that
the interests of the International Fixed Income Fund and its shareholders, and
the Portfolios and their investors, come before those of the Adviser and its
employees.
Administrator of the Funds
Standish also serves as the administrator to the Global Fixed Income Fund
and the Diversified Income Fund (the "Fund Administrator") pursuant to written
administration agreements with the Trust on behalf of these Funds. Certain
services provided by the Fund Administrator under the administration agreement
are described in the Prospectus. For these services, the Fund Administrator
currently does not receive any additional compensation. The Trustees of the
Trust may, however, determine in the future to compensate the Fund Administrator
for its administrative services. Each of the Global Fixed Income Fund and the
Diversified Income Fund's administration agreements can be terminated by either
party on not more than sixty days' written notice.
Administrator of the Portfolios
IBT Trust Company (Cayman) Ltd., P.O. Box 501, Grand Cayman, Cayman
Islands, BWI, serves as the administrator to the Global Fixed Income Portfolio
and the Diversified Income Portfolio (the "Portfolio Administrator") pursuant to
a written administration agreement with the Portfolio Trust on behalf of each
Portfolio. The Portfolio Administrator provides the Portfolio Trust with office
space for managing its affairs, and with certain clerical services and
facilities. For its services to the Portfolio Trust, the Portfolio Administrator
currently receives a fee from each of the two Portfolios in the amount of $7,500
annually. The Portfolios' administration agreement can be terminated by either
party on not more than sixty days' written notice.
Distributor of the Funds
Standish Fund Distributors, L.P. (the "Principal Underwriter"), an
affiliate of Standish, serves as the Trust's exclusive principal underwriter and
holds itself available to receive purchase orders for each Fund's shares. In
that capacity, the Principal Underwriter has been granted the right, as agent of
the Trust, to solicit and accept orders for the purchase of each Fund's shares
in accordance with the terms of the Underwriting Agreement between the Trust and
the Principal Underwriter. Pursuant to the Underwriting Agreement, the Principal
Underwriter has agreed to use its best efforts to obtain orders for the
continuous offering of each Fund's shares. The Principal Underwriter receives no
commissions or other compensation for its services, and has not received any
such amounts in any prior year. The Underwriting Agreement shall continue in
effect with respect to each Fund until two years after its execution and for
successive periods of one year thereafter only if it is approved at least
annually thereafter (i) by a vote of the holders of a majority of the Fund's
outstanding shares or by the Trustees of the Trust or (ii) by a vote of a
majority of the Trustees of the Trust who are not "interested persons" (as
defined by the 1940 Act) of the parties to the Underwriting Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Underwriting Agreement will terminate automatically if assigned by either party
thereto and is terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust, a vote of a majority of the Trustees who are not
"interested persons" of the Trust, or, with respect to a Fund, by a vote of the
holders of a majority of the Fund's outstanding shares, in any case without
payment of any penalty on not more than 60 days' written notice to the other
party. The offices of the Principal Underwriter are located at One Financial
Center, 26th Floor, Boston, Massachusetts 02111.
REDEMPTION OF SHARES
Detailed information on redemption of shares is included in the
Prospectus. In addition to Standish Fund Distributors and other agents of the
Trust, each Fund has authorized one or more brokers and dealers to accept on its
behalf orders for the purchase and redemption of Fund shares. Under certain
conditions, such authorized brokers and dealers may designate other
intermediaries to accept orders for the purchase and redemption of Fund shares.
In accordance with a position taken by the staff of the SEC, such purchase and
redemption orders are considered to have been
24
<PAGE>
received by a Fund when accepted by the authorized broker or dealer or, if
applicable, the authorized broker's or dealer's designee. Also in accordance
with the position taken by the staff of the SEC, such purchase and redemption
orders will receive the appropriate Fund's net asset value per share next
computed after the purchase or redemption order is accepted by the authorized
broker or dealer or, if applicable the authorized broker's or dealer's designee.
The Trust may suspend the right to redeem Fund shares or postpone the date
of payment upon redemption for more than seven days (i) for any period during
which the NYSE is closed (other than customary weekend or holiday closings) or
trading on the exchange is restricted; (ii) for any period during which an
emergency exists as a result of which disposal by a Fund of securities owned by
it or determination by a Fund of the value of its net assets is not reasonably
practicable; or (iii) for such other periods as the SEC may permit for the
protection of shareholders of a Fund.
The Trust intends to pay redemption proceeds in cash for all Fund shares
redeemed but, under certain conditions, the Trust may make payment wholly or
partly in portfolio securities, in conformity with a rule of the SEC. Portfolio
securities paid upon redemption of Fund shares will be valued at their then
current market value. The Trust, on behalf of each of its series, has elected to
be governed by the provisions of Rule 18f-1 under the 1940 Act which limits each
Fund's obligation to make cash redemption payments to any shareholder during any
90-day period to the lesser of $250,000 or 1% of the Fund's net asset value at
the beginning of such period. An investor may incur brokerage costs in
converting portfolio securities received upon redemption to cash. Each Portfolio
has advised the Trust that the Portfolio will not redeem in-kind except in
circumstances in which the applicable Fund is permitted to redeem in-kind or
except in the event the applicable Fund completely withdraws its interest from
the Portfolio.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for placing the International Fixed Income
Fund's and each Portfolio's portfolio transactions and will do so in a manner
deemed fair and reasonable to the International Fixed Income Fund and the
Portfolios and not according to any formula. The primary consideration in all
portfolio transactions will be prompt execution of orders in an efficient manner
at the most favorable price. In selecting broker-dealers and in negotiating
commissions, SIMCO will consider the firm's reliability, the quality of its
execution services on a continuing basis and its financial condition. When more
than one firm is believed to meet these criteria, preference may be given to
firms which also sell shares of the Funds. In addition, if SIMCO determines in
good faith that the amount of commissions charged by a broker is reasonable in
relation to the value of the brokerage and research services provided by such
broker, the International Fixed Income Fund and the Portfolios may pay
commissions to such broker in an amount greater than the amount another firm may
charge. Research services may include (i) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, (ii)
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends, portfolio
strategy, access to research analysts, corporate management personnel, industry
experts and economists, comparative performance evaluation and technical
measurement services and quotation services, and products and other services
(such as third party publications, reports and analysis, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) that assist the Adviser in carrying out its responsibilities,
and (iii) effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research services furnished by firms
through which the International Fixed Income Fund and the Portfolios effect
their securities transactions may be used by SIMCO in servicing other accounts;
not all of these services may be used by the Adviser in connection with the
International Fixed Income Fund or the Portfolios generating the soft dollar
credits. The investment advisory fee paid by the International Fixed Income Fund
and the Portfolios under the investment advisory agreements will not be reduced
as a result of SIMCO's receipt of research services.
SIMCO also places portfolio transactions for other advisory accounts.
SIMCO will seek to allocate portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell securities for the International Fixed
Income Fund or a Portfolio and another advisory account. In some cases, this
procedure could have an adverse effect on the price or the amount of securities
available to the International Fixed Income Fund or a Portfolio. In making such
allocations, the main factors considered by SIMCO will be the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and opinions of the persons responsible
for recommending the investment.
25
<PAGE>
Because most of the International Fixed Income Fund's and the Portfolios'
securities transactions are effected on a principal basis involving a "spread"
or "dealer mark-up," the International Fixed Income Fund and the Portfolios have
not paid any brokerage commissions during the past three years.
DETERMINATION OF NET ASSET VALUE
Each Fund's net asset value is calculated each day on which the NYSE is
open (a "Business Day"). Currently, the NYSE is not open on weekends, New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value of each Fund's shares is determined as of the close of regular trading on
the NYSE (normally 4:00 p.m., New York City time) and is computed by dividing
the value of all securities and other assets of a Fund (substantially all of
which, in the case of the Global Fixed Income Fund and Diversified Income Fund,
will be represented by the Fund's interest in its corresponding Portfolio) less
all liabilities by the number of Fund shares outstanding, and adjusting to the
nearest cent per share. Expenses and fees of each Fund are accrued daily and
taken into account for the purpose of determining net asset value.
The value of a Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of the applicable Fund is determined. Each investor in a Portfolio may add
to or reduce its investment in the Portfolio on each Business Day. As of the
close of regular trading on the NYSE on each Business Day, the value of each
investor's interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of regular trading on the NYSE on such day plus or minus, as the
case may be, the amount of net additions to or reductions in the investor's
investment in the Portfolio effected on such day, and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the close of
regular trading on the NYSE on such day plus or minus, as the case may be, the
amount of the net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the close of regular trading on the NYSE on the following
Business Day.
Portfolio securities that are fixed income securities (other than money
market instruments) for which accurate market prices are readily available are
valued at their current market value on the basis of quotations, which may be
furnished by a pricing service or provided by dealers in such securities. Fixed
income securities for which accurate market prices are not readily available and
other assets are valued at fair value as determined in good faith by the Adviser
in accordance with procedures approved by the Trustees, which may include the
use of yield equivalents or matrix pricing.
Money market instruments with less than sixty days remaining to maturity
when acquired by the International Fixed Income Fund or the Portfolios are
valued on an amortized cost basis. If the International Fixed Income Fund or the
Portfolios acquire a money market instrument with more than sixty days remaining
to its maturity, it is valued at current market value until the sixtieth day
prior to maturity and will then be valued at amortized cost based upon the value
on such date unless the Trustees determine during such sixty-day period that
amortized cost does not represent fair value.
Generally, trading in securities on foreign securities exchanges is
substantially completed each day at various times prior to the close of regular
trading on the NYSE. The values of foreign securities (whose principal trading
markets are such foreign exchanges) used in computing the net asset value of the
International Fixed Income Fund's or the Portfolios' shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of regular trading on the NYSE. Occasionally, events which affect
the values of such securities and such exchange rates may occur between the
times at which they are determined and the close of regular trading on the NYSE
and will therefore not be reflected in the computation of the Fund's or the
Portfolios' net asset value. If events materially affecting the value of such
securities occur during such period, then these securities are valued at their
fair value as determined in good faith by the Trustees.
THE FUNDS AND THEIR SHARES
Each Fund is an investment series of the Trust, an unincorporated business
trust organized under the laws of The Commonwealth of Massachusetts pursuant to
an Agreement and Declaration of Trust dated August 13, 1986. Under the Agreement
and Declaration of Trust, the Trustees of the Trust have
26
<PAGE>
authority to issue an unlimited number of shares of beneficial interest, par
value $.01 per share, of each Fund. Each share of a Fund represents an equal
proportionate interest in the Fund with each other share and is entitled to such
dividends and distributions as are declared by the Trustees. Shareholders are
not entitled to any preemptive, conversion or subscription rights. All shares,
when issued, will be fully paid and nonassessable by the Trust. Upon any
liquidation of a Fund, shareholders of that Fund are entitled to share pro rata
in the net assets available for distribution.
Pursuant to the Declaration, the Trustees may create additional funds by
establishing additional series of shares in the Trust. The establishment of
additional series would not affect the interests of current shareholders in any
Fund. The Trustees have established other series of the Trust. Pursuant to the
Declaration, the Board may establish and issue multiple classes of shares for
each series of the Trust. As of the date of this SAI, the Trustees do not have
any plan to establish multiple classes of shares for the Funds. Pursuant to the
Declaration of Trust and subject to shareholder approval (if then required by
applicable law), the Trustees may authorize each Fund to invest all of its
investable assets in a single open-end investment company that has substantially
the same investment objectives, policies and restrictions as the Fund. As of the
date of this SAI, the Global Fixed Income Fund and the Diversified Income Fund
invest all of their investible assets in their corresponding Portfolios.
All Fund shares have equal rights with regard to voting, and shareholders
of a Fund have the right to vote as a separate class with respect to matters as
to which their interests are not identical to those of shareholders of other
classes of the Trust, including the approval of an investment advisory contract
and any change of investment policy requiring the approval of shareholders.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration also provides for indemnification from the assets
of the Trust for all losses and expenses of any Trust shareholder held liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring a
financial loss on account of his or its liability as a shareholder of the Trust
is limited to circumstances in which the Trust would be unable to meet its
obligations. The possibility that these circumstances would occur is remote.
Upon payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Trust. The Declaration also provides that no series of the Trust is liable for
the obligations of any other series. The Trustees intend to conduct the
operations of the Trust to avoid, to the extent possible, ultimate liability of
shareholders for liabilities of the Trust.
Except as described below, whenever the Trust is requested to vote on a
fundamental policy of or matters pertaining to a Portfolio, the Trust will hold
a meeting of the associated Fund's shareholders and will cast its vote
proportionately as instructed by the Fund's shareholders. Fund shareholders who
do not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing Fund shareholders not voting will
be voted by the Trustees of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Subject to applicable statutory and
regulatory requirements, a Fund would not request a vote of its shareholders
with respect to (a) any proposal relating to the Portfolio, which proposal, if
made with respect to the Fund would not require the vote of the shareholders of
the Fund, or (b) any proposal with respect to the Portfolio that is identical in
all material respects to a proposal that has previously been approved by
shareholders of the Fund. Any proposal submitted to holders in a Portfolio, and
that is not required to be voted on by shareholders of the associated Fund,
would nonetheless be voted on by the Trustees of the Trust.
THE PORTFOLIOS AND THEIR INVESTORS
Each of the Portfolios is a series of Standish, Ayer & Wood Master
Portfolio, a trust which, like the Trust, is an open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Portfolio Trust was organized as a master trust fund under the laws of the State
of New York on January 18, 1996.
Interests in a Portfolio have no preemptive or conversion rights, and are
fully paid and non-assessable, except as set forth in the Prospectus. A
Portfolio normally will not hold meetings of holders of such interests except as
required under the 1940 Act. A Portfolio would be required to hold a meeting of
holders in the event that at any time less than a majority of its Trustees
holding office had been elected by holders. The Trustees of the Portfolios
continue to hold office until their successors are elected and have qualified.
Holders holding a specified percentage of interests in a Portfolio may call a
meeting of holders in the Portfolio for the purpose of removing any Trustee.
27
<PAGE>
A Trustee of the Portfolio may be removed upon a majority vote of the interests
held by holders in the Portfolio qualified to vote in the election. The 1940 Act
requires a Portfolio to assist its holders in calling such a meeting. Upon
liquidation of a Portfolio, holders in the Portfolio would be entitled to share
pro rata in the net assets of the Portfolio available for distribution to
holders. Each holder in the Portfolio is entitled to a vote in proportion to its
percentage interest in the Portfolio.
TAXATION
Each series of the Trust, including each Fund, is treated as a separate
entity for accounting and tax purposes. Each Fund has qualified and elected or
intends to elect to be treated as a "regulated investment company" ("RIC") under
Subchapter M of the Code, and intends to continue to so qualify in the future.
As such and by complying with the applicable provisions of the Code regarding
the sources of its income, the timing of its distributions, and the
diversification of its assets, each Fund will not be subject to Federal income
tax on its investment company taxable income (i.e., all taxable income, after
reduction by deductible expenses, other than its "net capital gain," which is
the excess, if any, of its net long-term capital gain over its net short-term
capital loss) and net capital gain which are distributed to shareholders in
accordance with the timing and other requirements of the Code.
Each Portfolio is treated as a partnership for federal income tax
purposes. As such, a Portfolio is not subject to federal income taxation.
Instead, the corresponding Fund must take into account, in computing its federal
income tax liability (if any), its share of the Portfolio's income, gains,
losses, deductions, credits and tax preference items, without regard to whether
it has received any cash distributions from the Portfolio. Because the Global
Fixed Income Fund and the Diversified Income Fund invest their assets in the
Global Fixed Income Portfolio and the Diversified Income Portfolio,
respectively, each Portfolio normally must satisfy the applicable source of
income and diversification requirements in order for the corresponding Fund to
satisfy them. Each Portfolio will allocate at least annually among its
investors, including the corresponding Fund, each investor's distributive share
of that Portfolio's net investment income, net realized capital gains, and any
other items of income, gain, loss, deduction or credit. Each Portfolio will make
allocations to the corresponding Fund in a manner intended to comply with the
Code and applicable regulations and will make moneys available for withdrawal at
appropriate times and in sufficient amounts to enable the corresponding Fund to
satisfy the tax distribution requirements that apply to it and that must be
satisfied in order for the Fund to avoid Federal income and/or excise tax. For
purposes of applying the requirements of the Code regarding qualification as a
RIC, the Global Fixed Income Fund and Diversified Income Fund each will be
deemed (i) to own its proportionate share of each of the assets of the
corresponding Portfolio and (ii) to be entitled to the gross income of the
corresponding Portfolio attributable to such share.
Each Fund will be subject to a 4% non-deductible federal excise tax on
certain amounts not distributed (and not treated as having been distributed) on
a timely basis in accordance with annual minimum distribution requirements. Each
Fund intends under normal circumstances to seek to avoid liability for such tax
by satisfying such distribution requirements. Certain distributions made in
order to satisfy the Code's distribution requirements may be declared by the
Funds during October, November or December of the year but paid during the
following January. Such distributions will be taxable to taxable shareholders as
if received on December 31 of the year the distributions are declared,
rather than the year in which the distributions are received.
Each Fund is not subject to Massachusetts corporate excise or franchise
taxes. Provided that the Funds qualify as regulated investment companies under
the applicable provisions of federal law incorporated in Massachusetts law, they
will also not be required to pay any Massachusetts income tax.
Each Fund will not distribute net capital gains realized in any year to
the extent that a capital loss is carried forward from prior years against such
gain. For federal income tax purposes, a Fund is permitted to carry forward a
net capital loss in any year to offset its own net capital gains, if any, during
the eight years following the year of the loss. To the extent subsequent net
capital gains are offset by such losses, they would not result in federal income
tax liability to the Fund.
If a Fund or a Portfolio invests in zero coupon securities, certain
increasing rate or deferred interest securities or, in general, other securities
with original issue discount (or with market discount if an election is made to
include market discount in income currently), the Fund or the Portfolio must
accrue income on such investments prior to the receipt of the corresponding cash
payments. However, a Fund must distribute, at least annually, all or
substantially all of its net income, including its distributive share of such
income accrued by the corresponding Portfolio, to shareholders to qualify as a
regulated investment company under the Code and avoid federal income
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and excise taxes. Therefore, a Fund or Portfolio, may have to dispose of its
portfolio securities under disadvantageous circumstances to generate cash, or
may have to leverage itself by borrowing the cash, to allow satisfaction of the
distribution requirements.
Limitations imposed by the Code on regulated investment companies like the
Funds may restrict a Fund's or a Portfolio's ability to enter into futures,
options or currency forward transactions.
Certain options, futures or currency forward transactions undertaken by a
Fund or Portfolio may cause the Fund or Portfolio to recognize gains or losses
from marking to market even though the Fund's or Portfolio's positions have not
been sold or terminated and affect the character as long-term or short-term (or,
in the case of certain options, futures or forward contracts relating to foreign
currency, as ordinary income or loss) and timing of some capital gains and
losses realized by a Fund or realized by a Portfolio and allocable to the
corresponding Fund. Additionally, a Fund or Portfolio may be required to
recognize gain if an option, future, forward contract, short sale, swap or other
Strategic Transaction that is not subject to the mark to market rules is treated
as a "constructive sale" of an "appreciated financial position" held by the Fund
or Portfolio under Section 1259 of the Code. Any net mark to market gains and/or
gains from constructive sales may also have to be distributed by a Fund to
satisfy the distribution requirements referred to above even though no
corresponding cash amounts may concurrently be received, possibly requiring the
disposition of portfolio securities or borrowing to obtain the necessary cash.
Also, certain losses on transactions involving options, futures or forward
contracts and/or offsetting or successor positions may be deferred rather than
being taken into account currently in calculating the Funds' taxable income or
gain. Certain of the applicable tax rules may be modified if a Fund or a
Portfolio is eligible and chooses to make one or more of certain tax elections
that may be available. These transactions may therefore affect the amount,
timing and character of a Fund's distributions to shareholders. Each Fund will
take into account the special tax rules applicable to options, futures, forward
contracts and constructive sales in order to minimize any potential adverse tax
consequences.
The Federal income tax rules applicable to certain structured or hybrid
securities, dollar rolls, currency swaps, and interest rate swaps, caps, floors,
collars and possibly other investments or transactions are unclear in certain
respects, and a Fund or Portfolio will account for these instruments in a manner
that is intended to allow the Funds to continue to qualify as RICs. Due to
possible unfavorable consequences under present tax law, the International Fixed
Income Fund and each Portfolio does not currently intend to acquire "residual"
interests in real estate mortgage investment conduits ("REMICs"), although the
Funds or the Portfolios may acquire "regular" interests in REMICs.
Foreign exchange gains and losses realized by the Portfolios and the
International Fixed Income Fund in connection with certain transactions, if any,
involving foreign currency-denominated debt securities, certain foreign currency
futures and options, foreign currency forward contracts, foreign currencies, or
payables or receivables denominated in a foreign currency are subject to Section
988 of the Code, which generally causes such gains and losses to be treated as
ordinary income and losses and may affect the amount, timing and character of
Fund distributions to shareholders. In some cases, elections may be available
that would alter this treatment. Any such transactions that are not directly
related to the Portfolios' or the International Fixed Income Fund's investment
in stock or securities, possibly including speculative currency positions or
currency derivatives not used for hedging purposes, could under future Treasury
regulations produce income not among the types of "qualifying income" from which
each Fund must derive at least 90% of its gross income for its taxable year.
In some countries, restrictions on repatriation may make it difficult or
impossible for a Fund or Portfolio to obtain cash corresponding to its earnings
from such countries, which may cause a Fund to have difficulty obtaining cash
necessary to satisfy tax distribution requirements.
The Portfolios or the International Fixed Income Fund may be subject to
withholding and other taxes imposed by foreign countries with respect to their
investments in foreign securities. Tax conventions between certain countries and
the U.S. may reduce or eliminate such taxes in some cases. Investors in a Fund
would be entitled to claim U.S. foreign tax credits or deductions with respect
to such taxes, subject to certain holding period requirements and other
provisions and limitations contained in the Code, only if more than 50% of the
value of the applicable Fund's total assets (in the case of a Fund that invests
in a Portfolio, taking into account its allocable share of the Portfolio's
assets) at the close of any taxable year were to consist of stock or securities
of foreign corporations and the Fund were to file an election with the Internal
Revenue Service.
The International Fixed Income Fund and, taking into account their share
of the investments of the corresponding Portfolios, the Global Fixed Income
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Fund and the Diversified Income Fund may meet the 50% threshold referred to in
the previous paragraph for a year and, if one does, it may file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to (i) include in ordinary gross income (in addition to taxable
dividends actually received) their pro rata shares of qualified foreign taxes
paid by the Fund or paid by the Portfolio and allocated to the Fund even though
not actually received by them and (ii) treat such respective pro rata portions
as foreign taxes paid by them.
If any Fund makes this election, that Fund's shareholders may then deduct
such pro rata portions of qualified foreign taxes in computing their taxable
incomes, or, alternatively, use them as foreign tax credits, subject to
applicable holding period requirements and other limitations, against their U.S.
federal income taxes. Shareholders who do not itemize deductions for federal
income tax purposes will not, however, be able to deduct their pro rata portion
of qualified foreign taxes paid by the Portfolios or the International Fixed
Income Fund, although such shareholders will be required to include their share
of such taxes in gross income if the election is made. Shareholders who claim a
foreign tax credit for such foreign taxes may be required to treat a portion of
dividends received from a Fund as a separate category of income for purposes of
computing the limitations on the foreign tax credit. Tax exempt shareholders
will ordinarily not benefit from this election. Each year (if any) that a Fund
files the election described above, its shareholders will be notified of the
amount of (i) each shareholder's pro rata share of qualified foreign taxes paid
by the Fund or Portfolio and (ii) the portion of Fund dividends which represents
income from each foreign country.
If a Portfolio or the International Fixed Income Fund acquires stock
(including, under proposed regulations, an option to acquire stock such as is
inherent in a convertible bond) in certain foreign corporations that receive at
least 75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties, or capital gains) or hold at least 50%
of their assets in investments producing such passive income ("passive foreign
investment companies"), the Funds could be subject to Federal income tax and
additional interest charges on "excess distributions" actually or constructively
received from such companies or gain from the actual or deemed sale of stock in
such companies, even if all income or gain actually realized is timely
distributed to its shareholders. They would not be able to pass through to their
shareholders any credit or deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but any such election
would require them to recognize taxable income or gain (subject to tax
distribution requirements) without the concurrent receipt of cash. These
investments could also result in the treatment of associated capital gains as
ordinary income. The Portfolios and the International Fixed Income Fund may
limit and/or manage stock holdings, if any, in passive foreign investment
companies to minimize each Fund's tax liability or maximize its return from
these investments.
Investment in debt obligations by the Portfolios or the International
Fixed Income Fund that are at risk of or in default presents special tax issues
for the applicable Fund. Tax rules are not entirely clear about issues such as
when the Portfolio or Fund may cease to accrue interest, original issue
discount, or market discount, when and to what extent deductions may be taken
for bad debts or worthless securities, how payments received on obligations in
default should be allocated between principal and income, and whether exchanges
of debt obligations in a workout context are taxable. These and other issues
will be addressed by a Portfolio and the International Fixed Income Fund, in the
event that they hold such obligations, in order to reduce the risk of the
corresponding Fund, or any other RIC investing in a Portfolio, distributing
insufficient income to preserve its status as a RIC or becoming subject to
Federal income or excise tax.
Distributions from a Fund's current or accumulated earnings and profits
("E&P"), as computed for Federal income tax purposes, will be taxable as
described in the Funds' Prospectus whether taken in shares or in cash.
Distributions, if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in Fund shares and thereafter
(after such basis is reduced to zero) will generally give rise to 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 amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received. As a result
of the enactment of the Taxpayer Relief Act of 1997 (the "1997 TRA") on August
5, 1997, gain recognized after May 6, 1997 from the sale of a capital asset is
taxable to individual (noncorporate) investors at different maximum federal
income tax rates, depending generally upon the tax holding period for the asset,
the federal income tax bracket of the taxpayer, and the dates the asset was
acquired and/or sold. The Treasury Department has issued guidance under the 1997
TRA that (subject to possible modification by future "technical corrections"
legislation) enables each Fund to pass through to its shareholders the benefits
of the capital gains tax rates enacted in the 1997 TRA.
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Each Fund will provide appropriate information to its shareholders about the tax
rate(s) applicable to its distributions from its long-term capital gains in
accordance with this and any future guidance. Shareholders should consult their
own tax advisers on the correct application of these new rules in their
particular circumstances.
A Fund's distributions to its corporate shareholders would potentially
qualify in their hands for the corporate dividends received deduction, subject
to certain holding period requirements and limitations on debt financing under
the Code, only to the extent a Fund earned dividend income (or, in the case of
the Global Fixed Income and Diversified Income Funds, was allocated dividend
income of the applicable Portfolio) from stock investments in U.S. domestic
corporations. The International Fixed Income Fund and the Portfolios are
permitted to acquire preferred stocks of U.S. domestic corporations, and it is
therefore possible that a portion of a Fund's distributions, from the dividends
attributable to such preferred stocks, may qualify for the dividends received
deduction. Such qualifying portion, if any, may affect a corporate shareholder's
liability for alternative minimum tax and/or result in basis reductions and
other consequences in certain circumstances.
At the time of an investor's purchase of Fund shares, a portion of the
purchase price may be attributable to undistributed net investment income and/or
realized or unrealized appreciation in the Fund's portfolio (or share of the
Portfolio's portfolio in the case of the Global Fixed Income Fund and the
Diversified Income Fund). Consequently, subsequent distributions by a Fund on
such shares from such income and/or appreciation may be taxable to such investor
even if the net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares, and the
distributions economically represent a return of a portion of the purchase
price.
Upon a redemption or other disposition of shares of a Fund in a
transaction that is treated as a sale for tax purposes, a shareholder may
realize a taxable gain or loss, depending upon the difference between the
redemption proceeds and the shareholder's tax basis in his shares. Such gain or
loss will generally be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands. Any loss realized on a redemption or other
disposition may be disallowed to the extent the shares disposed of are replaced
with other shares of the same Fund within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of, such as pursuant to
automatic dividend reinvestments. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized upon
the redemption of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares.
Shareholders should consult their own tax advisers regarding their particular
circumstances to determine whether a disposition of Fund shares is properly
treated as a sale for tax purposes, as is assumed in the foregoing discussion.
Also, future Treasury Department regulations, announcements or other guidance
issued to implement the 1997 TRA may contain rules for determining different tax
rates applicable to sales of Fund shares held for more than one year, more than
18 months, and (for certain sales after the year 2000 or the year 2005) more
than five years. Those regulations may also modify some of the provisions
described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
adviser for more information.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts or estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies, and financial
institutions. Dividends, capital gain distributions, and ownership of or gains
realized on the redemption (including an exchange) of Fund shares may also be
subject to state and local taxes. A state income (and possibly local income
and/or intangible property) tax exemption is generally available to the extent,
if any, a Fund's distributions are derived from interest on (or, in the case of
intangible property taxes, the value of its assets is attributable to)
investments in certain U.S. Government obligations, provided in some states that
certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Shareholders should consult their tax advisers
regarding the applicable requirements in their particular states, including the
effect, if any, of any Standish Feeder Fund's indirect ownership (through the
corresponding Portfolio) of any such obligations, as well as the Federal, and
any other state or local, tax consequences of ownership of shares of, and
receipt of distributions from, a Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in a Fund is effectively connected will be subject to U.S.
Federal
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income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax adviser regarding such
treatment and the application of foreign taxes to an investment in the Fund.
ADDITIONAL INFORMATION
The Prospectus and this SAI omit certain information contained in the
registration statement filed with the SEC, which may be obtained from the SEC's
principal office at 450 Fifth Street, N.W, Washington, D.C. 20549, upon payment
of the fee prescribed by the rules and regulations promulgated by the Commission
or by accessing the SEC's Web site at http://www.sec.gov.
EXPERTS AND FINANCIAL STATEMENTS
Except as noted in the next sentence, each Fund's financial statements
contained in the 1997 Annual Reports of the Fund have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are incorporated by reference into
this SAI. Financial highlights of International Fixed Income Fund for periods
from commencement of operations through December 31, 1992 were audited by other
auditors. The Global Fixed Income Portfolio and the Diversified Income
Portfolio's financial statements contained in their corresponding Fund's 1997
Annual Report have been audited by Coopers & Lybrand, (P.O. Box 219), Grand
Cayman, Grand Cayman Islands, BWI, an affiliate of Coopers & Lybrand L.L.P.
The financial statements for the year ended December 31, 1997 are
incorporated by reference from the 1997 Annual Reports, which were previously
sent to shareholders and were filed with the SEC on March 9, 1998, 1940 Act File
No. 811-04813.
APPENDIX
MOODY'S RATINGS DEFINITIONS FOR
CORPORATE BONDS AND SOVEREIGN,
SUBNATIONAL AND SOVEREIGN
RELATED ISSUES
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
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Moody's also provides credit ratings for tax-exempt commercial paper.
These are promissory obligations (1) not having an original maturity in excess
of nine months, and (2) backed by commercial banks. Notes bearing the
designation P-1 have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.
STANDARD & POOR'S RATINGS DEFINITIONS
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB - Debt rated BB is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
Commercial paper rated A-2 or better by S&P is described as having a very
strong degree of safety regarding timeliness and capacity to repay.
Additionally, as a precondition for receiving an S&P commercial paper rating, a
bank credit line and/or liquid assets must be present to cover the amount of
commercial paper outstanding at all times.
STANDARD & POOR'S CHARACTERISTICS OF
SOVEREIGN DEBT OF FOREIGN COUNTRIES
AAA - Stable, predictable governments with demonstrated track record of
responding flexibly to changing economic and political circumstances
Key players in the global trade and financial system:
- Prosperous and resilient economies,
high per capita incomes
- Low fiscal deficits and government
debt, low inflation
- Low external debt.
AA - Stable, predictable governments with demonstrated track record of
responding to changing economic and political circumstances
- tightly integrated into global trade and
financial system
- Differ from AAAs only to a small
degree because:
- Economies are smaller, less prosperous
and generally more vulnerable to
adverse external influences (e.g.,
protection and terms of trade shocks)
- More variable fiscal deficits,
government debt and inflation
- Moderate to high external debt.
A - Politics evolving toward more open, predictable forms of governance in
environment of rapid economic and social change
- Established trend of integration into
global trade and financial system
- Economies are smaller, less prosperous
and generally more vulnerable to
adverse external influences (e.g.,
protection and terms of trade shocks),
but
- Usually rapid growth in output and
per capita incomes
- Manageable through variable fiscal
deficits, government debt and inflation
- Usually low but variable debt
- Integration into global trade and
financial system growing but untested
- Low to moderate income developing
economies but variable performance
and quite vulnerable to adverse
external influences
- Variable to high fiscal deficits,
government debt and inflation
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- Very high and variable debt, often graduates of Brady plan but track
record not well established.
BBB - Political factors a source of significant uncertainty, either
because system is in transition or due to external threats, or both, often in
environment of rapid economic and social change
- Integration into global trade and
financial system growing but untested
- Economies less prosperous and often
more vulnerable to adverse external
influences
- Variable to high fiscal deficits,
government debt and inflation
- High and variable external debt.
BB - Political factors a source of major uncertainty, either because
system is in transition or due to external threats, or both, often in
environment of rapid economic and social change
- Integration into global trade and
financial system growing but untested
- Low to moderate income developing
economies, but variable performance
and quite vulnerable to adverse
external influences
- Variable to high fiscal deficits,
government debt and inflation
- Very high and variable debt, often
graduates of Brady Plan but track
record not well established
In the case of sovereign, subnational and sovereign related issuers, a
Fund uses the foreign currency or domestic (local) currency rating depending
upon how a security in the portfolio is denominated. In the case where a Fund
holds a security denominated in a domestic (local) currency and one of the
rating services does not provide a domestic (local) currency rating for the
issuer, the Fund will use the foreign currency rating for the issuer; in the
case where a Fund holds a security denominated in a foreign currency and one of
the rating services does not provide a foreign currency rating for the issuer,
the Fund will treat the security as being unrated.
DESCRIPTION OF DUFF & PHELPS RATINGS FOR CORPORATE BONDS AND FOR SOVEREIGN,
SUBNATIONAL AND SOVEREIGN RELATED ISSUERS
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A - Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
BBB - Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic cycles.
BB - Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B - Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating guide.
FITCH IBCA INTERNATIONAL LONG-TERM CREDIT RATING DEFINITIONS
AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB - Bonds considered to be investment grade and of good credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have
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adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
BB - Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B - Bonds are considered highly speculative. The obligor's ability to pay
interest and repay principal are currently being met, but a limited margin
safety remains. However, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
FITCH IBAC LONG TERM RATINGS FOR NATIONAL ISSUES
AAA - Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially.
AA - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk, albeit not very significantly.
A - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories.
BB - Obligations for which capacity for timely repayment of principal and
interest is uncertain relative to other obligors in the same country. Within the
context of the country, these obligations are speculative to some degree and
capacity for timely repayment remains susceptible over time to adverse changes
in business, financial or economic conditions.
B - Obligations for which capacity for timely repayment of principal and
interest is uncertain relative to other obligors in the same country. Timely
repayment of principal and interest is not sufficiently protected against
adverse changes in business, economic or financial conditions and these
obligations are more speculative than those in higher rated categories.
35
<PAGE>
36
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Parts A of Standish Fixed Income Fund, Standish Diversified
Income Fund, Standish Fixed Income Fund II, Standish Short-Term Asset Reserve
Fund, Standish Controlled Maturity Fund, Standish Securitized Fund, Standish
International Fixed Income Fund and Standish Global Fixed Income Fund: each a
series of Standish, Ayer & Wood Investment Trust (the "Registrant").
Financial Highlights
Incorporated by reference into Parts B of Standish Fixed Income Fund,
Standish Diversified Income Fund, Standish Fixed Income Fund II, Standish Short-
Term Asset Reserve Fund, Standish Controlled Maturity Fund, Standish Securitized
Fund, Standish International Fixed Income Fund and Standish Global Fixed Income
Fund.+
Schedule of Portfolio Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
(1) Agreement and Declaration of Trust dated
August 13, 1986***
(1A) Certificate of Designation of Standish Fixed Income Fund***
(1B) Certificate of Designation of Standish International Fund***
(1C) Certificate of Designation of Standish Securitized Fund***
(1D) Certificate of Designation of Standish Short-Term Asset Reserve
Fund***
(1E) Certificate of Designation of Standish Marathon Fund***
C-1
<PAGE>
(1F) Certificate of Amendment dated November 21, 1989***
(1G) Certificate of Amendment dated November 29, 1989***
(1H) Certificate of Amendment dated April 24, 1990***
(1I) Certificate of Designation of Standish Equity Fund***
(1J) Certificate of Designation of Standish International Fixed Income
Fund***
(1K) Certificate of Designation of Standish Intermediate Tax Exempt Bond
Fund***
(1L) Certificate of Designation of Standish Massachusetts Intermediate
Tax Exempt Bond Fund***
(1M) Certificate of Designation of Standish Global Fixed Income Fund***
(1N) Certificate of Designation of Standish Controlled Maturity Fund and
Standish Fixed Income Fund II***
(1O) Certificate of Designation of Standish Tax-Sensitive Small Cap
Equity Fund and Standish Tax-Sensitive Equity Fund***
(1P) Form of Certificate of Designation of Standish Equity Asset Fund,
Standish Small Capitalization Equity Asset Fund, Standish Fixed
Income Asset Fund and Standish Global Fixed Income Asset Fund***
(1Q) Form of Certificate of Designation of Standish Small Capitalization
Equity Fund II***
(1R) Certificate of Designation of Standish Small Capitalization Equity
Asset Fund II, Standish Diversified Income Fund, Standish
Diversified Income Asset Fund*
(2) Bylaws of the Registrant***
(3) Not applicable
(4) Not applicable
(5A) Form of Investment Advisory Agreement between Registrant and
Standish, Ayer & Wood, Inc. relating to Standish International
Fund***
C-2
<PAGE>
(5B) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Securitized Fund***
(5C) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish International Fixed Income
Fund***
(5D) Assignment of Investment Advisory Agreement between the Registrant
and Standish, Ayer & Wood, Inc. relating to Standish International
Fixed Income Fund***
(5E) Form of Investment Advisory Agreement between the Registrant and
Standish, Ayer & Wood, Inc. relating to Standish Intermediate Tax
Exempt Bond Fund***
(5F) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Massachusetts Intermediate
Tax Exempt Bond Fund***
(5G) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Controlled Maturity Fund***
(5H) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Fixed Income Fund II***
(5I) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Small Cap Tax-Sensitive
Equity Fund***
(5J) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Tax-Sensitive Equity Fund***
(5K) Form of Assignment of Investment Advisory Agreement***
(6A) Underwriting Agreement between the Registrant and Standish Fund
Distributors, L.P.***
(6B) Most recently dated/filed revised Appendix A to Underwriting
Agreement between the Registrant and Standish Fund Distributors,
L.P.*
(7) Not applicable
(8A) Master Custody Agreement between the Registrant and Investors Bank
& Trust Company***
C-3
<PAGE>
(8B) Most recently dated/filed revised Appendix A to Master Custody
Agreement between the Registrant and Investors Bank & Trust Company*
(8C) Custody Agreement between Registrant with respect to Standish
International Equity Fund and Morgan Stanley Company***
(8D) Master Custody Agreement between the Registrant and Morgan Stanley
Trust Company***
(9A) Transfer Agency and Service Agreement between the Registrant and
Investors Bank & Trust Company***
(9B) Most recently dated/filed revised Exhibit A to Transfer Agency and
Service Agreement between the Registrant and Investors Bank & Trust
Company*
(9C) Master Administration Agreement between the Registrant and Investors
Bank & Trust Company***
(9D) Most recently dated/filed revised Exhibit A to Master Administration
Agreement between the Registrant and Investors Bank & Trust
Company***
(9E) Form of Administrative Services Agreement between Standish, Ayer &
Wood, Inc. and the Registrant***
(9F) Most recently dated/filed revised Exhibit A to Administrative
Services Agreement between Standish, Ayer & Wood, Inc. and the
Registrant***
(10) Opinion and Consent of Counsel for the Registrant**
(11A) Consent of Independent Public Accountants***
(11B) Consent of Independent Public Accountants***
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Not applicable
C-4
<PAGE>
(16) Performance Calculations
(17A) Financial Data Schedule of Standish Fixed Income Fund ***
(17B) Financial Data Schedule of Standish Diversified Income Fund ***
(17C) Financial Data Schedule of Standish Fixed Income Fund II***
(17D) Financial Data Schedule of Standish Short-Term Asset Reserve Fund***
(17E) Financial Data Schedule of Standish Controlled Maturity Fund***
(17F) Financial Data Schedule of Standish Securitized Fund***
(17G) Financial Data Schedule of Standish International Fixed Income
Fund***
(17H) Financial Data Schedule of Standish Global Fixed Income Fund***
(18) Not applicable
(19A) Power of Attorney for Registrant (Richard S. Wood)^
(19B) Power of Attorney for Registrant (Samuel C. Fleming)^
(19C) Power of Attorney for Registrant (Benjamin M. Friedman)^
(19D) Power of Attorney for Registrant (John H. Hewitt)^
(19E) Power of Attorney for Registrant (Edward H. Ladd)^
(19F) Power of Attorney for Registrant (Caleb Loring III)^
(19G) Power of Attorney for Registrant (D. Barr Clayson)^
(19H) Power of Attorney for Registrant (Paul G. Martins)**
(19I) Power of Attorney for Portfolio Trust (Richard S. Wood)^
(19J) Power of Attorney for Portfolio Trust (Samuel C. Fleming, Benjamin
M. Friedman, John H. Hewitt, Edward H. Ladd, Caleb Loring III,
Richard S. Wood and D. Barr Clayson)+
C-5
<PAGE>
(19K) Power of Attorney for Portfolio Trust (Paul G. Martins)**
- ----------
+ The December 31, 1997 financial statements were filed on Forms
N-30D, File No. 811-4813, on March 9, 1998.
^ Filed as an exhibit to Registration Statement No. 33-8214 and
incorporated herein by reference thereto.
+ Filed electronically as an exhibit to Registration Statement No.
811-07603 and incorporated herein by reference thereto.
* Filed electronically as an exhibit to Registration Statement No.
33-8214 (Post-Effective Amendment No. 81) and incorporated herein by
reference thereto.
** Filed electronically as an exhibit to Registration Statement No.
33-8214 (Post-Effective Amendment No. 82) and incorporated herein by
reference thereto.
*** Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
No person is directly or indirectly controlled by or under common control
with the Registrant.
Item 26. Number of Holders of Securities
Set forth below is the number of record holders, as of April 1, 1998, of
the shares of each series of the Registrant.
Number of Record
Title of Class Holders
-------------- -------
Shares of beneficial interest,
par value $.01, of:
Standish Fixed Income Fund 518
Standish Securitized Fund 7
Standish Short-Term Asset 92
Reserve Fund
Standish International Fixed 238
Income Fund
Standish Global Fixed Income Fund 74
Standish Equity Fund 201
Standish Small Capitalization 282
Equity Fund
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<PAGE>
Standish Massachusetts Intermediate 104
Tax Exempt Bond Fund
Standish Intermediate Tax Exempt 164
Bond Fund
Standish International Equity Fund 133
Standish Controlled Maturity Fund 18
Standish Fixed Income Fund II 13
Standish Small Cap Tax-Sensitive 258
Equity Fund
Standish Tax-Sensitive Equity Fund 156
Standish Equity Asset Fund 1
Standish Small Capitalization 1
Equity Asset Fund
Standish Fixed Income Asset Fund 0
Standish Global Fixed Income Asset Fund 0
Standish Small Capitalization Equity Fund II 67
Standish Diversified Income Fund 18
Standish Diversified Income Asset Fund 0
Item 27. Indemnification
Under the Registrant's Agreement and Declaration of Trust, any past or
present Trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or is otherwise involved by reason of his being or having been a Trustee
or officer of the Registrant. The Agreement and Declaration of Trust of the
Registrant does not authorize indemnification where it is determined, in the
manner specified in the Declaration, that such Trustee or officer has not acted
in good faith in the reasonable belief that his actions were in the best
interest of the Registrant. Moreover, the Declaration does not authorize
indemnification where such Trustee or officer is liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by 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 any such Trustee, officer or controlling person
against the
C-7
<PAGE>
Registrant in connection with the securities being registered, and the
Commission is still of the same opinion, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers
The business and other connections of the officers and Directors of
Standish, Ayer & Wood, Inc. ("Standish, Ayer & Wood"), the investment adviser to
certain series of the Registrant, are listed on the Form ADV of Standish, Ayer &
Wood as currently on file with the Commission (File No. 801-584), the text of
which is hereby incorporated by reference.
The business and other connections of the officers and partners of
Standish International Management Company, L.P. ("SIMCO"), the investment
adviser to certain other series of the Registrant, are listed on the Form ADV of
SIMCO as currently on file with the Commission (File No. 801-639338), the text
of which is hereby incorporated by reference.
The following sections of each such Form ADV are incorporated herein by
reference:
(a) Items 1 and 2 of Part 2;
(b) Section IV, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) Standish Fund Distributors, L.P. serves as the principal
underwriter of each of the series of the Registrant as listed in Item 26 above.
(b) Directors and Officers of Standish Fund Distributors, L.P.:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
James E. Hollis, III Chief Executive Officer Vice President
Beverly E. Banfield Chief Operating Officer Vice President
C-8
<PAGE>
The General Partner of Standish Fund Distributors, L.P. is Standish, Ayer
& Wood, Inc.
(c) Not applicable.
Item 30. Location of Accounts and Records
The Registrant maintains the records required by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 inclusive thereunder at
its principal office, located at One Financial Center, Boston, Massachusetts
02111. Certain records, including records relating to the Registrant's
shareholders and the physical possession of its securities, may be maintained
pursuant to Rule 31a-3 at the main offices of the Registrant's transfer and
dividend disbursing agent and custodian.
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Not applicable.
(b) With respect to Standish Equity Asset Fund, Standish Small
Capitalization Equity Asset Fund, Standish Fixed Income Asset
Fund and Standish Global Fixed Income Asset Fund, the
Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within
four to six months from the effective date of the applicable
Post-Effective Amendment to its Registration Statement
registering shares of such Funds.
(c) The Registrant undertakes to furnish each person to whom a
Prospectus is delivered a copy of Registrant's latest annual
report to shareholders, upon request and without charge.
C-9
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
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 Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts on the 28th day of April, 1998.
STANDISH, AYER & WOOD
INVESTMENT TRUST
/s/ Paul G. Martins
---------------------------
Paul G. Martins, Treasurer
The term "Standish, Ayer & Wood Investment Trust" means and refers to the
Trustees from time to time serving under the Agreement and Declaration of Trust
of the Registrant dated August 13, 1986, a copy of which is on file with the
Secretary of State of The Commonwealth of Massachusetts. The obligations of the
Registrant hereunder are not binding personally upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Registrant, but
bind only the trust property of the Registrant, as provided in the Agreement and
Declaration of Trust of the Registrant. The execution of this Registration
Statement has been authorized by the Trustees of the Registrant and this
Registration Statement has been signed by an authorized officer of the
Registrant, acting as such, and neither such authorization by such Trustees nor
such execution by such officer shall be deemed to have been made by any of them,
but shall bind only the trust property of the Registrant as provided in its
Declaration of Trust.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
C-10
<PAGE>
Signature Title Date
Richard S. Wood* Trustee and President April 28, 1998
- -------------------------- (principal executive officer)
Richard S. Wood
/s/ Paul G. Martins Treasurer (principal April 28, 1998
- -------------------------- financial and accounting
Paul G. Martins officer)
D. Barr Clayson* Trustee April 28, 1998
- --------------------------
D. Barr Clayson
Samuel C. Fleming* Trustee April 28, 1998
- --------------------------
Samuel C. Fleming
Benjamin M. Friedman* Trustee April 28, 1998
- --------------------------
Benjamin M. Friedman
John H. Hewitt* Trustee April 28, 1998
- --------------------------
John H. Hewitt
Edward H. Ladd* Trustee April 28, 1998
- --------------------------
Edward H. Ladd
Caleb Loring III* Trustee April 28, 1998
- --------------------------
Caleb Loring III
*By: /s/ Paul G. Martins
----------------------
Paul G. Martins
Attorney-In-Fact
C-11
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Standish, Ayer & Wood Master Portfolio has duly
caused this Post-Effective Amendment to the Registration Statement of Standish,
Ayer & Wood Investment Trust to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hamilton, Bermuda, on the 28th day of
February, 1998.
STANDISH, AYER & WOOD
MASTER PORTFOLIO
/s/ Richard S. Wood
--------------------------
Richard S. Wood, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of Standish, Ayer & Wood
Investment Trust has been signed by the following persons in their capacities
with Standish, Ayer & Wood Master Portfolio and on the date indicated.
Signature Title Date
Richard S. Wood* Trustee and President February 28, 1998
- ---------------------- (principal executive
Richard S. Wood officer)
Paul G. Martins* Treasurer (principal February 28, 1998
- ---------------------- financial and accounting
Paul G. Martins officer)
D. Barr Clayson* Trustee February 28, 1998
- ----------------------
D. Barr Clayson
Samuel C. Fleming* Trustee February 28, 1998
- ----------------------
Samuel C. Fleming
Benjamin M. Friedman* Trustee February 28, 1998
- ----------------------
Benjamin M. Friedman
C-12
<PAGE>
John H. Hewitt* Trustee February 28, 1998
- ----------------------
John H. Hewitt
Edward H. Ladd* Trustee February 28, 1998
- ----------------------
Edward H. Ladd
Caleb Loring III* Trustee February 28, 1998
- ----------------------
Caleb Loring III
*By: /s/ James E. Hollis III
-----------------------
James E. Hollis, III
Attorney-In-Fact
C-13
<PAGE>
EXHIBIT INDEX
Exhibit
(1) Agreement and Declaration of Trust dated
August 13, 1986***
(1A) Certificate of Designation of Standish Fixed Income Fund***
(1B) Certificate of Designation of Standish International Fund***
(1C) Certificate of Designation of Standish Securitized Fund***
(1D) Certificate of Designation of Standish Short-Term Asset Reserve
Fund***
(1E) Certificate of Designation of Standish Marathon Fund***
(1F) Certificate of Amendment dated November 21, 1989***
(1G) Certificate of Amendment dated November 29, 1989***
(1H) Certificate of Amendment dated April 24, 1990***
(1I) Certificate of Designation of Standish Equity Fund***
(1J) Certificate of Designation of Standish International Fixed Income
Fund***
(1K) Certificate of Designation of Standish Intermediate Tax Exempt Bond
Fund***
(1L) Certificate of Designation of Standish Massachusetts Intermediate
Tax Exempt Bond Fund***
(1M) Certificate of Designation of Standish Global Fixed Income Fund***
(1N) Certificate of Designation of Standish Controlled Maturity Fund and
Standish Fixed Income Fund II***
(1O) Certificate of Designation of Standish Tax-Sensitive Small Cap
Equity Fund and Standish Tax-Sensitive Equity Fund***
(1P) Form of Certificate of Designation of Standish Equity Asset Fund,
Standish Small Capitalization Equity Asset Fund, Standish Fixed
Income Asset Fund and Standish Global Fixed Income Asset Fund***
<PAGE>
(1Q) Form of Certificate of Designation of Standish Small Capitalization
Equity Fund II***
(2) Bylaws of the Registrant***
(3) Not applicable
(4) Not applicable
(5A) Form of Investment Advisory Agreement between Registrant and
Standish, Ayer & Wood, Inc. relating to Standish International
Fund***
(5B) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Securitized Fund***
(5C) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish International Fixed Income
Fund***
(5D) Assignment of Investment Advisory Agreement between the Registrant
and Standish, Ayer & Wood, Inc. relating to Standish International
Fixed Income Fund***
(5E) Form of Investment Advisory Agreement between the Registrant and
Standish, Ayer & Wood, Inc. relating to Standish Intermediate Tax
Exempt Bond Fund***
(5F) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Massachusetts Intermediate
Tax Exempt Bond Fund***
(5G) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Controlled Maturity Fund***
(5H) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Fixed Income Fund II***
(5I) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Small Cap Tax-Sensitive
Equity Fund***
(5J) Investment Advisory Agreement between the Registrant and Standish,
Ayer & Wood, Inc. relating to Standish Tax-Sensitive Equity Fund***
C-15
<PAGE>
(5K) Form of Assignment of Investment Advisory Agreement***
(6A) Underwriting Agreement between the Registrant and Standish Fund
Distributors, L.P.***
(8A) Master Custody Agreement between the Registrant and Investors Bank
& Trust Company***
(8C) Custody Agreement between Registrant with respect to Standish
International Equity Fund and Morgan Stanley Company***
(8D) Master Custody Agreement between the Registrant and Morgan Stanley
Trust Company***
(9A) Transfer Agency and Service Agreement between the Registrant and
Investors Bank & Trust Company***
(9C) Master Administration Agreement between the Registrant and Investors
Bank & Trust Company***
(9D) Most recently dated/filed revised Exhibit A to Master Administration
Agreement between the Registrant and Investors Bank & Trust
Company***
(9E) Form of Administrative Services Agreement between Standish, Ayer &
Wood, Inc. and the Registrant***
(9F) Most recently dated/filed revised Exhibit A to Administrative
Services Agreement between Standish, Ayer & Wood, Inc. and the
Registrant***
(11A) Consent of Independent Public Accountants***
(11B) Consent of Independent Public Accountants***
(17A) Financial Data Schedule of Standish Fixed Income Fund ***
(17B) Financial Data Schedule of Standish Diversified Income Fund ***
(17C) Financial Data Schedule of Standish Fixed Come Fund II***
(17D) Financial Data Schedule of Standish Short-Term Asset Reserve Fund***
(17E) Financial Data Schedule of Standish Controlled Maturity Fund***
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<PAGE>
(17F) Financial Data Schedule of Standish Securitized Fund***
(17G) Financial Data Schedule of Standish International Fixed Income
Fund***
(17H) Financial Data Schedule of Standish Global Fixed Income Fund***
C-12
DECLARATION OF TRUST
STANDISH, AYER & WOOD INVESTMENT TRUST
AUGUST 13, 1986
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
Table of Contents
Page
RECITALS......................................................................1
ARTICLE I THE TRUST....................................................2
Section 1.1 Name.........................................................2
Section 1.2 Location.....................................................2
Section 1.3 Nature of Trust..............................................3
Section 1.4 Definitions..................................................3
ARTICLE II PURPOSE OF THE TRUST.........................................7
ARTICLE III POWERS OF THE TRUSTEES.......................................8
Section 3.1 Powers of General ...........................................8
(a) Investments..............................................9
(b) Disposition of Assets....................................9
(c) Ownership Powers........................................10
(d) Form of Holding.........................................10
(e) Reorganization, etc.....................................10
(f) Voting Trusts, etc......................................10
(g) Contracts, etc..........................................11
(h) Guarantee, etc..........................................11
(I) Partnerships, etc.......................................11
(j) Insurance...............................................11
(k) Pensions, etc...........................................11
(l) Power of Collection
and Litigation.........................................12
(m) Issuance and Repurchase
of Shares .............................................12
(n) Offices.................................................12
(o) Expenses................................................12
(p) Agents, etc.............................................12
<PAGE>
(q) Accounts................................................13
(r) Valuation...............................................13
(s) Indemnification.........................................13
(t) General.................................................13
Section 3.2 Borrowings; Financings;
Issuance of Securities.....................................13
Section 3.3 Deposits....................................................14
Section 3.4 Allocations.................................................14
Section 3.5 Further Powers; Limitations.................................14
ARTICLE IV TRUSTEES AND OFFICERS.......................................15
Section 4.1 Number, Designation, Election,
Term, etc..................................................15
(a) Initial Trustee.........................................15
(b) Number..................................................15
(c) Election and Term.......................................15
(d) Resignation and
Retirement.............................................15
(e) Removal.................................................16
(f) Vacancies...............................................16
(g) Acceptance of Trusts....................................16
(h) Effect of Death,
Resignation, etc.......................................16
(i) Conveyance..............................................17
(j) No Accounting...........................................17
(k) Filings.................................................17
Section 4.2 Trustees' Meetings; Participation by
Telephone, etc.............................................17
Section 4.3 Committees; Delegation......................................18
Section 4.4 Officers....................................................18
Section 4.5 Compensation of Trustees
and Officers...............................................18
Section 4.6 Ownership of Shares and Securities
of the Trust...............................................19
<PAGE>
Section 4.7 Right of Trustees and Officers
to Own Property or to Engage
in Business; Authority of Trustees
to Permit Others to Do Likewise............................19
Section 4.8 Reliance on Experts.........................................19
Section 4.9 Surety Bonds................................................20
Section 4.10 Apparent Authority of
Trustees and Officers......................................20
Section 4.11 Other Relationships Not
Prohibited.................................................20
Section 4.12 Payment of Trust Expenses...................................21
Section 4.13 Ownership of the Trust Property.............................21
ARTICLE V DELEGATION OF MANAGERIAL
RESPONSIBILITIES...........................................22
Section 5.1 Appointment; Action by
Less than All Trustees.....................................22
Section 5.2 Certain Contracts...........................................22
(a) Advisory................................................23
(b) Administration..........................................24
(c) Distribution............................................24
(d) Custodian...............................................24
(e) Transfer and Dividend
Disbursing Agency.....................................24
(f) Shareholder Servicing...................................25
(g) Accounting..............................................25
ARTICLE VI FUNDS AND SHARES............................................25
Section 6.1 Description of Funds and Shares.............................25
(a) Shares; Funds; Series of Shares.........................25
(b) Establishment, etc. of Funds; Authorization
of Shares..............................................26
(c) Character of Separate Funds
and Shares Thereof.....................................26
(d) Consideration for Shares................................27
<PAGE>
Section 6.2 Establishment and Designation
of Certain Funds; General
Provisions for All Funds...................................27
(a) Assets Belonging to Funds...............................27
(b) Liabilities of Funds....................................28
(c) Dividends...............................................28
(d) Liquidation.............................................29
(e) Voting..................................................29
(f) Redemption by Shareholder...............................29
(g) Redemption at the Option
of the Trust..........................................30
(h) Net Asset Value.........................................30
(i) Transfer................................................31
(j) Equality................................................31
(k) Right of Fractional Shares..............................31
(l) Conversion Rights.......................................31
Section 6.3 Ownership of Shares.........................................32
Section 6.4 Investments in the Trust....................................32
Section 6.5 No Preemptive Rights........................................32
Section 6.6 Status of Shares............................................32
ARTICLE VII SHAREHOLDERS' VOTING
POWERS AND MEETINGS........................................33
Section 7.1 Voting Powers...............................................33
Section 7.2 Number of Votes and Manner
of Voting; Proxies.........................................33
Section 7.3 Meetings....................................................34
Section 7.4 Record Dates................................................34
Section 7.5 Quorum and Required Vote....................................35
Section 7.6 Action by Written Consent...................................35
Section 7.7 Inspection of Records.......................................35
Section 7.8 Additional Provisions.......................................36
<PAGE>
ARTICLE VIII LIMITATION OF LIABILITY;
INDEMNIFICATION............................................36
Section 8.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice..................................36
Section 8.2 Trustees' Good Faith Action;
Expert Advice; No Bond or Surety...........................37
Section 8.3 Indemnification of Shareholders ............................37
Section 8.4 Indemnification of Trustees,
Officers, etc..............................................37
Section 8.5 Compromise Payment..........................................39
Section 8.6 Indemnification Not
Exclusive, etc.............................................39
Section 8.7 Liability of Third Persons
Dealing with Trustees......................................39
ARTICLE IX DURATION; REORGANIZATION;
AMENDMENTS.................................................40
Section 9.1 Duration and Termination
of Trust...................................................40
Section 9.2 Reorganization..............................................40
Section 9.3 Amendments; etc.............................................41
Section 9.4 Filing of Copies of
Declaration and Amendments.................................42
ARTICLE X MISCELLANEOUS...............................................42
Section 10.1 Governing Law...............................................42
Section 10.2 Counterparts................................................42
Section 10.3 Reliance by Third Parties...................................42
Section 10.4 References; Headings........................................43
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Section 10.5 Use of the Name Standish, Ayer & Wood.......................43
SIGNATURES ...........................................................44
ACKNOWLEDGMENTS..............................................................45
<PAGE>
EXHIBIT 2
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
STANDISH, AYER & WOOD INVESTMENT TRUST
This AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts
this 13th day of August, 1986, by and between the Settlor and the Trustee whose
signature is set forth below (the "Initial Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Bryan G. Tyson, an individual residing in Natick, Massachusetts
(the "Settlor"), proposes to deliver to the Initial Trustee the sum of the one
hundred dollars ($100.00) lawful money of the United States of America in trust
hereunder and to authorize the Initial Trustee and all other Persons acting as
Trustees hereunder to employ such funds, and any other funds coming into their
hands or the hands of their successor or successors as such Trustees, to carry
on the business of an investment company, and as such of buying, selling,
investing in or otherwise dealing in and with stocks, bonds, debentures,
warrants and other Securities, and interests therein, or calls or puts with
respect to any of the same, or financial futures contracts, or such other and
further investment media and other property as the Trustees may deem advisable,
which are not prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee is willing to accept such sum, together with
any and all additions thereto and the income or increments thereof, upon the
terms, conditions and trusts hereinafter set forth; and
WHEREAS, the assets held by the Trustees may be divided into separate
Funds, each with its own separate investment portfolio and investment
objectives, policies and purposes, and the beneficial interest in each such Fund
shall be divided into transferable Shares, there being a separate Series of
Shares for each Fund, all in accordance with the provisions hereinafter set
forth; and
WHEREAS, it is desired that the trust established hereby (the "Trust") by
managed and operated as a trust with transferable shares under the laws of
Massachusetts, of the type commonly known and referred to as a
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Massachusetts business trust, in accordance with the provisions hereinafter set
forth;
NOW, THEREFORE, the Initial Trustee, for himself and his successors as
Trustees, hereby declares, and agrees with the Settlor, for himself and for all
Persons who shall hereafter become holders of Shares of Beneficial Interest of
the Trust, of any Series,--that the Trustees will hold the sum delivered to them
upon the execution hereof, and all other and further cash, Securities and other
property of every type and description which they may in any way acquire in
their capacity as such Trustees, together with the income therefrom and the
proceeds thereof, IN TRUST, to manage and dispose of the same for the benefit of
the holders from time to time of the Shares of the several Series being issued
and to be issued hereunder and in the manner and subject to the provisions
hereof, to wit:
ARTICLE I
THE TRUST
SECTION 1.1 Name. The name of the Trust shall be "STANDISH, AYER & WOOD
INVESTMENT TRUST", and so far as may the practicable the Trustees shall conduct
the Trust's activities, execute all documents and sue or be sued under that
name, which name (and the word "Trust" wherever used in this Agreement and
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees in their capacity as Trustees, and not individually or
personally, and shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the Shares of Beneficial
Interest of the Trust, of any Series. If the Trustees determine that the use of
such name is not practicable, legal or convenient at any time or in any
jurisdiction, or if the Trust is required to discontinue the use of such name
pursuant to Section 10.5 hereof, then subject to that Section, the Trustees may
use such other designation, or they may adopt such other name for the Trust as
they deem proper, and the Trust may hold property and conduct its activities
under such designation or name.
SECTION 1.2 Location. The Trust shall have an office in Boston,
Massachusetts, unless changed by the Trustees to another location in
Massachusetts or elsewhere, but such office need not be the sole or principal
office of the Trust. The Trust may have such other offices or places of business
as the Trustees may from time to time determine to be necessary or expedient.
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SECTION 1.3 Nature of Trust. The Trust shall be a trust with transferable
shares under the laws of The Commonwealth of Massachusetts, of the type referred
to in Section 1 of Chapter 182 of the Massachusetts General Laws and commonly
known as a Massachusetts business trust. The Trust is not intended to be, shall
not be deemed to be, and shall not be treated as, a general partnership, limited
partnership, joint venture, corporation or joint stock company. The Shareholders
shall be beneficiaries and their relationship to the Trustees shall be solely in
that capacity in accordance with the rights conferred upon them hereunder.
SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.
"Administrator" shall have the meaning designated in Section 5.2 (b)
hereof.
"Affiliated Person" shall have the meaning designated in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.
"Certificate of Designation" shall have the meaning designated in Section
6.1 hereof.
"Certificate of Termination" shall have the meaning designated in Section
6.1 hereof.
"Commission" shall have the meaning designated in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble to
Section 5.2 hereof.
"Covered Person" shall have the meaning designated in Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
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"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time to
time in effect. References in this Agreement and Declaration of Trust to
"hereof," "herein" and "hereunder" shall be deemed to refer to the Declaration
of Trust generally, and shall not be limited to the particular text, Article or
Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.
"Distributor" shall have the meaning designated in Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning designated in Section
5.2(e) hereof.
"Fund" or "Funds" shall mean one or more of the separate components of the
assets of the Trust which are now or hereafter established and designated under
or in accordance with the provisions of Article VI hereof.
"Fund Assets" shall have the meaning designated in Section 6.2(a) hereof.
"General Items" shall have the meaning designated in Section 6.2(a)
hereof.
"Initial Trustee" shall have the meaning designated in the Preamble
hereto.
"Investment Adviser" shall have the meaning designated in Section 5.2(a)
hereof.
"Majority of the Trustees," shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one (1)
Trustee in office, such phrase shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to the election of any
Trustee at a meeting of Shareholders, shall mean the vote for the election of
such Trustee of a plurality of all outstanding Shares, without regard to Series,
represented in person or by proxy and entitled to vote thereon, provided that a
quorum (as determined in accordance with Section 7.5 hereof) is present, and as
used with respect to any other action required or permitted to be taken by
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Shareholders, shall mean the vote for such action of the holders of that
majority of outstanding Shares (or where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that majority of the
outstanding Shares of that Series) which consists of: (i) a majority of all
Shares (or of all Shares of the particular Series) represented in person or by
proxy and entitled to vote on such action at the meeting of Shareholders at
which such action is to be taken, provided that a quorum (as determined in
accordance with Section 7.5 hereof) is present; or (ii) if such action is to be
taken by written consent of Shareholders, a majority of all outstanding Shares
(or of all outstanding Shares of the particular Series) entitled to vote on such
action; provided further, that (iii) as used with respect to any action
requiring the affirmative vote of "a majority of the outstanding voting
securities," as the quoted phrase is defined in the 1940 Act, of the Trust or of
any Fund, "Majority Shareholder Vote" shall mean the vote for such action at a
meeting of Shareholders of the smallest majority of all outstanding shares of
the Trust (or the particular Series) entitled to vote on such action which
satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of 1940
and the rules and regulations thereunder, both as amended from time to time, and
any order or orders thereunder which may from time to time be applicable to the
Trust.
"Person" shall mean and include individuals as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, business trusts or any other
organizations or entities whatsoever established under the laws of any
jurisdiction, whether or not considered to be legal entities, and governments
and agencies and political subdivisions thereof.
"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.
"Prospectus," as used with respect to any Fund or Series of Shares, shall
mean the prospectus relating to such Fund or Series which constitutes part of
the currently effective Registration Statement of the Trust under the Securities
Act of 1933, as such prospectus may be amended or supplemented from time to
time.
"Securities" shall mean any and all bills, notes, bonds, debentures or
other obligations or evidences of indebtedness, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements or other money
market
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instruments, stocks, shares or other equity ownership interests, and warrants,
options, futures, "when issued" or "delayed delivery" contracts, or other
instruments representing rights to subscribe for, purchase, receive or otherwise
acquire or to sell, transfer, assign or otherwise dispose of, and scrip,
certificates, receipts, or other instruments evidencing any ownership rights or
interests in, any of the foregoing, issued, guaranteed or sponsored by any
governments, political subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or entities
whatsoever, irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit, and whether
they be domestic or foreign with respect to The Commonwealth of Massachusetts or
the United States of America.
"Securities of the Trust" shall mean any Securities issued by the Trust.
"Series" shall mean one or more of the series of Shares authorized by the
Trustees to represent the beneficial interest in one or more of the Funds.
"Settlor" shall have the meaning designated in the first "Whereas" clause
set forth above.
"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series, and shall include a pledge into whose name any such Shares are
transferred in pledge.
"Shareholder Servicing Agent" shall have the meaning designated in Section
5.2(f) hereof.
"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Fund of the Trust (as the context may require)
shall be divided from time to time, and includes fractions of Shares as well as
whole Shares. All reference herein to "Shares" which are not accompanied by a
reference to any particular Series or Fund shall be deemed to apply to
outstanding Shares without regard to Series number.
"Single Class Voting," as used with respect to any matter to be acted upon
at a meeting or by written consent of Shareholders, shall mean a style of voting
in which each holder of one or more Shares shall be entitled to one vote on the
matter in question for each Share standing in his name on the records of
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the Trust, irrespective of Series, and all outstanding Shares of all Series
shall vote as a single class.
"Statement of Additional Information," as used with respect to any Fund or
Series of Shares, shall mean the statement of additional information relating to
such Fund or Series which constitutes part of the currently effective
Registration Statement of the Trust under the Securities Act of 1933, a such
statement of additional information may be amend or supplemented from time to
time.
"Transfer Agent" shall have the meaning designated in Section 5.2(e)
hereof.
"Trust" shall have the meaning designated in the fourth "Whereas" clause
set forth above.
"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or the
Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the Trustees,
without regard to the Fund to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, as long as he
shall continue in office, and all other individuals who at the time in question
have been duly elected or appointed as Trustees of the Trust in accordance with
the provisions hereof and who have qualified and are then in office. At any time
at which there shall be only one (1) Trustee in office, such term shall mean
such single Trustee.
ARTICLE II
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and selling
short, selling, assigning, negotiating or exchanging and otherwise disposing of,
and turning to account, realizing upon and generally dealing in and with, in
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any manner, (i) Securities of all kinds, and (ii) precious metals and other
minerals, contracts to purchase and sell, and other interests of every nature
and kind in, such metals or minerals, and all as the Trustees in their
discretion shall determine to be necessary, desirable or appropriate, and to
exercise and perform any and every act, thing or power necessary, suitable or
desirable for the accomplishment of such purpose, the attainment of any of the
objects or the furtherance of any of the powers given hereby which are lawful
purposes, objects or powers of a trust with transferable shares of the type
commonly known as a Massachusetts business trust; and to do every other act or
acts or thing or things incidental or appurtenant to or growing out of or in
connection with the aforesaid objects, purposes or powers, or any of them, which
a trust of the type commonly known as a Massachusetts business trust is not now
or hereafter prohibited from doing, exercising or performing.
ARTICLE III
POWERS OF THE TRUSTEES
SECTION 3.1 Powers in General. The Trustees shall have, without other or
further authorization, full, entire, exclusive and absolute power, control and
authority over, and the management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such powers
of delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting the aforesaid power or authority or any specific
power or authority. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust providing for conduct of
the business and affairs of the trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders; they may
select, and from time to time change, the fiscal year of the Trust; they may
adopt and use a seal for the Trust, provided, that unless otherwise required by
the Trustees, it shall not be necessary to place the seal upon, 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; they may from time to time
in accordance with the provisions of Section 6.1 hereof establish one or more
Funds to which they may allocate such of the Trust Property, subject to such
liabilities, as they shall deem appropriate, each such Fund to be operated by
the Trustees as a separate and distinct investment portfolio and with separately
defined investment objectives and policies and distinct investment purposes, all
as established by the Trustees, or
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from time to time changed by them; they may as they consider appropriate elect
and remove officers and appoint and terminate agents and consultants and hire
and terminate employees, any one or more of the foregoing of whom may be a
Trustee; they may appoint from their own number, and terminate, any one or more
committees consisting of one or more Trustees, including without implied
limitation an Execution Committee, which may, when the Trustees are not in
session and subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Section 5.2 hereof they may employ one or more Investment Advisers,
Administrators and Custodians and may authorize any Custodian to employ
subcustodians or agents and to deposit all or any part of the Securities held by
the Trust in a system or systems for the central handling of Securities, retain
Transfer, Dividend Disbursing, Accounting or Shareholder Servicing Agents or any
of the foregoing, provide for the distribution of Shares through one or more
Distributors or Principal Underwriters, or otherwise; they may set record dates
or times for the determination of Shareholders entitled to participate in,
benefit from or act with respect to various matters; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, Investment Adviser, Administrator, Distributor, Custodian,
Transfer, Dividend Disbursing, Accounting or Shareholder Servicing Agents, or
any other agent or consultant of the Trust, such authority, powers, functions
and duties as they consider desirable or appropriate for the conduct of the
business and affairs of the Trust, including without implied limitation the
power and authority to act in the name of the Trust and of the Trustees, to sign
documents and to act as attorney-in-fact for the Trustees. Without limiting the
foregoing and to the extent not inconsistent with the 1940 Act or other
applicable law, the Trustees shall have power and authority:
(a) Investments. To invest and reinvest cash and other property
forming part of the Trust Property; to buy, for cash or on margin, and
otherwise acquire and hold, Securities created or issued by any Persons,
including Securities maturing after the possible termination of the Trust;
to make payment therefor in any lawful manner in exchange for any of the
Trust Property; and to hold cash or other property uninvested without in
any event being bound or limited by any present or future law or custom in
regard to investments by Trustees;
(b) Disposition of Assets. To lend, sell, exchange, mortgage,
pledge, hypothecate, grant security interests in, encumber, negotiate,
convey, transfer or otherwise dispose of, and to trade in, any and all of
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the Trust Property, free and clear of all trusts, for cash or on terms,
with or without advertisement, and on such terms as to payment, security
or otherwise, all as they shall deem necessary or expedient;
(c) Ownership Powers. To vote or give assent, or exercise any and
all other rights, powers and privileges of ownership with respect to, and
to perform any and all duties and obligations as owners of, any Securities
or other property forming part of the Trust Property, the same as any
individual might do; to exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of Securities, and to
receive powers of attorney from, and to execute and deliver proxies or
powers of attorney to, such Person or Persons as the Trustees shall deem
proper, receiving from or granting to such Person or Persons such power
and discretion with relation to Securities or other property forming part
of the Trust Property, all as they shall deem proper;
(d) Form of Holding. To hold any Security or other property, whether
in bearer, unregistered or other negotiable form, or in the name of the
Trustees or of the Trust or of the fund to which such Securities or other
property have been assigned, or in the name of a Custodian, subcustodian
or other nominee or nominees, or otherwise, upon such terms, in such
manner or with such powers as the Trustees may determine and with or
without indicating any trust or the interest of the Trustees therein;
(e) Reorganization, etc. To consent to or participate in any plan
for the reorganization, consolidation or merger of any issuer, any
Security of which is or was held in the Trust or any Fund; to consent to
any contract, lease, mortgage, purchase or sale of property by any such
issuer; and to pay calls or subscriptions with respect to any Security
forming part of the Trust Property;
(f) Voting Trusts, etc. To join with other holders of any Securities
in acting through a committee, depository, voting trustee or otherwise,
and in that connection to deposit any Security with, or transfer any
Security to, any such committee, depository or trustee, and to delegate to
them such power and authority with relation to any Security (whether or
not so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation of
such committee, depository or trustee as the Trustees shall deem proper;
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(g) Contracts, etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust, for
such terms as they shall see fit, whether or not extending beyond the term
of office of the Trustees, or beyond the possible expiration of the Trust;
to amend, extend, release or cancel any such obligations, contracts,
agreements or understandings; and to execute, acknowledge, deliver and
record all written instruments which they may deem necessary or expedient
in the exercise or their powers;
(h) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage or pledge the Trust Property or any part thereof to secure any
part of or all such obligations;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships, and any other combinations or associations;
(j) Insurance. To purchase and pay for the entirely out of the Trust
property such insurance as they may deem necessary of appropriate for the
conduct of the business of the Trust, including, without limitation,
insurance policies insuring the Trust Property and payment of
distributions and principal of Securities included in the Trust Property,
and insurance policies insuring the Shareholders, Trustees, officers,
employees, consultants, Investment Advisers, Administrators, Distributors,
Principal Underwriters, or other agents or independent contractors, or any
thereof (or any Person connected therewith), of the Trust, individually,
against all claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by reason of
any action alleged to have been taken or omitted by any such Person in any
such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have
the power to indemnify any such Person against such liability;
(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trusts and provisions,
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including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust;
(l) Power of Collection and Litigation. To collect, sue for and
receive all sums of money coming due to the Trust, to employ counsel, and
to commence, engage in, prosecute, intervene in, join, defend, compound,
compromise, adjust or abandon, in the name of the Trust, any and all
actions, suits, proceedings, disputes, claims, controversies, demands or
other litigation or legal proceedings relating to the Trust, the business
of the Trust, the Trust Property, or the Trustees, officers, employees,
agents and independent contracts of the Trust, in their capacity as such,
at law or in equity, or before any other bodies or tribunals, and to
compromise, arbitrate or otherwise adjust any dispute to which the Trust
may be a party, whether or not any suit is commenced or any claim shall
have been made or asserted;
(m) Issuance and Repurchase of Shares. To issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and subject to
Article VI hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any Series any of the
Fund assets belonging to the Fund to which such Series relates, whether
constituting capital or surplus or otherwise, to the full extent now or
hereafter permitted by applicable law; provided, that any Shares belonging
to the Trust shall not be voted, directly or indirectly;
(n) Offices. To have one or more offices, and to carry on all or any
of the operations and business of the Trust, in any of the States,
Districts or Territories of the United States of America, and in any and
all foreign countries, subject to the laws of such State, District,
Territory or country;
(o) Expenses. To incur and pay any and all such expenses and charges
as they may deem advisable (including without limitation appropriate fees
to themselves as Trustees), and to pay all such sums of money for which
they may be held liable by way of damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, investment advisers, accountants,
engineers, escrow agents, depositories, consultants,
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ancillary trustees, custodians, agents for collection, insurers, banks and
officers, as they think best for the business of the Trust or any Fund, to
supervise and direct the acts of any of the same, and to fix and pay their
compensation and define their duties;
(q) Accounts. To determine, and from time to time change, the method
or form in which the accounts of the Trust shall be kept;
(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust
Property and of any services, Securities, property or other consideration
to be furnished to or acquired by the Trust, and from time to time to
revalue all or any part of the Trust Property in accordance with such
appraisals or other information as is, in the Trustees' sole judgment,
necessary and satisfactory;
(s) Indemnification. In addition to the mandatory indemnification
provided for in Article VIII hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with
any Person with whom the Trust has dealings, including, without
limitation, any independent contractor, to such extent as the Trustees
shall determine; and
(t) General. To do all such other acts and things and to conduct,
operate, carry on and engage in such other lawful businesses or business
activities as they shall in their sole and absolute discretion consider to
be incidental to the business of the Trust or any Fund, and to exercise
all powers which they shall in their discretion consider necessary, useful
or appropriate to carry on the business of the Trust or any Fund, to
promote any of the purposes for which the Trust is formed, whether or not
such things are specifically mentioned herein, in order to protect or
promote the interests of the Trust or any Fund, or otherwise to carry out
the provisions of the Declaration.
SECTION 3.2 Borrowings; Financings; Issuance of Securities. Subject to the
requirements of the 1940 Act, the Trustees shall have power to borrow or in any
other manner raise such sum or sums of money, and to incur such other
indebtedness for goods or services, or for or in connection with the purchase of
other acquisition of property, as they shall deem advisable for the purposes of
the Trust, in any manner and on any terms, and to evidence the same by
negotiable or non-negotiable Securities which may mature at any time or
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times, even beyond the possible date of termination of the Trust; to issue
Securities of any type for such cash, property, services or other consideration,
and at such time or times and upon such terms, as they may deem advisable; and
to reacquire any such Securities. Any such Securities of the Trust may, at the
discretion of the Trustees, be made convertible into Shares of any Series, or
may evidence the right to purchase, subscribe for or otherwise acquire Shares of
any Series, at such times and on such terms as the Trustees may prescribe.
SECTION 3.3 Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits are
to be subject to withdrawal in such manner as the Trustees may determine, and
the Trustees shall have no responsibility for any loss which may occur by reason
of the failure of the bank, trust company or other banking institution with
which any such moneys or Securities have been deposited, other than liability
based on their gross negligence or willful fault.
SECTION 3.4 Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive.
SECTION 3.5 Further Powers; Limitations. In construing the provisions of
this Declaration of Trust, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain any court order to
deal with the Trust Property. The Trustees may limit their right to exercise any
of their powers through express restrictive provisions in the instruments
evidencing or providing the terms for any Securities of the Trust or in other
contractual instruments adopted on behalf of the Trust.
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ARTICLE IV
TRUSTEES AND OFFICERS
SECTION 4.1 Number, Designation, Election, Term, etc.
(a) Initial Trustee. Upon his execution of this Declaration of Trust
or a counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, the individual whose
signature is affixed hereto as Initial Trustee shall become the Initial
Trustee hereof.
(b) Number. A Majority of the Trustees may increase or decrease the
number of Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term, but
the number of Trustees may be decreased in conjunction with the removal of
the Trustee may be decreased in conjunction with the removal of a Trustee
pursuant to subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at a meeting of Shareholders held prior to the
effective date of the Registration Statement of the Trust under the 1940
Act, and the term of office of any Trustees in office before such election
shall terminate at the time of such election. Subject to Section 16(a) of
the 1940 Act and to the preceding sentence of this subsection (c), the
Trustees shall have the power to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten their own terms or make
their terms of unlimited duration, to elect their own successors and,
pursuant to subsection (f) of this Section 4.1, to appoint Trustees to
fill vacancies; provided, that Trustees shall be elected by a Majority
Shareholder Vote at any such time or times as the Trustees shall determine
that such action is required under Section 16(a) of the 1940 Act or, if
not so required, that such action is advisable.
(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by a written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, and such resignation
or retirement shall take effect upon such delivery or upon such later date
as is specified in such instrument.
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(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds (2/3) of
the number of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds (2/3) of all outstanding Shares of the
Trust without regard to Series, case in person or by proxy at any meeting
called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds (2/3) of all outstanding
Shares of the Trust without regard to Series and filed with the Trust's
Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of Trustees, may (but unless
required by the 1940 Act need not) be filled by a Majority of the
Trustees, subject to the provisions of Section 16(a) of the 1940 Act,
through the appointment of such other individual as such remaining
Trustees in their discretion shall determine; provided, that if there
shall be no Trustees in office, such vacancy or vacancies shall be filled
by Majority Shareholder Vote. Any such appointment or election shall take
effect immediately, except that any such appointment or election in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in the number of Trustees to be effective at a later date shall
become effective only at or after the effective date of said retirement,
resignation or increase in the number of Trustees.
(g) Acceptance of Trusts. Whenever any conditions to the appointment
or election of any individual as a Trustee hereunder who was not,
immediately prior to such election, acting as a Trustee shall have been
satisfied, such individual shall become a Trustee and the Trust Property
shall vest in the new Trustee, together with the continuing Trustees,
without any further act or conveyance. Such new Trustee shall accept such
appointment or election in writing and agree in such writing to be bound
by the provisions hereof, but the execution of such writing shall not be
requisite to the effectiveness of the appointment or election of a new
Trustee.
(h) Effect of Death, Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, removal or incapacity of any
Trustee, an increase in the number of Trustees or otherwise, shall operate
to annul or terminate the Trust hereunder or to revoke or terminate any
existing agency or contract created or entered into
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pursuant to the terms of this Declaration of Trust. Until such vacancy is
filled as provided in this Section 4.1, the Trustees in office (if any),
regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by
this Declaration.
(i) Conveyance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or
his legal representative shall, upon request of the continuing Trustees,
execute and deliver such documents as may be required for the purpose of
consummating or evidencing the conveyance to the Trust or the remaining
Trustees of any Trust Property held in such former Trustee's name, but the
execution and delivery of such documents shall not be requisite to the
vesting of title to the Trust Property in the remaining Trustees, as
provided in subsection (g) of this Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no Person
ceasing to be a Trustee (nor the estate of any such Person) shall be
required to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
(k) Filings. Whenever there shall be a change in the composition of
the Trustees, the Trust shall cause to be filed in the office of the
Secretary of The Commonwealth of Massachusetts, and in each other place
where the Trust is required to file amendments to this Declaration, a
certificate executed by a Trustee or officer of the Trust as to the fact
of the appointment or election of an individual who was not theretofore a
Trustee or as to the resignation, removal or death of a Trustee, but the
filing of such certificate shall not be requisite to the effectiveness of
any such appointment, election, resignation or removal of a Trustee.
SECTION 4.2 Trustee's Meetings; Participation by Telephone, etc. An annual
meeting of Trustees shall be held not later than the last day of the fourth
month after the end of each fiscal year of the Trust and special meetings may be
held from time to time, in each case, upon the call of such officers as may be
thereunto authorized by the By-Laws or vote of the Trustees, or by any two (2)
Trustees, or pursuant to a vote of the Trustees, adopted at a duly constituted
meeting of the Trustees, and upon such notice as shall be provided in the
By-Laws. The Trustees may act with or without a meeting, and a
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written consent to any matter, signed by a Majority of the Trustees, shall be
equivalent to action duly taken at a meeting of the Trustees, duly called and
held. Except as otherwise provided by the 1940 act or other applicable law, or
by this Declaration of Trust or the By-Laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum, consisting of at least a Majority of the Trustees, being
present), within or without Massachusetts. If authorized by the By-Laws, all or
any one or more Trustees may participate in a meeting of the Trustees or any
Committee thereof by means of a conference telephone or similar means of
communication by means of which all Persons participating in the meeting can
hear each other, and participation in a meeting pursuant to such means of
communication shall constitute presence in person at such meeting. The minutes
of any meeting thus held shall be prepared in the same manner as a meeting at
which all participants were present in person.
SECTION 4.3 Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to an executive committee, and to one or
more other committees, or to any single Trustee, or to any other Person, the
doing of such things and the execution of such deeds or other instruments,
either in the name of the Trust or the names of the Trustees or as their
attorney or attorneys in fact, or otherwise as the Trustees may from time to
time deem expedient, and any agreement, deed, mortgage, lease or other
instrument or writing executed by the Trustee or Trustees or other Person to
whom such delegation was made shall be valid and binding upon the Trustees and
upon the Trust.
SECTION 4.4. Officers. The Trustees shall annually elect such officers or
agents, who shall have such powers, duties and responsibilities as the Trustees
may deem to be advisable, and as they shall specify by resolution or in the
By-Laws. Except as may be provided in the By-Laws, any officer elected by the
Trustees may be removed at any time with or without cause. Any two (2) or more
offices may be held by the same individual.
SECTION 4.5 Compensation of Trustees and Officers. The Trustees shall fix
the compensation of all officers and Trustees. Without limiting the generality
of any of the provisions hereof, the Trustees shall be entitled to receive
reasonable compensation for their general service as such, and to fix the amount
of such compensation, and to pay themselves or any one or more of themselves
such compensation for special services, including legal, accounting, or other
professional services, as they in good faith may deem reasonable. No Trustee or
officer resigning and (except where a right to
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receive compensation for a definite future period shall be expressly provided in
a written agreement with the Trust, duly approved by the Trustees) no Trustee or
officer removed shall have any right to any compensation as such Trustee or
officer for any period following his resignation or removal, or any right to
damages on account of his removal, whether his compensation be by the month, by
the year or otherwise.
SECTION 4.6 Ownership of Shares and Securities of the Trust. Any Trustee,
and any officer, employee or agent of the Trust, and any organization in which
any such Person is interested, may acquire, own, hold and dispose of Shares of
any Series and other Securities of the Trust for his or its individual account,
and may exercise all rights of a holder of such Shares or Securities to the same
extent and in the same manner as if such Person were not such a Trustee,
officer, employee or agent of the Trust; and the Trust may issue and sell, or
cause to be issued and sold, and may purchase any such Shares or other
Securities from any such Person or any such organization, subject only to the
general limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Series or other Securities of the Trust generally.
SECTION 4.7 Right of Trustees and Officers to Own Property or to Engage in
Business; Authority of Trustees to Permit Others to Do Likewise. The Trustees,
in their capacity as Trustees, and (unless otherwise specifically directed by
vote of the Trustees) the officers of the Trust in their capacity as such, shall
not be required to devote their entire time to the business and affairs of the
Trust. Except as otherwise specifically provided by vote of the Trustees, or by
agreement in any particular case, any Trustee or officer of the Trust may
acquire, own, hold and dispose of, for his own individual account, any property,
and acquire, own, hold, carry on and dispose of, for his own individual account,
any business entity or business activity, whether similar or dissimilar to any
property or business entity or business activity invested in or carried on by
the Trust, and without first offering the same as an investment opportunity to
the Trust, and may exercise all rights in respect thereof as if he were not a
Trustee or officer of the Trust. The Trustees shall also have power, generally
or in specific cases, to permit employees or agents of the Trust to have the
same rights (or lesser rights) to acquire, hold, own and dispose of property and
businesses, to carry on businesses, and to accept investment opportunities
without offering them to the Trust, as the Trustees have by virtue of this
Section 4.7.
SECTION 4.8 Reliance on Experts. The Trustees and officers may consult
with counsel, brokers, appraisers, accountants, investment bankers, securities
analysts or other Persons (any of which may be a firm in which one
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or more of the Trustees or officers is or are members or otherwise interested)
whose profession gives authority to a statement made by them on the subject in
question, and who are reasonably deemed by the Trustees or officers in question
to be competent, and the advice or opinion of such Persons shall be full and
complete personal protection to all of the Trustees and officers in respect of
any action taken or suffered by them in good faith and in reliance on or in
accordance with such advice or opinion. In discharging their duties, Trustees
and officers, when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by any officer of the Trust having
charge of its books of account, or stated in a written report by an independent
certified public accountant fairly to present the financial position of the
Trust. The Trustees and officers may rely, and shall be personally protected in
taking action, upon any instrument or other document believed by them to be
genuine.
SECTION 4.9 Surety Bonds. No Trustee, officer, employee or agent of the
Trust shall, as such, be obligated to give any bond or surety or other security
for the performance of any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in any particular
case.
SECTION 4.10 Apparent Authority of Trustees and Officers. No purchaser,
lender, transfer agent or other Person dealing with the Trustees or any officer
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, or to make
inquiry concerning or be liable for the application or money or property paid,
loaned or delivered to or on the order of the Trustees or of such officer.
SECTION 4.11 Other Relationships Not Prohibited. The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner,
trustee, employee, investment adviser, principal
underwriter or distributor, or agent of or for any
Contracting Party or of or for any parent or
affiliate of any Contracting Party, or that any
Contracting Party or any parent or affiliate thereof
is a Shareholder or has an interest in the Trust or
any Fund, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited
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partnerships or other organizations, or have other businesses
or interests, shall not affect the validity of any contract for
the performance and assumption of services, duties and
responsibilities to, for or of the Trust and/or the Trustees or
disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any liability
or accountability to the Trust or to the Shareholders;
provided, that, in the case of any relationship or interest
referred to in the preceding clause (i) on the part of any
Trustee or officer of the Trust, either (x) the material facts
as to such relationship or interest have been disclosed to or
are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by
a majority of such Trustees not having any such relationship or
interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the
material facts as to such relationships or interest and as to
the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the
Shareholders, or (z) the specific contract involved is fair to
the Trust as of the time it is authorized, approved or ratified
by the Trustees or by the Shareholders.
SECTION 4.12 Payment of Trust Expenses. The Trustees are authorized to pay
or to cause to be paid out of the principal or income of the Trust, or partly
out of principal and partly out of income, and according to any allocation to
particular Funds made by them pursuant to Section 6.2(b) hereof, all expenses,
fees, charges, taxes and liabilities incurred or arising in connection with the
business and affairs of the Trust or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, Investment Adviser,
Administrator, Distributor or Principal Underwriter, auditor, counsel,
Custodian, Transfer Agent, Dividend Disbursing Agent, Account Agent, Shareholder
Servicing Agent, and such other agents, consultants, and independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur.
SECTION 4.13 Ownership of the Trust Property. Legal title to all the Trust
Property shall be vested in the Trustees as joint tenants, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
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by or in the name of one or more of the Trustees, or in the name of the Trust,
or of any particular Fund, or in the name of any other Person as nominee, on
such terms as the Trustees may determine; provided, that the interest of the
Trust and of the respective Fund therein is appropriately protected. 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 as provided in Section 4.1(c),
(d) or (e) hereof, 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 documents have been executed and delivered pursuant
to Section 4.1 (i) hereof.
ARTICLE V
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1 Appointment; Action by Less than All Trustees. The Trustees
shall be responsible for the general operating policy of the Trust and for the
general supervision of the business of the Trust conducted by officers, agents
or employees of the Trust or by independent contractors, but the Trustees shall
not be required personally to conduct all the business of the Trust and,
consistent with their ultimate responsibility as stated herein, the Trustees may
appoint, employ or contract with one or more officers, employees or agents to
conduct, manage or supervise the operations of the Trust, and may grant or
delegate such authority to such officers, employees or agents as the Trustees
may, in their discretion, deem to be necessary or desirable, without regard to
whether such authority is normally granted or delegated by trustees. With
respect to those matters of the operation and business of the Trust which they
shall elect to conduct themselves, except as otherwise provided by this
Declaration or the By-Laws, if any, the Trustees may authorize any single
Trustee or defined group of Trustees or any committee consisting of a number of
Trustees less than the whole number of Trustees then in office without
specification of the particular Trustees required to be included therein, to act
for and to bind the Trust, to the same extent as the whole number of Trustees
could do, either with respect to one or more particular matters or classes of
matters, or generally.
SECTION 5.2 Certain Contracts. Subject to compliance with the provisions
of the 1940 Act, but notwithstanding any limitation of present and
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future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships, or other
organizations or individuals (any such Person being herein referred to as a
"Contracting Party"), to provide for the performance and assumption of some or
all of the following services, duties and responsibilities to, for or on behalf
of the Trust or any Fund, or the Trustees, and to provide for the performance
and assumption of such other services, duties and responsibilities in addition
to those set forth below, as the Trustees may deem appropriate:
(a) Advisory. An agreement whereby an investment adviser
registered under the Investment Advisers Act of 1940, as amended,
shall undertake to furnish the Trust or any Fund such management,
investment advisory or supervisory, administrative, accounting,
legal, statistical and research facilities and services, and such
other facilities and services, if any, as the Trustees shall from
time to time consider desirable, all upon such terms and conditions
as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the
1940 Act or any applicable provisions of the By-Laws (any such
investment adviser being herein referred to as an "Investment
Adviser"). Any such advisory or management agreement and any
amendment thereto shall be subject to approval by a Majority
Shareholder Vote at a meeting of the Shareholders of the Trust.
Notwithstanding any provisions of this Declaration, the Trustees may
authorize an Investment Adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of Securities on behalf of the
Trustees or may authorize any officer or employee of the Trust or
any Trustee to effect such purchases, sales, loans or exchanges
pursuant to recommendations of an Investment Adviser (and all
without further action by the Trustees). Any such purchases, sales,
loans and exchanges shall be deemed to have been authorized by all
of the Trustees. The Trustees may, in their sole discretion, call a
meeting of Shareholders in order to submit to a vote of Shareholders
at such meeting the approval of continuance of any such investment
advisory or management agreement. If the Shareholders of any Fund
should fail to approve any such investment advisory or management
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agreement, the Investment Adviser may nonetheless serve as
Investment Adviser with respect to any other Fund whose Shareholders
shall have approved such contract.
(b) Administration. An agreement whereby an agent, subject to
the general supervision of the Trustees and in conformity with any
policies of the Trustees with respect to the operations of the Trust
and each Fund, will supervise all or any part of the operations of
the Trust and each Fund, and will provide all or any part of the
administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient administration
and operations of the Trust and each Fund (any such agent being
herein referred to as an "Administrator").
(c) Distribution. An agreement providing for the sale of Shares
of any one or more Series to net the Trust not less than the net
asset value per Share (as described in Section 6.2(h) hereof) and
pursuant to which the Trust may appoint the other party to such
agreement as its principal underwriter or sales agent for the
distribution of such Shares. The agreement shall contain such terms
and conditions as the Trustees may in their discretion determine to
be not inconsistent with this Declaration, the applicable provisions
of the 1940 Act and any applicable provisions of the By-Laws (any
such agent being herein referred to as a "Distributor" or a
"Principal Underwriter," as the case may be).
(d) Custodian. An agreement appointing a bank or trust company
having an aggregate capital surplus and undivided profits (as shown
in its last published report) of at least two million dollars
($2,000,000), and meeting the requirements of Section 17(f) of the
1940 Act as custodian of the Securities and similar investments of
the Trust or of any Fund and of the accounting records in connection
therewith (any such custodian being herein referred to as a
"Custodian").
(e) Transfer and Dividend Disbursing Agency. An agreement with
an agent to maintain records of the ownership of outstanding Shares,
the issuance and redemption and the transfer thereof (any such agent
being herein referred to as a "Transfer Agent"), and to disburse any
dividends declared by
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the Trustees and in accordance with the policies of the Trustees or
the instructions of any particular Shareholder to reinvest any such
dividends (any such agent being herein referred to as a "Dividend
Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to
provide service with respect to the relationship of the Trust and
its Shareholders, records with respect to Shareholders and their
Shares, and similar matters (any such agent being herein referred to
as a "Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or
any part of the accounting responsibilities, whether with respect to
the Trust Property, Shareholders or otherwise (any such agent being
herein referred to as an "Accounting Agent").
The same Person may be a Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust or the Trustees, and the
contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relative to any of the matters referred to in
subsections (a) through (g) of this Section 5.2.
ARTICLE VI
FUNDS AND SHARES
Section 6.1 Description of Funds and Shares
(a) Shares; Funds; Series of Shares. The beneficial interest in the
Trust shall be divided into Shares having a nominal or par value of one
cent ($.01) per Shares, and all of one class, of which an unlimited number
may be issued. The Trustees shall have the authority from time to time to
establish and designate one or more separate, distinct and independent
Funds into which the assets of the Trust shall be divided, and to
authorize a separate Series of Shares for each such Fund (each of which
Series, including without limitation the Series authorized in Section 6.2
hereof, shall represent interests only in the Fund with respect to which
such Series was authorized), as they deem necessary or
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desirable. Except as otherwise provided as to a particular Fund herein, or
in the Certificate of Designation therefor, the Trustees shall have all
the rights and powers, and be subject to all the duties and obligations,
with respect to each such Fund and the assets and affairs thereof as they
have under this Declaration with respect to the Trust and the Trust
Property in general.
(b) Establishment, etc. of Funds; Authorization of Shares. The
establishment and designation of any Fund in addition to the Fund
established and designated in Section 6.2 hereof and the authorization of
the Shares thereof shall be effective upon the execution by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a
Majority of the Trustees) of an instrument setting forth such
establishment and designation and the relative rights and preferences of
the Shares of such Fund and the manner in which the same may be amended (a
"Certificate of Designation"). A Certificate of Designation may provide
that the number of Shares of any such Series which may be issued is
unlimited, or may limit the number issuable. At any time that there are no
Shares outstanding of any particular Fund previously established and
designated, including any Fund established and designated in Section 6.2
hereof, the Trustees may by an instrument (a "Certificate of Termination")
executed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) terminate such Fund
and the establishment and designation thereof and the authorization of its
Shares. Each Certificate of Designation, Certificate of Termination and
any instrument amending a Certificate of Designation shall have the status
of an amendment to this Declaration of Trust, and shall be filed and
become effective as provided in Section 9.3 hereof.
(c) Character of Separate Funds and Shares Thereof. Each Fund
established hereunder shall be a separate component of the assets of the
Trust, and the holders of Shares of the Series representing the beneficial
interest in the assets of that Fund shall be considered Shareholders of
such Fund, but such Shareholders shall also be considered Shareholders of
the Trust for purposes of receiving reports and notices and, except as
otherwise provided herein or in the Certificate of Designation of a
particular Fund as to such Fund, or as required by the 1940 Act or other
applicable law, the right to vote, all without distinction by Series. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Funds, and
to fix and determine
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the relative rights and preferences as between the Shares of the
respective Funds as to rights of redemption and the price, terms and
manner of redemption, special and relative rights as to dividends and
other distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the Shareholders
of the several Funds shall have separate voting rights or no voting
rights.
(d) Consideration for Shares. The Trustees may issue Shares of any
Series for such consideration (which may include property subject to, or
acquired in connection with the assumption of, liabilities) and on such
terms as they may determine (or for no consideration if pursuant to a
Share dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and nonassessable (but may be subject to
mandatory contribution back to the Trust as provided in Section 6.2(h)
hereof). The Trustees may classify or reclassify any unissued Shares, or
any Shares of any Series previously issued and required by the Trust, into
Shares of one or more other Funds that may be established and designated
from time to time.
SECTION 6.2 Establishment and Designation of Certain Funds; General
Provisions for All Funds. Without limiting the authority of the Trustees set
forth in Section 6.1(a) hereof to establish and designate further Funds, there
is hereby establishing and designated the following Fund: "Standish Bond Fund."
The Shares of such Fund, and the Shares of any further Fund that may from time
to time by established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Fund at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Funds. Any portion of the Trust Property
allocated to a particular Fund, and all consideration received by the
Trust for the issue or sale of Shares of such Fund, together with all
assets in which such consideration is invested or reinvested, all
interest, dividends, income, earnings, profits and gains therefrom, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of
that Fund and shall irrevocably belong to that Fund for all purposes, and
shall be so recorded upon the books of account of
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the Trust, and the Shareholders of such Fund shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of any Fund
of which they are not Shareholders. Such consideration, assets, interest,
dividends, income, earnings, profits, gains and proceeds, together with
any General Items allocated to that Fund as provided in the following
sentence, are herein referred to collectively as "Fund Assets" of such
Fund, and as assets "belonging to" that Fund. In the event that there are
any assets, interest, dividends, income, earnings, profits, gains and
proceeds which are not readily identifiable as belonging to any particular
Fund (collectively "General Items"), the Trustees shall allocate such
General Items to and among any one or more of the Funds established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items so
allocated to a particular Fund shall belong to and be part of the Fund
Assets of that Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Funds for all
purposes.
(b) Liabilities of Funds. The assets belonging to each particular
Fund shall be charged with the liabilities in respect of that Fund and all
expenses, costs, charges and reserves attributable to that Fund, and any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as pertaining to any particular Fund
shall be allocated and charged by the Trustees to and among any one or
more of the Funds established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The indebtedness, expenses, costs, charges and
reserves allocated and so charged to a particular Fund are herein referred
to as "liabilities of" that Fund. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive
and binding upon the Shareholders of all Funds for all purposes. Any
creditor of any Fund may look only to the assets belonging to that Fund to
satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of a particular
Fund may be paid with such frequency as the Trustees may determine, which
may be daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of that Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to that Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of that
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Fund. All dividends and distributions on Shares of a particular Fund shall
be distributed pro rata to the Shareholders of that Fund in proportion to
the number of such Shares held by such holders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and payment have not been received by the time established by the Trustees
under such program or procedure, or that dividends or distributions shall
be payable on Shares which have been tendered by the holder thereof for
redemption or repurchase, but which have not yet been redeemed or
repurchased. Such dividends and distributions may be made in cash,
property or Shares of that Fund, or a combination thereof, as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares shall be paid at the net asset
value thereof as determined in accordance with subsection (h) of this
Section 6.2.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Fund of which Shares are outstanding
shall be entitled to receive, when and as declared by the Trustees, the
excess of the Fund Assets over the liabilities of such Fund. The assets so
distributable to the Shareholders of any particular Fund shall be
distributed among such Shareholders in proportion to the number of Shares
of that Fund held by them and recorded on the books of the Trust. The
liquidation of any particular Fund of which Shares are outstanding may be
authorized by a Majority of the Trustees.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article VII hereof.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Fund shall have the right at such times as may be permitted by the Trust,
but no less frequently than once each week, to require the Trust to redeem
all or any part of his Shares of that Fund at a redemption price equal to
the net asset value per Share of that Fund next determined in accordance
with subsection (h) of this Section 6.2 after such Shares are properly
tendered for redemption; provided, that the Trustees may from time to
time, in their discretion, determine and impose a fee for such redemption.
Payment of the redemption price
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shall be in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Trust may make payment
wholly or partly in Securities or other assets belonging to such Fund at
the value of such Securities or assets used in such determination of net
asset value. Notwithstanding the foregoing, the Trust may postpone payment
of the redemption price and may suspend the right of the holders of Shares
of any Fund to require the Trust to redeem Shares of that Fund during any
period or at any time when and to me extent permissible under the 1940
Act.
(g) Redemption at the Option of the Trust. Each Share of any Fund
shall be subject to redemption at any time at the option of the Trust at
the redemption price which would be applicable if such Share were then
being redeemed by a Shareholder pursuant to subsection (f) of this Section
6.2: (i) if the Trustees determine in their sole discretion that failure
to so redeem may have materially adverse consequences to the holders of
Shares of the Trust or of any Fund, or (ii) upon such other conditions
with respect to maintenance of Shareholder accounts of a minimum amount as
may from time to time be determined by the Trustees and set forth in the
then current Prospectus or Statement of Additional Information of such
Fund. Upon such redemption the holders of the Shares so redeemed shall
have no further right with respect thereto other than to receive payment
of such redemption price.
(h) Net Asset Value. The net asset value per Share of any Fund at
any time shall be the quotient obtained by dividing the value of the net
assets of such Fund at such time (being the current value of the assets
belonging to such Fund, less the then existing liabilities of such Fund)
by the total number of Shares of the Fund then outstanding, all determined
in accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the Trustees
from time to time. The Trustees may determine to maintain the net asset
value per Share of any Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940
Act for the continuing declaration of income attributable to that Fund as
dividends payable in additional Shares of that Fund at the designated
constant dollar amount and for the handling of any losses attributable to
that Fund. Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the shares of
beneficial interest account of that Fund his pro rata portion of the total
number of Shares required to be
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canceled in order to permit the net asset value per Share of that Fund to
be maintained, after reflecting such loss, at the designated constant
dollar amount. Each Shareholder of the Trust shall be deemed to have
expressly agreed, by his investment in any Fund with respect to which the
Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Fund shall be
transferable, but transfers of Shares of a particular Fund shall be
recorded on the Share transfer records of the Trust applicable to that
Fund only at such times as Shareholders have the right to require the
Trust to redeem Shares of that Fund and at such other times as may be
permitted by the Trustees.
(j) Equity. All Shares of each particular Fund shall represent an
equal proportionate interest in the assets belonging to that Fund (subject
to the liabilities of that Fund), and each Share of any particular Fund
shall be equal to each other Share thereof; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection
(c) of this Section 6.2 that may exist with respect to dividends and
distributions on Shares of the same Fund. The Trustees may from time to
time divide or combine the Shares of any particular Fund into a greater or
lesser number of Shares of that Fund without thereby changing the
proportionate beneficial interest in the assets belonging to that Fund or
in any way affecting the rights of the holders of Shares of any other
Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption and
liquidation.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
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SECTION 6.3 Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or of a Transfer Agent or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series that
has been authorized. Certificates evidencing the ownership of Shares need not be
issued except as the Trustees may otherwise determine from time to time, and the
Trustees shall have power to call outstanding Share certificates and to replace
them with book entries. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The record books of the
Trust as kept by the Trust or any Transfer Agent or similar agent, as the case
may be, shall be conclusive as to who are the Shareholders and as to the number
of Shares of each Fund held from time to time by each such Shareholder.
The holders of Shares of each Fund shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of Shares of such Fund as the Trustees deem necessary to comply with
the provisions of the Internal Revenue Code of 1954, as amended, or to comply
with the requirements of any other authority.
SECTION 6.4 Investments in the Trust. The Trustees may accept investments
in any Fund of the Trust from such Persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any Distributor or
Principal Underwriter, Custodian, Transfer Agent or other Person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any such orders, whether or not conforming to such authorized terms.
SECTION 6.5 No Preemptive Rights. No Shareholder, by virtue of holding
Shares of any Fund, shall have any preemptive or other right to subscribe to any
additional Shares of that Fund, or to any Shares of any other Fund, or any other
Securities of the Trust.
SECTION 6.6 Status of Shares. 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. Shares shall be deemed to be
personal property, giving only the rights provided herein. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part of
the Trust Property or any right to call for a partition or division of the same
or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. The death of a Shareholder during the continuance of
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the Trust shall not operate to terminate the Trust or any Fund, nor to entitle
the representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1 Voting Powers. Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Sections 4.1(c) and (e)
hereof, (ii) with respect to the approval or termination of any contract as to
which Shareholder action is required by the 1940 Act, (iii) with respect to any
termination or reorganization of the Trust or any Fund to the extent and as
provided in Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 9.3 hereof,
(v) 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 any Fund, or the Shareholders of any of them (except that a
Shareholder of a particular Fund shall not in any event be entitled to maintain
a derivative or class action on behalf of any other Fund or the Shareholders
thereof), and (vi) with respect to such additional matters as may be required by
the 1940 Act, this Declaration of Trust, the By-Laws, or any registration with
the Commission or any State, or as the Trustees may consider necessary or
desirable. Each matter required or permitted to be voted upon at a meeting or by
written consent of Shareholders shall be submitted to a separate vote of the
outstanding Shares of each Fund entitled to vote thereon; provided, that (i)
when required by this Declaration or by the 1940 Act, actions of Shareholders
shall be taken by Single Class Voting and (ii) when the Trustees determine that
any mater to be submitted to a vote of Shareholders affects only the right or
interests of Shareholders of one or more but not all Funds, then only the
Shareholders of the Funds so affected shall be entitled to vote thereon.
SECTION 7.2 Number of Votes and Manner of Voting; Proxies. On each matter
submitted to a vote of the Shareholders, each holder of Shares of any Series
shall be entitled to a number of votes equal to the number of Shares of such
Series standing in his name of the books of the Trust. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two (2) or more
Persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary
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from any one of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, this Declaration of Trust or the By-Laws to be taken
by Shareholders.
SECTION 7.3 Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of Shareholders as herein provided, or upon any
other matter deemed by the Trustees to be necessary or desirable. Written notice
or any meeting of Shareholders shall be given or caused to be given by the
Trustees by mailing such notice at least seven (7) days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder entitled to vote or act at any such meeting at the Shareholder's
address as it appears are the records of the Trust. The Trustees shall promptly
call and give notice of a meeting of Shareholders for the purpose of voting upon
removal of any Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of thirty (30) days after written application by
Shareholders holding at least ten percent (10%) of the Shares then outstanding
requesting that a meeting be called for any other purpose requiring action by
the Shareholders as provided herein or in the By-Laws, then Shareholders holding
at least ten percent (10%) of the Shares then outstanding may call and give
notice of such meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees.
SECTION 7.4 Record Dates. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding thirty (30) days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than ninety (90) days prior to the date of any meeting of Shareholders or other
action as the date and time of record for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to be treated as
Shareholders of record for purposes of such other action, and any Shareholder
who was a Shareholder at the date and time so fixed shall be entitled to vote at
such meeting or any adjournment thereof or to be treated as a Shareholder of
record for purposes of such other
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action, even though he has since that date and time disposed of his Shares
(other than through redemption or repurchase by the Trust), and no Shareholder
becoming such after that date and time shall be so entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action.
SECTION 7.5 Quorum and Required Vote. Fifty percent (50%) of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote shall decide any question, except
when a different vote is required or permitted by the 1940 Act or other
applicable law or by this Declaration of Trust or the By-Laws, or when the
Trustees shall in their discretion require a larger vote or the vote of a
majority or larger fraction of the Shares of one or more particular Series.
SECTION 7.6 Action By Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof or of the Shares of any particular Series as
shall be required by the 1940 Act or by any provision of this Declaration or
Trust or the By-Laws or as shall be permitted by the Trustees) consent to the
action in writing and if the writings in which such consent is given are filed
with the records of the meetings of Shareholders, to the same extent and for the
same period as proxies given in connection with a Shareholders' meeting. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 7.7 Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
a Massachusetts business corporation under the Massachusetts Business
Corporation Law.
SECTION 7.8 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION
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SECTION 8.1 Trustees, Shareholders, etc. Not Personally Liable; Notice.
The Trustees and officers of the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other actions for or in connection
with the Trust, are or shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No Shareholder shall be subject to
any personal liability whatsoever in tort, contract or otherwise to any other
Person in connection with the assets or affairs of the Trust or of any Fund; and
subject to Section 8.4 hereof, no Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever in tort, contract or
otherwise to any other Person in connection with the assets or affairs of the
Trust or of any Fund, unless only that arising from his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office or the discharge of his functions. The Trust (or if the
matter relates only to a particular Fund, that Fund) shall be solely liable for
any and all debts, claims, demands, judgments, decrees, liabilities or
obligations of any and every kind, against or with respect to the Trust or such
Fund in tort, contract or otherwise in connection with the assets or affairs of
the Trust or of such Fund, and all Persons dealing with the Trust or any Fund
shall be deemed to have agreed that resort shall be had solely to the Trust
Property or the Fund Assets of such Fund, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officer shall give notice that this Declaration of Trust is on file
with the Secretary of The Commonwealth of Massachusetts and shall recite to the
effect that the same was executed or made by or on behalf of the Trust or by
them as Trustees or officers, and not individually, and that the obligations of
such instrument are not binding upon any of them or Shareholders individually,
but are binding only upon the Trust Property, or the Fund Assets of the
particular Fund in questions, as the case may be, but the omission thereof shall
not operate to bind any Trustee or officer or Shareholder individually, or to
subject the Fund Assets of any Fund to the obligations of any other Fund.
SECTION 8.2 Trustees' Good Faith Action; Expert Advice; No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. Subject to Section 8.4 hereof, a Trustee shall
be liable for his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law. Subject to the foregoing, (i) the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of
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any officer, agent, employee, consultant or Contracting Party, nor shall any
Trustee by responsible for the act or omission of any other Trustee; (ii) the
Trustees may take advice or counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (iii) in discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party. The Trustees as such shall not be
required to give any bond or surety or any other security for the performance of
their duties.
SECTION 8.3 Indemnification of Shareholders. If any Shareholder (or former
Shareholder) of the Trust shall be charged or held to be personally liable for
any obligation or liability of the Trust solely by reason of being or having
been a Shareholder and not because of such Shareholder's acts or omissions or
for some other reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former Shareholder (or his 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 (but solely out of the assets of the Fund of which such Shareholder or
former Shareholder is or was the holder of Shares) to be held harmless from and
indemnified against all loss and expense arising from such liability.
SECTION 8.4 Indemnification of Trustees, Officers, etc. Subject to the
limitations set forth in this Section 8.4, the Trust shall indemnify (from the
assets of the Fund or Funds to which the conduct in question relates) each of
its Trustees and officers, including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise (referred to hereinafter,
together with such Person's heirs, executors, administrators or other legal
representatives, as a "Covered Person") against all liabilities, including but
not limited to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such Covered Person may or may have been threatened, while in office
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or thereafter, by reason of being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that his action was in or not opposed to the best interests of
the Trust or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office (either and both of the conduct described in clauses (i) and (ii) above
being referred to hereinafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that such Covered Person was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding against such
Covered Person for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that such Covered
Person was not liable by reason of Disabling Conduct by (a) vote of a majority
of a quorum of Trustees who are neither "interested persons" of the Trust as the
quoted phrase is defined in Section 2(a) (19) of the 1940 Act nor parties to the
action, suit or other proceeding in question and against whom no other action,
suit or proceeding on the same or similar grounds is then or has been pending or
threatened (such quorum of such Trustees being referred to hereinafter as the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by the Fund
or Funds to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so paid if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article VIII and if (i) the Covered Person shall have provided security for such
undertaking, (ii) the Trust shall be insured against losses arising by reason of
any lawful advances, or (iii) a majority of the Disinterested Trustees, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be
entitled to indemnification hereunder.
SECTION 8.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any Covered Person referred to in Section 8.4 hereof,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of the Disinterested
Trustees or (ii) by an independent legal counsel in a written opinion.
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Approval by the Disinterested Trustees pursuant to clause (i) or by independent
legal counsel pursuant to clause (ii) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
either of such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
SECTION 8.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VIII shall not be exclusive of or
affect any other rights to which any Covered Person may be entitled. Nothing
contained in this Article VIII shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
Persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such Person.
SECTION 8.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
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ARTICLE IX
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to the trust or any Fund or Series of Shares shall
operate to terminate the Trust. The Trust may be terminated at any time by a
Majority of the Trustees, subject to the favorable vote of the holders of not
less than a majority of the Shares outstanding and entitled to vote of each Fund
of the Trust, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, or by
such greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such Series was
authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of Section 6.2(d) hereof.
SECTION 9.2 Reorganization. The Trustees may sell, convey and transfer all
or substantially all of the Trust Property, or the assets belonging to any one
or more Funds, to another trust, partnership, association, corporation or other
entity, or may transfer such assets to another Fund of the Trust, in exchange
for cash, Shares or other Securities (including, in the case of a transfer to
another Fund of the Trust, Shares of such other Fund), or to the extent
permitted by law then in effect, may merge or consolidate the Trust or any Fund
with any other trust, partnership, association, corporation or other entity, all
upon such terms and conditions and for such consideration when and as authorized
by a Majority of the Trustees, subject to the favorable vote of the holders of
not less than a majority of the Shares outstanding and entitled to vote of each
Fund whose assets are affected by such transaction, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, or by such greater or different vote of
Shareholders of any Series as may be established by the Certificate of
Designation by which such Series was authorized. Following such transfer, the
Trustees shall distribute the cash, Shares or other Securities or other
consideration received in such transaction (giving due effect to the assets
belonging to and the liabilities of, and any other differences among, the
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various Funds of which the assets have been so transferred, among the
Shareholders of the Fund of which the assets have been so transferred; and if
all of the assets of the Trust have been so transferred, the Trust shall be
terminated. Nothing in this Section 9.2 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 to
sell, convey or transfer less than substantially all of the Trust Property or
the assets belonging to any Fund to such organizations or entities.
SECTION 9.3 Amendments; etc. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall adversely affect the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.2(h)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of shareholders)
may be amended at any time, so long as such amendment does not adversely affect
the rights of any Shareholder with respect to matters to which such amendment is
or purports to be applicable and so long as such amendment is not in
contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with Section 7.1
hereof of Shareholders holding a majority of all the shares outstanding and
entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Funds, by the
vote of the holders of a majority of all the Shares entitled to vote of each
Fund so affected. A Certificate of Designation establishing and designating any
Fund in addition to the Fund established and designated in Section 6.2 hereof
and authorizing of the Shares thereof shall not constitute an amendment to this
Declaration which adversely affects the rights of any Shareholder. Subject to
the foregoing, any amendment shall be effective when an instrument containing
the terms thereof and a certificate (which may be a part of such instrument) to
the effect that such amendment has been duly adopted, and setting forth the
circumstances thereof, shall have been executed by a Trustee or officer of the
Trust and filed as provided in Section 9.4 hereof.
Page41
<PAGE>
SECTION 9.4 Filing of Copies of Declaration and Amendments. The original or
a copy of this Declaration and of each amendment hereto (including each
Certificate of Designation and Certificate of Termination) shall be kept at the
principal office of the Trust where it may be inspected by any Shareholder, and
one copy of each such instrument shall be filed with the Secretary of The
Commonwealth of Massachusetts, as well as with any other governmental office
where such filing may from time to time be required by the laws 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 Secretary of The Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Governing Law. This Declaration of Trust is executed and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the laws of said
Commonwealth.
SECTION 10.2 Counterparts. This Declaration of Trust and any amendment
hereto may be simultaneously executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts, together,
shall constitute but one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.3 Reliance by Third Parties. Any certificate executed by an
individual who, according to the records in the office of the Secretary of The
Commonwealth of Massachusetts appears to be a Trustee hereunder or an officer of
the Trust, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration of Trust, (v) the form of any By-Law adopted, or the identity
of any officers elected, by the Trustees, or (vi) the existence or nonexistence
of any fact or facts which in any manner relate to the affairs of
Page42
<PAGE>
the Trust, shall be conclusive evidence as to the matters so certified in favor
of any Person dealing with the Trustees, or any of them, and the successors of
such Person.
SECTION 10.4 References; Headings. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
SECTION 10.5 Use of the Name Standish, Ayer & Wood. Standish, Ayer & Wood,
Inc., ("SA&W") has consented to the use by the Trust and by each Fund and each
Series thereof of the identifying name "Standish, Ayer & Wood" and any of the
identifying words contained therein ("Standish") in the name of the Trust and of
each Fund and Series thereof. Such consent is conditioned upon the Trust's
employment of SA&W as Investment Adviser to the Trust and to each Fund thereof.
As between SA&W and the Trust, SA&W shall control the use of such name insofar
as the name of the Trusts or of any Fund contains the identifying word
"Standish." SA&W may from time to time use the identifying word "Standish" in
other connections and for other purposes, including without limitation in the
names of other investment companies, corporations or businesses that it may
manage, advise, sponsor or own or in which it may have a financial interest.
SA&W may require the Trust or any Fund thereof to cease using the identifying
word "Standish" in the name of the Trust or any Fund or any Series thereof if
the Trust or any Fund thereof ceases to employ SA&W or an affiliate thereof, as
Investment Adviser.
Page43
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal, for
himself and his assigns, and has thereby accepted the Trusteeship as the Initial
Trustee of Standish, Ayer & Wood Investment Trust hereby granted and agreed to
the provisions hereof, all as of the day and year first above written.
/s/ W. Lee H. Dunham
--------------------
W. Lee H. Dunham
The undersigned Settlor of Standish, Ayer & Wood Investment Trust hereby
accepts, approves and authorizes the foregoing Agreement and Declaration of
Trust of Standish, Ayer & Wood Investment Trust.
Dated: August 13, 1986
/s/ Bryan G. Tyson
------------------
Bryan G. Tyson
Page44
<PAGE>
ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: August 13, 1986
Then personally appeared the above-names W. Lee H. Dunham and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
------------------------
Notary Public
M A S S A C H U S E T T S
Suffolk, ss.: August 13, 1986
Then personally appeared the above-names Bryan G. Tyson and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
------------------------
Notary Public
Page45
STANDISH, AYER & WOOD INVESTMENT TRUST
CERTIFICATE OF DESIGNATION
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Trustees of the Trust
by Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust,
dated August 13, 1986 (hereinafter referred to as the "Declaration of Trust"),
and by the affirmative vote of a Majority of the Trustees at a meeting duly
called and held on November 3, 1986, the Declaration of Trust is amended as
follows:
(1) The name of the Trust's initial fund, the Standish Bond Fund, is
hereby changed to "Standish Fixed Income Fund."
(2) There is hereby established and designated the Standish
International Fund (hereinafter referred to as the "Standish International
Fund"). The beneficial interest in the Standish International Fund shall be
divided into Shares having a nominal or par value of one cent ($.01) per Share,
of which an unlimited number may be issued, which Shares shall represent
interests only in the Standish International Fund. The Trustees shall have
authority from time to time to authorized separate Series of Shares for the
Standish International Fund (each of which Series shall represent interests only
in the Standish International Fund), as they deem necessary and desirable. The
Shares of the Standish International Fund shall have the following relative
rights and preferences:
(a) Assets Belonging to the Standish International Fund. Any portion
of the Trust Property allocated to the Standish International Fund, and
all consideration received by the Trust for the issue or sale of Shares of
the Standish International Fund, together with all assets in which such
consideration is invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in trust
for the benefit of the holders of Shares of the Standish International
Fund and shall irrevocably belong to the Standish International Fund for
all purposes, and shall be so recorded upon the books of account of the
Trust, and the Shareholders of the Standish International Fund Shall not
have, and shall be conclusively deemed to have waived, any claims to the
assets of any Fund of which they are not Shareholders. Such consideration,
<PAGE>
-2-
assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to the Standish
International Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Standish International
Fund, and as assets "belonging to" the Standish International Fund. In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Fund (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of
the Funds established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to the Standish International Fund
shall belong to and be a part of the Fund Assets of the Standish
International Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of the all Funds for all
purposes.
(b) Liabilities of the Standish International Fund. The assets
belonging to the Standish International Fund shall be charged with the
liabilities in respect of the Standish International Fund and all
expenses, costs, charges and reserves attributable to the Standish
International Fund, and any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as pertaining
to any particular Fund shall be allocated and charged by the Trustees to
and among any one or more of the Funds established and designated from
time to time in such manner and on such basis as the Trustees in their
sole discretion deemed fair and equitable. The indebtedness, expenses,
costs, charges and reserves allocated and so charged to the Standish
International Fund are herein referred to as "liabilities of" the Standish
International Fund. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all Funds for all purposes. Any creditor of the
Standish International Fund may look only to the assets of the Standish
International Fund to satisfy such creditor's debt. The Trustees shall use
their best efforts to ensure that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any
officers of officer shall give notice that the obligations of such
instrument are binding only upon the Fund Assets of the Standish
International Fund, and that any creditor's acceptance or execution of
such instrument shall constitute agreement that such creditor shall look
only to the assets and property of the Standish International Fund to
satisfy the obligations of such instrument.
(c) Dividends. Dividends and distributions on Shares of the Standish
International Fund may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may
<PAGE>
-3-
determine, to the Shareholders of the Standish International Fund, from
such of the income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to the Standish International
Fund, as the Trustees may determine, after providing for actual and
accrued liabilities of the Standish International Fund. All dividends and
distributions on Shares of the Standish International Fund shall be
distributed pro rata to the Shareholders of the Standish International
Fund in proportion to the number of such Shares held by such holders at
the date and time of record established for the payment of such dividends
or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no
dividend of distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the
time or times established by the Trustees under such program or procedure,
or that dividends or distributions shall be payable on Shares which have
been tendered by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid to such
Shareholder. Such dividends and distributions may be made in cash or
Shares of the Standish International Fund or a combination thereof as
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to the Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h) of
this Certificate of Designation.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Standish International Fund shall be
entitled to receive, when and as declared by the Trustees, the excess of
the Fund Assets over the liabilities of the Standish International Fund.
The assets so distributable to the Shareholders of the Standish
International Fund shall be distributed among such Shareholders in
proportion to the number of Shares of the Standish International Fund held
by them and recorded on the books of the Trust. The liquidation of the
Standish International Fund may be authorized by vote of a Majority of the
Trustees, subject to the affirmative vote of "a majority of the
outstanding voting securities" of the Standish International Fund, as the
quoted phrase is defined in the 1940 Act, determined in accordance with
clause (iii) of the definition of "Majority Shareholder Vote" in Section
1.4 of the Declaration of Trust.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article VII of the Declaration of Trust.
<PAGE>
-4-
(f) Redemption by Shareholder. Each holder of Shares of the Standish
International Fund shall have the right at such times as may be permitted
by the Trust, but not less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of the Standish
International Fund at a redemption price equal to the net asset value per
Share of the Standish International Fund next determined in accordance
with subsection (h) of this Certificate of Designation after the Shares
are properly tendered for redemption; provided, that the Trustees may from
time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Standish International Fund at the value
of such Securities or assets used in such determination of net asset
value. Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of
the Standish International Fund to require the Trust to redeem Shares of
the Standish International Fund during any period or at any time when and
to the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of the
Standish International Fund shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such
Share were then being redeemed by the Shareholder pursuant to subsection
(f) of this Certificate of Designation: (i) at any time, if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Shares of the Trust
or of any Fund or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time
to time be determined by the Trustees and set forth in the then current
Prospectus of the Standish International Fund. Upon such redemption the
holders of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of the Standish
International Fund at any time shall be the quotient obtained by dividing
the value of the net assets of the Standish International Fund at such
time (being the current value of the assets belonging to the Standish
International Fund, less its then existing liabilities) by the total
number of Shares of the Standish International Fund then outstanding, all
determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net
asset value per Share of the Standish International
<PAGE>
-5-
Fund at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declaration of income attributable to the Standish International Fund as
dividends payable in additional Shares of the Standish International Fund
at the designated constant dollar amount and for the handling of any
losses attributable to the Standish International Fund. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed
to have contributed to the shares of beneficial interest account of the
Standish International Fund his pro rata portion of the total number of
Shares required to be cancelled in order to permit the net asset value per
Share of the Standish International Fund to be maintained, after
reflecting such loss, at the designed constant dollar amount. Each
Shareholder of the Standish International Fund shall be deemed to have
expressly agreed, by this investment in the Standish International Fund,
to make the contribution referred to in the preceding sentence in the
event of any such loss and in the event of the adoption by the Trustees of
any such procedure with respect to the Standish International Fund.
(i) Transfer. All Shares of the Standish International Fund shall be
transferable, but transfers of Shares of the Standish International Fund
will be recorded on the Share transfer records of the Trust applicable to
the Standish International Fund only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of the Standish
International Fund and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of the Standish International Fund shall
represent an equal proportionate interest in the assets belonging to the
Standish International Fund (subject to the liabilities of the Standish
International Fund), and each Share of the Standish International Fund
shall be equal to each other Share thereof; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection
(c) of this Certificate of Designation that may exist with respect to
dividends and distributions on Shares of the Standish International Fund.
The Trustees may from time to time divide or combine the Shares of the
Standish International Fund into a greater or lesser number of Shares of
the Standish International Fund without thereby changing the proportionate
beneficial interest in the assets belonging to the Standish International
Fund or in any way affecting the rights of the holders of Shares of any
other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of
<PAGE>
-6-
dividends and distributions, redemption of Shares, and liquidation of the
Trust or of the Standish International Fund.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Standish International Fund shall have the right
to convert said Shares into Shares of one or more other Funds in
accordance with such requirements and procedures as the Trustees may
establish.
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Standish
International Fund, such amendment may be adopted by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the
Trust pursuant to the vote of a Majority of the Trustees) when authorized
to do so by the vote in accordance with Section 7.1 of the Declaration of
Trust of the holders of a majority of all the Shares of the Standish
International Fund outstanding and entitled to vote, without regard to
Series.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of these resolutions,
the Trust take all necessary action to file a copy of this Certificate of
Designation with the Secretary of State of The Commonwealth of Massachusetts and
at any other place required by law or by the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 6th day
of November, 1986.
/s/ George W. Noyes
------------------------------------
George W. Noyes, Secretary
<PAGE>
-7-
ACKNOWLEDGEMENT
COMMONWEALTH OF MASSACHUSETTS )
: ss.
COUNTY OF SUFFOLK )
On this 6th day of November, 1986, before me personally appeared George W.
Noyes, to me known and known to me to be the person described in and who
executed the foregoing Certificate of Designation as Secretary of Standish Ayer
& Wood Investment Trust, as stated therein, and he acknowledged that he executed
the same as his free act and deed, and that he is the Secretary now in office of
Standish, Ayer & Wood Investment Trust.
Before me,
/s/
-----------------------
Notary Public
[NOTARIAL SEAL]
STANDISH, AYER & WOOD INVESTMENT TRUST
CERTIFICATE OF DESIGNATION
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Trustees of the Trust
by Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust,
dated August 13, 1986 (hereinafter referred to as the "Declaration of Trust"),
and by the affirmative vote of a Majority of the Trustees at a meeting duly
called and held on November 3, 1986, the Declaration of Trust is amended as
follows:
(1) The name of the Trust's initial fund, the Standish Bond Fund, is
hereby changed to "Standish Fixed Income Fund."
(2) There is hereby established and designated the Standish
International Fund (hereinafter referred to as the "Standish International
Fund"). The beneficial interest in the Standish International Fund shall be
divided into Shares having a nominal or par value of one cent ($.01) per Share,
of which an unlimited number may be issued, which Shares shall represent
interests only in the Standish International Fund. The Trustees shall have
authority from time to time to authorized separate Series of Shares for the
Standish International Fund (each of which Series shall represent interests only
in the Standish International Fund), as they deem necessary and desirable. The
Shares of the Standish International Fund shall have the following relative
rights and preferences:
(a) Assets Belonging to the Standish International Fund. Any portion
of the Trust Property allocated to the Standish International Fund, and
all consideration received by the Trust for the issue or sale of Shares of
the Standish International Fund, together with all assets in which such
consideration is invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in trust
for the benefit of the holders of Shares of the Standish International
Fund and shall irrevocably belong to the Standish International Fund for
all purposes, and shall be so recorded upon the books of account of the
Trust, and the Shareholders of the Standish International Fund Shall not
have, and shall be conclusively deemed to have waived, any claims to the
assets of any Fund of which they are not Shareholders. Such consideration,
<PAGE>
-2-
assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to the Standish
International Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Standish International
Fund, and as assets "belonging to" the Standish International Fund. In the
event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Fund (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of
the Funds established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to the Standish International Fund
shall belong to and be a part of the Fund Assets of the Standish
International Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of the all Funds for all
purposes.
(b) Liabilities of the Standish International Fund. The assets
belonging to the Standish International Fund shall be charged with the
liabilities in respect of the Standish International Fund and all
expenses, costs, charges and reserves attributable to the Standish
International Fund, and any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as pertaining
to any particular Fund shall be allocated and charged by the Trustees to
and among any one or more of the Funds established and designated from
time to time in such manner and on such basis as the Trustees in their
sole discretion deemed fair and equitable. The indebtedness, expenses,
costs, charges and reserves allocated and so charged to the Standish
International Fund are herein referred to as "liabilities of" the Standish
International Fund. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all Funds for all purposes. Any creditor of the
Standish International Fund may look only to the assets of the Standish
International Fund to satisfy such creditor's debt. The Trustees shall use
their best efforts to ensure that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any
officers of officer shall give notice that the obligations of such
instrument are binding only upon the Fund Assets of the Standish
International Fund, and that any creditor's acceptance or execution of
such instrument shall constitute agreement that such creditor shall look
only to the assets and property of the Standish International Fund to
satisfy the obligations of such instrument.
(c) Dividends. Dividends and distributions on Shares of the Standish
International Fund may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may
<PAGE>
-3-
determine, to the Shareholders of the Standish International Fund, from
such of the income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to the Standish International
Fund, as the Trustees may determine, after providing for actual and
accrued liabilities of the Standish International Fund. All dividends and
distributions on Shares of the Standish International Fund shall be
distributed pro rata to the Shareholders of the Standish International
Fund in proportion to the number of such Shares held by such holders at
the date and time of record established for the payment of such dividends
or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no
dividend of distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the
time or times established by the Trustees under such program or procedure,
or that dividends or distributions shall be payable on Shares which have
been tendered by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid to such
Shareholder. Such dividends and distributions may be made in cash or
Shares of the Standish International Fund or a combination thereof as
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to the Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h) of
this Certificate of Designation.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Standish International Fund shall be
entitled to receive, when and as declared by the Trustees, the excess of
the Fund Assets over the liabilities of the Standish International Fund.
The assets so distributable to the Shareholders of the Standish
International Fund shall be distributed among such Shareholders in
proportion to the number of Shares of the Standish International Fund held
by them and recorded on the books of the Trust. The liquidation of the
Standish International Fund may be authorized by vote of a Majority of the
Trustees, subject to the affirmative vote of "a majority of the
outstanding voting securities" of the Standish International Fund, as the
quoted phrase is defined in the 1940 Act, determined in accordance with
clause (iii) of the definition of "Majority Shareholder Vote" in Section
1.4 of the Declaration of Trust.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article VII of the Declaration of Trust.
<PAGE>
-4-
(f) Redemption by Shareholder. Each holder of Shares of the Standish
International Fund shall have the right at such times as may be permitted
by the Trust, but not less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of the Standish
International Fund at a redemption price equal to the net asset value per
Share of the Standish International Fund next determined in accordance
with subsection (h) of this Certificate of Designation after the Shares
are properly tendered for redemption; provided, that the Trustees may from
time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Standish International Fund at the value
of such Securities or assets used in such determination of net asset
value. Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of
the Standish International Fund to require the Trust to redeem Shares of
the Standish International Fund during any period or at any time when and
to the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of the
Standish International Fund shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such
Share were then being redeemed by the Shareholder pursuant to subsection
(f) of this Certificate of Designation: (i) at any time, if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Shares of the Trust
or of any Fund or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time
to time be determined by the Trustees and set forth in the then current
Prospectus of the Standish International Fund. Upon such redemption the
holders of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of the Standish
International Fund at any time shall be the quotient obtained by dividing
the value of the net assets of the Standish International Fund at such
time (being the current value of the assets belonging to the Standish
International Fund, less its then existing liabilities) by the total
number of Shares of the Standish International Fund then outstanding, all
determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net
asset value per Share of the Standish International
<PAGE>
-5-
Fund at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declaration of income attributable to the Standish International Fund as
dividends payable in additional Shares of the Standish International Fund
at the designated constant dollar amount and for the handling of any
losses attributable to the Standish International Fund. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed
to have contributed to the shares of beneficial interest account of the
Standish International Fund his pro rata portion of the total number of
Shares required to be cancelled in order to permit the net asset value per
Share of the Standish International Fund to be maintained, after
reflecting such loss, at the designed constant dollar amount. Each
Shareholder of the Standish International Fund shall be deemed to have
expressly agreed, by this investment in the Standish International Fund,
to make the contribution referred to in the preceding sentence in the
event of any such loss and in the event of the adoption by the Trustees of
any such procedure with respect to the Standish International Fund.
(i) Transfer. All Shares of the Standish International Fund shall be
transferable, but transfers of Shares of the Standish International Fund
will be recorded on the Share transfer records of the Trust applicable to
the Standish International Fund only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of the Standish
International Fund and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of the Standish International Fund shall
represent an equal proportionate interest in the assets belonging to the
Standish International Fund (subject to the liabilities of the Standish
International Fund), and each Share of the Standish International Fund
shall be equal to each other Share thereof; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection
(c) of this Certificate of Designation that may exist with respect to
dividends and distributions on Shares of the Standish International Fund.
The Trustees may from time to time divide or combine the Shares of the
Standish International Fund into a greater or lesser number of Shares of
the Standish International Fund without thereby changing the proportionate
beneficial interest in the assets belonging to the Standish International
Fund or in any way affecting the rights of the holders of Shares of any
other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of
<PAGE>
-6-
dividends and distributions, redemption of Shares, and liquidation of the
Trust or of the Standish International Fund.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Standish International Fund shall have the right
to convert said Shares into Shares of one or more other Funds in
accordance with such requirements and procedures as the Trustees may
establish.
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Standish
International Fund, such amendment may be adopted by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the
Trust pursuant to the vote of a Majority of the Trustees) when authorized
to do so by the vote in accordance with Section 7.1 of the Declaration of
Trust of the holders of a majority of all the Shares of the Standish
International Fund outstanding and entitled to vote, without regard to
Series.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of these resolutions,
the Trust take all necessary action to file a copy of this Certificate of
Designation with the Secretary of State of The Commonwealth of Massachusetts and
at any other place required by law or by the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 6th day
of November, 1986.
/s/ George W. Noyes
---------------------------------
George W. Noyes, Secretary
<PAGE>
-7-
ACKNOWLEDGEMENT
COMMONWEALTH OF MASSACHUSETTS )
: ss.
COUNTY OF SUFFOLK )
On this 6th day of November, 1986, before me personally appeared George W.
Noyes, to me known and known to me to be the person described in and who
executed the foregoing Certificate of Designation as Secretary of Standish Ayer
& Wood Investment Trust, as stated therein, and he acknowledged that he executed
the same as his free act and deed, and that he is the Secretary now in office of
Standish, Ayer & Wood Investment Trust.
Before me,
/s/
----------------------------
Notary Public
[NOTARIAL SEAL]
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August 13, 1986, as amended November 3, 1986 (hereinafter, as so amended,
referred to as the "Declaration of Trust"), and by the affirmative vote of a
Majority of the Trustees at a meeting duly called and held on April 27, 1988,
the Declaration of Trust is amended as follows:
(1) There is hereby established and designated the Standish Securitized
Fund (hereinafter referred to as the "Securitized Fund"). The beneficial
interest in the Securitized Fund shall be divided into Shares having a nominal
or par value of one cent ($.01) per Share, of which an unlimited number may be
issued, which Shares shall represent interests only in the Securitized Fund. The
Trustees shall have authority from time to time to authorize separate Series of
Shares for the Securitized Fund (each of which Series shall represent interests
only in the Securitized Fund), as they deem necessary and desirable. The Shares
of the Securitized Fund shall have the following rights and preferences:
(a) Assets Belonging to the Securitized Fund. Any portion of the
Trust Property allocated to the Securitized Fund, and all consideration
received by the Trust for the issue or sale of Shares of the Securitized
Fund, together with all assets in which such consideration is invested or
reinvested, all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held by the Trustees in trust for the benefit of the
holders of Shares of the Securitized Fund and shall irrevocably belong to
the Securitized Fund for all purposes, and shall be so recorded upon the
books of account of the Trust, and the Shareholders of any other Fund who
are not Shareholders of the Securitized Fund shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of the
Securitized Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Securitized Fund as provided in the following sentence,
are herein referred to collectively as "Fund Assets" of the Securitized
Fund, and as assets "belonging to" the Securitized Fund. In the event that
there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to any
particular Fund (collectively "General Items"),
<PAGE>
the Trustees shall allocate such General Items to and among any one or
more of the Funds established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to the Securitized Fund
shall belong to and be part of the Fund Assets of the Securitized Fund.
Each such allocation by the Trustees shall be conclusive and binding upon
the Shareholders of all the Funds for all purposes.
(b) Liabilities of the Securitized Fund. The assets belonging to the
Securitized Fund shall be charged with the liabilities in respect of the
Securitized Fund and all expenses, costs, charges and reserves
attributable to the Securitized Fund, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as pertaining to any particular Fund shall be allocated and
charged by the Trustees to and among any one or more of the Funds
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
The indebtedness, expenses, costs, charges and reserves allocated and so
charged to the Securitized Fund are herein referred to as "liabilities of"
the Securitized Fund. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all the Funds for all purposes. Any creditor of the
Securitized Fund may look only to the assets of the Securitized Fund to
satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of the
Securitized Fund may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the Shareholders of the Securitized Fund, from
such of the income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to the Securitized Fund, as
the Trustees may determine, after providing for actual and accrued
liabilities of the Securitized Fund. All dividends and distributions on
Shares of the Securitized Fund shall be distributed pro rata to the
Shareholders of the Securitized Fund in proportion to the number of such
Shares held by such holders at the date and time of record established for
the payment of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Shares as
to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such
program or procedure, or that dividends or distributions shall be payable
on Shares which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such
-2-
<PAGE>
Shareholder. Such dividends and distributions may be made in cash or
Shares of the Securitized Fund or a combination thereof as determined by
the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (h) hereof.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Securitized Fund shall be entitled to
receive, when and as declared by the Trustees, the excess of the Fund
Assets over the liabilities of the Securitized Fund. The assets so
distributable to the Shareholders of the Securitized Fund shall be
distributed among such Shareholders in proportion to the number of Shares
of the Securitized Fund held by them and recorded on the books of the
Trust. The liquidation of the Securitized Fund may be authorized by vote
of a Majority of the Trustees, subject to the affirmative vote of "a
majority of the outstanding voting securities" of the Securitized Fund, as
the quoted phrase is defined in the 1940 Act, determined in accordance
with clause (iii) of the definition of "Majority Shareholder Vote" in
Section 1.4 of the Declaration of Trust.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
(f) Redemption by Shareholder. Each holder of Shares of the
Securitized Fund shall have the right at such times as may be permitted by
the Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of the Securitized Fund at a
redemption price equal to the net asset value per Share of the Securitized
Fund next determined in accordance with subsection (h) hereof after the
Shares are properly tendered for redemption; provided, that the Trustees
may from time to time, in their discretion, determine and impose a fee for
such redemption. Payment of the redemption price shall be in cash;
provided, however, that if the Trustees determine, which determination
shall be conclusive, that conditions exist which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly or partly in
Securities or other assets belonging to the Securitized Fund at the value
of such Securities or assets used in such determination of net asset
value. Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of
the Securitized Fund to require the Trust to redeem Shares of the
Securitized Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
-3-
<PAGE>
(g) Redemption at the Option of the Trust. Each Share of the
Securitized Fund shall be subject to redemption at the option of the Trust
at the redemption price which would be applicable if such Share were then
being redeemed by the Shareholder pursuant to subsection (f) hereof: (i)
at any time, if the Trustees determine in their sole discretion that
failure to so redeem may have materially adverse consequences to the
holders of the Shares of the Trust or of any Fund, or (ii) upon such other
conditions with respect to maintenance of Shareholder accounts of a
minimum amount as may from time to time be determined by the Trustees and
set forth in the then current Prospectus of the Securitized Fund. Upon
such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of the
Securitized Fund at any time shall be the quotient obtained by dividing
the value of the net assets of the Securitized Fund at such time (being
the current value of the assets belonging to the Securitized Fund, less
its then existing liabilities) by the total number of Shares of the
Securitized Fund then outstanding, all determined in accordance with the
methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time. The Trustees may
determine to maintain the net asset value per Share of the Securitized
Fund at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declaration of income attributable to the Securitized Fund as dividends
payable in additional Shares of the Securitized Fund at the designated
constant dollar amount and for the handling of any losses attributable to
the Securitized Fund. Such procedures may provide that in the event of any
loss each Shareholder shall be deemed to have contributed to the shares of
beneficial interest account of the Securitized Fund his pro rata portion
of the total number of Shares required to be canceled in order to permit
the net asset value per Share of the Securitized Fund to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Securitized Fund shall be deemed to have expressly
agreed, by his investment in the Securitized Fund, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
(i) Transfer. All Shares of the Securitized Fund shall be
transferable, but transfers of Shares of the Securitized Fund will be
recorded on the Share transfer records of the Trust applicable to the
Securitized Fund only at such times as Shareholders shall have the right
to require the Trust to redeem Shares of the Securitized Fund and at such
other times as may be permitted by the Trustees.
-4-
<PAGE>
(j) Equality. All Shares of the Securitized Fund shall represent an
equal proportionate interest in the assets belonging to the Securitized
Fund (subject to the liabilities of the Securitized Fund), and each Share
of the Securitized Fund shall be equal to each other Share thereof; but
the provisions of this sentence shall not restrict any distinctions
permissible under subsection (c) hereof that may exist with respect to
dividends and distributions on Shares of the Securitized Fund. The
Trustees may from time to time divide or combine the Shares of the
Securitized Fund into a greater or lesser number of Shares of the
Securitized Fund without thereby changing the proportionate beneficial
interest in the assets belonging to the Securitized Fund or in any way
affecting the rights of the holders of Shares of any other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Securitized Fund.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Securitized Fund shall have the right to convert
said Shares into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the
Securitized Fund, such amendment may be adopted by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do
so by the vote in accordance with Section 7.1 of the Declaration of Trust
of the holders of a majority of all the Shares of the Securitized Fund
outstanding and entitled to vote, without regard to Series.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of the
Commonwealth of Massachusetts.
-5-
<PAGE>
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his and seal this 14th day of
September, 1988.
/s/ George W. Noyes
--------------------------------
George W. Noyes, Secretary
ACKNOWLEDGMENT
M A S S A C H U S E T T S
Suffolk, ss.: September 14, 1988
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Joseph W. Chin
--------------------------------
Notary Public
-6-
EXHIBIT 1A
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August 13, 1986, as amended November 3, 1986 (hereinafter, as so amended,
referred to as the "Declaration of 'Trust"), and by the affirmative vote of a
Majority of the Trustees at a meeting duly called and held on October 26, 1988,
the Declaration of Trust is amended as follows:
(1) There is hereby established and designated the Standish Short-Term
Asset Reserve Fund (hereinafter referred to as the "Short-Term Asset Reserve
Fund"). The beneficial interest in the Short-Term Asset Reserve Fund shall be
divided into Shares having a nominal or par value of one cent ($.01) per Share,
of which an unlimited number may be issued, which Shares shall represent
interests only in the Short-Term Asset Reserve Fund. The Shares of the
Short-Term Asset Reserve Fund shall have the following rights and preferences:
(a) Assets Belonging to the Short-Term Asset Reserve Fund. Any
portion of the Trust Property allocated to the Short-Term Asset Reserve
Fund, and all consideration received by the Trust for the issue or sale of
Shares of the Short-Term Asset Reserve Fund, together with all assets in
which such consideration is invested or reinvested, all interest,
dividends, income, earnings, profits and gains therefrom, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of
the Short-Term Asset Reserve Fund and shall irrevocably belong to the
Short-Term Asset Reserve Fund for all purposes, and shall be so recorded
upon the books of account of the Trust, and the Shareholders of any other
Fund who are not Shareholders of the Short-Term Asset Reserve Fund shall
not have, and shall be conclusively deemed to have waived, any claims to
the assets of the Short-Term Asset Reserve Fund. Such consideration,
assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to the Short-Term
Asset Reserve Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Short-Term Asset Reserve
Fund, and as assets "belonging to" the Short-Term Asset Reserve Fund. In
the event that there are any assets, income, earnings, profits, and
<PAGE>
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Fund (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of
the Funds established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to the Short-Term Asset Reserve Fund
shall belong to and be part of the Fund Assets of the Short-Term Asset
Reserve Fund. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds for all purposes.
(b) Liabilities of the Short-Term Asset Reserve Fund. The assets
belonging to the Short-Term Asset Reserve Fund shall be charged with the
liabilities in respect of the Short-Term Asset Reserve Fund and all
expenses, costs, charges and reserves attributable to the Short-Term Asset
Reserve Fund, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as pertaining to
any particular Fund shall be allocated and charged by the Trustees to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The indebtedness, expenses, costs,
charges and reserves allocated and so charged to the Short-Term Asset
Reserve Fund are herein referred to as "liabilities of" the Short-Term
Asset Reserve Fund. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all the Funds for all purposes. Any creditor of the
Short-Term Asset Reserve Fund may look only to the assets of the
Short-Term Asset Reserve Fund to satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of the
Short-Term Asset Reserve Fund may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the Shareholders of the
Short-Term Asset Reserve Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Short-Term Asset Reserve Fund, as the Trustees may
determine, after providing for actual and accrued liabilities of the
Short-Term Asset Reserve Fund. All dividends and distributions on Shares
of the Short-Term Asset Reserve Fund shall be distributed pro rata to the
Shareholders of the Short-Term Asset Reserve Fund in proportion to the
number of such Shares held by such holders at the date and time of record
established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure
the Trustees may determine that no dividend or distribution shall be
payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the
Trustees under such program or procedure, or that dividends or
distributions shall be payable on Shares which
2
<PAGE>
have been tendered by the holder thereof for redemption or repurchase, but
the redemption or repurchase proceeds of which have not yet been paid to
such Shareholder. Such dividends and distributions may be made in cash or
Shares of the Short-Term Asset Reserve Fund or a combination thereof as
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h)
hereof.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Short-Term Asset Reserve Fund shall be
entitled to receive, when and as declared by the Trustees, the excess of
the Fund Assets over the liabilities of the Short-Term Asset Reserve Fund.
The assets so distributable to the Shareholders of the Short-Term Asset
Reserve Fund shall be distributed among such Shareholders in proportion to
the number of Shares of the Short-Term Asset Reserve Fund held by them and
recorded on the books of the Trust. The liquidation of the Short-Term
Asset Reserve Fund may be authorized by vote of a Majority of the
Trustees, subject to the affirmative vote of "a majority of the
outstanding voting securities" of the Short-Term Asset Reserve Fund, as
the quoted phrase is defined in the 1940 Act, determined in accordance
with clause (iii) of the definition of "Majority Shareholder Vote" in
Section 1.4 of the Declaration of Trust.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
(f) Redemption by Shareholder. Each holder of Shares of the
Short-Term Asset Reserve Fund shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of his Shares of the
Short-Term Asset Reserve Fund at a redemption price equal to the net asset
value per Share of the Short-Term Asset Reserve Fund next determined in
accordance with subsection (h) hereof after the Shares are properly
tendered for redemption; provided, that the Trustees may from time to
time, in their discretion, determine and impose a fee for such redemption.
Payment of the redemption price shall be in cash; provided, however, that
if the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable,
the Trust may make payment wholly or partly in Securities or other assets
belonging to the Short-Term Asset Reserve Fund at the value of such
Securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of the
Short-Term Asset Reserve Fund to require the Trust to redeem Shares of the
3
<PAGE>
Short-Term Asset Reserve Fund during any period or at any time when and to
the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of the
Short-Term Asset Reserve Fund shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such
Share were then being redeemed by the Shareholder pursuant to subsection
(f) hereof: (i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or of any Fund, or
(ii) upon such other conditions with respect to maintenance of Shareholder
accounts of a minimum amount as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Short-Term
Asset Reserve Fund. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of the Short-Term
Asset Reserve Fund at any time shall be the quotient obtained by dividing
the value of the net assets of the Short-Term Asset Reserve Fund at such
time (being the current value of the assets belonging to the Short-Term
Asset Reserve Fund, less its then existing liabilities) by the total
number of Shares of the Short-Term Asset Reserve Fund then outstanding,
all determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net
asset value per Share of the Short-Term Asset Reserve Fund at a designated
constant dollar amount and in connection therewith may adopt procedures
not inconsistent with the 1940 Act for the continuing declaration of
income attributable to the Short-Term Asset Reserve Fund as dividends
payable in additional Shares of the Short-Term Asset Reserve Fund at the
designated constant dollar amount and for the handling of any losses
attributable to the Short-Term Asset Reserve Fund. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the shares of beneficial interest account of the
Short-Term Asset Reserve Fund his pro rata portion of the total number of
Shares required to be canceled in order to permit the net asset value per
Share of the Short-Term Asset Reserve Fund to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Short-Term Asset Reserve Fund shall be deemed to have
expressly agreed, by his investment in the Short-Term Asset Reserve Fund,
to make the contribution referred to in the preceding sentence in the
event of any such loss.
(i) Transfer. All Shares of the Short-Term Asset Reserve Fund shall
be transferable, but transfers of Shares of the Short-Term Asset Reserve
Fund will be recorded on the Share transfer records of the Trust
applicable to the Short-Term Asset Reserve Fund only at such times as
Shareholders shall have the
4
<PAGE>
right to require the Trust to redeem Shares of the Short-Term Asset
Reserve Fund and at such other times as may be permitted by the Trustees.
(j) Equality. All Shares of the Short-Term Asset Reserve Fund shall
represent an equal proportionate interest in the assets belonging to the
Short-Term Asset Reserve Fund (subject to the liabilities of the
Short-Term Asset Reserve Fund), and each Share of the Short-Term Asset
Reserve Fund shall be equal to each other Share thereof; but the
provisions of this sentence shall not restrict any distinctions
permissible under subsection (c) hereof that may exist with respect to
dividends and distributions on Shares of the Short-Term Asset Reserve
Fund. The Trustees may from time to time divide or combine the Shares of
the Short-Term Asset Reserve Fund into a greater or lesser number of
Shares of the Short-Term Asset Reserve Fund without thereby changing the
proportionate beneficial interest in the assets belonging to the
Short-Term Asset Reserve Fund or in any way affecting the rights of the
holders of Shares of any other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Short-Term Asset Reserve Fund.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Short-Term Asset Reserve Fund shall have the
right to convert said Shares into Shares of one or more other Funds in
accordance with such requirements and procedures as the Trustees may
establish.
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the
Short-Term Asset Reserve Fund, such amendment may be adopted by an
instrument signed in writing by a Majority of the Trustees (or by an
officer of the Trust pursuant to the vote of a Majority of the Trustees)
when authorized to do so by the vote in accordance with Section 7.1 of the
Declaration of Trust of the holders of a majority of all the Shares of the
Short-Term Asset Reserve Fund outstanding and entitled to vote, without
regard to Series.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of the
Commonwealth of Massachusetts.
5
<PAGE>
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his and seal this ___ day of
October, 1988.
-----------------------------------
George W. Noyes, Secretary
ACKNOWLEDGMENT
MASSACHUSETTS
Suffolk, ss.: October , 1988
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
-----------------------------------
Notary Public
6
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trustby
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August 13, 1986, as amended (hereinafter, as so amended, referred to as the
"Declaration of Trust"), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on April 26, 1989, the Declaration of
Trust is amended as follows:
I. There is hereby established and designated the Standish Marathon Fund
(hereinafter referred to as the "Fund"). The beneficial interest in the Standish
International Fund shall be divided into Shares having a nominal or par value of
one cent ($.01) per Share, of which an unlimited number may be issued, which
Shares shall represent interests only in the Fund. The Shares of the Fund shall
have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
any Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be a part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall
<PAGE>
be conclusive and binding upon the Shareholders of the all Funds for all
purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deemed fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Funds for all purposes. Any creditor
of the Fund may look only to the assets of the Fund to satisfy such
creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend of distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (8) hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Fund shall be entitled to receive, when
and as
<PAGE>
declared by the Trustees, the excess of the Fund Assets over the
liabilities of the Fund. The assets so distributable to the Shareholders
of the Fund shall be distributed among such Shareholders in proportion to
the number of Shares of the Fund held by them and recorded on the books of
the Trust. The liquidation of the Fund may be authorized by vote of a
Majority of the Trustees, subject to the affirmative vote of "a majority
of the outstanding voting securities" of the Fund, as the quoted phrase is
defined in the 1940 Act, determined in accordance with clause (iii) of the
definition of "Majority Shareholder Vote" in Section 1.4 of the
Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) of this Certificate
of Designation: (i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or of any Fund or
(ii) upon such other conditions with respect to maintenance of Shareholder
accounts of a minimum amount as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Fund. Upon
such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
<PAGE>
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the designed
constant dollar amount. Each Shareholder of the Fund shall be deemed to
have expressly agreed, by this investment in the Fund, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate beneficial interest in the assets belonging to
the Fund or in any way affecting the rights of the holders of Shares of
any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
<PAGE>
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument in writing signed by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of these resolutions,
the Trust take all necessary action to file a copy of this Certificate of
Designation with the Secretary of State of The Commonwealth of Massachusetts and
at any other place required by law or by the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 2nd day
of May, 1989.
/s/ George W. Noyes
---------------------------------
George W. Noyes, Secretary
<PAGE>
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: May 2, 1989
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/
-------------------------------
Notary Public
My Commission expires: 3/3/96
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Amendment
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 9.3 of the Agreement and Declaration of Trust by Section 9.3 of the
Agreement and Declaration of Trust, dated August 13, 1986, as amended
(hereinafter, as so amended, referred to as the "Declaration of Trust"), and by
the affirmative vote of a Majority of the Trustees at a meeting duly called and
held on October 25, 1989, the Declaration of Trust is amended to provide that
the name of Standish Marathon Fund, as established by a Certificate of
Designation dated May 2, 1989, is changed to "Standish Small Capitalization
Equity Fund".
The Trustees further direct that, upon the execution of this Certificate
of Amendment, the Trust take all necessary action to file a copy of this
Certificate of Amendment with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 21st
day of November, 1989.
/s/ George W. Noyes
------------------------------
George W. Noyes, Secretary
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: November 21, 1989
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Joseph W. Chin
------------------------------
Notary Public
My Commission expires 9/12/91
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Amendment
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustee of the Trust by
Section 9.3 of the Agreement and Declaration of Trust, dated August 13, 1986, as
amended (hereinafter, as so amended, referred to as the "Declaration of Trust"),
and by the affirmative vote of a Majority of the Trustees at a meeting duly
called and held on October 25, 1989, and by the shareholders of Consolidated
Standish Short-Term Asset Reserve Fund at a meeting held on November 29, 1989,
the Declaration of Trust is amended to provide that one share (or, if
appropriate, a fraction of a share) of beneficial interest of Consolidated
Standish Short-Term Asset Reserve Fund be issued to shareholders in exchange for
and in conversion of each 20 shares (or, if appropriate, such lesser number of
shares) held by each shareholder of the Fund.
The Trustees further direct that, upon the execution of this Certificate
of Amendment, the Trust take all necessary action to file a copy of this
Certificate of Amendment with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, undersigned has set his hand and seal this 29th day of
November, 1989.
/s/ George W. Noyes
-----------------------------------
George W. Noyes, Secretary
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: November 29, 1989
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Joseph W. Chin
-----------------------------------
Notary Public
My Commission Expires: 9/12/91
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Amendment
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 9.3 of the Agreement and Declaration of Trust, dated August 13, 1986, as
amended (hereinafter, as so amended, referred to as the "Declaration of Trust"),
and by the affirmative vote of a Majority of the Trustees at a meeting duly
called and held on April 18, 1990, the Declaration of Trust is amended to
provide that the name of Standish International Fund, as established by a
Certificate of Designation dated November 6, 1986, is changed to "Standish
International Equity Fund".
The Trustees further direct that, upon the execution of this Certificate
of Amendment, the Trust take all necessary action to file a copy of this
Certificate of Amendment with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, undersigned has set his hand and seal this 24th day of
April, 1990.
/s/ George W. Noyes
-----------------------------------
George W. Noyes, Secretary
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: April 24, 1990
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Joseph W. Chin
-----------------------------------
Notary Public
My Commission Expires: 9/12/91
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trustby
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August 13, 1986, as amended (hereinafter, as so amended, referred to as the
"Declaration of Trust"), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on July 11, 1990, the Declaration of
Trust is amended as follows:
I. There is hereby established and designated the Standish Equity Fund
(hereinafter referred to as the "Fund"). The beneficial interest in the Standish
International Fund shall be divided into Shares having a nominal or par value of
one cent ($.01) per Share, of which an unlimited number may be issued, which
Shares shall represent interests only in the Fund. The Shares of the Fund shall
have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
any Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be a part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall
<PAGE>
be conclusive and binding upon the Shareholders of the all Funds for all
purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Funds for all purposes. Any creditor
of the Fund may look only to the assets of the Fund to satisfy such
creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend of distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (8) hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Fund shall be entitled to receive, when
and as
<PAGE>
declared by the Trustees, the excess of the Fund Assets over the
liabilities of the Fund. The assets so distributable to the Shareholders
of the Fund shall be distributed among such Shareholders in proportion to
the number of Shares of the Fund held by them and recorded on the books of
the Trust. The liquidation of the Fund may be authorized by vote of a
Majority of the Trustees, subject to the affirmative vote of "a majority
of the outstanding voting securities" of the Fund, as the quoted phrase is
defined in the 1940 Act, determined in accordance with clause (iii) of the
definition of "Majority Shareholder Vote" in Section 1.4 of the
Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) of this Certificate
of Designation: (i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or of any Fund or
(ii) upon such other conditions with respect to maintenance of Shareholder
accounts of a minimum amount as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Fund. Upon
such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
<PAGE>
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the designed
constant dollar amount. Each Shareholder of the Fund shall be deemed to
have expressly agreed, by this investment in the Fund, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate beneficial interest in the assets belonging to
the Fund or in any way affecting the rights of the holders of Shares of
any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
<PAGE>
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument in writing signed by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of these resolutions,
the Trust take all necessary action to file a copy of this Certificate of
Designation with the Secretary of State of The Commonwealth of Massachusetts and
at any other place required by law or by the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 4th day
of September, 1990.
/s/ George W. Noyes
-----------------------------------
George W. Noyes, Secretary
<PAGE>
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: September 4, 1990
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/
------------------------------------
Notary Public
My Commission expires: 3/15/96
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trustby
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August 13, 1986, as amended (hereinafter, as so amended, referred to as the
"Declaration of Trust"), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on April 26, 1989, the Declaration of
Trust is amended as follows:
I. There is hereby established and designated the Standish International
Fixed Income Fund (hereinafter referred to as the "Fund"). The beneficial
interest in the Standish International Fund shall be divided into Shares having
a nominal or par value of one cent ($.01) per Share, of which an unlimited
number may be issued, which Shares shall represent interests only in the Fund.
The Shares of the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
any Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be a part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall
<PAGE>
be conclusive and binding upon the Shareholders of the all Funds for all
purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Funds for all purposes. Any creditor
of the Fund may look only to the assets of the Fund to satisfy such
creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend of distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (8) hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Fund shall be entitled to receive, when
and as
<PAGE>
declared by the Trustees, the excess of the Fund Assets over the
liabilities of the Fund. The assets so distributable to the Shareholders
of the Fund shall be distributed among such Shareholders in proportion to
the number of Shares of the Fund held by them and recorded on the books of
the Trust. The liquidation of the Fund may be authorized by vote of a
Majority of the Trustees, subject to the affirmative vote of "a majority
of the outstanding voting securities" of the Fund, as the quoted phrase is
defined in the 1940 Act, determined in accordance with clause (iii) of the
definition of "Majority Shareholder Vote" in Section 1.4 of the
Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) hereof: (i) at any
time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Fund or (ii) upon such other conditions with
respect to maintenance of Shareholder accounts of a minimum amount as may
from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Fund. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
<PAGE>
(h) Net Asset Value. The net asset value per Share of the Fund at
any time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the designed
constant dollar amount. Each Shareholder of the Fund shall be deemed to
have expressly agreed, by this investment in the Fund, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate beneficial interest in the assets belonging to
the Fund or in any way affecting the rights of the holders of Shares of
any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
<PAGE>
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument in writing signed by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of these resolutions,
the Trust take all necessary action to file a copy of this Certificate of
Designation with the Secretary of State of The Commonwealth of Massachusetts and
at any other place required by law or by the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 4th day
of September, 1990.
/s/ George W. Noyes
-----------------------------------
George W. Noyes, Secretary
<PAGE>
ACKNOWLEDGEMENT
M A S S A C H U S E T T S
Suffolk, ss.: September 4, 1990
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/
-----------------------------------
Notary Public
My Commission expires: 3/15/96
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust"),
dated August 13, 1986, as amended, hereinafter, as so amended, referred to as
the "Declaration of Trust"), and by the affirmative vote of a Majority of the
trustees at a meeting duly called and held on August 12, 1992, the Declaration
of Trust is amended as follows:
I. There is hereby established and designated the Standish Intermediate
Tax-Exempt Bond Fund (hereinafter referred to as the "Fund"). The beneficial
interest in the Fund shall be divided into Shares having a nominal or par value
of one cent ($.01) per Share, of which an unlimited number may be issued, which
Shares shall represent interest only in the Fund. The Shares of the Fund shall
have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the issue
or sale of Shares of the Fund, together with all assets in which consideration
is invested or reinvested, all interest, dividends, income, earnings, profits
and gains therefrom, and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall be held by the Trustees in trust for the benefit of the holders of Shares
of the Fund and shall irrevocably belong to the Fund for all purposes, and shall
be so recorded upon the books of account of the Trust, and the Shareholders of
any Fund who are not Shareholders of the Fund shall not have, and shall be
conclusively deemed to have waived, any claims to the assets of the Fund. Such
consideration, assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to the Fund as provided in
the following sentence, are herein referred to the collectively as "Fund Assets"
of the Fund, and as assets "belonging to" the Fund. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Fund
(collectively "General Items"), the Trustees shall allocate such General Items
to and among any one or more of the Funds established and designated from time
to time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to the Fund shall belong
to and be part of the Fund Assets of the Fund. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all the Funds
for all purposes.
<PAGE>
2. Liabilities of the Fund. The assets belonging to the Fund shall be
charged with the liabilities in respect of the Fund and all expenses, costs,
charges and reserves attributable to the Fund, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as pertaining to any particular Fund shall be allocated and charged
by the Trustees to and among any one or more of the Funds established and
designated from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The indebtedness, expenses,
costs, charges and reserves allocated and so charged to the Fund are herein
referred to as "liabilities of" the Fund. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds for all purposes. Any creditor of
the Fund may look only to the assets of the Fund to satisfy such creditor's
debt.
3. Dividends. Dividends any distributions on Shares of the Fund may be
paid with such frequency as the Trustees may determine, which may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, to the Shareholders of the
Fund, from such of the income, accrued or realized, and capital gains, realized
or unrealized, and out of the assets belonging to the Fund, as the Trustees may
determine, after providing for actual and accrued liabilities of the Fund. All
dividends and distributions on Shares of the Fund shall be distributed pro rata
to the Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment of
such dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times established by
the Trustees under such program or procedure, or that dividends or distributions
shall be payable on Shares which have been tendered by the holder thereof for
redemption or repurchase, but the redemption or repurchase proceeds of which
have not yet been paid to such Shareholder. Such dividends and distributions may
be made in cash or Shares of the Fund or a combination thereof as determined by
the Trustees, or pursuant to any program that the Trustees may have in effect at
the time for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or distribution
paid in Shares will be paid at the net asset value thereof as determined in
accordance with subsection (8) hereof.
4. Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of the Fund shall be entitled to receive, when and as
declared by the Trustees, the excess of the Fund Assets over the liabilities of
the Fund. The assets so distributable to the Shareholders of the Fund shall be
distributed among such Shareholders in proportion to the number of Shares of the
Fund held by them and recorded on the books of the Trust. The liquidation of the
Fund may be authorized by a vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the
<PAGE>
outstanding voting securities" of the Fund, as the quoted phrase is defined in
the 1940 Act, determined in accordance with clause (iii) of the definition of
"Majority Shareholder Vote" in Section 1.4 of the Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth in or
determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund shall have
the right at such times as may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem all or any part of his
Shares of the Fund at a redemption price equal to the net asset value per Share
of the Fund next determined in accordance with subsection (8) hereof after the
Shares are properly tendered for redemption; provided, that the Trustees may
from time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in Securities or other assets belonging
to the Fund at the value of such Securities or assets used in such determination
of the net asset value. Notwithstanding the foregoing, the Trust may postpone
payment of the redemption price and may suspend the right of the holders of
Shares of the Fund to require the Trust to redeem Shares of the Fund during any
period or at any time when and to the extend permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund shall be
subject to redemption at the option of the Trust at the redemption price which
would be applicable if such Share were then being redeemed by the Shareholder
pursuant to subsection (6) hereof: (i) at any time, if the Trustees determine in
their sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or any Fund, or (ii) upon
such other conditions with respect to maintenance of Shareholder accounts of a
minimum amount as may from time to time be determined by the Trustees and set
forth in the then current Prospectus of the Fund. Upon such redemption the
holders of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any time
shall be the quotient obtained by dividing the value of the net assets of the
Fund at such time (being the current value of the assets belonging to the Fund,
less its then existing liabilities) by the total number of Shares of the Fund
then outstanding, all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net asset
value per Share of the Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
<PAGE>
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder shall be
deemed to have contributed to the shares of beneficial interest account of the
Fund his pro rata portion of the total number of Shares required to be cancelled
in order to permit the net asset value per Share of the Fund to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Fund shall be deemed to have expressly agreed, by his
investment in the Fund, to make the contribution referred to in the preceding
sentence in the event of any such loss.
9. Transfer. All Share of the Fund shall be transferable, but transfers of
Shares of the Fund will be recorded on the Share transfer records of the Trust
applicable to the Fund only at such times as Shareholders shall have the right
to require the Trust to redeem Shares of the Fund and at such other times as may
be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to each
other Share thereof; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (3) hereof that may exist with respect
to dividends and distributions on Shares of the Fund. The Trustees may from time
to time divide or combine the Shares of the fund into a greater or lesser number
of Shares of the Fund without thereby changing the proportionate beneficial
interest in the assets belonging to the Fund or in any way affecting the rights
of the holders of Shares of any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series shall
carry proportionately all the rights and obligations of a whole Share of that
Series, including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the Trust
or of the Fund.
12. Conversion Rights. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of the Fund shall have the right to convert said Shares into Shares of
one or more other Funds in accordance with such requirements and procedures as
the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of Section
9.3 of the Declaration of Trust and applicable law, this Certificate of
Designation may be amended by an instrument signed in writing by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a Majority
of the Trustees), provided that, if any amendment adversely affects the rights
of the Shareholders of the Fund, such amendment may be adopted by an instrument
signed in writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do so by
the vote in accordance with Section 7.1 of the Declaration
<PAGE>
of Trust of the holders of a majority of all the Shares of the Fund outstanding
and entitled to vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are not
defined herein shall have the same meanings as are assigned to those terms in
the Declaration of Trust filed with the Secretary of State of the Commonwealth
of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 8th day
of September, 1992.
/s/ George W. Noyes
---------------------------------------
George W. Noyes, Secretary
<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
Suffolk, ss.: September 8, 1992
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/
---------------------------------
Notary Public
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August, 13, 1986, as amended, (hereinafter, as so amended, referred to as the
"Declaration of Trust"), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on August 12, 1992, the Declaration
of Trust is amended as follows:
I. There is hereby established and designated the Standish Massachusetts
Intermediate Tax-Exempt Bond Fund (hereinafter referred to as the "Fund"). The
beneficial interest in the Fund shall be divided into Shares having a nominal or
par value of one cent ($.01) per Share, of which an unlimited number may be
issued, which Shares shall represent interests only in the Fund. The Shares of
the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall
<PAGE>
-2-
be conclusive and binding upon the Shareholders of all the Funds for all
purposes.
2. "Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds for all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (8) hereof.
<PAGE>
-3-
4. Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Fund shall be entitled to receive, when
and as declared by the Trustees, the excess of the Fund Assets over the
liabilities of the Fund. The assets so distributable to the Shareholders
of the Fund shall be distributed among such Shareholders in proportion to
the number of Shares of the Fund held by them and recorded on the books of
the Trust. The liquidation of the Fund may be authorized by vote of a
Majority of the Trustees, subject to the affirmative vote of "a majority
of the outstanding voting securities" of the Fund, as the quoted phrase is
defined in the 1940 Act, determined in accordance with clause (iii) of the
definition of "Majority Shareholder Vote" in Section 1.4 of the
Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) hereof: (i) at any
time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Fund, or (ii) upon such other conditions
with respect to maintenance of Shareholder accounts of a minimum amount as
may from time to time be determined by the Trustees and set forth in the
then current Prospectus of the Fund. Upon such
<PAGE>
-4-
redemption the holders of the Shares so redeemed shall have no further
right with respect thereto other than to receive payment of such
redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be canceled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate beneficial interest in the assets belonging to
the Fund or in any way affecting the rights of the holders of Shares of
any other Fund.
<PAGE>
-5-
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment. etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of the
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his and seal this 8th day of
September, 1992.
/s/ George W. Noyes
----------------------------------
George W. Noyes, Secretary
<PAGE>
-6-
ACKNOWLEDGMENT
M A S S A C H U S E T T S
Suffolk, ss.: September 8, 1992
Then personally appeared the above named George W. Noyes and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/
--------------------------------
Notary Public
STANDISH, AYER & WOOD INVESTMENT TRUST
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood investment
Trust (hereinafter referred to as the "Trust"), a trust with transferable shares
of the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
August, 13, 1986, as amended, (hereinafter, as so amended, referred to as the
"Declaration of Trust"'), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on November 10, 1993, the Declaration
of Trust is amended as follows:
A. There is hereby established and designated the Standish Global Fixed
Income Fund (hereinafter referred to as the "Fund"). The beneficial interest in
the Fund shall be divided into Shares having a nominal or par value of one cent
($.01) per Share, of which an unlimited number may be issued, which Shares shall
represent interests only in the Fund. The Shares of the Fund shall have the
following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all the Funds for all purposes.
<PAGE>
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds for all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend or distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection (h) hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Fund shall be entitled to receive, when
and as declared by
-2-
<PAGE>
the Trustees, the excess of the Fund Assets over the liabilities of the
Fund. The assets so distributable to the Shareholders of the Fund shall be
distributed among such Shareholders in proportion to the number of Shares
of the Fund held by them and recorded on the books of the Trust. The
liquidation of the Fund may be authorized by vote of a Majority of the
Trustees, subject to the affirmative vote of "a majority of the
outstanding voting securities" of the Fund, as the quoted phrase is
defined in the 1940 Act, determined in accordance with clause (iii) of the
definition of "Majority Shareholder Vote" in Section 1.4 of the
Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) hereof: (i) at any
time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Fund, or (ii) upon such other conditions
with respect to maintenance of Shareholder accounts of a minimum amount as
may from time to time be determined by the Trustees and set forth in the
then current Prospectus of the Fund. Upon such redemption the holders of
the Shares so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
-3-
<PAGE>
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be canceled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate beneficial interest in the assets belonging to
the Fund or in any way affecting the rights of the holders of Shares of
any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
-4-
<PAGE>
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an Officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of the
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 8th day
of December, 1993.
/s/ David Murray
--------------------------------
David W. Murray, Secretary
-5-
<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
Suffolk, SS.: December 8, 1993
Then personally appeared the above named David W. Murray and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Beverly E. Banfield
----------------------------------
Notary Public
-6-
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Certificate of Designation
The undersigned, being the Secretary of Standish, Ayer & Wood Investment
Trust (the "Trust"), a trust with transferable shares of the type commonly
called a Massachusetts business trust, DOES HEREBY CERTIFY that, pursuant to the
authority conferred upon the Trustees of the Trust by Section 6.1(b) and Section
9.3 of the Agreement and Declaration of Trust, dated August 13, 1986, as amended
(as so amended, the "Declaration of Trust"), and by the affirmative vote of a
Majority of the Trustees at a meeting duly called and held on February 8, 1995,
the Declaration of Trust is amended as set forth in this Certificate of
Designation.
A. There is hereby established and designated two additional Series of the
Trust: "Standish Controlled Maturity Fund" and "Standish Fixed Income Fund II."
References in this Certificate of Designation to the "Fund" shall apply equally
and individually to Standish Controlled Maturity Fund and Standish Fixed Income
Fund II.
B. The beneficial interest in the Fund shall be divided into Shares having
a nominal or par value of one cent ($.01) per Share, of which an unlimited
number may be issued, which Shares shall represent interests only in the Fund.
The Shares of the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund-Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
<PAGE>
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so allocated to the Fund
shall belong to and be part of the Fund Assets of the Fund. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all the Funds for all purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds for all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the rate and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been receive by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may
-2-
<PAGE>
have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (8)
hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust or the liquidation of the Fund, the Shareholders of the Fund
shall be entitled to receive, when and as declared by the Trustees, the
excess of the Fund Assets over the liabilities of the Fund. The assets so
distributable to the Shareholders of the Fund shall be distributed among
such Shareholders in proportion to the number of Shares of the Fund held
by them and recorded on the books of the Trust. The liquidation of the
Fund may be authorized by vote of a Majority of the Trustees, subject to
the affirmative vote of "a majority of the outstanding voting securities"
of the Fund, as the quoted phrase is defined in the 1940 Act, determined
in accordance with clause (iii) of the definition of "Majority Shareholder
Vote" in Section 1.4 of the Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust, but
no less frequently than once each week, to require the Trust to redeem all
or any part of his Shares of the Fund at a redemption price equal to the
net asset value per Share of the Fund next determined in accordance with
subsection (8) hereof after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in Securities or other assets belonging to
the Fund at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the Fund to require the Trust to redeem Shares of
the Fund during any period or at any time when and to the extent
permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) hereof: (i) at any
time, if the Trustees
-3-
<PAGE>
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Shares of the Trust
or of any Fund, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time
to time be determined by the Trustees and set forth in the then current
prospectus of the Fund. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designate constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be Permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser
-4-
<PAGE>
number of Shares of the Fund without thereby changing the proportionate
beneficial interest in the assets belonging to the Fund or in any way
affecting the rights of the holders of Shares of any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
12. Conversion Rights Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
Pursuant to the Vote of a Majority of the Trustees), provided that if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an Officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund Outstanding and entitled to
vote, without regard to Series.
14. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 13th
day of March,1995.
/s/ David W. Murray
----------------------------------
David W. Murray. Secretary
-5-
<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
SUFFOLK, SS.: March 13, 1995
Then personally appeared the above-named David W. Murray and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Joseph W. Chin
-----------------------------
Notary Public
-6-
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Certificate of Designation
The undersigned, being a Vice President of Standish, Ayer & Wood
Investment Trust (the "Trust"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by Section
6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated August
13, 1986, as amended (as so amended, the "Declaration of Trust"), and by the
affirmative vote of a Majority of the Trustees at a meeting duly called and held
on September 27, 1995 the Declaration of Trust is amended as set forth in this
Certificate of Designation.
A. There is hereby established and designated two additional Series of the
Trust: "Standish Small Cap Tax-Sensitive Equity Fund" and "Standish
Tax-Sensitive Equity Fund." References in this Certificate of Designation to the
"Fund" shall apply equally and individually to Standish Small Cap Tax-Sensitive
Equity Fund and Standish Tax-Sensitive Equity Fund.
B. The beneficial interest in the Fund shall be divided into Shares having
a nominal or par value of one cent ($.01) per Share, of which an unlimited
number may be issued, which Shares shall represent interests only in the Fund.
The Shares of the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund-Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds,
<PAGE>
or payments which are not readily identifiable as belonging to any
particular Fund (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Funds
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to the Fund shall belong to and be part of the
Fund Assets of the Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all the Funds for all
purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds or all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been receive by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as
-2-
<PAGE>
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (8)
hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust or the liquidation of the Fund, the Shareholders of the Fund
shall be entitled to receive, when and as declared by the Trustees, the
excess of the Fund Assets over the liabilities of the Fund. The assets so
distributable to the Shareholders of the Fund shall be distributed among
such Shareholders in proportion to the number of Shares of the Fund held
by them and recorded on the books of the Trust. The liquidation of the
Fund may be authorized by vote of a Majority of the Trustees, subject to
the affirmative vote of "a majority of the outstanding voting securities"
of the Fund, as the quoted phrase is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), determined in accordance with clause
(iii) of the definition of "Majority Shareholder Vote" in Section 1.4 of
the Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust to
require the Trust to redeem all or any part of his Shares of the Fund at a
redemption price equal to the net asset value per Share of the Fund next
determined in accordance with subsection (8) hereof after the Shares are
properly tendered for redemption; provided, that the Trustees may from
time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Fund at the value of such Securities or
assets used in such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares of the Fund to require the
Trust to redeem Shares of the Fund during any period or at any time when
and to the extent permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the
-3-
<PAGE>
Shareholder pursuant to subsection (6) hereof: (i) at any time, if the
Trustees determine in their sole discretion that failure to so redeem may
have materially adverse consequences to the holders of the Shares of the
Trust or of any Fund, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time
to time be determined by the Trustees and set forth in the then current
Prospectus of the Fund. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from
-4-
<PAGE>
time to time divide or combine the Shares of the Fund into a greater or
lesser number of Shares of the Fund without thereby changing the
proportionate beneficial interest in the assets belonging to the Fund or
in any way affecting the rights of the holders of Shares of any other
Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligation with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Master/Feeder. Notwithstanding any other provisions herein or in
the Declaration of Trust as applicable to the Fund, the Trustees shall
have full power in their discretion, without any requirement of approval
by shareholders of the Fund, to invest part or all of the Fund Assets, or
to dispose of parts or all of the Fund Assets and invest the proceeds of
such disposition, in securities issued by one or more other investment
companies registered under the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the Commonwealth
of Massachusetts any other state or jurisdiction) which is classified as a
partnership for Federal income tax purposes.
14. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the Vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to the other Series.
15. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms
-5-
<PAGE>
in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 16th
day of October, 1995.
By: /s/ Anne P. Herrmann
-----------------------------
Its: Vice President
-----------------------------
-6-
<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
SUFFOLK, SS.: October 16, 1995
Then personally appeared the above-named Vice President of Standish, Ayer
& Wood Investment Trust and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/Lora L. Beaulieu
----------------------------------
Notary Public
My commission expires: 3/10/2000
-7-
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Certificate of Designation
The undersigned, being a Vice President of Standish, Ayer & Wood
Investment Trust (the "Trust"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by Section
6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated August
13, 1986, as amended (as so amended, the "Declaration of Trust"), and by the
affirmative vote of a Majority of the Trustees at a meeting duly called and held
on February 9 and 10, 1996 the Declaration of Trust is amended as set forth in
this Certificate of Designation.
A. There are hereby established and designated four additional Series of
the Trust: "Standish Fixed Income Asset Fund," "Standish Global Fixed Income
Asset Fund," "Standish Equity Asset Fund" and "Standish Small Capitalization
Equity Asset Fund" )(references in this Certificate of Designation to the "Fund"
shall apply equally and individually to each of the foregoing Funds.)
B. The beneficial interest in the Fund shall be divided into Shares having
a nominal or par value of one cent ($.01) per Share, of which an unlimited
number may be issued, which Shares shall represent interests only in the Fund.
The Shares of the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund-Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds,
<PAGE>
or payments which are not readily identifiable as belonging to any
particular Fund (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Funds
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to the Fund shall belong to and be part of the
Fund Assets of the Fund. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all the Funds for all
purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds or all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been receive by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as
-2-
<PAGE>
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (8)
hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust or the liquidation of the Fund, the Shareholders of the Fund
shall be entitled to receive, when and as declared by the Trustees, the
excess of the Fund Assets over the liabilities of the Fund. The assets so
distributable to the Shareholders of the Fund shall be distributed among
such Shareholders in proportion to the number of Shares of the Fund held
by them and recorded on the books of the Trust. The liquidation of the
Fund may be authorized by vote of a Majority of the Trustees, subject to
the affirmative vote of "a majority of the outstanding voting securities"
of the Fund, as the quoted phrase is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), determined in accordance with clause
(iii) of the definition of "Majority Shareholder Vote" in Section 1.4 of
the Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust to
require the Trust to redeem all or any part of his Shares of the Fund at a
redemption price equal to the net asset value per Share of the Fund next
determined in accordance with subsection (8) hereof after the Shares are
properly tendered for redemption; provided, that the Trustees may from
time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Fund at the value of such Securities or
assets used in such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares of the Fund to require the
Trust to redeem Shares of the Fund during any period or at any time when
and to the extent permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the
-3-
<PAGE>
Shareholder pursuant to subsection (6) hereof: (i) at any time, if the
Trustees determine in their sole discretion that failure to so redeem may
have materially adverse consequences to the holders of the Shares of the
Trust or of any Fund, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from time
to time be determined by the Trustees and set forth in the then current
Prospectus of the Fund. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from
-4-
<PAGE>
time to time divide or combine the Shares of the Fund into a greater or
lesser number of Shares of the Fund without thereby changing the
proportionate beneficial interest in the assets belonging to the Fund or
in any way affecting the rights of the holders of Shares of any other
Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligation with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Master/Feeder. Notwithstanding any other provisions herein or in
the Declaration of Trust as applicable to the Fund, the Trustees shall
have full power in their discretion, without any requirement of approval
by shareholders of the Fund, to invest part or all of the Fund Assets, or
to dispose of parts or all of the Fund Assets and invest the proceeds of
such disposition, in securities issued by one or more other investment
companies registered under the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the Commonwealth
of Massachusetts any other state or jurisdiction) which is classified as a
partnership for Federal income tax purposes.
14. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the Vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to the other Series.
15. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms
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<PAGE>
in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 18th
day of July, 1996.
By: /s/ Richard C. Doll
---------------------------
Its: Vice President
---------------------------
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<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
SUFFOLK, SS.: July 18, 1996
Then personally appeared the above-named Vice President of Standish, Ayer
& Wood Investment Trust and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/ Lora L. Beaulieu
--------------------------------
Notary Public
My commission expires: 3/10/2000
-7-
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, Massachusetts 02111
Certificate of Designation
The undersigned, being a Vice President of Standish, Ayer & Wood
Investment Trust (the "Trust"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by Section
6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated August
13, 1986, as amended (as so amended, the "Declaration of Trust"), and by the
affirmative vote of a Majority of the Trustees at a meeting duly called and held
on June 6 and 7, 1996 the Declaration of Trust is amended as set forth in this
Certificate of Designation.
A. There is hereby established and designated an additional Series of the
Trust: "Standish Small Capitalization Equity Fund II."
B. The beneficial interest in the Fund shall be divided into Shares having
a nominal or par value of one cent ($.01) per Share, of which an unlimited
number may be issued, which Shares shall represent interests only in the Fund.
The Shares of the Fund shall have the following rights and preferences:
1. Assets Belonging to the Fund. Any portion of the Trust Property
allocated to the Fund, and all consideration received by the Trust for the
issue or sale of Shares of the Fund, together with all assets in which
such consideration is invested or reinvested, all interest, dividends,
income, earnings profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of the Fund and
shall irrevocably belong to the Fund for all purposes, and shall be so
recorded upon the books of account of the Trust, and the Shareholders of
any other Fund who are not Shareholders of the Fund shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of
the Fund. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Fund as provided in the following sentence, are herein
referred to collectively as "Fund-Assets" of the Fund, and as assets
"belonging to" the Fund. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds, or payments which are not
readily identifiable as belonging to any particular Fund (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Funds established and designated
<PAGE>
from time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so allocated to
the Fund shall belong to and be part of the Fund Assets of the Fund. Each
such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all the Funds for all purposes.
2. Liabilities of the Fund. The assets belonging to the Fund shall
be charged with the liabilities in respect of the Fund and all expenses,
costs, charges and reserves attributable to the Fund, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the Fund are herein referred to as
"liabilities of" the Fund. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all the Funds or all purposes. Any
creditor of the Fund may look only to the assets of the Fund to satisfy
such creditor's debt.
3. Dividends. Dividends and distributions on Shares of the Fund may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of the Fund, from such of the income, accrued or
realized, and capital gains, realized or unrealized, and out of the assets
belonging to the Fund, as the Trustees may determine, after providing for
actual and accrued liabilities of the Fund. All dividends and
distributions on Shares of the Fund shall be distributed pro rata to the
Shareholders of the Fund in proportion to the number of such Shares held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which
the Shareholder's purchase order and/or payment have not been receive by
the time or times established by the Trustees under such program or
procedure, or that dividends or distributions shall be payable on Shares
which have been tendered by the holder thereof for redemption or
repurchase, but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends and distributions may be
made in cash or Shares of the Fund or a combination thereof as determined
by the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of the
making of such dividend or distribution to that Shareholder. Any such
dividend
-2-
<PAGE>
or distribution paid in Shares will be paid at the net asset value thereof
as determined in accordance with subsection (8) hereof.
4. Liquidation. In the event of the liquidation or dissolution of
the Trust or the liquidation of the Fund, the Shareholders of the Fund
shall be entitled to receive, when and as declared by the Trustees, the
excess of the Fund Assets over the liabilities of the Fund. The assets so
distributable to the Shareholders of the Fund shall be distributed among
such Shareholders in proportion to the number of Shares of the Fund held
by them and recorded on the books of the Trust. The liquidation of the
Fund may be authorized by vote of a Majority of the Trustees, subject to
the affirmative vote of "a majority of the outstanding voting securities"
of the Fund, as the quoted phrase is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), determined in accordance with clause
(iii) of the definition of "Majority Shareholder Vote" in Section 1.4 of
the Declaration of Trust.
5. Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
6. Redemption by Shareholder. Each holder of Shares of the Fund
shall have the right at such times as may be permitted by the Trust to
require the Trust to redeem all or any part of his Shares of the Fund at a
redemption price equal to the net asset value per Share of the Fund next
determined in accordance with subsection (8) hereof after the Shares are
properly tendered for redemption; provided, that the Trustees may from
time to time, in their discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Fund at the value of such Securities or
assets used in such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares of the Fund to require the
Trust to redeem Shares of the Fund during any period or at any time when
and to the extent permissible under the 1940 Act.
7. Redemption at the Option of the Trust. Each Share of the Fund
shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (6) hereof: (i) at any
time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Fund, or
-3-
<PAGE>
(ii) upon such other conditions with respect to maintenance of Shareholder
accounts of a minimum amount as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Fund. Upon
such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
8. Net Asset Value. The net asset value per Share of the Fund at any
time shall be the quotient obtained by dividing the value of the net
assets of the Fund at such time (being the current value of the assets
belonging to the Fund, less its then existing liabilities) by the total
number of Shares of the Fund then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the Fund at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to the Fund as dividends
payable in additional Shares of the Fund at the designated constant dollar
amount and for the handling of any losses attributable to the Fund. Such
procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the Fund his pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value per Share
of the Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Fund shall be
deemed to have expressly agreed, by his investment in the Fund, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
9. Transfer. All Shares of the Fund shall be transferable, but
transfers of Shares of the Fund will be recorded on the Share transfer
records of the Trust applicable to the Fund only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
the Fund and at such other times as may be permitted by the Trustees.
10. Equality. All Shares of the Fund shall represent an equal
proportionate interest in the assets belonging to the Fund (subject to the
liabilities of the Fund), and each Share of the Fund shall be equal to
each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection (3) hereof that may
exist with respect to dividends and distributions on Shares of the Fund.
The Trustees may from time to time divide or combine the Shares of the
Fund into a greater or lesser number of Shares of the Fund without thereby
changing the proportionate
-4-
<PAGE>
beneficial interest in the assets belonging to the Fund or in any way
affecting the rights of the holders of Shares of any other Fund.
11. Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligation with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Fund.
12. Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Fund shall have the right to convert said Shares
into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
13. Master/Feeder. Notwithstanding any other provisions herein or in
the Declaration of Trust as applicable to the Fund, the Trustees shall
have full power in their discretion, without any requirement of approval
by shareholders of the Fund, to invest part or all of the Fund Assets, or
to dispose of parts or all of the Fund Assets and invest the proceeds of
such disposition, in securities issued by one or more other investment
companies registered under the 1940 Act. Any such other investment company
may (but need not) be a trust (formed under the laws of the Commonwealth
of Massachusetts any other state or jurisdiction) which is classified as a
partnership for Federal income tax purposes.
14. Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the Vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the Fund,
such amendment may be adopted by an instrument signed in writing by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) when authorized to do so by the vote
in accordance with Section 7.1 of the Declaration of Trust of the holders
of a majority of all the Shares of the Fund outstanding and entitled to
vote, without regard to the other Series.
15. Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of State of The
Commonwealth of Massachusetts.
-5-
<PAGE>
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set his hand and seal this 22nd
day of July, 1996.
By: /s/ James E. Hollis, III
------------------------------
Its: Vice President
------------------------------
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<PAGE>
ACKNOWLEDGMENT
M A S S A C H U S E T T S
SUFFOLK, SS.: October 1, 1996
Then personally appeared the above-named Vice President of Standish, Ayer
& Wood Investment Trust and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/ Lora L. Beaulieu
----------------------------------
Notary Public
My commission expires: 3/10/2000
-7-
------------------------------------------------------
STANDISH, AYER & WOOD INVESTMENT TRUST
By-Laws
------------------------------------------------------
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
BYLAWS
Table of Contents
Page
----
ARTICLE I - SHAREHOLDERS AND SHAREHOLDERS' MEETINGS..........................1
SECTION 1.1 Meetings..................................................1
SECTION 1.2 Presiding Officer; Secretary..............................1
SECTION 1.3 Authority of Chairman of Meeting to Interpret Declaration
and By-Laws..........................................2
SECTION 1.4 Voting; Quorum............................................2
SECTION 1.5 Inspectors................................................2
SECTION 1.6 Shareholders' Action in Writing...........................2
ARTICLE II - TRUSTEES AND TRUSTEES' MEETINGS.................................2
SECTION 2.1 Number of Trustees........................................2
SECTION 2.2 Regular Meetings of Trustees..............................2
SECTION 2.3 Special Meetings of Trustees..............................3
SECTION 2.4 Notice of Meetings........................................3
SECTION 2.5 Quorum; Presiding Officer.................................3
SECTION 2.6 Participation by Telephone................................3
SECTION 2.7 Location of Meetings......................................4
SECTION 2.8 Votes.....................................................4
SECTION 2.9 Rulings of Chairman.......................................4
SECTION 2.10 Trustees' Action in Writing..............................4
SECTION 2.11 Resignations.............................................4
ARTICLE III - OFFICERS.......................................................4
SECTION 3.1 Officers of the Trust.....................................4
SECTION 3.2 Time and Terms of Election................................4
SECTION 3.3 Resignation and Removal...................................4
SECTION 3.4 Fidelity Bond.............................................5
SECTION 3.5 Chairman of the Trustees..................................5
SECTION 3.6 Vice Chairmen.............................................5
SECTION 3.7 President.................................................5
SECTION 3.8 Vice Presidents...........................................5
SECTION 3.9 Treasurer and Assistant Treasurers........................5
SECTION 3.10 Controller and Assistant Controllers.....................6
SECTION 3.11 Secretary and Assistant Secretaries......................6
SECTION 3.12 Substitutions............................................6
SECTION 3.13 Execution of Deeds, etc..................................6
<PAGE>
SECTION 3.14 Power to Vote Securities.................................7
ARTICLE IV - COMMITTEES......................................................7
SECTION 4.1 Power of Trustees to Designate Committees.................7
SECTION 4.2 Rules for Conduct of Committee Affairs....................7
SECTION 4.3 Trustees May Alter, Abolish, etc., Committees.............7
SECTION 4.4 Minutes; Review by Trustees...............................8
ARTICLE V - SEAL.............................................................8
ARTICLE VI - SHARES..........................................................8
SECTION 6.1 Issuance of Shares........................................8
SECTION 6.2 Uncertificated Shares.....................................8
SECTION 6.3 Share Certificates........................................8
SECTION 6.4 Lost, Stolen, etc., Certificates..........................9
SECTION 6.5 Record Transfer of Pledged Shares.........................9
ARTICLE VII - AMENDMENTS.....................................................9
SECTION 7.1 By-Laws Subject to Amendment..............................9
SECTION 7.2 Notice of Proposal to Amend By-Laws Required.............10
<PAGE>
BYLAWS
OF
STANDISH, AYER & WOOD INVESTMENT TRUST
These ARTICLES are the BYLAWS of Standish, Ayer & Wood Investment Trust, a
trust with transferable shares established under the laws of The Commonwealth of
Massachusetts (the "Trust"), pursuant to an Agreement and Declaration of Trust
of the Trust (the "Declaration") made the 13th day of August, 1986, and filed in
the office of the Secretary of the Commonwealth. These By-Laws have been adopted
by the Trustees pursuant to the authority granted by Section 3.1 of the
Declaration.
All words and terms capitalized in these By-Laws, unless otherwise defined
herein, shall have the same meanings as they have in the Declaration.
ARTICLE I
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1 Meetings. A meeting of the Shareholders of the Trust shall be
held whenever called by the Trustees and whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of the 1940 Act. Meetings
of Shareholders shall also be called by the Trustees when requested in writing
by Shareholders holding at least ten percent (10%) of the Shares then
outstanding for the purpose of voting upon removal of any Trustee, or if the
Trustees shall fail to call or give notice of any such meeting of Shareholders
for a period of thirty (30) days after such application, then Shareholders
holding at least ten percent (10%) of the Shares then outstanding may call and
give notice of such meeting. Notice of Shareholders' meetings shall be given as
provided in the Declaration.
SECTION 1.2 Presiding Officer; Secretary. The Chairman of the Trustees, or
in his absence the Vice Chairman or Chairmen, if any, in the order of their
seniority or as the Trustees shall otherwise determine, and in the absence of
the Chairman and all Vice Chairmen, if any, the President, shall preside at each
Shareholders' meeting as chairman of the meeting, or in the absence of the
Chairman, all Vice Chairmen and the President, the Trustees present at the
meeting shall elect one of their number as chairman of the meeting. Unless
otherwise provided for by the Trustees, the Secretary of the Trust shall be the
secretary of all meetings of Shareholders and shall record the minutes thereof.
2
<PAGE>
SECTION 1.3 Authority of Chairman of Meeting to Interpret Declaration and
By-Laws. At any Shareholders' meeting the chairman of the meeting shall be
empowered to determine the construction or interpretation of the Declaration or
these By- Laws, or any part thereof or hereof, and his ruling shall be final.
SECTION 1.4 Voting; Quorum. At each meeting of Shareholders, except as
otherwise provided by the Declaration, every holder of record of Shares entitled
to vote shall be entitled to a number of votes equal to the number of Shares
standing in his name on the Share register of the Trust. Shareholders may vote
by proxy and the form of any such proxy may be prescribed from time to time by
the Trustees. As provided in the Declaration, a quorum shall exist if the
holders of fifty percent (50%) of the outstanding Shares of the Trust entitled
to vote without regard to Series, are present in person or by proxy, but any
lesser number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless otherwise
provided for by the Declaration or by vote of the Trustees, or as required by
the 1940 Act, but the chairman of the meeting may in his discretion authorize
any matter to be voted upon by ballot.
SECTION 1.5 Inspectors. At any meeting of Shareholders, the chairman of
the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall, appoint one or
more Inspectors for such purpose. If appointed, Inspectors shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 1.6 Shareholders' Action in Writing. Nothing in this Article I
shall limit the power of the Shareholders to take any action without a meeting
by means of written instruments as permitted by Section 7.6 of the Declaration.
ARTICLE II
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1 Number of Trustees. There shall initially be one (1) Trustee,
and the number of Trustees shall thereafter be such number as shall be fixed
from time to time by a vote adopted by a Majority of the Trustees.
3
<PAGE>
SECTION 2.2 Regular Meetings of Trustees. Regular meetings of the Trustees
may be held without call or notice at such places and at such times as the
Trustees may from time to time determine; provided, that notice of such
determination, and of the time, place and purposes of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance with Section 2.4
hereof.
SECTION 2.3 Special Meetings of Trustees. Special meetings of the Trustees
may be held at any time and at any place when called by the Chairman of the
Trustees, any Vice Chairman, the President or the Treasurer or by two (2) or
more Trustees, or if there shall be fewer than three (3) Trustees, by any
Trustee; provided, that notice of the time, place and purposes thereof is given
to each Trustee in accordance with Section 2.4 hereof by the Secretary or an
Assistant Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4 Notice of Meetings. Notice of any regular or special meeting
of the Trustees shall be sufficient if given orally or in writing to each
Trustee, and if sent by mail at least five (5) days, or by telegram at least
twenty-four (24) hours, before the meeting, addressed to his usual or last known
business or residence address, or if delivered to him in person or communicated
by telephone at least twenty-four (24) hours before the meeting. Notice of a
special meeting need not be given to any Trustee who was present at an earlier
meeting, not more than thirty-one (31) days prior to the subsequent meeting, at
which the subsequent meeting was called. Notice of a meeting may be waived by
any Trustee by written waiver of notice, executed by him before or after the
meeting, and such waiver shall be filed with the records of the meeting.
Attendance by a Trustee at a meeting shall constitute a waiver of notice, except
where a Trustee attends a meeting for the purpose of protesting prior thereto or
at its commencement the lack of notice.
SECTION 2.5 Quorum; Presiding Officer. At any meeting of the Trustees, a
Majority of the Trustees shall constitute a quorum. Any meeting may be adjourned
from time to time by a majority of the votes cast upon the question, whether or
not a quorum is present, and the meeting may be held as adjourned without
further notice. Unless the Trustees shall otherwise elect, generally or in a
particular case, the Chairman of the Trustees, if any, or in his absence the
Vice Chairman or Vice Chairmen, if any, in the order of their seniority or as
the Trustees shall otherwise determine, or in the absence of the Chairman and
all Vice Chairmen, if any, and if he shall be a Trustee, the President, shall
preside at each meeting of the Trustees as chairman of the meeting.
SECTION 2.6 Participation by Telephone. One or more of the Trustees may
participate in a meeting thereof or of any Committee of the Trustees by means of
a conference telephone or similar communications equipment allowing all persons
4
<PAGE>
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
SECTION 2.7 Location of Meetings. Trustees' meetings may be held at any
place, within or without Massachusetts.
SECTION 2.8 Votes. Voting at Trustees' meetings may be conducted orally,
by show of hands, or, if requested by any Trustee, by written ballot. The
results of all voting shall be recorded by the Secretary in the minute book.
SECTION 2.9 Rulings of Chairman. All other rules of conduct adopted and
used at any Trustees' meeting shall be determined by the chairman of such
meeting, whose ruling on all procedural matters shall be final.
SECTION 2.10 Trustees' Action in Writing. Nothing in this Article II shall
limit the power of the Trustees to take action without a meeting by means of a
written instrument, as provided in Section 4.2 of the Declaration.
SECTION 2.11 Resignations. Any Trustee may resign at any time by written
instrument signed by him and delivered to the Chairman, the President or the
Secretary or to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time.
ARTICLE III
OFFICERS
SECTION 3.1 Officers of the Trust. The officers of the Trust shall consist
of a President, a Treasurer and a Secretary, and may include a Chairman of the
Trustees, one or more Vice Chairmen, Vice Presidents, Assistant Treasurers and
Assistant Secretaries, and such other officers as the Trustees may designate.
Any person may hold more than one office. Except for the Chairman and Vice
Chairmen, no officer need be a Trustee.
SECTION 3.2 Time and Terms of Election. The President, the Treasurer and
the Secretary shall be elected by the Trustees at their first meeting. All other
officers of the Trust may be elected or appointed at any meeting of the
Trustees. Officers of the Trust shall hold office for any term, or indefinitely,
as determined by the Trustees, and shall be subject to removal, with or without
cause, at any time by the Trustees.
5
<PAGE>
SECTION 3.3 Resignation and Removal. Any officer may resign at any time by
giving written notice to the Trustees. Such resignation shall take effect at the
time specified therein, and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective. If the office
of any officer or agent becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office or otherwise, the Trustees may
choose a successor, who shall hold office for the unexpired term in respect of
which such vacancy occurred. Except to the extent expressly provided in a
written agreement with the Trust, no officer resigning or removed shall have any
right to any compensation for any period following such resignation or removal,
or any right to damage on account of such removal.
SECTION 3.4 Fidelity Bond. The Trustees may, in their discretion, direct
any officer appointed by them to furnish at the expense of the Trust a fidelity
bond approved by the Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5 Chairman of the Trustees. Unless the Trustees otherwise
provide, the Chairman of the Trustees shall preside at all meetings of the
Shareholders and of the Trustees and shall have such other powers and duties as
the Trustees may prescribe.
SECTION 3.6 Vice Chairmen. If the Trustees shall elect one or more Vice
Chairmen, the Vice Chairman or if there shall be more than one, such Vice
Chairmen in the order of their seniority or as otherwise designated by the
Trustees, shall preside at meetings of the Shareholders and of the Trustees, and
shall exercise such other powers and duties of the Chairman as the Trustees
shall determine.
SECTION 3.7 President. The President shall be the chief executive officer
of the Trust and shall have general charge and supervision of the business,
property and affairs of the Trust and such other powers and duties as the
Trustees shall prescribe.
SECTION 3.8 Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The Vice
Presidents shall have the power to execute bonds, notes, mortgages and other
contracts, agreements and instruments in the name of the Trust, and shall do and
perform such other duties as the Trustees or the President shall direct.
SECTION 3.9 Treasurer and Assistant Treasurers. The Treasurer shall be the
chief financial officer of the Trust, and shall have the custody of the Trust
Property, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit all moneys and
other valuable effects in the name and to the credit of the Trust in such
depositories as may be designated by the Trustees, taking
6
<PAGE>
proper vouchers for such disbursements, and shall have such other duties and
powers as may be prescribed from time to time by the Trustees or the President,
and shall render to the Trustees, whenever they may require it, an account
of all his transactions as Treasurer and of the financial condition of the
Trust. If no Controller is elected, the Treasurer shall also have the duties and
powers of the Controller, as provided in these By-Laws. Any Assistant Treasurer
shall have such duties and powers as shall be prescribed from time to time by
the Trustees or the Treasurer, and shall be responsible to and shall report to
the Treasurer. In the absence or disability of the Treasurer, the Assistant
Treasurer or, if there shall be more than one, the Assistant Treasurers in the
order of their seniority or as otherwise designated by the Trustees, shall have
the powers and duties of the Treasurer.
SECTION 3.10 Controller and Assistant Controllers. If a Controller is
elected, he shall be the chief accounting officer of the Trust, and shall be in
charge of its books of account and accounting records and of its accounting
procedures, and shall have such duties and powers as are commonly incident to
the office of a controller and such other duties and powers as may be prescribed
from time to time by the Trustees. The Controller shall be responsible to and
shall report to the Trustees, but in the ordinary conduct of the Trust's
business, shall be under the supervision of the Treasurer. Any Assistant
Controller shall have such duties and powers as shall be prescribed from time to
time by the Trustees or the Controller, and shall be responsible to and shall
report to the Controller. In the absence or disability of the Controller, the
Assistant Controller or, if there shall be more than one, the Assistant
Controllers in the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Controller.
SECTION 3.11 Secretary and Assistant Secretaries. The Secretary shall, if
and to the extent requested by the Trustees, attend all meetings of the
Trustees, any Committee of the Trustees and/or the Shareholders and record all
votes and the minutes of proceedings in a book to be kept for that purpose, and
shall give or cause to be given notice of all meetings of the Trustees, any
Committee of the Trustees, and of the Shareholders, and shall perform such other
duties as may be prescribed by the Trustees. The Secretary, or in his absence
any Assistant Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so affixed, it shall be attested by the signature of the
Secretary or an Assistant Secretary. The Secretary shall be the custodian of the
Share records and all other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements, certificates and
other documents and records required by law are properly kept and filed. In the
absence or disability of the Secretary, the Assistant Secretary or, if there
shall be more than one, the Assistant Secretaries in the order of their
seniority or as otherwise designated by the Trustees, shall have the powers and
duties of the Secretary.
7
<PAGE>
SECTION 3.12 Substitutions. In case of the absence or disability of any
officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer, or to any Trustee.
SECTION 3.13 Execution of Deeds, etc. Except as the Trustees may generally
or in particular cases otherwise authorize or direct, all deeds, leases,
transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by the Chairman, the President, one of the Vice
Presidents or the Treasurer.
SECTION 3.14 Power to Vote Securities. Unless otherwise ordered by the
Trustees, the President, Chairman of the Trustees, Vice Presidents, if any, or
the Treasurer shall have full power and authority on behalf of the Trust to give
proxies for, and/or to attend and to act and to vote at, any meeting of
stockholders of any corporation in which the Trust may hold stock, and at any
such meeting any such officer or his proxy shall possess and may exercise any
and all rights and powers incident to the ownership of such stock which, as the
owner thereof, the Trust might have possessed and exercised if present. The
Trustees, by resolution from time to time, or, in the absence thereof, the
President, Chairman of the Trustees, Vice Presidents, if any, or the Treasurer,
may confer like powers upon any other person or persons as attorneys and proxies
of the Trust.
ARTICLE IV
COMMITTEES
SECTION 4.1 Power of Trustees to Designate Committees. The Trustees, by
vote of a Majority of the Trustees, may elect from their number an executive
committee and any other committees and may delegate thereto some or all of their
powers except those which by law, by the Declaration or by these By-Laws may not
be delegated; provided, that no committee shall be empowered to elect the
Chairman of the Trustees, the President, the Treasurer or the Secretary, to
amend the By-Laws, to exercise the powers of the Trustees under this Section 4.1
or under Section 4.3 hereof, or to perform any act for which the action of a
Majority of the Trustees is required by law, by the Declaration or by these
By-Laws. The members of any such Committee shall serve at the pleasure of the
Trustees.
SECTION 4.2 Rules for Conduct of Committee Affairs. Except as otherwise
provided by the Trustees, each Committee elected or appointed pursuant to this
Article IV may adopt such standing rules and regulations for the conduct of its
affairs as
8
<PAGE>
it may deem desirable, subject to review and approval of such rules and
regulations by the Trustees at the next succeeding meeting of the Trustees, but
in the absence of any such action or any contrary provisions by the Trustees,
the business of each Committee shall be conducted, so far as practicable, in the
same manner as provided herein and in the Declaration for the Trustees.
SECTION 4.3 Trustees May Alter, Abolish, etc., Committees. The Trustees
may at any time alter or abolish any Committee, change the membership of any
Committee, or revoke, rescind or modify any action of any Committee or the
authority of any Committee with respect to any manner or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4 Minutes; Review by Trustees. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
ARTICLE V
SEAL
The seal of the Trust shall consist of a flat-faced circular die with the
word "Massachusetts," together with the name of the Trust, the words "Trust
Seal," and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE VI
SHARES
SECTION 6.1 Issuance of Shares. The Trustees may issue Shares of any or
all Series either in certificated or uncertificated form, they may issue
certificates to the holders of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series, require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership of
Shares for such Series.
9
<PAGE>
SECTION 6.2 Uncertificated Shares. For any Series of Shares for which the
Trustees issue Shares without certificates, the Trust 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 such Shares as if they had received
certificates therefor and shall be held to have expressly assented and agreed to
the terms hereof and of the Declaration.
SECTION 6.3 Share Certificates. For any Series of Shares for which the
Trustees shall issue Share certificates, each Shareholder of such Series shall
be entitled to a certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the Chairman or a Vice Chairman, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Trust. Such signatures may be facsimiles if the
certificate is countersigned by the Transfer Agent, or by a registrar, other
than a Trustee, officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
cease to be such officer before such certificate is issued, it may be issued by
the Trust with the same effect as if he were such officer at the time of its
issue.
SECTION 6.4 Lost, Stolen, etc., Certificates. If any certificate for
certificated Shares shall be lost, stolen, destroyed or mutilated, the Trustees
may authorize the issuance of a new certificate of the same tenor and for the
same number of Shares in lieu thereof. The Trustees shall require the surrender
of any mutilated certificate in respect of which a new certificate is issued,
and may, in their discretion, before the issuance of a new certificate, require
the owner of a lost, stolen or destroyed certificate, or the owner's legal
representative, to make an affidavit or affirmation setting forth such facts as
to the loss, theft or destruction as they deem necessary, and to give the Trust
a bond, in such reasonable sum as the Trustees direct, in order to indemnify the
Trust.
SECTION 6.5 Record Transfer of Pledged Shares. A pledgee of Shares pledged
as collateral security shall be entitled to a new certificate in his name as
pledgee, in the case of certificated Shares, or to be registered as the holder
in pledge of such Shares in the case of uncertificated Shares; provided, that
the instrument of pledge substantially describes the debt or duty that is
intended to be secured thereby. Any 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, and any such registration of uncertificated Shares shall be
in a form which indicates that the registered holder holds such Shares in
pledge. After such issue or registration, and unless and until such pledge is
released, such pledgee and his successors and assigns shall alone be entitled to
the rights of a Shareholder, and entitled to vote such Shares.
10
<PAGE>
ARTICLE VII
AMENDMENTS
SECTION 7.1 By-Laws Subject to Amendment. These By-Laws may be altered,
amended or repealed, in whole or in part, at any time by vote of the holders of
a majority of the Shares (or whenever there shall be more than one Series of
Shares, of the holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a Majority of the
Trustees, may alter, amend or repeal these By-Laws, in whole or in part,
including By-Laws adopted by the Shareholders, except with respect to any
provision hereof which by law, the Declaration or these By-Laws requires action
by the Shareholders. By-Laws adopted by the Trustees may be altered, amended or
repealed by the Shareholders.
SECTION 7.2 Notice of Proposal to Amend By-Laws Required. No proposal to
amend or repeal these By-Laws or to adopt new By-Laws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the waiver
of notice, as the case may be, of the meeting of the Trustees or Shareholders at
which such action is taken, or (ii) all of the Trustees or Shareholders, as the
case may be, are present at such meeting and all agree to consider such proposal
without protesting the lack of notice.
11
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
One Financial Center
Boston, Massachusetts 02111
August 30, 1991
Standish, Ayer & Wood Investment Trust
One Financial Center
Boston, MA 02111
Re: Investment Advisory Agreement dated October 26, 1988 for
Standish International Equity Fund
Dear Sirs:
As we have previously discussed with you, it is contemplated that,
effective October 1, 1991, Standish, Ayer & Wood, Inc. ("Standish") will assign
the above-mentioned agreement to Standish International Management Company,
L.P., a Delaware limited partnership ("SIMCO"). Standish controls and manages
SIMCO as its general partner and owns substantially all of its outstanding
partnership interests.
Please be so kind as to indicate your consent to the foregoing assignment
in the space provided below.
Very truly yours,
STANDISH, AYER & WOOD, INC.
By: /s/ D. Barr Clayson
------------------------
D. Barr Clayson
Managing Director
ACKNOWLEDGED AND ACCEPTED:
STANDISH, AYER & WOOD INVESTMENT
TRUST
By: /s/ Richard S. Wood
-----------------------------
Richard S. Wood, President
<PAGE>
The undersigned, Standish International Management Company, L.P., hereby
assumes all of the obligations and duties of Standish, Ayer & Wood, Inc., under
the above-mentioned agreement.
STANDISH INTERNATIONAL MANAGEMENT
COMPANY, L.P.,
By: /s/ D. Barr Clayson
-------------------------
D. Barr Clayson
Managing Director
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 26th day of October, 1988, by and between
Standish, Ayer & Wood Investment Trust, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust"), and
Standish, Ayer & Wood, Inc., a Massachusetts corporation (the "Advisor").
W I T N E S S E T H :
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 19640, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish International Fund (the "Fund"), a separate
fund of the Trust, and the Adviser is willing to furnish such services;
3
<PAGE>
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto. The Adviser, and any affiliate thereof,
shall be free to render similar services to other investment companies and other
clients and to engage in other activities, so long as the services rendered
hereunder are not impaired.
4
<PAGE>
(b) The Adviser shall provide, without cost to the Trust, all
necessary office space and the services of executive personnel for administering
the affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including
legal and auditing services, taxes and governmental fees, certain insurance
premiums, costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing and prospective shareholders, bookkeeping and
share pricing expenses, fees and disbursements of the Trust's custodian,
transfer and dividend disbursing agent or registrar, or interest and other like
expenses properly payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished to the Adviser under this Agreement, the Trust agrees
to pay to the Adviser a fee at the annual rate of 0.8% of the Fund's average net
asset value computed no less frequently than weekly. Such fee shall be accrued
when computed and payable monthly. For purposes of calculating such fee, the
Fund's average net asset value shall be determined by taking the average of all
determinations of net asset value made in the manner provided in the Fund's
current prospectus and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period
less than a full month during which this Agreement is in effect shall be
prorated according to the proportion which such period bears to a full month.
5
<PAGE>
(c) The Adviser agrees that if total expenses of the Fund for any
fiscal year of the Fund exceed the permissible limits applicable in any state in
which shares of the Fund are then qualified for sale, the compensation due the
Adviser for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with any investment policy or the purchase, sale or
retention of any securities on the recommendation of the Adviser; provided,
however, that nothing herein contained shall be construed to protect the Adviser
against any liability to the Trust by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not
6
<PAGE>
parties to this Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval.
(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of the Trust or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of the Fund or by
the Adviser, on sixty days' written notice to the other party.
(c) This Agreement shall automatically and immediately terminate in
the event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees and shareholder of the Fund and this Agreement has been signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholder nor such execution and delivery by such officer
shall be deemed to have been made by any of them, but shall bind only the trust
property of the Trust as provided in the Agreement and Declaration of Trust.
7
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT
TRUST
Attest:
/s/ By: /s/
- ------------------------------- ----------------------------
Title: President
STANDISH, AYER & WOOD, INC.
Attest:
/s/ By: /s/ D. Barr Clayson
- ------------------------------- ----------------------------
Title: Vice President
8
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of September, 1988, by and between
Standish, Ayer & Wood Investment Trust, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust"), and
Standish, Ayer & Wood, Inc., a Massachusetts corporation (the "Adviser").
W I T N E S S E T H :
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish Securitized Fund (the "Fund"), a separate fund
of the Trust, and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms herein set
forth.
<PAGE>
The Adviser accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided. The Adviser shall for all
purposes herein be deemed an independent contractor and shall, unless expressly
otherwise provided, have no authority to act for or represent the Fund in any
way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto. The Adviser, and any affiliate thereof,
shall be free to render similar services to other investment companies and other
clients and to engage in other activities, so long as the services rendered
hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of
-2-
<PAGE>
shareholder notices and reports, typesetting and printing of prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing and prospective shareholders, bookkeeping and share
pricing expenses, fees and disbursements of the Trust's custodian, transfer and
dividend disbursing agent or registrar, or interest and other like expenses
properly payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished to the Adviser under this Agreement, the Trust agrees
to pay to the Adviser a fee at the annual rate of 0.25% of the first
$500,000,000 of the Fund's average net asset value and .20% of the Fund's
average net asset value in excess of $500,000,000, computed no less frequently
than weekly. Such fee shall be accrued when computed and payable monthly. For
purposes of calculating such fee, the Fund's average net asset value shall be
determined by taking the average of all determinations of net asset value made
in the manner provided in the Fund's current prospectus and statement of
additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses of the Fund for any fiscal
year of the Fund exceed the permissible limit applicable in any state in which
shares of the Fund are then qualified for sale, the compensation due the Adviser
for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof at the
-3-
<PAGE>
time such compensation is payable after the end of each calendar month, subject
to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with any investment policy or the purchase, sale or
retention of any securities on the recommendation of the Adviser; provided,
however, that nothing herein contained shall be construed to protect the Adviser
against any liability to the Trust by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
-4-
<PAGE>
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other party.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees and shareholder of the Fund and this Agreement has been signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholder nor such execution and delivery by such officer
shall be deemed to have been made by any of them, but shall bind only the trust
property of the Trust as provided in the Agreement and Declaration of Trust.
-5-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
/s/ By: /s/ D. Barr Clayson
- ------------------------ -----------------------------
Title: Trustee
STANDISH, AYER & WOOD, INC.
Attest:
/s/ By: /s/
- ------------------------ -----------------------------
Title: Treasurer
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 30th day of November, 1990, by and between Standish,
Ayer & Wood Investment Trust, an unincorporated business trust organized under
the laws of The Commonwealth of Massachusetts (the "Trust") and Standish, Ayer &
Wood, Inc., a Massachusetts corporation (the "Adviser".)
W I T N E S S E T H :
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment advisory
and management services, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment advisory
services to the Standish International Fixed Income Fund (the "Fund"), a
separate fund of the Trust, and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto. The Adviser, and any affiliates
<PAGE>
-2-
thereof, shall be free to render similar services to other investment companies
and other clients and to engage in other activities, so long as the services
rendered hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders, bookkeeping and share pricing expenses,
fees and disbursements of the Trust's custodian, transfer and dividend
disbursing agent or registrar, or interest and other like expenses properly
payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust agrees
to pay to the Adviser a fee at the annual rate of .40% of the Fund's average net
asset value, computed no less frequently than weekly. Such fees shall be accrued
when computed and payable monthly. For purposes of calculating such fees, the
Fund's average net asset value shall be determined by taking the average of all
determinations of net asset value made in the manner provided in the Fund's
current prospectus and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proporation which such period bears to a full month.
(c) The Adviser agrees that through December 31, 1993, if total expenses
(excluding brokerage, taxes and extraordinary expenses) of the Fund for any
fiscal year of the Fund exceed the lower of (a) .80% of the Fund's average daily
net assets or (b) the permissible limit applicable in any state in which shares
of the Fund are then qualified for sale, the compensation due the Adviser for
such fiscal year shall be proportionately reduced by the amount of such excess
by a reduction or refund thereof at the time such compensation is payable after
the end of each calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with any investment policy or the purchase, sale or retention of
any securities on the recommendation of the Adviser; provided, however, that
nothing herein contained shall be construed to protect the Adviser against any
liability to the Fund by reason of
<PAGE>
-3-
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties under
this agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parities to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other parties.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Fund and this Agreement has been signed by an authorized officer
of the Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have been
made by any of them, but shall bind only the trust property of the Trust as
provided in the Agreement and Declaration of Trust.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
/s/ By /s/ Richard S. Wood
---------------------------
Title: President
STANDISH, AYER & WOOD, INC.
Attest:
/s/ By /s/
--- ---
Title: President
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
One Financial Center
Boston, Massachusetts 02111
August 30, 1991
Standish, Ayer & Wood
Investment Trust
One Financial Center
Boston, MA 02111
Re: Investment Advisory Agreement dated November 30, 1990 for Standish
International Fixed Income Fund
Dear Sirs:
As we have previously discussed with you, it is contemplated that,
effective October 1, 1991, Standish, Ayer & Wood, Inc. ("Standish") will assign
the above-mentioned agreement to Standish International Management Company,
L.P., a Delaware limited partnership ("SIMCO"). Standish controls and manages
SIMCO as its general partner and owns substantially all of its outstanding
partnership interests.
Please be so kind as to indicate your consent to the foregoing assignment
in the space provided below.
Very truly yours,
STANDISH, AYER & WOOD, INC.
By: /s/ D. Barr Clayson
-------------------------------
D. Barr Clayson
Managing Director
ACKNOWLEDGED AND ACCEPTED:
STANDISH, AYER & WOOD INVESTMENT
TRUST
By: /s/ Richard S. Wood
--------------------------------
Richard S. Wood, President
The undersigned, Standish International Management Company, L.P., hereby
assumes all of the obligations and duties of Standish, Ayer & Wood, Inc., under
the above-mentioned agreement.
<PAGE>
STANDISH INTERNATIONAL MANAGEMENT
COMPANY, L.P.
By: Standish, Ayer & Wood, Inc.
General Partner
By: /s/ D. Barr Clayson
------------------------
D. Barr Clayson
Managing Director
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of November, 1992, by and between
Standish, Ayer & Wood Investment Trust, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust") and
Standish, Ayer & Wood, Inc., a Massachusetts corporation (the "Adviser".)
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish Intermediate Tax Exempt Bond Fund (the
"Fund"), a separate fund of the Trust, and the Adviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the
<PAGE>
other affairs and business of the Fund and matters incidental thereto. The
Adviser, and any affiliates thereof, shall be free to render similar services to
other investment companies and other clients and to engage in other activities,
so long as the services rendered hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders, bookkeeping and share pricing expenses,
fees and disbursements of the Trust's custodian, transfer and dividend
disbursing agent or registrar, or interest and other like expenses properly
payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust agrees
to pay to the Adviser a fee at the annual rate of 0.40% of the Fund's average
net asset value, computed no less frequently than weekly. Such fees shall be
accrued when computed and payable monthly. For purposes of calculating such
fees, the Fund's average net asset value shall be determined by taking the
average of all determinations of net asset value made in the manner provided in
the Fund's current prospectus and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for the short fiscal year ending
December 31, 1992, or either of the full fiscal years ending December 31, 1993
or 1994 exceed the lower of (a) 0.65% of the Fund's average daily net assets or
(b) the permissible limit applicable in any state in which shares of the Fund
are then qualified for sale, the compensation due the Adviser for any such
fiscal year shall be proportionately reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with any investment policy or the purchase, sale or retention of
any securities on the recommendation of the Adviser; provided, however, that
nothing
-2-
<PAGE>
herein contained shall be construed to protect the Adviser against any liability
to the Fund by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other parties.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and this Agreement has been signed by an authorized
officer of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them, but shall bind only the trust property of the Trust as
provided in the Agreement and Declaration of Trust.
-3-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
/s/ By: /s/ Richard S. Wood
- --------------------- ------------------------------
Title: President
STANDISH, AYER & WOOD, INC.
Attest:
/s/ By: /s/
- --------------------- ------------------------------
Title: President
-4-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of November, 1992, by and between
Standish, Ayer & Wood Investment Trust, an unincorporated business trust
organized under the laws of The Commonwealth of Massachusetts (the "Trust") and
Standish, Ayer & Wood, Inc., a Massachusetts corporation (the "Adviser".)
W I T N E S S E T H :
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish Massachusetts Intermediate Tax Exempt Bond
Fund (the "Fund"), a separate fund of the Trust, and the Adviser is willing to
furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and
<PAGE>
Bylaws and of the 1940 Act, the Adviser will also manage, supervise and conduct
the other affairs and business of the Fund and matters incidental thereto. The
Adviser, and any affiliates thereof, shall be free to render similar services to
other investment companies and other clients and to engage in other activities,
so long as the services rendered hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders, bookkeeping and share pricing expenses,
fees and disbursements of the Trust's custodian, transfer and dividend
disbursing agent or registrar, or interest and other like expenses properly
payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust agrees
to pay to the Adviser a fee at the annual rate of 0.40% of the Fund's average
net asset value, computed no less frequently than weekly. Such fees shall be
accrued when computed and payable monthly. For purposes of calculating such
fees, the Fund's average net asset value shall be determined by taking the
average of all determinations of net asset value made in the manner provided in
the Fund's current prospectus and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for the short fiscal year ending
December 31, 1992, or either of the full fiscal years ending December 31, 1992
or 1994 exceed the lower of (a) 0.65% of the Fund's average daily net assets or
(b) the permissible limit applicable in any state in which shares of the Fund
are then qualified for sale, the compensation due the Adviser for any such
fiscal year shall be proportionately reduced by the amount of such excess by a
reduction or refund thereof at the time such compensation is payable after the
end of each calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with any investment policy or the purchase, sale or retention of
any
-2-
<PAGE>
securities on the recommendation of the Adviser; provided, however, that nothing
herein contained shall be construed to protect the Adviser against any liability
to the Fund by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other parties.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and this Agreement has been signed by an authorized
officer of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them, but shall bind only the trust property of the Trust as
provided in the Agreement and Declaration of Trust.
-3-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
/s/ By: /s/ Richard S. Wood
- --------------------- ------------------------------
Title: President
STANDISH, AYER & WOOD, INC.
Attest:
/s/ By: /s/
- --------------------- ------------------------------
Title: President
-4-
INVESTMENT ADVISORY AGREEMENT
================================================================================
AGREEMENT made as of this 1st day of June 1995, by and between Standish, Ayer &
Wood Investment Trust, an unincorporated business trust organized under the laws
of The Commonwealth of Massachusetts (the "Trust") and Standish, Ayer & Wood,
Inc., a Massachusetts corporation (the "Adviser".)
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment advisory
and management services, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment advisory
services to the Standish Controlled Maturity Fund (the "Fund"), a separate fund
of the Trust, and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Anointment of the Adviser. The Trust hereby appoints the Adviser to act
as investment adviser of the Fund for the period and on the terms herein
set forth. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided. The
Adviser shall for all purposes herein be deemed an independent contractor
and shall, unless expressly otherwise provided, have no authority to act
for or represent the Fund in any way nor shall otherwise be deemed an
agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject
to the overall supervision and review of the Trustees of the Trust, what
investments shall be purchased, held, sold or exchanged by the Fund and
what portion, if any, of the assets of the Fund will be held uninvested,
and shall, on behalf of the Trust, make changes in the investments of the
Fund. Subject always to the supervision of the Trustees of the Trust and
to the provisions of the Trust's Agreement and Declaration of Trust and
Bylaws and of the 1940 Act, the Adviser will also manage, supervise and
conduct the other affairs and business of the Fund and matters incidental
thereto. The Adviser, and any affiliates thereof, shall be free to render
similar services to other investment companies and other clients and to
engage in other activities, so long as the services rendered hereunder are
not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance
premiums, costs of shareholder notices and reports, typesetting and
printing of prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders, bookkeeping and
share pricing expenses, fees and disbursements of the Trust's custodian,
transfer and dividend disbursing agent or registrar, or interest and other
like expenses properly payable by the Trust.
<PAGE>
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust
agrees to pay to the Adviser a fee at the annual rate of .35% of the
Fund's average net asset value, computed no less frequently than weekly.
Such fees shall be accrued when computed and payable monthly. For purposes
of calculating such fees, the Fund's average net asset value shall be
determined by taking the average of all determinations of net asset value
made in the manner provided in the Fund's current prospectus and statement
of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be
prorated according to the proportion which such period bears to a full
month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for any fiscal year of the Fund
exceed the lower of the permissible limit applicable in any state in which
shares of the Fund are then qualified for sale, the compensation due the
Adviser for such fiscal year shall be proportionately reduced by the
amount of such excess by a reduction or refund thereof at the time such
compensation is payable after the end of each calendar month, subject to
readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with any investment policy or the purchase, sale or
retention of any securities on the recommendation of the Adviser;
provided, however, that nothing herein contained shall be construed to
protect the Adviser against any liability to the Fund by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years from the date hereof and
shall continue in full force and effect for successive periods of one year
thereafter, but only so long as each such continuance is approved annually
(i) by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund,
and, in either event, (ii) by vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of the
Fund or by the Adviser, on sixty days' written notice to the other
parties.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under
the Agreement and Declaration of Trust of the Trust dated August 13, 1986,
as the same may subsequently thereto have been, or subsequently hereto be,
amended. 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 as provided in the
Agreement and Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Fund and this Agreement has been signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them, but shall bind only the trust property of the Trust
as provided in the Agreement and Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
__________________________________ By __________________________________
Title:
STANDISH, AYER & WOOD, INC.
Attest:
__________________________________ By: __________________________________
Title:
INVESTMENT ADVISORY AGREEMENT
================================================================================
AGREEMENT made as of this 30th day of June 1995, by and between Standish, Ayer &
Wood Investment Trust, an unincorporated business trust organized under the laws
of The Commonwealth of Massachusetts (the "Trust") and Standish, Ayer & Wood,
Inc., a Massachusetts corporation (the "Adviser".)
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment advisory
and management services, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment advisory
services to the Standish Fixed Income Fund II (the "Fund"), a separate fund of
the Trust, and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act as investment adviser of the Fund for the period and on the terms
herein set forth. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein
provided. The Adviser shall for all purposes herein be deemed an
independent contractor and shall, unless expressly otherwise provided,
have no authority to act for or represent the Fund in any way nor shall
otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject
to the overall supervision and review of the Trustees of the Trust, what
investments shall be purchased, held, sold or exchanged by the Fund and
what portion, if any, of the assets of the Fund will be held uninvested,
and shall, on behalf of the Trust, make changes in the investments of the
Fund. Subject always to the supervision of the Trustees of the Trust and
to the provisions of the Trust's Agreement and Declaration of Trust and
Bylaws and of the 1940 Act, the Adviser will also manage, supervise and
conduct the other affairs and business of the Fund and matters incidental
thereto. The Adviser, and any affiliates thereof, shall be free to render
similar services to other investment companies and other clients and to
engage in other activities, so long as the services rendered hereunder are
not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance
premiums, costs of shareholder notices and reports, typesetting and
printing of prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders, bookkeeping and
share pricing expenses, fees and disbursements of the Trust's custodian,
transfer and dividend disbursing agent or registrar, or interest and other
like expenses properly payable by the Trust.
<PAGE>
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust
agrees to pay to the Adviser a fee at the annual rate of .40% of the
Fund's average net asset value, computed no less frequently than weekly.
Such fees shall be accrued when computed and payable monthly. For purposes
of calculating such fees, the Fund's average net asset value shall be
determined by taking the average of all determinations of net asset value
made in the manner provided in the Fund's current prospectus and statement
of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be
prorated according to the proportion which such period bears to a full
month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for any fiscal year of the Fund
exceed the lower of the permissible limit applicable in any state in which
shares of the Fund are then qualified for sale, the compensation due the
Adviser for such fiscal year shall be proportionately reduced by the
amount of such excess by a reduction or refund thereof at the time such
compensation is payable after the end of each calendar month, subject to
readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with any investment policy or the purchase, sale or
retention of any securities on the recommendation of the Adviser;
provided, however, that nothing herein contained shall be construed to
protect the Adviser against any liability to the Fund by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years from the date hereof and
shall continue in full force and effect for successive periods of one year
thereafter, but only so long as each such continuance is approved annually
(i) by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund,
and, in either event, (ii) by vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of the
Fund or by the Adviser, on sixty days' written notice to the other
parties.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under
the Agreement and Declaration of Trust of the Trust dated August 13, 1986,
as the same may subsequently thereto have been, or subsequently hereto be,
amended. 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 as provided in the
Agreement and Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Fund and this Agreement has been signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them, but shall bind only the trust property of the Trust
as provided in the Agreement and Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
STANDISH, AYER & WOOD INVESTMENT TRUST
Attest:
__________________________________ By __________________________________
Title:
STANDISH, AYER & WOOD, INC.
Attest:
__________________________________ By: __________________________________
Title:
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 2nd day of January, by and between Standish,
Ayer & Wood Investment Trust, an unincorporated business trust organized under
the laws of The Commonwealth of Massachusetts (the "Trust"), and Standish, Ayer
& Wood, Inc., a Massachusetts corporation (the "Adviser").
WITNESSETH
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish Small Cap Tax-Sensitive Equity Fund (the
"Fund"), a separate fund of the Trust, and the Adviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to
act an investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto. The Adviser, and any affiliates thereof,
shall be free to render similar services to other investment companies and other
clients and to engage in other activities, so long as the services rendered
hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal
and auditing services, taxes and governmental fees, certain insurance premiums,
costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders, bookkeeping and share pricing expenses,
fees and disbursements of the Trust's custodian, transfer and dividend
disbursing agent or registrar, or interest and other like expenses properly
payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust agrees
to pay the Adviser a fee at the annual rate of 0.60% of the
<PAGE>
Fund's average daily net asset value. Such fees shall be accrued when computed
and payable monthly. For purposes of calculating such fees, the Fund's average
net asset value shall be determined by taking the average of all determinations
of net asset value made in the manner provided in the Fund's current prospectus
and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for any fiscal year of the Fund exceed
the permissible limit applicable in any state in which shares of the Fund are
then qualified for sale, the compensation due the Adviser for such fiscal year
shall be proportionately reduced by the amount of such excess by a reduction or
refund thereof at the time such compensation is payable after the end of each
calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with any investment policy or the purchase, sale or retention of
any securities on the recommendation of the Adviser; provided, however, that
nothing herein contained shall be construed to protect the Adviser against any
liability to the Fund by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of
any penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other party.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees and shareholders of the Fund and this Agreement has been signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholders nor such execution and delivery by such
officer shall be deemed to have been made by any of them, but shall bind only
the trust property of the Trust as provided in the Agreement and Declaration of
Trust.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
<PAGE>
STANDISH, AYER & WOOD
INVESTMENT TRUST
Attest:
__________________________________ By __________________________________
Title:
STANDISH, AYER & WOOD, INC.
Attest:
__________________________________ By: __________________________________
Title:
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 2nd day of January, by and between Standish,
Ayer & Wood Investment Trust, an unincorporated business trust organized under
the laws of The Commonwealth of Massachusetts (the "Trust"), and Standish, Ayer
& Wood, Inc., a Massachusetts corporation (the "Adviser").
WITNESSETH
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the assets held by the Trustees of the Trust may be divided into
separate funds, each with its own separate investment portfolio, investment
objectives, policies and purposes; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services, and is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Standish Tax-Sensitive Equity Fund (the "Fund"), a
separate fund of the Trust, and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of the Adviser. The Trust hereby appoints the Adviser to act
an investment adviser of the Fund for the period and on the terms herein set
forth. The Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor and shall, unless
expressly otherwise provided, have no authority to act for or represent the Fund
in any way nor shall otherwise be deemed an agent of the Fund.
2. Duties of the Adviser. (a) The Adviser, at its expense, will furnish
continuously an investment program for the Fund, will determine, subject to the
overall supervision and review of the Trustees of the Trust, what investments
shall be purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund will be held uninvested, and shall, on behalf of
the Trust, make changes in the investments of the Fund. Subject always to the
supervision of the Trustees of the Trust and to the provisions of the Trust's
Agreement and Declaration of Trust and Bylaws and of the 1940 Act, the Adviser
will also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto. The Adviser, and any affiliates thereof,
shall be free to render similar services to other investment companies and other
clients and to engage in other activities, so long as the services rendered
hereunder are not impaired.
(b) The Adviser shall provide, without cost to the Trust, all necessary
office space and the services of executive personnel for administering the
affairs of the Fund.
(c) The Fund shall bear the expenses of its operations, including legal and
auditing services, taxes and governmental fees, certain insurance premiums,
costs of shareholder notices and reports, typesetting and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders, bookkeeping and share pricing expenses,
fees and disbursements of the Trust's custodian, transfer and dividend
disbursing agent or registrar, or interest and other like expenses properly
payable by the Trust.
3. Compensation of the Adviser. (a) As full compensation for the services
and facilities furnished by the Adviser under this Agreement, the Trust agrees
to pay the Adviser a fee at the annual rate of 0.50% of the
<PAGE>
Fund's average daily net asset value. Such fees shall be accrued when computed
and payable monthly. For purposes of calculating such fees, the Fund's average
net asset value shall be determined by taking the average of all determinations
of net asset value made in the manner provided in the Fund's current prospectus
and statement of additional information.
(b) The compensation payable to the Adviser hereunder for any period less
than a full month during which this Agreement is in effect shall be prorated
according to the proportion which such period bears to a full month.
(c) The Adviser agrees that if total expenses (excluding brokerage, taxes
and extraordinary expenses) of the Fund for any fiscal year of the Fund exceed
the permissible limit applicable in any state in which shares of the Fund are
then qualified for sale, the compensation due the Adviser for such fiscal year
shall be proportionately reduced by the amount of such excess by a reduction or
refund thereof at the time such compensation is payable after the end of each
calendar month, subject to readjustment during such fiscal year.
4. Limitation of Liability of the Adviser. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with any investment policy or the purchase, sale or retention of
any securities on the recommendation of the Adviser; provided, however, that
nothing herein contained shall be construed to protect the Adviser against any
liability to the Fund by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under this Agreement.
5. Term and Termination. (a) This Agreement shall become effective on the
date hereof. Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof and shall continue
in full force and effect for successive periods of one year thereafter, but only
so long as each such continuance is approved annually (i) by either the Trustees
of the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment of any
penalty by vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund or by the
Adviser, on sixty days' written notice to the other party.
(c) This Agreement shall automatically and immediately terminate in the
event of its assignment as defined in the 1940 Act.
6. Limitation of Liability. The term "Standish, Ayer & Wood Investment
Trust" means and refers to the Trustees from time to time serving under the
Agreement and Declaration of Trust of the Trust dated August 13, 1986, as the
same may subsequently thereto have been, or subsequently hereto be, amended. 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 as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees and shareholders of the Fund and this Agreement has been signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholders nor such execution and delivery by such
officer shall be deemed to have been made by any of them, but shall bind only
the trust property of the Trust as provided in the Agreement and Declaration of
Trust.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
<PAGE>
STANDISH, AYER & WOOD
INVESTMENT TRUST
Attest:
__________________________________ By __________________________________
Title:
STANDISH, AYER & WOOD, INC.
Attest:
__________________________________ By: __________________________________
Title:
STANDISH INTERNATIONAL MANAGEMENT COMPANY, L.P.
One Financial Center
Boston, Massachusetts 02111
August 30, 1991
Standish, Ayer & Wood
Investment Trust
One Financial Center
Boston, MA 02111
RE: Investment Advisory Agreement dated November 30, 1990 for Standish
International Fixed Income Fund
Dear Sir:
As we have previously discussed with you, it is contemplated that,
effective October 1, 1991, Standish, Ayer & Wood, Inc. ("Standish") will assign
the above-mentioned agreement to Standish International Management Company,
L.P., a Delaware limited partnership ("SIMCO"). Standish controls and manages
SIMCO as its general partner and owns substantially all of its outstanding
partnership interests.
Please be so kind as to indicate your consent to the foregoing assignment
in the space provided below.
Very truly yours,
STANDISH, AYER & WOOD, INC.
By: /s/ D. Barr Clayson
-----------------------
D. Barr Clayson
Managing Director
ACKNOWLEDGED AND ACCEPTED:
STANDISH, AYER & WOOD INVESTMENT
TRUST
By: /s/ Richard S. Wood
-------------------------------
Richard S. Wood, President
<PAGE>
The undersigned, Standish International Management Company, L.P., hereby
assumes all of the obligations and duties of Standish, Ayer & Wood, Inc., under
the abo e-mentioned agreement.
STANDISH INTERNATIONAL
MANAGEMENT
BY: Standish, Ayer & Wood, Inc.
General Partner
By: /s/ D. Barr Clayson
----------------------------
D. Barr Clayson
Managing Director
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT, dated this 21st day of February, 1996, by and
between Standish, Ayer and Wood Investment Trust, a Massachusetts business trust
(the "Trust"), and Standish Fund Distributors, L.P., a Delaware limited
partnership (the "Underwriter").
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has an effective registration statement (the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") for the purpose of
registering shares of beneficial interest for offering under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, the Underwriter is registered as a broker-dealer with the
Commission and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD");
WHEREAS, the parties hereto deem it mutually advantageous that the
Underwriter should act as Principal Underwriter, as defined in the 1940 Act, for
the sale of the shares of beneficial interest of each series of the Trust which
the Trustees may or have established from time to time and make subject to this
Agreement by listing on Exhibit A hereto (individually, a "Portfolio" and
collectively, the "Portfolios"); and
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Trust and the Underwriter do hereby agree as follows:
1. The Trust does hereby grant to the Underwriter the right and option to
purchase shares of beneficial interest of each Portfolio (the "Shares") for sale
to investors, either directly or indirectly through other broker-dealers. The
Underwriter is not required to purchase any specified number of Shares, but will
purchase from the Trust only a sufficient number of Shares as may be necessary
to fill unconditional orders received from time to time by the Underwriter for
the benefit of investors.
2. The Underwriter shall use its best efforts (but only in states in which
it may lawfully do so) to obtain from investors unconditional orders for Shares
authorized for issue by the Trust and registered under the 1933 Act, provided
that the Underwriter may in its sole discretion refuse to accept orders for
Shares from any particular applicant. The Underwriter shall offer Shares at the
net asset value of the Shares, to be calculated for each Portfolio of Shares as
described in the Registration
<PAGE>
Statement, including the prospectuses, filed with the Commission and in effect
at the time of the offering.
3. Any right granted to the Principal Underwriter to accept orders for
shares or make sales on behalf of the Trust will not apply to shares issued in
connection with the merger or consolidation of any other investment company with
the Trust, or any Portfolio, or its acquisition, by purchase or otherwise, of
all or substantially all the assets of any investment company or substantially
all the outstanding shares of any such company, and such right shall not apply
to shares that may be offered or otherwise issued by the Trust to shareholders
by virtue of their being shareholders of the Trust.
4. The Trust, on behalf of the respective Portfolio, shall receive the
applicable net asset value on all sales of shares by the Principal Underwriter
as agent of the Trust.
5. The Principal Underwriter shall not have "custody" (as such term is
interpreted by the staff of the Commission) of Trust assets, including payments
made pursuant to orders accepted by the Principal Underwriter. In this regard,
the Principal Underwriter shall not accept payment for Shares made by wire
transfer and shall not accept payment for Shares made by draft, other than
drafts made payable to the Trust. To the extent the Principal Underwriter
accepts drafts made payable to the Trust, the Principal Underwriter shall
deliver such drafts accompanied by proper applications for the purchase of
Shares to the Trust's custodian no later than 12:00 p.m. (Boston time) on the
first business day following the receipt by the Principal Underwriter of such
payments and applications.
6. The Trust will use its best efforts to register from time to time under
the 1933 Act such number of Shares not already so registered as the Underwriter
may be expected to sell on behalf of the Trust. The Underwriter and the Trust
agree to cooperate in taking such action as may be necessary from time to time
to qualify Shares so registered for sale by the Underwriter or the Trust in any
states mutually agreeable and to maintain such qualification. This Agreement
relates to the issue and sale of Shares that are duly authorized and registered
and available for sale by the Trust, including redeemed or repurchased Shares if
and to the extent that they may legally be sold and if, but only if, the Trust
sees fit to sell them.
7. If and whenever the determination of net asset value is suspended and
until such suspension is terminated, the Underwriter shall not accept further
orders for Shares except unconditional orders placed with the Underwriter before
the Underwriter had knowledge of the suspension. In addition, the Trust reserves
the right to suspend sales and the Underwriter's authority to accept orders for
Shares on behalf of the Trust if, in the judgment of a majority of the Board of
Trustees or a majority of the Executive
-2-
<PAGE>
Committee of such Board, if such body exists, it is in the best interests of the
Trust to do so, such suspension to continue for such period as may be determined
by such majority; and in that event, the Underwriter shall not sell any Shares
on behalf of the Trust while such suspension remains in effect except for Shares
necessary to cover unconditional orders accepted by the Underwriter before the
Underwriter had knowledge of the suspension.
8. This Agreement shall become effective on the date first written above
and shall terminate on any anniversary thereof if its terms and renewal have not
been approved by a majority vote of the Trustees of the Trust voting in person,
including a majority of its Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in the operation of
the Underwriting Agreement (the "Qualified Trustees"), at a meeting of Trustees
called for the purpose of voting on such approval. This Agreement may also be
terminated at any time, without payment of any penalty, by the Trust on 60 days'
written notice to the Underwriter, or by the Underwriter upon similar notice to
the Trust. This Agreement may also be terminated by a party upon five (5) days'
written notice to the other party in the event that the Commission has issued an
order or obtained an injunction or other court order suspending effectiveness of
the Registration Statement covering the Shares of the Trust. Finally, this
Agreement may also be terminated by the Trust upon five (5) days' written notice
to the Underwriter if the NASD has expelled the Underwriter or suspended its
membership in that organization.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
10. The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising hereunder, whether direct or indirect, of any
nature whatsoever shall be satisfied out of the assets of the Trust and that no
Trustee, officer or holder of shares of beneficial interest of the Trust shall
be personally liable for any of the foregoing liabilities. No Portfolio of the
Trust shall be responsible for the liabilities or obligations of any other
Portfolio. The Trust's Declaration of Trust, as amended from time to time, is on
file in the Office of Secretary of State of The Commonwealth of Massachusetts,
and a copy of the Trust's Declaration of Trust, as amended from time to time,
has been provided to the Underwriter. The Declaration of Trust describes in
detail the respective responsibilities and limitations on liability of the
Trustees, officers, and holders of Shares of the Trust.
11. Nothing contained herein shall relieve the Trust of any obligation
under its investment advisory agreement or any other contract with any affiliate
of the Underwriter.
-3-
<PAGE>
12. This Agreement shall automatically terminate in the event of its
assignment (as that term is defined in the 1940 Act).
13. In the event of any dispute between the parties, this Agreement shall
be construed according to the laws of The Commonwealth of Massachusetts provided
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, 1933 Act or any rule or order of the Securities and Exchange Commission
thereunder.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of day and year first above
written.
ATTEST: STANDISH, AYER AND WOOD
INVESTMENT TRUST on behalf of each of its
series
By:/s/ Lora L. Beaulieu By:/s/ Richard S. Wood
---------------------------- -----------------------------------
Its: Regulatory Specialist Its: President
ATTEST: STANDISH FUND DISTRIBUTORS, L.P.
By:/s/ Beverly E. Banfield By:/s/ James E. Hollis III
---------------------------- -----------------------------------
Its: Chief Operations Officer Its: Chief Executive Officer
MASTER CUSTODIAN AGREEMENT
between
STANDISH, AYER & WOOD INVESTMENT TRUST
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
1. Bank Appointed Custodian.........................................1
2. Definitions......................................................1
2.1 Authorized Person....................................1
2.2 Board................................................1
2.3 Security.............................................1
2.4 Portfolio Security...................................2
2.5 Officers' Certificate................................2
2.6 Book-Entry System....................................2
2.7 Depository...........................................2
2.8 Proper Instructions..................................2
2.9 Foreign Securities...................................3
3. Separate Accounts................................................3
4. Certification as to Authorized Persons...........................3
5. Custody of Cash..................................................3
5.1 Purchase of Securities...............................4
5.2 Redemptions..........................................4
5.3 Distributions and Expenses of Fund...................4
5.4 Payment in Respect of Securities.....................4
5.5 Repayment of Loans...................................4
5.6 Repayment of Cash....................................5
5.7 Foreign Exchange Transactions........................5
5.8 Other Authorized Payments............................5
5.9 Termination..........................................5
6. Securities.......................................................5
6.1 Segregation and Registration.........................5
6.2 Voting and Proxies...................................6
6.3 Book-Entry System....................................6
6.4 Use of a Depository..................................7
6.5 Use of Book-Entry System for Commercial Paper........9
6.6 Use of Immobilization Programs......................10
6.7 Eurodollar CDs......................................10
-ii-
<PAGE>
6.8 Options and Futures Transactions....................10
6.9 Segregated Account..................................11
6.10 Interest Bearing Call or Time Deposits..............13
6.11 Transfer of Securities..............................13
7. Redemptions.....................................................15
8. Merger, Dissolution, etc. of Fund...............................15
9. Actions of Bank Without Prior Authorization.....................15
10. Collections and Defaults........................................16
11. Maintenance of Records and Accounting Services..................17
12. Fund Evaluation.................................................17
13. Concerning the Bank.............................................19
13.1 Performance of Duties and Standard of Care..........19
13.2 Agents and Subcustodians with Respect to
Property of the Fund Held in the United States......20
13.3 Duties of the Bank with Respect to Property
of the Fund Held Outside of the United States.......21
13.4 Insurance...........................................24
13.5 Fees and Expenses of Bank...........................24
13.6 Advances by Bank....................................25
14. Termination.....................................................25
15. Confidentiality.................................................26
16. Notices.........................................................26
17. Amendments......................................................27
18. Parties.........................................................27
19. Governing Law...................................................27
20. Counterparts....................................................27
21. Limitation of Liability.........................................27
-iii-
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22. Single Agreement................................................27
iv
<PAGE>
MASTER CUSTODIAN AGREEMENT
AGREEMENT made as of this 29th day of February, 1996, between STANDISH,
AYER & WOOD INVESTMENT TRUST, a Massachusetts business trust (the "Fund"), and
INVESTORS BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company, on behalf of the
individual portfolios listed on Appendix A hereto, desires to place and maintain
portfolio securities and cash in the custody of the Bank. The Bank has at least
the minimum qualifications required by Section 17(f)(1) of the Investment
Company Act of 1940, as amended, (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Fund, and has indicated its willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign
<PAGE>
currency, or, in general, any interest or instrument commonly known as a
"security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, as amended,
("Exchange Act") its successor or successors and its nominee or nominees. The
term "Depository" shall further mean and include any other person authorized to
act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action
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requires the Bank to act the Fund shall give the Bank specific Proper
Instructions as to the action required. Upon receipt of an Officers' Certificate
as to the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electromechanical or electronic devices provided that
the Board and the Bank are satisfied that such procedures afford adequate
safeguards for the Fund's assets.
2.9 Foreign Securities. The term Foreign Securities as used herein
will have the same meaning as when such term is used in rule 17f-5 of the 1940
Act.
3. Separate Accounts. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon). Unless the context otherwise requires, any reference in this Agreement
to any actions to be taken by the Fund shall be deemed to refer to the Fund
acting on behalf of one or more of its series, any reference in this Agreement
to any assets of the Fund, including, without limitation, any portfolio
securities and cash and earnings thereon, shall be deemed to refer only to
assets of the applicable series, any duty or obligation of the Bank hereunder to
the Fund shall be deemed to refer to duties and obligations with respect to the
individual series and any obligation or liability of the Fund hereunder shall be
binding only with respect to the individual series, and shall be discharged only
out of the assets of such series.
It is agreed that for the purposes of this Agreement, that each of the
series of the Fund listed on Appendix A, individually and not jointly, shall be
deemed to be a party hereto. It is also understood that each of such entities
shall be deemed to be entering into a separate agreement with the Bank that it
is as if each of such entities has signed a separate Agreement with the Bank and
that a single document is being signed simply to facilitate the execution and
administration of the Agreement.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
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<PAGE>
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 13.2 or 13.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank registered
in the name of the Fund or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book Entry Paper) of purchase of the securities received
by the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
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<PAGE>
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Fund
deals or for their failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 13.2 or 13.3 hereof, the Bank as custodian, will receive
and hold pursuant to the provisions hereof, in a separate account or accounts
and physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund (or
-5-
<PAGE>
series of the Fund in accordance with Section 3). All such Portfolio Securities
will be held or disposed of by the Bank for, and subject at all times to, the
instructions of the Fund pursuant to the terms of this Agreement. Subject to the
specific provisions herein relating to Portfolio Securities that are not
physically held by the Bank, the Bank will register all Portfolio Securities
(unless otherwise directed by Proper Instructions or an Officers' Certificate),
in the name of a registered nominee of the Bank as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued thereunder,
and will execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any state. The
Bank will use its best efforts to the end that the specific Portfolio Securities
held by it hereunder will be at all times identifiable.
The Fund will from time to time furnish to the Bank
appropriate instruments to enable it to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Portfolio
Securities which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials with respect to such Securities, such proxies to
be executed by the registered holder of such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted.
6.3 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officers Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) win identify by book entry Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the
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<PAGE>
Bank (or such agent) be open for inspection by duly authorized officers,
employees or agents of the Fund. Where securities are transferred to the Fund's
account, the Bank shall also, by book entry or otherwise, identify as belonging
to the Fund a quantity of securities in fungible bulk of securities (i)
registered in the name of the Bank or its nominee, or (ii) shown on the Bank's
account on the books of the Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank
(or its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advises from the Book-Entry System of transfers of securities for
the account of the Fund shall identify the Fund, be maintained for the Fund by
the Bank and shall be provided to the Fund at its request. The Bank shall send
the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Book-Entry System by reason of any
gross negligence, willful misfeasance or bad faith of the Bank or any of its
agents or of any of its or their employees or from any reckless disregard by the
Bank or any such agent of its duty to use its best efforts to enforce such
rights as it may have against the Book-Entry System; at the election of the
Fund, it shall be entitled to be subrogated for the Bank in any claim against
the Book-Entry System or any other person which the Bank or its agent may have
as a consequence of any such loss or damage if and to the extent that the Fund
has not been made whole for any loss or damage;
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6.4 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal on behalf of the Fund with Portfolio
Securities including stock dividends, rights and other items of like nature, and
to receive and remit to the Bank on behalf of the Fund all income and other
payments thereon and to take all steps necessary and proper in connection with
the collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment thereof or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of a Depository by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or its employees or
from any reckless disregard by the Bank of its duty to use its best efforts to
enforce such rights as it may have against a Depository; at the election of the
Fund, it shall be entitled to be subrogated for the Bank in any claim against
the Depository or any other person which the Bank or its agent may have as a
consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any loss or damage. In this connection, the Bank shall
use its best efforts to ensure that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
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<PAGE>
(ii) Any proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank and the Fund
all internal accounting control reports, whether or not audited by an
independent public accountant, as well as such other reports as the Fund may
reasonably request in order to verify the Portfolio Securities held by such
Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book- Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Bookentry Paper System,
the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) the records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
Commercial Paper belonging to the Fund which is included in the Book-Entry Paper
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
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<PAGE>
(d) the Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper System as
the Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Securities are identified on the books of the Bank as
belonging to the Fund and that the books of the Bank identify the European
Branch holding such Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.7, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund, and shall have no liability to the Fund or
its shareholders with respect to the actions, inactions, whether negligent or
otherwise of such European Branch in connection with such Eurodollar CDs, except
for any loss or damage to the Fund resulting from the Bank's own gross
negligence, willful misfeasance or bad faith in the performance of its duties
hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ
or Over-the-Counter.
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<PAGE>
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a) (2) of this Section 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and calls
thereon instead of options.
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6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund, into which Account or Accounts may be transferred upon
receipt of Proper Instructions, cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among
the Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a dally basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(d) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(e) for other proper corporate purposes, but only, in the case
of this clause (e), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes.
(f) Assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
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(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a) or (b)
above, in accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (c) or
(d) above, for sale or delivery to meet the Fund's obligations
under outstanding firm commitment when issued agreements for
the purchase of Portfolio Securities and under reverse
repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of
portfolio securities or reverse repurchase agreements are sold
to other parties or the Fund's obligations thereunder are met
from assets of the Fund other than those in the Segregated
Account;
(v) for delivery upon settlement of a forward commitment
agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set
forth in Proper Instructions.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section the Bank will receive
Proper Instructions requesting such
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transfer, exchange or delivery stating that it is for a purpose permitted under
the terms of this Section 6.11, specifying the applicable subsection, or
describing the purpose of the transaction with sufficient particularity to
permit the Bank to ascertain the applicable subsection, only
(a) upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment there for in full,
each such payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer there for, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of redeeming in kind shares of the Fund
upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, except that in cases where additional collateral is
required to secure a
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borrowing already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that purpose
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b)
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange there
for shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
shares of beneficial interest, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles and By-laws of the Fund, from assets
available for said purpose.
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8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable instruments
or other orders for the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income, dividends, interest and
other payments or distribution of cash with respect to the Portfolio Securities
held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code or
the regulations of the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and
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any Regulations of the Treasury Department issued thereunder, or under the laws
of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. In addition, the Bank will send the Fund a written report once each
month showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously been
reported.
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act, and under any applicable
federal and state law and will furnish the Fund daily with a statement of
condition of the Fund. The Bank will furnish to the Fund at the end of every
month, and at the close of each quarter of the Fund's fiscal year, a list of the
Portfolio Securities and the aggregate amount of cash held by it for the Fund.
The books and records of the Bank pertaining to its actions under this Agreement
and reports by the Bank or its independent accountants concerning its accounting
system, procedures for safeguarding securities and internal accounting controls
will be open to inspection and audit at reasonable times by officers of or
auditors employed by the Fund and will be preserved by the Bank in the manner
and in accordance with the applicable rules and regulations under the 1940 Act
With respect to any books and records relating to the Trust pertaining to Fund
shares which are in the possession of the Bank, the Bank agrees to permit
examination of such books and records at any time or from time to time during
the Bank's business hours by representatives or designees of the Securities and
Exchange Commission (the "SEC") and to promptly furnish, upon demand and to the
location specified by the SEC, true,
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correct, complete and current hard copies of any or all or any part of such
books and records.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
The books and records maintained by the Bank on behalf of the Fund are the
property of the Fund and will be surrendered upon request in accordance with
Section 14.
12. Fund Evaluation. The Bank shall compute and, unless otherwise directed
by the Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other days, or hours, if any, as may be authorized by the Board, the
net asset value and the public offering price of a share of capital stock of the
Fund, such determination to be made in accordance with the provisions of the
Articles and By-laws of the Fund and Prospectus and Statement of Additional
Information relating to the Fund, and valuation procedures approved by the
Board, and any applicable resolutions of the Board at the time in force and
applicable, as they may from time to time be amended. Current copies of each
such document are to be made available by the Fund to the Bank on a timely
basis. The Bank shall promptly notify the Fund, the proper exchange and the NASD
or such other persons as the Fund may request of the results of such computation
and determination. In computing the net asset value hereunder, the Bank may rely
in good faith upon information furnished to it by any Authorized Person in
respect of (i) the manner of accrual of the liabilities of the Fund and in
respect of liabilities of the Fund not appearing on its books of account kept by
the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any quotations received from a source pursuant to
(iii) above.
(a) The Bank shall compute the Yield Calculation for the Fund
for the stated periods of time as shall be mutually agreed upon, and communicate
in a timely manner the result of such computation to the Fund.
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(b) In performing the Yield Calculation, the Bank will derive
from the records it generates and maintains for the Fund pursuant Section 11
hereof, the items of data necessary for the computation. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of the Bank, the Fund shall provide, and
the Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security, or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained by
the Fund from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and the
Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in writing.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice. In the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless
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for any action taken or omitted to be taken by it in good faith reliance upon
the terms of this Agreement, any Officers' Certificate, Proper Instructions,
resolution of the Board, telegram, notice, request, certificate or other
instrument reasonably believed by the Bank to be genuine and for any other loss
to the Fund except in the case of its gross negligence, willful misfeasance or
bad faith in the performance of its duties or reckless disregard of its
obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third panty:
(a) for any losses or damages of any kind resulting from acts
of God, earthquakes, fires, floods, storms or other disturbances of nature,
epidemics,
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strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, or computers
(hardware or software) and computer facilities, the unavailability of energy
sources and other similar happenings or events except as results from the Bank's
own gross negligence; or
(b) for special, punitive or consequential damages arising
from the provision of services hereunder, even if the Bank has been advised of
the possibility of such damages.
13.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians,
provided that any such subcustodian meets at least the minimum qualifications
required by Section 17(f)(l) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Fund or any other person by reason of any act or
omission of any subcustodian and the Fund shall indemnify the Bank and hold it
harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Fund shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Fund shall pay all fees and
expenses of any subcustodian.
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States the
foreign banning institutions and foreign securities depositories designated in
the Fund's Board Meeting (each, a "Selected Foreign Sub- Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banning institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
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(b) Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Fund, the Fund authorizes the
deposit in Euro-clear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
foreign Portfolio Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the foreign Portfolio Securities held by each
Selected Foreign subcustodian. Each agreement pursuant to which the Bank employs
a foreign banning institution shall require that such institution establish a
custody account for the Bank and hold in that account, foreign Portfolio
Securities and other assets of the Fund, and, in the event that such institution
deposits foreign Portfolio Securities in a foreign securities depository, that
it shall identify on its books as belonging to the Bank the securities so
deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banning institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
accountants for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Fund held by the Selected Foreign Sub-Custodian will
be subject only to the instructions of the Bank or its agents.
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(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banning institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by Selected Foreign Sub-Custodians, including
but not limited to an identification of entities having possession of the
Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee nameless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer there
for (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions.
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Notwithstanding the foregoing, the Bank shall have no further duty or obligation
with respect to such Rights, including, without limitation, the determination of
whether the Fund is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Fund or by the applicable Foreign
Sub-Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within the
market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund, information concerning the Selected Foreign Sub-Custodians
employed hereunder for use by the Fund in evaluating such Selected Foreign
Sub-Custodians to ensure compliance with the requirements of Rule 17f-5 of the
1940 Act. In addition, the Bank will promptly inform the Fund in the event that
the Bank is notified by a Selected Foreign Sub-Custodian that there appears to
be a substantial likelihood that its shareholders' equity will decline below
$200 million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting
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principles) or any other capital adequacy test applicable to it by exemptive
order, or if the Bank has actual knowledge of any material loss of the assets of
the Fund held by a Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
13.5 Fees and Expenses of Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness, a loan made by the Bank to the Fund payable on demand and bearing
interest at the current rate charged by the Bank for such loans unless the Fund
shall provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the extent
of any overdraft or indebtedness, in and to any property at any time held by it
for the Fund's benefit or in which the Fund has an
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<PAGE>
interest and which is then in the Bank's possession or control (or in the
possession or control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in its sole discretion, at any time to charge any overdraft
or indebtedness, together with interest due thereon against any balance of
account standing to the credit of the Fund on the Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time without penalty
upon sixty days written notice delivered by either party to the other by means
of registered mail, and upon the expiration of such sixty days this Agreement
will terminate; provided, however, that the effective date of such termination
may be postponed to a date not more than ninety days from the date of delivery
of such notice (i) by the Bank in order to prepare for the transfer by the Bank
of all of the assets of the Fund held hereunder, and (ii) by the Fund in order
to give the Fund an opportunity to make suitable arrangements for a successor
custodian. At any time after the termination of this Agreement, the Fund will,
at its request, have access to the records of the Bank relating to the
performance of its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function
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<PAGE>
without a custodian for the assets of the Fund held by the Bank. In that event
the Bank will deliver the Portfolio Securities and cash of the Fund held by it,
subject as aforesaid, in accordance with one of such alternatives which may be
approved by the requisite vote of shareholders, upon receipt by the Bank of a
copy of the minutes of the meeting of shareholders at which action was taken,
certified by the Fund's Secretary and an opinion of counsel to the Fund in form
and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
Standish Ayer & Wood Investment Trust
One Financial Center
Boston, MA 02111
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: James Keenan
or at such other place as such party may from time to time designate in writing.
17. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written
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<PAGE>
consent of the Bank or by the Bank without the written consent of the Fund,
authorized and approved by its Board; and provided further that termination
proceedings pursuant to Section 14 hereof will not be deemed to be an assignment
within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Limitation of Liability. A copy of the Declaration of Trust of the
Fund is on file with the Secretary of the Fund and notice is hereby given that
this Agreement has been executed on behalf of the Fund by an officer of the Fund
as an officer and not individually and the obligations of the Fund arising out
of this Agreement are not binding upon any of the trustees, officers or
shareholders of the Fund individually but are binding only upon the assets and
property of the Fund.
22. Single Agreement. This Agreement (including any exhibits, appendices
and schedules hereto) constitutes the entire agreement between the Bank and the
Fund as to the subject matter hereof and supersedes any and all agreements,
representations and warranties, written or oral, regarding such subject matter
made prior to the time at which this Agreement has been executed and delivered
between the Bank and the Fund.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
Standish, Ayer & Wood Investment Trust
By: /s/ Richard S. Wood
-----------------------------
Name: Richard S. Wood
Title: President
ATTEST:
/s/
- ----------------------
Investors Bank & Trust Company
By: /s/
--------------------------------
Name:
Title:
ATTEST:
/s/
- ----------------------
DATE:
---------------------
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<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111
June 2, 1997
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Re: Master Custody Agreement (the "Agreement")
Ladies and Gentlemen:
Attached is an amendment to Appendix A (the "Amendment") to the Agreement
between Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant
to ss.17 of the Agreement, the Trust proposes that the Agreement be amended to
include three additional series of the Trust named in the Amendment in bold.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.
Very truly yours,
Standish, Ayer & Wood Investors Bank & Trust Company
Investment Trust
By: /s/ Anne P. Herrmann By: David Flynn
------------------------ -----------------------------
Name: Anne Herrmann Name: David Flynn
------------------------ -----------------------------
Title: Vice President Title: Managing Director
---------------------- ---------------------------
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CUSTODY AGREEMENT
This Custody Agreement is dated February 17, 1993 between MORGAN STANLEY
TRUST COMPANY, a New York State chartered trust company (the "Custodian"), and
STANDISH, AVER & WOOD INVESTMENT TRUST (the "Client"), with respect to STANDISH
INTERNATIONAL EQUITY FUND.
1. The Client hereby appoints the Custodian as a custodian of securities
and other property owned or under the control of the Client which are delivered
to the Custodian, or any Subcustodian as appointed below, from time to time to
be held in custody for the benefit of the Client. The Client instructs the
Custodian to establish on the books and records of the Custodian one or more
accounts (the "Accounts") in the name of the Client. The Custodian shall record
in the Accounts and shall have general responsibility for the safekeeping of all
securities ("Securities"), cash and other property (all such Securities, cash
and other property being collectively the "Property") of the Client so delivered
for custody. It is understood that the specific procedures the Custodian will
use in carrying out its responsibilities under this Agreement are set forth in
the procedures manual (the "Procedures Manual") prepared by the Custodian and
delivered to the Client, as such Procedures Manual may be amended from time to
time by the Custodian by written notice to the Client. The Client acknowledges
that the Procedures Manual constitutes an integral part of this Agreement.
2. The Property held in the Accounts may be held by subcustodians
appointed pursuant to the provisions of this Section 2 (a "Subcustodian"). The
Custodian may, at any time and from time to time, appoint any bank or trust
company
<PAGE>
to act as a Subcustodian for the Client, provided that the Client shall have
approved in writing (1) any such bank or trust company and the subcustodian
agreement to be entered into between such bank or trust company and the
Custodian, and (2) the Subcustodian's offices or branches at which the
Subcustodian is authorized to hold the Property. Upon such approval by the
Client, the Custodian is authorized on behalf of the Client to notify each
Subcustodian of its appointment as such. It is intended by the parties that each
Subcustodian meet the requirements of a custodian or a foreign custodian under
the Investment Company Act of 1940 and the rules and regulations thereunder. The
Custodian may, at any time in its discretion, remove any bank or trust company
that has been appointed as a Subcustodian. The Custodian may hold property for
all of its clients with a subcustodian in a single account that is identified as
belonging to the Custodian for the benefit of its clients.
Those Subcustodians, their offices or branches which the Client has
approved to date are set forth on Exhibit A hereto. Such Exhibit shall be
amended from time to time as Subcustodians, branches or offices are changed,
added or deleted. The Client shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held at a
location not listed on Exhibit A, in order that there shall be sufficient time
for the Client to give the approval required by the preceding paragraph and for
the Custodian to put the appropriate arrangements in place with such
Subcustodian pursuant to such subcustodian agreement.
2
<PAGE>
With respect to the Property held by a Subcustodian, the Custodian shall
be liable to the Client if and only to the extent that such Subcustodian is
liable to the Custodian. The Custodian shall nevertheless be liable to the
Client for damages sustained by the Client from the Custodian's own negligence
in transmitting any instructions received by it from the Client and for its own
negligence in connection with the delivery of any Property held by it to any
such Subcustodian.
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 2 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
reasonable efforts to cause such Subcustodian to perform such obligations. In
the event that the Custodian is unable to cause such Subcustodian to perform
fully its obligations thereunder, the Custodian shall forthwith upon the
Client's request attempt to obtain the return of all Property held by such
Subcustodian and, if necessary or desirable, appoint another Subcustodian in
accordance with the provisions of this Section 2. At the election of the Client,
it shall have the right to enforce, to the extent permitted by the subcustodian
agreement and applicable law, the Custodian's rights against any such
Subcustodian for loss or damage caused the Client by such Subcustodian.
At the written request of the Client, the Custodian will attempt to obtain
the return of all Property held by any Subcustodian appointed pursuant to the
provisions of this Section 2. The Custodian will not amend any subcustodian
agreement or agree
3
<PAGE>
to change or permit any changes thereunder which would affect substantial rights
of the Client except upon the prior written approval of the Client.
In the event the Custodian intends to make any payment to a Subcustodian
under the indemnification provisions of any subcustodian agreement, the
Custodian shall give the Client written notice of such intention no less than
thirty (30) days prior to the date such payment is to be made. The Client shall
be obligated promptly to reimburse the Custodian the amount of such payment,
unless the Client shall, within thirty (30) days of receipt of the Custodian's
notice, object in writing to such payment to the Subcustodian because the Client
disputes the right of the Subcustodian to be so indemnified. In the event the
Client, at the direction of its Board of Trustees, shall give written notice of
such objection and the reasons therefor, the Custodian may nevertheless make
such payment to the Subcustodian, but without prejudice to the Client's right to
refuse to reimburse the Custodian if the Client's objection to the right of the
Subcustodian to be so indemnified shall be upheld in an appropriate judicial or
other proceeding; or in the alternative, the Custodian may refuse to pay the
indemnification demanded by the Subcustodian and the Custodian shall in such
event defend against any judicial or other proceeding brought against the
Custodian by the Subcustodian to obtain such indemnification. Such defense shall
be conducted by counsel reasonably satisfactory to both the Client and the
Custodian. The Client shall be entitled to participate in any such proceeding
with separate counsel of its own choice if it believes its position might
otherwise be compromised and, if the Client or the
4
<PAGE>
Custodian believes there may be a conflict in the respective positions of the
Client and the Custodian, then each may retain separate counsel of its own
choice. The Client shall bear the costs and expenses of defending against the
Subcustodian's claim, and the Client shall indemnify the Custodian and hold it
harmless from all claims, liabilities, judgments, costs and expenses (including
fees of its counsel) and settlements of such claim (provided that such
settlement shall have been effected with the Client's written consent) incurred
or assessed against the Custodian.
The Custodian or any Subcustodian, from time to time, may appoint such
non-U.S. securities depositaries or clearing agencies as it may determine (each
an "Authorized Depositary") for the purposes of acquiring, holding or disposing
of Property. The appointment of any such Authorized Depositary shall be approved
in writing in advance by the Client. Those Authorized Depositaries which the
Client has approved to date are set forth on Exhibit A hereto. It is intended by
the parties that each Authorized Depositary shall be qualified to act as an
"Eligible Foreign Custodian" pursuant to the Investment Company Act of 1940 and
the rules and regulations thereunder. The Custodian or the Subcustodian, as the
case may be, may at any time in its discretion terminate any such appointment
and shall, at the request of the Client, terminate any such Authorized
Depositary as promptly as practicable.
With respect to the Property held by an Authorized Depositary appointed by
the Custodian, the Custodian shall be liable to the Client if and only to the
extent that such Authorized
5
<PAGE>
Depositary is liable to the Custodian and the Custodian recovers from such
Authorized Depositary. The Custodian shall nevertheless be liable to the Client
for damages sustained by the Client from the Custodian's own negligence in
transmitting any instructions received by it from the Client and for its own
negligence in connection with the delivery of any securities or funds held by it
to any such Authorized Depositary.
The Client agrees that the Property may be physically held outside the
United States.
3. With respect to Property held by a Subcustodian pursuant to Section
2:
(a) The Custodian will identify on its books as belonging to the
Client any Property held by a Subcustodian for the Custodian's
account;
(b) The Custodian will hold Property through a Subcustodian only
if (i) such Subcustodian and any securities depository or
clearing agency in which such Subcustodian holds Property, or
any of their creditors, may not assert any right, charge,
security interest, lien, encumbrance or other claim of any
kind to such Property except a claim of payment for its safe
custody and (ii) Property may be freely transferred without
the payment of money or value other than for safe custody or
administration;
(c) The Custodian shall require that Property held by the
Subcustodian for the Custodian's account be identified on the
Subcustodian's books as separate from any property held by the
Subcustodian
6
<PAGE>
other than property of the Custodian's clients and as held
solely for the benefit of clients of the Custodian; and
(d) In the event that the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian
will be required by its agreement with the Custodian to
identify on its books such Property as being held for the
account of the Custodian as a custodian for its clients.
4. The Custodian shall allow the Client's accountants reasonable access to
the Custodian's records relating to the Property held by the Custodian as such
accountants may reasonably require in connection with their examination of the
Client's affairs. The Custodian shall also obtain from any Subcustodian (and
will require each Subcustodian to use reasonable efforts to obtain from any
securities depository or clearing agency in which it deposits Property) an
undertaking, to the extent consistent with local practice and the laws of the
jurisdiction or jurisdictions to which such Subcustodian, securities depository
or clearing agency is subject, to permit independent public accountants such
reasonable access to the records of such Subcustodian, securities depository or
clearing agency as may be reasonably required in connection with the examination
of the Client's affairs or to take such other action as the Custodian in its
judgment may deem sufficient to ensure such reasonable access.
5. The Custodian shall provide such reports and other information to the
Client and to such persons as the Client directs as the Custodian and the Client
may
7
<PAGE>
agree from time to time, including periodic reports with respect to the
safekeeping of the Property, including, but not limited to, notification of any
transfer to or from the Accounts.
6. The Custodian shall make or cause any Subcustodian to make payments
from monies being held in the Accounts only:
(a) upon the purchase of Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon the delivery of such Securities;
(b) for payments to be made in connection with the conversion,
exchange or surrender of Securities;
(c) upon a request of the Client that the Custodian return monies
being held in the Accounts;
(d) upon a request of the Client that monies be exchanged for or
used to purchase monies denominated in a different currency
and then only upon receipt of such exchanged or purchased
monies;
(e) as provided in Section 8 and 12 hereof;
(f) upon termination of this Custody Agreement as hereinafter set
forth; and
(g) for any other purpose upon receipt of explicit instructions of
the Client accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such payment.
8
<PAGE>
Except as provided in the last two sentences of this Section 6 and as
provided in Section 8, all payments pursuant to this Section 6 will be made only
upon receipt by the Custodian of Authorized Instructions (as hereinafter
defined) from the Client which shall specify the purpose for which the payment
is to be made. In the event that it is not possible to make a payment in
accordance with Authorized Instructions of the Client, the Custodian shall
proceed in accordance with the procedures set forth in the Procedures Manual.
Any payment pursuant to subsection (f) of this Section 6 will be made in
accordance with Section 16.
7. The Custodian shall make or cause any Subcustodian to make transfers,
exchanges or deliveries of Securities only:
(a) upon sale of such Securities and then, to the extent
consistent with practice in the jurisdiction in which
settlement occurs, upon receipt of payment therefor;
(b) upon exercise of conversion, subscription, purchase, exchange
or other similar rights pertaining to such Securities and, if
applicable to such exercise and if consistent with practice in
the applicable jurisdiction, only on receipt of substitute or
additional securities to be received upon such exercise;
(c) as provided in Section 8 hereof;
(d) upon the termination of this Custody Agreement as hereinafter
set forth; and
9
<PAGE>
(e) for any other purpose upon receipt of explicit instructions of
the Client accompanied by evidence reasonably acceptable to
the Custodian as to the authorization of such transfer,
exchange or delivery.
Except as provided in the last two sentences of this Section 7 and as
provided in Section 8, all transfers, exchanges or deliveries of Securities
pursuant to this Section 7 will be made only upon receipt by the Custodian of
Authorized Instructions of the Client which shall specify the purpose for which
the transfer, exchange or delivery is to be made. In the event that it is not
possible to transfer Securities in accordance with Authorized Instructions of
the Client, the Custodian shall proceed in accordance with the procedures set
forth in the Procedures Manual. Any transfer or delivery pursuant to subsection
(d) of this Section 7 will be made in accordance with Section 16.
8. In the absence of Authorized Instructions from the Client to the
contrary, the Custodian may, and may authorize any Subcustodian to:
(a) make payments to itself or others for expenses of handling
Property or other similar items relating to its duties under
this Agreement, provided that all such payments shall be
accounted for to the Client;
(b) receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Accounts;
10
<PAGE>
(c) exchange Securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim
receipts or temporary securities for securities in definitive
form and the exchange of warrants, or other documents of
entitlement to securities, for the securities themselves);
(d) surrender Securities at maturity or when called for redemption
upon receiving payment therefor;
(e) execute in the Client's name such ownership and other
certificates as may be required to obtain the payment of
income from Securities;
(f) pay or cause to be paid, from the Accounts, any and all taxes
and levies in the nature of taxes imposed on Property by any
governmental authority in connection with custody of and
transactions in such Property;
(g) endorse for collection, in the name of the Client, checks,
drafts and other negotiable instruments; and
(h) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and
other dealings with the Property.
9. "Authorized Instructions" of the Client shall mean instructions
received by telecopy, tested telex, electronic link or other electronic means or
by such other means
11
<PAGE>
as may be agreed in writing in advance between the Client and the Custodian.
The Custodian shall be entitled to act, and shall have no liability for acting,
in accordance with the terms of this Agreement or upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Client.
10. Securities which must be held in registered form may be registered in
the name of the Custodian's nominee or, in the case of Securities in the custody
of an entity other than the Custodian, in the name of such entity's nominee. The
Client agrees to hold the Custodian and Subcustodians and any such nominee
harmless from any liability arising out of any such person acting as a holder of
record of such Securities, except for any such liability resulting from the
Custodian, Subcustodian or any nominee's negligence or willful misconduct. The
Custodian may without notice to the Client cause any Securities to cease to be
registered in the name of any such nominee and to be registered in the name of
the Client.
11. All cash received by the Custodian for the Accounts shall be held by
the Custodian as a short-term credit balance in favor of the Client and the
Client shall earn interest at the rates and times as agreed between the
Custodian and the Client. The Client understands that any such credit balances
will not be accompanied by the benefit of any governmental insurance.
12. From time to time, the Custodian may arrange or extend short-term
credit for the Client which is (i) necessary in connection with payment and
clearance of
12
<PAGE>
securities and foreign exchange transactions or (ii) pursuant to an agreed
schedule, as and if set forth in the Procedures Manual, of credits for dividends
and interest payments on Securities. All such extensions of credit shall be
repayable by the Client on demand. The Custodian shall be entitled to charge the
Client interest for any such credit extension at rates to be agreed upon from
time to time. In addition to any other remedies available, the Custodian shall
be entitled to a right of set-off against the Property to satisfy the repayment
of such credit extensions and the payment of accrued interest thereon. The
Custodian may act as the Client's agent or act as a principal in foreign
exchange transactions at such rates as are agreed from time to time between the
Client and the Custodian.
13. The Client represents that (i) the execution, delivery and performance
of this Agreement (including, without limitation, the ability to obtain the
short-term extensions of credit in accordance with Section 12) are within the
Client's power and authority and have been duly authorized by all requisite
action (corporate or otherwise) and (ii) this Agreement and each extension of
short-term credit extended or arranged for the benefit of the Client in
accordance with Section 12 will at all times constitute a legal, valid and
binding obligation of the Client and be enforceable against the Client in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
in general and subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
13
<PAGE>
The Custodian represents that the execution, delivery and performance of
this Agreement is within the Custodian's power and authority and has been duly
authorized by all requisite action of the Custodian. This Agreement constitutes
the legal, valid and binding obligation of the Custodian enforceable against the
Custodian in accordance with its terms, except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
in general and subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
14. The Custodian shall be responsible for the performance of only such
duties as are set forth in this Agreement or the Procedures Manual or contained
in Authorized Instructions given to the Custodian which are not contrary to the
provisions of any relevant law or regulation. The Custodian shall not be liable
to the Client or to any other person for any action taken or omitted to be taken
by it in connection with this Agreement in the absence of negligence or willful
misconduct on the part of the Custodian. Upon the request of the Custodian, the
Client agrees to deliver to the Custodian a duly executed power of attorney, in
form and substance satisfactory to the Custodian, authorizing the Custodian to
take any action or execute any instrument on behalf of the Client as necessary
or advisable to accomplish the purposes of this Agreement.
15. The Client agrees to pay to the Custodian from time to time such
compensation for its services pursuant to this Agreement as may be mutually
agreed
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<PAGE>
upon from time to time and the Custodian's out-of-pocket or incidental expenses.
The Client hereby agrees to hold the Custodian harmless from any liability or
loss resulting from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed or assessed with respect to the Accounts
or any Property held therein. The Custodian is and any Subcustodians are
authorized to charge the Accounts for such items and the Custodian shall have a
lien, charge and security interest on any and all Property for any amount owing
to the Custodian from time to time under this Agreement.
If the Client is a U.S. person as defined in Rule 902 promulgated by the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), the Client recognizes that, in connection with the Client's
election from time to time to participate in distributions of securities
(whether pursuant to rights offerings, warrant subscriptions, mergers,
reorganizations or otherwise) which have not been registered pursuant to the
Act, the Custodian may inform the issuer and its agents that the acquiror of the
securities is a U.S. person. The Custodian shall not be responsible to the
Client for the consequences of any issuer's or agent's refusal to permit the
Client to acquire such securities, and the Client shall hold the Custodian
harmless from liability to the issuer and its agents in connection with any such
election by the Client.
16. This Agreement may be terminated by the Client or the Custodian by 60
days written notice to the other, sent by registered mail. If notice of
termination is given, the Client shall, within 30 days following the giving of
such notice, deliver to the
15
<PAGE>
Custodian a statement in writing specifying the successor custodian or other
person to whom the Custodian shall transfer the Property. In either event the
Custodian, subject to the satisfaction of any lien it may have, will transfer
the Property to the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property to a bank or
trust company established under the laws of the United States or any state
thereof to be held and disposed of pursuant to the provisions of this Agreement
or may continue to hold the Property until such a statement is delivered to the
Custodian. In such event the Custodian shall be entitled to fair compensation
for its services during such period as the Custodian remains in possession of
any Property and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect; provided,
however, that the Custodian shall no longer settle any transactions in
securities for the Accounts.
17. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the Accounts,
including in dealings with affiliates of the Custodian. In the event the
Custodian or any Subcustodian is requested or required to disclose any
confidential information concerning the Property, the Custodian shall to the
extent practicable and legally permissible, promptly notify the Client of such
request or requirement so that the Client may seek a protective order or waive
the Custodian's or such Subcustodian's compliance with this Section 17. In the
absence of such a waiver, if the Custodian or such Subcustodian is compelled, in
the
16
<PAGE>
opinion of its counsel, to disclose any confidential information, the Custodian
or such Subcustodian may disclose such information to such persons as, in the
opinion of counsel, is so required.
18. Any notice or other communication from the Client to the Custodian,
unless otherwise provided by this Agreement, shall be sent by certified or
registered mail to Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn,
New York, 11201, Attention: President, and any notice from the Custodian to the
Client is to be mailed postage prepaid, addressed to the Client at the address
appearing below, or as it may hereafter be changed on the Custodian's records in
accordance with notice from the Client.
19. The term "Standish, Ayer & Wood Investment Trust" means and refers to
the Trustees from time to time serving under the Agreement and Declaration of
Trust of the Client dated August 13, 1986, as the same may subsequently thereto
have been, or subsequently hereto be, amended. It is expressly agreed that the
obligations of the Client hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Client,
personally, but shall bind only the trust property of the Client as provided in
the Agreement and Declaration of Trust of the Client. The execution and delivery
of this Agreement have been authorized by the Trustees of the Client and this
Agreement has been signed by an authorized officer of the Client, acting as
such, and neither such authorization by such Trustees, nor such execution and
delivery by such officer shall be deemed to have been made by any of
17
<PAGE>
them personally, but shall bind only the trust property of the Client as
provided in the Agreement and Declaration of Trust.
20. The Custodian may assign all of its rights and obligations hereunder
to any other entity which is qualified to act as custodian under the terms of
this Agreement and majority-owned, directly or indirectly, by Morgan Stanley
Group Inc., and upon the assumption of the rights and obligations hereunder by
such entity, such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity had been
originally named as custodian herein. The Custodian shall give prompt written
notice to the Client upon the effectiveness of any such assignment.
18
<PAGE>
This Agreement shall bind the successors and assigns of the Client and the
Custodian and shall be governed by the laws of the State of New York applicable
to contracts executed in and to be performed in that state.
STANDISH, AYER & WOOD
INVESTMENT TRUST
By /s/ Richard S. Wood
-------------------------------
Name: Richard S. Wood
Title: President
Address for record: One Financial Center
Boston, MA 02111
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ Daniel Roccato
-------------------------------
Authorized Signature
Daniel Roccato
19
MORGAN STANLEY TRUST COMPANY
One Pierrepont Plaza
Brooklyn, New York 11202
July 18, 1995
STANDISH, AYER & WOOD INVESTMENT TRUST
re: Custody Agreement and Procedures Manual
Gentlemen:
We refer to the custody agreement (the "Agreement") dated February 17,
1993 between MORGAN STANLEY TRUST COMPANY (the "Custodian") and STANDISH, AYER &
WOOD INVESTMENT TRUST, with respect to STANDISH INTERNATIONAL EQUITY FUND (the
"Client"), and the Procedures Manual which is a part thereof (the "Procedures
Manual"). We hereby agree to amend the terms and procedures described in the
Agreement as follows (Defined terms in this letter are used as defined in the
Agreement and "Section" numbers used below refer to the section numbers in the
Agreement):
1. Client Services Guide. The procedures the Custodian and the Client will
use in performing activities in connection with the Agreement are hereafter set
forth in a client services guide provided to the Client by the Custodian, as
such guide may be amended from time to time by the Custodian by written notice
to the Client (the "Client Services Guide"). Accordingly, all references in the
Agreement to the term "Procedures Manual" (or to any provision thereof) shall
refer instead to the "Client Services Guide", and the last two sentences of
Section 1 are deleted.
2. Appendices. (a) Appendixes 1, 2 and 3 attached hereto are hereby made a
part of the Agreement, as a record of, respectively: (a) the documents and items
provided by the Client under the Agreement; (b) the accounts established in the
name of the Client on the Custodian's books and records; and (c) the Client's
"Authorized Persons" under the Agreement.
3. Additional Accounts. The following sentence is hereby added to the end
of Section 1:
Upon receipt of Authorized Instructions (as defined below) and appropriate
documentation, the Custodian shall open additional Accounts for the
Client. Upon the Custodian's confirmation to the Client of the opening of
such additional Accounts, or of the closing of Accounts, Appendix 2 shall
be deemed automatically amended or supplemented accordingly.
<PAGE>
4. Authorized Instructions; Authorized Persons. Section 9 is amended by
adding the following to the end thereof:
Except as otherwise provided herein, all payments of monies, all
transfers, exchanges or deliveries of Property and all responses to
corporate actions shall be made or taken only upon receipt by the
Custodian of Authorized Instructions, which may be issued only by
Authorized Persons; provided that such Authorized Instructions are timely
received by the Custodian. "Authorized Person" means each of the persons
or entities identified on Appendix 3 as amended from time to time by
written notice from the Client to the Custodian. The Client represents and
warrants to the Custodian that each Authorized person listed in Appendix
3, as amended from time to time, is authorized to issue Authorized
Instructions on behalf of the Client. Prior to the delivery of the
Property to the Custodian, the Custodian shall provide a list of
designated system user ID numbers and passwords that the Client shall be
responsible for assigning to Authorized Persons. The Custodian shall
assume that an electronic transmission received and identified by a system
user ID number and password was sent by an Authorized Person. The
Custodian agrees to provide additional designated system user ID numbers
and passwords as needed by the Client. Upon the issuance of additional
workstation user ID's by the Custodian to the Client, Appendix 3 shall be
deemed automatically amended accordingly. The Client authorizes the
Custodian to receive, act and rely upon any Authorized Instructions
received by the Custodian which have been issued, or which the Custodian
reasonably believes have been issued, by an Authorized Person.
5. Standard of Care; Indemnification. Section 14 is amended by adding the
following to the end thereof:
In addition, the Client shall indemnify the Custodian and Subcustodians
and any nominee for, and hold each of them harmless from, any liability,
loss or expense (including attorneys' fees and disbursements) incurred in
connection with this Agreement; provided that such indemnity will not
apply to any liability, loss or expense caused by the negligence or
willful misconduct of the Custodian or a Subcustodian.
6. Direction of the Custodian.
a. In Section 6(d), the following words are hereby deleted: "and then only
upon receipt of such exchanged or purchased monies".
b. In Section 6(g), the words "explicit instructions of the Client
accompanied by evidence reasonably acceptable to the Custodian as to the
authorization of such
2
<PAGE>
"payment" are hereby deleted and replaced with the words "Authorized
Instructions (as hereinafter defined)".
c. The following words in Section 6 (after subsection (g)) are hereby
deleted: ("as hereinafter defined) from the Client which shall specify the
purpose for which the payment is to be made".
d. In Section 7(e), the words "explicit instructions of the Client
accompanied by evidence reasonably acceptable to the Custodian as to the
authorization of such transfer, exchange or delivery" are hereby deleted
and replaced with the words "Authorized Instructions".
e. The following words in Section 7 (after subsection (e)) are hereby
deleted: "of the Client which shall specify the purpose for which the
transfer, exchange or delivery is to be made".
Please acknowledge your agreement to the foregoing amendments by signing
where provided below.
MORGAN STANLEY TRUST COMPANY
By:____________________________________
Name:
Title:
Agreed and accepted:
STANDISH, AYER & WOOD INVESTMENT TRUST
with respect to STANDISH INTERNATIONAL EQUITY FUND
By:___________________
Authorized Signature
3
<PAGE>
MORGAN STANLEY TRUST COMPANY
One Pierrepont Plaza
Brooklyn, New York 11202
December 9, 1994
STANDISH, AYER & WOOD INVESTMENT TRUST
re: Custody Agreement and Procedures Manual
Gentlemen:
We refer to the custody agreement (the "Agreement") dated February 17, 1993
between MORGAN STANLEY TRUST COMPANY (the "Custodian") and STANDISH, AYER & WOOD
INVESTMENT TRUST, with respect to STANDISH INTERNATIONAL EQUITY FUND (the
"Client"), and the Procedures Manual which is a part thereof (the "Procedures
Manual"). We hereby agree to amend the terms and procedures described in the
Agreement as follows (Defined terms in this letter are used as defined in the
Agreement and "Section" numbers used below refer to the section numbers in the
Agreement):
1. Client Services Guide. The procedures the Custodian and the Client will
use in performing activities in connection with the Agreement are hereafter set
forth in a client services guide provided to the Client by the Custodian, as
such guide may be amended from time to time by the Custodian by written notice
to the Client (the "Client Services Guide"). Accordingly, all references in the
Agreement to the term "Procedures Manual" (or to any provision thereof) shall
refer instead to the "Client Services Guide", and the last two sentences of
Section 1 are deleted.
2. Appendices. (a) Appendices 1, 2 and 3 attached hereto are hereby made a
part of the Agreement, as a record of, respectively: (a) the documents and items
provided by the Client under the Agreement; (b) the accounts established in the
name of the Client on the Custodian's books and records; and (c) the Client's
"Authorized Persons" under the Agreement.
3. Additional Accounts. The following sentence is hereby added to the end of
Section 1:
Upon receipt of Authorized Instructions (as defined below) and appropriate
documentation, the Custodian shall open additional Accounts for the Client.
Upon the Custodian's confirmation to the Client of the opening of such
additional Accounts, or of the closing of Accounts, Appendix 2 shall be
deemed automatically amended or supplemented accordingly.
<PAGE>
4. Authorized Instructions; Authorized Persons. Section 9 is amended by
adding the following to the end thereof.
Except as otherwise provided herein, all payments of monies, all transfers,
exchanges or deliveries of Property and all responses to corporate actions
shall be made or taken only upon receipt by the Custodian of Authorized
Instructions, which may be issued only by Authorized Persons; provided that
such Authorized Instructions are timely received by the Custodian.
"Authorized Person" means each of the persons or entities identified on
Appendix 3 as amended from time to time by written notice from the Client to
the Custodian. The Client represents and warrants to the Custodian that each
Authorized Person listed in Appendix 3, as amended from time to time, is
authorized to issue Authorized Instructions on behalf of the Client. Prior to
the delivery of the Property to the Custodian, the Custodian shall provide a
list of designated system user ID numbers and passwords that the Client shall
be responsible for assigning to Authorized Persons. The Custodian shall
assume that an electronic transmission received and identified by a system
user ID number and password was sent by an Authorized Person. The Custodian
agrees to provide additional designated system user ID numbers and passwords
as needed by the Client. The Client authorizes the Custodian to issue new
workstation user ID's upon the request of a previously existing Authorized
person. Upon the issuance of additional workstation user ID's by the
Custodian to the Client, Appendix 3 shall be deemed automatically amended
accordingly. The Client authorizes the Custodian to receive, act and rely
upon any Authorized Instructions received by the Custodian which have been
issued, or purport to have been issued by an Authorized Person.
5. Standard of Care; Indemnification. Section 14 is amended by adding the
following to the end thereof:
In addition, the Client shall indemnify the Custodian and Subcustodians and
any nominee for, and hold each of them harmless from, any liability, loss or
expense (including attorneys' fees and disbursements) incurred in connection
with this Agreement, including without limitation, (i) as a result of the
Custodian having acted or relied upon any Authorized Instructions or (ii)
arising out of any such person acting as a nominee or holder of record of
Securities.
6. Discretion of the Custodian.
a. In Section 6(d), the following words are hereby deleted: "and then only
upon receipt of such exchanged or purchased monies".
b. In section 6(g), the words "explicit instructions of the Client
accompanied by evidence reasonably acceptable to the Custodian as to the
authorization of such
2
<PAGE>
payment" are hereby deleted and replaced with the words "Authorized
Instructions (as hereinafter defined)".
c. The following words in Section 6 (after subsection (g)) are hereby
deleted: "(as hereinafter defined) from the Client which shall specify the
purpose for which the payment is to be made".
d. In Section 7(e), the words "explicit instructions of the Client
accompanied by evidence reasonably acceptable to the Custodian as to the
authorization of such transfer, exchange or delivery" are hereby deleted and
replaced with the words "Authorized Instructions".
e. The following words in Section 7 (after subsection (e)) are hereby
deleted: "of the Client which shall specify the purpose for which the
transfer, exchange or delivery is to be made".
Please acknowledge your agreement to the foregoing amendments by signing
where provided below.
MORGAN STANLEY TRUST COMPANY
By: _/s/____________________________
Name:
Title:
Agreed and accepted:
STANDISH, AYER & WOOD INVESTMENT TRUST
with resect to STANDISH INTERNATIONAL EQUITY FUND
By_____________________
Authorized Signature
3
<PAGE>
APPENDIX 1
Account Documentation
REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES (INCLUDING
TAX RECLAIMS):
CUSTODY AGREEMENT
CLIENT SERVICES GUIDE (INCLUDING APPENDICES)
FEE SCHEDULE / BILLING GUIDE
GENERAL ACCOUNT INFORMATION
US TAX AUTHORITY DOCUMENTATION
LOCAL TAX OFFICE LETTER / APPLICATION LETTER
(NON-UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FORM 6166/ REQUEST FOR FOREIGN CERTIFICATION FORM
UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
CERTIFICATION OF BENEFICIAL OWNERSHIP, LEGAL NAME, LEGAL
RESIDENCY, TAX STATUS AND TAX IDS
TAX RECLAIM POWER OF ATTORNEY
PREVIOUS TAX RECLAIM FILING INFORMATION
(PREVIOUS FILERS, ONLY)
UK TAX AUTHORITY DOCUMENTATION
SOPHISTICATED INVESTOR (ACCREDITED INVESTOR) LETTER
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED FROM AN ENTITY CLASSIFIED AS
TAX-EXEMPT BY ITS LOCAL TAX AUTHORITY:
UK FORM 4338
(EXEMPT NON-UNITED KINGDOM-RESIDENT BENEFICIAL OWNERS, ONLY)
UK FORM 3O9A
(EXEMPT UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
<PAGE>
FOREIGN EXEMPTION LETTERS / APPLICATION FOR AUSTRALIAN
EXEMPTION LETTER
(EXEMPT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL USE THE PROXY
VOTING SERVICE:
VOTING POWER OF ATTORNEY
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL DEAL IN CERTAIN
SECURITIES:
JGB INDEMNIFICATION LETTER
KOREAN SECURITIES POWER OF ATTORNEY
NEW ZEALAND 'APPROVED ISSUER LEVY' LETTER
SPANISH POWER OF ATTORNEY WITH APOSTILE
<PAGE>
APPENDIX 2
Client Accounts
Account Name Account Number Account Mnemonic
- ------------------------------------------------------------------------------
1. Standish International Equity Fund 00040120 STAN
<PAGE>
APPENDIX 3
Part I
Authorized Signatures
The Custodian is directed to accept and act upon Authorized Instructions
received from any of the following persons or entities:
Telephone/ Authorized
Name Organization Title Fax Signature
- ---- ------------ ----- --- ---------
- --------------------------------------------------------------------------------
Ian Watson Stan Int'l Mgt. Co. 457-7254 /s/ Ian Watson
- --------------------------------------------------------------------------------
Sara Walcott Standish Ayers & Wood,
Inc. 457-7306 /s/ Sarah Walcott
- --------------------------------------------------------------------------------
Anne P. Standish Ayers & Wood /s/ Anne P.
Herrmann Investment Trust 457-7248 Herrman
- --------------------------------------------------------------------------------
Michael C. Standish International /s/ Michael C.
Schoeck Management Co. 457-7365 Schoeck
- --------------------------------------------------------------------------------
Edward W. /s/ Edward W.
Webb Standish Ayer & Wood, Inc. 457-7362 Webb
- --------------------------------------------------------------------------------
Maura A.
Neely Standish Ayer & Wood, Inc. 457-7210 /s/ Maura A. Neely
- --------------------------------------------------------------------------------
John A. /s/ John A.
Hamecher Standish Ayer & Wood, Inc. 457-7398 Hamecher
- --------------------------------------------------------------------------------
Authorized by: /s/ James C. Hollis
-------------------
Executive Vice President
Standish Ayer & Wood Investment Trust
<PAGE>
Part II - System User ID's
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID's for the following activities:
<TABLE>
<CAPTION>
Workstation Account
User I.D. Mnemonic Number Workstation Sessions
TE TCC SL FE CM MA TD
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
077 Ed Webb STAN 00040120 YES YES YES YES YES NO YES
35 IPO STAN 00040120 YES YES YES YES YES YES YES
36 OK STAN 00040120 YES YES YES YES YES YES YES
43 OK STAN 00040120 YES YES YES YES YES YES YES
</TABLE>
Workstation Session Codes
- -------------------------
TE Trade Entry
TCC Trace Cancel/Correct
SL Securities Lending
FE Foreign Exchange
CM Cash Movement
MA Mass Authorization
TD Time Deposit
<PAGE>
MORGAN STANLEY TRUST COMPANY
CLIENT SERVICE GUIDE
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINED TERMS....................................................1
SECTION 1.1. Capitalized Terms....................................1
ARTICLE II ELECTRONIC TRANSMISSIONS, INSTRUCTIONS, ETC......................1
SECTION 2.1 Electronic Transmissions.............................1
SECTION 2.2. Instructions.........................................1
SECTION 2.3. Confirmation of Trade Instructions...................2
ARTICLE III TRAD.............................................................2
SECTION 3.1. Trade Notification Deadlines.........................2
SECTION 3.2. Settlement of Securities Transactions
Through MSTC.........................................2
SECTION 3.3. Settlement of Securities Transactions Through
the Client's Brokers.................................3
SECTION 3.4. Communication of Settlement Status...................3
SECTION 3.5. LDC Documentation Reconciliations....................3
ARTICLE IV FOREIGN EXCHANGE TRANSACTIONS....................................3
SECTION 4.1. Foreign Exchange Instructions........................3
SECTION 4.2. Settlement of Foreign Exchange Transactions
Through the Client's Brokers.........................3
SECTION 4.3. Settlement of Foreign Exchange Transactions
Through MSTC.........................................3
ARTICLE V CASH MANAGEMENT..................................................4
SECTION 5.1. Interest Earned on Cash Balances.....................4
SECTION 5.2. Interest Payable on Credit Extensions
by the Custodian.....................................4
SECTION 5.3. Payment of Interest..................................4
SECTION 5.4. Receipt and Disbursement of Funds....................4
SECTION 5.5. Cash Movement Instructions...........................5
SECTION 5.6. Back Valuation.......................................5
-i-
<PAGE>
SECTION 5.7. Overdraft Procedures.................................5
ARTICLE VI RECONCILIATION PROCEDURES........................................5
SECTION 6.1. Unidentified Cash....................................5
SECTION 6.2. Non-Receipt of Cash..................................6
SECTION 6.3. Daily Security Reconciliation........................6
SECTION 6.4. Other Client/Custodian Reconciliations...............7
SECTION 6.5. Pricing of Securities................................7
ARTICLE VII CLAIMS........................................................7
SECTION 7.1. Claims Received......................................7
SECTION 7.2. Claims Issued........................................8
ARTICLE VIII DIVIDEND/INCOME COLLECTION; CORPORATE
ACTIONS; ETC...............................................8
SECTION 8.1. Dividends/Income Collection..........................8
SECTION 8.2. Corporate Actions....................................9
SECTION 8.3. Optional Dividends..................................10
SECTION 8.4. Dividend Reinvestment Plans (DRIPS).................10
SECTION 8.5. Coupon Interest Collection and Maturities...........11
ARTICLE IX TAX RECLAIMS AND EXEMPTIONS..................................11
SECTION 9.1. Reclaims and Exemptions.............................11
SECTION 9.2. Tax Status Documentation............................11
SECTION 9.3. Filing Procedures for Withholding Tax...............12
ARTICLE X SECURITIES LENDING..............................................13
ARTICLE XI REPORTING....................................................13
SECTION 11.1. Daily Transmission of Information...................13
SECTION 11.2. Monthly Report Delivery.............................13
ARTICLE XII CLIENT WORKSTATION...........................................13
SECTION 12.1. Client Inquiry System...............................13
SECTION 12.3. Client Workstation Technical Support................14
-ii-
<PAGE>
ARTICLE XIII MISCELLANEOUS................................................14
SECTION 13.1. Amendments..........................................14
SECTION 13.2. Time................................................14
-iii-
<PAGE>
CLIENT SERVICES GUIDE
ARTICLE I
DEFINED TERMS
SECTION 1.1. Capitalized Terms. Capitalized terms used below and not
otherwise defined have the meanings assigned to such terms in the Custody
Agreement between Client and the Custodian (as it may be amended from time to
time, the "Custody Agreement").
ARTICLE II
ELECTRONIC TRANSMISSIONS, INSTRUCTIONS, ETC.
(a) The Custodian will provide the client with the Custodian's proprietary
software for access to the Custodian 5 workstation.
(b) "Electronic Transmission" means any electronic communication received
by the Custodian by means of (i) a dataset transmitted over a mainframe link
between the client and the Custodian, (ii) a dataset transmitted by an
Authorized Person to the Custodian by uploading a dataset from the client's PC
workstation to the Custodian's mainframe, (iii) a manual transmission of data
from an the client's workstation to the Custodian's mainframe, and (iv) an
electronic mail from the client.
SECTION 2.2. Instructions. Any Authorized Person may provide Instructions
(as defined below) to the Custodian relating to the Property (including
instructions relating to Trades (as defined below) or other transactions in or
relating to Securities, payment of funds, foreign exchange transactions and any
other matters relating to the management of the Property) by means of:
(a) an Electronic Transmission;
(b) an electronic transmission in the form of a dataset received by the
Custodian from Morgan Stanley & Co., Incorporated ("MS&Co.") or one
of its affiliates through the Morgan Stanley International Basket
System;
(c) in the case of foreign exchange transactions only, an electronic
transmission in the form of a dataset received by the Custodian from
MS&Co. or one of its affiliates through the MS&Co. FX trade link;
-1-
<PAGE>
(d) an electronic transmission via the SWIFT communications network,
identified as originating from the Client
(e) when the computer facilities necessary for an Authorized Person to
transmit instructions electronically are not available or where
expressly stated elsewhere in this Client Services Guide, a
facsimile transmission signed by an Authorized Person and
(f) only where expressly stated elsewhere in this Client Services Guide,
by telephone. Any Instructions received by telephone may be recorded
by the Custodian.
"Instructions" means all instructions or other communications received by the
Custodian in accordance with this Section 2.2. "Trade" means a purchase or sale
of securities.
SECTION 2.3. Confirmation of Trade Instructions. Upon receipt by the
Custodian of Trade Instructions consisting of Electronic Transmissions of the
type described in clause (i) or (ii) of Section 2.1(b), or via the SWIFT
communications network, the Custodian may transmit to the Client via electronic
mail an automated confirmation citing the number of Trade Instructions received
via mainframe or PC upload transmission. Upon receipt by the Custodian of Trade
Instructions consisting of Electronic Transmissions of the type described in
clause (iii) of Section 2.1(b) or clause (b) or (c) of Section 2.2, the Client
may retrieve a report from the workstation, summarizing all of the current day's
transactions entries. Upon receipt of any Trade Instructions, the Custodian will
undertake various automated checks of the information contained in such Trade
Instructions. The Custodian will notify the Client if the Custodian is unable to
carry out such Trade Instructions. The Custodian may then request that an
Authorized Person confirm the accuracy of such information.
ARTICLE III
TRADE SETTLEMENTS
SECTION 3.1. Trade Notification Deadlines. The Custodian must receive any
Instructions relating to the settlement of a Trade no later than the applicable
deadline specified in Appendix 1. The Custodian's trade notification deadlines
take into account both trade settlement and funding requirements. The Custodian
will settle any Trade for which it receives Instructions after the applicable
trade notification deadline using reasonable efforts.
SECTION 3.2. Settlement of Securities Transactions Through MSTC. Under
separate cover, the Custodian has provided the Client with a reference source
(the "MSTC Settlement Book") containing information regarding the settlement of
securities
-2-
<PAGE>
transactions through the Custodian or its subcustodian in each relevant
jurisdiction. Upon request, the Custodian will provide to the Client additional
copies of the MSTC Settlement Book.
To the extent practicable, the Custodian will notify the Client of any
material change to the settlement information contained in the MSTC Settlement
Book at least four (4) weeks before the effective date of the change.
SECTION 3.3. Settlement of Securities Transactions Through the Client's
Brokers. Prior to delivery of any Property to the Custodian, the Client will
provide the Custodian with written settlement instructions for each broker with
which the Client intends to execute Trades, in each case containing the
information requested by the form shown in Appendix 2.
SECTION 3.4. Communication of Settlement Status. On a same-day basis, the
Custodian will report to the Client the status of all Trades for which the
Custodian has received settlement confirmation.
In addition, the Custodian will provide, by electronic mail, telephone or
hardcopy report, all information concerning the settlement status of any Trade.
SECTION 3.5. LDC Documentation Reconciliations. [TO COME]
ARTICLE IV
FOREIGN EXCHANGE TRANSACTIONS
SECTION 4.1. Foreign Exchange Instructions. Under separate cover, the
Custodian has provided the Client with the MSTC Settlement Book containing
information regarding the settlement of foreign exchange transactions through
the Custodian or its subcustodian in each relevant jurisdiction. Upon request,
the Custodian will provide to the Client additional copies of the MSTC
Settlement Book.
To the extent practicable, the Custodian will notify the Client of any
material change to the settlement information contained in the MSTC Settlement
Book at least four (4) weeks before the effective date of the change.
SECTION 4.2. Settlement of Foreign Exchange Transactions Through the
Client's Brokers. Prior to delivery of any Property to the Custodian, the Client
will provide the Custodian with written settlement instructions for each foreign
exchange broker with which the Client intends to execute foreign exchange
transactions, in each case containing the information requested by the form
shown in Appendix 3.
-3-
<PAGE>
SECTION 4.3. Settlement of Foreign Exchange Transactions Through MSTC. (a)
In connection with the settlement of any foreign exchange transaction through
the Custodian, the Client will provide the Custodian with Instructions
specifying the information requested in Appendix 4. The Instructions concerning
the settlement of a foreign currency trade must be transmitted to the Custodian
no later than the cash deadlines specified in Appendix 7 for the currencies
involved. A contact list for the Custodian's foreign exchange desk is included
in Appendix 4.
(b) In select currencies, the Custodian will, where possible, execute
same-day and next day foreign exchange contracts on behalf of the Client based
upon Instructions from an Authorized Person.
ARTICLE V
CASH MANAGEMENT
SECTION 5.1. Interest Earned on Cash Balances. The Custodian will credit
interest earned and payable to the Client on cash/credit balances maintained
with the Custodian in the currencies listed in, and subject to the minimum
balance levels indicated in, Appendix 5.
SECTION 5.2. Interest Payable on Credit Extensions by the Custodian. The
Client will pay to the Custodian all interest accrued on any extension of
short-term credit made to the Client by the Custodian at such rates and at such
times as the Custodian and the Client agree from time to time.
SECTION 5.3. Payment of Interest. (a) All interest payable by the
Custodian on cash balances maintained with the Custodian will be credited to the
Client on the last business day of each month.
(b) Interest received and interest to be paid out by the Client may be
automatically converted as instructed in Appendix 8.
(c) If a Client believes that there is an erroneous debit or credit
interest posting to its Account, the Customer will provide details to the
Custodian within thirty (30) business days of posting. The Custodian will
evaluate the information and provide a response within five (5) business days of
receipt of details.
(d) Adjustments to debit/credit interest will be processed in one of two
ways. The first option is to adjust the value date of the underlying transaction
to be adjusted. In this situation, the interest will be automatically
recalculated and adjusted at the end of the next interest period. The second
option is for the Custodian to manually adjust the interest
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posting at the point of resolution. One of the foregoing options will be
selected by the Client.
(e) Funds received late but with good value may not result in credit
interest.
SECTION 5.4. Receipt and Disbursement of Funds. Prior to the delivery to
the Custodian of any Property, the Client will provide the Custodian with
settlement instructions for the counterparties that the Custodian will deliver
to or receive funds from on behalf of the Client, containing the information
requested in Appendix 6.
SECTION 5.5. Cash Movement Instructions. In order to facilitate the
payment or receipt of funds by the Custodian, the Client will provide the
Custodian with Instructions specifying the information requested in Appendix 7.
SECTION 5.6. Back Valuation. If the Client requests that a payment be back
valued, the Custodian will use reasonable efforts to accommodate this request.
Due to longer processing time frames and potential additional costs related to
back valuation, the Custodian encourages the Client to resolve late payment
claims through direct interest compensation.
SECTION 5.7. Overdraft Procedures. The Client will monitor its currency
positions on a daily basis. The Custodian will provide the Client with a
contractual currency projection report five days forward. In addition, the
Custodian will provide the Client with a cash balance report which will enable
the Client to identify potential overdrawn positions due to failed cash
transactions, as well as uncovered cash positions.
If the Client does not confirm to the Custodian that the Client has taken
affirmative action to prevent the occurrence of an overdraft or to resolve an
existing overdraft, the Custodian may arrange independent borrowings on the
Client's behalf with our Subcustodians at prevailing market rates. The Client
will pay the cost of such borrowings, even if the compensating funds are
back-valued when received.
In cases where it appears that the Client account may be overdrawn as the
result of the payment order, the Custodian will refer the potential exception to
the Client. If the Client cannot be contacted, or confirms that the payment will
overdraw the account, the Custodian, in its discretion, may prevent the payment
from occurring. In such situations, an alternative payment date will be agreed
upon with the Client.
ARTICLE VI
RECONCILIATION PROCEDURES
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SECTION 6.1. Unidentified Cash. The Custodian will advise the Client by
electronic mail (or, if electronic mail is unavailable, by facsimile) of any
unidentified cash received by the Custodian. If the Client recognizes any such
unidentified cash receipts, the Client will notify the Custodian via an
electronic mail (or, if electronic mail is unavailable, by facsimile), or
telephone to avoid unnecessary returns of cash, provided that, if the Client
notifies the Custodian by telephone, the Client will promptly issue Instructions
confirming such notice; provided, however, the Custodian is entitled to rely on
such telephone instructions regardless of whether Client so confirms. Upon
client notification that an unidentified receipt is the property of a specific
client account, MSTC will determine the appropriate value date that the funds
can be credited to the account. In general, the funds will be credited to the
client's account in accordance with the cash notification deadlines from the
date of the client notification. Unidentified cash receipts are returned by the
Custodian to sender within three (3) days if the value equals or exceeds US$
100,000 or within five (5) days if the value is less than US$ 100,000.
SECTION 6.2. Non-Receipt of Cash. The Custodian will advise the Client by
electronic mail (or, if electronic mail is unavailable, by facsimile) of any
non-receipt of cash for which the Custodian has received Instructions. The
Client will notify the Custodian of the status of all non-receipts by Electronic
Transmissions, a free formatted SWIFT instruction, a tested telex or by
telephone, provided that, if the Client notifies the Custodian by telephone, the
Client will promptly issue Instructions confirming such notice; provided,
however, the Custodian is entitled to rely on such telephone instructions
regardless of whether Client so confirms. Non-receipts equal to or greater than
US$ 100,000 will be reversed on value date + 1; non-receipts of less than US$
100,000 will be reversed on value date + 2. This policy applies to free cash
receipts as well as the receive side of FX contracts executed with a broker
other than MS&Co. or one of its affiliates.
If the Custodian does not receive the cash at the designated cash agent,
as per the MSTC Settlement Book and therefore has to transfer the currency
between Subcustodians, the value date of the contractual credit posting will be
adjusted to reflect the date that the funds are received by the correct
Subcustodian.
SECTION 6.3. Daily Security Reconciliation. (a) The Client may be provided
with an asset holdings dataset for daily reconciliation. The Client may select
from three (3) different reconciliation methods. The reconciliation options are
as follows:
(i) The Custodian will transmit a daily positions dataset to the
Client's mainframe whereby the Client initiates a security
comparison;
(ii) The Custodian will transmit a daily positions dataset to the
Client's PC whereby the Client initiates a security comparison; or
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(iii) The Client will transmit a daily positions dataset to the Custodian
mainframe whereby the Custodian initiates the comparison and
provides a variance report back to the Client.
If the Client wishes to use this functionality, the Client and the
Custodian will agree upon one of these options as the method by which the Client
will perform such reconciliations.
(b) Using the automated functionality set forth in Section 6.3(a), or any
other method, such as a manual comparison of holdings reports, the Client will
identify all security position differences and make reasonable efforts to
resolve them with the Custodian no less frequently than by the first business
day after each month-end.
SECTION 6.4. Other Client/Custodian Reconciliations. On a pre-determined
basis, the Client will reconcile dividend, corporate action and tax reclaims
accruals and payments which the Custodian reports. The Client will notify the
Custodian of any discrepancies as quickly as possible but no later than six (6)
months after the posting of the transaction entry.
SECTION 6.5. Pricing of Securities. Prices of Securities reported to
Clients on any statement or report are obtained (i) from third party sources,
including data vendors, agent banks, market makers and other financial
institutions; (ii) from prices determined by Custodian's valuation models using
yield curves provided by third party vendors such as Blumbergs and industry
standard calculations; or (iii) as otherwise agreed between the Custodian and
the Client. The Custodian is not responsible for the accuracy of any prices or
information received from third parties.
ARTICLE VII
CLAIMS
SECTION 7.1. Claims Received. All claims received by the Client for which
the Client intends to issue a counterclaim against the Custodian must be
forwarded to and received by the Custodian within the following time frames:
(a) Claims relating to fixed income transactions - thirty (30) days from
actual settlement date.
(b) Claim relating to equity and cash transactions - ninety (90) days
from actual settlement date.
Claims received after these time frames will not be honored by the Custodian.
The Client will provide the Custodian with the original claim letter and any
other details regarding
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the incident. The Custodian will provide the Client with a response within five
(5) business days of receipt regarding the disposition of the claim. Claims sent
directly from brokers to the Custodian are also subject to the above deadlines.
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SECTION 7.2. Claims Issued. If the Client chooses contractual cash
accounting, the Custodian may issue claims for any failed settlements determined
to be the responsibility of the Client or a counterparty. Counterparty claims
will be sent to the Client or directly to the counterparty, depending on the
Client's preference. The Custodian's claims will be sent within the time frames
noted above.
ARTICLE VIII
DIVIDEND/INCOME COLLECTION; CORPORATE ACTIONS; ETC.
SECTION 8.1. Dividends/Income Collection. The Custodian will receive
information on corporate actions, including dividend reinvestments and optional
dividends, from a variety of sources including Excel, Telekurs, Nikkei Needs,
Morgan Stanley Capital International, as well as their Subcustodians and
depositories. The Custodian, through its Subcustodians, will receive dividends
on behalf of the Client. On ex-date, the Custodian will generate a receivable
for the net dividend or income amount which is included in the Client's
valuation. Likewise, the Custodian will reflect stock dividend accruals in the
portfolio when applicable.
After record date, the Custodian will adjust its accrual to take into
account all transactions effected prior to ex-date with settlement after ex-date
which had not been received by the Custodian at the time of the initial accrual
posting.
Based upon the Assured Dividend Schedule in Appendix 9, the Custodian will
reverse the dividend receivable and credit the amount due to the Client in
available funds. If the Client wishes to convert the local currency proceeds to
another currency, the Client will complete the standing instructions outlined in
Appendix 8. The Custodian will also credit the Client partial dividend payments
where appropriate.
If the Custodian's Subcustodian does not receive the dividend payment
within three (3) months from contractual paydate or if the Custodian determines
that the dividend payment will not be made by the company, the Custodian will
reverse the dividend credit from the Client's account, subject to seventy-two
(72) hours prior notification via electronic mail.
In the event that the amount of dividend paid by the Custodian to the
Client is inaccurate, the Client's account will be adjusted, subject to
seventy-two (72) hours prior notification via electronic mail. The Client will
ensure that there are funds available to avoid an overdraft when the overpayment
is corrected.
The Custodian will file for "market claims" which are defined as security
purchase transactions failing on record date whereby the counterparty receives
the Client's due
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entitlement by virtue of being the holder of record. The Custodian will reflect
a dividend accrual until actual payment is received.
Japanese odd lots resulting from dividend or corporate action activity
will be sold by the Custodian, and the Client's account will be credited with
the proceeds within one (1) month of receipt of entitlement.
SECTION 8.2. Corporate Actions. The Custodian will receive information on
corporate actions, including dividend reinvestments and optional dividends, from
a variety of sources including Excel, Telekurs, Nikkei Needs, Morgan Stanley
Capital International, as well as their Subcustodians and depositories.
The Custodian will notify the Client of provisional details of all
corporate actions affecting their portfolio within twenty-four (24) hours of
receipt of information from the aforementioned sources. This will be an official
notice, sent to the Client via electronic mail. Full terms of the offer,
expected ex-date, provisional customer holdings, and line of shares to be
received will be provided to the Client if available and/or applicable.
Additional pre-notifications will be provided as pertinent information is
received before ex-date.
On ex-date, the Custodian will notify the Client of confirmed available
details of all corporate actions by 3:00 p.m. The Custodian will include the
Client's holdings, entitlements and response date in its confirmation. The
Custodian will take the necessary action on mandatory corporate actions. For
voluntary corporate actions, the Custodian will await the Client's Instructions.
The Client's Instructions should include the client account name/number or
mnemonic, and the quantity of shares to be acted upon by the Custodian. After
receipt of the Client's Instructions, the Custodian will send a summary recap
via electronic mail, confirming the Client's entitlement and election.
If Instructions are not received from the Client before the stated
deadline, the Custodian will attempt to contact the Client to request
Instructions. If Instructions are not received by the deadline, the Custodian
will act in accordance with the default option provided by the local market
and/or company as stated in the Custodian's notification. Instructions received
after the deadline will be processed by the Custodian using reasonable efforts.
The Client will provide the Custodian with standing instructions in
Appendix 8 if desired. The Custodian will follow the standing instructions for
each action, unless the Custodian receives contrary Instructions forty-eight
(48) hours prior to the Custodian's specified deadline.
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If the Client purchases a security during the period when a corporate
action is outstanding, the Custodian will notify the Client of the corporate
action within one business day after receipt of complete Trade Instructions.
In the event there is a security purchase fail on an issue involved in a
corporate action, the Custodian will act in accordance with the Client's
Instructions for all shares received on or prior to the corporate action
response deadline. If entitlement has not been received by the Custodian by
response deadline, the Custodian will use reasonable efforts to protect the
Client's interest under the terms of the offer in accordance with local market
practice. If the Custodian has difficulty in doing so with a broker, it will
contact the Client for assistance.
Fractional shares resulting from corporate action activity will be treated
in accordance with local market practices.
The Custodian may provide proxy voting services, if the Client elects, in
those countries for which proxy voting service procedures are set forth in
Appendix 10.
SECTION 8.3. Optional Dividends. With respect to optional dividends, the
cash dividend will be accrued as described in Section 8.1. If the Client elects
to receive stock rather than cash, the Custodian will reverse the cash accrual
and create a stock receivable. The Custodian will credit the Client with the new
shares upon actual receipt in the market. For those markets where a tax payment
must be charged, the Custodian will inform the Client of the tax in the original
optional dividend notification that is sent to the Client. The Custodian will
accept standing instructions for optional stock dividends, as specified by the
Client in Appendix 8.
With respect to discretionary securities lending transactions, the
Custodian will notify the Client of entitlements due to the Client on all
security lending positions. The Client must send a copy of the instructions
given by the Client to the borrowing brokers prior to the Custodian's response
deadline.
SECTION 8.4. Dividend Reinvestment Plans (DRIPS). The Custodian will
accept Instructions from the Client to enroll shares in New Zealand and
Australian DRIPS. These will be treated as optional dividends; notification
received by the Custodian will be sent by the Custodian to the Client for each
offering. The share reinvestment rate will be sent to the Client once the
information is published. Until then, the Custodian will accrue the cash
equivalent of the dividend. Once the rate is known, shares will be accrued.
Resulting dividend shares will be credited only upon receipt by the Custodian.
If available, a prospectus on each plan will be provided to the Client by the
Custodian on request.
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When the Client wishes to enroll in a Canadian DRIP, the Custodian must be
given Instructions by the Client at least five (5) business days prior to record
date. If the Client wishes to sell shares enrolled in a Canadian DRIP, the
Custodian must be advised of the sale on trade date. Should a Canadian sale
transaction fail due to share transfer out of the DRIP, the Custodian will use
reasonable efforts to settle the trade as soon as possible. The Custodian,
however, will not be responsible for any losses due to the sale fail. If
available, a prospectus on each plan will be provided to the Client by the
Custodian on request.
SECTION 8.5. Coupon Interest Collection and Maturities. The Custodian will
accrue and report coupon interest daily for all fixed income Securities, taking
into account purchase or sale interest from the Client's Trade Instructions. The
Custodian will pay coupon interest payments and maturities according to the
Fixed Income Collections Assured Payment Schedule in Appendix 11 and convert the
local proceeds to another currency if the Client has so instructed in Appendix
8.
Regarding early and partial redemptions and lotteries, the Custodian will
notify the Client via electronic mail (or, if electronic mail is unavailable, by
facsimile) and credit the Client's cash account upon receipt of the funds.
ARTICLE IX
TAX RECLAIMS AND EXEMPTIONS
SECTION 9.1. Reclaims and Exemptions. (a) At the request of the Client,
the Custodian will also undertake to obtain exemptions from withholding taxes
imposed in various jurisdictions by filing the appropriate documentation as may
be required in the applicable jurisdiction.
(b) Representatives of the Custodian will be available to discuss with the
Client exemptions from tax liabilities which may be available to the Client or
the beneficial owner of the Property in various foreign jurisdictions. The
Client, however, should not rely on representatives of the Custodian to render
tax advice to the Client or any beneficial owner and should consult its own tax
advisor as to any such matters.
SECTION 9.2. Tax Status Documentation. To enable the Custodian to file for
tax reclaims and apply for exemptions from withholding taxes in accordance with
Section 9.1, the Client will provide, and will cause the beneficial owners of
the Property to provide, the documentation and information which may be
necessary in each relevant jurisdiction to:
(a) entitle the holder or owner of any Security to reclaim any taxes
paid or withheld from any dividend or interest payment made with
respect to such Security; or
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(b) entitle the holder or owner of any Security to be exempt from any
withholding tax applicable to any interest or dividend payments made
with respect to any Securities.
To the extent that separate documentation may be required in respect of a
particular individual or group of transactions, the Client will provide such
items before any transfer of Property to the Custodian. In the event that the
necessary documentation has not been received by the Custodian, the Custodian
will be under no obligation to seek exemptions, file for reclaims or to receive
anything other than the standard amounts net of normal withholding tax.
SECTION 9.3. Filing Procedures for Withholding Tax. Dividends received by
the Custodian on behalf of the Client may be received net of withholding tax
against which tax reclaims may be filed. Based on information received, but
assuming no obligation for the completeness or accuracy of such information, the
Custodian will identify any dividend or interest payment for which withholding
reclaims may be filed.
Where applicable, the Custodian will arrange for completion of the
necessary documentation and its forwarding to:
(a) the Client;
(b) the United States Internal Revenue Service;
(c) the Subcustodian in the jurisdiction concerned;
(d) the local taxing authority in the jurisdiction; and
(e) concerned other parties as may be required.
The documentation may need to be passed to one or more than one of the
above, based on the jurisdiction concerned.
Funds received by the Custodian from tax reclaims will be reconciled with
the amount of the expected tax reclaim in local currency and credited to the
Client upon reconciliation. If the Client requests the Custodian to convert the
local proceeds to another currency, the Client will provide the Custodian
standing instructions as set forth in Appendix 8.
On or before the 15th day of each calendar month, the Custodian will
provide information on the status of all outstanding reclaim items relating to
dividend and interest payments made on or before the 15th day of the second
preceding calendar month. The
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Custodian makes no representation as to the effectiveness of its pursuit of
information from any foreign or U.S. taxation authorities.
ARTICLE X
SECURITIES LENDING
[Under Separate Cover]
ARTICLE XI
REPORTING
SECTION 11.1. Daily Transmission of Information. The Custodian will
transmit to the Client on a daily basis the reports shown in Appendix 13 so as
to provide the Client with the informational means of reconciling Trades, cash,
and accruals on a daily basis. The Client will reconcile these reports daily and
communicate all inquiries concerning this reconciliation to the Coverage Officer
at the Custodian by Electronic Transmission (or, if electronic mail is
unavailable, by facsimile).
The reports will be transmitted so as to reach the Client by approximately
6:00 am on the business day of transmission and will relate to activity as of
the close of business on the previous business day.
SECTION 11.2. Monthly Report Delivery. On the first business day of each
month, the Custodian will provide the Client with a draft of the month end
reports shown on Appendix 13 (the "Monthly Reports"). The Client will review and
reconciliation of the Monthly Reports. This Client will confirm the accuracy of
the information contained in such Monthly Report, including without limitation,
the Securities held in the Account and the valuation of such Securities. Upon
receipt of Instructions confirming that all late Trades and any applicable
Client requests have been transmitted by the Client to the Custodian, the
Custodian will initiate the production of the final Monthly Reports which will
be provided to the Client on the following business day.
ARTICLE XII
CLIENT WORKSTATION
SECTION 12.1. Client Inquiry System. The Custodian may provide clients
with the Custodian's Client Inquiry System. This electronic communication
service provides a direct link between the Custodian and the Client involving
groups of personnel specifically selected to meet our Client's needs.
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This service is provided with the understanding that its use will be as
instructed by the Custodian. The Client may direct all inquiries through the
Client Inquiry System thereby creating a database which the Custodian will use
to monitor a variety of issues. Such information may be presented to the Client
on a regular basis.
In addition, the Custodian may assign a unique mail identification for the
client allowing the Custodian to respond to inquiries from specific areas at the
Client when applicable. Communication sent to this mail ID will constitute
confirmed delivery of the message to the Client.
As needed, additional mail grouping or personnel changes to the current
groupings can be established on two weeks notice.
SECTION 12.3. Client Workstation Technical Support. The Custodian supports
the Client Workstation applications from 9:00 AM to 5:00 PM every business day
and distributes technical information for user applications. It should be noted
that this communication link to the Custodian using SIMPC is through a public
data network. This application is the foundation of the Custodian's network to
brokers and agent banks worldwide.
Prior to the delivery of any Property to the Custodian under the Custodian
Agreement, training will be provided to the Client on use of the Customer
Workstation. In addition, user documentation will be provided to the Client for
its use.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Amendments. This Service Guide and any Appendix hereto may
be amended or supplemented by the Custodian from time to time by notice to the
Client. This may be done by the addition of a Service Enhancement Letter.
SECTION 13.2. Time. All references in this Procedure Manual or in any
Appendix to a time of day are to Eastern Standard Time unless otherwise stated.
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APPENDICES
TO
CLIENT SERVICES GUIDE
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APPENDIX 1
Trade Settlement Deadlines
(Note: All trades must be received by 4:00 pm on the deadlines stated below,
unless otherwise specified. All times are New York time.)
Country: Normal Settlement Cycle: MSTC Deadline:
Argentina Trade date plus 5 business 11:00 am on settlement date
days minus 2 business days
Australia Trade date plus 5 business Settlement date minus 2
days business days
Austria Trade date plus 5 business 11:00 a.m. on settlement date
days minus 2 business days
Bangladesh Trade date plus 4 business Settlement date minus 3
days business days
Belgium Shares: Trade date plus 3 Shares: Settlement date
business days minus 2 business days
Bonds: Trade date plus 7 Bonds: Settlement date
business days minus 1 business day
Botswana Trade date plus 4 business Settlement date minus 3
days business days
Brazil Trade date plus 2 business 11:00 a.m. on settlement date
days minus 1 business day
Canada Trade date plus 3 business Settlement date minus 2
days business days
*T-Bills Trade date plus 1 business Settlement date minus 1
day business day
Chile Trade date plus 2 business 11:00 a.m. on settlement date
days minus 1 business day
China - Shanghai Trade date plus 3 business Settlement date minus 2
days business days
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- Shenzhen Trade date plus 3 business Settlement date minus 2
days business days
Colombia Trade date plus 2 business 11:00 a.m. on settlement date
days minus 1 business day
Czech Republic Trade date plus 3 business Settlement date minus 2
days business days
Denmark Trade date plus 3 business 11:00 a.m. on settlement date
days minus 2 business days
Finland Trade date plus 4 business 11:00 a.m. on settlement date
days minus 2 business days
France Rolling Settlement Cycle Settlement date minus 1
business day
Germany Trade date plus 2 business Settlement date minus 2
days business days
Ghana Trade date plus 14 business Settlement date minus 12
days business days
Greece Bearer: Trade date plus 2 Bearer: Settlement date
business days or trade date minus 2 business days
plus 3 business days with
agreement getween broker
and client
Registered: Trade date plus Registered: Settlement date
9 through 12 plus 1 business day
Hong Kong Trade date plus 2 business Settlement date minus 1
days business day
Hungary Trade date plus 3 business Settlement date minus 2
days business days
India - A shares Trade date plus 29 business Settlement date minus 28
days business days
- B shares Trade date plus 32 business Settlement date minus 31
days business days
Indonesia Trade date plus 4 business Settlement date minus 4
days business days
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Israel Trade date Trade date
Italy Rolling settlement - settlement 3 business days prior to
date minus 2 business days Reporting Day
Ireland 10 day rolling settlement Settlement date minus 5
business days
Japan Trade date plus 3 business Settlement date minus 2
days business days
*JGB's Trade date plus 4 business Settlement date minus 3
days business days
Jordan Trade date plus 3 business Settlement date minus 2
days business days
Kenya Trade date plus 7 business Settlement date minus 6
days business days
Korea Trade date plus 2 business Settlement date minus 1
days business day
Malaysia
Buys Trade date plus 7 business Settlement date minus 2
days business days
Sales Trade date plus 4 business Settlement date minus 2
days business days
Mexico Trade date plus 2 business Equity: settlement date
days minus 1 business day
Bonds: 12:00 p.m. on
settlement date minus 1
business day
Morocco Trade date plus 1 business Settlement date minus 1
day business day
Netherlands Trade date plus 5 business Settlement date minus 2
days business days
New Zealand Trade date plus 5 business Settlement date minus 3
days business days
Norway Trade date plus 3 business 11:00 a.m. on settlement
days date minus 2 business days
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Papua New Trade date plus 5 business Settlement date minus 4
Guinea days business days
Pakistan Following Monday Settlement date minus 2
business day - closed
Fridays
Peru Trade date plus 2 business 11:00 a.m. on settlement
days date minus 1 business day
Philippines Trade date plus 3 business Settlement date minus 2
days business days
Poland Trade date plus 3 business Settlement date minus 2
days business days
Portugal Trade date plus 4 business Settlement date minus 3
days business days
Singapore Trade date plus 5 business Settlement date minus 2
days business days
South Africa Equity - First Tuesday of the Settlement date minus 2
week following trade date. business days
Gilts - Second Thursday after Settlement date minus 2
the trade date. business days
Spain Trade date plus 7 business Settlement date minus 2
days business days
Sri Lanka
Buys Trade date plus 5 business Settlement date minus 2
days business days
Sales Trade date plus 7 business Settlement date minus 2
days business days
Swaziland Trade date Trade date
Sweden Trade date plus 3 business 11:00 a.m. on settlement
days date minus 2 business days
Switzerland Trade date plus 3 business Settlement date minus 2
day business days
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Taiwan Trade date plus 1 business Settlement date minus 1
day business day - open
Saturdays
Thailand Trade date plus 3 business Settlement date minus 2
days business days
Turkey Trade date plus 2 business Settlement date minus 1
days business day
United Kingdom Rolling 10 day settlement Settlement date minus 5
business days
*Gilts Trade date plus 1 business Settlement date minus 1
day business day
United States Trade date plus 5 business Settlement date minus 2
days business days
CP and Trade date plus 1 business 11:00 a.m. on settlement
T-Bills day date
Uruguay Trade date plus 1 business 11:00 a.m. on settlement
day date minus 1 business day
Venezuela Trade date plus 5 business 11:00 a.m. on settlement
days date minus 1 business day
Zambia Trade date plus 3 business Settlement date minus 2
day business days
Zimbabwe Trade date plus 7 business Settlement date minus 2
days business days
Euroclear Trade date plus 5 business
days
Settlement date minus 2
*Euroclear/Cedel business days
Settlement date minus 2
*Kassenverein business days
*Physical 11:00 a.m. on settlement
date minus 2 business days
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11:00 a.m. on settlement date
minus 3 business days for
Italian Government Bonds.
EuroCDs Trade date plus 1 business Settlement date minus 1
day business day for USD and
GBP.
Settlement date minus 2
business days for all other
currencies.
EuroCommercial Trade date plus 1 business Settlement date minus 1
Paper day business day
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(MORGAN STANLEY TRUST COMPANY USE ONLY)
APPENDIX 2
Broker Information
Client Name: _______________________
Client Contact:_______________________
Contact Tel. No.:____________________
Broker: ____________________
Address: ____________________
Broker Contact:_______________________
Contact Tel. No.:____________________
Country: ____________________
Circle One: ____________________
Equities Fixed Income (Bonds) Other
Broker's Local Settlement Instructions
Agent: _____________________
Agent Address: _____________________
Beneficiary: __________________
Beneficiary Account No.:__________________
Cedel Account No.: _____________________
Euroclear Account No.:____________________
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APPENDIX 3
Broker FX Delivery Instructions
Broker Name: _____________________
Broker A/C# or Mnemonic: _____________________
Currency: _____________________
Agent Name: _____________________
Agent BIC, ABA, CHIPs or
CHAPS No.: _____________________
Beneficiary: _____________________
_____________________
Bank A/C#: _____________________
Completed and/or approved by: _____________________
Client
Completed and/or approved by: _____________________
Client Data Services
-8-
<PAGE>
APPENDIX 4
Foreign Exchange Information
Instructing the Custodian concerning the trading of foreign currency with a
third party, the Client must specify:
- Value date ___________ M/DD/YY_
- Currency Sold and Amount
- Currency Bought and Amount
- Exchange Rate
- Remitting and Delivering Banks including City
- by order of/for account of ________
Example,
value 02/01/93
Sold JPY 25,000,000
at 140.00
Bought USD 178,571.43
Deliver JPY to:
ABC Bank, Tokyo
F/A/O XYZ Bank, NY
ref. forex
Receive USD from:
ABC Bank, NY
ABA 000000000
B/O x company
-9-
<PAGE>
APPENDIX 5
Currencies Earning Interest
Currency Minimum Deposit Amount
- -------- ----------------------
GBP 50,000
USD 100,000
IEP NONE
CHF 100,000
DEM 100,000
NLG 100,000
JPY 20,000,000
-10-
<PAGE>
APPENDIX 6
Client SWIFT Delivery Instructions
Client Name: ____________________
Client A/C No.: ____________________
Currency: ____________________
Agent Name: ____________________
Agent BIC, ABA,
CHIPS or CHAPS No.: ____________________
Beneficiary: ____________________
Bank A/C No.: ____________________
Completed and/or approved by: ____________________
Client
Completed and/or approved by: ____________________
Client Data Services
Mnemonic Assigned: ____________________
NOTE: The mnemonic assigned to these instructions can be chosen by the client by
the MSTC Controllers Group.
-11-
<PAGE>
APPENDIX 7
Cash Disbursement/Deposit Information
Instructing the Custodian to receive currency, the Client must specify:
- Value date ____ M/DD/YY_
- Currency Sold and Amount
- Currency Bought and Amount
- Exchange Rate
- Remitting and Delivering Banks including City
- by order of/for account of _______
Instructing the Custodian to pay currency, the Client must specify:
- Value date ____ M/DD/YY_
- Currency Sold and Amount
- Currency Bought and Amount
- Exchange Rate
- Remitting and Delivering Banks including City
- by order of/for account of _______
account number when applicable
Instructions concerning the receipt or payment of funds in the currencies
indicated below must be received by the Custodian before the deadline specified:
Deadline Currencies
-------- ----------
2:30 p.m. (EST) USD
on value date
9:00 a.m. (GMT) GBP
4:00 p.m. (EST) ATS, DKK, FIM, NON, SEN
on value date
- 2 Business Day
4:00 PM (EST) ALL OTHER CURRENCIES
on value date
- 1 Business Day
-12-
<PAGE>
APPENDIX 8
Client Standing Instructions
The Custodian will act according to the standing instructions that the Client
has included below.
1. Convert Corporate Actions to USD and perform FX on Subscriptions
2. Convert Dividend Proceeds
3. Convert Monthly Debit/Credit Interest
4. Convert Corporate Action Proceeds
5. Convert Coupon Interest Proceeds
6. Convert Maturities
7. Convert Tax Reclaim Proceeds
8. Other Standing Instructions
-13-
<PAGE>
APPENDIX 9
Assured Dividend Schedule
Effective August 1994
Countrv Pavment Schedule
- ------- ----------------
Argentina PD +10
Australia PD + 1
Austria PD + 1
Belgium PD + 1
Canada PD
Chile PD + 10
Denmark PD + 1
Finland PD + 1
France PD + 1
Germany PD
Hong Kong PD + 1
Indonesia PD + 10
Ireland PD + 2
Italy PD + 5
Japan PD + 2
Korea (South) PD + 5
Malaysia PD + 4
Netherlands PD + 1
New Zealand PD + 1
Norway PD + 1
Portugal PD + 5
Singapore PD + 4*
Spain PD + 5
Sweden PD + 1
Switzerland PD
Thailand PD + 5
Turkey PD + 5
United Kingdom PD + 1
United States PD**
NOTE: * Malaysian securities that trade on the Singapore Stock Exchange will
be paid in MYR at the Malaysian tax rate.
** For equities only.
-14-
<PAGE>
EXCEPTIONS:
OPTIONAL DIVIDENDS: The cash portion will NOT be included in this schedule.
Securities Paying out of issued currency will not be part of this schedule, e.g.
Mandarin Oriental - This is safekept as US Security but issued in Hong Kong.
The following Countries are NOT on the Assured Dividend Schedule but MSTC will
continue to review market practice in countries and work with our agents to add
these to the schedule as soon as possible:
Botswana
Brazil
China
Colombia
Czech Republic
Ghana
Greece
Hungary
India
Israel
Jordan
Luxembourg
Mexico
Morocco
Pakistan
Papua New Guinea
Peru
Philippines
Poland
South Africa
Sri Lanka
Taiwan
Uruguay
Venezuela
Zimbabwe
-15-
<PAGE>
APPENDIX 10
Proxy Procedures
NOTIFICATION:
2. Meeting dates will be loaded into REUM (International Reorg
Calendar) via Telekurs and manually. Manual update information will
come from our sub-custodians and ISS.
3.
3. Agenda items and materials will be requested from the respective
agent. Agenda items will be distributed via REUM and materials will
be distributed upon request.
4. Clients will receive basic details of each upcoming meeting via mail
or fax instructions initiated through REUM.
5. Upon receipt of the agenda items, the client will receive final
details of the meeting: meeting dates, agenda items, MSTC response
deadline and details of any fees.
CLIENT RESPONSE:
MSTC will recap the clients proxy vote upon receipt. The clients vote(s)
will be input into REUM for reporting.
MSTC will not endeavor to follow-up with clients if they do not send a
proxy vote prior to the deadline. (Clients will be reminded of this with
each announcement.)
AGENT RESPONSE:
On MSTC response deadline, the votes will be tallied and forwarded to our
sub-custodian via mail, SWIFT or TELEX.
BILLING:
Proxy voting fees will be added to the monthly Custody Fee Bill as a
separate line item. Attached to this line item will be the details
of each vote.
-16-
<PAGE>
Reporting will be available to the client monthly, quarterly,
semi-annually, or annually upon request. The client will be able to
choose from two versions of the repoft:
Version A will include: company name, meeting date, and quantity of
shares voted.
Version B will include: company name, meeting date, quantity of
shares voted, agenda items, and the client's voted choice.
BLOCKING OF SHARES FOR VOTING:
For the countries that require blocking of the shares being voted at
the AGM or EGM, the sub-custodian will place a restriction ('block')
on these shares upon receipt of our voting instructions and will
remain until one business day following the meeting. To reflect this
block on MSTC records we will place a memo reference on the position
which will be tracked by the edit check system in MTUA. This memo
reference will remain until the shares are released by the
sub-custodian.
Memo reference entries will be made manually until system
enhancements are made available.
REGISTRATION OF SHARES FOR VOTING:
For the countries that require the shares to be registered in the
name of the beneficial owner, we will need to provide the name and
address of the beneficial owner at the same time we give the voting
instructions. Time is critical, as the shares are usually required
to be registered by a specified time period prior to the meeting
date (one to several weeks). The shares will be re-registered to the
sub-custodian's nominee name on one business day after the AGM or
EGM. To reflect this block on MSTC records we will place a memo
reference on the position which will be tracked by the edit check
system in MTUA. This memo reference will remain until the shares are
fully re-registered by the sub-custodian.
Memo reference entries will be made manually until system
enhancements are made available.
-17-
<PAGE>
COUNTRY SPECIFIC PROCEDURES
Australia As detailed above.
Austria Shares must be blocked prior to the meeting and will be
unblocked on meeting date + 1. Shares will be unavailable for
trade settlement during this period.
Cut memo reference journals to restrict the shares from trade
settlement.
Lawyer fees will be charged for a vote against or to abstain.
The sub-custodian will make arrangements for the lawyer.
Belgium As detailed above.
Canada Votes will be tallied and forwarded directly to the registrar
or company rather than the sub-custodian. A proxy card must be
completed for each company.
Denmark Shares need to be registered 3 1/2 months prior to the
meeting. Upon receipt of instructions to vote the proxy, MSTC
will instruct our agent (via SWIFT or Telex) to register the
required shares. Shares will be unavailable for trade
settlement until the shares are returned to the previous
registration. Details and agenda will not be available until
at least 6 weeks prior to the meeting. (varies)
Cut memo reference journals to restrict the shares from trade
settlement.
** NOTE: Since shares must be registered prior to the provision
of the meeting details and agenda, instructions for intent to
vote at the meeting must be received 3 1/2 months prior to the
meeting date.
Service is provided for the 50 major companies only.
Baltica Baltica Holding
Bang & Olufsen Hldg Burmeister & Wain Hldg
Carlsberg Cheminova Holding
Coloplast Danisco
-18-
<PAGE>
Danske Luftfartselkab Denske Trelastompagni
Den Danske Bank DFDS
D/S AF 1912 D/S AF Svendborg
D/S Torm F. Junckers Industrier
Fls Industries Ford Motor Company
GN Store Nord H&H Industri Holding
Hafnia Holding Incentive
ISS - Int Service System J. Lauritzen Holding
Jyske Bank Korn Og FoderstofKomp
Kryolitselskabet Oresund Micro Matic
Monberg & Thorsen Hldg NKT
Novo Nordisk Phonix
Radiometer Royal Copenhagen
SCS Holding Sophus Berendsen
Sparekassen Bikuben Superfoss
Tele Danmark Topdanmark
Unidanmark Varde Bank
Villadsens Fabr Wessel & Vett
O.K. Holding Co. Ostasiatisk Kompagni
Aalborg Portland Aarhus Oliefabrik
Finland Shares must be registered at least 1 month prior to the meeting.
Upon receipt of instructions to vote the proxy, MSTC will instruct
our agent (via SWIFT or Telex) to register the required shares and
lodge the vote. Shares will be unavailable for trade settlement
until the shares are returned to the previous registration.
Cut memo reference journals to restrict the shares from trade
settlement.
Registration fees will vary based upon the type of registration;
book- entry or share certificate. Book-entry registration will be
250fim and the share certificate registration will be 5fim per share
with a minimum of 50fim.
France Shares must be blocked prior to the meeting and will be unblocked on
meeting date + 1. Shares will be unavailable for trade settlement
during this period.
Cut memo reference journals to restrict the shares from trade
settlement.
Germany Once all votes are tallied we will provide one general vote which
must be an original proxy form with two authorized signatures from
MSTC. Shares must be blocked upon receipt of the proxy form and will
be unblocked on
-19-
<PAGE>
meeting date + 1. Shares will be unavailable for trade settlement
during this period.
Cut memo reference journals to restrict the shares from trade
settlement.
Hong Kong As detailed above.
Ireland As detailed above.
Italy Once all votes are tallied we will provide Studio Caleselle with our
voting instructions. The fee will be divided by the number of
clients that choose to vote.
Singapore As detailed above. Shares which are not duly registered on or before
the meeting date will not carry voting rights. Shares under
registration or blocking of shares held in "Street Name" will not
have voting rights.
Spain As detailed above. Shares must be purchased 5 days prior to the
meeting, in order to be eligible to vote.
Sweden Registration instructions must be sent to our sub-custodian first
via facsimile and confirmed by telex 12 days prior to the meeting.
Voting instructions, Power of Attorney, and cover letter must be
received by our sub-custodian seven days prior to the meeting. After
the meeting the shares are returned to their original registration.
The shares will be unavailable for trade settlement during this
period.
Cut memo reference journals to restrict the shares from trade
settlement.
There is a fee for registration in and out of the clients' name,
voting, and translation.
Our sub-custodian is prepared to vote for the following companies
only, but has plans to extend this service to smaller companies in
the future:
Aga Sandvik
Asea Skandia
Astra S-E Banken
Atlas Copco Skanska
Electrolux SKF
Ericsson Stora
Incentive SCA
Industrivarden Handelsbanken
Investor Sydkraft
Nobel Trelleborg
Procordia Volvo
-20-
<PAGE>
APPENDIX 11
Fixed Income Collections
Assured Payment Schedule
Effective October 1994
Countrv Schedule
------- --------
Australia PD
Austria PD
Belgium PD
Canada PD
Denmark PD
Finland PD
France PD
Germany PD
Hong Kong PD
Italy PD
Ireland PD
Japan PD
Netherlands PD
New Zealand PD
Norway PD
Spain PD
Sweden PD
Switzerland PD
United Kingdom PD
United States PD + 1
NOTE: All other Euroclear eligible bonds will also be paid on PD.
United States bonds which are held at DTC are paid with clearing house funds and
therefore will be paid PD + 1. However, bonds held at Chemical Bank will
continue to be paid on PD.
-21-
<PAGE>
APPENDIX 12
Daily Transmission of Client Reports
Each business day, the Custodian will electronically transmit the following
reports listed to the Client's mainframe and/or workstation as agreed with the
Custodian.
Report Title Report ID
Cash Balance Forecast Summary AI7441
Cash Balance Forecast Detail AI7442
Fail Trade Report AI765M
Daily Interest Report BI6000
Monthly Interest Report BI6001
Valuation Summary by Industry Sector with Security Type MT5014
Valuation by Holding Location MT5016
Valuation Investment Summary MT5019
Holdings Extract MT502X
Security Holding Listed Alphabetically MT5022
Cash Summary MT503A
Client Statement of Cash MT5038
Dividend Announcements MT506C
Accrual Income Due Recap MT506J
Accrual Income Due Summary MT506K
Reclaim Income Due Recap MT506L
Reclaim Income Due Summary MT506M
Ex-date Repor (Month-to-Date) MT5062/65
Pay-date Report (Month-to-Date) MT5064/66
Schedule of Purchases MT5122
Schedule of Sales MT5123
Corporate Action Recap MT5134
Transaction Detail Report MT5306
Positions/Prices Extract MT533X
Market Prices in Client Currency MT5332
-22-
<PAGE>
APPENDIX 13
Monthly Transmission of Client Reports
Report Title Report ID
------------ ---------
Monthly Interest Report BI600l
Valuation Summary by Industry Sector with Security Type MT50l4
Valuation by Holding Location MT5016
Valuation Investment Summary MT5019
Holdings Extract MT502X
Security Holding Listed Alphabetically MT5022
Cash Summary MT503A
Client Statement of Cash MT5038
Dividend Announcements MT506C
Accrual Income Due Recap MT506J
Accrual Income Due Summary MT506K
Reclaim Income Due Recap MT506L
Reclaim Income Due Summary MT506M
Ex-date Repor (Month-to-Date) MT5062/65
Pay-date Report (Month-to-Date) MT5064/66
Schedule of Purchases MT5122
Schedule of Sales MT5123
Corporate Action Recap MT5134
Transaction Detail Report MT5306
Positions/Prices Extract MT533X
Market Prices in Client Currency MT5332
-23-
<PAGE>
APPENDIX 14
Contacts at the Custodian
Client Service Team
- -------------------
Mistretta, Peter (MIST) (718) 754-4801
Crinieri, Michael (MCRIN) (718) 754-2713
Buck, Stephen (SBUCK) (718) 754-4334
Roccato, Daniel (DROCC) (718) 754-2707
NAME COUNTRY EXTENSION MAILBOX ID
---- ------- --------- ----------
Operations Team
(Cash/Securities/Reconciliation)
Rubin, Gerry VP-Settlements (718) 754-5524 GERRYR
North America
Jarvin, Tim (Luxembourg) VP-Settlements 352-463-46-215 TIMJ
Europe
Bopp, Anthony Latin America (718) 754-2736 BOPP
Chan, Kitty (Hong Kong) Far East 011-852-848-5262 KITTY
Cofield, Calvin USA, Canada (718) 754-5065 COFIELD
Commaille, Guy (Australia) Far East 011-612-777-1143 GCOM
Coppin, Bruce Far East (718) 754-2735 COP
Davies, Tom (Luxembourg) Europe 352-346-46-233 DAVIES
Goes, Paul (Luxembourg) Europe 352-346-46-234 GOES
Harper, Wayne USA/Canada (718) 754-5476 HARP
Harrison, David (Australia) Far East 011-612-777-1143 HARRI
Kapoor, Ramesh Europe (718) 754-2773 RKAP
Kasinathan, Thambo Europe 352-346-46-213 THAMBO
(Luxembourg)
Manon, Tomas (Luxembourg) Europe 352-346-46-256 MANON
Martin, Rod Latin America (718) 754-4988 ROD
Miller, Kami Europe (718) 754-4868 KAMIL
Otten, Marie (Luxembourg) Europe 352-463-46-235 OTTEN
Robertson, Bill USA/Canada (718) 754-4691 BROB
Skrodanes, David Latin America/Far (718) 754-2745 SKROD
East/Europe-TL
Spellman, Keith USA/Canada (718) 754-4918 KRS
Teller, Ray Far East (718) 754-4653 TELL
Young, Jean (Luxembourg) Europe 352-463-46-210 JEAN
Trade Processing
- ----------------
Bartolotta, Tracey All (718) 754-2776 TRAC
Serman, Reeve All (718) 754-4902 REEVE
Serrano, Rousana All (718) 754-2844 ROUSA
-24-
<PAGE>
Corporate Actions Team
- ----------------------
Cohen, Michael Far East (718) 754-2741 MSCOHEN
Contaldi, Greg USA/Canada (718) 754-2751 CONTA
Emmerson, Tammy Europe (718) 754-4659 TAMMYE
Giroux, David Team Leader (718) 754-2754 GIR
Hands, David Europe (718) 754-5248 HAND
Porinchak, Marypat Proxy (718) 754-5541 PORI
Stern, Mike Europe/Far East (718) 754-2749 MSTER
Security Lending
- ----------------
Minio, Angela Vice President (718) 754-2762 AMINIO
Bruno, Joe All (718) 754-2750 JBRUN
Infante, Myrna All (718) 754-2716 INFANTE
Scott, Elizabeth All (718) 754-2819 ESCOTT
Jacobs, Ina All (718) 754-2737 IJAC
Shannon, Jim All (718) 754-2747 SHANNON
Pastor, Diane All (718) 754-4878 DIANE
Dividends/Tax Reclaim Team
- --------------------------
Conway, Bill (718) 754-2742 WCOM
Dougherty, Dan (718) 754-2732 DANP
Garguiolo, John (718) 754-5644 JOHNNYG
McGuire, Kevin (718) 754-2752 KEVINJ
O'Brien, Mitchell (718) 754-4788 MOB
O'Rourke, Susan (718) 754-2980 SUSAN
Palagonia, Michael (718) 754-4074 MPAL
Poulos, Peter (718) 754-4065 POULOS
Shore, Kirsten (718) 754-2882 SHORE
Zimmerman, Sheila (718) 754-4787 ZIMME
Fixed Income Team
- -----------------
Bright, Clifton All (718) 754-4788 CLIFB
Delcore, Mark All (718) 754-2758 CORE
Mauer, Bill All (718) 754-2780 BMAUER
Foreign Exchange Team
- ---------------------
Alber, Russell All (718) 754-2740 TRUSTFX
Downey, James All (718) 754-2777 TRUSTFX
Maluste, Rajiv All (718) 754-2777 TRUSTFX
Cash and Claims Team
- --------------------
King, David (Luxembourg) Europe 352-346-46-250 DK
King, Kevin (Luxembourg) Europe 352-463-46-250 KKING
Mueller, Liz All (718) 754-2779 CASHPROD
Pillay, Joanne All (718) 754-2775 CASHPROD
Pulakhandan, Tanuja All (718) 754-2772 CASHPROD
Testa, Mark All (718) 754-2910 CASHPROD
Wing, Infante All (718) 754-2951 CASHPROD
-25-
<PAGE>
Client Data Services
- --------------------
Adams, Lorraine (718) 754-5048 LADAMS
Cherney, David (718) 754-2724 DAVIDC
Donnelly, John (718) 754-2723 JLDIII
Hill, Matthew (718) 754-2704 MATTHEW
Murphy, Joyce (718) 754-4654 JMURPHY
Mihailescu, Dana (718) 754-2748 DANA
Zwolak, Dorinda (718) 754-2705 DORINDA
Sterlacci, Carol (718) 754-4077 CAROLS
Woods, Diane (718) 754-4449 WOODSD
Sealy-Chin, Cheryl (718) 754-4397 SCHIN
Network Management Team
- -----------------------
DiMaria, Lina (London) Europe/Middle East 011-4471-425-8455 LINA
Engleman, Traci All (718) 754-2710 TRACI
Iuzzini, Anthony Vice President (718) 754-2711 AI
Pitcher, James (London) Europe/Middle East 011-4471-425-8456 PITCHER
Seibert, Keith Emerging Markets (718) 754-4917 KSEI
Sisco, Gregg Latin America (718) 754-2712 SISCO
Bohchalian, Ara All (718) 754-5108 ARA
Samuels, Michele All (718) 754-2714 MICHE
Turner, Kevin Europe 011-4471-425-4736 INTURN
Lau, Jeanette (Hong Kong) Far East 852-848-5020 JLAU
Glover, David (Hong Kong) Far East 852-848-5211 DGLOVER
Technical Support Team
- ----------------------
MSTC Help Desk (NY) (718) 754-5444 MSTCHD
-26-
<PAGE>
APPENDIX 15
Directed Securities Lending Transaction
Settlement Deadlines
(Note: All times listed are New York Time)
<TABLE>
<CAPTION>
Country: Preferred Date of Deadline:
- -------- ------------------ ---------
Receipt:
--------
<S> <C> <C>
Australia Trade date Settlement date minus 1 business day
Austria Trade date Settlement date minus 1 business day (10 AM)
*Non-Euroclear/Cedel Settlement date minus 2 business days
Belgium Trade date Settlement date minus 1 business day
Canada Trade date Settlement date minus 1 business day
Denmark Trade date Settlement date minus 1 business day (12 PM)
*Non-Euroclear/Cedel Settlement date minus 2 business days
France Trade date Settlement date minus 1 business day
Germany Trade date Settlement date minus 1 business day
*Registered Shares Trade date Settlement date minus 3 business days
Hong Kong Trade date Settlement date minus 1 business day
Japan Trade date Settlement date minus 1 business day
*JGB's Trade date Settlement date minus 2 business days
Malaysia Trade date Settlement date minus 2 business days
Netherlands Trade date Settlement date minus 2 business days with
"STOCK LOAN" on instructions
New Zealand Trade date Settlement date minus 3 business days
*Outside Wellington Settlement date minus 4 business days
Norway Trade date Settlement date minus 1 business day (12 PM)
*Non-Euroclear/Cedel Settlement date minus 2 business days
Singapore Trade date Settlement date minus 2 business days
Sweden Trade date Settlement date minus 2 business days (12 PM)
*Non-Euroclear/Cedel Settlement date minus 2 business days (4 PM)
Switzerland Trade date Settlement date minus 2 business days
*Registered Shares Settlement date minus 3 business days
</TABLE>
-27-
<PAGE>
United States Trade date Settlement date
(10 AM)
(including Canadian DTC eligible)
It is not recommended that trades be transmitted at the deadline as MSTC cannot
proactively advise the Client of any settlement problems prior to contractual
settlement day.
Add One business day to the settlement period for any instructions received
between 12:00 PM and 4:00 PM.
-28-
TRANSFER AGENCY AND SERVICE AGREEMENT
between
STANDISH AYER & WOOD INVESTMENT TRUST
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. Terms of Appointment; Duties of the Bank.........................1
ARTICLE 2. Sale of Company Shares...........................................4
ARTICLE 3. Returned Checks..................................................5
ARTICLE 4. Redemptions......................................................5
ARTICLE 5. Transfers and Exchanges..........................................5
ARTICLE 6. Right to Seek Assurances.........................................5
ARTICLE 7. Distributions....................................................6
ARTICLE 8. Other Duties.....................................................7
ARTICLE 9. Taxes............................................................7
ARTICLE 10. Books and Records................................................7
ARTICLE 11. Fees and Expenses................................................8
ARTICLE 12. Representations and Warranties of the Bank.......................8
ARTICLE 13. Representations and Warranties of the Company....................8
ARTICLE 14. Indemnification..................................................9
ARTICLE 15. Covenants of the Company and the Bank...........................11
ARTICLE 16. Term of Agreement...............................................12
ARTICLE 17. Additional Funds................................................13
ARTICLE 18. Assignment......................................................13
ARTICLE 19. Amendment.......................................................13
ARTICLE 20. Massachusetts Law to Apply......................................13
ARTICLE 21. Merger of Agreement and Severability............................13
ARTICLE 22. Notices.........................................................14
ARTICLE 23. Limitation of Liability.........................................14
i
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the 22nd day of March, 1996 by and between
STANDISH, AYER & WOOD, a Massachusetts business trust organized under the laws
of the Commonwealth of Massachusetts (the "Company"), and INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Bank").
WITNESSETH:
WHEREAS, the Company desires to appoint the Bank as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
for each of the portfolios of the Company listed in Appendix A hereto, and the
Bank desires to accept such appointment;
WHEREAS, the Bank is duly registered as a transfer agent as provided in
Section 17A(c) of the Securities Exchange Act of 1934, as amended, (the "1934
Act");
WHEREAS, the Company is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Company currently offers shares in fourteen series, named in
Appendix A hereto (such series, together with all other series subsequently
established by the Company and made subject to this Agreement in accordance with
Article 17, being herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the Company and the Bank agree as follows:
ARTICLE 1. Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement, the
Company on behalf of the Funds, hereby employs and appoints the Bank to act as,
and the Bank agrees to act as, transfer agent for each of the Fund(s)'
authorized and issued shares of beneficial interest ("Shares"), dividend
disbursing agent and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of the Company ("Shareholders") and
set out in the currently effective prospectus and statement of additional
information, as each may be amended from time to time, (the "Prospectus") of the
Company, including without limitation any periodic investment plan or periodic
withdrawal program.
<PAGE>
1.02 The Bank agrees that it will perform the following services:
(a) In connection with procedures established from time to time by
agreement between the Company and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the custodian
of the Company appointed by the Board of Trustees of the Company (the
"Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be paid over
in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Company on behalf of a Fund; and
(vii) Create and maintain all necessary records including those specified
in Article 10 hereof, in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the Investment Company Act of 1940, as amended (the "1940 Act"), and those
records pertaining to the various functions performed by it hereunder. All
records shall be available for inspection and use by the Company. Where
applicable, such records shall be maintained by the Bank for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
(viii) Make available during regular business hours all records and other
data created and maintained pursuant to this Agreement for reasonable audit and
inspection by the Company, or any person retained by the Company. Upon
reasonable notice by the Company, the Bank shall make available during regular
business hours its facilities and premises employed in connection with its
performance of this Agreement for reasonable visitation by the Company, or any
person retained by the Company.
(ix) At the expense of and at the request of the Company, the Bank shall
maintain an adequate supply of blank share certificates for each Fund providing
for the issuance of
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certificates to meet the Bank's requirements therefor. Such share certificates
shall be properly signed by facsimile. The Company agrees that, notwithstanding
the death, resignation, or removal of any officer of the Company whose signature
appears on such certificates, the Bank may continue to countersign certificates
which bear such signatures until otherwise directed by the Company. Share
certificates may be issued and accounted for entirely by the Bank and do not
require any third party registrar or other endorsing party.
(x) Issue replacement share certificates in lieu of certificates which
have been lost, stolen, mutilated or destroyed, without any further action by
the Board of Trustees or any officer of the Company, upon receipt by the Bank of
properly executed affidavits and lost certificate bonds, in form satisfactory to
the Bank with the Company and the Bank as obligees under the bond. At the
discretion of the Bank, and at its sole risk, the Bank may issue replacement
certificates without requiring the affidavits and lost certificate bonds
described above and the Bank ages to indemnify the Company against any and all
losses or claims which may arise by reason of the issuance of such new
certificates in the place of the ones allegedly lost, stolen or destroyed.
(xi) Record the issuance of Shares of the Company and maintain,
pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total number of
Shares of the Company which are authorized, based upon data provided to it by
the Company, and issued and outstanding. The Bank shall also provide the Company
on a regular basis with the total number of Shares which are authorized and
issued and outstanding and shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to take cognizance of any
laws relating to the issue or sale of such Shares, which functions shall be the
sole responsibility of the Company.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a) or in any Schedule hereto, the Bank shall: (i) perform all of the
customary services of a transfer agent, dividend disbursing agent and, as
relevant, agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program); including but not limited to maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, at such Shareholder's addresses specified on the Bank's books and
records or as specified by the Company, withholding taxes on all accounts,
including nonresident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, responding to Shareholder telephone calls
and Shareholder correspondence, preparing and mailing activity statements for
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Shareholders, and providing Shareholder account information; and (ii) provide a
system which will enable the Company to monitor the total number of shares sold
in each State. The Company shall (i) identity to the Bank in writing those
transactions and assets to be treated as exempt from blue sky reporting for each
State and (ii) verity the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for a Fund's blue sky state registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by such Fund(s) and the reporting of such transactions to
the Fund(s) as provided above.
(c) Additionally, the Bank shall utilize a system to identity all Share
transactions which involve purchase and redemption orders that are processed at
a time other than the time of the computation of net asset value per share next
computed after receipt of such orders, and shall compute the net effect upon the
Fund(s) of such transactions so identified on a daily and cumulative basis.
ARTICLE 2. Sale of Company Shares
2.01 Whenever the Company, or its agent, shall sell or cause to be sold
any Shares of a Fund, the Company, or its agent, shall deliver or cause to be
delivered to the Bank a document duly specifying: (i) the name of the Fund whose
Shares were sold; (ii) the number of Shares sold, trade date, and price; (iii)
the amount of money to be delivered to the Custodian for the sale of such Shares
and specifically allocated to such Fund; and (iv) in the case of a new account,
a new account application or sufficient information to establish an account.
2.02 The Bank will, upon receipt by it of a check or other payment
identified by it as an investment in Shares of one of the Funds and drawn or
endorsed to the Bank as agent for, or identified as being for the account of,
one of the Funds, promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the investment. The Bank will
notify the Company, or its designee, and the Custodian of all purchases and
related account adjustments.
2.03 Under procedures as established by mutual agreement between the
Company and the Bank, the Bank shall issue to the purchaser or his authorized
agent such Shares, computed to the nearest three decimal points, as he is
entitled to receive, based on the appropriate net asset value of the Funds'
Shares, determined in accordance with the applicable Fund's prospectus and
applicable Federal law or regulation. In issuing Shares to a purchaser or his
authorized agent, the Bank shall be entitled to rely upon the latest directions
given in accordance with procedures set forth in the applicable Fund's
prospectus, if any, previously received by the Bank from the purchaser or his
authorized agent concerning the delivery of such Shares.
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<PAGE>
2.04 The Bank shall not be required to issue any Shares of the Company
where it has received a written instruction from the Company or written
notification from any appropriate Federal or State authority that the sale of
the Shares of the Fund(s) in question has been suspended or discontinued, and
the Bank shall be entitled to rely upon such written instructions or written
notification. The Bank shall immediately notify the Company in the event it
receives instructions from any entity other than the Company to suspend or
discontinue the sale of Shares.
2.05 Upon the issuance of any Shares of any Fund(s) in accordance with
foregoing provisions of this Section, the Bank shall not be responsible for the
payment of any original issue or other taxes, if any, required to be paid by the
Company in connection with such issuance.
2.06 With the prior written consent of the Company, the Bank may establish
such additional rules and regulations governing the transfer or registration of
Shares as it may deem advisable and consistent with such rules and regulations
generally adopted by transfer agents, or any other rules and regulations.
ARTICLE 3. Returned Checks
3.01 In the event that any check or other order for the transfer of money
is returned unpaid for any reason, the Bank will take such steps as the Bank
may, in its discretion, deem appropriate to protect the Company from financial
loss or as the Company or its designee may instruct. Provided that the standard
procedures, as agreed upon from time to time, between the Company and the Bank,
regarding purchases and redemptions of Shares, are adhered to by the Bank, the
Bank shall not be liable for any loss suffered by a Fund as a result of returned
or unpaid purchase or redemption transactions. Legal or other expenses incurred
to collect amounts owed to a Fund as a consequence of returned or unpaid
purchase or redemption transactions shall be an expense of that Fund.
ARTICLE 4. Redemptions
4.01 Shares of any Fund may be redeemed and the Bank will duly and timely
process all redemption requests in accordance with the procedures set forth in
the Prospectus of the Company.
ARTICLE 5. Transfers and Exchanges
5.01 The Bank is authorized to review and process transfers of Shares of
each Fund, exchanges between Funds on the records of the Funds maintained by the
Bank, and
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<PAGE>
exchanges between the Company and any other entity as may be permitted by the
Prospectus of the Company. If Shares to be transferred are represented by
outstanding certificates, the Bank will, upon surrender to it of the
certificates in proper form for transfer, and upon cancellation thereof,
countersign and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by outstanding
certificates, the Bank will, upon an order therefor by or on behalf of the
registered holder thereof in proper form, credit the same to the transferee on
its books. If Shares are to be exchanged for Shares of another Fund, the Bank
will process such exchange in the same manner as a redemption and sale of
Shares, except that it may in its discretion waive requirements for information
and documentation (other than information and documentation required by the
applicable Fund's prospectus in conjunction with an exchange transaction).
ARTICLE 6. Right to Seek Assurances
6.01 The Bank reserves the right to refuse to transfer or redeem Shares
until it is satisfied that the requested transfer or redemption is legally
authorized, and it shall incur no liability for the refusal, in good faith, to
make transfers or redemptions which the Bank, in its judgment, deems improper or
unauthorized, or until it is satisfied that there is no basis for any claims
adverse to such transfer or redemption. The Bank may, in effecting transfers,
rely upon the provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the Company or of
its own legal counsel protect it in not requiring certain documents in
connection with the transfer or redemption of Shares of any Fund, and the
Company shall indemnify the Bank for any act done or omitted by it in reasonable
reliance upon such laws or opinions of counsel of the Company on of its own
counsel.
ARTICLE 7. Distributions
7.01 The Company will promptly notify the Bank of the declaration of any
dividend or distribution. The Company shall furnish to the Bank a resolution of
the Board of Trustees of the Company certified by an officer of the Company (a
"Certificate"): (i) authorizing the declaration of dividends on a specified
periodic basis and authorizing the Bank to rely on oral instructions or a
Certificate specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined and the amount payable per
share to Shareholders of record as of the date and the total amount payable to
the Bank on the payment date; or (ii) setting forth the date of the declaration
of any dividend or distribution by a Fund, the date of payment thereof, the
record date as of which Shareholders entitled to payment shall be determined,
and the amount payable per share to the Shareholders of record as of that date
and the total amount payable to the Bank on the payment date.
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<PAGE>
7.02 The Bank, on behalf of the Company, shall instruct the Custodian to
place in a dividend disbursing account funds equal to the cash amount of any
dividend or distribution to be paid out. The Bank will calculate, prepare and
mail checks to (at the address as it appears on the records of the Bank), or
(where appropriate) credit such dividend or distribution to the account of, Fund
Shareholders, and maintain and safeguard all underlying records.
7.03 The Bank will replace lost checks at its discretion and in conformity
with regular business practices.
7.04 The Bank will maintain all records necessary to reflect the crediting
of dividends which are reinvested in Shares of the Company, including without
limitation daily dividends.
7.05 The Bank shall not be liable for any improper payments made in
accordance with a resolution of the Board of Trustees of the Company, provided
that the Bank has not violated it's standard of care set forth in Section 14.02.
7.06 If the Bank shall not receive from the Custodian sufficient cash to
make payment to all Shareholders of the Company as of the record date, the Bank
shall upon notifying the Company, withhold payment to all Shareholders of record
as of the record date until such sufficient cash is provided to the Bank.
ARTICLE 8. Other Duties
8.01 In addition to the duties expressly provided for herein, the Bank
shall perform such other duties and functions and shall be paid such amounts
therefor as may from time to time be agreed to in writing.
ARTICLE 9. Taxes
9.01 It is understood that the Bank shall file such appropriate
information returns concerning the payment of dividends and capital gain
distributions and tax withholding with the proper Federal, State and local
authorities as are required by law to be filed by the Company and shall withhold
such sums as are required to be withheld by applicable law.
ARTICLE 10. Books and Records
10.01 The Bank shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax identification
numbers; (ii) numbers of Shares held; (iii) historical information (as available
from prior transfer agents) regarding
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<PAGE>
the account of each Shareholder, including dividends paid and date and price of
all transactions on a Shareholder's account; (iv) any stop or restraining order
placed against a Shareholder's account; (v) information with respect to
withholdings; (vi) any capital gain or dividend reinvestment order, plan
application, dividend address and correspondence relating to the current
maintenance of a Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; (viii) any information
required in order for the Bank to perform the calculations contemplated or
required by this Agreement; and (ix) such other information and data as may be
required by applicable law.
10.02 The Bank shall maintain such records in connection with the
performance of its duties hereunder as are required to be maintained by Rule
31a-1 under the 1940 Act and will preserve such records for the periods
prescribed in Rule 31a-2 under the 1940 Act. Such records may be inspected by
the Company at reasonable times. The Bank may, at its option at any time, and
shall forthwith upon the Company's demand, turn over to the Company and cease to
retain in the Bank's files, records and documents created and maintained by the
Bank in performance of its service or for its protection. At the end of the
six-year retention period, such periods and documents will either be turned over
to the Company, or destroyed in accordance with the Company's authorization.
10.03 Procedures applicable to the services to be performed hereunder may
be established from time to time by agreement between the Fund(s) and the Bank.
The Bank shall have the right to utilize any shareholder accounting and
recordkeeping systems which, in its good faith opinion, qualifies to perform any
services to be performed hereunder. The Bank shall keep records relating to the
services performed hereunder, in the form and manner as it may deem advisable
consistent with Rule 31a-2.
ARTICLE 11. Fees and Expenses.
11.01 For performance by the Bank pursuant to this Agreement, the Fund(s)
agree to pay the Bank an annual maintenance fee for each Shareholder account as
set out in the initial fee schedule attached hereto. Such fees and out-of-pocket
expenses and advances identified under Section 11.02 below may be changed from
time to time subject to mutual written agreement between the Fund(s) and the
Bank.
11.02 in addition to the fee paid under Section 11.01 above, the Fund(s)
agree to reimburse the Bank for reasonable out-of-pocket expenses or advances
incurred by the Bank for the items set out in the fee schedule attached hereto.
In addition, any other expenses incurred by the Bank at the request or with the
consent of the Fund(s) including, without limitation, any equipment or supplies
specifically ordered by the Company or required to be purchased by the Company,
will be reimbursed by the Fund(s).
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<PAGE>
11.03 The Fund(s) agree to pay all fees and reimbursable expenses within
thirty days following the mailing of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Fund(s) at least seven
(7) days prior to the mailing date of such material.
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<PAGE>
ARTICLE 12. Representations and Warranties of the Bank
The Bank represents and warrants to the Company that:
12.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
12.02 It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
12.04 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
12.05 It is and will remain registered as a transfer agent as provided in
Section 17A(c) of the 1934 Act.
ARTICLE 13. Representations and Warranties of the Company
The Company represents and warrants to the Bank that:
13.01 It is a business trust duly established and existing and in good
standing under the laws of the State of its incorporation as set forth in the
preamble hereto.
13.02 It is empowered under applicable laws and by its charter documents
and by-laws to enter into and perform this Agreement.
13.03 All proceedings required by said charter documents and by-laws have
been taken to authorize it to enter into and perform this Agreement.
13.04 It is an open-end investment company registered under the 1940 Act.
13.05 A registration statement on Form N-lA (including a prospectus and
statement of additional information) under the Securities Act of 1933 and the
1940 Act is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Company being offered for sale.
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<PAGE>
13.06 When Shares are hereafter issued in accordance with the terms of the
Prospectus, such Shares shall be validly issued, fully paid and nonassessable by
the Fund(s).
ARTICLE 14. Indemnification
14.01 Except as set forth in subparagraph (f) hereof, the Bank shall not
be responsible for, and the Company shall indemnify and hold the Bank harmless
from and against, any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions taken or omitted to be taken by the Bank or its agent or
subcontractors in good faith in reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received by
the Bank or its agents or subcontractors and furnished to it by or on behalf of
the Fund(s), (ii) have been prepared and/or maintained by the Fund(s) or any
other person or firm on behalf of the Fund(s), and (iii) were received by the
Bank or its agents or subcontractors from a prior transfer agent.
(b) Any action taken or omitted to be taken by the Bank in connection with
its appointment in good faith in reliance upon any law, act, regulation in
effect at the time such action was taken or omitted, or interpretation of the
same.
(c) The Fund(s)' refusal or failure to comply with the terms of this
Agreement, or which arise out of the Funds' lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund(s) hereunder.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests, whether written or oral, of the
Fund(s).
(e) The offer or sale of Shares by the Company in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any State that such Shares be registered in such State or
in violation of any stop order or other determination or ruling by any federal
agency or any State with respect to the offer or sale of such. Shares in such
state.
(f) In addition to any other limitation provided herein, or by law,
indemnification under this Agreement shall not apply to actions or omissions of
the Bank or its directors, officers, employees, agents or subcontractors in
cases its own gross negligence, willful misconduct, bad faith, reckless
disregard of its duties or their own duties hereunder, knowing violation of law
or fraud.
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<PAGE>
14.02 The Bank shall indemnify and hold the Fund(s) harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributed to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith, gross
negligence, willfil misconduct, knowing violation of law or fraud.
14.03 At any time the Bank may apply to any officer of the Company for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Company for any action taken or omitted by it in
reasonable reliance upon such instructions or upon the opinion of such counsel
except for a knowing violation of law. The Bank, its agents and subcontractors
shall be protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund(s), reasonably believed to be genuine and
to have been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or other similar
means authorized by the Fund(s), and shall not be held to have notice of any
change of authority of any person, until receipt of written notice thereof from
the Fund(s). The Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of an officer of the Company, and
one proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
14.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, interruption of
electrical power or other utilities, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond its control,
such party shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes.
14.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement even if the Bank
has been advised of the possibility of such damages, or for any act or failure
to act hereunder as contemplated by this Agreement.
14.06 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent, which consent shall not be unreasonably
withheld.
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<PAGE>
ARTICLE 15. Covenants of the Company and the Bank
15.01 The Company shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Company
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the charter documents and by-laws of the Company and all
amendments thereto.
(c) Copies of each vote of the Trustees designating authorized persons to
give instructions to the Bank, and a Certificate providing specimen signatures
for such authorized persons.
(d) Certificates as to any change in any officer or Trustee of the
Company.
(e) If applicable a specimen of the certificate of Shares in each Fund of
the Company in the form approved by the Trustees, with a Certificate as to such
approval.
(f) Specimens of all new certificates for Shares, accompanied by the
Trustees' resolutions approving such forms.
(g) All account application forms and other documents relating to
shareholder accounts or relating to any plan, program or service offered by the
Company.
(h) A list of all Shareholders of the Fund(s) with the name, address and
tax identification number of each Shareholder, and the number of Shares of the
Fund(s) held by each, certificate numbers and denominations (if any certificates
have been issued), lists of any account against which stops have been placed,
together with the reasons for said stops, and the number of Shares redeemed by
the Fund(s).
(i) An opinion of counsel for the Company with respect to the validity of
the Shares and the status of such Shares under the Securities Act of 1933.
(j) Copies of the Fund(s) registration statement on Form N-lA as amended
and declared effective by the Securities and Exchange Commission and all
post-effective amendments thereto.
(k) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for the Bank in the proper performance of its
duties.
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<PAGE>
15.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
15.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable consistent with Rule
31a-2 under the 1940 Act. To the extent required by Section 31 of the 1940 Act
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the confidential property of the Company and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered to the Company on and in accordance with its request.
15.04 The Bank and the Company agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law. Notwithstanding the foregoing, the Bank agrees
to permit examination of such books and records at any time or from time to time
during the Bank's business hours by representatives or designees of the
Securities and Exchange Commission (the "SEC") and to promptly furnish, upon
demand and to the location specified by the SEC, true, correct, complete and
current hard copies of any or all or any part of such books and records.
15.05 In case of any requests or demands for the inspection of the
Shareholder records of the Company, the Bank shall notify the Company and will
use its best efforts to secure instructions from an authorized officer of the
Company as to such instruction. The Bank reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to exhibit the Shareholder records to such
person.
ARTICLE 16. Term of Agreement
16.01 This Agreement shall become effective on the date hereof (the
"Effective Date") and shall continue in effect for twelve months from the
Effective Date (the "Initial Term") and from year to year thereafter with
respect to each Fund, provided that subsequent to the Initial Term, this
Agreement may be terminated by either party at any time without payment of any
penalty upon ninety (90) days written notice to the other. In the event such
notice is given by the Company, it shall be accompanied by a resolution of the
Board of Trustees, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent.
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16.02 Should the Company exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Company. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination.
ARTICLE 17. Additional Funds
17.01 In the event that the Company establishes one or more series of
Shares in addition to the initial series with respect to which it desires to
have the Bank render services as transfer agent under the terms hereof, it shall
so notify the Bank in writing, and if the Bank agrees in writing to provide such
services, such series of Shares or Trusts shall become a Fund hereunder.
ARTICLE 18. Assignment
18.01 Except as provided in Section 18.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
18.03 The Bank, may without further consent on the part of the Company,
subcontract for the performance of any of the services to be provided hereunder
to third parties, including any affiliate of the Bank, provided that the Bank
shall remain liable hereunder for any acts or omissions of any subcontractor as
if performed by the Bank.
ARTICLE 19. Amendment
19.01 This Agreement may be amended or modified only by a written
agreement executed by both parties.
ARTICLE 20. Massachusetts Law to Apply
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
ARTICLE 21. Merger of Agreement and Severability
21.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or
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<PAGE>
written, it being duly recognized that the Bank and the Company are parties to a
Master Custodian Agreement and a Master Administration Agreement.
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement shall
remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts shall
together, constitute only one instrument.
ARTICLE 22. Notices
22.01 Any notice or other instrument in writing authorized or required by
this Agreement to be given to either party hereto will be sufficiently given if
addressed to such party and mailed or delivered to it at its office at the
address set forth below:
For the Fund(s): Standish, Ayer & Wood Investment Trust
One Financial Center
Boston, Massachusetts 02111
Attention: Anne Herrmann
For the Bank: Investors Bank & Trust Company
P.O. Box 1537
Boston, Massachusetts 02205-1537
Attention: James Keenan
ARTICLE 23. Limitation of Liability
23.01 A copy of the Declaration of Trust of the Company is on file with
the Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that this Agreement has been executed on behalf of the Company by an
officer of the Company as an officer and not individually and the obligations of
the Company arising out of this Agreement are not binding upon any of the
trustees, officers, agents or shareholders of the Company individually but are
binding only upon the assets and property of the Company. No series of the
Company shall be liable for the obligations of any other series of the Company.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and the year first above written.
Standish, Ayer & Wood Investment Trust
By: /s/ James E. Hollis
---------------------------------------
Name: James E. Hollis
Title: Executive Vice President
ATTEST:
/s/
- --------------------------------
DATE: 3/22/96
---------------------------
Investors Bank & Trust Company
By: /s/ Henry N. Joyce
---------------------------------------
Name: Henry N. Joyce
Title: Director
ATTEST:
/s/ Karen M. Pratt
- --------------------------------
DATE: 3/19/96
---------------------------
-17-
<PAGE>
INVESTORS BANK & TRUST COMPANY
FEE SCHEDULE
FOR
STANDISH, AYER & WOOD INVESTMENT TRUST
TRANSFER AGENCY SERVICES:
-------------------------
On a per fund basis $l0,000.00/year or $833.33/month
OUT OF POCKET:
- --------------
These charges consist of postage, telephone, insurance, wire fees,
sub custodian fees, proxy solicitation fees, professional fees,
forms and supplies and other expenses related to the funds'
operation. (Note: wire fees are billed as follows: $5.00 incoming,
and $7.50 outgoing)
3/96
-18-
<PAGE>
STANDISH, AYER & WOOD INVESTMENT TRUST
One Financial Center
Boston, MA 02111
June 2 1997
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Re: Transfer Agency and Service Agreement (the "Agreement") Ladies and
Gentlemen:
Attached is an amendment to Appendix A (the "Amendment") to the Agreement
between Standish, Ayer & Wood Investment Trust (the "Trust") and you. Pursuant
to Article XVII, ss.17.01 of the Agreement, the Trust proposes that the
Agreement be amended to include three additional series of the Trust named in
the Amendment in bold.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two to the Trust and retaining two for your
records.
Very truly yours,
Standish, Ayer & Wood Investors Bank & Trust Company
Investment Trust
By: /s/ Anne P. Herrmann By: /s/ David Flynn
----------------------------------- -------------------------------
Name: Anne P. Herrmann Name: David Flynn
--------------------------------- ------------------------------
Title: Vice President and Secretary Title: Managing Director
------------------------------- ----------------------------
-19-
MASTER ADMINISTRATION AGREEMENT
between
STANDISH AYER & WOOD INVESTMENT TRUST
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
MASTER ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of March 22, 1996 by and between
STANDISH, AYER & WOOD INVESTMENT TRUST, a Massachusetts business trust (the
"Fund"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company
("Investors Bank").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
consisting of the separate portfolios set forth in Appendix A; and
WHEREAS, the Fund desires to retain Investors Bank to render certain
administrative services to the Fund and Investors Bank is willing to render such
services;
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Investors Bank to act as
Administrator of the Fund on the terms set forth in this Agreement. Investors
Bank accepts such appointment and agrees to render the services herein set forth
for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Investors Bank with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Investors Bank to provide certain administrative services to the
Fund and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of [ the state
] on [date] and all amendments thereto (the "Articles");
(c) The Fund's by-laws and all amendments thereto (the "By-Laws");
(d) The Fund's agreements with all service providers which include any
investment advisory agreements, sub-investment advisory agreements, custody
agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the 1940
Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of additional
information (the "Prospectus"); and
<PAGE>
(g) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for Investors Bank in the proper performance of
its duties hereunder.
The Fund will immediately furnish Investors Bank with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing. Furthermore, the Fund will notify Investors Bank as soon as possible
of any matter materially affecting the performance of Investors Bank of its
services under this Agreement.
3. Duties of Administrator. Subject to the supervision and direction of
the Board of Trustees of the Fund, Investors Bank, as an Administrator,
undertakes to perform the specific services set forth in Appendix B.
In performing all services under this Agreement, Investors Bank shall act
in conformity with the Fund's Articles and By-Laws and the 1940 Act, as the same
may be amended from time to time; and the investment objectives, investment
policies and other practices and policies set forth in the Fund's Registration
Statement, as the same may be amended from time to time. Notwithstanding any
item discussed herein, Investors Bank has no discretion over the Fund's assets
or choice of investments and cannot be held liable for any problem relating to
such investments.
4. Fees and Expenses.
(a) For the services to be rendered by Investors Bank, as provided for in
this Agreement, the Fund will compensate Investors Bank in accordance with the
fee schedule set forth in Appendix B. Such fees do not include out-of-pocket
disbursements (as delineated on the fee schedule or other expenses with the
prior approval of the Fund's management) of Investors Bank for which Investors
Bank shall be entitled to bill separately.
(b) Investors Bank shall not be required to pay any expenses incurred by
the Fund.
5. Limitation of Liability.
(a) Investors Bank, its directors, officers, employees and agents shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its obligations and
duties under this Agreement, except a loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of such obligations and duties,
or by reason of its reckless disregard thereof. The Fund will indemnify
Investors Bank, its directors, officers, employees and agents against and hold
it and them harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) resulting from any
claim, demand, action or suit not resulting from the willful misfeasance, bad
faith or gross negligence of Investors Bank in the performance of such
obligations and duties or by reason of its reckless disregard thereof.
2
<PAGE>
(b) Investors Bank may apply to the Fund at any time for instructions and
may consult counsel for the Fund, or its own counsel, and with accountants and
other experts with respect to any matter arising in connection with its duties
hereunder, and Investors Bank shall not be liable or accountable for any action
taken or omitted by it in good faith in accordance with such instruction, or
with the opinion of such counsel, accountants, or other experts. Investors Bank
shall be protected in acting upon any document, certificate or instrument which
it reasonably believes to be genuine and to be signed or presented by the proper
person or persons. Investors Bank shall not be held to have notice of any change
of authority of any officers, employees, or agents of the Fund until receipt of
written notice thereof has been received from the Fund.
6. Termination of Agreement.
(a) This Agreement shall become effective on the date hereof and shall
remain in force unless terminated pursuant to the provisions of subsection (b)
of this Section 6, provided however that Section 5 shall survive the termination
of the Agreement.
(b) This Agreement may be terminated at any time without payment of any
penalty, upon 60 days written notice delivered by either party to the other.
7. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or Investors Bank shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund: Standish Ayer & Wood Investment Trust
One Financial Center
Boston, MA 02111
Attention: James E. Hollis III
To Investors Bank: Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Attention: James Keenan
(b) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable without the written consent of the other
party.
(c) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
3
<PAGE>
(d) This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original and which collectively shall be deemed
to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
8. Confidentiality. All books, records, information and data pertaining to
the business of the other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain confidential, and
shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by law.
9. Use of Name. The Fund shall not use the name of Investors Bank or any
of its affiliates in any prospectus, sales literature or other material relating
to the Fund in a manner not approved by the Bank prior thereto in writing;
provided however, that the approval of Investors Bank shall not be required for
any use of its name which merely refers in accurate and factual terms to its
appointment hereunder or which is required by the Securities and Exchange
Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority; provided further, that in no
event shall such approval be unreasonably withheld or delayed.
10. Limitation of Liability. A copy of the Articles is on file with the
Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that this Agreement has been executed on behalf of the Fund by an officer
of the Fund as an officer and not individually and the obligations of the Fund
arising out of this Agreement are not binding upon any of the trustees,
officers, or shareholders of the Fund individually but are binding only upon the
assets and property of the Fund. No series of the Fund shall be liable for the
obligations of any other series of the Fund.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
Standish, Ayer & Wood Investment Trust
By: /s/ James E. Hollis III
Name: James E. Hollis III
Title: Executive Vice President
ATTEST:
/s/ Denise B. Kneeland
Denise B. Kneeland
March 22, 1996
Investors Bank & Trust Company
By: /s/ Henry N. Joyce
Name: Henry N. Joyce
Title: Director
ATTEST:
/s/ Karen Pratt
Karen Pratt
March 4, 1996
Date: March 22, 1996
<PAGE>
APPENDIX A
Dated ______________, 1996
to
MASTER ADMINISTRATION AGREEMENT
between
STANDISH, AYER & WOOD INVESTMENT TRUST
and
INVESTORS BANK & TRUST COMPANY
dated _______________, 1996
---------------------------------
Standish Massachusetts Intermediate Tax Exempt Bond Fund
Standish Intermediate Tax Exempt Bond Fund
Standish International Fixed Income Fund
Standish Fixed Income Fund
Standish Short-Term Asset Reserve Fund
Standish Equity Fund
Standish Small Capitalization Equity Fund
Standish Securitized Fund
Standish Global Fixed Income Fund
Standish Controlled Maturity Fund
Standish Fixed Income Fund II
Standish International Equity Fund
Standish Tax-Sensitive Equity Fund
Standish Small Cap Tax-Sensitive Equity Fund
Standish Fixed Income Asset Fund
Standish Equity Asset Fund
Standish Small Capitalization Asset Fund
Standish Global Fixed Income Asset Fund
STANDISH, AYER & WOOD INVESTMENT TRUST
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the close of business this 3rd day of May, 1996,
between Standish, Ayer & Wood Investment Trust, a Massachusetts business trust
(the "Trust"), on behalf of each of the Funds listed on Exhibit A hereto
(collectively, the "Funds"), and Standish, Ayer & Wood, Inc. (the
"Administrator").
1. Duties of the Administrator. The Trust hereby employs the Administrator
to act as administrator of the Funds and to administer their affairs, subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement.
The Administrator hereby accepts such employment, and undertakes to afford
to the Trust and its Board of Trustees the advice and assistance of the
Administrator's organization in the administration of the Funds and to furnish
for the use of the Funds office space and all necessary office facilities,
equipment and personnel for administering the affairs of the Funds and to pay
the portion allocable to the Funds of the salaries and fees of all officers and
trustees of the Trust who are members of the Administrator's organization and
the salaries and fees of all personnel of the Administrator performing services
relating to administrative activities. The Administrator shall for all purposes
herein be deemed to be an independent contractor and shall, except as otherwise
expressly provided or authorized, have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust.
Notwithstanding the foregoing, the Administrator shall not be deemed to
have assumed any duties hereunder with respect to, and shall not, by the
execution of this Agreement, be responsible for, the management of the Funds'
assets or the rendering of investment advice and supervision with respect
thereto or the distribution of shares of the Funds, nor shall the Administrator
be deemed to have assumed hereunder or have any responsibility hereunder with
respect to functions specifically assumed by any transfer agent, custodian, or
shareholder servicing agent of the Trust or the Funds. It is intended that the
assets of the Funds will be invested in corresponding portfolios (the
"Portfolios") of Standish, Ayer & Wood Master Portfolio (the "Portfolio Trust"),
each Portfolio having substantially the same investment objective, policies and
restrictions as the applicable Fund. It is duly recognized that Standish, Ayer &
Wood, Inc. or its affiliate, Standish International Management Company, L.P.,
acts as the investment adviser to each Portfolio under Investment Advisory
Agreements, dated May 3, 1996. As part of its duties hereunder, however, the
Administrator shall obtain from the Portfolios and compile such information
about the Portfolios as requested from time to time by the Trust's Board of
Trustees.
<PAGE>
2. Allocation of Charges and Expenses. The Administrator will pay all
costs it incurs in connection with the performance of its duties under Section 1
of this Agreement. The Administrator will pay the compensation and expenses of
all of its personnel and will make available, without expense to the Trust, the
services of such of its directors, officers and employees as may duly be elected
officers or Trustees of the Trust, subject to their individual consent to serve
and to any limitations imposed by law. The Administrator will not be required to
pay any expenses of the Trust other than those specifically allocated to the
Administrator in this Section 2. In particular, but without limiting the
generality of the foregoing, the Administrator will not be required to pay: (i)
fees and expenses of any investment adviser of the Trust; (ii) organization
expenses of the Trust; (iii) fees in investment company organizations; (iv)
commissions, fees and other expenses connected with the acquisition, disposition
and valuation of securities and other investments; (v) payment for portfolio
pricing services to a pricing agent, if any; (vi) legal, accounting or auditing
expenses; (vii) interest, insurance premiums, taxes or governmental fees; (viii)
the fees and expenses of the transfer agent of the Trust; (ix) the cost of
preparing stock certificates or any other expenses, including, without
limitation, clerical expenses of issue, redemption or repurchase of shares of
the Trust; (x) the expenses of and fees for registering or qualifying shares of
the Trust for sale and of maintaining the registration of the Trust and
registering the Trust as a broker or a dealer (xi) the fees and expenses of
Trustees of the Trust who are not affiliated with the Administrator; (xii) the
cost of preparing and distributing reports and notices to shareholders, the
Securities and Exchange Commission and other regulatory authorities; (xiii) the
fees or disbursements of custodians of the Trust's assets, including expenses
incurred in the performance of any obligations enumerated by the Declaration of
Trust or By-Laws of the Trust insofar as they govern agreements with any such
custodian; (xiv) costs in connection with annual or special meetings of
shareholders, including proxy material preparation, printing and mailing; (xv)
any direct charges to shareholders approved by the Board of Trustees of the
Trust; (xvi) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business; or (xvii)
costs, including brokerage commissions and transfer taxes, in connection with
the purchase and sale of portfolio securities. The Administrator shall not be
required to pay expenses of activities which are primarily intended to result in
sales of shares of the Trust.
3. Compensation of Administrator. The Board of Trustees of the Trust has
currently determined that the Administrator shall receive no compensation from
the Trust or the Funds in respect of the services to be rendered and the
facilities to be provided by the Administrator under this Agreement. If the
Board of Trustees determines that the Trust or a Fund should in the future
compensate the Administrator for such services and facilities, such compensation
shall be set forth in a new agreement or in an amendment to this Agreement to be
entered into by the parties hereto.
-2-
<PAGE>
4. Other Interests. It is understood that the Trustees and officers of the
Trust and shareholders of the Funds are or may be or become interested in the
Administrator as directors, officers, employees, shareholders or otherwise and
that directors, officers employees and shareholders of the Administrator are or
may be or become similarly interested in the Funds, and that the Administrator
may be or become interested in the Funds as shareholder or otherwise. It is also
understood that directors, officers, employees and shareholders of the
Administrator may be or become interested (as directors, trustees, officers,
employees, stockholders or otherwise) in other companies or entities (including,
without limitation, other investment companies) which the Administrator may
organize, sponsor or acquire, or with which it may merge or consolidate, and
which may include the words "Standish, Ayer & Wood" or any combination or
derivation thereof as part of their name, and that the Administrator or its
affiliates may enter into advisory or management or administration agreements or
other contracts or relationships with such other companies or entities.
5. Administrator's Services Not Exclusive. The services of the
Administrator to the Trust and the Funds are not to be deemed to be exclusive,
the Administrator being free to render services to others and engage in other
business activities.
6. Sub-Administrators. The Administrator may employ one or more sub-
administrators from time to time to perform such of the acts and services of the
Administrator and upon such terms and conditions as may be agreed upon between
the Administrator and the sub-administrators and approved by the Board of
Trustees of the Trust.
7. Duration and Termination of this Agreement. This Agreement shall become
effective on the date hereof. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years from the date
hereof and shall continue in full force and effect for successive periods of one
year thereafter, but only so long as each such continuance is approved annually
(i) by the Board of Trustees of the Trust and (ii) by the vote of a majority of
those Trustees of the Trust who are not interested persons of the Administrator
or the Trust.
Either party hereto may, at any time on at least sixty (60) days' prior
written notice to the other, terminate this Agreement without the payment of any
penalty, by action of Board of Trustees of the Trust or the Board of Trustees of
the Administrator, as the case may be. This Agreement shall terminate
automatically in the event of its assignment.
8. Amendments of the Agreement. This Agreement may be amended by a writing
signed by both parties hereto, provided that no amendment to this Agreement
shall be effective until approved by the (i) vote of a majority of those
Trustees of the
-3-
<PAGE>
Trust who are not interested persons of the Administrator or the Trust, and (ii)
vote of the entire Board of Trustees of the Trust.
9. Limitation of Liability of Fund and Administrator. The Administrator
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by the Administrator of its obligations and duties under this
Agreement. Any person, even though also employed by the Administrator, who may
be or become an employee of and paid by the Trust shall be deemed, when acting
within the scope of his or her employment by the Trust, to be acting in such
employment solely for the Trust and not as its employee or agent. It is
understood and expressly stipulated that none of the Trustees, officers, agents
or shareholders of the Trust shall be personally liable hereunder. None of the
trustees, officers, agents or shareholders of the Trust assume any personal
liability for obligations entered into on behalf of the Trust. All persons
dealing with the Trust must look solely to the property of the Trust for the
enforcement of any claims against the Trust. No Fund shall be liable for any
claims against any other Fund or any other series of the Trust.
10. Name of the Trust. The Trust hereby agrees that in the event that
neither the Administrator nor any of its affiliates acts as the administrator or
investment adviser to the Trust, the name of the Trust and the Fund will be
changed to one that does not contain the name "Standish, Ayer & Wood" or
otherwise suggest an affiliation with the Administrator.
11. Certain Definitions. The terms "assignment" and "interested persons"
when used herein shall have the respective meanings specified in the Investment
Company Act of 1940, as amended, as now in effect or as hereafter amended
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
STANDISH, AYER & WOOD INVESTMENT TRUST
on behalf of each of its series listed on
Exhibit A hereto
By: /s/ Richard S. Wood
----------------------
Its: President
----------------------
STANDISH, AYER & WOOD, INC.
By: D. Barr Clayson
----------------------
Its: Director
----------------------
-5-
[COOPERS AND LYBRAND LETTERHEAD]
April 16, 1998
Consent of Independent Accountants
We consent to the inclusion in Post-Effective Amendment No. 88 to the
Registration Statement of Standish, Ayer & Wood Master Portfolio (1933 Act File
No. 33-08214) on behalf of our reports relating to Standish Fixed Income
Portfolio, Standish Global Fixed Income Portfolio, Standish Diversified Income
Portfolio, dated February 19, 1998, in the Statements of Additional Information,
which are part of such Registration Statements.
We also consent to the reference to our Firm under the caption "Independent
Accountants" in the Prospectuses and under the caption "Experts and Financial
Statements" in the Statements of Additional Information which are part of the
Registration Statements.
COOPERS & LYBRAND
Chartered Accountants
Toronto, Ontario
Consent of Independent Accountants
To the Trustees of Standish, Ayer & Wood Investment Trust:
We consent to the inclusion in Post-Effective Amendment No. 88 to the
Registration Statement on Form N-1A (1933 Act File Number 33-8214) of Standish,
Ayer & Wood Investment Trust: Standish Controlled Maturity Fund, Standish
Securitized Fund, Standish Fixed Fund II, Standish International Fixed Income
Fund Standish Short-Term Asset Reserve Fund, Standish Fixed Income Fund,
Standish Global Fixed Income Fund and Standish Diversified Income Fund, of our
report dated February 19, 1998, on our audit of the financial statements and
financial highlights of the Standish Controlled Maturity Fund, Standish
Securitized Fund, Standish Fixed Income Fund II, Standish International Fixed
Income Fund, Standish Short-Term Asset Reserve Fund, Standish Fixed Income Fund,
Standish Global Fixed Income Fund and Standish Diversified Income Fund which
report is included in the Annual Report to Shareholders for the period ended
December 31, 1997, which is also included in this Registration Statement.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 16, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> Standish Fixed Income Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 3,325,622,596
<RECEIVABLES> 3,510,591
<ASSETS-OTHER> 89,188
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,329,222,375
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,904,732
<TOTAL-LIABILITIES> 40,904,732
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,223,554,659
<SHARES-COMMON-STOCK> 158,068,105
<SHARES-COMMON-PRIOR> 126,807,250
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2,421,313)
<ACCUMULATED-NET-GAINS> 7,600,878
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,583,419
<NET-ASSETS> 3,288,317,643
<DIVIDEND-INCOME> 6,202,602
<INTEREST-INCOME> 199,818,078
<OTHER-INCOME> (10,313,208)
<EXPENSES-NET> 519,642
<NET-INVESTMENT-INCOME> 195,187,830
<REALIZED-GAINS-CURRENT> 42,948,049
<APPREC-INCREASE-CURRENT> 27,756,607
<NET-CHANGE-FROM-OPS> 265,892,486
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 217,278,174
<DISTRIBUTIONS-OF-GAINS> 17,660,360
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,977,522
<NUMBER-OF-SHARES-REDEEMED> 21,760,201
<SHARES-REINVESTED> 9,043,534
<NET-CHANGE-IN-ASSETS> 684,689,374
<ACCUMULATED-NII-PRIOR> 5,299,151
<ACCUMULATED-GAINS-PRIOR> (1,219,259)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 519,642
<AVERAGE-NET-ASSETS> 2,889,390,986
<PER-SHARE-NAV-BEGIN> 20.53
<PER-SHARE-NII> 1.46
<PER-SHARE-GAIN-APPREC> 0.45
<PER-SHARE-DIVIDEND> (1.52)
<PER-SHARE-DISTRIBUTIONS> (0.12)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.80
<EXPENSE-RATIO> 0.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> Standish Fixed Income Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,263,787,091
<INVESTMENTS-AT-VALUE> 3,309,841,243
<RECEIVABLES> 45,795,070
<ASSETS-OTHER> 14,474,530
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,370,110,843
<PAYABLE-FOR-SECURITIES> 38,330,133
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,157,995
<TOTAL-LIABILITIES> 44,488,128
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,854,353,074
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 471,269,641
<NET-ASSETS> 3,325,622,715
<DIVIDEND-INCOME> 6,202,603
<INTEREST-INCOME> 199,818,084
<OTHER-INCOME> 0
<EXPENSES-NET> 10,313,208
<NET-INVESTMENT-INCOME> 195,707,479
<REALIZED-GAINS-CURRENT> 42,948,051
<APPREC-INCREASE-CURRENT> 27,756,610
<NET-CHANGE-FROM-OPS> 266,412,140
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 709,511,126
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,043,263
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,313,208
<AVERAGE-NET-ASSETS> 2,891,364,715
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> Standish Diversified Income Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 27,784,237
<RECEIVABLES> 3,763
<ASSETS-OTHER> 15,971
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,803,971
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 406,307
<TOTAL-LIABILITIES> 406,307
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,706,832
<SHARES-COMMON-STOCK> 1,336,114
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 64,032
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,724
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (377,924)
<NET-ASSETS> 27,397,664
<DIVIDEND-INCOME> 79,562
<INTEREST-INCOME> 665,243
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 744,805
<REALIZED-GAINS-CURRENT> 132,118
<APPREC-INCREASE-CURRENT> (377,924)
<NET-CHANGE-FROM-OPS> 498,999
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 678,973
<DISTRIBUTIONS-OF-GAINS> 129,194
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,320,752
<NUMBER-OF-SHARES-REDEEMED> 6,730
<SHARES-REINVESTED> 22,092
<NET-CHANGE-IN-ASSETS> 27,397,664
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 42,939
<AVERAGE-NET-ASSETS> 15,806,394
<PER-SHARE-NAV-BEGIN> 20.00
<PER-SHARE-NII> 0.98
<PER-SHARE-GAIN-APPREC> 0.26
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.51
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> Standish Diversified Income Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 25,932,408
<INVESTMENTS-AT-VALUE> 25,485,999
<RECEIVABLES> 574,795
<ASSETS-OTHER> 1,824,929
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,885,723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101,381
<TOTAL-LIABILITIES> 101,381
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,285,338
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 499,004
<NET-ASSETS> 27,784,342
<DIVIDEND-INCOME> 79,562
<INTEREST-INCOME> 665,247
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 744,809
<REALIZED-GAINS-CURRENT> 132,120
<APPREC-INCREASE-CURRENT> (377,925)
<NET-CHANGE-FROM-OPS> 499,004
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 27,784,342
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45,742
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 138,250
<AVERAGE-NET-ASSETS> 15,807,206
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> Standish Fixed Income Fund Series II Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 74,290,782
<INVESTMENTS-AT-VALUE> 75,298,626
<RECEIVABLES> 1,166,625
<ASSETS-OTHER> 73,696
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 76,538,947
<PAYABLE-FOR-SECURITIES> 1,492,654
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 466,058
<TOTAL-LIABILITIES> 1,958,712
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,455,327
<SHARES-COMMON-STOCK> 3,890,376
<SHARES-COMMON-PRIOR> 1,894,219
<ACCUMULATED-NII-CURRENT> 4,599
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68,177
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,052,132
<NET-ASSETS> 74,580,235
<DIVIDEND-INCOME> 25,552
<INTEREST-INCOME> 3,478,395
<OTHER-INCOME> 0
<EXPENSES-NET> 199,639
<NET-INVESTMENT-INCOME> 3,304,308
<REALIZED-GAINS-CURRENT> 76,622
<APPREC-INCREASE-CURRENT> 1,060,405
<NET-CHANGE-FROM-OPS> 4,441,335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,318,681
<DISTRIBUTIONS-OF-GAINS> 57,788
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,028,481
<NUMBER-OF-SHARES-REDEEMED> 175,022
<SHARES-REINVESTED> 142,698
<NET-CHANGE-IN-ASSETS> 39,094,931
<ACCUMULATED-NII-PRIOR> 11,552
<ACCUMULATED-GAINS-PRIOR> 56,763
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 200,481
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 372,464
<AVERAGE-NET-ASSETS> 50,228,917
<PER-SHARE-NAV-BEGIN> 18.73
<PER-SHARE-NII> 1.11
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> (1.11)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.17
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> Standish Short Term Asset Reserve Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 245,907,796
<INVESTMENTS-AT-VALUE> 246,021,693
<RECEIVABLES> 2,226,859
<ASSETS-OTHER> 49,161
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 248,297,713
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,540,712
<TOTAL-LIABILITIES> 2,540,712
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 257,120,139
<SHARES-COMMON-STOCK> 12,616,483
<SHARES-COMMON-PRIOR> 9,953,704
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (159,329)
<ACCUMULATED-NET-GAINS> (11,317,706)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 113,897
<NET-ASSETS> 245,757,001
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,450,396
<OTHER-INCOME> 121,700
<EXPENSES-NET> 849,852
<NET-INVESTMENT-INCOME> 13,722,244
<REALIZED-GAINS-CURRENT> (544,274)
<APPREC-INCREASE-CURRENT> 355,566
<NET-CHANGE-FROM-OPS> 13,533,536
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,714,508
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,681,922
<NUMBER-OF-SHARES-REDEEMED> 9,519,545
<SHARES-REINVESTED> 500,402
<NET-CHANGE-IN-ASSETS> 51,683,396
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,808,680)
<OVERDISTRIB-NII-PRIOR> (131,817)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 582,254
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 849,852
<AVERAGE-NET-ASSETS> 233,051,945
<PER-SHARE-NAV-BEGIN> 19.50
<PER-SHARE-NII> 1.15
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (1.15)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.48
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> Standish Controlled Maturity Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 12,105,637
<INVESTMENTS-AT-VALUE> 12,117,121
<RECEIVABLES> 1,984,007
<ASSETS-OTHER> 6,587
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,107,715
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 191,720
<TOTAL-LIABILITIES> 191,720
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,996,584
<SHARES-COMMON-STOCK> 697,521
<SHARES-COMMON-PRIOR> 626,464
<ACCUMULATED-NII-CURRENT> 14,993
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (109,109)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,527
<NET-ASSETS> 13,915,995
<DIVIDEND-INCOME> 6,817
<INTEREST-INCOME> 860,867
<OTHER-INCOME> 0
<EXPENSES-NET> 46,508
<NET-INVESTMENT-INCOME> 821,176
<REALIZED-GAINS-CURRENT> (93,752)
<APPREC-INCREASE-CURRENT> 72,254
<NET-CHANGE-FROM-OPS> 799,678
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 819,657
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102,366
<NUMBER-OF-SHARES-REDEEMED> 47,171
<SHARES-REINVESTED> 15,862
<NET-CHANGE-IN-ASSETS> 1,391,120
<ACCUMULATED-NII-PRIOR> 14,419
<ACCUMULATED-GAINS-PRIOR> (16,302)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 43,478
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158,968
<AVERAGE-NET-ASSETS> 12,445,988
<PER-SHARE-NAV-BEGIN> 19.99
<PER-SHARE-NII> 1.34
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> (1.34)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.95
<EXPENSE-RATIO> 0.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> Standish Securitized Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 42,107,026
<INVESTMENTS-AT-VALUE> 43,014,774
<RECEIVABLES> 356,822
<ASSETS-OTHER> 1,518
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,373,114
<PAYABLE-FOR-SECURITIES> 1,996,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,252,092
<TOTAL-LIABILITIES> 3,248,342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,099,182
<SHARES-COMMON-STOCK> 1,996,268
<SHARES-COMMON-PRIOR> 2,569,380
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (21,338)
<ACCUMULATED-NET-GAINS> (1,886,361)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 933,289
<NET-ASSETS> 40,124,772
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,267,056
<OTHER-INCOME> 0
<EXPENSES-NET> 212,566
<NET-INVESTMENT-INCOME> 3,054,490
<REALIZED-GAINS-CURRENT> 183,436
<APPREC-INCREASE-CURRENT> 910,398
<NET-CHANGE-FROM-OPS> 4,148,324
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,102,532
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 591,543
<SHARES-REINVESTED> 18,431
<NET-CHANGE-IN-ASSETS> (10,492,484)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,053,795)
<OVERDISTRIB-NII-PRIOR> (97,839)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 118,095
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 267,978
<AVERAGE-NET-ASSETS> 47,210,038
<PER-SHARE-NAV-BEGIN> 19.70
<PER-SHARE-NII> 1.46
<PER-SHARE-GAIN-APPREC> 0.37
<PER-SHARE-DIVIDEND> (1.43)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.10
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> Standish International Fixed Income Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,161,001,560
<INVESTMENTS-AT-VALUE> 1,133,087,451
<RECEIVABLES> 31,208,838
<ASSETS-OTHER> 55,127,936
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,219,424,225
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,729,164
<TOTAL-LIABILITIES> 46,729,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,152,336,236
<SHARES-COMMON-STOCK> 51,419,630
<SHARES-COMMON-PRIOR> 36,136,500
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,556,611)
<ACCUMULATED-NET-GAINS> 7,681,493
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,233,943
<NET-ASSETS> 1,172,695,061
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,288,492
<OTHER-INCOME> 0
<EXPENSES-NET> 5,314,793
<NET-INVESTMENT-INCOME> 63,973,699
<REALIZED-GAINS-CURRENT> 74,075,302
<APPREC-INCREASE-CURRENT> (25,008,757)
<NET-CHANGE-FROM-OPS> 113,040,244
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133,232,541
<DISTRIBUTIONS-OF-GAINS> 12,277,114
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,174,061
<NUMBER-OF-SHARES-REDEEMED> 5,647,545
<SHARES-REINVESTED> 4,756,614
<NET-CHANGE-IN-ASSETS> 332,562,243
<ACCUMULATED-NII-PRIOR> 7,509,300
<ACCUMULATED-GAINS-PRIOR> 6,107,628
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,012,641
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,314,793
<AVERAGE-NET-ASSETS> 1,004,236,786
<PER-SHARE-NAV-BEGIN> 23.25
<PER-SHARE-NII> 1.54
<PER-SHARE-GAIN-APPREC> 1.16
<PER-SHARE-DIVIDEND> (2.86)
<PER-SHARE-DISTRIBUTIONS> (0.28)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.81
<EXPENSE-RATIO> 0.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> Standish Global Fixed Income Fund Series
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 262,553,031
<RECEIVABLES> 674,414
<ASSETS-OTHER> 14,061
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 263,241,506
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,479,083
<TOTAL-LIABILITIES> 7,479,083
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 249,924,233
<SHARES-COMMON-STOCK> 12,540,458
<SHARES-COMMON-PRIOR> 7,752,638
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (667,896)
<ACCUMULATED-NET-GAINS> 1,536,278
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,969,808
<NET-ASSETS> 255,762,423
<DIVIDEND-INCOME> 75,945
<INTEREST-INCOME> 14,121,346
<OTHER-INCOME> (1,226,099)
<EXPENSES-NET> 87,135
<NET-INVESTMENT-INCOME> 12,884,057
<REALIZED-GAINS-CURRENT> 10,546,991
<APPREC-INCREASE-CURRENT> (1,136,691)
<NET-CHANGE-FROM-OPS> 22,294,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,206,015
<DISTRIBUTIONS-OF-GAINS> 226,915
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,385,323
<NUMBER-OF-SHARES-REDEEMED> 1,149,790
<SHARES-REINVESTED> 552,287
<NET-CHANGE-IN-ASSETS> 100,031,860
<ACCUMULATED-NII-PRIOR> 364,160
<ACCUMULATED-GAINS-PRIOR> (493,895)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 98,621
<AVERAGE-NET-ASSETS> 200,557,833
<PER-SHARE-NAV-BEGIN> 20.09
<PER-SHARE-NII> 1.34
<PER-SHARE-GAIN-APPREC> 0.96
<PER-SHARE-DIVIDEND> (1.98)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.39
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Standish, Ayer & Wood Investment Trust
form N-SAR for the period ended December 31, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> Standish Global Fixed Income Portfolio
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 254,293,024
<INVESTMENTS-AT-VALUE> 252,858,535
<RECEIVABLES> 4,708,681
<ASSETS-OTHER> 8,540,415
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 266,107,631
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,554,474
<TOTAL-LIABILITIES> 3,554,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,536,429
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 41,016,728
<NET-ASSETS> 262,553,157
<DIVIDEND-INCOME> 75,945
<INTEREST-INCOME> 14,121,353
<OTHER-INCOME> 0
<EXPENSES-NET> 1,226,099
<NET-INVESTMENT-INCOME> 12,971,199
<REALIZED-GAINS-CURRENT> 10,546,998
<APPREC-INCREASE-CURRENT> (1,136,692)
<NET-CHANGE-FROM-OPS> 22,381,505
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 102,738,659
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 802,027
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,226,099
<AVERAGE-NET-ASSETS> 200,788,140
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
