CLEARWATER INVESTMENT TRUST
(the "Trust")
Clearwater Growth Fund
Clearwater Small Cap Fund
(each, a "Fund")
332 Minnesota Street, Suite 2100
St. Paul, Minnesota 55101
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held February 24, 1998
A Special Meeting of Shareholders of each Fund (the "Meeting") referred to
above (the "Funds") will be held on Tuesday, February 24, 1998, at 9:00 a.m.
(Central Time) at 332 Minnesota Street, Suite 2100, St. Paul, Minnesota 55101
for the following purposes:
(1) With respect to the Trust, to elect two Trustees;
(2) With respect to the Trust, to ratify the selection of KPMG Peat Marwick LLP
as independent public accountants of the Trust for the fiscal year ending
December 31, 1998;
(3) With respect to the Trust, to approve the amendment and restatement of the
Trust's Declaration of Trust;
(4) With respect to each Fund, to reclassify the Fund's investment objective
from fundamental to non-fundamental;
(5) With respect to each Fund, to amend, delete or reclassify certain of the
Funds' fundamental investment restrictions;
(6) With respect to each Fund, to approve a new management contract between the
Trust and Clearwater Management Company;
(7) With respect to Clearwater Growth Fund, to approve the subadvisory contract
with Parametric Portfolio Associates;
(8) With respect to Small Cap Fund, to ratify the action of the Board of
Trustees with respect to the subadvisory fee; and
(9) To transact such other business that may properly come before the Meeting
or any adjournment of the Meeting.
<PAGE>
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE
IN FAVOR OF THE PROPOSALS RELATING TO YOUR FUND(S).
Shareholders of record of each Fund at the close of business on December
31, 1997 will be entitled to vote at the Meeting or at any adjournment or
adjournments thereof. The Proxy Statement and Proxy Card are being mailed to
shareholders on or about January 12, 1998.
It is important that you return your signed and dated Proxy Card promptly,
regardless of the size of your holdings, so that a quorum may be assured.
By Order of the Board of Trustees
Frederick T. Weyerhaeuser, Chairman
January 12, 1998
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Please complete, date and sign the Proxy Card for the shares held by you and
return the Proxy Card in the envelope provided so that your vote can be
recorded. No postage is required if the envelope is mailed in the United States.
Prompt return of your proxy or proxies may save the Trust the necessity and
expense of further solicitations. If you attend the Meeting, you may vote your
shares in person.
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<PAGE>
CLEARWATER INVESTMENT TRUST
(the "Trust")
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Clearwater Growth Fund
Clearwater Small Cap Fund
(each, a "Fund")
332 Minnesota Street, Suite 2100
St. Paul, Minnesota 5501
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PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Trustees of Clearwater
Investment Trust (the "Trust") to be used at the Special Meeting of Shareholders
(the "Meeting") of each series of the Trust (each, a "Fund"; collectively, the
"Funds") to be held at 332 Minnesota Street, Suite 2100, St. Paul Minnesota
55101 on Tuesday, February 24, 1998, at 9:00 a.m. (Central Time) for the
purposes set forth in the accompanying Notice of Meeting.
The Trustees have fixed the close of business on December 31,
1997 as the record date (the "Record Date") for determining the shareholders of
each Fund entitled to notice of and to vote at the Meeting. Shareholders of
record of each Fund on the Record Date are entitled to one vote per share at the
Meeting or any adjournment of the Meeting relating to their Fund. Appendix A
sets forth the number of shares of beneficial interest of each Fund outstanding
as of the Record Date. Appendix B sets forth the persons who owned beneficially
or of record more than 5% of the shares of any Fund as of the Record Date.
Proxies will be solicited by mail and also may be solicited in
person or by telephone by officers of the Trust, Clearwater Management Company
("CMC" or the "Adviser") and by the Trustees.
This Proxy Statement and the Proxy Card are being mailed to
shareholders on or about January 12, 1998.
The following table summarizes the proposals to be voted on at
the Meeting and indicates those shareholders whom are being solicited with
respect to each proposal:
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SUMMARY OF VOTING ON PROPOSALS
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Proposal Shareholders Solicited
1. Election of two Trustees. All Funds voting together.
2. Ratification of the selection of KPMG All Funds voting together.
Peat Marwick LLP as independent public
accountants for the fiscal year ending
December 31,1998.
3. Approval of the amendment and restatement All Funds voting together.
of the Trust's Declaration of Trust.
4. Approval of the reclassification of each Each Fund voting separately.
Fund's investment objective from
fundamental to non-fundamental.
5.(a)-(e) Approval of the amendment, deletion Each Fund voting separately and,
or reclassification of certain of the with respect to Proposals 5(c)
Funds' fundamental investment only Clearwater Growth Fund will
restrictions. vote
6. Approval of a new management contract Each Fund voting separately.
between the Trust and Clearwater
Management Company, Inc.
7. Approval of the subadvisory contract with Clearwater Growth Fund voting
Parametric Portfolio Associates on behalf separately.
of Clearwater Growth Fund.
8. Ratification of action by Board of Clearwater Small Cap Fund voting
Trustees with respect to the subadvisory separately.
fee.
The Trust will furnish, without charge, copies of the Trust's most recent Annual
and Semi-annual Reports to any shareholder upon request addressed to Clearwater
Investment Trust, 332 Minnesota Street, Suite 2100, St. Paul, Minnesota 55101 or
by telephone at (888) 228-0935.
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PROPOSAL 1
ELECTION OF TWO TRUSTEES
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At a meeting on December 5, 1997 (the "Board of Trustees' Meeting"), the
Trustees, including the Trustees who are not "interested persons" of the Trust
(as defined by the Investment Company Act of 1940, as amended (the "1940 Act"))
(the "Independent Trustees"), voted to approve, and to recommend to the
shareholders that they approve, a proposal to elect Mr. Philip W. Pascoe and Mr.
Samuel B. Carr, Jr. (the "Nominees") to the Board of Trustees of the Trust. Mr.
Carr is currently a Trustee and has served in that capacity since his election
by the Board of Trustees in 1995, but he has yet not been elected by the Trust's
shareholders. Information concerning each Nominee and other relevant factors is
discussed below.
Using the enclosed Proxy Card, a shareholder may authorize the proxies to
vote his or her shares for each Nominee or may withhold from the proxies
authority to vote for each Nominee. If no contrary instructions are given, the
proxies will vote FOR each of the Nominees. Each Nominee has consented to his
nomination and has agreed to serve if elected. If, for any reason, either or
both of the Nominees should not be available for election or able to serve as a
Trustee, the proxies will exercise their voting power in favor of one or more
substitute Nominees, if any, as the Trustees may designate. The Trust has no
reason to believe that it will be necessary to designate substitute Nominees.
Information Concerning the Nominees and the Trustees.
The following table sets forth certain information about the Nominees and
the Trustees, including each person's principal occupation or employment during
the past five years.
<TABLE>
<CAPTION>
Name, Age and Positions with the Principal Occupation or Employment During the Last First Became
Trust Five Years Trustee
<S> <C> <C>
Frederick T. Weyerhaeuser* Chairman, Clearwater Management Co.,Inc.(1987-1996); 1987
(66) Director, Potlatch Corporation (1960-Present); Trustee,
Chairman, Treasurer and The Minnesota Mutual Life Insurance Company
Trustee (1968-Present); Director, Weeden Securities Corporation
(1987-Present)
Samuel B. Carr, Jr. President and Chief Investment Officer, S.B. Carr 1995
(42) Investments, Inc. (1990-Present)
Trustee and Nominee
Stanley R. Day, Jr. President and Director, SRAM Corporation (1987-Present) 1988
(39)
Trustee
5
<PAGE>
Robert J. Phares Chief Executive Officer, Battle Ridge Ranch Company 1990
(34) (1986-Present)
Trustee
Philip W. Pascoe* Chairman, Clearwater Management Co., Inc. 1997
(51) (1996-Present); Managing Director, Investments of Piper
Nominee Jaffray, Inc. (1996-Present); Senior Vice President
(1996), Associate Vice President (1982-1996), Dean
Witter Reynolds, Inc.
<FN>
* Mr. Weyerhaeuser and Mr. Pascoe are deemed to be "interested persons" of
the Trust for the purposes of the 1940 Act because of their positions with
either the Trust or CMC.
</FN>
</TABLE>
Information Concerning Meetings of Trustees and Committees
The number of shares of beneficial interest of each Fund beneficially owned
by each Trustee, directly or indirectly, as of December 31, 1997, is set forth
in Appendix B.
Six meetings of the Trustees were held during the fiscal year ended
December 31, 1997. Each Trustee attended at least seventy-five percent of all
meetings of the Board of Trustees during this year, except Mr. Day who attended
fifty percent of the meetings. The Board of Trustees has not delegated any
responsibilities of the Board to any committees.
Remuneration of Trustees
The following table sets forth certain information about the
compensation of each Trustee for the Trust's most recent fiscal year.
Name of Trustee Aggregate Pension or Retirement Total Compensation
Compensation Benefits Accrued as from the Trust
from the Trust Part of Trust
Expenses
Frederick T. Weyerhaeuser $4,000 $0 $4,000
Samuel B. Carr, Jr. 4,000 0 4,000
Stanley R. Day, Jr. 3,000 0 3,000
Robert J. Phares 3,500 0 3,500
6
<PAGE>
Officers
The following table sets forth information with respect to the principal
executive officers of the Trust. Each officer is elected by the Trustees. Each
of the Chairman, Treasurer and Secretary serves until the next annual meeting of
the Trustees and until his successor is chosen and qualified or until his death,
resignation, removal or disqualification.
Name, Position and Age Principal Occupation(s) During the Past Five Years
Frederick T. Weyerhaeuser* Chairman, Clearwater Management Co., Inc.
(66) (1987-1996); Director, Potlatch Corporation
Chairman and Treasurer (1960-Present); Trustee, The Minnesota Mutual Life
Insurance Company (1968-Present);
Director, Weeden
Securities Corporation (1987-Present)
Daniel C. Titcomb President and Director, Research Engineering and
(44) Design, Inc. (1994-Present); President and
Vice President and Secretary Director, Titcomb Associates, Inc. (1987-1994)
The Trust pays no salaries or compensation to any of its principal
executive officers in their capacity as principal executive officers of the
Trust.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE IN FAVOR OF
THE NOMINEES LISTED ABOVE.
Required Vote
Because your Fund is a series of the Trust, your vote will be counted
together with the votes of shareholders of the other series of the Trust voting
as a single class in the election of Trustees. In accordance with the Trust's
Declaration of Trust, there will be no cumulative voting. Election of each
Nominee requires a plurality of votes of the shareholders of the entire Trust
present at the Meeting.
7
<PAGE>
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PROPOSAL 2
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
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As directed by the Trustees and required by the 1940 Act, the
ratification of the selection of the independent public accountants for the
Trust's fiscal year ending December 31, 1998 will be voted upon at the Meeting.
It is intended that the persons named in the accompanying Proxy Card will vote
for KPMG Peat Marwick LLP, unless contrary instructions are given. If the
selection of the Trust's independent public accountants is not ratified by the
shareholders at the Meeting, the Board will reconsider such selection.
The Trust's financial statements for the fiscal year ended December 31,
1997 were audited by KPMG Peat Marwick LLP. Audit services during the fiscal
year ended December 31, 1997 consisted of examinations of the Trust's financial
statements for this period and reviews of the Fund's filings with the Securities
and Exchange Commission ("SEC").
At the Board of Trustees' Meeting, the Trustees unanimously selected KPMG
Peat Marwick LLP as the Trust's independent accountants for the fiscal year
ending December 31, 1998. A representative of KPMG Peat Marwick LLP is expected
to be available at the Meeting by telephone should any matter arise requiring
consultation with the accountants, and the accountants have been given the
opportunity to make a statement if they so desire.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
Required Vote
Ratification of the independent public accountants of the Trust requires
the affirmative vote of a majority of the outstanding shares of each Fund voting
separately which means the vote of the lesser of (A) 67% or more of the shares
present at the Meeting, if the holders of more than 50% of the shares of that
Fund are present or represented by proxy, or (B) more than 50% of that Fund's
outstanding shares ("1940 Act Majority Vote").
8
<PAGE>
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PROPOSAL 3
APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE TRUST'S DECLARATION OF TRUST
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The Declaration of Trust of the Clearwater Investment Trust (the "Current
Declaration") has not changed significantly since it was executed in 1987. The
Current Declaration is proposed to be amended and restated (as amended and
restated, the "Amended Declaration") to provide the Trustees of the Trust with
greater flexibility to manage the Trust. This enhanced flexibility may result in
more efficient operation of the Trust and lower costs. In connection with the
proposed amendments to the Current Declaration, the Trustees will amend the
By-laws of the Trust to conform them to the Amended Declaration. The Amended
Declaration, substantially in the form attached to this Proxy Statement as
EXHIBIT A, will become effective on March 1, 1998 if approved by the
shareholders.
Material Differences Between the Current Declaration and the Amended Declaration
Set forth below is a description of the material differences between the
Current Declaration and the Amended Declaration. This information is qualified
in its entirety by reference to the full text of the Amended Declaration at
EXHIBIT A.
<TABLE>
<CAPTION>
Issue Current Declaration Amended Declaration
<S> <C> <C>
Management Restricts the Trustees' Adopts a modern approach to Fund
Flexibility management flexibility and management by permitting the
requires shareholder approval for Trustees greater management
management decisions relating to flexibility without the expense
the ordinary course of business. of additional shareholder
meetings.
Amendments to Shareholder vote required on all Trustees may make any amendment
Declaration amendments except those relating to the Declaration of Trust that
of Trust to changing the Trust's name, does not have a materially
supplying any omission, curing adverse effect on the financial
any ambiguity or curing, interests of shareholders without
correcting or supplementing any shareholder approval.
defective or inconsistent
provision.
Termination Ambiguous provision relating to No shareholder vote required if a
of Trust or the requirement that shareholders majority of the Trustees
Series approve termination of the Trust determine that it is in the best
or any series. interests of the Trust or series
to terminate.
9
<PAGE>
Merger, Shareholder approval required. No requirement of shareholder
Consolidation approval.
or Sale of
Assets
Multiple Not permitted. Trustees may designate one or
Classes of more classes of shares of any
Shares series as they deem necessary,
appropriate or desirable without
shareholder approval.
Consequence No applicable provision. In the event of a negative net
of Negative income of any series or class,
Net Iincome the Trustees may offset each
shareholder's pro rata amount of
such negative income from any
accrued dividend or reduce the
number of outstanding shares of a
series or class in each
shareholder's account.
Voting Each whole share of a Fund is As determined by the Trustees
entitled to one vote on which it without shareholder vote or
is entitled to vote and consent, on any voting matter,
fractional shares are entitled to either each whole share is
a proportionate fractional vote. entitled to one vote and
fractional shares to a
proportional vote, or each dollar
of net asset value of the Fund is
entitled to one vote and
fractional dollars to a
proportional vote. (Set forth in
Trust's By-laws.)
Power of Trustees are not permitted to No such provision.
Trustees pledge, mortgage or hypothecate
the Trust's assets to secure
borrowings.
Independence No applicable provision. Service by any Trustee on one or
of Trustees more boards of directors/trustees
of investment companies
affiliated with the Trust does
not affect the disinterested
status of one or more of the
Trustee(s).
Written Unanimous. Majority of Trustees. (Set forth
Consent of in Trust's By-laws.)
Trustees
</TABLE>
10
<PAGE>
In addition to the material differences described above, there
are other substantive and stylistic differences between the Current Declaration
and the Amended Declaration. You are urged to review the form of Amended
Declaration attached to the Proxy Statement as EXHIBIT A. Except as described in
the Proxy Statement, approval of the Amended Declaration will not result in
changes in the Trustees, officers, investment programs and services or any
operations and services of the Trust or the Funds that are described in the
Trust's current prospectus.
Trustees' Evaluation
At the Board of Trustees' Meeting, the Trustees approved, and voted to
recommend to shareholders that they approve, a proposal to amend and restate the
Current Declaration. In taking this action and making this recommendation, the
Trustees considered the likelihood that the Amended Declaration will result in
more efficient and economical operation of the Funds by giving the Trustees more
flexibility to manage the Funds and adapt the Amended Declaration to changes in
applicable law, industry developments and other changes. This greater
flexibility should reduce the need for costly and time-consuming proxy
solicitations and meetings of shareholders.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE TRUST'S SHAREHOLDERS APPROVE
THE AMENDMENT AND RESTATEMENT OF THE TRUST'S DECLARATION OF TRUST
Required Vote
Approval of this Proposal requires an affirmative 1940 Act Majority Vote of
the outstanding voting securities of the Trust. Because your Fund is a series of
the Trust, your vote will be counted together with the votes of shareholders of
the other series of the Trust voting as a single class on the amendment and
restatement of the Trust's Declaration of Trust. If the proposed changes are not
approved by the shareholders, the Current Declaration will continue in its
existing form. Alternatively, the Trustees may consider submitting to
shareholders at a future meeting other proposals to amend and restate the
Current Declaration.
11
<PAGE>
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PROPOSAL 4
APPROVAL OF THE RECLASSIFICATION OF EACH FUND'S INVESTMENT OBJECTIVE
FROM FUNDAMENTAL TO NON-FUNDAMENTAL
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Each Fund's investment objective is "fundamental" which means that it
cannot be changed by the Trustees without shareholder approval. The Trustees
believe that it is in the best interests of each Fund for the Trustees to be
able to change the Fund's investment objective in the future without the cost
and delay of further shareholder approval. In the unlikely event that a Fund's
investment objective is determined in the future no longer to be appropriate for
that Fund, shareholders would be advised by the Fund of the change in its
investment objective.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND
APPROVE RECLASSIFYING THAT FUND'S INVESTMENT OBJECTIVE AS NON-FUNDAMENTAL.
Required Vote
Approval of this proposal by each Fund requires an affirmative 1940 Act
Majority Vote of that Fund. If the proposal is approved by a Fund, the changes
will be effective on April 30, 1998 for that Fund. If the proposal is not
approved with respect to a Fund, that Fund's investment objective will remain
classified as fundamental.
12
<PAGE>
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PROPOSALS 5(a), (b), (c), (d) and (e)
APPROVAL OF THE AMENDMENT, DELETION OR RECLASSIFICATION OF
EACH FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
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The 1940 Act requires mutual funds (including the Funds) to have certain
investment restrictions that can be changed only by a shareholder vote. Mutual
funds also may elect to designate other restrictions that may be changed only by
a shareholder vote. Both types of restrictions are often referred to as
"fundamental" restrictions. Some fundamental restrictions previously adopted by
the Funds reflect certain regulatory, business or industry conditions and
practices which have changed. Accordingly, the Trustees authorized a review of
the Funds' fundamental investment restrictions to simplify, standardize and
modernize those restrictions that are required to be fundamental. The Trustees
have recommended that certain fundamental restrictions be amended, deleted or
reclassified as non-fundamental.
The numerical references to the Funds' investment restrictions correspond
to the paragraphs in EXHIBIT B. If Proposal 5 is approved, in part or in its
entirety, the restrictions may be reordered and renumbered.
Amendment to and Deletion of Certain Restrictions
The Trustees propose that restrictions (3), (6), and (8) be
amended, restriction (7) be deleted and restriction (4) be reclassified as
non-fundamental, as set forth in EXHIBIT B. While restrictions (8) and (9) are
referred to as fundamental investment policies in the Funds' statement of
additional information ("SAI"), the provisions of the 1940 Act do not
distinguish fundamental investment restrictions from fundamental investment
policies, and future amendments to the SAI may enumerate fundamental investment
policies as investment restrictions.
(a) For shareholders of each Fund: Restriction (3) will be amended to permit the
Funds to loan portfolio securities to the extent permitted by the 1940 Act.
Currently, the value of securities loaned by a Fund may not exceed 10% of the
value of that Fund's total assets. As amended, the value of securities loaned by
a Fund may not exceed 33 1/3% of the value of that Fund's total assets. The
Funds have no current intention to loan securities in excess of 5% of the Funds'
total assets.
(b) For shareholders of each Fund: Restriction (6) will be amended to increase
the extent to which each of the Funds is permitted to borrow money. The
amendment of this restriction will provide each Fund with the opportunity to
increase its borrowing where obtaining additional cash would be in the best
interests of the Funds' shareholders, for example, at times when there is an
increased demand for redemptions. The Funds are not currently authorized to
borrow money for investment purposes. If a Fund's Board of Trustees authorizes
that Fund to borrow for investment purposes, that Fund will be permitted to do
so without further approval by shareholders.
(c) For shareholders of Clearwater Growth Fund only: Restriction (8), concerning
concentration of investments, will be amended to permit Clearwater Growth Fund
to invest without regard to the limits of the restriction, in circumstances
where CMC or the subadviser determines that such investment is necessary in
order to pursue Clearwater Growth Fund's policy of tracking the Russell 1000
Index.
13
<PAGE>
(d) For shareholders of each Fund: Restriction (7), concerning mortgaging,
pledging or hypothecating of a Fund's assets will be deleted. There is no
requirement in the 1940 Act that a Fund have such a restriction. The Funds'
activities with respect to borrowing are subject to Restriction (6) as proposed
to be amended.
Reclassification of Restriction on Short Sales
(e) For shareholders of each Fund: Restriction (4) concerning short sales will
be reclassified as non-fundamental. There is no requirement in the 1940 Act that
this policy be fundamental. Each Fund would like the ability to consider the use
of investment techniques consistent with the 1940 Act as interpretations of the
1940 Act are further developed. The Funds have no current intention to change
their policies with respect to short sales.
Trustees' Evaluation
The Trustees believe that approval of the changes recommended in this
Proposal will increase investment management flexibility and is in the best
interests of each Fund and its shareholders. The Trustees believe that CMC's or
the subadvisers' ability to manage the Funds' portfolios in a changing
regulatory or investment environment will be enhanced and, accordingly, that
investment management opportunities may be increased. By reducing to a minimum
those restrictions that can be changed only by shareholder vote, each Fund would
be able to avoid the costs and delay associated with future meetings of
shareholders.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE TO APPROVE
THE AMENDMENT OR RECLASSIFICATION OF EACH FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS.
Required Vote
Approval of each subproposal with respect to the applicable Fund requires
an affirmative 1940 Act Majority Vote of that Fund's outstanding shares. Only
shareholders of Clearwater Growth Fund will vote on subproposal(c) with respect
to amendments to Restriction (8). If a subproposal is approved by shareholders
of a Fund, the changes will be effective on April 30, 1998 with respect to that
Fund. If a subproposal is not approved with respect to a Fund, that Fund's
respective current fundamental restriction or restrictions will remain in effect
and retain its fundamental status, and a shareholder vote will be required
before that Fund can engage in activities prohibited by such current fundamental
restriction or restrictions.
14
<PAGE>
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PROPOSAL 6
APPROVAL OF A NEW MANAGEMENT
CONTRACT WITH CLEARWATER MANAGEMENT COMPANY
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General
The Trust is managed by CMC pursuant to an investment management contract
(the "Management Contract") dated as of May 1, 1994 between CMC and the Trust.
The Management Contract was approved by the Funds' shareholders at a meeting
held on April 20, 1994 and was most recently approved by the Trust's Board of
Trustees on December 5, 1997.
At the Board of Trustees' Meeting, the Board of Trustees considered a
proposal by CMC to adopt a new management contract between CMC and the Trust
(the "Proposed Contract") to (1) reduce the management fee applicable to the
Clearwater Growth Fund; (2) change the method of accruing a Fund's management
fee from monthly to daily; (3) delete the provision in the Management Contract
that requires CMC to limit a Fund's operating expense to the limits set by state
securities administrators; and (4) amend the annual approval and amendment
provisions. Except for the changes described in this Proxy Statement and
non-material stylistic changes, all provisions of the Proposed Contract will be
substantially identical to those in the Management Contract. The Proposed
Contract is set forth in its entirety at EXHIBIT C and all discussion of the
Proposed Contract is qualified in its entirety by reference to EXHIBIT C.
The Investment Adviser
CMC is an investment adviser registered under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), and is organized as a Minnesota
corporation with its principal office at 332 Minnesota Street, Suite 2090, St.
Paul, Minnesota 55101. During the fiscal year ended December 31, 1997, each
of Clearwater Growth Fund and Clearwater Small Cap Fund incurred an obligation
to pay CMC $1,012,399 and $534,172, respectively.
CMC is a closely held corporation and is owned by its directors. Each
director owns an equal share of CMC's stock.
Set forth below is the name, address and principal occupation of each
director and the principal executive officer of CMC:
15
<PAGE>
Name and Address Principal Occupation
Philip W. Pascoe Managing Director, Investments of Piper
President and Treasurer Jaffray, Inc.; Chairman and Treasurer
1145 Broadway, Suite 1500 of CMC
P.O. Box 1278
Tacoma, WA 98402
William T. Weyerhaeuser Chairman of Rock Island Company;
Vice President, Secretary and Director Director of Potlatch Corporation; Vice
1145 Broadway, Suite 1500 President, Secretary and Director of
P.O. Box 1278 CMC
Tacoma, WA 98402
George H. Weyerhaeuser, Jr. President and Chief Executive Officer
Director of Weyerhaeuser Canada
1145 Broadway, Suite 1500
P.O. Box 1278
Tacoma, WA 98402
Elizabeth C. Driscoll Professional Consultant, McKinsey &
Director Company, Inc.
332 Minnesota Street, Suite 2100
St. Paul, MN 55101
Walter J. Driscoll Director of Weyerhaeuser Co.; Director
Director of Northern States Power Co.; Director
332 Minnesota Street, Suite 2100 of The John Nuveen Co.; Director of
St. Paul, MN 55101 Comshare, Inc.; Director of The St.
Paul Companies
Daniel C. Titcomb Vice President and Secretary of the
Director Trust; President and Director, Research
332 Minnesota Street, Suite 2100 Engineering and Design, Inc.
St. Paul, MN 55101
Frank W. Piasecki Managing Director, A - T Financial
Director Information Inc.
332 Minnesota Street, Suite 2100
St. Paul, MN 55101
Catherine W. Morley Private Investor
Director
332 Minnesota Street, Suite 2100
St. Paul, MN 55101
16
<PAGE>
Material Terms of the Management Contract
The Management Contract provides that CMC, subject to the supervision of
the Trustees and the investment policies and restrictions of each Fund, will
develop, recommend and implement an investment program and strategies for the
Funds and in connection with that responsibility provide research and analysis
relative to the securities to be bought and sold, place orders for the purchase
and sale of each Fund's securities and report on its activities on behalf of the
Funds to the Trustees. The Management Contract also provides that the Manager,
at its own expense, will furnish the Trust with office space and necessary
office facilities, equipment and personnel for managing the affairs and
investments of the Funds and provide its own personnel to serve as officers of
the Trust. The Management Contract permits CMC to employ one or more subadvisers
to provide investment advisory services to the Funds.
The Management Contract sets forth CMC's compensation from the Trust on
behalf of each Fund and provides that CMC's fee will be calculated and accrued
monthly as a percentage of the Fund's month end net assets and will be payable
quarterly after the end of each calendar quarter on or before the 15th day of
January, April, July and October. In the event the Management Contract is
terminated, the fee will be pro rated for the number of days the Contract was in
effect in the month in which it was terminated.
The Management Contract provides that the Trust is required to pay only for
commissions and other direct charges relating to the purchase and sale of
portfolio securities by a Fund, taxes, interest and extraordinary expenses
(including litigation expenses) ("Extraordinary Expenses") incurred by the
Trust. CMC is required to pay directly or reimburse the Trust for all other
expenses. Therefore, CMC is required to pay substantially all of each Fund's
expenses ("Ordinary Expenses"), absent extraordinary circumstances. The primary
reason for having CMC bear responsibility for substantially all of the Trust's
expenses is to simplify the administrative process of paying Trust expenses.
The Management Contract contains a provision that requires CMC to reduce
its fee and make arrangements for a Fund's other expenses in order to reduce the
Fund's operating expenses to the limits set by applicable state securities laws
or regulations. As described more fully below, this provision was imposed by
certain state securities administrators.
The Management Contract provides that it will automatically terminate in
the event of its assignment and that it can be amended and approved annually
only with the affirmative vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the affected Fund and the affirmative
vote of a majority of the Independent Trustees cast in person at a meeting
called for that purpose. The Trust may without penalty terminate the Contract as
to any Fund at any time upon not more than 60 days' nor less than 30 days'
written notice to CMC. CMC may without penalty terminate the Contract as to any
Fund or the Trust on not less than 120 days' written notice to the Trust.
Under the terms of the Management Contract, CMC is not subject to liability
to the Trust or either Fund in the absence of the willful misfeasance, bad faith
or gross negligence of CMC or the reckless disregard of its duties.
The Management Contract was most recently approved by the Board of
Trustees on December 5, 1997.
17
<PAGE>
Material Differences between the Management Contract and the Proposed Contract
The Management Fee for Clearwater Growth Fund. As described in more detail
below in Proposal 7, as of November 1, 1997, the Trust's Board of Trustees, on
behalf of Clearwater Growth Fund, has approved the appointment of a new
subadviser, Parametric Portfolio Associates ("Parametric"), subject to approval
by Growth Fund's shareholders. In connection with the appointment of Parametric,
the Board also approved a reduction in the management fee payable to CMC by
Growth Fund from 1.10% of the Fund's average annual net assets to 0.45% of such
assets. Pursuant to the terms of the Proposed Contract, CMC will still be
required to pay directly or reimburse, from the management fee, the Fund's
Ordinary Expenses, including the proposed subadvisory fee of 0.15% of Growth
Fund's average annual net assets, to the new subadviser.
In connection with the appointment of Parametric as subadviser to Growth
Fund, the Board of Trustees approved several changes to the Fund's investment
policies to permit Parametric to manage the Fund to track the Russell 1000 Index
and to utilize tax-sensitive management techniques. As discussed in Proposal 7,
the Board determined that operating the Fund as a passively managed portfolio
would create an opportunity to reduce the Fund's expenses. Accordingly, CMC has
agreed to reduce its management fee in light of the expected reduction in the
Fund's Ordinary Expenses under Parametric's management.
The reduction in the management fee to 0.45% of net assets was effective as
of November 1, 1997. However, if Growth Fund's shareholders do not approve the
appointment of Parametric, the Board will consider what action, if any, is
appropriate with respect to the continued reduction in the management fee. If
the Board is unable to immediately find a subadviser willing and able to manage
the Fund in the manner described in Proposal 7, then the Board will be entitled
to increase the management fee to 1.10% of the Fund's net assets in order to
adequately compensate CMC for directly providing portfolio management services
or engaging a substitute subadviser. Engagement of a substitute subadviser by
the Board of Trustees would be subject to further shareholder approval.
Method of Accruing the Management Fee. The Board of Trustees has recently
approved a new custody agreement with Investors Fiduciary Trust Company ("IFTC")
to permit IFTC to serve as custodian for the Fund's assets. IFTC will also serve
as the Fund's accounting agent and in that capacity IFTC will monitor the Fund's
expenses and keep the Fund's books and records. For ease of administration of
its duties as accounting agent, IFTC and the Trust have agreed that each Fund
will accrue its expenses, including the management fee, on a daily basis.
CMC and the Board of Trustees have considered whether such a change would
result in an increase in the aggregate dollar amount of each Fund's management
fee that would be paid to CMC during the course of the Trust's fiscal year. It
is not possible to recalculate each Fund's management fee paid to CMC during the
most recently completed fiscal year because the fee was not calculated on a
daily basis and the data was not captured. Likewise, it is not possible to
accurately project the aggregate amount that will be paid by each Fund to CMC
during the current fiscal year under both daily and monthly accrual methods
because the size of each Fund's assets cannot be accurately predicted. However,
CMC believes that any
18
<PAGE>
increase or decrease in the aggregate amount of the management fees that will be
paid to CMC as a result of the change to daily accruals will be de minimis.
To obviate any concern that the management fee would be impermissibly
increased without explicit authority in the Proposed Contract, the Trustees have
recommended that shareholders approve the amendment to the Management Contract
to permit daily accruals of each Fund's management fee. The change in the
accrual method will not result in a change in the rate of each Fund's management
fee paid to CMC, except as described elsewhere in this Proxy Statement.
Deletion of Outdated Provision. As a result of amendments by Congress to
the 1940 Act in October, 1996, states are preempted from enforcing state
regulations affecting the operations of mutual funds. The Management Contract
contains a provision that reflects a requirement imposed on mutual fund advisers
by some state securities administrators requiring an adviser to reimburse a
mutual fund if the fund's operating expenses exceeded amounts specified in the
state's securities laws. CMC believes this provision should be deleted in the
Proposed Contract because it is no longer relevant. Neither Fund's expenses have
ever been as high as the lowest expense limit imposed by any of the states. The
Proposed Contract will continue to contain the provision describing CMC's
agreement that it may from time to time agree not to impose all or a portion of
its management fee with respect to either Fund.
Amendment of Approval Requirements. From time to time the SEC issues rules
relating to provisions of the 1940 Act or grants exemptive relief from certain
specific requirements of the 1940 Act when it believes that such rules or relief
or interpretive positions are in the public interest. The Management Contract
recites word for word certain provisions of the 1940 Act with respect to Trustee
and shareholder approval of amendments to the Management Contract and the annual
approval of the Contract. At some time in the future, CMC and the Board of
Trustees may seek to operate the Trust in accordance with new rules or seek
exemptive relief from the provisions of the 1940 Act on behalf of the Trust. If
the rules or the exemptive relief or other interpretive positions of the SEC
relate to Trustee and shareholder provisions in the 1940 Act, the presence in
the Management Contract of specific language that is no longer consistent with
the rule, the relief or the interpretive position may prohibit the Trust from
taking advantage without another shareholder meeting. The relevant provisions in
the Proposed Contract no longer contain those specific recitations of the
provisions of the 1940 Act and now state that amendments and approvals will be
obtained in accordance with the "requirements" of the 1940 Act, as such
requirements may be modified by rule, regulation, interpretation or order of the
SEC. Although the wording in the Proposed Contract has changed, the Contract
still requires that it can only be amended or approved on an ongoing basis in
accordance with the requirements of the 1940 Act.
Analysis of the Proposed Contract and Evaluation by the Board of Trustees
The Trustees, including the Independent Trustees, have determined that the
terms of the Proposed Contract and the management fees described in that
Contract are fair and reasonable. In approving the Proposed Contract and
recommending that shareholders approve the Proposed Contract, the Trustees,
including the Independent Trustees,
19
<PAGE>
considering the best interests of the shareholders of each Fund, took into
account all such factors as they deemed relevant.
As described more fully below in Proposal 7, the Trustees evaluated several
factors in connection with the appointment of a new subadviser for Growth Fund
and the resulting expected substantial decrease in the Fund's total operating
expenses. Although the Fund's management fee is decreasing, the Trustees have
determined that the Fund will continue to receive the same level and quality of
administrative and management services from CMC.
In connection with their evaluation of the proposed change to the method of
accruing the management fee, the Trustees considered the representation of CMC
that the change in the method of accruing the management fees of the Funds would
result, at most, in a de minimis increase or decrease in the aggregate amount of
the management fees paid by each Fund to CMC.
In evaluating the deletion of the expense limitation provision in the
Proposed Contract, the Trustees evaluated the history of each Fund's total
annual operating expenses and noted that neither Fund's expenses had ever been
limited by operation of that provision in the Management Contract. The Trustees
also noted that the Proposed Contract will continue to provide that CMC may
voluntarily agree not to impose a portion of its management fee and may agree to
reimburse a Fund's expenses. In addition, the Trustees periodically review each
Fund's total annual operating expenses in relation to the services provided for
the payment of those expenses to determine if each Fund's expenses are fair and
reasonable.
In evaluating the change to the approval and amendment provisions of the
Proposed Contract, the Trustees noted that although the text of the Proposed
Contract was to be amended, the amendments would not alter the requirement that
the Proposed Contract be approved in accordance with the substantive provisions
of the 1940 Act. The Trustees determined that the amended provisions continue to
provide the protections afforded to the Funds and the shareholders by the 1940
Act.
In evaluating the Proposed Contract and the management fee on behalf of
each Fund set forth in the Contract, the Trustees relied on their ongoing review
of CMC's activities on behalf of the Funds and were also provided with
additional specific data and analyses by CMC. The Trustees considered the
benefit to each Fund and its shareholders that the "all-in-one" nature of the
management fee provides some level of certainty that the Fund's total annual
operating expenses will not fluctuate (absent extraordinary circumstances) from
year to year.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND
APPROVE THE PROPOSED CONTRACT.
20
<PAGE>
Vote Required
Approval of this proposal to approve the Proposed Contract by the
shareholders of each Fund requires the affirmative 1940 Act Majority Vote of
each Fund.
If the shareholders of a Fund approve the Proposed Contract, the Proposed
Contract will be effective as to that Fund on March 1, 1998. If the shareholders
of a Fund do not approve the Proposed Contract, the Proposed Contract will not
be adopted for that Fund and the Management Contract will continue in existence
for that Fund. In that circumstance, the Trustees will consider what action, if
any, to take. The Trustees may consider resubmitting to that Fund's shareholders
another proposal with respect to the Management Contract.
21
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 7
APPROVAL OF THE SUBADVISORY AGREEMENT
WITH PARAMETRIC PORTFOLIO ASSOCIATES
ON BEHALF OF CLEARWATER GROWTH FUND
- --------------------------------------------------------------------------------
General
At a meeting of the Board of Trustees on October 11, 1997, the Trustees,
including the Independent Trustees, approved and voted to recommend that
Clearwater Growth Fund's shareholders approve, a proposal to approve a new
subadvisory contract (the "Subadvisory Contract") among the Trust, on behalf of
Clearwater Growth Fund, CMC and Parametric Portfolio Associates, the proposed
subadviser ("Parametric"), attached hereto as EXHIBIT D. Pursuant to the terms
of the Subadvisory Contract, Parametric will provide portfolio management
services to the Fund's portfolio. Effective October 31, 1997, the Board of
Trustees terminated the investment subadvisory contract (the "Prior Contract")
among the Trust, on behalf of the Fund, CMC and Sit Investment Associates, the
prior subadviser, because the Trustees believed that the Fund's portfolio has
many characteristics of an index fund and that it would be in the best interests
of the Fund's shareholders to reduce the Fund's expenses by employing passive
management techniques to manage the Fund's portfolio. In addition, Parametric
offers the benefit of tax-sensitive management techniques to manage the Fund.
As described above in Proposal 6, the Trust's Board of Trustees has
approved a decrease in the rate of the management fee that is paid by the Trust
to CMC to an annual rate of 0.45% of the Growth Fund's net assets. From this
management fee, CMC pays the Fund's subadvisory fee to Parametric at an annual
rate of 0.15% of the Fund's net assets under Parametric's management, the Fund's
Ordinary Expenses, and reimburses itself for the expenses it incurs in providing
management services to the Fund. The Fund has no direct responsibility to pay
the subadvisory fee to Parametric. Under the terms of the Subadvisory Agreement,
Parametric pays its own expenses.
The Subadviser
Parametric, located at 701 Fifth Avenue, Suite 7310, Seattle, Washington
98104-7090 is a sub-partnership of PIMCO Advisors, L.P. ("PIMCO") and is
registered with the SEC as an investment adviser. PIMCO is the supervisory
general partner of Parametric and is located at 800 Newport Center Drive,
Newport Beach, California 92660. Parametric Management, Inc., a wholly-owned
subsidiary of PIMCO, is the managing general partner of Parametric and is
located at 701 Fifth Avenue, Suite 7310, Seattle, Washington 98104-7090. As of
December 31, 1997, Parametric had assets of $2.5 billion under management.
Parametric acts as investment manager to private accounts for institutions such
as qualified retirement plans, foundations and endowments and for individuals,
but has no prior experience
22
<PAGE>
managing a mutual fund. Set forth below is the name, address and principal
occupation of each principal executive officer of Parametric.
Name and Address Principal Occupation
William Eugene Cornelius, Jr. Managing Director, Parametric Portfolio
Managing Director Associates; Director and Managing Director.
701 Fifth Avenue, Suite 7310
Seattle, WA 98104
David M. Stein Ph.D. Managing Director, Parametric Portfolio
Managing Director Associates.
701 Fifth Avenue, Suite 7310
Seattle, WA 98104
The Subadvisory Contract
A copy of the Subadvisory Contract is attached as EXHIBIT D and the
following discussion of the terms of the Subadvisory Contract is qualified in
its entirety by reference to EXHIBIT D.
The terms of the Subadvisory Contract are substantially similar to the
Prior Contract with Sit that was approved by the Fund's shareholders on April
20, 1994 in connection with the appointment of Sit as the Fund's subadviser. The
Subadvisory Contract provides that (i) Parametric will, subject to the
supervision of CMC and the Board of Trustees, regularly provide the Fund with
advice concerning the investment management of the Fund's portfolio as
appropriate to the achievement of the investment objectives and place orders for
the purchase and sale of portfolio securities of the Fund; (ii) the Subadvisory
Contract will remain in full force and effect for two years from the date of
execution and from year to year thereafter upon the approvals required by the
1940 Act; (iii) in the event that the Subadvisory Contract terminates during any
portion of a year, the fee due to Parametric shall be prorated for such portion
of a calendar quarter during which the Contract was in effect; and (iv)
Parametric is not liable to CMC, the Trust or any shareholder, except for
willful misfeasance, bad faith or gross negligence or for reckless disregard of
its obligations and duties under the Contract.
If approved by the Fund's shareholders, the Subadvisory Contract will
remain in effect, unless earlier terminated, for an initial two year term, and
from year to year thereafter, provided that the Contract is approved at least
annually in accordance with the requirements of the 1940 Act. The Subadvisory
Contract will terminate automatically in the event of its assignment, and the
Contract may be terminated with respect to the Fund at any time, without penalty
charged to the Fund, by CMC or the Trust by not more than 60 days' nor less than
30 days' written notice to Parametric.
23
<PAGE>
Material Differences Between the Prior Contract and the Subadvisory Contract
Subadvisory Fee. Under the Prior Contract, CMC paid a subadvisory fee
quarterly, accrued monthly, that was equal on annual basis to a stated
percentage of the Fund's net assets under Sit's management as follows:
Assets under Management Annual Rate
Up to $10 million 0.75%
More than $10 million, up to $20 million 0.70%
More than $20 million, up to $30 million 0.65%
More than $30 million, up to $40 million 0.60%
More than $40 million, up to $50 million 0.55%
More than $50 million, up to $60 million 0.50%
More than $60 million, up to $70 million 0.45%
More than $70 million, up to $80 million 0.40%
More than $80 million 0.35%
Under the Subadvisory Contract, CMC, out of its management fee paid by the
Trust, will pay Parametric quarterly, accrued monthly, a fee that is equal on an
annual basis to 0.15% of the Fund's net assets under Parametric's management.
During the period from January 1, 1997 to October 31, 1997, CMC accrued an
obligation to pay $450,753 in subadvisory fees to Sit pursuant to the terms of
the Prior Contract. Had the Subadvisory Contract been in place for the same
period, CMC would have accrued an obligation to pay $128,894 to Parametric.
Amendment and Approval Provisions. As described above in Proposal 6, the
SEC occasionally issues rules or grants exemptive relief from certain specific
requirements of the 1940 Act when it believes that such actions are in the
public interest. The Prior Contract recites word for word certain provisions of
the 1940 Act with respect to Trustee and shareholder approval of amendments to
the Prior Contract and the annual approval of the Contract. The Subadvisory
Contract has been revised to delete these specific recitations and states that
amendments and approvals will be obtained in accordance with the requirements of
the 1940 Act, as such requirements may be modified by rule, regulation or order
of the SEC. Although the wording in the Subadvisory Contract has changed, the
Contract still requires that it can only be amended or approved on an ongoing
basis in accordance with the requirements of the 1940 Act.
Trustees' Evaluation
The Trustees have considered several factors relating to the Subadvisory
Contract with Parametric and believe that it would be in the best interests of
the Growth Fund and its shareholders that Parametric be approved as the
subadviser to the Fund. In making this determination, the Trustees considered
Parametric's qualifications as an investment adviser,
24
<PAGE>
the nature of the services to be provided to the Fund by Parametric and
Parametric's investment strategy which includes passive management of the Fund
while minimizing turnover and the unnecessary recognition of capital gains. The
Trustees approved the subadvisory fee to be paid by CMC to Parametric based on
its analysis of the factors described above. The Trustees believe the
Subadvisory Contract and the proposed subadvisory fee to be reasonable and fair,
and the appointment of Parametric to be in the best interests of the Fund's
shareholders.
In evaluating the change to the approval and amendment provisions of the
Subadvisory Contract, the Trustees noted that although the text of the Contract
was amended, the amendments would not alter the requirement that the Subadvisory
Contract be approved in accordance with the substantive provisions of the 1940
Act. The Trustees determined that the amended provisions continue to provide the
protection afforded to the Fund and the shareholders by the 1940 Act.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE TO APPROVE
THE SUBADVISORY CONTRACT WITH PARAMETRIC.
Required Vote
Approval of the Subadvisory Contract requires an affirmative 1940 Act
Majority Vote of Clearwater Growth Fund's outstanding shares. If the Fund's
shareholders do not approve the Subadvisory Contract, the Trustees will seek to
obtain interim advisory services for the Fund either from Parametric or from
another advisory organization. Thereafter, the Trustees would either negotiate a
new subadvisory contract with an advisory organization selected by the Trustees
or make other appropriate arrangements, subject to any required approval by the
Fund's shareholders.
25
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL 8
RATIFICATION OF ACTION BY BOARD OF TRUSTEES
TO REDUCE SUBADVISORY FEE
- --------------------------------------------------------------------------------
General
At the Board of Trustees' Meeting, the Trustees, including the Independent
Trustees, approved a reduction in the subadvisory fee that CMC pays to Kennedy
Capital Management ("KCM"), the subadviser to the Clearwater Small Cap Fund. The
reduction in the rate of the subadvisory fee will be ongoing as of January 1,
1998 and retroactive to January 1, 1997. KCM intends to reimburse CMC in the
amount of $50,404, which is the difference between the obligation CMC accrued
and owed to KCM during the fiscal year ended December 31, 1997 and what would
have been accrued and owed to KCM if the reduced fee rate was in effect during
that fiscal year. At the same time, the Board of Trustees adopted a resolution
recommending that shareholders of Small Cap Fund ratify these actions.
The Management Contract between the Trust, on behalf of Small Cap Fund, and
CMC that was approved by shareholders on April 20, 1994 provides that the Small
Cap Fund will pay an "all-in-one" management fee to CMC of 1.35% of the Fund's
net assets on an annual basis (the "Management Fee"). Out of the Management Fee,
CMC pays or reimburses the Fund for all of the Fund's Ordinary Expenses,
including the subadvisory fee to KCM. The subadvisory fee paid to KCM was 1.00%
of the Fund's month-end net assets up to $30 million, 0.90% on such assets over
$30 million and up to $50 million and 0.80% on such assets over $50 million.
The intended consequence of such an arrangement is that CMC bears the risk
that the Fund's Ordinary Expenses in any one year will exceed the Management Fee
and that CMC will be out of pocket for that difference. Another intended
consequence is that CMC will negotiate the Fund's Ordinary Expenses so that the
Fund's total annual operating expenses will not exceed the Management Fee.
Although CMC would be entitled to ask the Board of Trustees and the shareholders
to approve an increase in the Management Fee if the Fund's Ordinary Expenses
were to increase to such an extent that the Management Fee was no longer
reasonable, both the Board of Trustees and CMC agree that the all-in-one
Management Fee gives each shareholder a certain level of confidence that the
Fund's expenses will not increase each year as service providers to the Fund
seek to increase their fees.
KCM and CMC have agreed to a reduction in the subadvisory fee rate that CMC
pays to KCM. KCM has agreed to reduce the subadvisory fee to 0.85% of the Fund's
net assets up to and including $50 million and 0.80% of such assets over $50
million. KCM has agreed to this reduction because its experience with the Fund's
portfolio over the past three years has resulted in more efficiencies at KCM in
managing the portfolio. The reduction in fee will not result in a reduction of
portfolio management services from KCM to the Fund. Furthermore, KCM and CMC
have agreed that the reduction in subadvisory fee will be
26
<PAGE>
retroactive to January 1, 1997 This means that KCM will reimburse CMC $50,404
for subadvisory services to the Fund for the period from January 1, 1997 to
December 31, 1997.
Since shareholders approved the all-in-one Management Fee in 1994, CMC has
been paying the Fund's Ordinary Expenses. For the fiscal years ended on December
31, 1994, 1995 and 1996, the Management Fee was not adequate to both pay the
Fund's Ordinary Expenses and compensate CMC. CMC believes that it is fair and
reasonable under the terms of the all-in-one Management Fee that the reduction
in the subadvisory fee not be accompanied by a concomitant reduction in the
Management Fee and that the reimbursement payment by KCM be made to CMC to
compensate CMC in part for its provision of management and administrative
services to the Fund.
Trustees' Evaluation
After consideration of all factors it considered relevant, the Trustees
approved the reduction in the subadvisory fee without a concomitant decrease in
the Management Fee and the reimbursement payment from KCM to CMC as fair and
reasonable. The Trustees considered the following and other factors in their
decision.
The Trustees considered whether the Fund's shareholders would continue to
pay a Management Fee that reasonably reflects the estimated costs of managing
the Fund and paying its Ordinary Expenses for the coming year and considered
CMC's representation that it believes the Management Fee is reasonable and that
CMC does not intend to seek an increase in the Management Fee. The Trustees also
considered whether the reduction in the rate of the subadvisory fee would result
in a reduction in the amount and quality of services by either KCM or CMC. The
Trustees took note of the representations of both KCM and CMC that no decrease
in the amount or quality of services provided to the Fund would result if the
rate of the subadvisory fee were reduced. The Trustees noted especially that an
intended effect of the Management Fee was to provide some level of certainty to
the shareholders that the Fund's total annual operating expenses would remain
relatively predictable. The Trustees believe that this result is being achieved,
especially since no increase in the Management Fee is proposed.
Trustees' Recommendation
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE TO RATIFY THE
REDUCTION IN THE SUBADVISORY FEE AND THE REIMBURSEMENT TO CMC.
Required Vote
Approval of this proposal requires an affirmative 1940 Act Majority Vote of
the Small Cap Fund's outstanding shares. If the Fund's shareholders do not
ratify the Board's actions, the Board of Trustees, will consider what action, if
any, should be taken.
27
<PAGE>
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Other Business
As of the date of this Proxy Statement, the Trustees are not aware of any
matters to be presented for action at the Meeting other than those described
above. Should other business properly be brought before the Meeting, it is
intended that the accompanying Proxy Card will be voted in accordance with the
judgment of the persons named as proxies.
Proxies and Voting at the Meeting
The enclosed proxy is revocable by a shareholder at any time before it is
exercised by written notice to the Trust (addressed to the Secretary at the
Trust's principal executive offices), by executing a superseding proxy or by
attending the Meeting and voting in person. All valid proxies received prior to
the Meeting (including any adjournment thereof) will be voted at the Meeting.
Matters on which a choice has been provided will be voted as indicated on the
Proxy Card and, if no instruction is given, the persons named as proxies will
vote the shares represented thereby in favor of the matters set forth in each
proposal and will use their best judgment in connection with the transaction of
such other business as may properly come before the Meeting.
In the event that at the time any session of the Meeting is
called to order a quorum is not present in person or by proxy, the persons named
as proxies may vote those proxies which have been received to adjourn the
Meeting to a later date. In the event that a quorum is present but sufficient
votes in favor of any of Proposals 1 through 8 have not been received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies with respect to the proposal. Any
adjournment will require the affirmative vote of a majority of the shares of the
Trust (or the affected Fund) present in person or by proxy at the session of the
Meeting to be adjourned. The persons named as proxies will vote those proxies
which they are entitled to vote in favor of any such proposal in favor of such
an adjournment, and will vote those proxies required to be voted against any
such proposal against any such adjournment. A shareholder vote may be taken on
one or more of the proposals in this Proxy Statement prior to such adjournment
if sufficient votes for their approval have been received and it is otherwise
appropriate.
A majority of the shares of the Trust outstanding and entitled to vote
shall be a quorum for the transaction of business at the Meeting, but any lesser
number shall be sufficient for adjournments. Abstentions will be treated as
shares that are present and entitled to vote with respect to each proposal, but
will not be counted as a vote in favor of a proposal. Accordingly, an abstention
from voting on a proposal has the same effect as a vote against the proposal.
28
<PAGE>
Manner and Cost of Proxy Solicitation
In addition to the solicitation by use of the mails, certain officers and
employees of CMC, none of whom will receive compensation for their services
other than their regular salaries, may solicit the return of proxies personally
or by telephone or fax. CMC will bear all of the costs associated with the
Meeting, including the cost of solicitation.
Shareholder Proposals
The Trust is not required and does not intend to hold a meeting of
shareholders each year. Instead, meetings will be held only when and if
required. Any shareholders desiring to present a proposal for consideration at
the next meeting of shareholders of their respective Fund must submit the
proposal in writing, so that it is received by the appropriate Fund within a
reasonable time before any meeting.
Other Information
The Trust is an affiliated person of Weeden Securities Corporation
("Weeden") During 1997, the Small Cap Fund engaged in securities transactions
with Weeden in an aggregate amount of $1,395,813. Of the Fund's aggregate
brokerage commissions in 1997, 2.52% were paid to Weeden.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
January 12, 1998
29
<PAGE>
APPENDIX A
Number of Shares Outstanding As of
the Record Date
----------------------------------
As of December 31, 1997 each Fund had the following number of shares
outstanding:
Fund Shares Outstanding
Clearwater Growth Fund 5,047,760.304
Clearwater Small Cap Fund 2,679,103.840
30
<PAGE>
<TABLE>
Clearwater Growth Fund APPENDIX B
Ownership of Trustees, Officers, Nominees and Other 5% Shareholders
<CAPTION>
Sole Shared Spouse (Not
Personal/Rev Sole Voting Shared Voting Investment Investment Total Shares Included)
<S> <C> <C> <C> <C> <C> <C> <C>
FTW 63,703.848 63,703.848 658,927.770 63,703.848 745,993.785 809,697.633 15,930.678
1.26% 1.26% 13.05% 1.26% 14.78% 16.04% 0.32%
PWP 0.000 0.000 0.000 0.000 87,066.015 87,066.015 0.000
1.72% 1.72%
RJP 0.000 0.000 66,211.993 0.000 66,211.993 66,211.993 941.187
1.31% 1.31% 1.31% 0.02%
SBCJR 0.000 0.000 0.000 0.000 0.000 0.000 0.000
SRDJR 4,779.204 4,779.204 92,198.576 4,779.204 92,198.576 96,977.780 0.000
0.09% 0.09% 1.83% 0.09% 1.83% 1.92%
DCT 0.000 0.000 56,585.312 0.000 143,651.327 143,651.327 0.000
1.12% 2.85% 2.85%
WJD 33,754.251 187,715.875 530,053.288 33,754.251 653,797.039 804,835.178 36,666.258
0.67% 3.72% 10.50% 0.67% 12.95% 15.94% 0.73%
DCW 27,140.908 27,140.908 239,789.753 27,140.908 239,789.753 266,930.661 N/A
0.54% 0.54% 4.75% 0.54% 4.75% 5.29%
GHW 0.000 0.000 1,228,504.063 0.000 1,228,504.063 1,228,504.063 24,692.551
24.34% 24.34% 24.34% 0.49%
WTW 25,304.261 34,386.019 1,334,371.852 34,386.019 1,421,437.867 1,455,823.886 10,005.860
0.50% 0.68% 26.43% 0.68% 28.16% 28.84% 0.20%
DMW* 27,989.978 0.000 461,817.218 0.000 461,817.218 461,817.218 0.000
0.55% 9.15% 9.15% 9.15%
WSRIII 776.347 18,149.608 434,117.563 18,149.608 434,117.563 452,267.171 0.000
0.02% 0.36% 8.60% 0.36% 8.60% 8.96%
CAW 153,764.424 153,764.424 451,530.152 153,764.424 451,530.152 605,294.576 N/A
3.05% 3.05% 8.95% 3.05% 8.95% 11.99%
JWTJR 0.000 296,091.701 3,939.967 296,091.701 3,939.967 300,031.668 0.000
5.87% 0.08% 5.87% 0.08% 5.94%
WWW 24,692.551 24,692.551 528,359.736 24,692.551 528,359.736 553,052.287 0.000
0.49% .49% 10.47% 0.49% 10.47% 10.96%
<FN>
*Personal/Rev for DMW-shares held in his revocable trust where he has not reserved voting and
investment powers.
**332 Minnesota Street, Suite 2100, St. Paul, MN 55101-1394.
</FN>
***1145 Broadway, Suite 1500, P.O. Box 1278, Tacoma, WA 98402.
</TABLE>
31
<PAGE>
<TABLE>
Key
<CAPTION>
Trustees and Officers** Other 5% Holders
<S> <C> <C> <C> <C> <C>
FTW Frederick T. Weyerhaeuser WJD W. John Driscoll** CAW Charles A. Weyerhaeuser**
PWP Philip W. Pascoe DCW David C. Weyerhaeuser** JWTJR John W. Titcomb, Jr.***
RJP Robert J. Phares GHW George H. Weyerhaeuser*** WWW Wendy W. Weyerhaeuser***
SBCJR Samuel B. Carr, Jr. WTW William T. Weyerhaeuser***
SRDJR Stanley R. Day, Jr. DMW David M. Weyerhaeuser***
DCT Daniel C. Titcomb WSRIII Walter S. Rosenberry, III**
</TABLE>
<PAGE>
<TABLE>
Clearwater Small Cap Fund APPENDIX B
Ownership of Trustees, Officers, Nominees and Other 5% Shareholders
<CAPTION>
Sole Shared
Personal/Rev Sole Voting Shared Voting Investment Investment Total Shares Spouse (Not
Included)
<S> <C> <C> <C> <C> <C> <C> <C>
FTW 49,730.565 49,730.565 561,971.299 49,730.565 611,573.303 61,303.868 16,547.714
1.86% 1.86% 20.98% 1.86% 22.83% 24.68% 0.62%
PWP 0.000 0.000 0.000 0.000 49,602.004 49,602.004 0.000
1.85% 1.85%
RJP 0.000 1,109.350 56,235.182 1,109.350 56,235.182 57,344.532 155.290
0.04% 2.10% 0.04% 2.10% 2.14% 0.01%
SBCJR 0.000 0.000 0.000 0.000 0.000 0.000 0.000
SRDJR 119,535.878 119,535.878 85,308.904 119,535.878 85,308.904 204,844.782 0.000
4.46% 4.46% 3.18% 4.46% 3.18% 7.65%
DCT 8,847.560 8,847.560 55,909.229 8,847.560 105,511.233 114,358.793 0.000
0.33% 0.33% 2.09% 0.33% 3.94% 4.27%
WJD 20,762.407 195,952.295 129,676.971 20,762.407 294,225.455 375,231.270 50,093.988
0.77% 7.31% 4.84% 0.77% 10.98% 14.01% 1.87%
DCW 17,256.610 17,256.610 308,864.510 17,256.610 308,864.510 326,121.120 N/A
0.64% 0.64% 11.53% 0.64% 11.53% 12.17%
GHW 0.000 0.000 540,322.364 0.000 540,322.364 540,322.364 0.000
20.17% 20.17% 20.17%
WTW 24,996.546 27,180.155 456,289.145 27,180.155 505,891.149 533,071.304 0.000
0.93% 1.01% 17.03% 1.01% 18.88% 19.90%
DMW 0.000 0.000 192,375.922 0.000 192,375.922 192,375.922 0.000
7.18% 1.18% 7.18%
WSRIII 0.000 6,824.278 209,442.242 6,824.278 209,442.242 216,266.520 0.000
0.25% 7.82% 0.25% 7.82% 8.07%
CAW 115,061.812 115,061.812 116,357.047 115,061.812 116,357.047 231,418.859 N/A
4.29% 4.29% 4.34% 4.29% 4.34% 8.64%
ERT 10,641.322 10,641.322 356,194.599 10,641.322 356,194.599 366,835.921 0.000
0.40% 0.40% 13.30% 0.40% 13.30% 13.69%
<FN>
**332 Minnesota Street, Suite 2100, St. Paul, MN 55101-1394.
***1145 Broadway, Suite 1500, P.O. Box 1278, Tacoma, WA 98402.
</FN>
</TABLE>
<TABLE>
Key
<CAPTION>
Trustees and Officers** Other 5% Holders
<S> <C> <C> <C> <C> <C>
FTW Frederick T. Weyerhaeuser WJD W. John Driscoll** ERT Edward R. Titcomb**
PWP Philip W. Pascoe DCW David C. Weyerhaeuser**
RJP Robert J. Phares GHW George H. Weyerhaeuser***
SBCJR Samuel B. Carr, Jr. WTW William T.Weyerhaeuser***
SRDJR Stanley R. Day, Jr. DMW David M. Weyerhaeuser***
DCT Daniel C. Titcomb WSRIII Walter S. Rosenberry, III**
</TABLE>
32
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CLEARWATER INVESTMENT TRUST
2100 First National Bank Building
St. Paul, Minnesota, 55101
AMENDED AND RESTATED DECLARATION OF TRUST made effective as of the 1st day
of March, 1998 by the undersigned (together with all other persons from time to
time duly elected, qualified and serving as Trustees in accordance with the
provisions of Article II hereof, the "Trustees");
WHEREAS, pursuant to a declaration of trust executed and delivered on
January 12, 1987 (the "Original Declaration"), the Trustees established a trust
for the investment and reinvestment of funds contributed thereto:
WHEREAS, the Trustees divided the beneficial interest in the trust assets
into transferable shares of beneficial interest, as provided therein;
WHEREAS, the Trustees declared that all money and property contributed to
the trust established thereunder be held and managed in trust for the benefit of
the holders, from time to time, of the shares of beneficial interest issued
thereunder and subject to the provisions thereof;
WHEREAS, the Trustees desire to amend and restate the Original Declaration;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements contained herein, the undersigned, being all of the trustees of the
trust, hereby amend and restate the Original Declaration as follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is Clearwater
Investment Trust (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings.
(a) "Administrator" means the party, other than the Trust, to a contract
described in Section 3.3 hereof.
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<PAGE>
(b) "By-Laws" means the By-Laws referred to in Section 2.5 hereof, as from
time to time amended.
(c) "Class" means any division or Class of Shares within a Series or Fund,
which Class is or has been established within such Series or Fund in accordance
with the provisions of Article V.
(d) "Commission" has the meaning given it in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust, as amended from time to
time. Reference in this Declaration of Trust to "Declaration," "hereof," and
"hereunder" shall be deemed to refer to this Declaration rather than exclusively
to the article or section in which such words appear.
(g) "Fund" or "Funds," individually or collectively, means the separate
Series of Shares of the Trust, together with the assets and liabilities
belonging and allocated thereto.
(h) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(i) The term "Interested Person" has the meaning specified in the 1940 Act
subject, however, to such exceptions and exemptions as may be granted by the
Commission in any rule, regulation or order.
(j) "Investment Adviser" means the party, other than the Trust, to an
agreement described in Section 3.2 hereof.
(k) The "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(l) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, firms, joint ventures and other entities, whether or not
legal entities,
as well as governments, instrumentalities, and agencies and political
subdivisions thereof, and quasi-governmental agencies and instrumentalities.
(m) "Principal Underwriter" means the party, other than the Trust, to a
contract described in Section 3.1 hereof.
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<PAGE>
(n) "Prospectus" means the Prospectus and Statement of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(o) "Series" individually or collectively means such separately managed
component(s) or Fund(s) of the Trust (or, if the Trust shall have only one such
component or Fund, then that one) as may be established and designated from time
to time by the Trustees pursuant to Section 5.5 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares. A Shareholder
of Shares of a Series shall be deemed to own a proportionate undivided
beneficial interest in such Series equal to the number of Shares of each Series
of which he is the record owner divided by the total number of Outstanding
Shares of such Series. A Shareholder of Shares of a Class within a Series shall
be deemed to own a proportionate undivided beneficial interest in such Class
equal to the number of Shares of such Class of which he is the record owner
divided by the total number of Outstanding Shares of such Class. As used herein
the term "Shareholder" shall, when applicable to one or more Series or Funds or
to one or more Classes thereof, refer to the record owners of Outstanding Shares
of such Series, Fund or Funds or of such Class or Classes of Shares.
(q) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time, including
the Shares of any and all Series or of any Class within any Series (as the
context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding Shares" means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust, appointed by
the Trustees pursuant to Section 3.5 hereof, who maintains the Shareholder
records of the Trust, such as the list of Shareholders, the number of Shares
credited to each account, and the like.
(s) "Trust" means Clearwater Investment Trust. As used herein the term
Trust shall, when applicable to one or more Series or Funds, refer to such
Series or Funds.
A-3
<PAGE>
(t) The "Trustees" means the persons who have signed this Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who now serve or may from time to time be duly elected,
qualified and serving as Trustees in accordance with the provisions of Article
II hereof and the By- Laws of the Trust, and reference herein to a Trustee or
the Trustees shall refer to such person or persons in this capacity or their
capacities as Trustees hereunder.
(u) "Trust Property" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of the Trust or the
Trustees, including any and all assets of or allocated to any Series or Class,
as the context may require.
(v) Except as such term may be otherwise defined by the Trustees in
connection with any meeting or other action of Shareholders or in conjunction
with the establishment of any Series or Class of Shares, the term "vote" when
used in connection with an action of Shareholders shall include a vote taken at
a meeting of Shareholders or the consent or consents of Shareholders taken
without such a meeting.
ARTICLE II
TRUSTEES
Section 2.1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees and they shall have all powers and authority
necessary, appropriate or desirable to perform that function. The number, term
of office, manner of election, resignation, filling of vacancies and procedures
with respect to meetings and actions of the Trustees shall be as prescribed in
the By-Laws of the Trust.
Section 2.2. General Powers. The Trustees in all instances shall act as
principals for and on behalf of the Trust and the applicable Series thereof, and
their acts shall bind the Trust and the applicable Series. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary, appropriate
or desirable in connection with the management of the Trust. The Trustees shall
not be bound or limited in any way by present or future laws, practices or
customs in regards to trust investments or to other investments which may be
made by fiduciaries, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
promote, implement or accomplish the various objectives and interests of the
Trust and of its Series of Shares. The Trustees shall have full power and
authority to adopt such accounting and tax accounting practices as they consider
appropriate for the Trust and for any Series or Class of Shares. The Trustees
shall have exclusive and absolute control over the Trust Property and over the
business of the Trust to the same extent as if the Trustees were the sole owners
of the Trust Property and business in their own right, and with such full powers
of delegation as the Trustees may exercise from time to time. The Trustees shall
have
A-4
<PAGE>
power to conduct the business of the Trust and carry on its operations in any
and all of its branches and maintain offices both within and without The
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United States of America and of foreign governments, and to do all such
other things as they deem necessary, appropriate or desirable in order to
promote or implement the interests of the Trust or of any Series or Class of
Shares although such things are not herein specifically mentioned. Any
determination as to what is in the best interests of the Trust or of any Series
or Class of Shares made by the Trustees in good faith shall be conclusive and
binding upon all Shareholders. In construing the provisions of this Declaration,
the presumption shall be in favor of a grant of plenary power and authority to
the Trustees.
The enumeration of any specific power in this Declaration
shall not be construed as limiting the aforesaid general and plenary powers.
Section 2.3. Investments. The Trustees shall have full power and authority:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To acquire or buy, and invest Trust Property in, own, hold for
investment or otherwise, and to sell or otherwise dispose of, all types and
kinds of securities including, but not limited to, stocks, profit-sharing
interests or participations and all other contracts for or evidences of equity
interests, bonds, debentures, warrants and rights to purchase securities,
certificates of beneficial interest, bills, notes and all other contracts for or
evidences of indebtedness, money market instruments including bank certificates
of deposit, finance paper, commercial paper, bankers' acceptances and other
obligations, and all other negotiable and non-negotiable securities and
instruments, however named or described, issued by corporations, trusts,
associations or any other Persons, domestic or foreign, or issued or guaranteed
by the United States of America or any agency or instrumentality thereof, by the
government of any foreign country, by any State, territory or possession of the
United States, by any political subdivision or agency or instrumentality of any
State or foreign country, or by any other government or other governmental or
quasi-governmental agency or instrumentality, domestic or foreign; to acquire
and dispose of interests in domestic or foreign loans made by banks and other
financial institutions; to deposit any assets of the Trust in any bank, trust
company or banking institution or retain any such assets in domestic or foreign
cash or currency; to purchase and sell gold and silver bullion, precious or
strategic metals, coins and currency of all countries; to engage in "when
issued" and delayed delivery transactions; to enter into repurchase agreements,
reverse repurchase agreements and firm commitment agreements; to employ all
types and kinds of hedging techniques
A-5
<PAGE>
and investment management strategies; and to change the investments of the Trust
and of each Series.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend and to pledge any Trust Property or any of the
foregoing securities, instruments or investments; to purchase and sell (or
write) options on securities, currency, precious metals and other commodities,
indices, futures contracts and other financial instruments and assets, and enter
into closing and other transactions in connection therewith; to enter into all
types of commodities contracts, including without limitation the purchase and
sale of futures contracts on securities, currency, precious metals and other
commodities, indices and other financial instruments and assets; to enter into
forward foreign currency exchange contracts and other foreign exchange and
currency transactions of all types and kinds; to enter into transactions in
interest rate, currency and other swaps, swaptions, and interest rate caps,
floors and collars; and to engage in all types and kinds of hedging and risk
management transactions.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities and other assets included in the Trust Property, including
without limitation the right to vote thereon and otherwise act with respect
thereto; and to do all acts and things for the preservation, protection,
improvement and enhancement in value of all such securities and assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, lease, develop and dispose of (by sale or otherwise) any type or kind
of property, real or personal, including domestic or foreign currency, and any
right or interest therein.
(f) To borrow money and in this connection issue notes, commercial paper or
other evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security all or any part of the Trust Property; to
endorse, guarantee, or undertake the performance of any obligation or engagement
of any other Person; and to send all or any part of the Trust Property to other
Persons.
(g) To aid, support or assist by further investment or other action any
Person, any obligation of or interest in which is included in the Trust Property
or in the affairs of which the Trust or any Series has any direct or indirect
interest; to do all acts and things designed to protect, preserve, improve or
enhance the value of such obligation or interest; and to guarantee or become
surety on any or all of the contracts, securities and other obligations of any
such Person.
(h) To carry on any other business in connection with or incidental to any
of the foregoing powers referred to in this Declaration, to do everything
necessary, appropriate or desirable for the accomplishment of any purpose or the
attainment of
A-6
<PAGE>
any object or the furtherance of any power referred to in this Declaration,
either alone or in association with others, and to do every other act or thing
incidental or appurtenant to or arising out of or connected with such business
or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
shall not be held to limit or restrict in any manner the general and plenary
powers of the Trustees.
Notwithstanding any other provision herein, the Trustees shall have full
power in their discretion, without any requirement of approval by Shareholders,
to invest part or all of the Trust Property (or part or all of the assets of any
Fund), or to dispose of part or all of the Trust Property (or part or all of the
assets of any Fund) 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 State of New York or of any other state) which is classified as
a partnership for federal income tax purposes.
Section 2.4. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees who from time to time shall be in office. The Trustees
may hold any security or other Trust Property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, and may cause
legal title to any security or other Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust or any Series, or in
the name of a custodian, subcustodian, agent, securities depository, clearing
agency, system for the central handling of securities or other book-entry
system, or in the name of a nominee or nominees of the Trust or a Series, or in
the name of a nominee or nominees of a custodian, subcustodian, agent,
securities depository, clearing agent, system for the central handling of
securities or other book-entry system, or in the name of any other Person as
nominee. 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, resignation, removal or death of a
Trustee he 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.
Section 2.5. By-Laws. The Trustees shall have full power and authority to
adopt By-Laws providing for the conduct of the business of the Trust and
containing such other provisions as they deem necessary, appropriate or
desirable, and to amend and repeal such By-Laws. Unless the By-Laws specifically
require that Shareholders authorize or approve the amendment or repeal of a
particular provision of the By- Laws, any provision of the By-Laws may be
amended or repealed by the Trustees without Shareholder authorization or
approval.
A-7
<PAGE>
Section 2.6. Distribution and Repurchase of Shares. The Trustees shall have
full power and authority to issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in
Shares. Shares may be sold for cash or property or other consideration whenever
and in such amounts and manner as the Trustees deem desirable. The Trustees
shall have full power to provide for the distribution of Shares either through
one or more principal underwriters or by the Trust itself, or both. The Trustees
shall have full power and authority to cause the Trust and any Series and Class
of Shares to finance distribution activities in the manner described in Section
3.7, and to authorize the Trust, on behalf of one or more Series or Classes of
Shares, to adopt or enter into one or more plans or arrangements whereby
multiple Series and Classes of Shares may be issued and sold to various types of
investors.
Section 2.7. Advisory Board. The Trustees shall have full power and
authority to establish advisory boards and to appoint members thereto. Any such
advisory board shall have the duties assigned to it by the Trustees and shall be
as set forth in the By-Laws. The Trustees may terminate any advisory board in
their sole discretion.
Section 2.8. Delegation. The Trustees shall have full power and authority
to delegate from time to time to such of their number or to officers, advisory
board members, employees or agents of the Trust or to other Persons the doing of
such things and the execution of such agreements or other instruments either in
the name of the Trust or any Series of the Trust or the names of the Trustees or
otherwise as the Trustees may deem desirable or expedient.
Section 2.9. Collection and Payment. The Trustees shall have full power and
authority to collect all property due to the Trust; to pay all claims, including
taxes, against the Trust or Trust Property; to prosecute, defend, compromise,
settle or abandon any claims relating to the Trust or Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.10. Expenses. The Trustees shall have full power and authority to
incur on behalf of the Trust or any Series or Class of Shares and pay any costs
or expenses which the Trustees deem necessary, appropriate, desirable or
incidental to carry out, implement or enhance the business or operations of the
Trust or any Series thereof, and to pay compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall determine the compensation of all
officers, employees and Trustees of the Trust. The Trustees shall have full
power and authority to cause the Trust to charge all or any part of any cost,
expense or expenditure (including without limitation any expense of selling or
distributing Shares) or tax against the principal or capital of the Trust or any
Series or Class of Shares, and to credit all or any part of the profit, income
or receipt (including without limitation any deferred sales charge or fee,
whether contingent or otherwise, paid or payable to the Trust or
A-8
<PAGE>
any Series or Class of Shares on any redemption or repurchase of Shares) to the
principal or capital of the Trust or any Series or Class of Shares.
Section 2.11. Manner of Acting. Except as otherwise provided herein or in
the By-Laws, the Trustees and committees of the Trustees shall have full power
and authority to act in any manner which they deem necessary, appropriate or
desirable to carry out, implement or enhance the business or operations of the
Trust or any Series thereof.
Section 2.12. Miscellaneous Powers. The Trustees shall have full power and
authority to: (a) distribute to Shareholders all or any part of the earnings or
profits, surplus (including paid-in surplus), capital (including paid-in
capital) or assets of the Trust or of any Series or Class of Shares, the amount
of such distributions and the manner of payment thereof to be solely at the
discretion of the Trustees; (b) employ, engage or contract with such Persons as
the Trustees may deem desirable for the transaction of the business or
operations of the Trust or any Series thereof; (c) enter into or cause the Trust
or any Series thereof to enter into joint ventures, partnerships (whether as
general partner, limited partner or otherwise) and any other combinations or
associations; (d) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees or other Persons as they consider appropriate, and appoint from their
own number, and terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
(e) purchase, and pay for out of Trust Property, insurance policies which may
insure such of the Shareholders, Trustees, officers, employees, agents,
investment advisers, administrators, principal underwriters, distributors or
independent contractors of the Trust as the Trustees deem appropriate against
loss or liability arising by reason of holding any such position or by reason of
any action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such loss or liability; (f) establish pension,
profit-sharing, share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (g)
indemnify or reimburse any Person with whom the Trust or any Series thereof has
dealings, including without limitation the Investment Adviser, Administrator,
Principal Underwriter, Transfer Agent and financial service firms, to such
extent as the Trustees shall determine; (h) guarantee the indebtedness or
contractual obligations of other Persons; (i) determine and change the fiscal
year of the Trust or any Series thereof and the methods by which its and their
books, accounts and records shall be kept; and (j) adopt a seal for the Trust,
but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust or any Series thereof.
Section 2.13. Litigation. The Trustees shall have full power and authority,
in the name and on behalf of the Trust, to engage in and to prosecute, defend,
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<PAGE>
compromise, settle, abandon, or adjust by arbitration or otherwise, any actions,
suits, proceedings, disputes, claims and demands relating to the Trust, and out
of the assets of the Trust or any Series thereof to pay or to satisfy any
liabilities, losses, debts, claims or expenses (including without limitation
attorneys' fees) incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power of the
Trustees or any committee thereof, in the exercise of their or its good faith
business judgment, to dismiss or terminate any action, suit, proceeding,
dispute, claim or demand, derivative or otherwise brought by any Person,
including a Shareholder in his own name or in the name of the Trust or any
Series thereof, whether or not the Trust or any Series thereof or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust or any Series thereof. No
Shareholder may bring any action, suit, proceeding, dispute, claim or demand,
derivative or otherwise, in the name of any Series of which the Shareholder does
not hold Shares. The power of the Trustees, or any committee thereof, to dismiss
or terminate any action, suit, proceeding, dispute, claim or demand, derivative
or otherwise, brought by any Person, as described in this Section 2.13, shall
not be affected by any Trustee's service on one or more boards of directors or
trustees of investment companies affiliated with the Trust.
ARTICLE III
CONTRACTS
Section 3.1. Principal Underwriter. The Trustees may in their discretion
from time to time authorize the Trust to enter into one or more exclusive or
non-exclusive contracts providing for the sale of the Shares. Pursuant to any
such contract the Trust may either agree to sell the Shares to the other party
to the contract or appoint such other party its sales agent for such Shares. In
either case, any such contract shall be on such terms and conditions as the
Trustees may in their discretion determine; and any such contract may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
Section 3.2. Investment Adviser. The Trustees may in their discretion from
time to time authorize the Trust to enter into one or more investment advisory
agreements with respect to one or more Series whereby the other party or parties
to any such agreements shall undertake to furnish the Trust or such Series
investment advisory and research facilities and services and such other
facilities and services, if any, as the Trustees shall consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of this Declaration, the Trustees may
authorize the Investment Adviser, in its discretion and without any prior
consultation with the Trust, to buy, sell, lend and otherwise trade and deal in
any and all securities, commodity contracts and other investments and
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assets of the Trust and of each Series and to engage in and employ all types of
transactions and strategies in connection therewith. Any such action taken
pursuant to such agreement shall be deemed to have been authorized by all of the
Trustees.
The Trustees may also authorize the Trust to employ, or authorize the
Investment Adviser to employ, one or more sub-investment advisers from time to
time to perform such of the acts and services of the Investment Adviser and upon
such terms and conditions as may be agreed upon between the Investment Adviser
and such sub-investment adviser and approved by the Trustees.
Section 3.3. Administrator. The Trustees may in their discretion from time
to time authorize the Trust to enter into one or more administration agreements
with respect to one or more Series or Classes, whereby the other party to such
agreement shall undertake to furnish to the Trust or a Series or a Class thereof
with such administrative facilities and services and such other facilities and
services, if any, as the Trustees consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine.
Section 3.4. Other Service Providers. The Trustees may in their discretion
from time to time authorize the Trust to enter into one or more agreements with
respect to
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one or more Series or Classes of Shares whereby the other party or parties to
any such agreements will undertake to provide to the Trust or Series or Class or
Shareholders or beneficial owners of Shares such services as the Trustees
consider desirable and all upon such terms and conditions as the Trustees in
their discretion may determine.
Section 3.5. Transfer Agents. The Trustees may in their discretion from
time to time appoint one or more transfer agents for the Trust or any Series
thereof. Any contract with a transfer agent shall be on such terms and
conditions as the Trustees may in their discretion determine.
Section 3.6. Custodian. The Trustees may appoint a bank or trust company,
having an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least $1,000,000, or a company which is a member of a
national securities exchange as defined in the Securities Exchange Act of 1934
as the principal custodian of the Trust (the "Custodian") with authority as its
agent to hold cash and securities owned by the Trust and to release and deliver
the same upon such terms and conditions as may be agreed upon between the Trust
and the Custodian.
Section 3.7. Plans of Distribution. The Trustees may in their discretion
authorize the Trust, on behalf of one or more Series or Classes of Shares, to
adopt or enter into a plan or plans of distribution and any related agreements
whereby the Trust or Series or Class may finance directly or indirectly any
activity which is
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primarily intended to result in sales of Shares or any distribution activity
within the meaning of Rule 12b-1 (or any successor rule) under the 1940 Act.
Such plan or plans of distribution and any related agreements may contain such
terms and conditions as the Trustees may in their discretion determine, subject
to the requirements of the 1940 Act and any other applicable rules and
regulations.
Section 3.8. Affiliations. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, creditor, director, officer, partner, trustee or employee of or has
any interest in any Person or any parent or affiliate of any such Person, with
which a contract or agreement of the character described in Sections 3.1, 3.2,
3.3, 3.4, 3.5 or 3.6 above has been or will be made or to which payments have
been or will be made pursuant to a plan or related agreement described in
Section 3.7 above, or that any such Person, or any parent or affiliate thereof,
is a Shareholder of or has an interest in the Trust, or that
(ii) any such Person also has similar contracts, agreements or plans with
other investment companies (including, without limitation, the investment
companies referred to in the last paragraph of Section 2.3) or organizations, or
has other business activities or interests, shall not affect in any way the
validity of any such contract, agreement or plan or disqualify any Shareholder,
Trustee or officer of the Trust from authorizing, voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Advisory
Board Members, Officers and Employees. No Shareholder shall be subject to any
personal liability whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust or any Series thereof. All Persons
dealing or contracting with the Trustees as such or with the Trust or any Series
thereof shall have recourse only to the Trust or such Series for the payment of
their claims or for the payment or satisfaction of claims, obligations or
liabilities arising out of such dealings or contracts. No Trustee, advisory
board member, officer or employee of the Trust, whether past, present or future,
shall be subject to any personal liability whatsoever to any such Person, and
all such Persons shall look solely to the Trust Property, or to the assets of
one or more specific Series of the Trust if the claim arises from the act,
omission or other conduct of such Trustee, advisory board member,
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officer or employee with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust or such
Series. If any Shareholder, Trustee, advisory board member, officer or employee,
as such, of the Trust or any Series thereof, is made a party to any suit or
proceeding to enforce any such liability of the Trust or any Series thereof, he
shall not, on account thereof, be held to any personal liability.
Section 4.2. Trustee's Good Faith Action; Advice of Others; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any advisory
board member, officer, agent, employee, consultant, investment adviser or other
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee. The Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration 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. In discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely upon the records,
books and accounts of the Trust and upon reports made to the Trustees by any
advisory board member, officer, employee, agent, consultant, accountant,
attorney, investment adviser or other adviser, principal underwriter, expert,
professional firm or independent contractor. The Trustees as such shall not be
required to give any bond, surety or other security for the performance of their
duties. No provision of this Declaration shall protect any Trustee or officer of
the Trust against any liability to the Trust or its Shareholders to which he
would otherwise be subject by reason of his own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Section 4.3. Indemnification. The Trustees may provide, whether in the
By-Laws or by contract, vote or other action, for the indemnification by the
Trust or by one or more Series thereof (if the claim arises from conduct with
respect to only such Series) of the Shareholders, Trustees, advisory board
members, officers and employees of the Trust and of such other Persons as the
Trustees in the exercise of their discretion may deem appropriate or desirable.
Any such indemnification may be mandatory or permissive, and may be insured
against by policies maintained by the Trust.
Section 4.4. No Duty of Investigation. No purchaser, lender or other Person
dealing with the Trustees or any officer, employee or agent of the Trust or a
Series thereof shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said officer, employee
or agent or be liable for the application of money or property paid, loaned, or
delivered to or on the
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order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust or a Series thereof. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or a Series thereof or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration, and
that the obligations of the Trust or a Series thereof under any such instrument
are not binding upon any of the Trustees or Shareholders individually, but bind
only the Trust Property or the Trust Property of the applicable Series, and may
contain any further recital which they may deem appropriate, but the omission of
any such recital shall not operate to bind the Trustees or Shareholders
individually.
Section 4.5. Reliance on Records and Experts. Each Trustee, advisory board
member, officer or employee of the Trust or a Series thereof shall, in the
performance of his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the records, books and accounts of the Trust or a Series thereof, upon an
opinion or other advice of legal counsel, or upon reports made or advice given
to the Trust or a Series thereof by any Trustee or any of its officers or
employees or by the Investment Adviser, the Administrator, the Custodian, the
Principal Underwriter, Transfer Agent, accountants, appraisers or other experts,
advisers, consultants or professionals selected with reasonable care by the
Trustees or officers of the Trust, regardless of whether the person rendering
such report or advice may also be a Trustee, officer or employee of the Trust.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such Shares of beneficial interest authorized
hereunder and the number of Shares of each Series or Class thereof that may be
issued hereunder is unlimited. The Trustees shall have the exclusive authority
without the requirement of Shareholder authorization or approval to establish
and designate one or more Series of Shares and one or more Classes thereof as
the Trustees deem necessary, appropriate or desirable. Each Share of any Series
shall represent a beneficial interest only in the assets of that Series. Subject
to the provisions of Section 5.5 hereof, the Trustees may also authorize the
creation of additional Series of Shares (the proceeds of which may be
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invested in separate and independent investment portfolios) and additional
Classes of Shares within any Series. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend or distribution
in Shares or a split in Shares, shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business of the Trust are vested
exclusively in the Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest conferred by their Shares, and they shall
have no right to call for any partition or division of any property, profits,
rights or interests of the Trust or of any Series nor can they be called upon to
share or assume any losses of the Trust or of any Series or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may specifically determine
with respect to any Series or Class of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association, limited
liability company, corporation, bailment or any form of legal relationship other
than a Massachusetts business trust. Nothing in this Declaration shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or member of a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may, from
time to time and without any authorization or vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem appropriate or desirable, except that only Shares
previously contracted to be sold may be issued during any period when the right
of redemption is suspended pursuant to Section 6.9 hereof, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and
reissue and resell full and fractional Shares held in the treasury. The Trustees
may from time to time divide or combine the Shares of the Trust or, if the
Shares be divided into Series or Classes, of any Series or any Class thereof of
the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or fractional Shares as the Trustees may in their discretion
determine. The Trustees may authorize the
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issuance of certificates of beneficial interest to evidence the ownership of
Shares. Shares held in the treasury shall not be voted nor shall such Shares be
entitled to any dividends or other distributions declared with respect thereto.
Section 5.5. Series and Class Designations. Without limiting the exclusive
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series or Classes, it is hereby confirmed that the Trust consists of
the presently Outstanding Shares of the following Series: Clearwater Growth Fund
and Clearwater Small Cap Fund (the "Existing Series"). The Shares of any Series
and Classes thereof that may from time to time be established and designated by
the Trustees shall be established and designated, and the variations in the
relative rights and preferences as between the different Series and Classes
shall be fixed and determined, by the Trustees (unless the Trustees otherwise
determine with respect to Series or Classes at the time of establishing and
designating the same); provided, that all Shares shall be identical except that
there may be variations so fixed and determined between different Series or
Classes thereof as to investment objective, policies and restrictions, sales
charges, purchase prices, determination of net asset value, assets, liabilities,
expenses, costs, charges and reserves belonging or allocated thereto, the price,
terms and manner of redemption or repurchase, special and relative rights as to
dividends and distributions and on liquidation, conversion rights, exchange
rights, and voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all Series or Classes as the context may require.
As to any division of Shares of the Trust into Series or Classes, the following
provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares of each
Series or Class thereof that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series or Class into one or more other Series
or one or more other Classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other Series or Class), reissue for such consideration and on such terms as
they may determine, or cancel any Shares of any Series or Class reacquired
by the Trust at their discretion from time to time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the
rights of creditors of such Series and except as may otherwise be required
by applicable tax laws, and shall be so recorded on the books of account of
the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds,
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or payments which are not readily identifiable as belonging to any
particular Series, the Trustees or their delegate shall allocate them among
any one or more of the Series 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. Each such allocation by the Trustees or their
delegate shall be conclusive and binding upon the Shareholders of all
Series for all purposes. No holder of Shares of any Series shall have any
claim on or right to any assets allocated or belonging to any other Series.
(iii) Any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Series shall be allocated and charged by the Trustees or their delegate to
and among any one or more of the Series 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 assets belonging to each particular
Series shall be charged with the liabilities, expenses, costs, charges and
reserves of the Trust so allocated to that Series and all liabilities,
expenses, costs, charges and reserves attributable to that Series which are
not readily identifiable as belonging to any particular Class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees or their delegate shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes. The Trustees shall
have full discretion to determine which items are capital; and each such
determination shall be conclusive and binding upon the Shareholders. The
assets of a particular Series of the Trust shall, under no circumstances,
be charged with liabilities, expenses, costs, charges and reserves
attributable to any other Series or Class thereof of the Trust. All Persons
extending credit to, or contracting with or having any claim against a
particular Series of the Trust shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
(iv) Dividends and distributions on Shares of a particular Series or
Class may be paid or credited in such manner and with such frequency as the
Trustees may determine, to the holders of Shares of that Series or Class,
from such of the earnings or profits, surplus (including paid-in surplus),
capital (including paid-in capital) or assets belonging to that Series, as
the Trustees may deem appropriate or desirable, after providing for actual
and accrued liabilities, expenses, costs, charges and reserves belonging
and allocated to that Series or Class. Such dividends and distributions may
be paid daily or otherwise pursuant to the offering prospectus relating to
the Shares or pursuant to a standing vote or votes of the Trustees adopted
only once or from time to time or pursuant to other authorization or
instruction of the Trustees. All dividends and distributions on Shares of a
particular Series or Class shall be distributed pro rata to the
Shareholders of that Series or Class in proportion to the number of Shares
of that Series or Class held by such Shareholders at
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the time of record established for the payment or crediting of such
dividends or distributions.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive his pro rata Share of
distributions of income and capital gains made with respect to such Series
or Class net of liabilities, expenses, costs, charges and reserves
belonging and allocated to such Series or Class. Upon redemption of his
Shares or indemnification for liabilities incurred by reason of his being
or having been a Shareholder of a Series, such Shareholder shall be paid
solely out of the funds and property of such Series of the Trust. Upon
liquidation or termination of a Series or Class thereof of the Trust, a
Shareholder of such Series or Class thereof shall be entitled to receive a
pro rata Share of the net assets of such Series based on the net asset
value of his Shares. A Shareholder of a particular Series of the Trust
shall not be entitled to commence or participate in a derivative or class
action on behalf of any other Series or the Shareholders of any other
Series of the Trust.
(vi) On any matter submitted to a vote of Shareholders, the Shares
entitled to vote thereon and the manner in which such Shares shall be voted
shall be as set forth in the By-Laws or proxy materials for the meeting or
other solicitation materials or as otherwise determined by the Trustees,
subject to any applicable requirements of the 1940 Act. The Trustees shall
have full power and authority to call meetings of the Shareholders of a
particular Class or Classes of Shares or of one or more particular Series
of Shares, or otherwise call for the action of such Shareholders on any
particular matter.
(vii) Except as otherwise provided in this Article V, the Trustees
shall have full power and authority to determine the designations,
preferences, privileges, sales charges, purchase prices, assets,
liabilities, expenses, costs, charges and reserves belonging or allocated
thereto, limitations and rights, including without limitation voting,
dividend, distribution and liquidation rights, of each Class and Series of
Shares. Subject to any applicable requirements of the 1940 Act, the
Trustees shall have the authority to provide that the Shares of one Class
shall be automatically converted into Shares of another Class of the same
Series or that the holders of Shares of any Series or Class shall have the
right to convert or exchange such Shares into Shares of one or more other
Series or Classes of Shares, all in accordance with such requirements,
conditions and procedures as may be established by the Trustees.
(viii) The establishment and designation of any Series or Class of
Shares shall be effective upon the execution by a majority of the then
Trustees
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of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Class, or as otherwise
provided in such instrument. The Trustees may by an instrument subsequently
executed by a majority of their number amend, restate or rescind any prior
instrument relating to the establishment and designation of any such Series
or Class. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration in accordance with Section 8.4
hereof, and a copy of each such instrument shall be filed in accordance
with Section 9.1 hereof.
Section 5.6. Assent to Declaration of Trust and By-Laws. Every Shareholder,
by virtue of having become a Shareholder, shall be held to have expressly
assented and agreed to all the terms and provisions of this Declaration and of
the By-Laws of the Trust.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) Shares of the Trust shall be
redeemable, at such times and in such manner as may be permitted by the Trustees
from time to time. The Trustees shall have full power and authority to vary and
change the right of redemption applicable to the various Series and Classes of
Shares established by the Trustees. Redeemed or repurchased Shares may be resold
by the Trust. The Trust may require any Shareholder to pay a sales charge to the
Trust, the Principal Underwriter or any other Person designated by the Trustees
upon redemption or repurchase of Shares in such amount and upon such conditions
as shall be determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or Class
thereof at the price determined as hereinafter set forth, upon the appropriately
verified written application of the record holder thereof (or upon such other
form of request as the Trust may use for the purpose) deposited at such office
or agency as may be designated from time to time for that purpose by the
Trustees. The Trust may from time to time establish additional requirements,
terms, conditions and procedures, not inconsistent with the 1940 Act, relating
to the redemption of Shares.
Section 6.2. Price. Shares shall be redeemed at a price based on their net
asset value determined as set forth in Section 7.1 hereof as of such time as the
Trustees shall prescribe. The amount of any sales charge or redemption fee
payable upon redemption of Shares may be deducted from the proceeds of such
redemption.
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Section 6.3. Payment. Payment of the redemption price of redeemed Shares
shall be made in cash or in property to the Shareholder at such time and in the
manner, not inconsistent with the 1940 Act, as may be specified from time to
time in the then effective Prospectus relating to such Shares, subject to the
provisions of Sections 6.4 and 6.9 hereof. Notwithstanding the foregoing, the
Trust or its agent may withhold from such redemption proceeds any amount arising
(i) from a liability of the redeeming Shareholder to the Trust, or (ii) in
connection with any federal or state tax withholding requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 7.1 hereof, the Trust shall declare a suspension of the
determination of net asset value with respect to Shares of the Trust or of any
Series or Class thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 6.1 hereof but who shall not yet
have received payment) to have Shares redeemed and paid for by the Trust or a
Series shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice at the office or
agency where his application or request for redemption was made, withdraw his
application or request and withdraw any Share certificates on deposit.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Principal Underwriter or another agent designated for
the purpose, by agreement with the owner thereof at a price not exceeding the
net asset value per share determined as of such time as the Trustees shall
prescribe. The Trust may from time to time establish the requirements, terms,
conditions and procedures relating to such repurchases, and the amount of any
sales charge or repurchase fee payable on any repurchase of Shares may be
deducted from the proceeds of such repurchase.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of one or more
Series or Classes thereof held by any Shareholder if (a) the value of such
Shares held by such Shareholder is less than the minimum amount established from
time to time by the Trustees or (b) the aggregate value of the assets of any
Series or Class is less than the minimum amount determined by the Trustees to be
the minimum for maintaining and operating the Series or Class as a viable
economic entity.
Section 6.7. Disclosure of Holding. The holders of Shares or other
securities of the Trust shall upon demand disclose to the Trustees in writing
such information with respect to direct and indirect ownership of Shares or
other securities of the Trust as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code of 1986, or to comply with the
requirements of any other taxing authority.
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Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series or Class thereof pursuant to the provisions of
Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust or a Fund fairly to determine the value of its net
assets, or (iv) as the Commission may by order permit for the protection of
security holders of the Trust. Such suspension shall take effect at such time as
the Trust shall specify but not later than the close of business on the business
day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment on redemption until the Trust shall declare
the suspension at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have reopened or the
period specified in clauses (ii) or (iii) shall have expired (as to which in the
absence of an official ruling by the Commission, the determination of the Trust
shall be conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his application or request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET
VALUE, NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding Share
of the Trust or of each Series or Class thereof shall be determined on such days
and at or as of such time or times as the Trustees may determine. Any reference
in this Declaration to the time at which a determination of net asset value is
made shall mean the time as of which the determination is made. The power and
duty to determine net asset value may be delegated by the Trustees from time to
time to the Investment Adviser, the Administrator, the Custodian, the Transfer
Agent or such other Person or Persons as the Trustees may determine. The value
of the assets of the Trust or any Series thereof shall be determined in a manner
authorized by the Trustees. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, amounts determined and declared as a dividend or
distribution and all other
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items in the nature of liabilities which shall be deemed appropriate, as
incurred by or allocated to the Trust or any Series or Class thereof. The
resulting amount, which shall represent the total net assets of the Trust or
Series or Class thereof, shall be divided by the number of Shares of the Trust
or Series or Class thereof outstanding at the time and the quotient so obtained
shall be deemed to be the net asset value of the Shares of the Trust or Series
or Class thereof. The Trust may declare a suspension of the determination of net
asset value to the extent permitted by the 1940 Act. It shall not be a violation
of any provision of this Declaration if Shares are sold, redeemed or repurchased
by the Trust at a price other than one based on net asset value if the net asset
value is affected by one or more errors inadvertently made in the pricing of
portfolio securities or other investments or in accruing or allocating income,
expenses, reserves or liabilities. No provision of this Declaration shall be
construed to restrict or affect the right or ability of the Trust to employ or
authorize the use of pricing services, appraisers or any other means, methods,
procedures, or techniques in valuing the assets or calculating the liabilities
of the Trust or any Series or Class thereof.
Section 7.2. Dividends and Distributions. (a) The Trustees may from time to
time distribute ratably among the Shareholders of the Trust or of a Series or
Class thereof such proportion of the net earnings or profits, surplus (including
paid-in surplus), capital (including paid-in capital), or assets of the Trust or
such Series held by the Trustees as they may deem appropriate or desirable. Such
distributions may be made in cash, additional Shares or property (including
without limitation any type of obligations of the Trust or Series or Class or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders of the Trust or Series or Class thereof additional Shares of the
Trust or Series or Class thereof issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem appropriate or desirable. Such
distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time.
The Trustees may always retain from the earnings or profits such amounts as they
may deem appropriate or desirable to pay the expenses and liabilities of the
Trust or a Series or Class thereof or to meet obligations of the Trust or a
Series or Class thereof, together with such amounts as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business or operations of the Trust or such Series. The Trust
may adopt and offer to Shareholders such dividend reinvestment plans, cash
dividend payout plans or other distribution plans as the Trustees may deem
appropriate or desirable. The Trustees may in their discretion determine that an
account administration fee or other similar charge may be deducted directly from
the income and other distributions paid on Shares to a Shareholder's account in
any Series or Class.
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<PAGE>
(b) The Trustees may prescribe, in their absolute discretion, such bases
and times for determining the amounts for the declaration and payment of
dividends and distributions as they may deem necessary, appropriate or
desirable.
(c) Inasmuch as the computation of net income and gains for federal income
tax purposes may vary from the computation thereof on the books of account, the
above provisions shall be interpreted to give the Trustees full power and
authority in their absolute discretion to distribute for any fiscal year as
dividends and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust or a Series thereof to avoid or reduce liability
for taxes.
Section 7.3. Constant Net Asset Value; Reduction of Outstanding Shares. The
Trustees may determine to maintain the net asset value per Share of any Series
or Class at a designated constant amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the continuing declarations of
income attributable to that Series or Class as dividends payable in additional
Shares of that Series or Class or in cash or in any combination thereof and for
the handling of any losses attributable to that Series or Class. Such procedures
may provide that, if, for any reason, the income of any such Series or Class
determined at any time is a negative amount, the Trust may with respect to such
Series or Class (i) offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) reduce the
number of Outstanding Shares of such Series or Class by reducing the number of
Shares in the account of such Shareholder by that number of full and fractional
Shares which represents the amount of such excess negative income, or (iii)
cause to be recorded on the books of the Trust an asset account in the amount of
such negative income, which account may be reduced by the amount, provided that
the same shall thereupon become the property of the Trust with respect to such
Series or Class and shall not be paid to any Shareholder, of dividends declared
thereafter upon the Outstanding Shares of such Series or Class on the day such
negative income is experienced, until such asset account is reduced to zero, or
(iv) combine the methods described in clauses (i), (ii) and (iii) of this
sentence, in order to cause the net asset value per Share of such Series or
Class to remain at a constant amount per Outstanding Share immediately after
such determination and declaration. The Trust may also fail to declare a
dividend out of income for the purpose of causing the net asset value of any
such Share to be increased. The Trustees shall have full discretion to determine
whether any cash or property received shall be treated as income or as principal
and whether any item of expense shall be charged to the income or the principal
account, and their determination made in good faith shall be conclusive upon all
Shareholders. In the case of stock dividends or similar distributions received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much if any of the value thereof shall be treated
as income, the balance, if any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
provisions contained in this Declaration, the Trustees may prescribe, in their
absolute discretion, such other means, methods, procedures or techniques for
determining the per Share net asset value of a Series or Class thereof or the
income of the Series of Class thereof, or for the declaration and payment of
dividends and distributions on any Series or Class of Shares.
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<PAGE>
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A
SERIES OR CLASS; MERGERS; AMENDMENTS
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII. The death, declination,
resignation, retirement, removal or incapacity of the Trustees, or any one of
them, shall not operate to terminate or annul the Trust or to revoke any
existing agency or delegation of authority pursuant to the terms of this
Declaration or of the By-Laws.
Section 8.2. Termination of the Trust or a Series or a Class. (a) The Trust
or any Series or Class thereof may be terminated by: (1) the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote at any meeting of Shareholders of the Trust or the appropriate Series or
Class thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the Shares of the Trust or a Series
or Class thereof, provided, however, that, if such termination is recommended by
the Trustees, the vote of a majority of the outstanding voting securities of the
Trust or a Series or Class thereof entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a majority
of the Trustees, to be followed by a written notice to Shareholders stating that
a majority of the Trustees has determined that the continuation of the Trust or
a Series or a Class thereof is not in the best interest of the Trust, such
Series or Class or of their respective Shareholders. Such determination may (but
need not) be based on factors or events adversely affecting the ability of the
Trust, such Series or Class to conduct its business and operations in an
economically viable manner. Such factors and events may include (but are not
limited to) the inability of a Series or Class or the Trust to maintain its
assets at an appropriate size, changes in laws or regulations governing the
Series or Class or the Trust or affecting assets of the type in which such
Series or Class or the Trust invests, or political, social, legal or economic
developments or trends having an adverse impact on the business or operations of
such Series or Class or the Trust. Upon the termination of the Trust or the
Series or Class,
(i) The Trust, Series or Class shall carry on no business except for
the purpose of winding up its affairs.
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(ii) The Trustees shall proceed to wind up the affairs of the Trust,
Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust, Series or Class
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust, Series or Class, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or assets allocated or belonging to such Series or
Class to one or more persons at public or private sale for the
consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust property or the remaining property of the
terminated Series or Class, in cash or in kind or in any combination
thereof, among the Shareholders of the Trust or the Series or Class
according to their respective rights.
(b) After termination of the Trust, Series or Class and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust and file with the Massachusetts Secretary
of State an instrument in writing setting forth the fact of such termination,
and the Trustees shall thereupon be discharged from all further liabilities and
duties with respect to the Trust or the terminated Series or Class, and the
rights and interests of all Shareholders of the Trust or the terminated Series
or Class shall thereupon cease.
Section 8.3. Merger, Consolidation or Sale of Assets of a Series. A
particular Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees and
without any authorization, vote or consent of the Shareholders; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of The Commonwealth
of Massachusetts. The Trustees may also at any time sell and convert into money
all the assets of a particular Series. Upon making provision for the payment of
all outstanding obligations, taxes, and other liabilities, accrued or
contingent, of the particular Series, the Trustees shall distribute the
remaining assets of such Series among the Shareholders of such Series according
to their respective rights. Upon completion of the distribution of the remaining
proceeds or the remaining assets, the Series shall terminate and the Trustees
shall take the action provided in Section 8.2(b) hereof and the Trustees shall
thereupon be discharged from all further liabilities and duties with respect to
such
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<PAGE>
Series, and the rights and interests of all Shareholders of the terminated
Series shall thereupon cease.
Section 8.4. Amendments.
(a) This Declaration may be amended by a vote of the holders of a majority
of the Shares outstanding and entitled to vote or by any instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
holders of a majority of the Shares outstanding and entitled to vote.
(b) This Declaration may be amended by a vote of a majority of Trustees,
without approval or consent of the Shareholders, except that no amendment can be
made by the Trustees to impair any voting or other rights of shareholders
prescribed by Federal or state law. Without limiting the foregoing, the Trustees
may amend this Declaration without the approval or consent of Shareholders (i)
to change the name of the Trust or any Series; (ii) to add to their duties or
obligations or surrender any rights or powers granted to them herein; (iii) to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Declaration which will
not be inconsistent with the provisions of this Declaration; and (iv) to
eliminate or modify any provision of this Declaration which (a) incorporates,
memorializes or sets forth an existing requirement imposed by or under any
Federal or state statute or any rule, regulation or interpretation thereof or
thereunder or (b) any rule, regulation, interpretation or guideline of any
Federal or state agency, now or hereafter in effect, including without
limitation, requirements set forth in the 1940 Act and the rules and regulations
thereunder (and interpretations thereof), to the extent any change in applicable
law liberalizes, eliminates or modifies any such requirements, but the Trustees
shall not be liable for failure to do so.
(c) The Trustees may also amend this Declaration without the approval or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable Federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or if requested or required to do so by any
Federal agency, but the Trustees shall not be liable for failing so to do.
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<PAGE>
(d) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Trustees or by the
Shareholders as aforesaid or a copy of the Declaration, as amended, and executed
by a majority of the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Filing of Copies, References, Headings and Counterparts. The
original or a copy of this instrument, of any amendment hereto and of each
declaration of trust supplemental hereto, shall be kept at the office of the
Trust. A copy of this instrument, or any amendment hereto, and of each
supplemental declaration of trust shall be filed with the Massachusetts
Secretary of State and with any other governmental office where such filing may
from time to time be required. Anyone dealing with the Trust may rely on a
certificate by a Trustee or an officer of the Trust as to whether or not any
such amendments or supplemental declarations of trust have been made and as to
any matters in connection with the Trust hereunder, and with the same effect as
if it were the original, may rely on a copy certified by a Trustee or an officer
of the Trust to be a copy of this instrument or of any such amendment hereto or
supplemental declaration of trust.
In this instrument or in any such amendment or supplemental declaration of
trust, references to this instrument, and all expressions such as "herein",
"hereof", and "hereunder", shall be deemed to refer to this instrument as
amended or affected by any such supplemental declaration of trust. Headings are
placed herein for convenience of reference only and in case of any conflict, the
text of this instrument, rather than the headings, shall control. This
instrument shall be executed in any number of counterparts each of which shall
be deemed an original, but such counterparts shall constitute one instrument. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees then in office and filed with the
Massachusetts Secretary of State. A restated Declaration shall, upon execution,
be conclusive evidence of all amendments and supplemental declarations contained
therein and may hereafter be referred to in lieu of the original Declaration and
the various amendments and supplements thereto.
Section 9.2. Applicable Law. The Trust set forth in this instrument is made
in The Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth.
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The Trust shall be of the type commonly called a Massachusetts business trust,
and without limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Section 9.3. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of legal counsel, that any of such provisions is in
conflict with the 1940 Act, the Internal Revenue Code of 1986, as amended, or
with other applicable laws and regulations, the conflicting provision shall be
deemed never to have constituted a part of this Declaration; provided, however,
that such determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the current Trustees of
the Trust, have executed this instrument this 1st day of March, 1998.
[Trustees will execute]
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<PAGE>
EXHIBIT B
<TABLE>
AMENDMENTS TO FUNDAMENTAL
INVESTMENT RESTRICTIONS
The following table sets forth the Funds' current fundamental restrictions and as proposed to be amended.
<CAPTION>
Current Fundamental Restrictions Amended Restrictions
<S> <C>
Each Fund may not: Each Fund may not:
(1) invest more than 5% of its assets in (1) No change recommended.
commodities or commodity
contracts, except that each Fund may
invest without regard to the 5%
limitation in interest rate futures
contracts, options on securities,
securities indices, currency and other
financial instruments, futures
contracts on securities, securities
indices, currency and other financial
instruments, options on such futures
contracts, forward commitments,
securities index put and call
warrants and repurchase agreements
entered into in accordance with the
Fund's investment policies;
(2) underwrite any issue of securities; (2) No change recommended.
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<PAGE>
Current Fundamental Restrictions Amended Restrictions
(3) make loans in an aggregate amount (3) make loans to any person except by
in excess of 10% of the value of the (a) the acquisition of debt securities
Fund's total assets, taken at the time and making portfolio investments,
any loan is made; provided, that (i) (b) entering into repurchase
the purchase of debt securities agreements, or (c) lending portfolio
pursuant to such Fund's investment securities;
objectives shall not be deemed loans
for the purposes of this restriction,
(ii) loans of portfolio securities from
time to time as described in the then
effective Prospectus and/or
Statement of Additional Information
of the Funds shall be made only in
accordance with the terms and
conditions therein set forth and (iii)
in seeking a return on temporarily
available cash, the Fund may engage
in repurchase transactions maturing
in one week or less and involving
obligations of the U.S. Government,
its agencies or instrumentalities (i.e.,
U.S. Government Securities);
Current Fundamental Restrictions Amended Restrictions
(4) sell securities short, except to the (4) This fundamental investment
extent that the Fund restriction will be reclassified as non-
contemporaneously owns or has the fundamental. No other change
right to acquire at no additional cost recommended.
securities identical to those sold
short;
(5) purchase securities on margin, (5) No change recommended.
except for short-term credit
necessary for clearance of portfolio
transactions;
(6) borrow money, except that, as a (6) borrow money or issue senior
temporary measure for extraordinary securities, except as permitted by the
or emergency purposes and not for Investment Company Act of 1940;
investment purposes, the Fund may
borrow up to 5% of the value of its
total assets at the time of the
borrowing;
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<PAGE>
Current Fundamental Restrictions Amended Restrictions
Current Fundamental Restrictions Amended Restrictions
(7) mortgage, pledge, or hypothecate (7) No similar restriction. This restriction
any of its assets; was required by state securities
administrators and is no longer
required because of the preemption
of state regulation of mutual funds
by Congress. Each Fund's activities
relating to borrowing are subject to
the limits of fundamental restriction
no. 6.
(8) invest more than 25% of its total (8) invest more than 25% of its total
assets in securities of issuers in any assets in securities of issuers in any
one industry, except that this one industry except that this
limitation does not apply to limitation does not apply to (i)
obligations of the U.S. Government obligations of the U.S. Government
or any of its agencies or or any of its agencies or
instrumentalities (i.e., U.S. instrumentalities (i.e., U.S.
Government Securities). Government Securities), or (ii)
Clearwater Growth Fund to the
extent that the adviser or subadviser
determines that investment without
regard to the stated limits is
necessary in order to pursue
Clearwater Growth Fund's policy of
tracking the Russell 1000 Index or
any substitute index.
(9) with respect to 75% of its total (9) No change recommended.
assets, purchase any security (other
than U.S. Government Securities) if,
immediately after and as a result of
such purchase, (a) more than 5% of
the value of the Fund's total assets
would be invested in securities of
the issuer or (b) the Fund would
hold more than 10% of the voting
securities of the issuer.
</TABLE>
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<PAGE>
EXHIBIT C
MANAGEMENT CONTRACT
AGREEMENT made as of the 1st day of March, 1998, by and between CLEARWATER
INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), and CLEARWATER
MANAGEMENT CO., INC., a Minnesota corporation (the "Manager").
WITNESSETH:
WHEREAS, the Trust desires to utilize the services of the Manager as the
manager for the Trust and of the existing series of the Trust, Clearwater Growth
Fund and Clearwater Small Cap Fund (each a "Fund"), and any further series of
the Trust as may be set forth on Appendix A hereto; and
WHEREAS, the Manager is willing to perform such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, it is agreed as follows:
1. The Manager's Services.
a. Subject always to the supervision of the Trustees of the Trust and the
investment policies and restrictions applicable to each Fund as set forth in the
registration statement of the Trust filed with the Securities and Exchange
Commission (the "SEC"), the Manager is hereby authorized and directed and hereby
agrees to develop, recommend and implement such investment programs and
strategies for the Funds as may from time to time in the circumstances appear
most appropriate to the achievement of the respective investment objectives of
the Funds as stated in the aforesaid registration statement, to provide research
and analysis relative to the investment program and investments of each Fund, to
determine what securities should be purchased and sold and what portion of the
assets of each Fund should be held in cash or cash equivalents or other assets
and to monitor on a continuing basis the performance of the portfolio securities
of the Fund. In addition, the Manager will place orders for the purchase and
sale of securities and will advise the custodian for each Fund on a prompt basis
of each purchase and sale of a portfolio security for such Fund specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, commission and gross or net price, trade
date, settlement date and identity of the effecting broker or dealer. From time
to time as the Trustees of the Trust may reasonably request, the Manager will
furnish to the Trust's officers and to each of its Trustees reports on portfolio
transactions and reports on issues of securities held in each Fund, all in such
detail as any such Trustee may reasonably request. The Manager will also inform
the Trust's
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officers and Trustees on a current basis of changes in investment strategy or
tactics. The Manager will make its officers and employees available to meet with
the Trust's officers and Trustees at least quarterly on due notice to review the
investments and investment program of each Fund in the light of current and
prospective economic and market conditions. In the performance of its duties
hereunder, the Manager will comply with the provisions of the Declaration of
Trust and By-laws of the Trust, each as amended from time to time, and will use
its best efforts to safeguard and promote the welfare of the Trust and to comply
with other policies which the Trustees may from time to time adopt and shall
exercise the same care and diligence expected of the Trustees.
b. Except as otherwise provided herein, the Manager, at its own expense,
shall furnish the Trust with office space in the offices of the Manager or in
such other place as may be agreed upon from time to time, and all necessary
office facilities, equipment and personnel for managing the affairs and
investments of the Funds, and shall arrange, if desired by the Trust, for
members of the Manager's organization to serve as officers or agents of the
Trust.
c. The Manager shall pay directly or reimburse the Trust for all expenses
not hereinafter specifically assumed by the Trust or a Fund. The Trust on behalf
of each Fund will pay commissions and other direct charges relating to the
purchase and sale of portfolio securities and other assets, taxes, interest and
extraordinary expenses, including without limitation litigation expenses.
d. It shall be the duty of the Manager to furnish to the Trustees of the
Trust such information as may reasonably be necessary in order for the Trustees
to evaluate this Contract or any proposed amendments hereto for the purposes of
casting a vote pursuant to Sections 5 or 7 hereof.
e. In the performance of its duties hereunder, the Manager is and shall be
an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Trust in any way
or otherwise be deemed to be an agent of the Trust.
2. Subadvisers. It is understood that the Manager may employ one or more
subinvestment advisers (each a "Subadviser") to provide investment advisory
services to the Funds by entering into a written agreement with each such
Subadviser; provided, that any such agreement first shall be approved on behalf
of the respective Fund in accordance with the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act"), as such requirements are
modified by rule, regulation, interpretation or order of the SEC. The authority
given to the Manager in Sections 1 through 7 hereof may be delegated by it under
any such agreement; provided, that any Subadviser shall be subject to the same
restrictions and limitations on investments and
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<PAGE>
brokerage discretion as the Manager. The Trust agrees that the Manager shall not
be accountable to the Trust or either Fund or either Fund's shareholders for any
loss or other liability relating to specific investments directed by any
Subadviser, even though the Manager retains the right to reverse any such
investment, because, in the event a Subadviser is retained, the Trust and the
Manager will rely almost exclusively on the expertise of such Subadviser for the
selection and monitoring of specific investments.
3. Other Agreements, etc. It is understood that any of the shareholders,
trustees, officers and employees of the Trust may be a shareholder, director,
officer or employee of, or be otherwise interested in, the Manager, any
interested person (as defined in the 1940 Act) of the Manager, any organization
in which the Manager may have an interest or any organization which may have an
interest in the Manager, and that the Manager, any such interested person or any
such organization may have an interest in the Trust. It is also understood that
the Trust and the Manager may have advisory, management, service or other
contracts with other individuals or entities, and may have other interests and
business; provided, that the Manager shall not undertake any seriously
conflicting duties or loyalties which would affect its prior fiduciary duty to
the Trust.
4. Manager's Compensation.
a. The Trust on behalf of Clearwater Growth Fund ("Growth Fund") shall pay
to the Manager, as compensation for the Manager's services to the Growth Fund
and as reimbursement to the Manager for the payment of the Growth Fund's
expenses, a fee at the annual rate of 0.45% of the Growth Fund's average daily
net assets. The management fee payable by the Growth Fund hereunder shall be
calculated and accrued daily as a percentage of such Fund's average daily net
assets and shall be payable quarterly after the end of each calendar quarter on
or before the 15th day of January, April, July and October with respect to the
preceding quarter. In the event of termination of this Contract with respect to
the Growth Fund, the fee provided for in this paragraph shall be computed on the
basis of the period ending on the last business day on which this Contract is in
effect subject to a pro rata adjustment based on the number of days elapsed in
the current quarter as a percentage of the total number of days in such quarter.
b. The Trust on behalf of Clearwater Small Cap Fund ("Small Cap Fund")
shall pay to the Manager, as compensation for the Manager's services to the
Small Cap Fund and as reimbursement to the Manager for the payment of the Small
Cap Fund's expenses, a fee at the annual rate of 1.35% of the Small Cap Fund's
average daily net assets. The management fee payable by the Small Cap Fund
hereunder shall be calculated and accrued daily as a percentage of such Fund's
average daily net assets and shall be payable quarterly after the end of each
calendar
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<PAGE>
quarter on or before the 15th day of January, April, July and October with
respect to the preceding quarter. In the event of termination of this Contract
with respect to the Small Cap Fund, the fee provided for in this paragraph shall
be computed on the basis of the period ending on the last business day on which
this Contract is in effect subject to a pro rata adjustment based on the number
of days elapsed in the current quarter as a percentage of the total number of
days in such quarter.
c. The method of determining the net assets of each Fund for purposes of
calculating the fee payable to the Manager hereunder shall be the same as the
method of determining net assets for purposes of establishing the offering and
redemption price of shares of the Fund. If this Contract shall be effective for
only a portion of a calendar quarter with respect to a Fund, the applicable fee
shall be prorated for that portion of such calendar quarter during which this
Contract is in effect.
d. The Manager may from time to time agree not to impose all or a portion
of its fee with respect to either Fund otherwise payable hereunder (in advance
of the time such fee or a portion thereof would otherwise accrue) and/or
undertake to pay or reimburse such Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by the Manager. Any such fee
reduction or undertaking may be discontinued or modified by the Manager at any
time.
5. Assignment and Amendment. This Contract shall automatically terminate,
without the payment of any penalty, in the event of its assignment (as defined
in the 1940 Act); provided, that such termination shall not relieve either party
of any liability incurred hereunder. The terms of this Contract shall not be
changed unless such change is approved in accordance with the requirements of
the 1940 Act, as such requirements are modified by rule, regulation,
interpretation or order of the SEC.
6. Avoidance of Inconsistent Position.
a. In connection with purchases and sales of portfolio securities for the
account of each Fund, neither the Manager nor any of its Directors, officers or
employees will act as a principal or agent or receive any commission except as
permitted by the 1940 Act. The Manager shall arrange for the placing of all
orders for the purchase and sale of portfolio securities for each Fund's account
with brokers or dealers selected by the Manager. In the selection of such
brokers or dealers and the placing of such orders, the Manager is directed at
all times to seek for each Fund the most favorable execution and net price
available except as described herein. It is understood that it is desirable for
each Fund that the Manager have access to supplemental investment and market
research and security and economic analyses provided by brokers who may execute
brokerage transactions at a higher cost to the
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<PAGE>
Fund than may result when allocating brokerage to other brokers on the basis of
seeking the most favorable price and efficient execution. Therefore, the Manager
is authorized to place orders for the purchase and sale of securities for a Fund
with such brokers, subject to review by the Trust's Trustees from time to time
with respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to the Manager in
connection with the Manager's services (or its affiliates' services) to other
clients.
b. On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of a Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the best execution and
lower brokerage commissions, if any. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Manager in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such clients.
7. Effective Period and Termination of this Contract.
a. This Contract shall become effective on the date hereof and shall remain
in full force and effect as to each Fund until two years from the date set forth
above and from year to year thereafter, but only so long as its continuance is
approved in accordance with the requirements of the 1940 Act, as such
requirements are modified by rule, regulation, interpretation or order of the
SEC, subject to the respective rights of the Trust and the Manager to terminate
this contract as provided in paragraphs (b) and (c) hereof.
b. The Trust may at any time and without penalty terminate this Contract as
to any Fund or as to the Trust as a whole by not more than sixty (60) days' nor
less than thirty (30) days' written notice given to the Manager; or
c. The Manager may at any time and without penalty terminate this Contract
as to any Fund or as to the Trust as a whole by not less than one hundred twenty
(120) days' written notice given to the Trust.
8. Complete Agreement. This Contract states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with Section 5 hereof and the applicable requirements of the 1940 Act
as such requirements are modified by rule, regulation, interpretation or order
of the SEC.
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<PAGE>
9. Nonliability of the Manager. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or of reckless disregard
of its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, to any shareholder of the Trust, or to any person, firm
or organization, for any act or omission in the course of, or connected with,
rendering services hereunder. Nothing herein, however, shall derogate from the
Manager's obligations under applicable federal and state securities laws.
10. Limitation of Liability of the Trustees, Officers and Shareholders. A
copy of the Declaration of Trust of the Trust is on file with the Secretary of
State of The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument with respect to a
Fund or to the Trust in general are not binding upon any of the Trustees,
officers or shareholders of the Trust but are binding only upon the assets and
property of that Fund or of the Trust, as the case may be.
11. Notices. Any notice, instruction, request or other communications
required or contemplated by this Contract shall be in writing and shall be duly
given when deposited by first-class mail, postage prepaid, or consigned to a
nationally recognized overnight delivery service addressed to (or delivered by
hand with confirmation to) the Trust or the Manager at the applicable address
set forth below:
If to Trust:
Clearwater Investment Trust
332 Minnesota Street, Suite 2100
St. Paul, Minnesota 55101
If to Manager:
Clearwater Management Co., Inc.
332 Minnesota Street, Suite 2100
St. Paul, Minnesota 55101
12. Disclosure Statement. The Trust acknowledges receipt of the Manager's
written disclosure statement required by Rule 204-3 under the Investment
Advisers Act of 1940 not less than 48 hours prior to entering into this
Contract.
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<PAGE>
13. Governing Law. This Contract and all performance hereunder shall be
governed by, interpreted, construed and enforced in accordance with the laws of
the State of Minnesota.
14. Severability. Any term or provision of this Contract which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Contract or affecting the validity or enforceability of any of the terms or
provisions of this Contract in any other jurisdiction.
15. Counterparts. This Contract may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their duly authorized officers and as of the day and year first
written above.
CLEARWATER INVESTMENT TRUST
By:
Name:
Title:
CLEARWATER MANAGEMENT CO., INC.
By:
Name:
Title:
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<PAGE>
EXHIBIT D
SUBADVISORY CONTRACT
AGREEMENT made as of the 1st day of November 1997, by and among CLEARWATER
INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), CLEARWATER
MANAGEMENT CO., INC., a Minnesota corporation (the "Manager"), and PARAMETRIC
PORTFOLIO ASSOCIATES (the "Subadviser").
W I T N E S S E T H:
WHEREAS, the Manager desires to utilize the services of the Subadviser as
financial counsel with respect to the Clearwater Growth Fund (the "Fund"), a
separate series of the Trust; and
WHEREAS, the Subadviser is willing to perform such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits
herein contained, it is agreed as follows:
1. The Subadviser's Services. The Subadviser will serve the Manager as
financial counsel with respect to the Fund which is under the management of the
Manager pursuant to the Management Contract dated May 1, 1994 between the
Manager and the Trust. Subject to the supervision of the Manager, the investment
policies and restrictions applicable to the Fund as set forth in the
registration statement of the Trust filed with the Securities and Exchange
Commission and such resolutions as from time to time may be adopted by the
Trust's Trustees and furnished to the Subadviser, the Subadviser is hereby
authorized and directed and hereby agrees to develop, recommend and implement
such investment program and strategy for the Fund as may from time to time in
the circumstances appear most appropriate to the achievement of the investment
objectives of the Fund as stated in the aforesaid registration statement, to
provide research and analysis relative to the investment program and investments
of the Fund, to determine what securities should be purchased and sold and what
portion of the assets of the Fund should be held in cash or cash equivalents or
other assets and to monitor on a continuing basis the performance of the
portfolio securities of the Fund. In addition, the Subadviser will place orders
for the purchase and sale of portfolio securities and will advise the Manager
and the custodian for the Fund on a prompt basis of each purchase and sale of a
portfolio security specifying the name of the issuer, the description and amount
or number of
D-1
<PAGE>
shares of the security purchased, the market price, commission and gross or net
price, trade date, settlement date and identity of the effecting broker or
dealer. From time to time as the Trustees of the Trust or the Manager may
reasonably request, the Subadviser will furnish to the Trust's officers and to
each of its Trustees reports on portfolio transactions and reports on issues of
securities held by the Fund, all in such detail as any such Trustee or the
Manager may reasonably request. The Subadviser also will inform the Trust's
officers and Trustees on a current basis of changes in investment strategy or
tactics. The Subadviser will make its officers and employees available to meet
with the Trust's officers and Trustees and the Manager's officers and Directors
at least quarterly on due notice to review the investments and investment
program of the Fund in the light of current and prospective economic and market
conditions.
2. Avoidance of Inconsistent Position.
(a) In connection with purchases and sales of portfolio securities for the
account of the Fund, the Subadviser will not act as a principal or agent or
receive any commission except as permitted by the Investment Company Act of
1940, as amended (the "1940 Act"). The Subadviser shall arrange for the placing
of all orders for the purchase and sale of portfolio securities for the Fund's
account with brokers or dealers selected by the Subadviser. In the selection of
such brokers or dealers and the placing of such orders, the Subadviser is
directed at all times to seek for the Fund the most favorable execution and net
price available except as otherwise described herein. It is understood that it
is desirable for the Fund that the Subadviser have access to supplemental
investment and market research and security and economic analyses provided by
brokers who may execute brokerage transactions at a higher cost to the Fund than
may result when allocating brokerage to other brokers on the basis of seeking
the most favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities for the Fund
with such brokers consistent with the requirements of Section 28(e) of the
Securities Exchange Act of 1934, subject to review by the Trust's Trustees from
time to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Subadviser in connection with its services (and the services of the Subadviser's
affiliates) to other clients.
(b) On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other clients, the
Subadviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the
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<PAGE>
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such clients.
3. Other Agreements, etc. It is understood that any of the shareholders,
Trustees, officers and employees of the Trust may be a shareholder, director,
officer or employee of, or be otherwise interested in, the Subadviser, any
interested person (as defined in the 1940 Act) of the Subadviser, any
organization in which the Subadviser may have an interest or any organization
which may have an interest in the Subadviser and that the Subadviser, any such
interested person or any such organization may have an interest in the Trust. It
is also understood that the Subadviser, the Manager and the Trust may have
advisory, management, service or other contracts with other individuals or
entities, and may have other interests and businesses. When a security proposed
to be purchased or sold for the Trust is also to be purchased or sold for other
accounts managed by the Subadviser at the same time, the Subadviser shall make
such purchases or sales on a pro rata, rotating or other equitable basis so as
to avoid any one account being preferred over any other account.
4. Subadviser's Compensation. The Manager shall pay to the Subadviser for
its services hereunder a fee at the annual rate of 0.15% of the Fund's net
assets under the Subadviser's management. Such fee shall be calculated and
accrued on a monthly basis as a percentage of the Fund's month end net assets
under the Subadviser's management, and shall be payable quarterly after the end
of each calendar quarter on or before the 15th day of January, April, July and
October of each year with respect to the preceding quarter. If this Contract
shall be effective for only a portion of a calendar quarter, the aforesaid fee
shall be prorated for that portion of such calendar quarter during which this
Contract is in effect.
5. Assignment and Amendment. This Contract shall automatically terminate,
without the payment of any penalty, in the event of its assignment (as defined
in the 1940 Act) or in the event of the termination of the Management Contract
between the Trust and the Manager insofar as it applies to the Fund; provided,
that such termination shall not relieve either party of any liability incurred
hereunder. The terms of this Contract shall not be changed unless such change is
approved in accordance with the requirements of the 1940 Act, and as such
requirements may be modified by rule, regulation or order of the Securities and
Exchange Commission (the "SEC").
6. Effective Period and Termination of this Contract.
(a) This Contract shall become effective on the date hereof and shall
remain in full force and effect until two years from the date hereof and from
year to year
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<PAGE>
thereafter, but only so long as its continuance is approved annually in
accordance with the requirements of the 1940 Act, and as such requirements may
be modified by rule, regulation or order of the SEC, subject to the respective
rights of the Trust, the Manager and the Subadviser to terminate this Contract
as provided in paragraphs (b) and (c) hereof.
(b) The Trust or the Manager may at any time terminate this Contract by not
more than sixty (60) days' nor less than thirty (30) days' written notice given
to the Subadviser.
(c) The Subadviser may at any time terminate this Contract by not less than
one hundred twenty (120) days' written notice given to the Trust and the
Manager.
7. Complete Agreement. This Contract states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with Section 5 hereof and the applicable requirements of the 1940
Act.
8. Nonliability of the Subadviser. In the absence of willful misfeasance,
bad faith or gross negligence on the part of the Subadviser, or of reckless
disregard of its obligations and duties hereunder, the Subadviser shall not be
subject to any liability to the Manager or the Trust, to any shareholder of the
Fund, or to any person, firm or organization, for any act or omission in the
course of, or connected with, rendering services hereunder. Nothing herein,
however, shall derogate from the Subadviser's obligations under applicable
federal and state securities laws.
9. Limitation of Liability of the Trustees, Officers and Shareholders. A
copy of the Declaration of Trust of the Trust is on file with the Secretary of
State of The Commonwealth of Massachusetts, and notice is hereby given that this
Contract is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations under this Contract are not binding upon
any of the Trustees, officers or shareholders of the Trust but are binding only
upon the assets and property of the Fund.
10. Notices. Any notice, instruction, request or other communications
required or contemplated by this Contract shall be in writing and shall be duly
given when deposited by first class mail, postage prepaid, addressed to (or
delivered by hand with confirmation to) the Trust, the Manager or the Subadviser
at the applicable address set forth below:
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<PAGE>
If to Subadviser:
Parametric Portfolio Associates
701 Fifth Avenue
Suite 7310
Seattle, Washington 98104-7090
If to Trust:
Clearwater Investment Trust
2100 First National Bank Building
St. Paul, Minnesota 55101
If to Manager:
Clearwater Management Co., Inc.
2100 First National Bank Building
St. Paul, Minnesota 55101
11. Disclosure Statement. The Manager and the Trust acknowledge receipt of
the Subadviser's written disclosure statement required by Rule 204-3 under the
Investment Advisers Act of 1940 not less than 48 hours prior to entering into
this Contract.
12. Governing Law. This Contract and all performance hereunder shall be
governed by, interpreted, construed and enforced in accordance with the laws of
the State of Minnesota.
13. Any term or provision of this Contract which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Contract or affecting
the validity or enforceability of any of the terms or provisions of this
Contract in any other jurisdiction.
14. This Contract may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
D-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their duly authorized officers and as of the day and year first
written above.
CLEARWATER INVESTMENT TRUST
By: /s/Frederick T. Weyerhaeuser
Name: Frederick T. Weyerhaeuser
Title: Chairman
CLEARWATER MANAGEMENT CO., INC.
By: /s/Philip W. Pascoe
Name: Philip W. Pascoe
Title: Chairman
PARAMETRIC PORTFOLIO ASSOCIATES
By: /s/David M. Stein
Name: David M. Stein
Title: Managing Director
D-6
<PAGE>
CLEARWATER INVESTMENT TRUST
332 Minnesota Street, Suite 2100
St. Paul, Minnesota 55101
This proxy is solicited on behalf of the Board of Trustees of Clearwater
Investment Trust (the "Trust") for the Special Meeting of Shareholders (the
"Meeting"). The undersigned hereby appoints Frederick T. Weyerhaeuser and Daniel
C. Titcomb and each of them, attorneys and proxies for the undersigned, with
full power of substitution and revocation to represent the undersigned and to
vote on behalf of the undersigned all shares of Clearwater Investment Trust (the
"Trust") which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held at the offices of Clearwater Investment Trust, 332
Minnesota Street, Suite 2100, St. Paul, Minnesota 55101 on February 24, 1998, at
9:00 a.m., Central time, and at any adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice of the Special Meeting of Shareholders and
the accompanying Proxy Statement and hereby instructs the attorneys and proxies
to vote the shares as indicated on this Proxy Card. In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the Meeting. The undersigned hereby revokes any proxy previously given.
PLEASE SIGN AND DATE THE PROXY CARD AND RETURN IT WITH YOUR VOTE IN THE ENCLOSED
ENVELOPE.
Please indicate your vote by an "X" in the appropriate box on the reverse side.
This proxy, if properly executed, will be voted in the manner directed by the
shareholder. If no direction is made, this proxy will be voted FOR all
Proposals. Please refer to the Proxy Statement for a discussion of the
Proposals.
PLEASE MARK VOTES For Withheld For All Except
|X| AS IN THIS EXAMPLE
1. Elect two Trustees. | | | | | |
INSTRUCTION: To withhold
authority to vote for an individual
nominee, strike a line through his
name below:
Philip W. Pascoe
Samuel B. Carr, Jr.
For Against Abstain
2. Ratify the selection of KPMG Peat | | | | | |
Marwick LLP as the independent
public accountants of the Trust for
the fiscal year ending December 31,
1998.
3. Approve the amendment and | | | | | |
restatement of the Trust's
Declaration of Trust.
4. Approve reclassification of the | | | | | |
Fund's investment objective from
fundamental to non-fundamental
<PAGE>
For Against Abstain
5a. Approve amendment of investment | | | | | |
policy on loaning portfolio
securities.
5b. Approve amendment of investment | | | | | |
policy on borrowing money.
5c. Approve amendment of investment | | | | | |
policy on concentration of
investments: Clearwater Growth
Fund only.
5d. Approve deletion of investment | | | | | |
policy concerning pledging,
mortgaging and hypothecation of
assets.
5e. Approve reclassification of | | | | | |
investment policy concerning short
sales.
6. Approve new management contract | | | | | |
between the Trust and Clearwater
Management Co., Inc.
7. Approve subadvisory contract with | | | | | |
Parametric Portfolio Associates:
Clearwater Growth Fund only.
8. Ratify the action of the Board of | | | | | |
Trustees with respect to the
subadvisory fee: Clearwater Small
Cap Fund only.
Please be sure to sign and date this Proxy. Date
Please sign your name in full. If
joint, owners EITHER may sign this
Shareholder sign here Co-owner sign here proxy. When signing as attorney,
executor, administrator, trustee,
guardian or corporate officer,
please give your full title.
