As filed with the Securities and Exchange Commission on
January 25, 1996.
Securities Act File No. 33-
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
X
Amendment No.
BT Insurance Funds Trust
(Exact Name of Registrant as Specified in Charter)
One Exchange Place
Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(617) 248-3502
Name and Address of Agent for Service: Copies to:
Julie A. Tedesco, Esq. Burton M. Leibert, Esq.
First Data Investor Services Group, Inc. Willkie Farr & Gallagher
One Exchange Place One Citicorp Center
Boston, Massachusetts 02109 New York, NY 10022-4669
*Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of the Registration
Statement.
It is proposed that this filing will become effective
(check appropriate box):
immediately upon filing pursuant to paragraph (b), or
on _______________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i), or
on _________ pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on _________ pursuant to paragraph (a)(ii) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant has registered an indefinite number of shares of
Common Stock, $0.001 par value per share, of all series and
classes of the Registrant, then existing or thereafter created,
and will file a Rule 24f-2 Notice within 60 days after the close
of the Registrant's fiscal year.
BT INSURANCE FUNDS TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
under the Securities Act of 1933
N-1A Location
Item
No. Prospectus
Item 1. Cover Page Cover Page
Item 2. Synopsis Not Applicable
Item 3. Condensed Financial
Information Not Applicable
Item 4. General Description of
Registrant Investment Objective,
Policies and Risks; Risk
Factors; Matching the Fund
to Your Investment Needs;
Additional Information
Item 5. Management of the Fund Management of the Fund;
Purchase of Shares; Additional
Information
Item 5A. Managements Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities Dividends, Distributions
and Taxes; Additional
Information
Item 7. Purchase of Securities Net Asset Value; Purchase
Being Offered and Redemption of Shares
Item 8. Redemption or Repurchase Purchase and Redemption
of Shares
Item 9. Pending Legal Proceedings Not Applicable
N-1A Statement of Additional
Item Information
No. .
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History Not Applicable
Item 13. Investment Objectives and
Policies Investment Objectives,
Policies and Restrictions
Item 14. Management of the Fund Management of the Funds
Item 15. Control Persons and Principal
Holders of Securities Management of the Funds
Item 16. Investment Advisory and
Other Services Management of the Funds
Item 17. Brokerage Allocation Investment Objectives,
and Other Practices Policies and Restrictions
Valuation of Securities;
Redemption in Kind
Item 18. Capital Stock and Other
Securities Investment Objectives,
Policies and Restrictions
Item 19. Purchase, Redemption and Valuation of Securities;
Pricing of Securities Redemption in Kind
Being Offered
Item 20. Tax Status Taxation
Item 21. Underwriters Valuation of Securities;
Redemption in Kind
Item 22. Calculation of Performance
Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under
the appropriate Item, so number, in Part C of this Registration
Statement.
SUBJECT TO COMPLETION, DATED _______, 1996
Information contained herein is subject to completion or
amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers
to buy be accepted prior to the time the registration
statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in
any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such State.
BT INSURANCE FUNDS TRUST
PROSPECTUS: ____________, 1996
Small Cap Fund
Seeks long-term capital growth through
investment in smaller sized growth
companies.
This Prospectus offers shares of the Small Cap
Fund (the "Fund"), a series of BT Insurance Funds
Trust (the "Trust"), which is an open-end
management investment company having two series.
Shares of the Fund are available to the public
only through the purchase of certain variable
annuity and variable life insurance contracts
("Contract(s)") issued by various insurance
companies (the "Companies").
Please read this Prospectus carefully before
investing and retain it for future reference. It
contains important information about the Fund that
you should know and can refer to in deciding
whether the Fund's goals match your own.
A Statement of Additional Information ("SAI") with
the same date has been filed with the Securities
and Exchange Commission, and is incorporated
herein by reference. You may request a free copy
of the SAI by calling 1-800-730-1313.
Shares of the Fund are not deposits or obligations
of, or guaranteed or endorsed by, Bankers Trust
Company and the shares are not Federally insured
by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
BANKERS TRUST GLOBAL INVESTMENT MANAGEMENT, a unit
of
BANKERS TRUST COMPANY
Investment Adviser of the Fund
440 FINANCIAL DISTRIBUTORS, INC.
Distributor
290 Donald Lynch Boulevard
Marlboro, MA 01752
TABLE OF CONTENTS
Investment Objective, Policies and Risks 2
Risk Factors; Matching the Fund to Your Investment
Needs 4
Net Asset Value 6
Purchase and Redemption of Shares 6
Dividends, Distributions and Taxes 7
Performance Information and Reports 8
Management of the Fund 9
Additional Information 12
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is long-term
capital growth; the production of
any current income is secondary to this objective.
There can be no assurance that the investment
objective of the Fund will be achieved.
The Fund seeks to provide long term capital growth
by investing primarily in equity securities of
smaller companies. The Fund's policy is to invest
in equity securities of smaller companies that
Bankers Trust Global Investment Management, a unit
of Bankers Trust Company, as the Fund's investment
adviser (the "Adviser" or "Bankers Trust"),
believes are in an early stage or transitional
point in their development and have demonstrated
or have the potential for above average capital
growth. The Adviser will select companies which
have the potential to gain market share in their
industry, achieve and maintain high and consistent
profitability or produce increases in earnings.
The Adviser also seeks companies with strong
company management and superior fundamental
strength.
The Adviser employs a flexible investment program
in pursuit of the Fund's investment objective. The
Adviser takes advantage of its market access and
the research available to it to select investments
in promising growth companies that are involved in
new technologies, new products, foreign markets
and special developments, such as research
discoveries, acquisitions, recapitalizations,
liquidations or management changes, and companies
whose stock may be undervalued by the market.
These situations are only illustrative of the
types of investment the Fund may make. The Fund is
free to invest in any common stock which in the
Adviser's judgment provides above average
potential for long-term growth of capital and
income.
Under normal market conditions, the Fund will
invest at least 65% of its assets in smaller
companies (with market capitalizations less than
$750 million at time of purchase that offer strong
potential for capital growth). Small
capitalization companies have the potential to
show earnings growth over time that is well above
the growth rate of the overall economy. The Fund
may also invest in larger, more established
companies that the Adviser believes may offer the
potential for strong capital growth due to their
relative market position, anticipated earnings
growth, changes in management or other similar
opportunities. The Fund will follow a disciplined
selling process to lessen market risks.
For temporary defensive purposes, when in the
opinion of the Adviser market conditions so
warrant, the Fund may invest all or a portion of
its assets in common stocks of larger, more
established companies or in fixed-income
securities or short-term money market securities.
To the extent the Fund is engaged in temporary
defensive investments, the Fund will not be
pursuing its investment objective.
The Fund may also invest up to 25% of its assets
in similar securities of foreign issuers. For
further information on foreign investments and
related hedging techniques, see "Risk Factors;
Matching the Fund to Your Investment Needs,"
"Additional Information" and the Statement of
Additional Information.
Equity Investments. The Fund invests primarily in
common stock and other securities with equity
characteristics, such as trust or limited
partnership interests, rights and warrants. These
investments may or may not pay dividends and may
or may not carry voting rights. The Fund may also
invest in convertible securities when, due to
market conditions, it is more advantageous to
obtain a position in an attractive company by
purchase of its convertible securities than by
purchase of its common stock. The convertible
securities in which the Fund invests may include
any debt securities or preferred stock which may
be converted into common stock or which carries
the right to purchase common stock. Convertible
securities entitle the holder to exchange the
securities for a specified number of shares of
common stock, usually of the same company, at
specified prices within a certain period of time
and to receive interest or dividends until the
holder elects to exercise the conversion
privilege. Since the Fund invests in both common
stock and convertible securities, the risks of the
general equity markets may be tempered to a degree
by the Fund's investments in convertible
securities which are often not as volatile as
equity securities.
Short-Term Instruments. The Fund intends to stay
invested in the securities described above to the
extent practical in light of its objective and
long-term investment perspective. However, the
Fund's assets may be invested in short-term
instruments with remaining maturities of 397 days
or less to meet anticipated redemptions and
expenses or for day-to-day operating purposes and
when, in Bankers Trust's opinion, it is advisable
to adopt a temporary defensive position because of
unusual and adverse conditions affecting the
equity markets. In addition, when the Fund
experiences large cash inflows through the sale of
securities and desirable equity securities that
are consistent with the Fund's investment
objective are unavailable in sufficient quantities
or at attractive prices, the Fund may hold short-
term investments for a limited time pending
availability of such equity securities. Short-term
instruments consist of foreign and domestic: (i)
short-term obligations of sovereign governments,
their agencies, instrumentalities, authorities or
political subdivisions; (ii) other short-term debt
securities rated Aa or higher by Moody's Investors
Service, Inc. ("Moody's") or AA or higher by
Standard & Poor's Corporation ("S&P") or, if
unrated, of comparable quality in the opinion of
Bankers Trust; (iii) commercial paper; (iv) bank
obligations, including negotiable certificates of
deposit, time deposits and bankers' acceptances;
and (v) repurchase agreements. At the time the
Fund invests in commercial paper, bank obligations
or repurchase agreements, the issuer or the
issuer's parent must have outstanding debt rated
Aa or higher by Moody's or AA or higher by S&P or
outstanding commercial paper or bank obligations
rated Prime-1 by Moody's or A-1 by S&P; or, if no
such ratings are available, the instrument must be
of comparable quality in the opinion of Bankers
Trust. These instruments may be denominated in
U.S. dollars or in foreign currencies.
Additional Investment Techniques
The Fund may also utilize the following
investments and investment techniques and
practices: foreign investments, options on stocks,
options on stock indexes, futures contracts on
stock indexes, options on futures contracts,
foreign currency exchange transactions, options on
foreign currencies, Rule 144A securities, when-
issued and delayed delivery securities, securities
lending, and repurchase agreements. See
"Additional Information" for further information.
Additional Investment Limitations
As a diversified fund, no more than 5% of the
assets of the Fund may be invested in the
securities of one issuer (other than U.S.
Government securities), except that up to 25% of
the Fund's assets may be invested without regard
to this limitation. The Fund will not invest more
than 25% of its assets in the securities of
issuers in any one industry. These are fundamental
investment policies of the Fund which may not be
changed without investor approval. No more than
15% of the Fund's net assets may be invested in
illiquid or not readily marketable securities
(including repurchase agreements and time deposits
maturing in more than seven days). The Fund will
not purchase securities issued by any open-end
investment company and will purchase securities
issued by closed-end investment companies only in
the open market or where such purchase is part of
a merger or consolidation plan. Additional
limitations on purchases of investment company
securities are imposed by statute and set forth in
the Statement of Additional Information.
Additional investment policies of the Fund are
contained in the Statement of Additional
Information.
RISK FACTORS; MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced
investment plan; the Fund seeks to provide long-
term capital growth, with the production of any
current income being incidental to this objective,
by investments primarily in growth-oriented common
stocks of domestic corporations and, to a limited
extent, foreign corporations. The Fund is designed
for those investors primarily interested in
capital growth from investments in smaller-sized
growth companies. In view of the long-term capital
growth objective of the Fund and the smaller size
of the companies, the risks of investment in the
Fund may be greater than the general equity
markets, and changes in domestic and foreign
interest rates may also affect the value of the
Fund's investments, and rising interest rates can
be expected to reduce the Fund's share value. A
description of a number of investments and
investment techniques available to the Fund,
including foreign investments and the use of
options and futures, and certain risks associated
with these investments and techniques is included
under "Additional Information." The Fund's share
price, yield and total return fluctuate and your
investment may be worth more or less than your
original cost when you redeem your shares.
Risks of Investing in Foreign Securities
In seeking to achieve its investment objective,
the Fund may invest in securities of foreign
issuers. Foreign securities may involve a higher
degree of risk and may be less liquid or more
volatile than domestic investments. Foreign
securities usually are denominated in foreign
currencies, which means their value will be
affected by changes in the strength of foreign
currencies relative to the U.S. dollar as well as
the other factors that affect security prices.
Foreign companies may not be subject to accounting
standards or governmental supervision comparable
to U.S. companies, and there often is less
publicly available information about their
operations. Generally, there is less governmental
regulation of foreign securities markets, and
security trading practices abroad may offer less
protection to investors such as the Fund. The
value of such investments may be adversely
affected by changes in political or social
conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization,
limitation on the removal of funds or assets, or
imposition of (or change in) exchange control or
tax regulations in those foreign countries.
Additional risks of foreign securities include
settlement delays and costs, difficulties in
obtaining and enforcing judgments, and taxation of
dividends at the source of payment. The Fund will
not invest more than 5% of the value of its total
assets in the securities of issuers based in
developing countries, including Eastern Europe.
The Fund intends to manage its holdings actively
to pursue its investment objective. Since the Fund
has a long-term investment perspective, it does
not intend to respond to short-term market
fluctuations or to acquire securities for the
purpose of short-term trading; however, it may
take advantage of short-term trading opportunities
that are consistent with its objective.
Derivatives
The Fund may invest in various instruments that
are commonly known as derivatives. Generally, a
derivative is a financial arrangement, the value
of which is based on, or "derived" from, a
traditional security, asset, or market index. Some
"derivatives" such as mortgage-related and other
asset-backed securities are in many respects like
any other investment, although they may be more
volatile or less liquid than more traditional debt
securities. There are, in fact, many different
types of derivatives and many different ways to
use them. There are a range of risks associated
with those uses. Futures and options are commonly
used for traditional hedging purposes to attempt
to protect a fund from exposure to changing
interest rates, securities prices, or currency
exchange rates and for cash management purposes as
a low cost method of gaining exposure to a
particular securities market without investing
directly in those securities. However, some
derivatives are used for leverage, which tends to
magnify the effects of an instrument's price
changes as market conditions change. Leverage
involves the use of a small amount of money to
control a large amount of financial assets, and
can in some circumstances, lead to significant
losses. In contrast, the Fund may use derivatives
to enhance return when Bankers Trust believes the
investment will assist the Fund in achieving its
investment objective, and for hedging purposes. A
description of the derivatives that the Fund may
use and some of their associated risks is found
under "Additional Information."
The Fund's investment objective is not a
fundamental policy and may be changed upon notice
to but without the approval of the Fund's
shareholders. If there is a change in the Fund's
investment objective, the Fund's shareholders
should consider whether the Fund remains an
appropriate investment in light of their then-
current needs. Shareholders of the Fund will
receive 30 days prior written notice with respect
to any change in the investment objective of the
Fund. See "Investment Objective and Policies" for
a description of the fundamental policies of the
Fund that cannot be changed without approval by
the holders of "a majority of the outstanding
voting securities" (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"))
of the Fund.
For descriptions of the management of the Fund,
see "Management of the Fund" herein and
"Management of the Funds" in the Statement of
Additional Information. For descriptions of the
expenses of the Fund, see "Management of the Fund"
herein.
NET ASSET VALUE
The net asset value per share of the Fund is
calculated on each day on which the New York Stock
Exchange Inc. (the "NYSE") is open (each such day
being a "Valuation Day"). The NYSE is currently
open on each day, Monday through Friday, except:
(a) January 1st, Presidents' Day (the third Monday
in February), Good Friday, Memorial Day (the last
Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last
Thursday in November) and December 25th; and (b)
the preceding Friday or the subsequent Monday when
one of the calendar-determined holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of the Fund is
calculated once on each Valuation Day as of the
close of regular trading on the NYSE (the
"Valuation Time"), which under normal
circumstances is 4:00 p.m., New York time. The
net asset value per share of the Fund is computed
by dividing the value of the Fund's assets, less
all liabilities, by the total number of its shares
outstanding. The Fund's securities and other
assets are valued primarily on the basis of market
quotations or, if quotations are not readily
available, by a method which the Fund's Board of
Trustees believes accurately reflects fair value.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are continuously offered to each
Company's separate accounts at the net asset value
per share next determined after a proper purchase
request has been received by the Company. The
Company then offers to owners of the Contracts
which provide for investment in the Fund
("Contractowner(s)") units in its separate
accounts which directly correspond to shares in
the Fund. Each Company submits purchase and
redemption orders to the Fund based on allocation
instructions for premium payments, transfer
instructions and surrender or partial withdrawal
requests which are furnished to the Company by
such Contractowners. Contractowners can send such
instructions and requests to the Companies by
first class mail, overnight mail or express mail
sent to the address set forth in the relevant
Company's offering memorandum included with this
prospectus. The Fund and 440 Financial
Distributors, Inc., the Fund's distributor ("440
Financial" or the "Distributor"), reserve the
right to reject any purchase order.
Payment for redeemed shares will ordinarily be
made within three (3) business days after the Fund
receives a redemption order from the relevant
Company. The redemption price will be the net
asset value per share next determined after the
Company receives the Contractowner's request in
proper form.
The Fund may suspend the right of redemption or
postpone the date of payment during any period
when trading on the New York Stock Exchange is
restricted, or such Exchange is closed for other
than weekends and holidays; when an emergency
makes it not reasonably practicable for the Fund
to dispose of assets or calculate its net asset
value; or as permitted by the Securities and
Exchange Commission (the "SEC").
.
The accompanying offering memorandum for the
Company's variable annuity or variable life
insurance policy describes the allocation,
transfer and withdrawal provisions of such annuity
or policy.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially
all of its net investment income and capital gains
each year. Income dividends and any net capital
gains are distributed in December. All dividends
and capital gains distributions paid by the Fund
will be automatically reinvested, at net asset
value, by the Companies' separate accounts in
additional shares of the Fund, unless an election
is made by a Contractowner to receive
distributions in cash.
Federal Taxes. The Fund will be treated as a
separate entity for federal income tax purposes.
The Fund intends to qualify as a "regulated
investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"), in order to
be relieved of federal income tax on that part of
its net investment income and realized capital
gains which it distributes to the Companies'
separate accounts. To qualify, the Fund must meet
certain relatively complex income and
diversification tests, including the requirement
that less than 30% of its gross income (exclusive
of losses) may be derived from the sale or other
disposition of securities held for less than three
months. The loss of such status would result in
the Fund being subject to federal income tax on
its taxable income and gains.
The Code and Treasury Department regulations
promulgated thereunder require that mutual funds
that are offered through insurance company
separate accounts must meet certain
diversification requirements to preserve the tax-
deferral benefits provided by the variable
contracts which are offered in connection with
such separate accounts. The Adviser intends to
diversify the Fund's investments in accordance
with those requirements. The enclosed offering
memorandum for a Company's variable annuity or
variable life insurance policies describes the
federal income tax treatment of distributions from
such contracts to Contractowners.
Other Tax Information. In addition to federal
taxes, there may be state or local tax law
provisions that affect the Fund and its
operations. Moreover, income received by the Fund
from sources within foreign countries may be
subject to withholding and other taxes imposed by
such countries.
Anyone who is considering allocating, transferring
or withdrawing monies held under a variable
contract to or from the Fund should consult a
qualified tax adviser.
PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to
time in advertisements, shareholder reports or
other communications to existing or prospective
owners of the Companies' variable contracts. When
performance information is provided in
advertisements, it will include the effect of all
charges deducted under the terms of the specified
contract, as well as all recurring and non-
recurring charges incurred by the Fund.
Performance information may include the Fund's
investment results and/or comparisons of its
investment results to various unmanaged indices
such as the Russell 2000 Index or Lipper Small
Company Growth Funds Average or results of other
mutual funds or investment or savings vehicles.
The Fund's investment results as used in such
communications will be calculated on a total rate
of return basis in the manner set forth below.
From time to time, fund rankings may be quoted
from various sources, such as Lipper Analytical
Services, Inc., Value Line and Morningstar Inc.
The Trust may provide period and average
annualized "total return" quotations for the Fund.
The Fund's "total return" refers to the change in
the value of an investment in the Fund over a
stated period based on any change in net asset
value per share and including the value of any
shares purchasable with any dividends or capital
gains distributed during such period. Period total
return may be annualized. An annualized total
return is a compounded total return which assumes
that the period total return is generated over a
one-year period, and that all dividends and
capital gain distributions are reinvested. An
annualized total return will be higher than a
period total return if the period is shorter than
one year, because of the compounding effect.
Unlike some bank deposits or other investments
which pay a fixed yield for a stated period of
time, the total return of the Fund will vary
depending upon interest rates, the current market
value of the securities held by the Fund and
changes in the Fund's expenses. In addition,
during certain periods for which total return
quotations may be provided, Bankers Trust may have
voluntarily agreed to waive portions of their fees
on a month-to-month basis. Such waivers will have
the effect of increasing the Fund's net income
(and therefore its total return) during the period
such waivers are in effect.
Shareholders will receive financial reports
semiannually that include the Fund's financial
statements, including listings of investment
securities held by the Fund at those dates. Annual
reports are audited by independent accountants.
MANAGEMENT OF THE FUND
Board of Trustees
The affairs of the Fund are managed under the
supervision of the Board of Trustees of the Trust,
of which the Fund is a series. By virtue of the
responsibilities assumed by Bankers Trust, neither
the Trust nor the Fund require employees other
than the Trust's officers. None of the Trust's
officers devotes full time to the affairs of the
Trust or the Fund.
For more information with respect to the Trustees
of the Trust, see "Management of the Fund" in the
Statement of Additional Information.
Investment Adviser and Administrator
The Fund has retained the services of Bankers
Trust Global Investment Management, a unit of
Bankers Trust, as investment adviser. Bankers
Trust, a New York banking corporation with
executive offices at 280 Park Avenue, New York,
New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust
conducts a variety of general banking and trust
activities and is a major wholesaler supplier of
financial services to the international and
domestic institutional markets.
As of September 30, 1995, Bankers Trust New York
Corporation was the ninth largest bank holding
company in the United States with total assets of
approximately $104 billion. Bankers Trust is a
worldwide merchant bank dedicated to servicing the
needs of corporations, governments, financial
institutions and private clients through a global
network of over 120 offices in more than 40
countries. Investment management is a core
business of Bankers Trust, built on a tradition of
excellence from its roots as a trust bank founded
in 1903. The scope of Bankers Trust's investment
management capability is unique due to its
leadership positions in both active and passive
quantitative management and its presence in major
equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and
most experienced investment managers with
approximately $200 billion in assets under
management as of September 30, 1995.
Bankers Trust has more than 50 years of experience
managing retirement assets for the nation's
largest corporations and institutions. Now, the
Trust brings Bankers Trust's extensive investment
management expertise -- once available to only the
largest institutions in the U.S. -- to individual
investors. Bankers Trust's officers have had
extensive experience in managing investment
portfolios having objectives similar to those of
the Fund.
Bankers Trust, subject to the supervision and
direction of the Board of Trustees, manages the
Fund in accordance with the Fund's investment
objective and stated investment policies, makes
investment decisions for the Fund, places orders
to purchase and sell securities and other
financial instruments on behalf of the Fund and
employs professional investment managers and
securities analysts who provide research services
to the Fund. Bankers Trust may utilize the
expertise of any of its world wide subsidiaries
and affiliates to assist it in its role as
investment adviser. All orders for investment
transactions on behalf of the Fund are placed by
Bankers Trust with broker-dealers and other
financial intermediaries that it selects,
including those affiliated with Bankers Trust. A
Bankers Trust affiliate will be used in connection
with a purchase or sale of an investment for the
Fund only if Bankers Trust believes that the
affiliate's charge for the transaction does not
exceed usual and customary levels. The Fund will
not invest in obligations for which Bankers Trust
or any of its affiliates is the ultimate obligor
or accepting bank. The Fund may, however, invest
in the obligations of correspondents and customers
of Bankers Trust.
Bankers Trust has been advised by its counsel
that, in counsel's opinion, Bankers Trust
currently may perform the services for the Trust
and the Fund described in this Prospectus and the
Statement of Additional Information without
violation of the Glass-Steagall Act or other
applicable banking laws or regulations. State
laws on this issue may differ from the
interpretations of relevant Federal law and banks
and financial institutions may be required to
register as dealers pursuant to state securities
law.
Mary Lisanti, Managing Director of Bankers Trust,
is responsible for the day-to-day management of
the Fund. Ms. Lisanti has been employed by
Bankers Trust since February, 1993 and has managed
the assets of various other funds sponsored by
Bankers Trust since that time. Prior to 1993, she
was a Vice President and Portfolio Manager with
Lieber & Company/The Evergreen Funds (since 1990).
As compensation for its services to the Fund,
Bankers Trust receives a fee from the Fund
computed daily and paid monthly at the annual rate
of 0.75% of the average daily net assets of the
Fund.
Expenses
In addition to the fees of the Adviser, the Fund
is responsible for the payment of all its other
expenses incurred in the operation of the Fund,
which include, among other things, expenses for
legal and independent auditor's services, charges
of the Fund's custodian and transfer agent, SEC
fees, a pro rata portion of the fees of the
Trust's unaffiliated trustees and officers,
accounting costs for reports sent to
Contractowners, the Fund's pro rata portion of
membership fees in trade organizations, a pro rata
portion of the fidelity bond coverage for the
Trust's officers, interest, brokerage and other
trading costs, taxes, all expenses of computing
the Fund's net asset value per share, expenses
involved in registering and maintaining the
registration of the Fund's shares with the SEC and
qualifying the Fund for sale in various
jurisdictions and maintaining such qualification,
litigation and other extraordinary or non-
recurring expenses. However, other typical Fund
expenses such as Contractowner servicing,
distribution of reports to Contractowners and
prospectus printing and postage will be borne by
the relevant Company.
Distributor
440 Financial Distributors, Inc. serves as
Distributor of the Fund's shares to separate
accounts of the Companies, for which it receives
no separate fee from the Fund. The principal
business address of the Distributor is 290 Donald
Lynch Boulevard, Marlboro, Massachusetts 01752.
Custodian and Transfer Agent
Bankers Trust acts as custodian of the assets of
the Fund and serves as the transfer agent for the
Fund.
Organization of the Trust
The Trust was organized on January 19, 1996, under
the laws of the Commonwealth of Massachusetts. The
Fund is a separate series of the Trust and was
established and designated as such on
_______,199__. The Trust offers shares of
beneficial interest of its two series, par value
$0.001 per share. The shares of the other series
of the Trust are offered through a separate
Prospectus. No series of shares has any preference
over any other series. All shares, when issued,
will be fully paid and nonassessable. The Trust's
Board of Trustees has the authority to create
additional series without obtaining shareholder
approval.
The Trust is an entity of the type commonly known
as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business
trust may, under certain circumstances, be held
personally liable as partners for its obligations.
However, the risk of a shareholder incurring
financial loss on account of shareholder liability
is limited to circumstances in which both
inadequate insurance existed and the Trust itself
was unable to meet its obligations.
Through its separate accounts, the Companies are
the Fund's sole stockholders of record, so under
the 1940 Act, the Companies are deemed to be in
control of the Fund. Nevertheless, when a
shareholders' meeting occurs, each Company
solicits and accepts voting instructions from its
Contractowners who have allocated or transferred
monies for an investment in the Fund as of the
record date of the meeting. Each Company then
votes the Fund's shares that are attributable to
its Contractowners' interests in the Fund in
proportion to the voting instructions received.
Each Company will vote any share that it is
entitled to vote directly due to amounts it has
contributed or accumulated in its separate
accounts in the manner described in the
prospectuses for its variable annuities and
variable life insurance policies.
Each share of the Fund is entitled to one vote,
and fractional shares are entitled to fractional
votes. Fund shares have non-cumulative voting
rights, so the vote of more than 50% of the shares
can elect 100% of the directors.
The Trust is not required, and does not intend, to
hold regular annual shareholder meetings, but may
hold special meetings for consideration of
proposals requiring shareholder approval.
The Fund is only available to owners of variable
annuities or variable life insurance policies
issued by the Companies through their respective
separate accounts. The Fund does not currently
foresee any disadvantages to Contractowners
arising from offering its shares to variable
annuity and variable life insurance policy
separate accounts simultaneously, and the Board of
Trustees monitors events for the existence of any
material irreconcilable conflict between or among
Contractowners. If a material irreconcilable
conflict arises, one or more separate accounts may
withdraw their investments in the Fund. This could
possibly force the Fund to sell portfolio
securities at disadvantageous prices. Each
Company will bear the expenses of establishing
separate portfolios for its variable annuity and
variable life insurance separate accounts if such
action becomes necessary; however, ongoing
expenses that are ultimately borne by
Contractowners will likely increase due to the
loss of economies of scale benefits that can be
provided to mutual funds with substantial assets.
ADDITIONAL INFORMATION
Rule 144A Securities. The Fund may purchase
securities in the United States that are not
registered for sale under Federal securities laws
but which can be resold to institutions under SEC
Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these
restricted securities are treated as exempt from
the Fund's 15% limit on illiquid securities. Under
the supervision of the Board of Trustees of the
Fund, the Adviser determines the liquidity of
restricted securities and, through reports from
the Adviser, the Board will monitor trading
activity in restricted securities. If
institutional trading in restricted securities
were to decline, the liquidity of the Fund could
be adversely affected.
When-Issued and Delayed Delivery Securities. The
Fund may purchase securities on a when-issued or
delayed delivery basis. Delivery of and payment
for these securities may take place as long as a
month or more after the date of the purchase
commitment. The value of these securities is
subject to market fluctuation during this period
and no income accrues to the Fund until settlement
takes place. The Fund maintains with the custodian
a segregated account containing high grade liquid
securities in an amount at least equal to these
commitments. When entering into a when-issued or
delayed delivery transaction, the Fund will rely
on the other party to consummate the transaction;
if the other party fails to do so, the Fund may be
disadvantaged.
Securities Lending. The Fund is permitted to lend
up to 30% of the total value of its securities.
These loans must be secured continuously by cash
or equivalent collateral or by a letter of credit
at least equal to the market value of the
securities loaned plus accrued income. By lending
its securities, the Fund can increase its income
by continuing to receive income on the loaned
securities as well as by the opportunity to
receive interest on the collateral. Any gain or
loss in the market price of the borrowed
securities which occurs during the term of the
loan inures to the Fund and its investors.
Foreign Investments. The Fund may invest in
securities of foreign issuers directly or in the
form of American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or other
similar securities representing securities of
foreign issuers. These securities may not
necessarily be denominated in the same currency as
the securities they represent. ADRs are receipts
typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities.
EDRs are receipts issued by a European financial
institution evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed
for use in the U.S. securities markets, and EDRs,
in bearer form, are designed for use in European
securities markets.
With respect to certain countries in which capital
markets are either less developed or not easily
accessed, investments by the Fund may be made
through investment in other investment companies
that in turn are authorized to invest in the
securities of such countries. Investment in other
investment companies is limited in amount by the
1940 Act, will involve the indirect payment of a
portion of the expenses, including advisory fees,
of such other investment companies and may result
in a duplication of fees and expenses.
Options on Stocks. The Fund may write and purchase
put and call options on stocks. A call option
gives the purchaser of the option the right to
buy, and obligates the writer to sell, the
underlying stock at the exercise price at any time
during the option period. Similarly, a put option
gives the purchaser of the option the right to
sell, and obligates the writer to buy, the
underlying stock at the exercise price at any time
during the option period. A covered call option,
which is a call option with respect to which the
Fund owns the underlying stock, sold by the Fund
exposes the Fund during the term of the option to
possible loss of opportunity to realize
appreciation in the market price of the underlying
stock or to possible continued holding of a stock
which might otherwise have been sold to protect
against depreciation in the market price of the
stock. A covered put option sold by the Fund
exposes the Fund during the term of the option to
a decline in price of the underlying stock. A put
option sold by the Fund is covered when, among
other things, cash or liquid securities are placed
in a segregated account to fulfill the obligations
undertaken.
To close out a position when writing covered
options, the Fund may make a "closing purchase
transaction," which involves purchasing an option
on the same stock with the same exercise price and
expiration date as the option which it has
previously written on the stock. The Fund will
realize a profit or loss for a closing purchase
transaction if the amount paid to purchase an
option is less or more, as the case may be, than
the amount received from the sale thereof. To
close out a position as a purchaser of an option,
the Fund may make a "closing sale transaction,"
which involves liquidating the Fund's position by
selling the option previously purchased.
The Fund intends to treat over-the-counter options
("OTC Options") purchased and the assets used to
"cover" OTC Options written as not readily
marketable and therefore subject to the
limitations described in "Investment Restrictions"
in the Statement of Additional Information.
Options on Stock Indexes. The Fund may purchase
and write put and call options on stock indexes
listed on stock exchanges. A stock index
fluctuates with changes in the market values of
the stocks included in the index.
Options on stock indexes are generally similar to
options on stock except that the delivery
requirements are different. Instead of giving the
right to take or make delivery of stock at a
specified price, an option on a stock index gives
the holder the right to receive a cash "exercise
settlement amount" equal to (a) the amount, if
any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of
the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier."
Receipt of this cash amount will depend upon the
closing level of the stock index upon which the
option is based being greater than, in the case of
a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash
received will be equal to such difference between
the closing price of the index and the exercise
price of the option expressed in dollars times a
specified multiple. The writer of the option is
obligated, in return for the premium received, to
make delivery of this amount. The writer may
offset its position in stock index options prior
to expiration by entering into a closing
transaction on an exchange or the option may
expire unexercised.
Because the value of an index option depends upon
movements in the level of the index rather than
the price of a particular stock, whether the Fund
will realize a gain or loss from the purchase or
writing of options on an index depends upon
movements in the level of stock prices in the
stock market generally or, in the case of certain
indexes, in an industry or market segment, rather
than movements in the price of a particular stock.
Accordingly, successful use by the Fund of options
on stock indexes will be subject to the Adviser's
ability to predict correctly movements in the
direction of the stock market generally or of a
particular industry. This requires different
skills and techniques than predicting changes in
the price of individual stocks.
Futures Contracts on Stock Indexes. The Fund may
enter into contracts providing for the making and
acceptance of a cash settlement based upon changes
in the value of an index of securities ("Futures
Contracts"). This investment technique is designed
only to hedge against anticipated future change in
general market prices which otherwise might either
adversely affect the value of securities held by
the Fund or adversely affect the prices of
securities which are intended to be purchased at a
later date for the Fund. A Futures Contract may
also be entered into to close out or offset an
existing futures position.
In general, each transaction in Futures Contracts
involves the establishment of a position which
will move in a direction opposite to that of the
investment being hedged. If these hedging
transactions are successful, the futures positions
taken for the Fund will rise in value by an amount
which approximately offsets the decline in value
of the portion of the Fund's investments that are
being hedged. Should general market prices move in
an unexpected manner, the full anticipated
benefits of Futures Contracts may not be achieved
or a loss may be realized.
Although Futures Contracts would be entered into
for hedging purposes only, such transactions do
involve certain risks. These risks could include a
lack of correlation between the Futures Contract
and the equity market being hedged, a potential
lack of liquidity in the secondary market and
incorrect assessments of market trends which may
result in poorer overall performance than if a
Futures Contract had not been entered into.
Brokerage costs will be incurred and "margin" will
be required to be posted and maintained as a good-
faith deposit against performance of obligations
under Futures Contracts written for the Fund. The
Fund may not purchase or sell a Futures Contract
if immediately thereafter its margin deposits on
its outstanding Futures Contracts would exceed 5%
of the market value of the Fund's total assets.
Options on Futures Contracts. The Fund may invest
in options on such Futures Contracts for similar
purposes.
Foreign Currency Exchange Transactions. Because
the Fund buys and sells securities denominated in
currencies other than the U.S. dollar and receives
interest, dividends and sale proceeds in
currencies other than the U.S. dollar, the Fund
from time to time may enter into foreign currency
exchange transactions to convert to and from
different foreign currencies and to convert
foreign currencies to and from the U.S. dollar.
The Fund either enters into these transactions on
a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market
or uses forward contracts to purchase or sell
foreign currencies.
A forward foreign currency exchange contract is an
obligation by the Fund to purchase or sell a
specific currency at a future date, which may be
any fixed number of days from the date of the
contract. Forward foreign currency exchange
contracts establish an exchange rate at a future
date. These contracts are transferable in the
interbank market conducted directly between
currency traders (usually large commercial banks)
and their customers. A forward foreign currency
exchange contract generally has no deposit
requirement and is traded at a net price without
commission. The Fund maintains with its custodian
a segregated account of high grade liquid assets
in an amount at least equal to its obligations
under each forward foreign currency exchange
contract. Neither spot transactions nor forward
foreign currency exchange contracts eliminate
fluctuations in the prices of the Fund's
securities or in foreign exchange rates, or
prevent loss if the prices of these securities
should decline.
The Fund may enter into foreign currency hedging
transactions in an attempt to protect against
changes in foreign currency exchange rates between
the trade and settlement dates of specific
securities transactions or changes in foreign
currency exchange rates that would adversely
affect a portfolio position or an anticipated
investment position. Since consideration of the
prospect for currency parities will be
incorporated into the Adviser's long-term
investment decisions, the Fund will not routinely
enter into foreign currency hedging transactions
with respect to security transactions; however,
the Adviser believes that it is important to have
the flexibility to enter into foreign currency
hedging transactions when it determines that the
transactions would be in the Fund's best interest.
Although these transactions tend to minimize the
risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to
limit any potential gain that might be realized
should the value of the hedged currency increase.
The precise matching of the forward contract
amounts and the value of the securities involved
will not generally be possible because the future
value of such securities in foreign currencies
will change as a consequence of market movements
in the value of such securities between the date
the forward contract is entered into and the date
it matures. The projection of currency market
movements is extremely difficult, and the
successful execution of a hedging strategy is
highly uncertain.
Options on Foreign Currencies. The Fund may write
covered put and call options and purchase put and
call options on foreign currencies for the purpose
of protecting against declines in the dollar value
of portfolio securities and against increases in
the dollar cost of securities to be acquired. The
Fund may use options on currency to cross-hedge,
which involves writing or purchasing options on
one currency to hedge against changes in exchange
rates for a different, but related currency. As
with other types of options, however, the writing
of an option on foreign currency will constitute
only a partial hedge up to the amount of the
premium received, and the Fund could be required
to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on foreign
currency may be used to hedge against fluctuations
in exchange rates although, in the event of
exchange rate movements adverse to the Fund's
position, it may forfeit the entire amount of the
premium plus related transaction costs. In
addition, the Fund may purchase call options on
currency when the Adviser anticipates that the
currency will appreciate in value.
There is no assurance that a liquid secondary
market on an options exchange will exist for any
particular option, or at any particular time. If
the Fund is unable to effect a closing purchase
transaction with respect to covered options it has
written, the Fund will not be able to sell the
underlying currency or dispose of assets held in a
segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to
effect a closing sale transaction with respect to
options it has purchased, it would have to
exercise the options in order to realize any
profit and will incur transaction costs upon the
purchase or sale of underlying currency. The Fund
pays brokerage commissions or spreads in
connection with its options transactions.
As in the case of forward contracts, certain
options on foreign currencies are traded over-the-
counter and involve liquidity and credit risks
which may not be present in the case of exchange-
traded currency options. The Fund's ability to
terminate OTC Options will be more limited than
with exchange-traded options. It is also possible
that brokerdealers participating in OTC Options
transactions will not fulfill their obligations.
Until such time as the staff of the SEC changes
its position, the Fund will treat purchased OTC
Options and assets used to cover written OTC
Options as illiquid securities. With respect to
options written with primary dealers in U.S.
Government securities pursuant to an agreement
requiring a closing purchase transaction at a
formula price, the amount of illiquid securities
may be calculated with reference to the repurchase
formula.
The Fund will write and purchase options only to
the extent permitted by the policies of state
securities authorities in states where shares of
the Fund are qualified for offer and sale.
There can be no assurance that the use of these
Fund strategies will be successful.
Repurchase Agreements. In a repurchase agreement
the Fund buys a security and simultaneously agrees
to sell it back at a higher price. In the event of
the bankruptcy of the other party to either a
repurchase agreement or a securities loan, the
Fund could experience delays in recovering either
its cash or the securities it lent. To the extent
that, in the meantime, the value of the securities
repurchased had decreased or the value of the
securities lent had increased, the Fund could
experience a loss. In all cases, the Adviser must
find the creditworthiness of the other party to
the transaction satisfactory. A repurchase
agreement is considered a collateralized loan
under the 1940 Act.
Asset Coverage. To assure that the Fund's use of
futures and related options, as well as when-
issued and delayed-delivery securities and foreign
currency exchange transactions, are not used to
achieve investment leverage, the Fund will cover
such transactions, as required under applicable
interpretations of the SEC, either by owning the
underlying securities or by establishing a
segregated account with the Fund's custodian
containing high grade liquid debt securities in an
amount at all times equal to or exceeding the
Fund's commitment with respect to these
instruments or contracts.
Investment Adviser of the Fund
BANKERS TRUST GLOBAL INVESTMENT MANAGEMENT
a unit of
BANKERS TRUST COMPANY
Distributor
440 FINANCIAL DISTRIBUTORS, INC.
Custodian
BANKERS TRUST COMPANY
Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
COOPERS & LYBRAND LLP
Counsel
WILLKIE FARR & GALLAGHER
..................................................
............................
No person has been authorized to give any
information or to make any representation other
than those contained in the Fund's Prospectus, its
Statement of Additional Information or the Fund's
official sales literature in connection with the
offering of the Fund's shares and, if given or
made, such other information or representations
must not be relied on as having been authorized by
the Fund. This Prospectus does not constitute an
offer in any state in which, or to any person to
whom, such offer may not lawfully be made
SUBJECT TO COMPLETION, DATED _______, 1996
Information contained herein is subject to completion or
amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers
to buy be accepted prior to the time the registration
statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in
any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such State.
BT INSURANCE FUNDS TRUST
PROSPECTUS: ____________, 1996
International Equity Fund
Seeks long-term capital appreciation
primarily from non-U.S. equities, or other
securities with equity characteristics.
This Prospectus offers shares of the International Equity
Fund (the "Fund"), a series of BT Insurance Funds Trust
(the "Trust"), which is an open-end management investment
company having two series. Shares of the Fund are available
to the public only through the purchase of certain variable
annuity and variable life insurance contracts
("Contract(s)") issued by various insurance companies (the
"Companies").
Shares of the Fund are being offered during an initial
subscription period scheduled to end on ________________,
1996. Subsequent to such date, the Fund will engage in a
continuous offering of its shares; see "Purchases and
Redemption of Shares."
Please read this Prospectus carefully before investing and
retain it for future reference. It contains important
information about the Fund that you should know and can
refer to in deciding whether the Fund's goals match your
own.
A Statement of Additional Information ("SAI") with the same
date has been filed with the Securities and Exchange
Commission, and is incorporated herein by reference. You may
request a free copy of the SAI by calling 1-800-730-1313.
Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, Bankers Trust Company and the
shares are not Federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BANKERS TRUST GLOBAL INVESTMENT MANAGEMENT, a unit of
BANKERS TRUST COMPANY
Investment Adviser of the Fund
440 FINANCIAL DISTRIBUTORS, INC.
Distributor
290 Donald Lynch Boulevard
Marlboro, MA 01752
TABLE OF CONTENTS
Investment Objective, Policies and Risks 2
Risk Factors; Matching the Fund to Your Investment Needs
4
Net Asset Value 7
Purchase and Redemption of Shares . 8
Dividends, Distributions and Taxes 8
Performance Information and Reports 10
Management of the Fund 10
Additional Information 14
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is long-term capital
appreciation from investment in foreign equity securities
(or other securities with equity characteristics); the
production of any current income is incidental to this
objective. There can be no assurance that the investment
objective of the Fund will be achieved.
The Fund seeks to provide long-term capital appreciation by
investing primarily in the equity securities of foreign
issuers, consisting of common stock and other securities
with equity characteristics. These issuers are primarily
established companies based in developed countries outside
the United States. However, the Fund may also invest in
securities of issuers in underdeveloped countries.
Investments in these countries will be based on an
acceptable degree of risk in anticipation of superior
returns. Under normal circumstances, the Fund will invest at
least 65% of the value of its total assets in the equity
securities of issuers based in at least three countries
other than the United States. For further discussion of the
unique risks associated with investing in foreign securities
in both developed and underdeveloped countries, see "Risk
Factors; Matching the Fund to Your Investment Needs" and
"Additional Information" herein and the Statement of
Additional Information.
The Fund's investments will generally be diversified among
several geographic regions and countries. Criteria for
determining the appropriate distribution of investments
among various countries and regions include the prospects
for relative growth among foreign countries, expected levels
of inflation, government policies influencing business
conditions, the outlook for currency relationships and the
range of alternative opportunities available to
international investors.
In countries and regions with well-developed capital markets
where more information is available, Bankers Trust will seek
to select individual investments for the Fund. Criteria for
selection of individual securities include the issuer's
competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative
market value and overall marketability. The Fund may invest
in securities of companies having various levels of net
worth, including smaller companies whose securities may be
more volatile than securities offered by larger companies
with higher levels of net worth.
In other countries and regions where capital markets are
underdeveloped or not easily accessed and information is
difficult to obtain, the Fund may choose to invest only at
the market level. Here, the Fund may seek to achieve country
exposure through use of options or futures based on an
established local index. Similarly, country exposure may
also be achieved through investments in other registered
investment companies. Restrictions on both these types of
investments are fully explained herein and in the Statement
of Additional Information.
The remainder of the Fund's assets will be invested in
dollar and nondollar denominated short-term instruments.
These investments are subject to the conditions described in
"Short-Term Instruments" below.
Equity Investments. The Fund invests primarily in common
stock and other securities with equity characteristics. For
purposes of the Fund's policy of investing at least 65% of
the value of its total assets in the equity securities of
foreign issuers, equity securities are defined as common
stock, preferred stock, trust or limited partnership
interests, rights and warrants, and convertible securities,
consisting of debt securities or preferred stock that may be
converted into common stock or that carry the right to
purchase common stock. The Fund invests in securities listed
on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets and
may invest in restricted or unlisted securities.
With respect to certain countries in which capital markets
are either less developed or not easily accessed,
investments by the Fund may be made through investment in
other investment companies that in turn are authorized to
invest in the securities of such countries. Investment in
other investment companies is limited in amount by the
Investment Company Act of 1940, as amended (the "1940 Act"),
will involve the indirect payment of a portion of the
expenses, including advisory fees, of such other investment
companies and may result in a duplication of fees and
expenses.
Short-Term Instruments. The Fund intends to stay invested in
the securities described above to the extent practical in
light of its objective and long-term investment perspective.
However, the Fund's assets may be invested in short-term
instruments with remaining maturities of 397 days or less to
meet anticipated redemptions and expenses or for day-to-day
operating purposes and when, in Bankers Trust's opinion, it
is advisable to adopt a temporary defensive position because
of unusual and adverse conditions affecting the equity
markets. In addition, when the Fund experiences large cash
inflows through the sale of securities and desirable equity
securities that are consistent with the Fund's investment
objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments
for a limited time pending availability of such equity
securities. Short-Term instruments consist of foreign and
domestic: (i) short-term obligations of sovereign
governments, their agencies, instrumentalities, authorities
or political subdivisions; (ii) other short-term debt
securities rated Aa or higher by Moody's Investors Service,
Inc. ("Moody's") or AA or higher by Standard & Poor's
Corporation ("S&P") or, if unrated, of comparable quality in
the opinion of Bankers Trust; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of
deposit, time deposits and bankers' acceptances; and (v)
repurchase agreements. At the time the Fund invests in
commercial paper, bank obligations or repurchase agreements,
the issuer or the issuer's parent must have outstanding debt
rated Aa or higher by Moody's or AA or higher by S&P or
outstanding commercial paper or bank obligations rated
Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are
available, the instrument must be of comparable quality in
the opinion of Bankers Trust. These instruments may be
denominated in U.S. dollars or in foreign currencies and
will have been determined to be of high quality by a
nationally recognized statistical rating organization, or if
unrated, by Bankers Trust.
Additional Investment Techniques
The Fund may also utilize the following investments and
investment techniques and practices: foreign currency
exchange transactions, options on foreign currencies,
American Depositary Receipts and European Depositary
Receipts, options on stocks, options on foreign stock
indexes, futures contracts on foreign stock indexes, options
on futures contracts, Rule 144A securities, when-issued and
delayed delivery securities, securities lending and
repurchase agreements. See "Additional Information" herein
for further information.
Additional Investment Limitations
As a diversified fund, no more than 5% of the assets of the
Fund may be invested in the securities of one issuer (other
than U.S. Government securities), except that up to 25% of
the Fund's assets may be invested without regard to this
limitation. The Fund will not invest more than 25% of its
assets in the securities of issuers in any one industry.
These are fundamental investment policies of the Fund which
may not be changed without investor approval. No more than
15% of the Fund's net assets may be invested in illiquid or
not readily marketable securities (including repurchase
agreements and time deposits maturing in more than seven
days). The Fund will not purchase securities issued by any
open-end investment company and will purchase securities
issued by closed-end investment companies only in the open
market or where such purchase is part of a merger or
consolidation plan. Additional limitations on purchases of
investment company securities are imposed by statute and set
forth in the Statement of Additional Information. Additional
investment policies of the Fund are contained in the
Statement of Additional Information.
RISK FACTORS; MATCHING THE FUND TO YOUR
INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced
investment plan; the Fund seeks long-term capital
appreciation from investment primarily in the equity
securities (or other securities with equity characteristics)
of foreign issuers. Changes in domestic and foreign interest
rates may affect the value of the Fund's investments, and
rising interest rates can be expected to reduce the Fund's
share value. A description of a number of investments and
investment techniques available to the Fund, including
foreign investments and the use of options and futures, and
certain risks associated with these investments and
techniques is included under "Additional Information." The
Fund's share price and total return fluctuate and your
investment may be worth more or less than your original cost
when you redeem your shares.
Risk of Investing in Foreign Securities
Investors should realize that investing in securities of
foreign issuers involves considerations not typically
associated with investing in securities of companies
organized and operated in the United States. Although the
Fund intends to invest primarily in securities of
established companies based in developed countries,
investors should realize that the value of the Fund's
investments may be adversely affected by changes in
political or social conditions, diplomatic relations,
confiscatory taxation, expropriation, nationalization,
limitation on the removal of funds or assets, or imposition
of (or change in) exchange control or tax regulations in
those foreign countries. In addition, changes in government
administrations or economic or monetary policies in the
United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or
unfavorably affect the Fund's operations. Furthermore, the
economies of individual foreign nations may differ from the
U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance
of payments position; it may also be more difficult to
obtain and enforce a judgment against a foreign issuer. In
general, less information is publicly available with respect
to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to
the uniform accounting and financial reporting requirements
applicable to issuers in the United States. Any foreign
investments made by the Fund must be made in compliance with
U.S. and foreign currency restrictions and tax laws
restricting the amounts and types of foreign investments.
The Fund may invest in the securities of issuers based in
underdeveloped countries, including those in Eastern Europe.
Investment in securities of issuers based in underdeveloped
countries entails all of the risks of investing in
securities of foreign issuers outlined in this section to a
heightened degree. These heightened risks include: (i)
greater risks of expropriation, confiscatory taxation,
nationalization, and less social, political and economic
stability; (ii) the smaller size of the market for such
securities and a low or nonexistent volume of trading,
resulting in lack of liquidity and in price volatility;
(iii) certain national policies which may restrict the
Fund's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to
relevant national interests; and (iv) in the case of Eastern
Europe, the absence of developed capital market and legal
structures governing private or foreign investment and
private property and the possibility that recent favorable
economic and political developments could be slowed or
reversed by unanticipated events. The Fund will not invest
more than 5% of the value of its total assets in securities
of issuers based in Eastern Europe.
Because foreign securities generally are denominated and pay
dividends or interest in foreign currencies, and the Fund
holds various foreign currencies from time to time, the
value of the net assets of the Fund as measured in U.S.
dollars will be affected favorably or unfavorably by changes
in exchange rates. Generally, the Fund's currency exchange
transactions will be conducted on a spot (i.e., cash) basis
at the spot rate prevailing in the currency exchange market.
The cost of the Fund's currency exchange transactions will
generally be the difference between the bid and offer spot
rate of the currency being purchased or sold. In order to
protect against uncertainty in the level of future foreign
currency exchange rates, the Fund is authorized to enter
into certain foreign currency exchange transactions. See
"Additional Information."
In addition, while the volume of transactions effected on
foreign stock exchanges has increased in recent years, in
most cases it remains appreciably below that of the New York
Stock Exchange Inc. (the "NYSE"). Accordingly, the Fund's
foreign investments may be less liquid and their prices may
be more volatile than comparable investments in securities
of U.S. companies. Moreover, the settlement periods for
foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity.
In buying and selling securities on foreign exchanges, the
Fund normally pays fixed commissions that are generally
higher than the
negotiated commissions charged in the United States. In
addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.
The Fund intends to manage its holdings actively to pursue
its investment objective. The Fund does not expect to trade
in securities for short-term profits but, when circumstances
warrant, securities may be sold without regard to the length
of time held.
Derivatives
The Fund may invest in various instruments that are commonly
known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived"
from, a traditional security, asset, or market index. Some
"derivatives" such as mortgage-related and other asset-
backed securities are in many respects like any other
investment, although they may be more volatile or less
liquid than more traditional debt securities. There are, in
fact, many different types of derivatives and many different
ways to use them. There are a range of risks associated with
those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices,
or currency exchange rates and for cash management purposes
as a low cost method of gaining exposure to a particular
securities market without investing directly in those
securities. However, some derivatives are used for leverage,
which tends to magnify the effects of an instrument's price
changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of
financial assets, and can in some circumstances, lead to
significant losses. The Adviser will use derivatives only in
circumstances where the Adviser believes they offer the most
economic means of improving the risk/reward profile of the
Fund. Derivatives will not be used to increase portfolio
risk above the level that could be achieved using only
traditional investment securities or to acquire exposure to
changes in the value of assets or indexes that by themselves
would not be purchased for the Fund. The use of derivatives
for non-hedging purposes may be considered speculative. A
description of the derivatives that the Fund may use and
some of their associated risks is found under "Additional
Information."
The Fund's investment objective is not a fundamental policy
and may be changed upon notice to but without the approval
of the Fund's shareholders. If there is a change in the
Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment
in light of their then-current needs. Shareholders of the
Fund will receive 30 days prior written notice with respect
to any change in the investment objective of the Fund. See
"Investment Objective and Policies" for a description of the
fundamental policies of the Fund that cannot be changed
without approval by the holders of "a majority of the
outstanding voting securities" (as defined in the 1940 Act)
of the Fund.
For descriptions of the management of the Fund, see
"Management of the Fund" herein and "Management of the
Funds" in the Statement of Additional Information. For
descriptions of the expenses of the Fund, see "Management of
the Fund" herein.
NET ASSET VALUE
The net asset value per share of the Fund is calculated on
each day on which the NYSE is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day,
Monday through Friday, except: (a) January 1st, Presidents'
Day (the third Monday in February), Good Friday, Memorial
Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or
the subsequent Monday when one of the calendar-determined
holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of the Fund is calculated once
on each Valuation Day as of the close of regular trading on
the NYSE (the "Valuation Time"), which under normal
circumstances is 4:00 p.m., New York time. The net asset
value per share of the Fund is computed by dividing the
value of the Fund's assets, less all liabilities, by the
total number of its shares outstanding. The Fund's
securities and other assets are valued primarily on the
basis of market quotations or, if quotations are not readily
available, by a method which the Fund's Board of Trustees
believes accurately reflects fair value.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are being offered to the Companies'
separate accounts during a 60-day period scheduled to end on
__________, 1996, subject to an extension of up to 60 days
by agreement between the Fund and Bankers Trust (the
"Subscription Period"). On the fifth business day after
termination of the Subscription Period or on such other date
as may be agreed upon between the Fund and Bankers Trust
(the "Closing Date"), the Fund will commence investment
operations and the Fund will begin a continuous offering of
the shares to the Companies' separate accounts. The
Companies will not be required to pay for shares offered
during the Subscription Period until the Closing Date, and
they may revoke subscriptions until the termination of the
Subscription Period. Any Company who makes payments prior
to the Closing Date may designate a temporary investment
(such as a money market fund offered to the relevant
separate account) for such payment until the Closing Date,
at the direction of the Contractowners. The Fund and
Bankers Trust reserve the right to withdraw, cancel or
modify the initial offering of shares without notice.
After the Closing Date, shares of the Fund will be
continuously offered to each Company's separate accounts at
the net asset value per share next determined after a proper
purchase request has been received by the Company. The
Company then offers to owners of the Contracts which provide
for investment in the Fund ("Contractowner(s)") units in its
separate accounts which directly correspond to shares in the
Fund. Each Company submits purchase and redemption orders
to the Fund based on allocation instructions for premium
payments, transfer instructions and surrender or partial
withdrawal requests which are furnished to the Company by
such Contractowners. Contractowners can send such
instructions and requests to the Companies by first class
mail, overnight mail or express mail sent to the address set
forth in the relevant Company's offering memorandum included
with this prospectus. The Fund and 440 Financial
Distributors, Inc., the Fund's distributor ("440 Financial"
or the "Distributor"), reserve the right to reject any
purchase order.
Payment for redeemed shares will ordinarily be made within
three (3) business days after the Fund receives a redemption
order from the relevant Company. The redemption price will
be the net asset value per share next determined after the
Company receives the Contractowner's request in proper form.
The Fund may suspend the right of redemption or postpone the
date of payment during any period when trading on the New
York Stock Exchange is restricted, or such Exchange is
closed for other than weekends and holidays; when an
emergency makes it not reasonably practicable for the Fund
to dispose of assets or calculate its net asset value; or as
permitted by the Securities and Exchange Commission (the
"SEC").
.
The accompanying offering memorandum for the Company's
variable annuity or variable life insurance policy describes
the allocation, transfer and withdrawal provisions of such
annuity or policy.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its
net investment income and capital gains each year. Income
dividends and any net capital gains are normally distributed
in December. All dividends and capital gains distributions
paid by the Fund will be automatically reinvested, at net
asset value, by the Companies' separate accounts in
additional shares of the Fund, unless an election is made by
a Contractowner to receive distributions in cash.
Federal Taxes. The Fund will be treated as a separate
entity for federal income tax purposes. The Fund intends to
qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"), in
order to be relieved of federal income tax on that part of
its net investment income and realized capital gains which
it distributes to the Companies' separate accounts. To
qualify, the Fund must meet certain relatively complex
income and diversification tests, including the requirement
that less than 30% of its gross income (exclusive of losses)
may be derived from the sale or other disposition of
securities held for less than three months. The loss of
such status would result in the Fund being subject to
federal income tax on its taxable income and gains.
The Code and Treasury Department regulations promulgated
thereunder require that mutual funds that are offered
through insurance company separate accounts must meet
certain diversification requirements to preserve the tax-
deferral benefits provided by the variable contracts which
are offered in connection with such separate accounts. The
Adviser intends to diversify the Fund's investments in
accordance with those requirements. The enclosed offering
memorandum for a Company's variable annuity or variable life
insurance policies describes the federal income tax
treatment of distributions from such contracts to
Contractowners.
Other Tax Information. In addition to federal taxes, there
may be state or local tax provisions that affect the Fund
and its operations. Income received by the Fund from sources
within foreign countries may be subject to withholding and
other taxes imposed by such countries. Tax conventions
between certain countries and the United States may reduce
or eliminate such taxes. It is impossible to determine the
effective rate of foreign tax in advance since the amount of
the Fund's assets to be invested in various countries will
vary.
If the Fund is liable for foreign taxes, and if more than
50% of the value of the Fund's total assets at the close of
its taxable year consists of stocks or securities of foreign
corporations, it may make an election pursuant to which
certain foreign taxes paid by it would be treated as having
been paid directly by shareholders of the Fund. Pursuant to
such election, the amount of foreign taxes paid will be
included in the income of Fund shareholders, and Fund
shareholders (except tax-exempt shareholders) may, subject
to certain limitations, claim either a credit or deduction
for the taxes. Each Fund shareholder will be notified after
the close of the Fund's taxable year whether the foreign
taxes paid will "pass through" for that year and, if so,
such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country and
(b) the portion which represents income derived from sources
within each such country.
The amount of foreign taxes for which a shareholder may
claim a credit in any year will generally be subject to a
separate limitation for "passive income," which includes,
among other items of income, dividends, interest and certain
foreign currency gains. Because capital gains realized by
the Fund on the sale of foreign securities will be treated
as U.S.-source income, the available credit of foreign taxes
paid with respect to such gains may be restricted by this
limitation.
Anyone who is considering allocating, transferring or
withdrawing monies held under a variable contract to or
from the Fund should consult a qualified tax adviser.
PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in
advertisements, shareholder reports or other communications
to existing or prospective owners of the Companies' variable
contracts. When performance information is provided in
advertisements, it will include the effect of all charges
deducted under the terms of the specified contract, as well
as all recurring and non-recurring charges incurred by the
Fund. Performance information may include the Fund's
investment results and/or comparisons of its investment
results to the MSCI GDP weighted EAFE Index, MSCI EAFE
Index, and the Lipper International Average or other various
unmanaged indices or results of other mutual funds or
investment or savings vehicles. The Fund's investment
results as used in such communications will be calculated on
a total rate of return basis in the manner set forth below.
From time to time, fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value
Line and Morningstar Inc.
The Trust may provide period and average annualized "total
return" quotations for the Fund. The Fund's "total return"
refers to the change in the value of an investment in the
Fund over a stated period based on any change in net asset
value per share and including the value of any shares
purchasable with any dividends or capital gains distributed
during such period. Period total return may be annualized.
An annualized total return is a compounded total return
which assumes that the period total return is generated over
a one-year period, and that all dividends and capital gain
distributions are reinvested. An annualized total return
will be higher than a period total return if the period is
shorter than one year, because of the compounding effect.
Unlike some bank deposits or other investments which pay a
fixed yield for a stated period of time, the total return of
the Fund will vary depending upon interest rates, the
current market value of the securities held by the Fund and
changes in the Fund's expenses. In addition, during certain
periods for which total return quotations may be provided,
Bankers Trust may have voluntarily agreed to waive portions
of their fees on a month-to-month basis. Such waivers will
have the effect of increasing the Fund's net income (and
therefore its total return) during the period such waivers
are in effect.
Shareholders will receive financial reports semiannually
that include the Fund's financial statements, including
listings of investment securities held by the Fund at those
dates. Annual reports are audited by independent
accountants.
MANAGEMENT OF THE FUND
Board of Trustees
The affairs of the Fund are managed under the supervision of
the Board of Trustees of the Trust, of which the Fund is a
series. By virtue of the responsibilities assumed by Bankers
Trust, neither the Trust nor the Fund require employees
other than the Trust's officers. None of the Trust's
officers devotes full time to the affairs of the Trust or
the Fund.
For more information with respect to the Trustees of the
Trust, see "Management of the Fund" in the Statement of
Additional Information.
Investment Adviser and Administrator
The Fund has retained the services of Bankers Trust Global
Investment Management, a unit of Bankers Trust, as
investment adviser. Bankers Trust, a New York banking
corporation with executive offices at 280 Park Avenue, New
York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a
major wholesaler supplier of financial services to the
international and domestic institutional markets.
As of September 30, 1995, Bankers Trust New York Corporation
was the ninth largest bank holding company in the United
States with total assets of approximately $104 billion.
Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial
institutions and private clients through a global network of
over 120 offices in more than 40 countries. Investment
management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank
founded in 1903. The scope of Bankers Trust's investment
management capability is unique due to its leadership
positions in both active and passive quantitative management
and its presence in major equity and fixed income markets
around the world. Bankers Trust is one of the nation's
largest and most experienced investment managers with
approximately $200 billion in assets under management as of
September 30, 1995.
Bankers Trust has more than 50 years of experience managing
retirement assets for the nation's largest corporations and
institutions. Now, the Trust brings Bankers Trust's
extensive investment management expertise -- once available
to only the largest institutions in the U.S. -- to
individual investors. Bankers Trust's officers have had
extensive experience in managing investment portfolios
having objectives similar to those of the Fund.
Bankers Trust, subject to the supervision and direction of
the Board of Trustees, manages the Fund in accordance with
the Fund's investment objective and stated investment
policies, makes investment decisions for the Fund, places
orders to purchase and sell securities and other financial
instruments on behalf of the Fund and employs professional
investment managers and securities analysts who provide
research services to the Fund. Bankers Trust may utilize
the expertise of any of its world wide subsidiaries and
affiliates to assist it in its role as investment adviser.
All orders for investment transactions on behalf of the Fund
are placed by Bankers Trust with broker-dealers and other
financial intermediaries that it selects, including those
affiliated with Bankers Trust. A Bankers Trust affiliate
will be used in connection with a purchase or sale of an
investment for the Fund only if Bankers Trust believes that
the affiliate's charge for the transaction does not exceed
usual and customary levels. The Fund will not invest in
obligations for which Bankers Trust or any of its affiliates
is the ultimate obligor or accepting bank. The Fund may,
however, invest in the obligations of correspondents and
customers of Bankers Trust. Bankers Trust has been advised
by its counsel that, in counsel's opinion, Bankers Trust
currently may perform the services for the Trust and the
Fund described in this Prospectus and the Statement of
Additional Information without violation of the Glass-
Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and
financial institutions may be required to register as
dealers pursuant to state securities law.
Mr. Michael Levy will be the primary portfolio manager for
the International Equity Fund. He also heads the
international active equity team which is responsible for
the day-to-day management of the Fund. Mr. Levy has been
the head of this team since joining Bankers Trust in March,
1993, and is a Managing Director and International Equity
Strategist of Bankers Trust. Prior to joining Bankers
Trust. Mr. Levy was an investment banker and an equity
analyst with Oppenheimer & Company. He has twenty-four
years of business experience, of which fourteen years have
been in the investment industry.
As compensation for its services to the Fund, Bankers Trust
receives a fee from the Fund computed daily and paid monthly
at the annual rate of 0.95% of the average daily net assets
of the Fund.
Expenses
In addition to the fees of the Adviser, the Fund is
responsible for the payment of all its other expenses
incurred in the operation of the Fund, which include, among
other things, expenses for legal and independent auditor's
services, charges of the Fund's custodian and transfer
agent, SEC fees, a pro rata portion of the fees of the
Trust's unaffiliated trustees and officers, accounting costs
for reports sent to Contractowners, the Fund's pro rata
portion of membership fees in trade organizations, a pro
rata portion of the fidelity bond coverage for the Trust's
officers, interest, brokerage and other trading costs,
taxes, all expenses of computing the Fund's net asset value
per share, expenses involved in registering and maintaining
the registration of the Fund's shares with the SEC and
qualifying the Fund for sale in various jurisdictions and
maintaining such qualification, litigation and other
extraordinary or non-recurring expenses. However, other
typical Fund expenses such as Contractowner servicing,
distribution of reports to Contractowners and prospectus
printing and postage will be borne by the relevant Company.
Distributor
440 Financial Distributors, Inc. serves as Distributor of
the Fund's shares to separate accounts of the Companies for
which it receives no separate fee from the Fund. The
principal business address of the Distributor is 290 Donald
Lynch Boulevard, Marlboro, Massachusetts 01752.
Custodian and Transfer Agent
Bankers Trust acts as custodian of the assets of the Fund
and serves as the transfer agent for the Fund.
Organization of the Trust
The Trust was organized on January 19, 1996, under the laws
of the Commonwealth of Massachusetts. The Fund is a separate
series of the Trust and was established and designated as
such on _______,199__. The Trust offers shares of beneficial
interest of its two series, par value $0.001 per share. The
shares of the other series of the Trust are offered through
a separate Prospectus. No series of shares has any
preference over any other series. All shares, when issued,
will be fully paid and nonassessable. The Trust's Board of
Trustees has the authority to create additional series
without obtaining shareholder approval.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law,
shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring
financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance
existed and the Trust itself was unable to meet its
obligations.
Through its separate accounts, the Companies are the Fund's
sole stockholder of record, so under the 1940 Act, The
Hartford is deemed to be in control of the Fund.
Nevertheless, when a shareholders' meeting occurs, each
Company solicits and accepts voting instructions from its
Contractowners who have allocated or transferred monies for
an investment in the Fund as of the record date of the
meeting. Each Company then votes the Fund's shares that are
attributable to its Contractowners' interests in the Fund in
proportion to the voting instructions received. Each
Company will vote any share that it is entitled to vote
directly due to amounts it has contributed or accumulated in
its separate accounts in the manner described in the
prospectuses for its variable annuities and variable life
insurance policies.
Each share of the Fund is entitled to one vote, and
fractional shares are entitled to fractional votes. Fund
shares have non-cumulative voting rights, so the vote of
more than 50% of the shares can elect 100% of the directors.
The Trust is not required, and does not intend, to hold
regular annual shareholder meetings, but may hold special
meetings for consideration of proposals requiring
shareholder approval.
The Fund is only available to owners of variable annuities
or variable life insurance policies issued by the Companies
through their respective separate accounts. The Fund does
not currently foresee any disadvantages to Contractowners
arising from offering its shares to variable annuity and
variable life insurance policy separate accounts
simultaneously, and the Board of Trustees monitors events
for the existence of any material irreconcilable conflict
between or among Contractowners. If a material
irreconcilable conflict arises, one or more separate
accounts may withdraw their investments in the Fund. This
could possibly force the Fund to sell portfolio securities
at disadvantageous prices. Each Company will bear the
expenses of establishing separate portfolios for its
variable annuity and variable life insurance separate
accounts if such action becomes necessary; however, ongoing
expenses that are ultimately borne by Contractowners will
likely increase due to the loss of economies of scale
benefits that can be provided to mutual funds with
substantial assets.
ADDITIONAL INFORMATION
American Depositary Receipts and European Depositary
Receipts. The Fund may invest in securities of foreign
issuers directly or in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") or
other similar securities representing securities of foreign
issuers. These securities may not necessarily be denominated
in the same currency as the securities they represent. ADRs
are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities.
EDRs are receipts issued by a European financial institution
evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the U.S. securities
markets, and EDRs, in bearer form, are designed for use in
European securities markets.
Rule 144A Securities. The Fund may purchase securities in
the United States that are not registered for sale under
Federal securities laws but which can be resold to
institutions under SEC Rule 144A. Provided that a dealer or
institutional trading market in such securities exists,
these restricted securities are treated as exempt from the
Fund's 15% limit on illiquid securities. Under the
supervision of the Board of Trustees of the Fund, the
Adviser determines the liquidity of restricted securities
and, through reports from the Adviser, the Board will
monitor trading activity in restricted securities. If
institutional trading in restricted securities were to
decline, the liquidity of the Fund could be adversely
affected.
When-Issued and Delayed Delivery Securities. The Fund may
purchase securities on a when-issued or delayed delivery
basis. Delivery of and payment for these securities may take
place as long as a month or more after the date of the
purchase commitment. The value of these securities is
subject to market fluctuation during this period and no
income accrues to the Fund until settlement takes place. The
Fund maintains with the custodian a segregated account
containing high grade liquid securities in an amount at
least equal to these commitments. When entering into a when-
issued or delayed delivery transaction, the Fund will rely
on the other party to consummate the transaction; if the
other party fails to do so, the Fund may be disadvantaged.
Securities Lending. The Fund is permitted to lend up to 30%
of the total value of its securities. These loans must be
secured continuously by cash or equivalent collateral or by
a letter of credit at least equal to the market value of the
securities loaned plus accrued income. By lending its
securities, the Fund can increase its income by continuing
to receive income on the loaned securities as well as by the
opportunity to receive interest on the collateral. Any gain
or loss in the market price of the borrowed securities which
occurs during the term of the loan inures to the Fund and
its investors.
Foreign Currency Exchange Transactions. Because the Fund
buys and sells securities denominated in currencies other
than the U.S. dollar and receives interest, dividends and
sale proceeds in currencies other than the U.S. dollar, the
Fund from time to time may enter into foreign currency
exchange transactions to convert to and from different
foreign currencies and to convert foreign currencies to and
from the U.S. dollar. The Fund either enters into these
transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or uses
forward contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an
obligation by the Fund to purchase or sell a specific
currency at a future date, which may be any fixed number of
days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future
date. These contracts are transferable in the interbank
market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward
foreign currency exchange contract generally has no deposit
requirement and is traded at a net price without commission.
The Fund maintains with its custodian a segregated account
of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange
contract. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the
prices of the Fund's securities or in foreign exchange
rates, or prevent loss if the prices of these securities
should decline.
The Fund may enter into foreign currency hedging
transactions in an attempt to protect against changes in
foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or
changes in foreign currency exchange rates that would
adversely affect a portfolio position or an anticipated
investment position. Since consideration of the prospect for
currency parities will be incorporated into the Adviser's
long term investment decisions, the Fund will not routinely
enter into foreign currency hedging transactions with
respect to security transactions; however, the Adviser
believes that it is important to have the flexibility to
enter into foreign currency hedging transactions when it
determines that the transactions would be in the Fund's best
interest. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential
gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward
contract amounts and the value of the securities involved
will not generally be possible because the future value of
such securities in foreign currencies will change as a
consequence of market movements in the value of such
securities between the date the forward contract is entered
into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
Options on Foreign Currencies. The Fund may write covered
put and call options and purchase put and call options on
foreign currencies for the purpose of protecting against
declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be
acquired. The Fund may use options on currency to cross-
hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a
different, but related currency. As with other types of
options, however, the writing of an option on foreign
currency will constitute only a partial hedge up to the
amount of the premium received, and the Fund could be
required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may be used to
hedge against fluctuations in exchange rates although, in
the event of exchange rate movements adverse to the Fund's
position, it may forfeit the entire amount of the premium
plus related transaction costs. In addition, the Fund may
purchase call options on currency when the Adviser
anticipates that the currency will appreciate in value.
There is no assurance that a liquid secondary market on an
options exchange will exist for any particular option, or at
any particular time. If the Fund is unable to effect a
closing purchase transaction with respect to covered options
it has written, the Fund will not be able to sell the
underlying currency or dispose of assets held in a
segregated account until the options expire or are
exercised. Similarly, if the Fund is unable to effect a
closing sale transaction with respect to options it has
purchased, it would have to exercise the options in order to
realize any profit and will incur transaction costs upon the
purchase or sale of underlying currency. The Fund pays
brokerage commissions or spreads in connection with its
options transactions.
As in the case of forward contracts, certain options on
foreign currencies are traded over-the-counter and involve
liquidity and credit risks which may not be present in the
case of exchange-traded currency options. The Fund's ability
to terminate OTC Options will be more limited than with
exchange-traded options. It is also possible that broker-
dealers participating in OTC Options transactions will not
fulfill their obligations. Until such time as the staff of
the SEC changes its position, the Fund will treat purchased
OTC Options and assets used to cover written OTC Options as
illiquid securities. With respect to options written with
primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a
formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.
The Fund will write and purchase options only to the extent
permitted by the policies of state securities authorities in
states where shares of the Fund are qualified for offer and
sale.
Options on Stocks. The Fund may write and purchase put and
call options on stocks. A call option gives the purchaser of
the option the right to buy, and obligates the writer to
sell, the underlying stock at the exercise price at any time
during the option period. Similarly, a put option gives the
purchaser of the option the right to sell, and obligates the
writer to buy, the underlying stock at the exercise price at
any time during the option period. A covered call option,
which is a call option with respect to which the Fund owns
the underlying stock, sold by the Fund exposes the Fund
during the term of the option to possible loss of
opportunity to realize appreciation in the market price of
the underlying stock or to possible continued holding of a
stock which might otherwise have been sold to protect
against depreciation in the market price of the stock. A
covered put option sold by the Fund exposes the Fund during
the term of the option to a decline in price of the
underlying stock. A put option sold by the Fund is covered
when, among other things, cash or liquid securities are
placed in a segregated account to fulfill the obligations
undertaken.
To close out a position when writing covered options, the
Fund may make a "closing purchase transaction," which
involves purchasing an option on the same stock with the
same exercise price and expiration date as the option which
it has previously written on the stock. The Fund will
realize a profit or loss for a closing purchase transaction
if the amount paid to purchase an option is less or more, as
the case may be, than the amount received from the sale
thereof. To close out a position as a purchaser of an
option, the Fund may make a "closing sale transaction,"
which involves liquidating the Fund's position by selling
the option previously purchased.
The Fund intends to treat OTC Options purchased and the
assets used to "cover" OTC Options written as not readily
marketable and therefore subject to the limitations
described in "Investment Restrictions" in the Statement of
Additional Information.
Options on Foreign Stock Indexes. The Fund may purchase and
write put and call options on foreign stock indexes listed
on domestic and foreign stock exchanges. A stock index
fluctuates with changes in the market values of the stocks
included in the index.
Options on stock indexes are generally similar to options on
stock except that the delivery requirements are different.
Instead of giving the right to take or make delivery of
stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed
exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by
(b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of
a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be
equal to such difference between the closing price of the
index and the exercise price of the option expressed in
dollars or a foreign currency, the case may be, times a
specified multiple. The writer of the option is obligated,
in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing
transaction on an exchange or the option may expire
unexercised.
To the extent permitted by U.S. federal or state securities
laws, the Fund may invest in options on foreign stock
indexes in lieu of direct investment in foreign securities.
The Fund may also use foreign stock index options for
hedging purposes.
Because the value of an index option depends upon movements
in the level of the index rather than the price of a
particular stock, whether the Fund will realize a gain or
loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes,
in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful use
by the Fund of options on stock indexes will be subject to
the Adviser's ability to predict correctly movements in the
direction of the stock market generally or of a particular
industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
Futures Contracts on Foreign Stock Indexes. The Fund may
enter into contracts providing for the making and acceptance
of a cash settlement based upon changes in the value of an
index of securities ("Futures Contracts"). This investment
technique is designed only to hedge against anticipated
future change in general market prices which otherwise might
either adversely affect the value of securities held by the
Fund or adversely affect the prices of securities which are
intended to be purchased at a later date for the Fund. A
Futures Contract may also be entered into to close out or
offset an existing futures position.
In general, each transaction in Futures Contracts involves
the establishment of a position which will move in a
direction opposite to that of the investment being hedged.
If these hedging transactions are successful, the futures
positions taken for the Fund will rise in value by an amount
which approximately offsets the decline in value of the
portion of the Fund's investments that are being hedged.
Should general market prices move in an unexpected manner,
the full anticipated benefits of Futures Contracts may not
be achieved or a loss may be realized.
Although Futures Contracts would be entered into for hedging
purposes only, such transactions do involve certain risks.
These risks could include a lack of correlation between the
Futures Contract and the foreign equity market being hedged,
a potential lack of liquidity in the secondary market and
incorrect assessments of market trends which may result in
poorer overall performance than if a Futures Contract had
not been entered into.
Brokerage costs will be incurred and "margin" will be
required to be posted and maintained as a good-faith deposit
against performance of obligations under Futures Contracts
written for the Fund. The Fund may not purchase or sell a
Futures Contract if immediately thereafter its margin
deposits on its outstanding Futures Contracts would exceed
5% of the market value of the Fund's total assets.
Options on Futures Contracts. The Fund may invest in options
on such Futures Contracts for similar purposes.
All options that the Fund writes will be covered under
applicable requirements of the SEC. The Fund will write and
purchase options only to the extent permitted by the
policies of state securities authorities in states where
shares of the Fund are qualified for offer and sale.
Repurchase Agreements. In a repurchase agreement the Fund
buys a security and simultaneously agrees to sell it back at
a higher price. In the event of the bankruptcy of the other
party to either a repurchase agreement or a securities loan,
the Fund could experience delays in recovering either its
cash or the securities it lent. To the extent that, in the
meantime, the value of the securities repurchased had
decreased or the value of the securities lent had increased,
the Fund could experience a loss. In all cases, the Adviser
must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is
considered a collateralized loan under the 1940 Act.
There can be no assurances that the use of these portfolio
strategies will be successful.
Asset Coverage. To assure that the Fund's use of futures and
related options, as well as when-issued and delayed-delivery
securities and foreign currency exchange transactions, are
not used to achieve investment leverage, the Fund will cover
such transactions, as required under applicable
interpretations of the SEC, either by owning the underlying
securities or by establishing a segregated account with the
Fund's custodian containing high grade liquid debt
securities in an amount at all times equal to or exceeding
the Fund's commitment with respect to these instruments or
contracts.
Investment Adviser of the Fund
BANKERS TRUST GLOBAL INVESTMENT MANAGEMENT
a unit of
BANKERS TRUST COMPANY
Distributor
440 FINANCIAL DISTRIBUTORS, INC.
Custodian
BANKERS TRUST COMPANY
Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
COOPERS & LYBRAND LLP
Counsel
WILLKIE FARR & GALLAGHER
............................................................
..................
No person has been authorized to give any information or to
make any representation other than those contained in the
Fund's Prospectus, its Statement of Additional Information
or the Fund's official sales literature in connection with
the offering of the Fund's shares and, if given or made,
such other information or representations must not be relied
on as having been authorized by the Fund. This Prospectus
does not constitute an offer in any state in which, or to
any person to whom, such offer may not lawfully be made.
............................................................
...................
STATEMENT OF
ADDITIONAL INFORMATION
____________, 1996
DRAFT
1/19/96
BT INSURANCE FUNDS TRUST
Small Cap Fund
International Equity Fund
BT Insurance Funds Trust (the "Trust") is comprised of the
Small Cap Fund and the International Equity Fund (each, a
"Fund"). The shares of these two funds are described
herein.
Table of Contents
Investment Objectives, Policies and Restrictions
2
Performance Information 20
Valuation of Securities; Redemption in Kind 23
Management of the Funds 24
Organization of the Trust 27
Taxation 28
Appendix (Bond, Commercial Paper and Municipal
Obligations Ratings) 32
Shares of the Funds are available to the public only through
the purchase of certain variable annuity and variable life
insurance contracts ("Contract(s)") issued by various
insurance companies (the "Companies"). The investment
adviser of each Fund is Bankers Trust Global Investment
Management, a unit of Bankers Trust Company (the "Adviser"
or "Bankers Trust"). The distributor of each Fund's shares
is 440 Financial Distributors, Inc. (the "Distributor" or
"440 Financial").
The Prospectus for each Fund is dated ____________, 1996.
Each Prospectus provides the basic information investors
should know before investing and may be obtained without
charge by calling the telephone number listed below. This
Statement of Additional Information, which is not a
Prospectus, is intended to provide additional information
regarding the activities and operations of each Fund and
should be read in conjunction with that Fund's Prospectus.
This Statement of Additional Information is not an offer of
any Fund for which an investor has not received a
Prospectus. Capitalized terms not otherwise defined in this
Statement of Additional Information have the meanings
accorded to them in each Fund's Prospectus.
BTO361A
BANKERS TRUST GLOBAL INVESTMENT MANAGEMENT, a unit of
BANKERS TRUST COMPANY
Investment Adviser of each Fund
440 FINANCIAL DISTRIBUTORS, INC.
Distributor
290 Donald Lynch Boulevard
Marlboro, MA 01752
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives
The investment objective of each Fund is described in that
Fund's Prospectus. There can, of course, be no assurance
that any Fund will achieve its investment objective.
Investment Policies
The following is a discussion of the various investments of
and techniques employed by each Fund.
Certificates of Deposit and Bankers' Acceptances.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The
issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the
certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed
to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be
sold in the secondary market at the going rate of discount
for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances
have maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes
issued by corporations in order to finance their current
operations. A variable amount master demand note (which is a
type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of
interest under a letter agreement between a commercial paper
issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.
For a description of commercial paper ratings, see the
Appendix.
Foreign Securities: Special Considerations Concerning
Eastern Europe. The Funds may invest in foreign securities
issued by Eastern European countries. Investments in
companies domiciled in Eastern European countries may be
subject to potentially greater risks than those of other
foreign issuers. These risks include: (i) potentially less
social, political and economic stability; (ii) the small
current size of the markets for such securities and the low
volume of trading, which result in less liquidity and in
greater price volatility; (iii) certain national policies
which may restrict a Fund's investment opportunities,
including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv)
foreign taxation; (v) the absence of developed legal
structures governing private or foreign investment or
allowing for judicial redress for injury to private
property; (vi) the absence, until recently in certain
Eastern European countries, of a capital market structure or
market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may
be slowed or reversed by unanticipated political or social
events in such countries, or in the Commonwealth of
Independent States (formerly the Union of Soviet Socialist
Republics).
The economic situation remains difficult for Eastern
European countries in transition from central planning,
following what has already been a sizable decline in output.
The contraction now appears to be bottoming out in parts of
Eastern Europe, where some countries are projected to
register positive growth in 1995. Following three
successive years of output declines, there are preliminary
indications of a turnaround in the former Czech and Slovak
Federal Republic, Hungary and Poland; growth in private
sector activity and strong exports now appear to have
contained the fall in output. A number of their
governments, including those of Hungary and Poland, are
currently implementing or considering reforms directed at
political and economic liberalization, including efforts to
foster multi-party political systems, decentralize economic
planning, and a move toward free-market economies. But key
aspects of the reform and stabilization efforts have not yet
been fully implemented, and there remain
risks of policy slippage. At present, no Eastern European
country has a developed stock market, but Poland, Hungary
and the Czech Republic have small securities markets in
operation.
In many other countries of the region, output losses have
been even larger. These declines reflect the adjustment
difficulties during the early stages of the transition, high
rates of inflation, the compression of imports, disruption
in trade among the countries of the former Soviet Union, and
uncertainties about the reform process itself. Large-scale
subsidies are delaying industrial restructuring and are
exacerbating the fiscal situation. A reversal of these
adverse factors is not anticipated in the near term, and
output is expected to decline further in most of these
countries. In the Russian Federation and most other
countries of the former Soviet Union, economic conditions
are of particular concern because of economic instability
due to political unrest and armed conflicts in many regions.
Further, no accounting standards exist in Eastern European
countries. Although certain Eastern European currencies may
be convertible into U.S. dollars, the conversion rates may
be artificial to the actual market values and may be adverse
to a Fund's shareholders.
Illiquid Securities. Historically, illiquid securities have
included securities subject to contractual or legal
restrictions on resale because they have not been registered
under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than
seven days. Securities which have not been registered under
the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or
other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions
could impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered
under the 1933 Act, including repurchase agreements,
commercial paper, foreign securities, municipal securities
and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the
unregistered security can be readily resold or on an
issuer's ability to honor a demand for repayment. The fact
that there arecontractual or legal restrictions on resale of
such investments to the general public or to certain
institutions may not be indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has
adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to
restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration
requirements of the 1933 Act of resales of certain
securities to qualified institutional buyers. The Adviser
anticipates that the market for certain restricted
securities such as institutional commercial paper will
expand further as a result of this regulation and the
development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc.
The Adviser will monitor the liquidity of Rule 144A
securities in each Fund's portfolio under the supervision of
the Fund's Board of Trustees. In reaching liquidity
decisions, the Adviser will consider, among other things,
the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers and other
potential purchasers wishing to purchase or sell the
security; (3) dealer undertakings to make a market in the
security and (4) the nature of the security and of the
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics
of the transfer).
Lending of Portfolio Securities. Each Fund has the
authority to lend portfolio securities to brokers, dealers
and other financial organizations. The Funds will not lend
securities to Bankers Trust, 440 Financial or their
affiliates. By lending its securities, a Fund can increase
its income by continuing to receive interest on the loaned
securities as well as by either investing the cash
collateral in short-term securities or obtaining yield in
the form of interest paid by the borrower when U.S.
Government obligations are used as collateral. There may be
risks of delay in receiving additional collateral or risks
of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the
securities fail financially. Each Fund will adhere to the
following conditions whenever its securities are loaned: (i)
the Fund must receive at least 100 percent cash collateral
or equivalent securities from the borrower; (ii) the
borrower must increase this collateral whenever the market
value of the securities including accrued interest rises
above the level of the collateral; (iii) the Fund must be
able to terminate the loan at any time; (iv) the Fund must
received reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Fund
may pay only reasonable custodian fees in connection with
the loan; and (vi) voting rights on the loaned securities,
may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs,
the Board of Trustees must terminate the loan and regain the
right to vote the securities.
Futures Contracts and Options on Futures Contracts
General. The successful use of such instruments draws upon
the Adviser's skill and experience with respect to such
instruments and usually depends on the Adviser's ability to
forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an
unexpected manner, a Fund may not achieve the anticipated
benefits of futures contracts or options on futures
contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In
addition, the correlation between movements in the price of
futures contracts or options on futures contracts and
movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could
produce unanticipated losses.
Futures Contracts. A Fund may enter into contracts for the
purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on
financial indices including any index of U.S. Government
securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by
exchanges which have been designated "contracts markets" by
the Commodity Futures Trading Commission (the "CFTC"), and
must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract
market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Fund may enter into
futures contracts which are based on debt securities that
are backed by the full faith and credit of the U.S.
Government, such as long-term U.S. Treasury Bonds, Treasury
Notes, GNMA modified pass-through mortgage-backed securities
and three-month U.S. Treasury Bills. A Fund may also enter
into futures contracts which are based on bonds issued by
entities other than the U.S. Government.
At the same time a futures contract is purchased or sold, a
Fund must allocate cash or securities as a deposit payment
("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's
face value. Daily thereafter, the futures contract is
valued and the payment of "variation margin" may be
required, since each day the Fund would provide or receive
cash that reflects any decline or increase in the contract's
value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in
value arising from the delivery of securities with a
different interest rate from that specified in the contract.
In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract
was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases
the contractual obligation is fulfilled before the date of
the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling
for delivery in the same month. Such a transaction, which
is effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities.
Since all transactions in the futures market are made,
offset or fulfilled through a clearinghouse associated with
the exchange on which the contracts are traded, a Fund will
incur brokerage fees when it purchases or sells futures
contracts.
The purpose of the acquisition or sale of a futures
contract, in the case of a Fund which holds or intends to
acquire fixed-income securities, is to attempt to protect
the Fund from fluctuations in interest or foreign exchange
rates without actually buying or selling fixed-income
securities or foreign currencies. For example, if interest
rates were expected to increase, the Fund might enter into
futures contracts for the sale of debt securities. Such a
sale would have much the same effect as selling an
equivalent value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt
security in the Fund's portfolio would decline, but the
value of the futures contracts to the Fund would increase at
approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it otherwise
would have. The Fund could accomplish similar results by
selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the
cash market, the use of futures contracts as an investment
technique allows the Fund to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to
hedge against anticipated purchases of debt securities at
higher prices. Since the fluctuations in the value of
futures contracts should be similar to those of debt
securities, a Fund could take advantage of the anticipated
rise in the value of debt securities without actually buying
them until the market had stabilized. At that time, the
futures contract could be liquidated and the Fund could then
buy debt securities on the cash market. To the extent a
Fund enters into futures contracts for this purpose, the
assets in the segregated asset account maintained to cover
the Fund's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high
quality liquid debt securities from its portfolio in an
amount equal to the difference between the fluctuating
market value of such futures contracts and the aggregate
value of the initial and variation margin payments made by
the Fund with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures
market, due to differences in the nature of those markets,
are subject to distortions. First, all participants in the
futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional
variation margin requirements, investors may close futures
contracts through offsetting transactions which could
distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures market
depends on participants entering into offsetting
transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the
Adviser may still not result in a successful transaction.
In addition, futures contracts entail risks. Although the
Adviser believes that use of such contracts will benefit the
Funds, if the Adviser's investment judgment about the
general direction of interest rates is incorrect, a Fund's
overall performance would be poorer than if it had not
entered into any such contract. For example, if a Fund has
hedged against the possibility of an increase in interest
rates which would adversely affect the price of debt
securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of
the increased value of its debt securities which it has
hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell debt securities from
its portfolio to meet daily variation margin requirements.
Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund
may have to sell securities at a time when it may be
disadvantageous to do so.
Options on Futures Contracts. Each Fund may purchase and
write options on futures contracts for hedging purposes.
The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the
option compared to either the price of the futures contract
upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As
with the purchase of futures contracts, when a Fund is not
fully invested it may purchase a call option on a futures
contract to hedge against a market advance due to declining
interest rates.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Fund
will retain the full amount of the option premium which
provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a
put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign
currency which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option
is higher than the exercise price, the Fund will retain the
full amount of the option premium which provides a partial
hedge against any increase in the price of securities which
the Fund intends to purchase. If a put or call option the
Fund has written is exercised, the Fund will incur a loss
which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes
in the value of its futures positions, the Fund's losses
from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, a Fund may
purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.
The amount of risk a Fund assumes when it purchases an
option on a futures contract is the premium paid for the
option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in
the value of the option purchased.
The Board of Trustees has adopted the requirement with
respect to each Fund that futures contracts and options on
futures contracts be used only as a hedge and not for
speculation. In addition to this requirement, the Board of
Trustees has also adopted a restriction with respect to each
Fund that the Fund will not enter into any futures contracts
or options on futures contracts if immediately thereafter
the amount of margin deposits on all the futures contracts
of the Fund and premiums paid on outstanding options on
futures contracts owned by the Fund would exceed 5% of the
market value of the total assets of the Fund.
Options on Foreign Currencies. Each Fund may purchase and
write options on foreign currencies for hedging purposes in
a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign
currency in which portfolio securities are denominated will
reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to
protect against such diminutions in the value of portfolio
securities, the Fund may purchase put options on the foreign
currency. If the value of the currency does decline, a Fund
will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
Conversely, where a rise in the dollar value of a currency
in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, a
Fund may purchase call options thereon. The purchase of
such options could offset, at least partially, the effects
of the adverse movements in exchange rates. As in the case
of other types of options, however, the benefit to the Fund
deriving from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, the Fund
could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
Each Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where a Fund
anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations
in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If
the expected decline occurs, the option will most likely not
be exercised, and the diminution in value of portfolio
securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of
securities to be acquired, a Fund could write a put option
on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to
hedge such increased cost up to the amount of the premium.
As in the case of other types of options, however, the
writing of a foreign currency option will constitute only a
partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be
required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the
Fund also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from
favorable movements in exchange rates.
Each Fund intends to write covered call options on foreign
currencies. A call option written on a foreign currency by
a Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held
in its portfolio. A call option is also covered if the Fund
has a call on the same foreign currency and in the same
principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than
the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government securities
and other high quality liquid debt securities in a
segregated account with its custodian.
Each Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes.
A call option on a foreign currency is for cross-hedging
purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a
security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option
due to an adverse change in the exchange rate. In such
circumstances, the Fund collateralizes the option by
maintaining in a segregated account with its custodian, cash
or U.S. Government securities or other high quality liquid
debt securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked to market
daily.
Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies. Unlike
transactions entered into by a Fund in futures contracts,
options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although
foreign currency options are also traded on certain national
securities exchanges such as the Philadelphia Stock Exchange
and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded
over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange
participants will not be available. For example, there are
no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent
over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related
transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward
contracts could lose amounts substantially in excess of
their initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are
other securities traded on such exchanges. As a result,
many of the protections provided to traders on organized
exchanges will be available with respect to such
transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation
("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting
a Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency
options, however, is subject to the risks of the
availability of a liquid secondary market described above,
as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign
currency market, possible intervention by governmental
authorities and the effects of other political and economic
events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the
over-the-counter market. For example, exercise and
settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result,
the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement
of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as
technical changes in the mechanics of delivery of currency,
the fixing of dollar settlement prices or prohibitions on
exercise.
As in the case of forward contracts, certain options on
foreign currencies are traded over-the-counter and involve
liquidity and credit risks which may not be present in the
case of exchange-traded currency options. A Fund's ability
to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that
broker-dealers participating in over-the-counter options
transactions will not fulfill their obligations. Until such
time as the staff of the SEC changes its position, each Fund
will treat purchased over-the-counter options and assets
used to cover written over-the-counter options as illiquid
securities. With respect to options written with primary
dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a
formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges. Such
transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or
securities. The value of such positions also could be
adversely affected by: (i) other complex foreign political
and economic factors; (ii) lesser availability than in the
United States of data on which to make trading decisions;
(iii) delays in a Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the
United States; (iv) the imposition of different exercise and
settlement terms and procedures and margin requirements than
in the United States; and (v) lesser trading volume.
Options on Securities. Each Fund may write (sell) covered
call and put options to a limited extent on its portfolio
securities ("covered options") in an attempt to increase
income. However, the Fund may forgo the benefits of
appreciation on securities sold or may pay more than the
market price on securities acquired pursuant to call and put
options written by the Fund.
When a Fund writes a covered call option, it gives the
purchaser of the option the right to buy the underlying
security at the price specified in the option (the "exercise
price") by exercising the option at any time during the
option period. If the option expires unexercised, the Fund
will realize income in an amount equal to the premium
received for writing the option. If the option is exercised,
a decision over which the Fund has no control, the Fund must
sell the underlying security to the option holder at the
exercise price. By writing a covered call option, the Fund
forgoes, in exchange for the premium less the commission
("net premium"), the opportunity to profit during the option
period from an increase in the market value of the
underlying security above the exercise price.
When a Fund writes a covered put option, it gives the
purchaser of the option the right to sell the underlying
security to the Fund at the specified exercise price at any
time during the option period. If the option expires
unexercised, the Fund will realize income in the amount of
the premium received for writing the option. If the put
option is exercised, a decision over which the Fund has no
control, the Fund must purchase the underlying security from
the option holder at the exercise price. By writing a
covered put option, the Fund, in exchange for the net
premium received, accepts the risk of a decline in the
market value of the underlying security below the exercise
price. The Fund will only write put options involving
securities for which a determination is made at the time the
option is written that the Fund wishes to acquire the
securities at the exercise price.
A Fund may terminate its obligation as the writer of a call
or put option by purchasing an option with the same exercise
price and expiration date as the option previously written.
This transaction is called a "closing purchase transaction."
Where the Fund cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer
spreads in selling securities it receives or it may be
forced to hold underlying securities until an option is
exercised or expires.
When a Fund writes an option, an amount equal to the net
premium received by the Fund is included in the liability
section of the Fund's Statement of Assets and Liabilities as
a deferred credit. The amount of the deferred credit will
be subsequently marked to market to reflect the current
market value of the option written. The current market
value of a traded option is the last sale price or, in the
absence of a sale, the mean between the closing bid and
asked price. If an option expires on its stipulated
expiration date or if the Fund enters into a closing
purchase transaction, the Fund will realize a gain (or loss
if the cost of a closing purchase transaction exceeds the
premium received when the option was sold), and the deferred
credit related to such option will be eliminated. If a call
option is exercised, the Fund will realize a gain or loss
from the sale of the underlying security and the proceeds of
the sale will be increased by the premium originally
received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the
option is being written. Securities against which call
options are written will be segregated on the books of the
custodian for the Fund.
A Fund may purchase call and put options on any securities
in which it may invest. A Fund would normally purchase a
call option in anticipation of an increase in the market
value of such securities. The purchase of a call option
would entitle the Fund, in exchange for the premium paid, to
purchase a security at a specified price during the option
period. The Fund would ordinarily have a gain if the value
of the securities increased above the exercise price
sufficiently to cover the premium and would have a loss if
the value of the securities remained at or below the
exercise price during the option period.
A Fund would normally purchase put options in anticipation
of a decline in the market value of securities in its
portfolio ("protective puts") or securities of the type in
which it is permitted to invest. The purchase of a put
option would entitle the Fund, in exchange for the premium
paid, to sell a security, which may or may not be held in
the Fund's portfolio, at a specified price during the option
period. The purchase of protective puts is designed merely
to offset or hedge against a decline in the market value of
the Fund's portfolio securities. Put options also may be
purchased by the Fund for the purpose of affirmatively
benefiting from a decline in the price of securities which
the Fund does not own. The Fund would ordinarily recognize
a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would
recognize a loss if the value of the securities remained at
or above the exercise price. Gains and losses on the
purchase of protective put options would tend to be offset
by countervailing changes in the value of underlying
portfolio securities.
Each Fund has adopted certain other nonfundamental policies
concerning option transactions which are discussed below.
The Fund's activities in options may also be restricted by
the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on securities may not
conform to the hours during which the underlying securities
are traded. To the extent that the option markets close
before the markets for the underlying securities,
significant price and rate movements can take place in the
underlying securities markets that cannot be reflected in
the option markets. It is impossible to predict the volume
of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or
continue.
A Fund may engage in over-the-counter options transactions
with broker-dealers who make markets in these options. At
present, approximately ten broker-dealers, including several
of the largest primary dealers in U.S. Government
securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with
exchange-traded option positions because the predominant
market is the issuing broker rather than an exchange, and
may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To
reduce this risk, the Fund will purchase such options only
from broker-dealers who are primary government securities
dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of)
entering into closing transactions, although there can be no
guarantee that any such option will be liquidated at a
favorable price prior to expiration. The Adviser will
monitor the creditworthiness of dealers with whom the Funds
enter into such options transactions under the general
supervision of the Funds' Trustees.
Options on Securities Indices. In addition to options on
securities, each Fund may also purchase and write (sell)
call and put options on securities indices. Such options
give the holder the right to receive a cash settlement
during the term of the option based upon the difference
between the exercise price and the value of the index. Such
options will be used for the purposes described above under
"Options on Securities."
The International Equity Fund may, to the extent allowed by
Federal and state securities laws, invest in securities
indices instead of investing directly in individual foreign
securities.
Options on securities indices entail risks in addition to
the risks of options on securities. The absence of a liquid
secondary market to close out options positions on
securities indices is more likely to occur, although a Fund
generally will only purchase or write such an option if the
Adviser believes the option can be closed out.
Use of options on securities indices also entails the risk
that trading in such options may be interrupted if trading
in certain securities included in the index is interrupted.
A Fund will not purchase such options unless the Adviser
believes the market is sufficiently developed such that the
risk of trading in such options is no greater than the risk
of trading in options on securities.
Price movements in a Fund's portfolio may not correlate
precisely with movements in the level of an index and,
therefore, the use of options on indices cannot serve as a
complete hedge. Because options on securities indices
require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement
obligations.
Forward Foreign Currency Exchange Contracts. Because each
Fund buys and sells securities denominated in currencies
other than the U.S. dollar and receives interest, dividends
and sale proceeds in currencies other than the U.S. dollar,
each Fund from time to time may enter into foreign currency
exchange transactions to convert to and from different
foreign currencies and to convert foreign currencies to and
from the U.S. dollar. A Fund either enters into these
transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or uses
forward contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an
obligation by a Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from
the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date.
These contracts are transferable in the interbank market
conducted directly between currency traders (usually large
commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit
requirement and is traded at a net price without commission.
Each Fund maintains with its custodian a segregated account
of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange
contract. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the
prices of the Fund's securities or in foreign exchange
rates, or prevent loss if the prices of these securities
should decline.
Each Fund may enter into foreign currency hedging
transactions in an attempt to protect against changes in
foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or
changes in foreign currency exchange rates that would
adversely affect a portfolio position or an anticipated
investment position. Since consideration of the prospect
for currency parities will be incorporated into Bankers
Trust's long-term investment decisions, a Fund will not
routinely enter into foreign currency hedging transactions
with respect to security transactions; however, Bankers
Trust believes that it is important to have the flexibility
to enter into foreign currency hedging transactions when it
determines that the transactions would be in the Fund's best
interest. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged
currency, at the time they tend to limit any potential gain
that might be realized should the value of the hedged
currency increase. The precise matching of the forward
contract amounts and the value of the securities involved
will not generally be possible because the future value of
such securities in foreign currencies will change as a
consequence of market movements in the value of such
securities between the date the forward contract is entered
into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
While these contracts are not presently regulated by the
CFTC, the CFTC may in the future assert authority to
regulate forward contracts. In such event, a Fund's ability
to utilize forward contracts in the manner set forth in the
Prospectus may be restricted. Forward contracts may reduce
the potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it had not
entered into such contracts. The use of foreign currency
forward contracts may not eliminate fluctuations in the
underlying U.S. dollar equivalent value of the prices of or
rates of return on a Fund's foreign currency denominated
portfolio securities and the use of such techniques will
subject a Fund to certain risks.
The matching of the increase in value of a forward contract
and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of
the hedge generally will not be precise. In addition, a
Fund may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit
the Fund's ability to use such contract to hedge or
cross-hedge its assets. Also, with regard to a Fund's use
of cross-hedges, there can be no assurance that historical
correlations between the movement of certain foreign
currencies relative to the U.S. dollar will continue. Thus,
at any time poor correlation may exist between movements in
the exchange rates of the foreign currencies underlying a
Fund's cross-hedges and the movements in the exchange rates
of the foreign currencies in which the Fund's assets that
are the subject of such cross-hedges are denominated.
Rating Services
The ratings of rating services represent their opinions as
to the quality of the securities that they undertake to
rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of
quality. Although these ratings are an initial criterion
for selection of portfolio investments, Bankers Trust also
makes its own evaluation of these securities, subject to
review by the Board of Trustees. After purchase by a Fund,
an obligation may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund.
Neither event would require a Fund to eliminate the
obligation from its portfolio, but Bankers Trust will
consider such an event in its determination of whether a
Fund should continue to hold the obligation. A description
of the ratings used herein and in the Funds' Prospectuses is
set forth in the Appendix to this Statement of Additional
Information.
Investment Restrictions
The following investment restrictions are "fundamental
policies" of each Fund and may not be changed with respect
to the Fund without the approval of a "majority of the
outstanding voting securities" of the Fund. "Majority of
the outstanding voting securities" under the Investment
Company Act of 1940, as amended (the "1940 Act"), and as
used in this Statement of Additional Information and the
Prospectuses, means, with respect to a Fund, the lesser of
(i) 67% or more of the outstanding voting securities of the
Fund present at a meeting, if the holders of more than 50%
of the outstanding voting securities of the Fund are present
or represented by proxy or (ii) more than 50% of the
outstanding voting securities of the Fund.
As a matter of fundamental policy, neither Fund may:
(1) borrow money or mortgage or hypothecate assets
of the Fund, except that in an amount not to exceed 1/3 of
the current value of the Fund's net assets, it may borrow
money, but only as a temporary measure for extraordinary or
emergency purposes, and enter into reverse repurchase
agreements or dollar roll transactions, and except that it
may pledge, mortgage or hypothecate not more than 1/3 of
such assets to secure such borrowings (it is intended that
money would be borrowed only from banks and only either to
accommodate requests for the redemption of shares while
effecting an orderly liquidation of portfolio securities or
to maintain liquidity in the event of an unanticipated
failure to complete a portfolio security transaction or
other similar situations) or reverse repurchase agreements,
provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit
and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may
be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company
sponsored by the Investment Company Institute;
(2) underwrite securities issued by other persons
except insofar as the Funds may technically be deemed an
underwriter under the 1933 Act in selling a portfolio
security;
(3) make loans to other persons except: (a) through
the lending of the Fund's portfolio securities and provided
that any such loans not exceed 30% of the Fund's total
assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of
debt securities of types distributed publicly or privately;
(4) purchase or sell real estate (including limited
partnership interests but excluding securities secured by
real estate or interests therein), interests in oil, gas or
mineral leases, commodities or commodity contracts (except
futures and option contracts) in the ordinary course of
business (the Fund may hold and sell, for the Fund's
portfolio, real estate acquired as a result of the Fund's
ownership of securities);
(5) concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it
is deemed appropriate for the achievement of a Fund's
investment objective(s), up to 25% of its total assets may
be invested in any one industry; and
(6) issue any senior security (as that term is
defined in the 1940 Act) if such issuance is specifically
prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including
deposits of initial deposit and variation margin, are not
considered to be the issuance of a senior security for
purposes of this restriction.
As an operating policy, neither Fund will invest in another
open-end registered investment company.
Statutory Restrictions. In order to comply with certain
statutes and regulatory policies, neither Fund will, as a
matter of operating policy:
(i) sell any security which it does not own unless
by virtue of its ownership of other securities it has at the
time of sale a right to obtain securities, without payment
of further consideration, equivalent in kind and amount to
the securities sold and provided that if such right is
conditional the sale is made upon the same conditions;
(ii) invest for the purpose of exercising control or
management;
(iii) purchase securities issued by any investment
company except by purchase in the open market where no
commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission,
or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation;
provided, however, that securities of any investment company
will not be purchased for the Fund if such purchase at the
time thereof would cause: (a) more than 10% of the Fund's
total assets (taken at the greater of cost or market value)
to be invested in the securities of such issuers; (b) more
than 5% of the Fund's total assets (taken at the greater of
cost or market value) to be invested in any one investment
company; or (c) more than 3% of the outstanding voting
securities of any such issuer to be held for the Fund;
provided further that, except in the case of a merger or
consolidation, the Fund shall not purchase any securities of
any open-end investment company;
(iv) invest more than 15% of the Fund's net assets
(taken at the greater of cost or market value) in securities
that are illiquid or not readily marketable (excluding Rule
144A securities deemed by the Board of Trustees to be
liquid);
(v) purchase securities of any issuer if such
purchase at the time thereof would cause the Fund to hold
more than 10% of any class of securities of such issuer, for
which purposes all indebtedness of an issuer shall be deemed
a single class and all preferred stock of an issuer shall be
deemed a single class, except that futures or option
contracts shall not be subject to this restriction;
(vi) with respect to 75% of its assets, invest more
than 5% of its total assets in the securities (excluding
U.S. Government securities) of any one issuer; and
(vii) invest more than 5% of the Fund's net assets in
warrants (valued at the lower of cost or market), but not
more than 2% of the Fund's net assets may be invested in
warrants not listed on the New York Stock Exchange Inc.
("NYSE") or the American Stock Exchange.
Portfolio Transactions and Brokerage Commissions
The Adviser is responsible for decisions to buy and sell
securities, futures contracts and options on such securities
and futures for each Fund, the selection of brokers, dealers
and futures commission merchants to effect transactions and
the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on
portfolio transactions, including options, futures and
options on futures transactions and the purchase and sale of
underlying securities upon the exercise of options. Orders
may be directed to any broker-dealer or futures commission
merchant, including to the extent and in the manner
permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain
portfolio securities on behalf of a Fund are frequently
placed by the Adviser with the issuer or a primary or
secondary market-maker for these securities on a net basis,
without any brokerage commission being paid by the Fund.
Trading does, however, involve transaction costs.
Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Transaction
costs may also include fees paid to third parties for
information as to potential purchasers or sellers of
securities. Purchases of underwritten issues may be made
which will include an underwriting fee paid to the
underwriter.
The Adviser seeks to evaluate the overall reasonableness of
the brokerage commissions paid (to the extent applicable) in
placing orders for the purchase and sale of securities for a
Fund, taking into account such factors as price, commission
(negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of
execution and skill required of the executing broker-dealer
through familiarity with commissions charged on comparable
transactions, as well as by comparing commissions paid by
the Fund to reported commissions paid by others. The
Adviser reviews on a routine basis commission rates,
execution and settlement services performed, making internal
and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended, when
placing portfolio transactions for a Fund with a broker to
pay a brokerage commission (to the extent applicable) in
excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of
research, market or statistical information. The term
"research, market or statistical information" includes
advice as to the value of securities; the advisability of
investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of
securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts.
Consistent with the policy stated above, the Rules of Fair
Practice of the National Association of Securities Dealers,
Inc. and such other policies as the Trustees of the Funds
may determine, the Adviser may consider sales of shares of
the Funds and of other investment company clients of Bankers
Trust as a factor in the selection of broker-dealers to
execute portfolio transactions. Bankers Trust will make such
allocations if commissions are comparable to those charged
by nonaffiliated, qualified broker-dealers for similar
services.
Higher commissions may be paid to firms that provide
research services to the extent permitted by law. Bankers
Trust may use this research information in managing each
Fund's assets, as well as the assets of other clients.
Except for implementing the policies stated above, there is
no intention to place portfolio transactions with particular
brokers or dealers or groups thereof. In effecting
transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security
being traded unless, after exercising care, it appears that
more favorable results are available otherwise.
Although certain research, market and statistical
information from brokers and dealers can be useful to a Fund
and to the Adviser, it is the opinion of the management of
the Funds that such information is only supplementary to the
Adviser's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in
providing services to clients other than the Funds, and not
all such information is used by the Adviser in connection
with the Funds. Conversely, such information provided to
the Adviser by brokers and dealers through whom other
clients of the Adviser effect securities transactions may be
useful to the Adviser in providing services to the Funds.
In certain instances there may be securities which are
suitable for a Fund as well as for one or more of the
Adviser's other clients. Investment decisions for a Fund
and for the Adviser's other clients are made with a view to
achieving their respective investment objectives. It may
develop that a particular security is bought or sold for
only one client even though it might be held by, or bought
or sold for, other clients. Likewise, a particular security
may be bought for one or more clients when one or more
clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive
investment advice from the same investment adviser,
particularly when the same security is suitable for the
investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or
sale of the same security, the securities are allocated
among clients in a manner believed to be equitable to each.
It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as
far as a Fund is concerned. However, it is believed that the
ability of a Fund to participate in volume transactions will
produce better executions for the Fund.
PERFORMANCE INFORMATION
Standard Performance Information
From time to time, quotations of a Fund's performance may be
included in advertisements, sales literature or shareholder
reports. These performance figures are calculated in the
following manner:
Total return. A Fund's average annual total return is
calculated for certain periods by determining the average
annual compounded rates of return over those periods that
would cause an investment of $1,000 (made at the maximum
public offering price with all distributions reinvested) to
reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures
which represent aggregate performance over a period or
year-by-year performance.
Performance Results. Any total return quotation provided
for a Fund should not be considered as representative of the
performance of the Fund in the future since the net asset
value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of
the securities held in the Fund, but also on changes in the
current value of such securities and on changes in the
expenses of the Fund. These factors and possible
differences in the methods used to calculate total return
should be considered when comparing the total return of a
Fund to total returns published for other investment
companies or other investment vehicles. Total return
reflects the performance of both principal and income.
Comparison of Fund Performance
Comparison of the quoted nonstandardized performance of
various investments is valid only if performance is
calculated in the same manner. Since there are different
methods of calculating performance, investors should
consider the effect of the methods used to calculate
performance when comparing performance of a Fund with
performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current
or prospective shareholders, a Fund also may compare these
figures to the performance of other mutual funds tracked by
mutual fund rating services or to unmanaged indices which
may assume reinvestment of dividends but generally do not
reflect deductions for administrative and management costs.
Evaluations of a Fund's performance made by independent
sources may also be used in advertisements concerning the
Fund. Sources for a Fund's performance information could
include the following:
Asian Wall Street Journal, a weekly Asian newspaper that
often reviews U.S. mutual funds investing internationally.
Barron's, a Dow Jones and Company, Inc. business and
financial weekly that periodically reviews mutual fund
performance data.
Business Week, a national business weekly that periodically
reports the performance rankings and ratings of a variety of
mutual funds investing abroad.
Changing Times, The Kiplinger Magazine, a monthly investment
advisory publication that periodically features the
performance of a variety of securities.
Consumer Digest, a monthly business/financial magazine that
includes a "MoneyWatch" section featuring financial news.
Financial Times, Europe's business newspaper, which features
from time to time articles on international or
country-specific funds.
Financial World, a general business/financial magazine that
includes a "Market Watch" department reporting on activities
in the mutual fund industry.
Forbes, a national business publication that from time to
time reports the performance of specific investment
companies in the mutual fund industry.
Fortune, a national business publication that periodically
rates the performance of a variety of mutual funds.
Global Investor, a European publication that periodically
reviews the performance of U.S. mutual funds investing
internationally.
Investor's Daily, a daily newspaper that features financial,
economic and business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis, a weekly publication of industry-wide mutual fund
averages by type of fund.
Money, a monthly magazine that from time to time features
both specific funds and the mutual fund industry as a whole.
Morningstar Inc., a publisher of financial information and
mutual fund research.
New York Times, a nationally distributed newspaper which
regularly covers financial news.
Personal Investing News, a monthly news publication that
often reports on investment opportunities and market
conditions.
Personal Investor, a monthly investment advisory publication
that includes a "Mutual Funds Outlook" section reporting on
mutual fund performance measures, yields, indices and
portfolio holdings.
Success, a monthly magazine targeted to the world of
entrepreneurs and growing business, often featuring mutual
fund performance data.
U.S. News and World Report, a national business weekly that
periodically reports mutual fund performance data.
Value Line, a biweekly publication that reports on the
largest 15,000 mutual funds.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper
which regularly covers financial news.
Weisenberger Investment Companies Services, an annual
compendium of information about mutual funds and other
investment companies, including comparative data on funds'
backgrounds, management policies, salient features,
management results, income and dividend records, and price
ranges.
Working Women, a monthly publication that features a
"Financial Workshop" section reporting on the mutual
fund/financial industry.
VALUATION OF SECURITIES; REDEMPTION IN KIND
The net asset value per share of each Fund is calculated on
each day on which the NYSE is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day,
Monday through Friday, except: (a) January 1st, Presidents'
Day (the third Monday in February), Good Friday, Memorial
Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or
the subsequent Monday when one of the calendar-determined
holidays falls on a Saturday or Sunday, respectively. The
net asset value per share of each Fund is calculated once on
each Valuation Day as of the close of regular trading on the
NYSE, which is currently 4:00 p.m., New York time. The net
asset value per share of each Fund is computed by dividing
the value of the Fund's assets, less all liabilities, by the
total number of its shares outstanding.
In valuing a Fund's assets, all securities for which market
quotations are readily available are valued (i) at the last
sale price prior to the time of determination if there was a
sale on the date of determination, (ii) at the mean between
the last current bid and asked prices if there was no sales
price of such date and bid and asked quotations are
available, and (iii) at the bid price if there was no sales
price on such date and only bid quotations are available.
In instances where a price determined above is deemed not to
represent fair market value, the price is determined in such
manner as the Board of Trustees may prescribe. Securities
may be valued by independent pricing services which use
prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or
securities with similar characteristics. Short-term
investments having a maturity of 60 days or less are valued
at amortized cost, unless the Board of Trustees determines
that such valuation does not constitute fair value. In
valuing assets, prices denominated in foreign currencies are
converted to dollar equivalents at the current exchange
rate. Securities for which reliable quotations or pricing
services are not readily available and all other securities
and assets are valued at fair value as determined in good
faith by, or under procedures established by, the Board of
Trustees.
The problems inherent in making a good faith determination
of value are recognized in the codification effected by SEC
Financial Reporting Release No. 1 ("FRR 1" (formerly
Accounting Series Release No. 113)), which concludes that
there is "no automatic formula" for calculating the value of
restricted securities. It recommends that the best method
simply is to consider all relevant factors before making any
calculation. According to FRR 1, such factors would include
consideration of the: type of security involved, financial
statements, cost at date of purchase, size of holding,
discount from market value of unrestricted securities of the
same class at the time of purchase, special reports prepared
by analysts, information as to any transactions or offers
with respect to the security, existence of merger proposals
or tender offers affecting the security, price and extent of
public trading in similar securities of the issuer or
comparable companies, and other relevant matters. To the
extent that a Fund purchases securities which are restricted
as to resale or for which current market quotations are not
available, the Adviser of the Fund will value such
securities based upon all relevant factors as outlined in
FRR 1.
The Trust, on behalf of each Fund, reserves the right, if
conditions exist which make cash payments undesirable, to
honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable
securities chosen by the Trust, and valued as they are for
purposes of computing the Fund's net asset value (a
redemption in kind). If payment is made to a Fund
shareholder in securities, the shareholder may incur
transaction expenses in converting these securities into
cash. The Trust, on behalf of each Fund, has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as
a result of which each Fund is obligated to redeem shares
with respect to any one investor during any 90-day period,
solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of the period.
MANAGEMENT OF THE FUNDS
The Trustees and officers of the Trust, of which each Fund
is a series, and their principal occupations during the past
five years, are set forth below. Their titles may have
varied during that period. Asterisks indicate those
Trustees who are "interested persons" (as defined in the
1940 Act) of the Trust. Unless otherwise indicated, the
address of each Trustee and officer is Exchange Place,
Boston, Massachusetts 02109.
Trustees and Officers
William F. Small, Trustee and President; Executive Vice
President of First Data Investor Services Group Inc. since
1994; Senior Vice President, The Shareholder Services Group
Inc. (1993-1994); individual consultant (1990-1993)
Michael Kardok, Treasurer and Chief Financial Officer; a
Vice President of First Data Investor Services Group Inc.
since 1994; Vice President, The Boston Company Advisors Inc.
prior to May, 1994.
Patricia L. Bickimer, Secretary; Vice President and
Associate General Counsel, First Data Investor Services
Group Inc. since 1995; Associate Vice Counsel and Associate
General Counsel, The Boston Company Advisors Inc. prior to
May 1994.
Messrs. Kardok and Small and Ms. Bickimer also hold similar
positions for other investment companies for which 440
Financial or an affiliate serves as the principal
underwriter.
No person who is an officer or director of Bankers Trust is
an officer or Trustee of the Trust. No director, officer or
employee of 440 Financial or any of its affiliates will
receive any compensation from the Trust for serving as an
officer or Trustee of the Trust.
As of January 22, 1996, the Trustees and officers of the
Trust owned in the aggregate less than 1% of the shares of
any Fund or the Trust (both series taken together).
Investment Adviser and Administrator
Under the terms of each Fund's investment advisory agreement
with Bankers Trust (the "Advisory Agreement"), Bankers Trust
manages the Fund subject to the supervision and direction of
the Board of Trustees of the Trust, of which each Fund is a
series. Bankers Trust will: (i) act in strict conformity
with the Trust's Declaration of Trust, the 1940 Act and the
Investment Advisers Act of 1940, as the same may from time
to time be amended; (ii) manage each Fund in accordance with
the Fund's investment objectives, restrictions and policies;
(iii) make investment decisions for each Fund; and (iv)
place purchase and sale orders for securities and other
financial instruments on behalf of each Fund.
Bankers Trust bears all expenses in connection with the
performance of services under each Advisory Agreement. Each
Fund bears certain other expenses incurred in its operation,
including: taxes, interest, brokerage fees and commissions,
if any; fees of Trustees of the Trust who are not officers,
directors or employees of Bankers Trust, 440 Financial or
any of their affiliates; SEC fees and state Blue Sky
qualification fees; charges of custodians and transfer and
dividend disbursing agents; certain insurance premiums;
outside auditing and legal expenses; costs of maintenance of
corporate existence; costs attributable to investor
services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of
shareholders, officers and Trustees of the Trust; and any
extraordinary expenses.
Bankers Trust may have deposit, loan and other commercial
banking relationships with the issuers of obligations which
may be purchased on behalf of the Funds, including
outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so
purchased. Such affiliates deal, trade and invest for their
own accounts in such obligations and are among the leading
dealers of various types of such obligations. Bankers
Trust, in making its investment decisions, does not obtain
or use material inside information in its possession or in
the possession of any of its affiliates. In making
investment recommendations for the Funds, Bankers Trust will
not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by a Fund is a
customer of Bankers Trust, its parent or its subsidiaries or
affiliates and, in dealing with its customers, Bankers
Trust, its parent, subsidiaries and affiliates will not
inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust
or any such affiliate.
Each Fund's prospectus contains disclosure as to the amount
of Bankers Trust's investment advisory and administration
and services fees.
In addition to its services as investment adviser, Bankers
Trust also serves as administrator of each Fund. As
administrator, Bankers Trust is obligated on a continuous
basis to provide such administrative services as the Board
of Trustees of the Trust reasonably deems necessary for the
proper administration of each Fund. Bankers Trust will
generally assist in all aspects of the Funds' operations;
supply and maintain office facilities (which may be in
Bankers Trust's own offices), statistical and research data,
data processing services, clerical, accounting, bookkeeping
and recordkeeping services (including without limitation the
maintenance of such books and records as are required under
the 1940 Act and the rules thereunder, except as maintained
by other agents), internal auditing, executive and
administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and
file tax returns; supply financial information and
supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting
documentation for meetings of the Board of Trustees; provide
monitoring reports and assistance regarding compliance with
The Declaration of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange
for appropriate insurance coverage; calculate net asset
values, net income and realized capital gains or losses; and
negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.
Pursuant to a sub-administration agreement (the
"Sub-Administration Agreement"), First Data Investor
Services Group, Inc. ("FDISG") performs such
sub-administration duties for the Funds as from time to time
may be agreed upon by Bankers Trust and FDISG. The
Sub-Administration Agreement provides that FDISG will
receive such compensation as from time to time may be agreed
upon by FDISG and Bankers Trust. All such compensation will
be paid by Bankers Trust.
Bankers Trust has agreed that if in any fiscal year the
aggregate expenses of any Fund (including fees pursuant to
the Advisory Agreement, but excluding interest, taxes,
brokerage and, if permitted by the relevant state securities
commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over a Fund,
Bankers Trust will reimburse the Fund for the excess expense
to the extent required by state law. As of the date of this
Statement of Additional Information, the most restrictive
annual expense limitation applicable to any Fund is 2.50% of
the Fund's first $30 million of average annual net assets,
2.00% of the next $70 million of average annual net assets
and 1.50% of the remaining average annual net assets.
Custodian and Transfer Agent
Bankers Trust, 280 Park Avenue, New York, New York 10017,
serves as custodian for each Fund. As custodian, it holds
the Funds' assets. Bankers Trust will comply with the self-
custodian provisions of Rule 17f-2 under the 1940 Act.
FDISG serves as transfer agent of the Trust and of each
Fund. Under its transfer agency agreement with the Trust,
FDISG maintains the shareholder account records for each
Fund, handles certain communications between shareholders
and the Fund and causes to be distributed any dividends and
distributions payable by a Fund.
Bankers Trust and FDISG may be reimbursed by the Funds for
out-of-pocket expenses.
Use of Name
The Trust and Bankers Trust have agreed that the Trust may
use "BT" as part of its name for so long as Bankers Trust
serves as investment adviser to the Funds. The Trust has
acknowledged that the term "BT" is used by and is a property
right of certain subsidiaries of Bankers Trust and that
those subsidiaries and/or Bankers Trust may at any time
permit others to use that term.
The Trust may be required, on 60 days' notice from Bankers
Trust at any time, to abandon use of the acronym "BT" as
part of its name. If this were to occur, the Trustees would
select an appropriate new name for the Trust, but there
would be no other material effect on the Trust, its
shareholders or activities.
Banking Regulatory Matters
Bankers Trust has been advised by its counsel that in its
opinion Bankers Trust may perform the services for the Funds
contemplated by the Advisory Agreements and other activities
for the Funds described in the Prospectuses and this
Statement of Additional Information without violation of the
Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future
changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust
companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes
and regulations, might prevent Bankers Trust from continuing
to perform those services for the Funds. State laws on this
issue may differ from the interpretations of relevant
Federal law and banks and financial institutions may be
required to register as dealers pursuant to state securities
law. If the circumstances described above should change,
the Board of Trustees would review the relationships with
Bankers Trust and consider taking all actions necessary in
the circumstances.
Counsel and Independent Accountants
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022-4669, serves as Counsel to
the Trust and each Fund. Coopers & Lybrand L.L.P., 1100
Main Street, Suite 900, Kansas City, Missouri 64105 acts as
independent accountants of the Trust and each Fund.
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights,
which means that holders of more than 50% of the shares
voting for the election of Trustees can elect all Trustees.
Shares are transferable but have no preemptive, conversion
or subscription rights. Shareholders generally vote by
Fund, except with respect to the election of Trustees and
the ratification of the selection of independent
accountants.
Through its separate accounts the Companies are each Fund's
sole stockholders of record, so under the 1940 Act, the
Companies are deemed to be in control of the Funds.
Nevertheless, when a shareholders' meeting occurs, each
Company solicits and accepts voting instructions from its
Contractowners who have allocated or transferred monies for
an investment in a Fund as of the record date of the
meeting. Each Company then votes the Fund's shares that are
attributable to its Contractowners' interest in the Fund in
proportion to the voting instructions received. Each
Company will vote any share that it is entitled to vote
directly due to amounts it has contributed or accumulated in
its separate accounts in the manner described in the
offering memoranda for its variable annuities and variable
life insurance policies.
Massachusetts law provides that shareholders could under
certain circumstances be held personally liable for the
obligations of the Trust. However, the Trust's Declaration
of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for
indemnification from the Trust's property for all losses and
expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would
be unable to meet its obligations, a possibility that the
Trust believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying the liability
will be entitled to reimbursement from the general assets of
the Trust. The Trustees intend to conduct the operations of
the Trust in a manner so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of
the Trust.
The Trust was organized on January 19, 1996.
TAXATION
Taxation of the Funds
The Trust intends to qualify annually and to elect each Fund
to be treated as a regulated investment company under the
Code.
To qualify as a regulated investment company, each Fund
must, among other things: (a) derive in each taxable year at
least 90% of its gross income from dividends, interest,
payments with respect to securities loans and gains from the
sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its
business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income
from the sale or other disposition of certain assets
(namely, in the case of the Fund, (i) stock or securities;
(ii) options, futures, and forward contracts (other than
those on foreign currencies); and (iii) foreign currencies
(including options, futures, and forward contracts on such
currencies) not directly related to the Fund's principal
business of investing in stock or securities (or options and
futures with respect to stocks or securities)) held less
than three months (the 30% Limitation"); (c) diversify its
holdings so that, at the end of each quarter of the taxable
year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of
other regulated investment companies and other securities,
with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than
5% of the value of the Fund's total assets and not greater
than 10% of the outstanding voting securities of such issuer
and (ii) not more than 25% of the value of its total assets
is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other
regulated investment companies); and (d) distribute at least
90% of its investment company taxable income (which
includes, among other items, dividends, interest and net
short-term capital gains in excess of net long-term capital
losses) and its net tax-exempt interest income, if any, each
taxable year.
As a regulated investment company, each Fund will not be
subject to U.S. Federal income tax on its investment company
taxable income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses),
if any, that it distributes to its shareholders, that is,
the Companies' separate accounts. Each Fund intends to
distribute to its shareholders, at least annually,
substantially all of its investment company taxable income
and net capital gains. Amounts not distributed on a timely
basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax.
To prevent imposition of the excise tax, the Fund must
distribute during each calendar year an amount equal to the
sum of: (1) at least 98% of its ordinary income (not taking
into account any capital gains or losses) for the calendar
year; (2) at least 98% of its capital gains in excess of its
capital losses (adjusted for certain ordinary losses, as
prescribed by the Code) for the one-year period ending on
October 31 of the calendar year; and (3) any ordinary income
and capital gains for previous years that was not
distributed during those years:
The Code and Treasury Department regulations promulgated
thereunder require that mutual funds that are offered
through insurance company separate accounts must meet
certain diversification requirements to preserve the tax-
deferred benefits provided by the variable contracts which
are offered in connection with such separate accounts. The
Adviser intends to diversify each Fund's investments in
accordance with those requirements. The offering memoranda
for each Company's variable annuities and variable life
insurance policies describe the federal income tax treatment
of distributions from such contracts.
To comply with regulations under Section 817(h) of the Code,
each Fund will be required to diversify its investments so
that on the last day of each calendar quarter no more than
55% of the value of its assets is represented by any one
investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three
investments and no more than 90% is represented by any four
investments. Generally, all securities of the same issuer
are treated as a single investment. For the purposes of
Section 817(h) of the Code, obligations of the U.S. Treasury
and each U.S. Government instrumentality are treated as
securities of separate issuers. The Treasury Department has
indicated that it may issue future pronouncements addressing
the circumstances in which a variable annuity contract
owner's control of the investments of a separate account may
cause the variable contract owner, rather than the separate
account's sponsoring insurance company, to be treated as the
owner of the assets held by the separate account. If the
variable annuity contract owner is considered the owner of
the securities underlying the separate account, income and
gains produced by those securities would be included
currently in the variable annuity contract owner's gross
income. It is not known what standards will be set forth in
such pronouncements or when, if at all, these pronouncements
may be issued. In the event that rules or regulations are
adopted, there can be no assurance that a Fund will be able
to operate as described currently in the Prospectus or that
the Fund will not have to change its investment policies or
goals.
A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund in
October, November or December with a record date in such a
month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the
distributions are received. To prevent application of the
excise tax, each Fund intends to make its distributions in
accordance with the calendar year distribution requirement.
Foreign Securities. Tax conventions between certain
countries and the United States may reduce or eliminate such
taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets
to be invested in various countries will vary.
If a Fund is liable for foreign taxes, and if more than 50%
of the value of the Fund's total assets at the close of its
taxable year consists of stocks or securities of foreign
corporations, it may make an election pursuant to which
certain foreign taxes paid by it would be treated as having
been paid directly by shareholders which have invested in
the Fund. Pursuant to such election, the amount of foreign
taxes paid will be included in the income of the
corresponding Fund's shareholders, and such Fund
shareholders (except tax-exempt shareholders) may, subject
to certain limitations, claim either a credit or deduction
for the taxes. Each such Fund shareholder will be notified
after the close of the Fund's taxable year whether the
foreign taxes paid will "pass through" for that year and, if
so, such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country and
(b) the portion which represents income derived from sources
within each such country.
The amount of foreign taxes for which a shareholder may
claim a credit in any year will generally be subject to a
separate limitation for "passive income," which includes,
among other items of income, dividends, interest and certain
foreign currency gains. Because capital gains realized by
the Fund on the sale of foreign securities will be treated
as U.S. source income, the available credit of foreign taxes
paid with respect to such gains may be restricted by this
limitation.
Distributions
Dividends paid out of a Fund's investment company taxable
income will be taxable to a U.S. shareholder as ordinary
income. Distributions of net capital gains, if any,
designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the
shareholder has held the Fund's shares, and are not eligible
for the dividends-received deduction. Shareholders receiving
distributions in the form of additional shares, rather than
cash, generally will have a cost basis in each such share
equal to the net asset value of a share of the Fund on the
reinvestment date. Shareholders will be notified annually
as to the U.S. Federal tax status of distributions.
Sale of Shares
Any gain or loss realized by a shareholder upon the sale or
other disposition of shares of the Fund, or upon receipt of
a distribution in complete liquidation of a Fund, generally
will be a capital gain or loss which will be long-term or
short-term, generally depending upon the shareholder's
holding period for the shares. Any loss realized on a sale
or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant
to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after
disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by a shareholder on a disposition
of Fund shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the
extent of any distributions of net capital gains received by
the shareholder with respect to such shares.
Foreign Withholding Taxes
Income received by a Fund from sources within foreign
countries may be subject to withholding and other taxes
imposed by such countries.
Backup Withholding
A Fund may be required to withhold U.S. Federal income tax
at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct
taxpayer identification number or to make required
certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding.
Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the
shareholder's U.S. Federal income tax liability.
Foreign Shareholders
The tax consequences to a foreign shareholder of an
investment in a Fund may be different from those described
herein. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Other Taxation
The Trust is organized as a Massachusetts business trust
and, under current law, neither the Trust nor any Fund is
liable for any income or franchise tax in the Commonwealth
of Massachusetts, provided that the Fund continues to
qualify as a regulated investment company under Subchapter M
of the Code.
Fund shareholders may be subject to state and local taxes on
their Fund distributions. Shareholders are advised to
consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a
Fund.
APPENDIX
BOND, COMMERCIAL PAPER AND MUNICIPAL OBLIGATIONS RATINGS
Set forth below are descriptions of the ratings of Moody's
and S&P, which represent their opinions as to the quality of
the Municipal Obligations and securities which they
undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute
standards of quality.
Moody's Bond Ratings
Aaa. Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
Baa. Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of
a desirable investment. Assurance of interest principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa. Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Unrated. Where no rating has been assigned or where a rating
has been suspended or withdrawn, it may be for reasons
unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that
are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue
or issuer.
4. The issue was privately placed, in which case the rating
is not published in Moody's publications.
Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude
satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be
formed; if a bond is called for redemption; or for other
reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes
are designated by the symbols Aa-1, A-1, Baa-1 and B-1.
S&P's Bond Rating
AAA. Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is
extremely strong.
AA. Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher
rated issues only in small degree.
A. Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than bonds in the highest rated
categories.
BBB. Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than in higher
rated categories.
BB, B, CCC, CC, and C. Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in
accordance with the terms of this obligations. BB indicates
the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, they are outweighed by large
uncertainties of major risk exposures to adverse conditions.
C1. The rating C1 is reserved for income bonds on which no
interest is being paid.
D. Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-). The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR. Indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or
that S&P does not rate a particular type of obligation as a
matter of policy.
Fitch Investors Service Bond Ratings
AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but
slight market fluctuation other than through changes in the
money rate. The factor last named is of importance varying
with the length of maturity. Such securities are mainly
senior issues of strong companies, and are most numerous in
the railway and public utility fields, though some
industrial obligations have this rating. The prime feature
of an AAA rating is showing of earnings several times or
many times interest requirements with such stability of
applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific
property as in the case of high class equipment certificates
or bonds that are first mortgages on valuable real estate.
Sinking funds or voluntary reduction of the debt by call or
purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence
the rating.
AA. Securities in this group are of safety virtually beyond
question, and as a class are readily salable while many are
highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior
though strong lien in many cases directly following an AAA
security or the margin of safety is less strikingly broad.
The issue may be the obligation of a small company, strongly
secured but influenced as to ratings by the lesser financial
power of the enterprise and more local type of market.
S&P's Commercial Paper Ratings
A is the highest commercial paper rating category utilized
by S&P, which uses the numbers 1+, 1, 2 and 3 to denote
relative strength within its A classification. Commercial
paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry
average. Long-term debt rating is A or better. The issuer
has access to at least two additional channels of borrowing.
Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a
well-established industry and has superior management.
Moody's Commercial Paper Ratings
Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:
leading market positions in well-established industries;
high rates of return on funds employed; conservative
capitalization structures with moderate reliance on debt and
ample asset protection; broad margins in earnings coverage
of fixed financial charges and high internal cash
generation; well-established access to a range of financial
markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions)
have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity
is maintained.
Issuers rated Prime-3 (or related supporting institutions)
have an acceptable capacity for repayment of short-term
promissory obligations. The effect of industry
characteristics and market composition may be more
pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection
measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is
maintained.
Fitch Investors Service and Duff & Phelps Commercial Paper
Ratings
Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is
considered very good grade paper and reflects an assurance
of timely payment only slightly less in degree than the
strongest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics: very high certainty
of timely payment, excellent liquidity factors supported by
strong fundamental protection factors, and risk factors
which are very small. Issues rated "Duff 2" have a good
certainty of timely payment, sound liquidity factors and
company fundamentals, small risk factors, and good access to
capital markets.
Investment Adviser of each Fund
Bankers Trust Global Investment Management
a unit of
Bankers Trust Company
280 Park Avenue
New York, NY 10017
Distributor
440 Financial Distributors, Inc.
290 Donald Lynch Boulevard
Marlboro, MA 01752
Custodian
Bankers Trust Company STATEMENT OF
280 Park Avenue ADDITIONAL
INFORMATION
New York, NY 10017
____________, 1996
Transfer Agent
Bankers Trust Company
280 Park Avenue
New York, NY 10017
Independent Accountants
Coopers & Lybrand L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
Legal Counsel
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4669
BTO361A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
None
Included in Part B:
None
(b) Exhibits:
Exhibit
Number Description
1
- -
- -
Declaration of Trust; filed
herewith.
2
- -
- -
By-Laws of Registrant.*
3
- -
- -
Not Applicable.
4
- -
- -
Not Applicable.
5
- -
- -
Investment Advisory Agreement
between Registrant and
Bankers Trust Global
Investment Management.*
6
- -
- -
Distribution Agreement
between Registrant and 440
Financial Distributors, Inc.*
7
- -
- -
Not Applicable.
8
- -
- -
Custodian Agreement between
Registrant and Bankers Trust
Company.*
9
- -
- -
Transfer Agency Agreement
between Registrant and First
Data Investor Services Group,
Inc.*
1
0
- -
- -
Opinion and Consent of
Counsel.*
1
1
- -
- -
Consent of Independent
Accountants.*
1
2
- -
- -
Not Applicable.
1
3
- -
- -
Purchase Agreement relating
to Initial Capital.*
* To be filed by amendment
1
4
- -
- -
Not Applicable.
1
5
- -
- -
Not Applicable.
1
6
- -
- -
Not Applicable.
1
7
- -
- -
Not Applicable.
Item 25. Persons Controlled by or under Common Control
with Registrant
All of the outstanding shares of each portfolio of
Registrant on the date Registrants Registration Statement
becomes effective will be owned by First Data Investor
Services Group, Inc. ("First Data"), a Massachusetts
business trust.
Item 26. Number of Holders of Securities
It is anticipated that First Data will hold all of
Registrants shares, par value $.01 per share, on the date
Registrants Registration Statement is declared effective.
Item 27. Indemnification.
Reference is made to Articles IV and V of Registrant's
Declaration of Trust filed as Exhibit 1 to the Registration
Statement.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities of Act")
may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment
Adviser.
Bankers Trust Global Investment Management, which
serves as investment adviser to Small Cap Fund and
International Equity Fund, is a unit of Bankers Trust
Company, which is a wholly owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of
commercial banking and trust activities and is a major
wholesale supplier of financial services to the
international institutional market.
To the knowledge of the Trust, none of the directors
or officers of Bankers Trust, except those set forth below,
is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain
directors and officers also hold various positions with and
engage in business for Bankers Trust New York Corporation.
Set forth below are the names and principal businesses of
the directors and officers of Bankers Trust who are or
during the past two fiscal years has been engaged in any
other business, profession, vocation or employment of a
substantial nature. These persons may be contacted c/o
Bankers Trust Company, 280 Park Avenue, New York, New York
10015.
Name and Principal Business Address
Principal Occupation and Other Information
George B. Beitzel - International Business Machines
Corporation, Old Orchard Road,
Armonk, NY 10504.
Retired Senior Vice President and Director, Member of
Advisory Board of International Business Machines
Corporation. Director of Bankers Trust and Bankers Trust
New York Corporation. Director of FlightSafety
International, Inc. Director of Phillips Petroleum Company.
Director of Roadway Services, Inc. Director of Rohm and
Hass Company.
William R. Howell - J.C. Penney Company, Inc., P.O. Box
10001,
Plano, TX 75301-0001.
Chairman of the Board and Chief Executive Officer, J.C.
Penney Company, Inc. Director of Bankers Trust and Bankers
Trust New York Corporation. Also a Director of Exxon
Corporation, Halliburton Company and Warner-Lambert
Corporation.
Jon M. Huntsman - Huntsman Chemical Corporation, 2000 Eagle
Gate Tower,
Salt Lake City, UT 84111.
Chairman and Chief Executive Officer, Huntsman Chemical
Corporation, Director of Bankers Trust and Bankers Trust New
York Corporation. Chairman of Constar Corporation, Huntsman
Corporation, Huntsman Holdings Corporation and Petrostar
Corporation. President of Autostar Corporation, Huntsman
Polypropylene Corporation and Restar Corporation. Director
of Razzleberry Foods Corporation and Thiokol Corporation.
General Partner of Huntsman Group Ltd., McLeod Creek
Partnership and Trustar Ltd.
Vernon E. Jordan, Jr. - Akin, Gump, Strauss, Hauer & Feld,
LLP,
1333 New Hampshire Ave., N.W., Washington, DC 20036.
Partner, Akin, Gump, Strauss, Hauer & Feld, LLP. Director
of Bankers Trust and Bankers Trust New York Corporation.
Also a Director of American Express Company, Corning
Incorporated, Dow Jones, Inc., J.C. Penney Company, Inc.,
RJR Nabisco Inc., Revlon Group Incorporated, Ryder System,
Inc., Sara Lee Corporation, Union Carbide Corporation and
Xerex Corporation.
Hamish Maxwell - Philip Morris Companies Inc., 120 Park
Avenue,
New York, NY 10017.
Chairman of the Executive Committee, Philip Morris Companies
Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of The News Corporation Limited.
Donald F. McCullough - Collins & Aikman Corporation, 210
Madison Avenue,
New York, NY 10016.
Chairman Emeritus, Collins & Aikman Corporation. Director
of Bankers Trust and Bankers Trust New York Corporation.
Director of Massachusetts Mutual Life Insurance Co. and
Melville Corporation.
N.J. Nicholas Jr. - 745 Fifth Avenue,
New York, NY 10020.
Former President, Co-Chief Executive Officer and Director of
Time Warner Inc. Director of Bankers Trust and Bankers
Trust New York Corporation. Also a Director of Xerox
Corporation.
Russell E. Palmer - The Palmer Group, 3600 Market Street,
Suite 530,
Philadelphia, PA 19104.
Chairman and Chief Executive Officer of The Palmer Group.
Director of Bankers Trust and Bankers Trust New York
Corporation. Also Director of Allied-Signal Inc., Contel
Cellular, Inc., Federal Home Loan Mortgage Corporation, GTE
Corporation, Goodyear Tire & Rubber Company, Imasco Limited,
May Department Stores Company and Safeguard Scientifics,
Inc. Member, Radnor Venture Partners Advisory Board.
Didier Pineau-Valencienne - Schneider S.A., 4 Rue de
Longchamp,
75116 Paris, France.
Chairman and Chief Executive Officer, Schneider S.A.
Director and member of the European Advisory Board of
Bankers Trust and Director of Bankers Trust New York
Corporation. Director of AXA (France) and Equitable Life
Assurance Society of America, Arbed (Luxembourg), Banque
Paribas (France), Ciments Francils (France), Cofibel
(Belgique), Compagnie Industrielle de Paris (France),
SIAPAP, Schneider USA, Sema Group PLC (Great Britain), Spie-
Batignolles, Tractebel (Belgique) and Whirlpool. Chairman
and Chief Executive Officer of Societe Parisienne
dEntreprises et de Participations.
Charles S. Sanford, Jr. - Bankers Trust Company, 280 Park
Avenue,
New York, NY 10017.
Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Also a Director of Mobil Corporation and
J.C. Penney Company, Inc.
Eugene B. Shanks, Jr. - Bankers Trust Company, 280 Park
Avenue,
New York, NY 10017.
President of Bankers Trust and Bankers Trust New York
Corporation.
Patricia Carry Stewart - c/o Office of the Secretary, 280
Park Avenue,
New York, NY 10017.
Former Vice President, The Edna McConnell Clark Foundation.
Director of Bankers Trust and Bankers Trust New York
Corporation. Director, Borden Inc., Continental Corp. and
Melville Corporation.
George J. Vojta - Bankers Trust Company, 280 Park Avenue,
New York, NY 10017.
Vice Chairman of the Board of Bankers Trust and Bankers
Trust New York Corporation. Director of Northwest Airlines
and Private Export Funding Corp.
Item 29. Principal Underwriters.
(a) In addition to BT Insurance Funds Trust, 440
Financial Distributors, Inc. (the "Distributor") currently
acts as distributor for The Galaxy Fund, The Galaxy VIP
Fund, Galaxy Fund II, The Kent Funds and Armada Funds
(formerly known as NCC Funds). The Distributor is
registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of
Securities Dealers. The Distributor is a wholly-owned
subsidiary of First Data Corporation, 53 State Street, Mail
Stop BOS 425, Boston, MA 02109.
(b) The information required by this Item 29 (b)
with respect to each director, officer, or partner of 440
Financial Distributors, Inc. is incorporated by reference to
Schedule A of Form BD filed by 440 Financial Distributors,
Inc. with the Securities and Exchange Commission pursuant to
the Securities Act of 1934 (File No. 8-45467).
(c) Not Applicable.
Item 30. Location of Accounts and Records.
(1) Bankers Trust Global Investment Management
280 Park Avenue
New York, NY 10017
(2) 440 Financial Distributors, Inc.
290 Donald Lynch Boulevard
Marlboro, MA 01752
(3) Bankers Trust Company
280 Park Avenue
New York, NY 10017
(4) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) The undersigned Registrant hereby undertakes to
file a post-effective amendment, using financial statements
which need not be certified, within four to six months after
the effective date of the Registration Statement under the
Securities Act of 1933.
(c) The Registrant will furnish each person to whom
a prospectus is delivered with a copy of the Registrants
latest annual report to shareholders, upon request and
without charge.
(d) Registrant hereby undertakes to call a
meeting of its shareholders for the purpose of voting upon
the question of removal of a trustee or trustees of
Registrant when requested in writing to do so by the holders
of at least 10% of Registrants outstanding shares.
Registrant undertakes further, in connection with the
meeting, to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940, as amended, relating to
communications with the shareholders of certain common-law
trusts.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has
duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the
City of Boston and Commonwealth of Massachusetts, on the
24th day of January, 1996.
BT INSURANCE FUNDS TRUST
By: /s/ William E. Small
William E. Small
President
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ William Small President and Trustee
January 24, 1996
William E. Small
/s/ Michael Kardok Treasurer (Chief
January 24, 1996
Michael Kardok Financial and Accounting
Officer)
EXHIBIT INDEX
EXHIBIT No. DESCRIPTION OF EXHIBIT
1. Declaration of Trust.
DECLARATION OF TRUST
OF
BT INSURANCE FUNDS TRUST
DECLARATION OF TRUST made this 18th day of January, 1996 by
William E. Small (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, the Trustees wish to establish a trust for the
investment and reinvestment of funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in
the trust assets be divided into transferable shares of beneficial
interest as hereinafter provided;
WHEREAS, the Trustees declare that all money and property
contributed to the trust established thereunder shall 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 hereof and in consideration of the
foregoing premises and the agreements herein contained declare as
follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created
hereby is BT Insurance Funds 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 the contract described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section 2.8
hereof, as from time to time amended.
(c) The terms "Commission" and "Interested Person", have
the meanings given them in the 1940 Act. Except as otherwise
defined by the Trustees in conjunction with the establishment of
any Series of Shares, the term "vote of a majority of the Shares
outstanding and entitled to vote" shall have the same meaning as
the term "vote of a majority of the outstanding voting security"
given it in the 1940 Act.
(d) "Class" means any division of shares within a Series,
which Class is or has been established within such Series in
accordance with the provision of Article V.
(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", "herein", and "hereunder" shall be
deemed to refer to this Declaration rather than exclusively to the
article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust,
to the contract described in Section 3.1 hereof.
(h) The "1940 Act" means the Investment Company Act of
1940, as amended from time to time.
(i) "Fund" or "Funds" individually or collectively means
the separate Series of Shares of the Trust, together with the
assets and liabilities assigned thereto.
(j) "His" shall include the feminine and neuter, as well
as the masculine, genders.
(k) "Investment Adviser" means the party, other than the
Trust, to the contract described in Section 3.2 hereof.
(l) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(m) "Series" individually or collectively means the
separate Series of the Trust (or if the Trust shall have only one
such component, then that one) as may be established and
designated from time to time by the Trustees pursuant to Section
5.11 hereof.
(n) "Shareholder" means the record owner of Outstanding
Shares.
(o) "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 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.
(p) "Transfer Agent" means any Person other than the Trust
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.
(q) "Trust" means BT Insurance Funds Trust.
(r) "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.
(s) The "Trustees" means the person who has signed this
Declaration, so long as he shall continue in office in accordance
with the terms hereof, and all other persons who may from time to
time be duly elected, qualified and serving as Trustees in
accordance with the provisions of Article II hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or
persons in this capacity or their capacities as trustees
hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. 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, but with such powers of delegation as may be permitted
by this Declaration. The Trustees shall have 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 and
execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although
such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the
Trustees may be exercised without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the
power:
(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 invest in, hold for investment, or reinvest in,
securities, including common and preferred stocks; warrants;
bonds, debentures, bills, time notes and all other evidences of
indebtedness; negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or
other political subdivision thereof, or any governmental or quasi-
governmental agency or instrumentality; and money market
instruments including bank certificates of deposit, finance paper,
commercial paper, bankers acceptances and all kinds of repurchase
agreements, of any corporation, company, trust, association, firm
or other business organization however established, and of any
country, state, municipality or other political subdivision, or
any governmental or quasi-governmental agency or instrumentality.
(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 such securities, to enter into repurchase
agreements, reverse repurchase agreements, firm commitment
agreements and forward foreign currency exchange contracts, to
purchase and sell options on securities, indices, currency or
other financial assets, futures contracts and options on futures
contracts of all descriptions, and other derivative securities,
and to engage in all types of hedging and risk management
transactions.
(d) To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase agreements
included in the Trust Property, including the right to vote
thereon and otherwise act with respect thereto and to do all acts
for the preservation, protection, improvement and enhancement in
value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop and dispose of (by sale or otherwise)
any property, real or personal, including cash, and any interest
therein.
(f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by
mortgaging, pledging or otherwise subjecting as security the Trust
Property; and to endorse, guarantee, or undertake the performance
of any obligation or engagement of any other Person and to lend
Trust Property.
(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in which
is included in the Trust Property or in the affairs of which the
Trustees have 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, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust,
association or firm.
(h) To enter into a plan of distribution and any related
agreements whereby the Trust may finance directly or indirectly
any activity which is primarily intended to result in sale of
Shares.
(i) In general to carry on any other business in
connection with or incidental to any of the foregoing powers, to
do everything necessary, suitable or proper for the accomplishment
of any purpose or the attainment of any object or the furtherance
of any power herein before set forth 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
the aforesaid business or purposes, objects or powers.
(j) Notwithstanding any other provision of this
Declaration to the contrary, the Trustees shall have the power in
their discretion without any requirement of approval by
Shareholders to either invest all or portion of the Trust Property
or the Property of a Series of the Trust, or sell all or a portion
of the Trust Property or the Property of a Series of the Trust and
invest the proceeds of such sales, in another investment company
that is registered under the 1940 Act.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not
be held to limit or restrict in any manner the general powers of
the Trustees.
The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust,
nor shall the Trustees be limited by any law limiting the
investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal to all the Trust
Property shall be vested in the Trustees as joint tenants except
that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust of any Series of the Trust,
or in the name of any other Person as nominee, on such terms as
the trustees may determine, provided that the interest of the
Trust therein is deemed appropriately protected. The right, title
and interest of the Trustees 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. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed
and delivered.
Section 2.4. Issuance and Repurchase of Shares. The
Trustees shall have the power to issue, sell, repurchase, redeem,
retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Articles VI and VII and Section 5.11
hereof, to apply to any such repurchase, redemption, retirement,
cancellation, or acquisition of Shares any funds or property of
the Trust, whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of The Commonwealth
of Massachusetts governing business corporations.
Section 2.5. Delegation: Committees. The Trustees
shall have the power to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the
doing of such things and the execution of such 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 expedient,
to the same extent as such delegation is permitted by the 1940
Act.
Section 2.6. Collection and Payment. Subject to
Section 5.11 hereof, the Trustees shall have power to collect all
property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the 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 2.7. Expenses. Subject to Section 5.11 hereof,
the Trustees shall have the power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental
to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves
as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 2.8. Manner of Acting: By-laws. Except as
otherwise provided herein or in the By-laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum being present),
including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all
persons participating in the meeting can hear each other, or by
written consents of the entire number of Trustees then in office.
The Trustees may adopt By-laws not inconsistent with this
Declaration to provide for the conduct of the business of the
Trust and may amend or repeal such By-laws to the extent such
power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8
and in addition to such provisions or any other provision of this
Declaration or of the By-laws, the Trustees may by resolution
appoint a committee consisting of less than the whole number of
Trustees then in office, which committee may be empowered to act
for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with
respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which
shall be pending or threatened to be brought before any court,
administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section
5.11 hereof, the Trustees shall have the power to: (a) employ or
contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series
thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) remove Trustees or fill
vacancies in or add their number, elect and remove such officers
and appoint and terminate such agents or employees 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; (d) purchase, and pay for out of Trust Property or the
Property of the appropriate Series of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or
independent contractors of the Trust against all claims 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 liability;
(e) establish pension, profit-sharing, share purchase and other
retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust: (f) to the extent
permitted by law, indemnify any person with whom the Trust or any
Series thereof has dealings, including the Investment Adviser,
Distributor, Administrator, Transfer Agent and selected dealers,
to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust or any Series thereof and
the method by which its accounts shall be kept; (i) 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.
Section 2.10. Principal Transactions. Except in
transactions not permitted by the 1940 Act or rules and
regulations adopted by the Commission, the Trustees may, on behalf
of the Trust, buy any securities from or sell any securities to,
or lend any assets of the Trust or any Series thereof to, any
Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any
such dealings with the Investment Adviser, Distributor or transfer
agent or with any Interested Person of such Person; and the Trust
or Series thereof may employ any such Person, or firm or company
in which such Person is in an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or
custodian upon customary terms.
Section 2.11. Number of Trustees. The number of
Trustees shall initially be one (1), and thereafter shall be such
number as shall be fixed from time to time by written instrument
signed by a majority of the Trustees; provided, however, that the
number of Trustees shall in no event be less than one (1) nor more
than fifteen (15).
Section 2.12. Election and Term. Except for the
Trustees named herein or appointed to fill vacancies pursuant to
Section 2.14 hereof, the Trustees shall be elected by the
Shareholders owning of record a plurality of the Shares voting at
a meeting of Shareholders on a date fixed by the Trustees. Except
in the event of resignation or removals pursuant to Section 2.13
hereof, each Trustee shall hold office until such time as less
than a majority of the Trustees holding office have been elected
by Shareholders. In such event the Trustees then in office will
call a Shareholders' meeting for the election of Trustees. Except
for the foregoing circumstances, the Trustees shall continue to
hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may
resign his trust (without the need for any prior or subsequent
accounting) by an instrument in writing signed by him and
delivered to the other Trustees and such resignation shall be
effective upon delivery, or at a lager date according to the terms
of the instrument. Any of the Trustees may be removed (provided
the aggregate number of Trustees shall not be less than one) with
cause, by the action of two-thirds of the remaining Trustees or by
the action of two-thirds of the outstanding shares of beneficial
interest of the Trust at a meeting duly called pursuant to Section
5.10 hereof by the Shareholders for such purpose. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to
be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to
the Trust or the remaining Trustees any Trust Property held in the
name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
Section 2.14. Vacancies. The term of office of a
Trustee shall terminate and a vacancy shall occur in the event of
his death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the
office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to
the terms of the Declaration. In the case of an existing vacancy,
including a vacancy existing by reason of an increase in the
number of Trustees, subject (but only after the Trust's initial
registration statement under the Securities Act of 1933 shall have
become effective) to the provisions of Section 16(a) of the 1940
Act, the remaining Trustees shall fill such vacancy by the
appointment of such other person as they in their discretion shall
see fit, made by a written instrument signed by a majority of the
Trustees then in office. Any such appointment shall not become
effective, however, until the person named in the written
instrument of appointment shall have accepted in writing such
appointment and agreed to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of
retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to
such retirement, resignation or increase in the number of
Trustees. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled as provided in this Section
2.14, the Trustees in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A
written instrument certifying the existence of such vacancy signed
by a majority of the Trustees in office shall be conclusive
evidence of the existence of such vacancy.
Section 2.15. Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other
Trustee or Trustees; provided that in no case shall fewer than two
(2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise
expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may
in their discretion from time to time enter into an exclusive or
non-exclusive distribution contract or contracts providing for the
sale of Shares to net the Trust or the applicable Series of the
Trust not less than the amount provided for in Section 7.1 of
Article VII hereof, whereby the Trustees may either agree to sell
the Shares to the other party to the contract or appoint such
other party their sales agent for the Shares, and in either case
on such terms and conditions, if any, as may be prescribed in the
By-laws, and such further terms and conditions as the Trustees may
in their discretion determine not inconsistent with the provisions
of this Article III or of the By-laws; and such contract may also
provide for the repurchase of the Shares by such other party as
agent of the Trustees.
Section 3.2. Advisory or Management Contract. The
Trustees may in their discretion from time to time enter into an
investment advisory contract, or, if the Trustees establish
multiple Series, separate investment advisory contracts with
respect to each Series, whereby the other party to such contract
or contracts shall undertake to manage the investment operations
of one or more Series of the Trust and the compositions of the
portfolios of the Trust or such Series, including the purchase,
retention and disposition of securities and other assets in
accordance with the investment objectives, policies and
restrictions of the Trust or such Series and all upon such terms
and conditions as the Trustees may in their discretion determine,
including the grant of authority to such other party to determine
what securities shall be purchased or sold by the Trust or
applicable Series of the Trust and what portion of its assets
shall be uninvested, which authority shall include the power to
make changes in the investments of the Trust or any Series.
Section 3.3. Administration Contract. The Trustees may
in their discretion from time to time enter into an administration
contract or contracts whereby the other party to such contract
shall undertake to supervise all or any part of the operations of
the Trust or any Series thereof and to provide all or any part of
the administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient
administration and operations of the Trust and any Series thereof.
Section 3.4. Affiliations of Trustees or Officers, Etc.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser or distributor of or for any
partnership, corporation, trust, association or other organization
or of or for any parent of affiliate of any organization, with
which a contract of the character described in Sections 3.1 or 3.2
above or for services as Custodian, Administrator, Transfer Agent
or disbursing agent or for related services may have been or may
hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder of or has any interest in the
Trust, or that
(ii) any partnership, corporation, trust, association or
other organization with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as
Custodian, Administrator, Transfer Agent or disbursing agent or
for related services may have been or may hereafter may be made
also has any one or more of such contracts with one or more other
partnerships, corporations, trusts, associations or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability to
the Trust or its Shareholders.
Section 3.5. Compliance with 1940 Act. Any contract
entered into or pursuant to Sections 3.1 or 3.2 shall be
consistent with and subject to the requirements of Section 15 of
the 1940 Act (including any other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its
termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders,
Trustees, Etc. 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. No
Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust Property
or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard
of his duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Property of one
or more specific Series of the Trust if the claim arises from the
conduct of such Trustee, officer, employee or agent with respect
to only such Series, for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the
Trust, is made a party to any suit or proceeding to enforce any
such liability of the Trust, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and
hold each Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder out of the Trust Property for all legal
and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made
only out of assets of the one or more Series whose Shares were
held by said Shareholder at the time the act or event occurred
which gave rise to the claim against or liability of said
Shareholder. The rights accruing to a Shareholder under this
Section 4.1 shall not impair any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
Section 4.2. Non-Liability of Trustees. Etc. No
Trustee, officer, employee or agent of the Trust shall be liable
to the Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee or agent thereof for any action or failure to
act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to
the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer
of the Trust shall be indemnified by the Trust, or by one or more
Series thereof if the claim arises from his conduct with respect
to only such Series, to the fullest extent permitted by the law
against all liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include, without
limitation, reasonable attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a Series
thereof or the Shareholders by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest of
the Trust or a Series thereof;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
paragraph (b) (ii) resulting in a payment by a Trustee or officer,
unless there has been a determination that such Trustee or officer
did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by (x) vote of a
majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-Interested Trustees then in
office act on the matter) or (y) written opinion of independent
legal counsel.
(c) The rights of indemnification herein provided
may be insured against by policies maintained by the Trust, shall
be severable, shall not affect any other rights to which any other
Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer, shall inure to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing contained
herein shall affect any rights to indemnification to which
personnel of the Trust other than Trustees and officer may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 4.3 may be advanced by
the Trust or a Series thereof prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to
repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that
either:
(i) such undertaking is secured by surety bond
or some other appropriate security provided by the recipient, or
the Trust or Series thereof shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Non-interested Trustees
acting on the matter (provided that a majority of the Non-
interested Trustees act on the matter) or an independent legal
counsel in a written opinion shall determine, based upon a review
of readily available facts (as opposed to a full trial-type
inquiry) that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this section 4.3, a "Non-interested Trustee" is
one who is not (i) an "Interested Person" of the Trust (including
anyone who has been exempted from being an "Interested Person" by
any rule, regulation, or order of the Commission), or (ii)
involved in the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
Section 4.5. No Duty of Investigation: Notice in Trust
Instruments, Etc. No purchases, lender, transfer agent 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 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 such recital shall not operate to bind the Trustees
individually. The Trustees shall at all times maintain insurance
for the protection of the Trust Property or the Trust Property of
the applicable Series, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem
advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee,
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 books of account or other
records of the Trust or a Series thereof, upon an opinion of
counsel, or upon reports made to the trust or a Series thereof by
any of its officers or employees or by the Investment Adviser, the
Distributor, Transfer Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with
reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a
Trustee.
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, par value $.001 per share. The Trustees
shall have the authority to establish and designate one or more
Series of shares and one or more Classes thereof as provided in
Section 5.11 hereof. The number of shares of beneficial interest
authorized hereunder is unlimited. All shares issued hereunder
including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and
non-assessable.
Section 5.2. Rights of Shareholders. The ownership of
the Trust Property of every description and the right to conduct
any business herein before described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest conferred by their Shares, and
they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can
they be called upon to share or assume any losses of the Trust 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
determine with respect to any Series 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,
corporation, bailment or any form of legal relationship other than
a trust. Nothing in this Declaration of Trust shall be construed
to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their
discretion may, from time to time without 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 best, 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 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, of any Series 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.
Contributions to the Trust or Series thereof may be accepted for,
and Shares shall be redeemed as, whole Shares and/or 1/1,000ths of
a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be
kept at the principal office of the Trust or an office of the
Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively
and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall
be entitled to receive dividends or distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder
shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him herein or in the By-
laws provided, until he has given his address to the Transfer
Agent or such other officer or agent of the Trustees as shall keep
the said register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the
Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as
to their use.
Section 5.6. Transfer of Shares. Shares shall be
transferable on the records of the Trust only by the record holder
thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other
matters as may reasonably be required. Upon such delivery the
transfer shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be deemed to
be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any
notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or
otherwise by operation of law, shall be recorded on the register
of Shares as the holder of such Shares upon production of the
proper evidence thereof to the Trustees or the Transfer Agent, but
until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder
and neither the Trustees nor any Transfer Agent or registrar nor
any officer or agent of the Trust shall be affected by any notice
of such death, bankruptcy or incompetence, or other operation of
law.
Section 5.7. Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall
be deemed duly served or given if mailed, postage pre-paid,
addressed to any Shareholder of record at his last known address
as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the
treasury shall, until resold pursuant to Section 5.4, not confer
any voting rights on the Trustees, nor shall such Shares be
entitled to any dividends or other distributions declared with
respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall
have power to vote only (i) for the election of Trustees as
provided in Section 2.12; (ii) with respect to any investment
advisory contract entered into pursuant to Section 3.2; (iii) with
respect to termination of the Trust or a Series thereof as
provided in Section 8.2; (iv) with respect to any amendment of
this Declaration to the extent and as provided in Section 8.3; (v)
with respect to any merger, consolidation or sale of assets as
provided in Section 8.4; (vi) with respect to incorporation of the
Trust to the extent and as provided in Section 8.5; (vii) to the
same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or a Series thereof or
the Shareholders of either; (viii) with respect to any plan
adopted pursuant to Rule 12b-1 (or any successor rule) under the
1940 Act, and related matters; and (ix) with respect to such
additional matters relating to the Trust as may be required by
this Declaration, the By-laws or any registration of the Trust as
an investment company under the 1940 Act with the Commission (or
any successor agency) or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional
Share shall be entitled to a proportionate fractional vote. On
any matter submitted to Shareholders all shares shall be voted in
the aggregate and not by individual Series except (1) when
required by the 1940 Act or any rule thereunder Shares shall be
voted by individual Series or Class and (2) when the Trustees
shall have determined that the matter affects only the interests
of one or more Series or Classes thereof, then only the
Shareholders of such Series or Classes thereof shall be entitled
to vote thereon. The Trustees may, in conjunction with the
establishment of any Series or any Classes of Shares, establish
conditions under which the several Series or Classes of Shares
shall have separate voting rights or no voting rights. There
shall be no cumulative voting in the election of Trustees. Until
Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this
Declaration or the By-laws to be taken by Shareholders. The By-
laws may include further provisions for Shareholders' votes and
meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of the
Shareholders of the Trust may be called at any time by the
Chairman of the Board (if there be one) or the President, and
shall be called by the President or the Secretary at the request,
in writing or by resolution, of a majority of the Trustees, or at
the written request of the holder or holders of ten percent (10%)
or more of the total number or Shares then issued and outstanding
of the Trust entitled to vote at such meeting. Meetings of the
Shareholders of any Series of the Trust shall be called by the
President or the Secretary at the written request of the holder or
holders of ten percent (10%) or more of the total number of Shares
then issued and outstanding of such Series of the Trust entitled
to vote at such meeting. Any such request shall state the purpose
of the proposed meeting.
Section 5.11. Series and Class Designation. The
Trustees, in their discretion, may authorize the division of
Shares into two or more Series or Classes thereof, and the
different Series and Classes 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; provided that all Shares shall be
identical except that there may be variations so fixed and
determined between different Series or Classes as to investment
objective, policies and restrictions, purchase price, payment
obligations, distribution expenses, right of redemption, special
and relative rights as to dividends and on liquidation, conversion
rights, exchange rights and conditions under which the several
Series or Classes shall have separate voting rights, all of which
are subject to the limitations set forth below. 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.
If the Trustees divide the Shares of the Trust into two or
more Series or Classes, the following provisions shall be
applicable:
(a) 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 Series or one or more 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.
(b) All consideration received by the Trust for the issue
or sale of Shares of a particular Series or Class thereof,
together with all assets in which such consideration is invested
or reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation of such assets and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may
be, shall 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 upon the books of account of the Trust. In the event
that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series, the Trustees shall allocate
them among any one or more of the Series established and
designated from time to time in such a manner and on such basis as
they, in their sole discretion, deem fair and equitable. Each
such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all Series and Classes 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.
(c) The assets belonging to each particular Series shall
be charged with the liabilities of the Trust in respect of that
Series or the appropriate Class or Classes thereof and all
expenses, costs, charges and reserves attributable to that Series
or Class or Classes thereof, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or
Class shall be allocated and charged by the Trustees to and among
any one or more of the Series or Classes 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 allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes. The
Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items are
capital; and each such determination and allocation 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 attributable to any other Series or Class
or Classes thereof of the Trust. All persons extending credit to,
or contracting with or having any claim against a particular
Series or Class thereof of the Trust shall look only to the assets
of that particular Series for payment of such credit, contract or
claim.
(d) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 7.2 of this Declaration
with respect to any Series or Class which represents the interests
in the assets of the Trust immediately prior to the establishment
of two or more Series or Classes. With respect to any other
Series or Class, dividends and distributions on Shares of a
particular Series or Class may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant
to a standing resolution or resolutions adopted only once or with
such frequency as the Trustees may determine, to the holders of
Shares of that Series or Class, from such of the income and
capital gains, accrued or realized, from the assets belonging to
that Series, as the Trustees may determine after providing for
actual and accrued liabilities belonging to that Series or Class.
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 the time of record
established for the payment of such dividends or distribution.
(e) 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 thereof. Upon
redemption of his Shares or indemnification for liabilities
incurred by reason of his being or having been a Shareholder of a
Series or Class thereof, 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, Shareholders of such Series or Class thereof shall be
entitled to receive a pro rata share of the net assets of such
Series. A Shareholder of a particular Series of the Trust shall
not be entitled to participate in a derivative or class action on
behalf of any other Series or the Shareholders of any other Series
of the Trust.
(f) Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that
the holders of Shares of any Series or Class shall have the right
to convert or exchange said Shares into Shares of one or more
Series or Classes of Shares in accordance with such requirements
and procedures as may be established by the Trustees.
The establishment and designation of any Series or Classes
of Shares shall be effective upon the execution by a majority of
the then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such Series or Classes, or as otherwise provided in
such instrument. At any time that there are no Shares outstanding
of any particular Series or Class previously established and
designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series or Class and the
establishment and designation thereof. Each instrument referred
to in this section shall have the status of an amendment to this
Declaration.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the
Trust shall be redeemable, at the redemption price determined in
the manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust shall redeem the Shares of the Trust or any Series
or Class thereof at the price determined hereinafter set forth,
upon appropriately verified written application of the record
holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from
time to time for that purpose by the Trustees. The Trustees may
from time to time specify additional conditions, not inconsistent
with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of
1933.
Section 6.2. Price. Shares shall be redeemed at their
net asset value determined as set forth in Section 7.1 hereof as
of such time as the Trustees shall have theretofore prescribed by
resolution. In absence of such resolution, the redemption price
of Shares deposited shall be the net asset value of such Shares
next determined as set forth in Section 7.1 hereof after receipt
of such application.
Section 6.3. Payment. Payment of the redemption price
of Shares of the Trust or any Series or Class thereof shall be
made in cash or in property to the Shareholder at such time and in
the manner, not inconsistent with the 1940 Act or other applicable
laws, as may be specified from time to time in the Trust's then
effective prospectus under the Securities Act of 1933, subject to
the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of
Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall
declare a suspension of the determination of net asset value with
respect to Shares of the Trust or any Series or Class thereof, the
rights of Shareholder (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 Series or Class thereof 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 of
revocation at the office or agency where application was made,
revoke any application for redemption not honored and withdraw any
certificates on deposit. The redemption price of Shares for which
redemption applications have not been revoked shall be the net
asset value of such Shares next determined as set forth in Section
7.1 after the termination of such suspension, and payment shall be
made within seven (7) days after the date upon which the
application was made plus the period after such application during
which the determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may
repurchase Shares directly, or through the Distributor or another
agent designated for the purpose, by agreement with the owner
thereof at a price not exceeding the net asset value per share
determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may
be later determined pursuant to Section 7.1 hereof, provided
payment is not made for the Shares prior to the time as of which
such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest.
The Trust shall have the right at any time without prior
notice to the Shareholder to redeem Shares of any Shareholder for
their then current net asset value per Share if at such time the
Shareholder owns Shares of any Series or Class having an aggregate
net asset value per Series or Class of less than $10,000 subject
to such terms and conditions as the Trustees may approve, and
subject to the Trust's giving general notice to all Shareholders
of its intention to avail itself of such right, either by
publication in the Trust's prospectus, if any, or by such other
means as the Trustees may determine.
Section 6.7. Redemption of Shares in Order to Qualify
as Regulated Investment Company; Disclosure of Holding. If the
Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of shares or other Securities of
the Trust has or may become concentrated in any Person to an
extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code,
then the Trustees shall have the power by lot or other means
deemed equitable by them (i) to call for the redemption by any
such Person a number, or principal amount, of Shares or other
securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or
other securities of the Trust or any Series of the Trust into
conformity with the requirements for such qualification and (ii)
to refuse to transfer or issue Shares or other securities of the
Trust or any Series of the Trust to any Person whose acquisition
of the Shares or other securities of the Trust or any Series of
the Trust in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the
manner provided in Section 6.1.
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, or to comply
with the requirements of any other taxing authority.
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 of
the Trust 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 Series thereof of securities owned by
it is not reasonably practicable or it is not reasonably
practicable for the Trust or a Series thereof fairly to determine
the value of its net assets, or (iv) during any other period when
the Commission may for the protection of Shareholders of the Trust
by order permit suspension of the right of redemption or
postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv)
exist. 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 (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 request for redemption or receive payment based on
the net asset value extending after the termination of the
suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets
of the Trust or of any Series of the Trust may be determined on
the basis of the amortized cost of such securities, by appraisal
of the securities owned by the Trust or any Series of the Trust,
or by such other method as shall be deemed to reflect the fair
value thereof, determined in good faith by or under the direction
of 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, net income
determined and declared as a distribution and all other items in
the nature of liabilities which shall be deemed appropriate, as
incurred by or allocated to any Series or Class of the Trust. The
resulting amount which shall represent the total net assets of the
Trust, Series or Class thereof shall be divided by the number of
Shares of the Trust, 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, Series or Class thereof.
The net asset value of the Shares shall be determined at least
once on each business day, as of the close of the trading on the
New York Stock Exchange or as such other time or times as the
Trustees shall determine. The power and duty to make the daily
calculations may be delegated by the Trustees to the Investment
Adviser, the Custodian, the Transfer Agent or such other Person as
the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.
Section 7.2. Distributions to Shareholders. The
Trustees shall from time to time distribute ratably among the
Shareholders of the Trust, a Series or Class thereof such
proportion of the net profits, surplus (including paid-in
surplus), capital, or assets of the Trust or such Series held by
the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of
obligations of the Trust, 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, Series or Class thereof issuable hereunder in such a
manner, at such times, and on such terms as the Trustees may deem
proper. Such distributions may be among the Shareholders of the
Trust, Series or Class thereof at the time of declaring a
distribution or among the Shareholders of the Trust, 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 on the date the distribution
is declared or on the next preceding day if the distribution is
declared as of a day on which Boston banks are not open for
business, all as described in the then effective prospectus under
the Securities Act of 1933. The Trustees may always retain from
the net profits such amount as they may deem necessary to pay the
debts or expenses of the Trust, a Series or Class thereof or to
meet obligations of the Trust, Series or Class thereof, or as they
may deem desirable to use in the conduct of its affairs or to
retain for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate. 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 each
Series or Class.
Inasmuch as the computation of net income and gains for
Federal income tax purposes may vary from the computation thereof
on the books, the above provisions shall be interpreted to give
the Trustees the power in their discretion to distribute for any
fiscal year as ordinary dividends and as capital gains
distributions, respectively, additional amounts sufficient to
enable the Trust, a Series or Class thereof to avoid or reduce
liability for taxes.
Section 7.3. Determination of Net Income: Constant Net
Asset Value: Reduction of Outstanding Shares. Subject to Section
5.11 hereof, the net income of the Series and Classes thereof of
the Trust shall be determined in such manner as the Trustees shall
provide by resolution. Expenses of the Trust or of a Series or
Class thereof, including the advisory or management fee, shall be
accrued each day. Each Class shall bear only expenses relating to
its Shares and an allocable portion of Series and Trust expenses
in accordance with such policies as may be established by the
Trustees from time to time and as are not inconsistent with the
provisions of this Declaration of Trust or of any applicable
document filed by the Trust with the Commission or of the Internal
Revenue Code of 1986, as amended. Such net income may be
determined by or under the direction of the Trustees as of the
close of trading on the New York Stock Exchange on each day on
which such market is open or as of such other time or times as the
Trustees shall determine, and, except as provided herein, all the
net income of any Series or Class of the Trust, as so determined,
may be declared as a dividend on the Outstanding Shares of such
Series or Class. If, for any reason, the net income of any Series
or Class of the Trust determined at any time is a negative amount,
the Trustees shall have the power with respect to such Series or
Class (i) to offset each Shareholder's pro rata share of such
negative amount from the accrued dividend account of such
Shareholder, or (ii) to 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 net
income, or (iii) to cause to be recorded on the books of the Trust
an asset account in the amount of such negative net 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 net income is
experienced, until such asset account is reduced to zero; or (iv)
to combine the methods described in clauses (i) and (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 Trustees shall also have the power to fail to
declare a dividend out of the net income for the purpose of
causing the net asset value per Share to be increased to a
constant amount. 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 the
Shareholders. In the case of stock dividends 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. The Trustees shall not be required to adopt, but at
any time may adopt, discontinue or amend the practice of
maintaining the net asset value per Share of a Series at a
constant amount.
Section 7.4. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article
VII, the Trustees may prescribe, in their absolute discretion,
such other bases and times for determining the per Share net asset
value of the Shares of the Trust or a Series or Class thereof, or
the declaration and payment of dividends and distributions as they
may deem necessary or desirable. Without limiting the generality
of the foregoing, the Trustees may establish several Series or
Classes of Shares in accordance with Section 5.11, and declare
dividends thereon in accordance with Section 5.11(d).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES; AMENDMENT; MERGERS,
ETC.
Section 8.1. Duration. The Trust shall continue
without limitation of time but subject to the provisions of this
Article VIII.
Section 8.2. Termination of the Trust, a Series or a
Class. The Trust, any Series or Class thereof may be terminated
by (i) 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 (ii) an instrument in writing signed by a
majority of the Trustees, stating that a majority of the Trustees
has determined that the continuation of the Trust, the Series or
Class thereof is not in the best interest of such Series or Class,
the Trust or their respective shareholders as a result of such
factors or events adversely affecting the ability of such Series
or Class or the Trust 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 of 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 the Trust
invests or economic developments or trends having a significant
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 or the Series or Class shall carry on
no business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust or the Series or Class and all of the powers
of the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including the power
to fulfill or discharge the contracts of the Trust or the Series,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust
Property or Trust Property allocated or belonging to such Series
or Class to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially
all the Trust Property or Trust Property allocated or belonging to
such Series or Class (other than as provided in (iii) below) shall
require Shareholder approval in accordance with Section 8.4
hereof.
(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 partly each, among the Shareholders
of the Trust or the Series or Class according to their respective
rights.
(b) After termination of the Trust or the 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 Secretary of The Commonwealth of
Massachusetts 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. Amendment Procedure. (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. The Trustees may amend this
Declaration without the vote or consent of Shareholders so long as
such amendment does not materially adversely affect the rights of
Shareholders.
(b) No amendment may be made under this Section 8.3 which
would change any rights with respect to any Shares of the Trust or
Series or Class thereof by reducing the amount payable thereon
upon liquidation of the Trust or Series or Class thereof or by
diminishing or eliminating any voting rights pertaining thereto,
except with the vote or consent of the holders of two-thirds of
the Shares of the Trust or such Series or Class outstanding and
entitled to vote. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption
from personal liability of the Shareholder, Trustees, officers,
employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) A certificate signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted
by the Shareholders or by the Trustees 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.
Section 8.4. Merger, Consolidation and Sale of Assets.
The Trust or any Series thereof may merger or consolidate with any
other corporation, association, trust or other organization or may
sell, lease or exchange all or substantially all of the Trust
Property or Trust Property allocated or belonging to such Series,
including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of
Shareholders called for the purpose by the affirmative vote of the
holders of two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, 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 such Series;
provided, however, that, if such merger, consolidation, sale,
lease or exchange is recommended by the Trustees, the vote or
written consent of the holders of a majority of the Shares of the
Trust or such Series outstanding and entitled to vote shall be
sufficient authorization; and any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposed to have
been accomplished under and pursuant to Massachusetts law.
Section 8.5. Incorporation. With the approval of the
holders of a majority of the shares of the Trust or a Series
thereof outstanding and entitled to vote, the Trustees may cause
to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over
all of the Trust Property or the Trust Property allocated or
belonging to such Series or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property or the Trust Property
allocated or belonging to such Series to any such corporation,
trust, association or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe
for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or
organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is
about to acquire shares or any other interest. The Trustees may
also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted
by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or
other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders of each Series a written financial report of the
transactions of the Trust, including financial statements which
shall at least annually be certified by independent public
accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration
and any amendment hereto shall be filed in the office of the
Secretary of The Commonwealth of Massachusetts and in such other
places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees
deem appropriate. Each amendment so filed shall be accompanied by
a certificate signed and acknowledged by a Trustee stating that
such action was duly taken in a manner provided herein, and unless
such amendment or such certificate sets forth some later time for
the effectiveness of such amendment, such amendment shall be
effective upon its execution. 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 and filed with the Secretary
of The Commonwealth of Massachusetts. A restated Declaration
shall, upon execution, be conclusive evidence of all amendments
contained therein and may hereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is
executed by the Trustees and delivered in The Commonwealth of
Massachusetts and with reference to the laws thereof, and the
rights of all parties and the validity and construction of every
provision hereof shall be subject to and construed according to
the laws of said State.
Section 10.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts,
together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any
certificate executed by an individual who, according to the
records of the Trust appears to be a Trustee hereunder, certifying
(a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing,
(c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers
elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be
conclusive evidence as to the matters so certified in favor of any
Person dealing with the Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or
Regulations. (a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940
Act, the regulated investment company provisions of the Internal
Revenue Code 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.
The address of the Trust is:
280 Park Avenue
New York, New York 10017
The address of the sole Trustee, William
E. Small , is:
Exchange Place
Boston MA 01867
IN WITNESS WHEREOF, the undersigned has executed this
instrument this 18th day of January 18, 1996.
/s/ William E. Small
William E. Small, as Trustee
and
not individually
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY MASSACHUSETTS
January 18, 1996
Then personally appeared the above-named person who
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Therese Hogan
Therese Hogan
Notary Public
My commission expires: 2/24/2000
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