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As filed with the Securities and Exchange Commission on February 28, 1996.
File No. 811-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
UBS INVESTOR PORTFOLIOS TRUST
(Exact name of registrant as specified in charter)
P.O. Box 2494, Elizabethan Square
George Town, Grand Cayman, Cayman Islands B.W.I.
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code:
(809) 945-1824
Thomas M. Lenz
Signature Financial Group, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
(Name and address of agent for service)
Copy to:
Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
UBS016A
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EXPLANATORY NOTE
This registration statement on Form N-1A has been filed by UBS Investor
Portfolios Trust (the "Registrant") pursuant to Section 8(b) of the Investment
Company Act of 1940, as amended. However, beneficial interests in the Registrant
are not being registered under the Securities Act of 1933, as amended (the "1933
Act"), because such interests will be issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in the Registrant may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any beneficial interests in the Registrant.
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PART A
UBS INVESTOR PORTFOLIOS TRUST
UBS BOND PORTFOLIO
UBS U.S. EQUITY PORTFOLIO
UBS INTERNATIONAL EQUITY PORTFOLIO
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
UBS Investor Portfolios Trust (the "Portfolios Trust") is a
diversified, open-end management investment company which was organized as a
trust under the law of the State of New York on February 9, 1996. Beneficial
interests of the Portfolios Trust are divided into three series, UBS Bond
Portfolio, UBS U.S. Equity Portfolio and UBS International Equity Portfolio
(each, a "Portfolio"; collectively the "Portfolios"). Additional series may be
established in the future. Beneficial interests in each Portfolio are issued
solely in private placement transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act, as amended (the
"1933 Act"). Investments in a Portfolio may only be made by investment
companies, insurance company separate accounts, common or commingled trust funds
or similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Portfolios are described below,
together with the policies the Portfolios employ in their efforts to achieve
their respective objectives. Additional information about the investment
policies of the Portfolios appears in Item 13 of Part B. There can be no
assurance that the investment objective of any of the Portfolios will be
achieved.
UBS BOND PORTFOLIO
The investment objective of UBS Bond Portfolio (the "Bond Portfolio")
is to provide a high total return from a portfolio of debt securities issued by
foreign and domestic companies, consistent with moderate risk of capital and
maintenance of liquidity. Total return will consist of realized and unrealized
capital gains and losses plus net income. Although the net asset value of the
Bond Portfolio will fluctuate, the Bond Portfolio attempts to preserve the value
of its investments to the extent consistent with its investment objective.
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The New York Branch (the "Branch" or the "Adviser") of Union Bank of
Switzerland (the "Bank") actively manages the Bond Portfolio's duration (defined
below), the allocation of securities across market sectors and the selection of
specific securities within sectors. Based on fundamental economic and capital
markets research, the Adviser adjusts the duration of the Bond Portfolio in
light of market conditions and the Adviser's opinion regarding future interest
rates. For example, if interest rates are expected to fall, the duration may be
lengthened to take advantage of the anticipated increase in bond prices. The
Adviser also actively allocates the Bond Portfolio's assets among the broad
sectors of the fixed income market including, but not limited to, U.S.
Government and agency securities, corporate securities, private placements,
asset-backed securities and mortgage related securities. The Adviser intends to
identify and purchase specific securities that it believes are undervalued using
quantitative tools, analyses of credit risk, the expertise of a dedicated
trading desk, and the judgment of fixed income portfolio managers and analysts.
Under normal circumstances, the Adviser intends to keep at least 65% of the Bond
Portfolio's assets invested in bonds. Bonds are debt instruments such as
debentures, notes, mortgage securities, equipment trust certificates and other
collateralized securities, zero coupon securities, government obligations and
money market instruments.
Duration is a measure of a bond's price sensitivity, expressed in
years. It is a measure of interest rate risk of a bond calculated by taking into
consideration the number of years until the average dollar, in present value
terms, is received from principal and interest payments. For example, for a bond
with a duration of four years, every 1% change in yield will result in a 4%
change in price in the opposite direction. The Bond Portfolio's benchmark is the
Lehman Government Corporate Intermediate Bond Index, which currently has a
duration of approximately 3.25 years. The Bond Portfolio intends to have a
duration between 0.5 years shorter and 0.5 years longer than its benchmark. The
maturities of the Bond Portfolio's individual securities may vary widely from
its duration, however, and may be as long as 30 years.
The Bond Portfolio intends to manage its securities actively in pursuit
of its investment objective. Portfolio transactions are undertaken principally
to accomplish the Bond Portfolio's objective in relation to expected movements
in the general level of interest rates, but the Bond Portfolio may also engage
in short-term trading consistent with its objective. To the extent the Bond
Portfolio engages in short-term trading, it may incur increased transaction
costs. See Item 20 in Part B. The annual portfolio turnover rate for the Bond
Portfolio is expected to be under 100%.
CORPORATE BONDS. The Bond Portfolio may invest in a broad range of
corporate bonds of domestic and foreign issuers. These include debt securities
of various types and maturities, e.g., debentures, notes, mortgage securities,
equipment trust certificates and other collateralized securities and zero coupon
securities. Collateralized securities are backed by a pool of assets such as
loans or receivables that generate cash flow to cover the payments due on the
securities. Collateralized securities are subject to certain risks,
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including a decline in the value of the collateral backing the security, failure
of the collateral to generate the anticipated cash flow or in certain cases more
rapid prepayment than anticipated because of events affecting the collateral,
such as accelerated prepayment of mortgages or other loans backing these
securities or destruction of equipment subject to equipment trust certificates.
In the event of any such prepayment, the Bond Portfolio will be required to
reinvest the proceeds of prepayments at interest rates prevailing at the time of
reinvestment, which may be lower than the interest rates on the prepaid
securities. In addition, the value of zero coupon securities, which do not pay
interest, is more volatile than that of interest bearing debt securities with
the same maturity. The Bond Portfolio does not intend to invest in common stock
but may invest to a limited degree in convertible debt or preferred stocks. The
Bond Portfolio does not expect to invest more than 25% of its total assets in
securities of foreign issuers. If the Bond Portfolio invests in non-U.S. dollar
denominated securities, it may hedge its foreign currency exposure. The Bond
Portfolio may purchase non- publicly offered debt securities.
GOVERNMENT OBLIGATIONS. The Bond Portfolio may invest in obligations
issued or guaranteed by the U.S. Government and backed by the full faith and
credit of the United States. These securities include Treasury securities,
obligations of the Government National Mortgage Association ("GNMA
Certificates"), the Farmers Home Administration and the Export Import Bank.
"GNMA Certificates" are mortgage-backed securities that evidence an undivided
interest in mortgage pools. These securities are subject to more rapid repayment
than their stated maturity would indicate because prepayments of principal on
mortgages in the pool are passed through to the holder of the securities. During
periods of declining interest rates, prepayments of mortgages in the pool can be
expected to increase. The pass-through of these prepayments would have the
effect of reducing the Bond Portfolio's positions in these securities and
requiring the Bond Portfolio to reinvest the prepayments at interest rates
prevailing at the time of reinvestment. The Bond Portfolio may also invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities where the Bond Portfolio must look principally to the issuing
or guaranteeing agency for ultimate repayment; some examples of agencies or
instrumentalities issuing these obligations are the Federal Farm Credit System,
the Federal Home Loan Banks and the Federal National Mortgage Association.
Although these governmental issuers are responsible for payments on their
obligations, they do not guarantee their market value. See Item 13 in Part B for
a more detailed discussion of the Bond Portfolio's investments in government
securities.
The Bond Portfolio may also invest in municipal obligations, which may
be general obligations of the issuer or payable only from specific revenue
sources. However, the Bond Portfolio will invest only in municipal obligations
that have been issued on a taxable basis or have an attractive yield excluding
tax considerations. In addition, the Bond Portfolio may invest in debt
securities of foreign governments and governmental entities.
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MONEY MARKET INSTRUMENTS. The Bond Portfolio may purchase money market
instruments to invest temporary cash balances or to maintain liquidity to meet
withdrawals. However, the Bond Portfolio may also invest, without limit, in
money market instruments as a temporary defensive measure taken during, or in
anticipation of, adverse market conditions. The money market investments
permitted for the Bond Portfolio include obligations of the U.S. Government and
its agencies and instrumentalities, other debt securities, commercial paper,
bank obligations and repurchase agreements. For more detailed information about
these money market investments, see Item 13 in Part B.
QUALITY INFORMATION. It is a current policy of the Bond Portfolio that
under normal circumstances at least sixty-five percent (65%) of its investment
in bonds will consist of securities that are rated at least A by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's") or that are unrated and in the Adviser's opinion are of
comparable quality. Up to thirty percent (30%) of the Bond Portfolio's bonds may
consist of debt securities rated Baa or better by Moody's or BBB or better by
Standard & Poor's or are unrated and in the Adviser's opinion are of comparable
quality. Up to five percent (5%) of the Bond Portfolio's bonds may be invested
in debt securities that are rated Ba or better by Moody's or BB or better by
Standard & Poor's or are unrated and in the Adviser's opinion are of comparable
quality. Securities rated Baa by Moody's or BBB by Standard & Poor's are
considered investment grade, but have some speculative characteristics.
Securities rated Ba by Moody's or BB by Standard & Poor's are below investment
grade and considered to be speculative with regard to payment of interest and
principal. These standards must be satisfied at the time an investment is made.
If the quality of the investment later declines, the Bond Portfolio may continue
to hold the investment.
The Bond Portfolio may also purchase obligations on a when-issued or
delayed delivery basis, enter into repurchase and reverse repurchase agreements,
engage in mortgage dollar roll transactions, loan its portfolio securities,
purchase certain privately placed securities and enter into certain hedging
transactions that may involve options on securities and securities indices,
futures contracts and options on futures contracts.
UBS EQUITY PORTFOLIO
The investment objective of UBS Equity Portfolio (the "Equity
Portfolio") is to provide long-term capital appreciation and the potential for a
high level of current income with lower investment risk and volatility than is
normally available from common stock funds. The average income yield of the
Equity Portfolio's common stocks is expected to be higher than that of the S&P
500 Index. It is also the objective of the Equity Portfolio that the Equity
Portfolio's investments have less price volatility than the S&P 500 Index.
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Under normal circumstances, the Equity Portfolio will invest at least
80% of its assets in income-producing equity securities of domestic issuers,
including dividend-paying common stocks and securities which are convertible
into common stocks. The Equity Portfolio intends to invest in securities that
generate relatively high levels of dividend income and have the potential for
capital appreciation. These generally include common stocks of established,
high-quality U.S. corporations. In addition, the Equity Portfolio will seek to
diversify its investment over a carefully selected list of securities in order
to moderate the risks inherent in equity investments.
The Equity Portfolio will invest in an equity security following a
fundamental analysis of the issuing company. An important part of this analysis
will be the examination of the company's ability to maintain its dividend. The
Adviser believes that dividend income has proved to be an important component of
total return. For example, during the ten-year period ended September 1994,
reinvested dividend income accounted for approximately 26% of the total return
of the S&P 500 Index. Also, the Adviser believes that dividend income tends to
be a more stable source of total return than capital appreciation. While the
price of a company's common stock can be significantly affected by market
fluctuations and other short-term factors, its dividend level usually has
greater stability. For this reason, securities that pay a high level of dividend
income tend to be less volatile in price than comparable securities that pay a
lower level of dividend income.
Although the Equity Portfolio intends to invest primarily in equity
securities, it may invest up to 20% of its assets in certain cash investments
and certain short-term fixed income securities. See Item 13 in Part B. Such
securities may be used to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions or to take a temporarily defensive
position against potential stock market declines. These securities include:
obligations of the United States Government and its agencies or
instrumentalities; commercial paper, bank certificates of deposit and bankers'
acceptances; and repurchase agreements collateralized by these securities. The
Equity Portfolio may purchase non-publicly offered debt securities.
The Equity Portfolio may also utilize equity futures contracts and
options to a limited extent. Specifically, the Equity Portfolio may enter into
futures contracts and options provided that such positions are established for
hedging purposes only.
The Equity Portfolio intends to manage its securities actively in
pursuit of its investment objective. Although it generally seeks to invest for
the long-term, the Equity Portfolio retains the right to sell securities
irrespective of how long they have been held. It is anticipated that the annual
portfolio turnover of the Equity Portfolio will not exceed 100%. To the extent
the Equity Portfolio engages in short-term trading, it may incur increased
transaction costs.
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EQUITY INVESTMENTS. Under normal circumstances, the Adviser intends to
invest at least 80% of the Equity Portfolio's assets in the equity securities of
domestic issuers. These investments will consist of common stocks and other
securities with equity characteristics such as preferred stock, warrants, rights
and convertible securities. The Equity Portfolio's primary equity investments
are the common stocks of established domestic companies. The common stock in
which the Equity Portfolio may invest includes the common stock of any class or
series or any similar equity interest such as trust or limited partnership
interests. The Equity Portfolio invests in domestic securities listed on
domestic securities exchanges and securities traded in domestic over-the-counter
markets, and may invest in certain restricted or unlisted securities.
UBS INTERNATIONAL EQUITY PORTFOLIO
The investment objective of UBS International Equity Portfolio (the
"International Equity Portfolio") is to provide a high total return from a
portfolio of equity securities of foreign corporations. Total return will
consist of realized and unrealized capital gains and losses plus net income. The
International Equity Portfolio seeks to achieve its investment objective by
investing in companies that UBS International Investment London Limited ("UBSII"
or the "Sub-Adviser"; together with the Adviser, the "Advisers") believes are
fundamentally sound and that are typically selling at below market valuations
and that will grow at above-market rates. The emphasis on value leads to
investments in companies with relatively low price/earnings and price/book value
ratios and high yields.
The Adviser is responsible for supervising the management of the
International Equity Portfolio's investments. Consistent with these duties, the
Adviser has entered into a Sub-Advisory Agreement with UBSII, whereby the
Sub-Adviser is primarily responsible for the day-to-day investment decisions for
the Portfolio. The Adviser is solely responsible for paying the Sub-Adviser for
these services. The Sub-Adviser is an affiliate of the Adviser.
The Advisers actively manage currency exposure, in conjunction with
country and stock allocations, in an attempt to protect the Portfolio's market
value. Through the use of forward foreign currency exchange contracts, futures
contracts and options on currencies, the Advisers will adjust the Portfolio's
foreign currency weightings to reduce its exposure to currencies deemed
unattractive as market conditions warrant, based on fundamental research,
technical factors and the judgment of the Advisers' experienced currency
managers.
The Portfolio intends to manage its securities actively in pursuit of
its investment objective. The Portfolio does not expect to trade in securities
for short-term profits; however, when circumstances warrant, securities may be
sold without regard to the length of time held. It is anticipated that the
annual portfolio turnover rate of the
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Portfolio will be less than 100%. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs.
EQUITY INVESTMENTS. Under normal circumstances, the Advisers intend to
keep at least 65% of the value of the Portfolio's total assets in equity
securities of foreign issuers, consisting of common stocks and other securities
with equity characteristics such as preferred stock, warrants, rights and
convertible securities. The Portfolio's primary equity investments are the
common stock of established companies based in developed countries outside the
United States. The Portfolio will invest in companies based in at least five
foreign countries. Initially, the Adviser expects to invest in issues located in
the United Kingdom, France, Japan, Germany and Switzerland. The common stock in
which the Portfolio may invest includes the common stock of any class or series
or any similar equity interest such as trust or limited partnership interests.
The Portfolio may also invest in securities of issuers located in developing
countries. The Portfolio will invest in securities listed on foreign or domestic
securities exchanges and securities traded in foreign or domestic
over-the-counter markets, and may invest in certain restricted or unlisted
securities.
The Portfolio may also invest in money market instruments denominated
in U.S. dollars and other currencies, securities on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities, enter
into forward contracts on foreign currencies, purchase options on currencies and
enter into certain hedging transactions that may involve options on securities
and securities indices, futures contracts and options on futures contracts.
Investments in non-U.S. issuers involve certain risks and
considerations not typically associated with investments in U.S. issuers. These
risks include greater price volatility, reduced liquidity and the significantly
smaller market capitalization of most non-U.S. securities markets, more
substantial government involvement in the economy, higher rates of inflation,
greater social, economic and political uncertainty and the risk of
nationalization or expropriation of assets and risk of war.
ADDITIONAL INVESTMENT INFORMATION
CONVERTIBLE SECURITIES. The convertible securities in which the
Portfolios may invest include any debt securities or preferred stocks that may
be converted into common stock or that carry 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolios may
purchase securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase
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commitment. The value of these securities is subject to market fluctuation
during this period and no interest or income accrues to a Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. Between the trade and settlement dates, the
Portfolios will maintain a segregated account with the Custodian consisting of a
portfolio of high-grade, liquid debt securities with a value at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, a Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of each Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).
REPURCHASE AGREEMENTS. The Portfolios may engage in repurchase
agreement transactions with brokers, dealers or banks that meet the credit
guidelines established by the Trust's Board of Trustees (the "Trustees"). In a
repurchase agreement, a Portfolio buys a security from a seller that has agreed
to repurchase it at a mutually agreed upon date and price, reflecting the
interest rate effective for the term of the agreement. The term of these
agreements is usually from overnight to one week. A repurchase agreement may be
viewed as a fully collateralized loan of money by a Portfolio to the seller. A
Portfolio always receives securities as collateral with a market value at least
equal to the purchase price plus accrued interest and this value is maintained
during the term of the agreement. If the seller defaults and the collateral's
value declines, a Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, a Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in repurchase
agreements maturing in more than seven days and certain other investments that
may be considered illiquid are limited.
REVERSE REPURCHASE AGREEMENTS. The Portfolios are permitted to enter
into reverse repurchase agreements. In a reverse repurchase agreement, a
Portfolio sells a security and agrees to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. It may also be viewed as the borrowing of money by a Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of a
Portfolio to be magnified. For more information, including limitations on the
use of reverse repurchase agreements, see Item 13 in the Part B and "Investment
Restrictions" below.
SECURITIES LENDING. Subject to applicable investment restrictions, each
Portfolio may lend its securities. The Portfolios may lend their securities if
such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay a Portfolio any income accruing
thereon. Loans will be subject to termination by a Portfolio in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan
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is terminated. Any gain or loss in the market price of the borrowed securities
that occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolios may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolios will consider all
the facts and circumstances, including the creditworthiness of the borrowing
financial institution, and will not make any loans in excess of one year. The
Portfolios will not lend their securities to any officer, Trustee, Director,
employee or affiliate or Placement Agent of the Company, the Portfolio, or the
Adviser, Sub-Adviser, Administrator or Distributor, unless otherwise permitted
by applicable law.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED
SECURITIES. Each Portfolio may not acquire any illiquid securities if, as a
result thereof, more than 15% of the market value of the Portfolio's net assets
would be in illiquid investments or investments that are not readily marketable.
In addition, each Portfolio will not invest more than 10% of the market value of
its total assets in restricted securities that cannot be offered for public sale
in the United States without first being registered under the 1933 Act. Subject
to those non-fundamental policy limitations, each Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the 1933 Act, and cannot
be offered for public sale in the United States without first being registered.
An illiquid investment is any investment that cannot be disposed of within seven
days in the normal course of business at approximately the amount at which it is
valued by a Portfolio. Repurchase agreements maturing in more than seven days
are considered illiquid investments and, as such, are subject to the limitations
set forth in this paragraph. The price a Portfolio pays for illiquid securities
or receives upon resale may be lower than the price paid or received for similar
securities with a more liquid market. Accordingly, the valuation of these
securities will reflect any limitations on their liquidity.
Each Portfolio may also purchase Rule 144A securities sold to
institutional investors without registration under the 1933 Act. These
securities may be determined to be liquid in accordance with guidelines
established by the Adviser and approved by the Trustees. The Trustees will
monitor the Adviser's implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. Each Portfolio is permitted to enter
into the futures and options transactions described below for hedging purposes.
These instruments are commonly known as derivatives.
The Bond Portfolio may purchase and sell exchange traded and
over-the-counter ("OTC") put and call options on fixed income securities or
indices of fixed income securities, enter into forward contracts, purchase and
sell futures contracts on indices of fixed income securities, purchase and sell
put and call options on futures contracts on indices of fixed income securities
and purchase and sell options on currencies. With respect to the Equity and
International Equity Portfolios, such Portfolios may purchase
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and sell exchange traded and OTC put and call options on equity securities or
indices of equity securities, enter into forward contracts, purchase and sell
futures contracts on indices of equity securities, purchase and sell put and
call options on futures contracts on indices of equity securities and purchase
and sell options on currencies. The Portfolios may use these techniques for
hedging or risk management purposes, or subject to certain limitations, for the
purpose of obtaining desired exposure to certain securities or markets.
Each Portfolio may use these techniques to manage its exposure to
changing interest rates, currency exchange rates (with respect to the Bond and
International Equity Portfolios only) and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge a Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
may tend to increase market exposure. For example, if the Portfolio wishes to
obtain exposure to a particular market or market sector but does not wish to
purchase the relevant securities, it could, as an alternative, purchase a
futures contract on an index of such securities or related securities. Such a
purchase would not constitute a hedging transaction and could be considered
speculative. However, the Portfolio will use future contracts or options in this
manner only for the purpose of obtaining the same level of exposure to a
particular market or market sector that it could have obtained by purchasing the
relevant securities and will not use futures contracts or options to leverage
its exposure beyond this level. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of a Portfolio's overall strategy in a manner deemed appropriate
to the Advisers and consistent with the Portfolio's objective and policies.
Because combined positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
A Portfolio's use of these transactions is a highly specialized
activity, which involves investment strategies and risks different from those
associated with ordinary portfolio securities transactions, and there can be no
guarantee that their use will increase the Portfolio's return. While a
Portfolio's use of these instruments may reduce certain risks associated with
owning its portfolio securities, these techniques themselves entail certain
other risks. If the Advisers apply a strategy at an inappropriate time or judge
market conditions or trends incorrectly, such strategies may lower a Portfolio's
return. Certain strategies limit a Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. A Portfolio could experience losses if
the prices of its options and futures positions were poorly correlated with its
other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, a Portfolio will incur costs, including
commissions and premiums, in connection with these transactions and these
transactions could significantly increase the Portfolio's turnover rate.
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Each Portfolio may purchase and sell put and call options on
securities, currencies, indices of securities and futures contracts, or purchase
and sell futures contracts only for hedging purposes.
The Commodity Exchange Act prohibits U.S. persons, such as the Bond and
International Equity Portfolios, from buying or selling certain foreign futures
contracts or options on such contracts. Accordingly, these Portfolios will not
engage in foreign futures or options transactions unless the contracts in
question may lawfully be purchased and sold by U.S. persons in accordance with
applicable Commodity Futures Trading Commission ("CFTC") regulations or CFTC
staff advisories, interpretations and no action letters. In addition, in order
to assure that the Portfolios will not be considered "commodity pools" for
purposes of CFTC rules, each Portfolio will enter into transactions in futures
contracts or options on futures contracts only if (1) such transactions
constitute BONA FIDE hedging transactions, as defined under CFTC rules, or (2)
no more than 5% of the Portfolio's net assets are committed as initial margin or
premiums to positions that do not constitute BONA FIDE hedging transactions.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a
Portfolio obtains the right (but not the obligation) to sell the instrument
underlying the option at a fixed strike price. In return for this right, a
Portfolio pays the current market price for the option (known as the option
premium). Options have various types of underlying instruments, including
specific securities, currencies, indices of securities, indices of securities
prices, and futures contracts. A Portfolio may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. A
Portfolio may also close out a put option position by entering into an
offsetting transaction, if a liquid market exists. If the option is allowed to
expire, a Portfolio will lose the entire premium it paid. If a Portfolio
exercises a put option on a security, it will sell the instrument underlying the
option at the strike price. If a Portfolio exercises an option on an index,
settlement is in cash and does not involve the actual sale of securities.
American style options may be exercised on any day up to their expiration date.
European style options may be exercised only on their expiration date.
The buyer of a typical put option can expect to realize a gain if the
price of the underlying instrument falls substantially. However, if the price of
the instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the instrument underlying the option at the option's
strike price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the
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option with risk limited to the cost of the option and related transaction costs
if security prices fall. At the same time, the buyer can expect to suffer a loss
if security prices do not rise sufficiently to offset the cost of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When a Portfolio writes a put
option, it takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the Portfolio assumes the
obligation to pay the strike price for the instrument underlying the option if
the other party to the option chooses to exercise it. A Portfolio may seek to
terminate its position in a put option it writes before exercise by purchasing
an offsetting option in the market at its current price. If the market is not
liquid for a put option a Portfolio has written, however, the Portfolio must
continue to be prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to post margin as discussed
below.
If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, however, the put writer
would expect to suffer a loss. This loss should be less than the loss from
purchasing and holding the underlying instrument directly, however, because the
premium received for writing the option should offset a portion of the decline.
Writing a call option obligates a Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security,
an index of securities or a futures contract is required to deposit cash or
securities or a letter of credit as margin and to make mark-to-market payments
of variation margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. A Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security. A
Portfolio, in purchasing or selling index options, is subject to the risk that
the value of its
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portfolio securities may not change as much as an index because the Portfolio's
investments generally will not match the composition of an index.
For a number of reasons, a liquid market may not exist and thus a
Portfolio may not be able to close out an option position that it has previously
entered into. When a Portfolio purchases an OTC option, it will be relying on
its counterparty to perform its obligations, and the Portfolio may incur
additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When a Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When a Portfolio sells a futures contract, it agrees to sell a specified
quantity of the underlying instrument at a specified future date and price or to
receive or make a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when a Portfolio
enters into the contract. Futures can be held until their delivery dates or the
positions can be (and normally are) closed out before then. There is no
assurance, however, that a liquid market will exist when a Portfolio wishes to
close out a particular position.
When a Portfolio purchases or sells a futures contract, the value of
the futures contract tends to increase and decrease in tandem with the value of
its underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, as discussed above. When a Portfolio sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the value of the underlying instrument. Selling futures
contracts on securities similar to those held by a Portfolio, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match a Portfolio's current or
anticipated investments. A Portfolio may invest in futures contracts and options
thereon based on currencies or on securities with different issuers, maturities,
or other characteristics from the securities in which it typically invests,
which involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments. A Portfolio may also enter
into transactions in futures contracts and options for non-hedging purposes, as
discussed above.
The purchaser or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is held until
the delivery date. However, when a Portfolio buys or sells a futures contract it
will be required to deposit "initial margin" with the Custodian in a segregated
account in the name of its futures broker,
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known as a futures commission merchant ("FCM"). Initial margin deposits are
typically equal to a small percentage of the contract's value. If the value of
either party's position declines, that party will be required to make additional
"variation margin" payments equal to the change in value on a daily basis. The
party that has a gain may be entitled to receive all or a portion of this
amount. A Portfolio may be obligated to make payments of variation margin at a
time when it is disadvantageous to do so. Furthermore, it may not always be
possible for a Portfolio to close out its futures positions. Until it closes out
a futures position, a Portfolio will be obligated to continue to pay variation
margin. Initial and variation margin payments do not constitute purchasing on
margin for purposes of a Portfolio's investment restrictions. In the event of
the bankruptcy of an FCM that holds margin on behalf of a Portfolio, the
Portfolio may be entitled to return of margin owed to it only in proportion to
the amount received by the FCM's other customers, potentially resulting in
losses to the Portfolio.
A Portfolio will segregate liquid, high-grade debt securities in
connection with its use of options and futures contracts to the extent required
by the SEC. Securities held in a segregated account cannot be sold while the
futures contract or option is outstanding, unless they are replaced with other
suitable assets. As a result, there is a possibility that the segregation of a
large percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet redemption requests or other current
obligations.
For further information about the Portfolio's use of futures and
options and a more detailed discussion of associated risks, see Item 13 in the
SAI.
MONEY MARKET INSTRUMENTS: EQUITY AND INTERNATIONAL EQUITY PORTFOLIOS.
The Equity and International Portfolios are permitted to invest in money market
instruments although each intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment
perspective. The Equity and International Portfolios may make money market
investments pending other investments or settlements, for liquidity or in
adverse market conditions. Such money market investments may include obligations
of the U.S. Government and its agencies and instrumentalities, other debt
securities, commercial paper, bank obligations and repurchase agreements. The
International Equity Portfolio may purchase non-publicly offered debt
securities. The Equity and International Portfolios may also invest in
short-term obligations of sovereign foreign governments, their agencies,
instrumentalities and political subdivisions. For more detailed information
about these money market investments, see Item 13 in Part B.
FOREIGN INVESTMENT INFORMATION: BOND AND INTERNATIONAL EQUITY
PORTFOLIOS. The Bond Portfolio may invest and the International Equity Portfolio
will invest primarily in foreign securities. Investments in securities of
foreign issuers and in obligations of foreign branches of domestic banks involve
somewhat different investment risks from those affecting securities of domestic
issuers. There may be limited publicly available
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information with respect to foreign issuers, and foreign issuers are not
generally subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to domestic companies. Dividends and
interest paid by foreign issuers may be subject to withholding and other foreign
taxes that may decrease the net return on such investments.
Investors should realize that the value of a Portfolio's investments in
foreign securities 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 a
Portfolio's operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, 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. Any foreign
investments made by a Portfolio must be made in compliance with U.S. and foreign
currency restrictions and tax laws restricting the amounts and types of foreign
investments.
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 domestic security exchanges. Accordingly, a Portfolio'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, purchasers normally pay 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 located in countries
other than in the United States.
Although the International Equity Portfolio invests primarily in
securities of established issuers based in developed foreign countries, it may
also invest in securities of issuers in developing market countries. Investments
in securities of issuers in developing market countries may involve a high
degree of risk and many may be considered speculative. These investments carry
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 small current size of the markets for
securities of emerging market issuers and the currently low or non-existent
volume of trading, resulting in limited liquidity and in price volatility; (iii)
certain national policies that may restrict the International Equity Portfolio's
investment opportunities including restrictions on investing in issuers or
industries deemed sensitive to relevant national
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interests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property.
A Portfolio 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 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 foreign securities. Certain institutions
issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangements with the foreign issuer. 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.
Because investments in foreign securities involve foreign currencies,
the value of assets as measured in U.S. dollars may be affected, favorably or
unfavorably, by changes in currency exchange rates and in exchange control
regulations, including currency blockage.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because a Portfolio will buy
and sell securities and will receive interest and dividends in currencies other
than the U.S. dollar, the Portfolio may, from time to time, enter into foreign
currency exchange transactions. A Portfolio may enter into these transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, use forward currency contracts to purchase or sell foreign
currencies, use currency futures contracts or purchase or sell options thereon
or purchase or sell currency options.
A forward foreign currency exchange contract is an obligation of a
Portfolio 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. Currency options give
the buyer the right, but not the obligation, to purchase or sell a fixed amount
of a specific currency at a fixed price at a future date. These contracts are
entered into in the interbank market 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. A Portfolio will not enter into these foreign currency
exchange transactions for speculative purposes. Foreign currency exchange
transactions do not eliminate fluctuations in the local currency prices of a
Portfolio's securities or in foreign exchange rates, or prevent loss if the
local currency prices of these securities should decline.
A currency futures contract is a contract involving an obligation to
deliver or acquire the specified amount of a currency at a specified price at a
specified future time.
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Futures contracts may be settled on a net cash payment basis rather than by the
sale and delivery of the underlying currency.
A Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. A Portfolio may use these techniques to
hedge against a change in foreign currency exchange rates (with the U.S. dollar
or other foreign currencies) that would cause a decline in the value of existing
investments denominated or principally traded in a foreign currency.
Although these transactions are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, these transactions also
limit any potential gain that might be realized should the value of the hedged
currency increase. Additionally, the premiums paid by a Portfolio for currency
or futures options increase the Portfolio's transaction costs. Similarly, the
cost of a Portfolio's spot currency exchange transactions is generally the
difference between the bid and offer spot rate of the currency being purchased
or sold. Moreover, forward contracts that convert one foreign currency into
another foreign currency will cause the International Equity Portfolio to assume
the risk of fluctuations in the value of the currency purchased vis-a-vis the
hedged currency and the U.S. dollar. The precise matching of these transactions
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
such a transaction 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.
INVESTMENT RESTRICTIONS
The investment objective of each Portfolio, together with the
investment restrictions described below and in Part B, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the "vote of a
majority of the outstanding voting securities" (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Portfolio.
As a diversified investment company, 75% of each Portfolio's total
assets are subject to the following fundamental limitations: (a) the Portfolio
may not invest more than 5% of its total assets in the securities of any one
issuer, except U.S. Government securities; and (b) the Portfolio may not own
more than 10% of the outstanding voting securities of any one issuer.
Each Portfolio may not: (i) purchase the securities or other
obligations of issuers conducting their principal business activity in the same
industry if its investments in such industry would exceed 25% of the value of
the Portfolio's total assets, except this
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limitation shall not apply to investments in U.S. Government securities; (ii)
enter into reverse repurchase agreements or other permitted borrowings that
constitute senior securities under the 1940 Act, exceeding in the aggregate
one-third of the value of the Portfolio's assets or (iii) borrow money, except
from banks for extraordinary or emergency purposes, or mortgage, pledge or
hypothecate any assets except in connection with any such borrowings or
permitted reverse repurchase agreements in amounts up to one-third of the value
of the Portfolio's assets at the time of such borrowing or purchase securities
while borrowings and other senior securities exceed 5% of its total assets. For
a more detailed discussion of the above investment restrictions, as well as a
description of certain other investment restrictions, see Item 13 in Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIOS TRUST.
DIRECTORS AND TRUSTEES. Pursuant to the Declaration of Trust, the
Trustees establish the Portfolio's general policies, are responsible for the
overall management of the Portfolios Trust and review the actions of the
Adviser, Sub-Adviser, Administrator and other service providers. Additional
information about the Portfolios Trust's Board of Trustees and officers appears
in Item 14 of Part B. The officers of the Portfolios Trust are also employees of
Signature Broker-Dealer Services, Inc. or its affiliates.
ADVISERS AND FUND SERVICES AGENT. The Portfolios Trust has retained the
services of the Branch as investment adviser with respect to each Portfolio and
UBSII as investment sub-adviser with respect to International Equity Portfolio.
The Branch, which operates out of offices located at 299 Park Avenue, New York,
New York, is licensed by the Superintendent of Banks of the State of New York
under the banking laws of the State of New York and is subject to state and
federal banking laws and regulations applicable to a foreign bank that operates
a state licensed branch in the United States. UBSII, with principal offices at
Triton Court, 14 Finsbury Square, London, England, EC2A 1PD, is a corporation
organized under the laws of the United Kingdom.
The Bank has branches, agencies, representative offices and
subsidiaries in Switzerland and in more than 40 cities outside Switzerland,
including, in the United States, New York City, Chicago, Houston, Los Angeles
and San Francisco. In addition to the receipt of deposits and the making of
loans and advances, the Bank, through its offices and subsidiaries (including
UBSII) engages in a wide range of banking and financial activities typical of
the world's major international banks, including fiduciary, investment advisory
and custodial services and foreign exchange in the United States, Swiss, Asian
and Euro-capital markets. The Bank is one of the world's leading asset managers
and has been active in New York City since 1946.
The Sub-Adviser employs a staff of approximately 85, and, as of
December 31, 1995, had assets under management totaling approximately $5.8
billion. At June 30, 1995, the Bank (including its consolidated subsidiaries)
had total assets of $307.4 billion (unaudited) and equity capital and reserves
of $19.7 billion (unaudited).
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The Advisers provide investment advice and portfolio management to the
Portfolios Trust. Subject to the supervision of the Trustees, the Adviser makes
the Bond and U.S. Equity Portfolios' day-to-day investment decisions, arranges
for the execution of portfolio transactions and generally manages said
Portfolios' investments and operations. Subject to the supervision of the
Trustees and the Adviser, the Sub-Adviser makes the International Equity
Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments and
operations. See Item 16 in Part B.
The Advisers use a sophisticated, disciplined, collaborative process
for managing all asset classes.
Nancy Tengler is primarily responsible for the day-to-day management
and implementation of the Adviser's process for the Bond Portfolio. Ms. Tengler
has been employed by the Branch since January 1996. Ms. Tengler is also the
Managing Director - Senior Portfolio Manager of UBS Asset Management (New York)
Inc.'s Value Equities Group. She has held this position since December 1994.
Previously, Ms. Tengler was the President and Senior Portfolio Manager for Spare
Tengler Kaplan & Bischel from August 1989 through June 1994. Ms. Tengler is
currently managing several portfolios and researching investment opportunities
in several industries, including the pharmaceutical and electric utilities
industries. Ms. Tengler co-authored a book entitled RELATIVE DIVIDEND
YIELD--COMMON STOCK INVESTING FOR INCOME AND APPRECIATION, and has twelve years
of investment experience. Ms. Tengler has previously managed the investments of
a mutual fund. Ms. Tengler received a B.A. degree from Point Loma College.
Louis N. Cohen is primarily responsible for the day-to-day management
and implementation of the Adviser's process for the U.S. Equity Portfolio. Mr.
Cohen has been a Vice President of the Adviser since January 1996. Mr. Cohen is
also a portfolio manager of UBS Asset Management (New York) Inc., a position he
has held since March 1991. Previously, Mr. Cohen was employed by Paine Webber,
Inc. as a credit officer from April 1990 through March 1991. Mr. Cohen is
currently managing several portfolios and is responsible for all credit research
relating to the issuers in which these portfolios invest. Mr. Cohen has not
previously managed the investments of an offshore mutual fund. Mr. Cohen
received both a B.A. and M.B.A. from New York University and has seventeen years
of investment experience.
Robin Apps is primarily responsible for the day-to-day management and
implementation of the Sub-Adviser's process for the International Equity
Portfolio. Mr. Apps has been a Senior Vice President of the Sub-Adviser since
1987, and is responsible for researching investment opportunities in the Far
East and Europe. Mr. Apps has not previously managed the investments of a mutual
fund. Mr. Apps received a bachelors degree from Birmingham University and has
fourteen years of investment experience. Mr. Apps is also qualified as an
actuary.
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Neither the Branch nor UBSII has previously advised an investment
company. This may be viewed as a risk of investing in the Portfolios.
In addition to the above-listed investment advisory services, the
Adviser also provides the Portfolios Trust with certain related administrative
services. Subject to the supervision of the Trustees, the Adviser is responsible
for: establishing performance standards for the third-party service providers of
the Portfolios Trust and overseeing and evaluating the performance of such
entities; providing and presenting quarterly management reports to the Trustees;
and supervising the preparation of reports for investors in the Portfolios.
Under Investment Advisory Agreements with the Portfolios Trust with
respect to each Portfolio, the Portfolios Trust pay the Adviser a fee,
calculated daily and payable monthly, at an annual rate equal to 0.45% of the
Bond Portfolio's average net assets, 0.60% of the U.S. Equity Portfolio's
average net assets, and 0.85% of the International Equity Portfolio's average
net assets. Pursuant to the Sub-Advisory Agreement between the Adviser and the
Sub-Adviser, the Adviser has agreed to pay the Sub-Adviser a fee, calculated
daily and payable monthly, at an annual rate equal to 0.75% of the International
Equity Portfolio's first $20 million of average net assets, 0.50% of the next
$30 million of average net assets, and 0.40% of the International Equity
Portfolio's average net assets in excess of $50 million. The Adviser is solely
responsible for paying the Sub-Adviser this fee.
ADMINISTRATOR. Under an Administrative Services Agreement with the
Portfolios Trust, Signature Financial Group (Cayman) Limited
("Signature-Cayman") serves as the Administrator of each Portfolio (in such
capacity, the "Administrator"). In this capacity, Signature-Cayman administers
all aspects of each Portfolio's day-to-day operations, subject to the
supervision of the Adviser and the Trustees, except as set forth under "Adviser
and Funds Services Agent", "Exclusive Placement Agent", and "Custodian and
Transfer Agent". The Administrator furnishes general office facilities and
ordinary clerical and related services for day-to-day operations including
recordkeeping responsibilities; (ii) takes responsibility for compliance with
all applicable federal and state securities and other regulatory requirements;
and (iii) performs administrative and managerial oversight of the activities of
the custodian, transfer agent and other agents or independent contractors of
each Portfolio.
Under the Administrative Services Agreement, the Portfolios Trust has
agreed to pay Signature-Cayman a fee, calculated daily and payable monthly, at
an annual rate of 0.05% of each Portfolio's average net assets.
EXCLUSIVE PLACEMENT AGENT. Under an Exclusive Placement Agent
Agreement, Signature-Cayman, P.O. Box 2494, Elizabethan Square, Grand Cayman,
Cayman Islands, B.W.I., serves as the exclusive placement agent of beneficial
interests in each Portfolio (in such capacity, the "Placement Agent"). The
Placement Agent is a wholly-owned
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direct subsidiary of Signature Financial Group, Inc. and is a registered
broker-dealer. The Placement Agent does not receive a fee pursuant to the terms
of the Exclusive Placement Agent Agreement.
CUSTODIAN AND TRANSFER AGENT. Investors Bank & Trust Company, whose
principal offices are located at 89 South Street, Boston, Massachusetts 02111,
serves as the custodian and transfer and dividend disbursement agent for each
Portfolio. See Item 16 in Part B. The Custodian also maintains offices at 1
First Canadian Place, Suite 2800, Toronto, Ontario M5X 1C8.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
Each Portfolio is a series of the Portfolios Trust, which is organized
as a series trust under the law of the State of New York. Under the Declaration
of Trust, the Trustees are authorized to issue beneficial interests in one or
more series or subtrusts (each a "Portfolio"). Currently, there are three active
series of the Portfolios Trust: UBS Bond Portfolio, UBS U.S. Equity Portfolio,
and UBS International Equity Portfolio. Investments in a Portfolio may not be
transferred, but an investor may withdraw all or any portion of its investment
at any time at net asset value. Investors in a Portfolio (e.g., investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of that Portfolio (and of no
other series). However, the risk of an investor in a Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Investments in a Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth below.
Each investor is entitled to a vote in proportion to the amount of its
investment in a Portfolio. Investors in each Portfolio will vote as a separate
class, except as to voting of Trustees, as otherwise required by the 1940 Act,
or if determined by the Trustees to be a matter which affects all series. As to
any matter which does not affect a particular series, only investors in the one
or more affected Portfolios are entitled to vote. The Portfolios are not
required and have no current intention of holding special meetings of investors,
but the Portfolios will hold special meetings of investors when in the judgment
of the Trustees it is necessary or desirable to submit matters for an investor
vote. Changes in fundamental objectives and policies will be submitted to
investors for approval. Investors under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of investors) have the right to communicate with other
investors in connection with requesting a meeting of investors for the purpose
of removing one or more Trustees. Investors also have the right to remove one or
more Trustees without a meeting by a declaration in writing by a specified
number of investors. Upon liquidation of a Portfolio, investors would be
entitled to share pro rata in the net assets of that Portfolio (and no other
series) available for distribution to investors.
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Each Portfolio determines its net income and realized capital gains, if
any, on each Portfolio Business Day (as defined below) and allocates all such
income and gain pro rata among the investors in the Portfolio at the time of
such determination.
The "net income" of each Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of a Portfolio,
less (ii) all actual and accrued expenses of that Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of a Portfolio. All the net income of each
Portfolio is allocated pro rata among the investors in that Portfolio (and no
other series).
Under their anticipated method of operation, the Portfolios will not be
subject to any income tax. However, each investor in each Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Portfolios Trust) of that Portfolio's ordinary income and capital gain in
determining its income tax liability. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
It is intended that each Portfolio's assets, income and distributions
will be managed in such a way that an investor in each Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in that Portfolio.
For more information on tax matters, see Item 20 in Part B. Investor
inquiries regarding the Portfolios Trust may be directed to UBS Investor
Portfolios Trust, P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman,
B.W.I. (809-945-1824).
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in each Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See Item 4 above.
An investment in a Portfolio may be made without sales load at the net
asset value next determined if an order is received "in good order" by the
Portfolios Trust. The net asset value of each Portfolio is determined each day
during which the New York Stock Exchange ("NYSE") is open for business
("Portfolio Business Day"). This determination is made once each day as of 4:00
p.m. New York time or at the close of regular trading on the NYSE, whichever is
earlier (the "Valuation Time"). For information on the valuation of the
Portfolio's securities, see Item 19 in Part B.
There is no minimum initial or subsequent investment in a Portfolio.
However, because each Portfolio intends to be as fully invested at all times as
is reasonably
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practicable in order to enhance the yield on its assets, investments must be
made in federal funds (i.e., monies credited to the account of a Portfolio's
custodian bank by a Federal Reserve Bank).
A Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interest. The securities delivered in kind are
valued by the method described in Item 19 of Part B as of the business day prior
to the day a Portfolio receives the securities. Securities may be accepted in
payment for beneficial interests only if they are, in the judgment of the
Trustees, appropriate investments for a Portfolio. In addition, securities
accepted in payment for beneficial interests must: (i) meet the investment
objective and policies of a Portfolio; (ii) be acquired by the Portfolio for
investment and not for resale; (iii) be liquid securities which are not
restricted as to transfer either by law or liquidity of market; and (iv) if
stock, have a value which is readily ascertainable as evidenced by a listing on
a stock exchange, over-the-counter market or by readily available market
quotations from a dealer in such securities. Each Portfolio reserves the right
to accept or reject at its own option any and all securities offered in payment
for beneficial interests.
The Portfolios Trust and Signature-Cayman reserve the right to cease
accepting investments in any Portfolio at any time or to reject any investment
order.
Each investor in each Portfolio may add to or reduce its investment in
that Portfolio on each Portfolio Business Day. As of the Valuation Time on each
such day, the value of each investor's beneficial interests in each Portfolio
will be determined by multiplying the net asset value of a Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or reductions
which are to be effected on that day will then be effected. The investor's
percentage of the aggregate beneficial interests in each Portfolio will then be
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in a Portfolio as of the Valuation Time
on such day plus or minus, as the case may be, the amount of net additions to or
reductions in the investor's investment in the Portfolio effected as of the
Valuation Time, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the Valuation Time on such day, plus or minus, as
the case may be, the amount of net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in a Portfolio as of the Valuation Time on the following Portfolio
Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in each Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in
proper form is furnished by the investor to the Portfolios Trust by the
designated cutoff time for each accredited
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investor. The proceeds of a reduction or withdrawal will be paid by the
Portfolios Trust in federal funds normally on the Portfolio Business Day the
withdrawal is effected, but in any event within seven days. Investments in the
Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists.
Each Portfolio reserves the right to pay redemptions in kind. Unless
requested by an investor, a Portfolio will not make redemptions in kind to an
investor, except in situations where that investor may make redemptions in kind.
See Item 19 in Part B.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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PART B
ITEM 10. COVER PAGE.
Not Applicable.
ITEM 11. TABLE OF CONTENTS.
General Information and History..........................B-1
Investment Objectives and Policies ......................B-1
Management of the Portfolio Series......................B-17
Control Persons and Principal Holders of Securities.....B-18
Investment Advisory and Other Services..................B-19
Brokerage Allocation and Other Practices................B-23
Capital Stock and Other Securities......................B-26
Purchase, Redemption and Pricing of Securities..........B-28
Tax Status..............................................B-30
Underwriters............................................B-32
Calculations of Performance Data .......................B-32
Financial Statements....................................B-33
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
Part A contains additional information about the investment objectives
and policies and management techniques of the Portfolios. This Part B should
only be read in conjunction with Part A of the registration statement.
The approval of the investors in the Portfolios is not required to
change any of the investment policies or management techniques of the Portfolios
discussed herein or in Part A of this registration statement, unless otherwise
indicated.
INVESTMENT OBJECTIVES AND POLICIES
The Bond Portfolio attempts to achieve its investment objective by
investing primarily in the corporate and government debt obligations and related
securities described in Part A and this Part B.
Under normal circumstances, at least 80% of the U.S. Equity Portfolio's
assets will be invested in income-producing domestic equity securities,
including dividend-
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paying common stocks and securities that are convertible into common stocks. The
U.S. Equity Portfolio's primary investments are the common stocks of
established, high-quality U.S. corporations.
The International Equity Portfolio seeks to achieve its investment
objective by investing primarily in the equity securities of foreign
corporations, consisting of common stocks and other securities with equity
characteristics such as preferred stocks, warrants, rights and convertible
securities. Under normal circumstances, the International Equity Portfolio
expects to invest at least 65% of its total assets in such securities. It does
not intend to invest in U.S. securities (other than short-term instruments),
except temporarily, when extraordinary circumstances prevailing at the same time
in a significant number of developed foreign countries render investments in
such countries inadvisable.
MONEY MARKET INSTRUMENTS
As discussed in Part A, each Portfolio may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased appears below. See "Quality and Diversification Requirements".
U.S. TREASURY SECURITIES. Each Portfolio may invest in direct
obligations of the U.S. Treasury, including Treasury Bills, Notes and Bonds, all
of which are backed as to principal and interest payments by the full faith and
credit of the United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, each Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitments.
Securities in which each Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not limited to,
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation and the U.S. Postal Service, each of which has the right to borrow
from the U.S. Treasury to meet its obligations, and the obligations of the
Federal Farm Credit System and the Federal Home Loan Banks, both of whose
obligations may be satisfied only by the individual credits of each issuing
agency. Securities that are backed by the full faith and credit of the United
States include obligations of the Government National Mortgage Association, the
Farmers Home Administration and the Export-Import Bank.
BANK OBLIGATIONS. Each Portfolio, unless otherwise noted in Part A or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of
B-2
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(i) banks, savings and loan associations and savings banks that have more than
$2 billion in total assets (the "Asset Limitation") and are organized under the
laws of the United States or any state, (ii) foreign branches of these banks or
of foreign banks of equivalent size (Euros) and (iii) U.S. branches of foreign
banks of equivalent size (Yankees). The Asset Limitation is not applicable to
the International Equity Portfolio. See "Foreign Investments". No Portfolio will
invest in obligations for which the Adviser, defined below (or the Sub-Adviser,
defined below, in the case of the International Equity Portfolio), or any of its
affiliated persons, is the ultimate obligor or accepting bank. Each Portfolio
may also invest in obligations of international banking institutions designated
or supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European Investment Bank, the
Inter- American Development Bank or the World Bank).
COMMERCIAL PAPER. Each Portfolio may invest in commercial paper,
including Master Demand obligations. Master Demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master Demand obligations are governed by
agreements between the issuer and the Bank, the Branch, and UBSII in the case of
the International Equity Portfolio, acting as agent, for no additional fee, in
its capacity as investment (sub)adviser to the Portfolios and as fiduciary for
other clients for whom it exercises investment discretion. The monies loaned to
the borrower come from accounts managed by the (Sub-)Adviser, or its affiliates,
pursuant to arrangements with such accounts. Interest and principal payments are
credited to such accounts. The (Sub-)Adviser, acting as a fiduciary on behalf of
its clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an obligation
together with interest to the date of payment. Because these obligations
typically provide that the interest rate is tied to the Federal Reserve
commercial paper composite rate, the rate on Master Demand obligations is
subject to change. Repayment of a Master Demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand, which is continuously monitored by the
(Sub-)Adviser. Because Master Demand obligations typically are not rated by
credit rating agencies, the Portfolios may invest in such unrated obligations
only if at the time of an investment the obligation is determined by the
(Sub-)Adviser to have a credit quality which satisfies a Portfolio's quality
restrictions. See "Quality and Diversification Requirements". Although there is
no secondary market for Master Demand obligations, such obligations are
considered to be liquid because they are payable upon demand. The Portfolios do
not have any specific percentage limitation on investments in Master Demand
obligations.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Trustees. In a repurchase agreement, a Portfolio buys a security
from a seller that has agreed to repurchase the same security at a mutually
agreed upon date and price. The resale price
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<PAGE>
normally is in excess of the purchase price, reflecting an agreed upon interest
rate. This interest rate is effective for the period of time the Portfolio is
invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Portfolio invest in repurchase agreements for more than
thirteen months. The securities that are subject to repurchase agreements,
however, may have maturity dates in excess of thirteen months from the effective
date of the repurchase agreement. The Portfolios will always receive securities
as collateral whose market value is, and during the entire term of the agreement
remains, at least equal to 100% of the dollar amount invested by the Portfolios
in each agreement plus accrued interest, and the Portfolios will make payment
for such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, a Portfolio
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of proceeds upon
disposition of the collateral by the Portfolio may be delayed or limited.
CORPORATE BONDS AND OTHER DEBT SECURITIES
Each Portfolio may invest in other debt securities with remaining
effective maturities of not more than thirteen months, including without
limitation corporate and foreign bonds, asset-backed securities and other
obligations described in Part A or this Part B.
As discussed in Part A, the Bond Portfolio may invest in bonds and
other debt securities of domestic and foreign issuers to the extent consistent
with its investment objectives and policies. A description of these investments
appears in Part A and below. See "Quality and Diversification Requirements". For
information on short-term investments in these securities, see "Money Market
Instruments".
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by or payable from, a
stream of payments generated by particular assets such as mortgages, motor
vehicles or credit card receivables. Payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution unaffiliated with the entities issuing
the securities. The asset-backed securities in which a Portfolio may invest are
subject to the Portfolio's overall credit requirements. However, asset-backed
securities, in general, are subject to certain risks. These risks include the
prepayment of the debtor's obligation and the creditor's limited interests in
applicable collateral. For example, credit card debt receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on
B-4
<PAGE>
credit card debt thereby reducing the balance due. Additionally, if the letter
of credit is exhausted, holders of asset-backed securities may also experience
delays in payments or losses if the full amounts due on underlying sales
contracts are not realized. Because asset-backed securities are relatively new,
the market experience in these securities is limited and the market's ability to
sustain liquidity through all phases of the market cycle has not been tested.
EQUITY INVESTMENTS
As discussed in Part A, the U.S. Equity and International Equity
Portfolios invest primarily in equity securities consisting of common stocks and
other securities with equity characteristics. The securities in which these
Portfolios invest include those listed on domestic and foreign securities
exchanges or traded on over-the-counter markets as well as certain restricted or
unlisted securities. A discussion of the various types of equity investments
that may be purchased by these Portfolios appears in Part A and below. See
"Quality and Diversification Requirements".
EQUITY SECURITIES. The common stocks in which these Portfolios may
invest include the common stocks of any class or series of corporations or any
similar equity interests such as trust or partnership interests. The Portfolios'
equity investments include preferred stocks, warrants, rights and convertible
securities. These investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure.
The convertible securities in which the Portfolios may invest include
debt securities or preferred stocks that may be converted into common stock or
that carry 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.
The terms of a convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors, but are senior to the claims of preferred and common
stockholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors, but are
senior to the claims of common stockholders.
FOREIGN INVESTMENTS
The International Equity Portfolio makes substantial investments in
companies based in foreign countries. The Bond Portfolio may also invest in
certain foreign securities. The Bond Portfolio does not expect to invest more
than 25% of its total assets at the time of purchase in securities of foreign
issuers. Foreign investments may be made directly in the securities of foreign
issuers or in the form of American
B-5
<PAGE>
Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs").
Generally, ADRs and EDRs are receipts issued by a bank or trust company that
evidence ownership of underlying securities issued by a foreign corporation and
that are designed for use in the domestic, in the case of ADRs, or European, in
the case of EDRs, securities markets.
Because investments in foreign securities may involve foreign
currencies, the value of the International Equity and Bond Portfolios' assets as
measured in U.S. dollars may be affected, favorably or unfavorably, by changes
in currency rates and in exchange control regulations, including currency
blockage. The Bond and International Equity Portfolios may enter into foreign
currency exchange transactions in connection with the settlement of foreign
securities transactions or to manage their currency exposure related to foreign
investments. The Portfolios will not enter into such transactions for
speculative purposes. For a description of the risks associated with investing
in foreign securities, see Item 4 in Part A.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Portfolio until
settlement takes place. At the time a Portfolio makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value of such securities each day in determining its
net asset value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement, a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, each Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other high-grade, liquid securities, in an amount at least equal to the value of
such commitments. On delivery dates for such transactions, each Portfolio will
meet its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If a Portfolio chooses to dispose of
the right to acquire a when-issued security prior to its acquisition, it could,
as with the disposition of any other portfolio obligation, incur a gain or loss
due to market fluctuation. It is the current policy of each Portfolio not to
enter into when-issued commitments exceeding in the aggregate 15% of the market
value of that Portfolio's total assets, less liabilities (excluding the
obligations created by when-issued commitments).
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by each Portfolio to the extent that such purchases are
consistent with that entity's investment objectives and restrictions and are
permitted under the 1940 Act.
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The 1940 Act requires that, as determined immediately after a purchase is made,
(i) not more than 5% of the value of the Portfolio's total assets will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of the Portfolio's total assets will be invested in securities of
investment companies as a group and (iii) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Portfolio,
provided, however, that a Portfolio may invest all of its investable assets in
an open-end investment company having the same investment objective as that
Portfolio. As a shareholder of another investment company, a Portfolio would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the expenses that such a Portfolio would bear in connection with
its own operations.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, reverse repurchase agreements are
considered borrowings by the Portfolio and, therefore, a form of leverage. The
Portfolios will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, the Portfolios will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the repurchase agreement. The
Portfolios will not invest the proceeds of a reverse repurchase agreement for a
period that exceeds the term of the reverse repurchase agreement. The
limitations on each Portfolio's use of reverse repurchase agreements are
discussed under "Investment Restrictions" below. Each Portfolio will establish
and maintain with the Custodian a separate account with a portfolio of
securities in an amount at least equal to its obligations under its reverse
repurchase agreements.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Bond Portfolio may engage in
mortgage dollar roll transactions with respect to mortgage securities issued by
the Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction, the Portfolio sells a mortgage backed security and
simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future repurchase
as well as by the interest earned on the reinvestment of the sales proceeds. The
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in an
amount sufficient to pay for the future repurchase are segregated with its
Custodian. Mortgage dollar roll transactions are considered reverse repurchase
agreements for purposes of the Portfolio's investment restrictions.
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SECURITIES LENDING. Each Portfolio may lend its securities if such
loans are secured continuously by cash or equivalent collateral or by a letter
of credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolios in the normal
settlement time, generally three business days after notice or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities that
occurs during the term of the loan inures to the Portfolio and its respective
investors. The Portfolios may pay reasonable finder's and custodial fees in
connection with a loan. In addition, the Portfolios will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Portfolios will not make any loans in excess of one year.
The Portfolios will not lend their securities to any officer, Trustee, Director,
employee, or affiliate or placement agent of the Company, the Trust, or to the
Adviser, Sub-Adviser, Administrator or Distributor or any affiliate thereof,
unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios
may invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in Part A.
As to illiquid investments, a Portfolio is subject to a risk that it
might not be able to sell such securities at a price that the Portfolio deems
respective of their value. Where an illiquid security must be registered under
the 1933 Act, before it may be resold, the Portfolio may be obligated to pay all
or part of the registration expenses and a considerable period may elapse
between the time the Portfolio decides to sell and the time the Portfolio is
permitted to sell under an effective registration statement. If, during such a
period, adverse market conditions develop, the Portfolio might obtain a less
favorable price than that which prevailed when it decided to sell. When the
Portfolios value these securities, they will take into account the illiquid
nature of these instruments.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each Portfolio intends to meet the diversification requirements of the
1940 Act. To meet these requirements, 75% of the Portfolio's assets are subject
to the following fundamental limitations: (1) the Portfolio may not invest more
than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities and (2)
the Portfolio may not own more than 10% of the outstanding voting securities of
any one issuer. As for the 25% of a Portfolio's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer, subject to the limitation of any applicable state securities
laws. Investments not subject to the limitations described above could involve
an increased risk to a
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Portfolio should an issuer, or a state or its related entities, be unable to
make interest or principal payments or should the market value of such
securities decline. See "Investment Restrictions".
BOND PORTFOLIO. The Bond Portfolio invests principally in a diversified
portfolio of "high grade" and "investment grade" securities. Investment grade
debt is rated, on the date of investment, within the four highest ratings of
Moody's Investors Service, Inc. ("Moody's"), currently Aaa, Aa, A and Baa, or of
Standard & Poor's Ratings Group ("Standard & Poor's"), currently AAA, AA, A and
BBB. High grade debt is rated, on the date of the investment, within the two
highest categories of the above ratings. The Bond Portfolio may also invest up
to 5% of its total assets in securities which are "below investment grade". Such
securities must be rated, on the date of investment, Ba by Moody's or BB by
Standard & Poor's. The Portfolio may invest in debt securities that are not
rated or other debt securities to which these ratings are not applicable, if in
the opinion of the Adviser, such securities are of comparable quality to the
rated securities discussed above. In addition, at the time the Portfolio invests
in any commercial paper, bank obligation or repurchase agreement, the issuer
must have outstanding debt rated A or higher by Moody's or Standard & Poor's,
the issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in the Adviser's
opinion.
U.S. EQUITY AND INTERNATIONAL EQUITY PORTFOLIOS. The U.S. Equity and
International Equity Portfolios may invest in convertible debt securities for
which there are no specific quality requirements. In addition, at the time the
Portfolios invest in any commercial paper, bank obligation or repurchase
agreement, the issuer must have outstanding debt rated A or higher by Moody's or
Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Adviser's1 opinion. At the time the Portfolios invest
in any other short-term debt securities, they must be rated A or higher by
Moody's or Standard & Poor's, or if unrated, the investment must be of
comparable quality in the Adviser's opinion.
In determining whether a particular unrated security is a suitable
investment, the Adviser takes into consideration asset and debt service
coverage, the purpose of the financing, the history of the issuer, existence of
other rated securities of the issuer, and other relevant conditions, such as
comparability to other issuers.
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1 Unless otherwise noted, references to the Adviser in the context of the
International Equity Portfolio refer to the Adviser and/or the Sub-Adviser, as
appropriate.
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OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE-TRADED AND OVER-THE-COUNTER OPTIONS. All options purchased or
sold by the Portfolios will be exchange traded or will be purchased or sold by
securities dealers ("over-the-counter" or "OTC options") that meet
creditworthiness standards approved by the Trustees. Exchange-traded options are
obligations of the Options Clearing Corporation. In OTC options, the Portfolio
relies on the dealer from which it purchased the option to perform if the option
is exercised. Thus, when a Portfolio purchases an OTC option, it relies on the
dealer from which it purchased the option to make or take delivery of the
underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Portfolio as well as loss of the expected benefit of
the transaction. To the extent that a Portfolio may trade in foreign options,
such options may be effected through local clearing organizations.
The staff of the SEC has taken the position that, in general, purchased
OTC options and the underlying securities used to cover written OTC options are
illiquid securities. However, a Portfolio may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Portfolio may repurchase any option
it writes for a maximum price to be calculated by a predetermined formula. In
these cases, the OTC option itself would only be considered illiquid to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios are
permitted to enter into futures and options transactions and may purchase or
sell futures contracts and purchase put and call options, including put and call
options on futures contracts. Futures contracts obligate the buyer to take and
the seller to deliver at a future date a specified quantity of a financial
instrument or an amount of cash based on the value of a securities index or
financial instrument. Currently, futures contracts are available on various
types of fixed-income securities, including but not limited to U.S. Treasury
bonds, notes and bills, Eurodollar certificates of deposit and on indices of
fixed income and equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
B-10
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The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on futures contracts and
on any options on futures contracts sold by a Portfolio are paid by the
Portfolio into a segregated account, in the name of the Futures Commission
Merchant, as required by the 1940 Act and the SEC's interpretations thereunder.
To the extent a Portfolio may trade in futures and options therein involving
foreign securities, such transactions may be effected according to local
regulations and business custom.
COMBINED POSITIONS. The Portfolios may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolios may, subject to regulations and
interpretations of the Commodity Futures Trading Commission, purchase a put
option and write a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Another possible combined position would involve
writing a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event of a
substantial price increase. Because combined positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open and
close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not exactly match a
Portfolio's current or anticipated investments. A Portfolio may invest in
options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
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<PAGE>
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. See "Exchange Traded and Over- the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Portfolio or the Adviser may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The
Portfolios intend to comply with Section 4.5 of the regulations under the
Commodity Exchange Act, which limits the extent to which a Portfolio can commit
assets to initial margin deposits and option premiums. In addition, the
Portfolios will comply with guidelines established by the SEC with respect to
coverage of options and futures contracts by mutual funds, and if the guidelines
so require, will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account cannot
be sold and will be considered illiquid securities while the futures contract or
option is outstanding, unless they are replaced with other suitable assets. As a
result, there is a possibility that the segregation of a large percentage of a
Portfolio's assets could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.
INVESTMENT RESTRICTIONS
The Portfolios have adopted the following fundamental and
non-fundamental investment restrictions (as defined and distinguished below); to
the extent that a fundamental policy and non-fundamental policy apply to a given
investment activity or strategy, the more restrictive policy shall govern.
FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions below
have been adopted by the Trustees with respect to each Portfolio. Except where
otherwise noted, these investment restrictions are fundamental policies which,
under the 1940 Act,
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may not be changed without the "vote of a majority of the outstanding voting
securities" of the Portfolio to which they relate. The "vote of a majority of
the outstanding voting securities" under the 1940 Act is the lesser of (a) 67%
or more of the voting shares present at a meeting of holders of beneficial
interests if the holders of more than 50% of the outstanding beneficial
interests are present or represented by proxy or (b) more than 50% of the
outstanding beneficial interests. The limitations described below apply at the
time the securities are purchased by the Portfolio.
1. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of its total assets (including
the amount borrowed), less liabilities (not including the amounts borrowed), or
mortgage, pledge, or hypothecate any assets, except in connection with any
permitted borrowing or reverse repurchase agreements (see Investment
Restrictions No. 7). It will not purchase securities while borrowings (including
reverse repurchase agreements) exceed 5% of its net assets; provided, however,
that it may increase its interest in an open-end management investment company
with the same investment objective and restrictions while such borrowings are
outstanding and provided further that for purposes of this restriction,
short-term credits necessary for the clearance of transactions are not
considered borrowings. This borrowing provision facilitates the orderly sale of
portfolio securities, for example, in the event of abnormally heavy redemption
requests and is not for investment purposes. Collateral arrangements for premium
and margin payments in connection with its hedging activities are not deemed to
be a pledge of assets;
2. Purchase the securities of an issuer if, immediately after such purchase, it
owns more than 10% of the outstanding voting securities of such issuer;
provided, however, that a Fund may invest all or part of its investable assets
in an open-end management investment company with the same investment objective
and restrictions. This limitation shall not apply to investments of up to 25% of
its total assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in securities or other obligations of any one such issuer;
provided, however, that a Fund may invest all or part of its investable assets
in an open-end management investment company with the same investment objective
and restrictions. This limitation shall not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or to
investments of up to 25% of its total assets;
4. Purchase securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase the value of its investments in such industry would exceed 25% of the
value of its total assets; provided, however, that a Fund may invest all or part
of its investable assets in an open-end management investment company with the
same investment objective and restrictions. For purposes of industry
concentration, there is no percentage limitation with respect to investments in
U.S. Government securities;
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<PAGE>
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or by entering into repurchase
agreements or loans of portfolio securities;
6. Purchase or sell real estate, commodities or commodities contracts or options
thereon (except for its interest in hedging and certain other activities as
described under "Investment Objective(s) and Policies"), interests in oil, gas,
or mineral exploration or development programs (including limited partnerships).
In addition, neither the U.S. Equity Portfolio nor the International Equity
Portfolio may purchase or sell real estate mortgage loans. The Bond Portfolio,
however, may purchase debt obligations secured by interests in real estate or
issued by companies that invest in real estate or interests therein including
real estate investment trusts ("REITs"); and the International Equity Portfolio
and the U.S. Equity Portfolio may purchase the equity securities or commercial
paper issued by companies that invest in real estate or interests therein,
including REITs;
7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that the
aggregate of senior securities, including reverse repurchase agreements, shall
not exceed one-third of the market value of its total assets (including the
amounts borrowed), less liabilities (excluding obligations created by such
borrowings and reverse repurchase agreements). Hedging activities as described
in "Investment Objective(s) and Policies" shall not be considered senior
securities for purposes hereof; or
8. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Portfolios and may be
changed by the Trustees. These non-fundamental investment policies provide that
the Portfolios may not:
i. borrow money (including through reverse repurchase or forward roll
transactions) for any purpose in excess of 5% of the Portfolio's total assets
(taken at cost), except that the Portfolio may borrow for temporary or emergency
purposes up to 1/3 of its assets;
ii. pledge, mortgage or hypothecate for any purpose in excess of 10% of the
Portfolio's total assets (taken at market value), provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this restriction;
iii. purchase any security or evidence of interest therein on margin, except
that such short-term credit as may be necessary for the clearance of purchases
and sales of securities may be obtained and except that deposits of initial
deposit and variation
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<PAGE>
margin may be made in connection with the purchase, ownership, holding or sale
of futures;
iv. sell securities it does not own such that the dollar amount of such short
sales at any one time exceeds 25% of the net equity of the Portfolio, and the
value of securities of any one issuer in which the Portfolio is short exceeds
the lesser of 2.0% of the value of the Portfolio's net assets or 2.0% of the
securities of any class of any U.S. issuer, and provided that short sales may be
made only in those securities which are fully listed on a national securities
exchange or a foreign exchange (This provision does not include the sale of
securities the Portfolio contemporaneously owns or where the Portfolio has the
right to obtain securities equivalent in kind and amount to those sold, I.E.,
short sales against the box.) (The Portfolio has no current intention to engage
in short selling.);
v. invest for the purpose of exercising control or management;
vi. 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 Portfolio if such purchase at the time thereof
would cause (a) more than 10% of the Portfolio'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 Portfolio'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 Portfolio; provided further that, except in the case of a merger or
consolidation, the Portfolio shall not purchase any securities of any open-end
investment company unless (1) the Portfolio's investment adviser waives the
investment advisory fee with respect to assets invested in other open-end
investment companies and (2) the Portfolio incurs no sales charge in connection
with that investment;
vii. invest more than 10% of the Portfolio's total assets (taken at the greater
of cost or market value) in securities (excluding Rule 144A securities) that are
restricted as to resale under the 1933 Act;
viii. invest more than 15% of the Portfolio's total assets (taken at the greater
of cost or market value) in (a) securities (excluding Rule 144A securities) that
are restricted as to resale under the 1933 Act, and (b) securities that are
issued by issuers which (including predecessors) have been in operation less
than three years (other than U.S. Government securities), provided, however,
that no more than 5% of the Portfolio's total assets are invested in securities
issued by issuers which (including predecessors) have been in operation less
than three years;
B-15
<PAGE>
ix. invest more than 15% of the Portfolio'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 Directors of the
Portfolio to be liquid);
x. invest in securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or Director of the Portfolio, or is
an officer or director of the Adviser, if after the purchase of the securities
of such issuer for the Portfolio one or more of such persons own beneficially
more than 1/2 of 1% of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such shares or
securities, or both, all taken at market value;
xi. invest in warrants (other than warrants acquired by the Portfolio as part of
a unit or attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 5% of the value
of the Portfolio's net assets or if, as a result, more than 2% of the
Portfolio's net assets would be invested in warrants not listed on a recognized
United States or foreign stock exchange, to the extent permitted by applicable
state securities laws;
xii. write puts and calls on securities unless each of the following conditions
are met: (a) the security underlying the put or call is within the investment
policies of the Portfolio and the option is issued by the Options Clearing
Corporation, except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b) the aggregate value
of the obligations underlying the puts determined as of the date the options are
sold shall not exceed 5% of the Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio must be owned by
the Portfolio at the time the call is sold and must continue to be owned by the
Portfolio until the call has been exercised, has lapsed, or the Portfolio has
purchased a closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's obligation to deliver securities pursuant to the
call it has sold; and (d) at the time a put is written, the Portfolio
establishes a segregated account with its custodian consisting of cash or
short-term U.S. Government securities equal in value to the amount the Portfolio
will be obligated to pay upon exercise of the put (this account must be
maintained until the put is exercised, has expired, or the Portfolio has
purchased a closing put, which is a put of the same series as the one previously
written); and
xiii. buy and sell puts and calls on securities, stock index futures or options
on stock index futures, or financial futures or options on financial futures
unless: (a) the options or futures are offered through the facilities of a
national securities association or are listed on a national securities or
commodities exchange, except for put and call options issued by non-U.S.
entities or listed on non-U.S. securities or commodities exchanges; (b) the
aggregate premiums paid on all such options which are held at any time do not
exceed 20% of the Portfolio's total net assets; (c) the aggregate margin
deposits required on all such futures or options thereon held at any time do not
exceed 5% of the
B-16
<PAGE>
Portfolio's total assets; and (d) such activities are permitted by Regulation
4.5 under the Commodity Exchange Act.
ALL PORTFOLIOS. There will be no violation of any investment
restriction if that restriction is complied with at the time the relevant action
is taken notwithstanding a later change in market value of an investment, in net
or total assets, in the securities rating of the investment or any other later
change.
ITEM 14. MANAGEMENT OF THE PORTFOLIO SERIES.
The Portfolios Trust's Board of Trustees, which consists of three
Trustees, is responsible for the overall management of the Portfolios, including
the general supervision and review of their investment activities. The Board, in
turn, elects the officers of the Portfolios Trust. The addresses and principal
occupations of the Trustees and principal officers of the Portfolios Trust are
set forth below.
DR. HANS-PETER LOCHMEIER*, 299 Park Avenue, New York, New York 10171;
Age: 54; Trustee; UBS Private Investor Funds, Inc. (mutual fund), Trustee
(February 1996- Present); Union Bank of Switzerland (Investment Services
Department), Department Head.
TIMOTHY M. SPICER, CPA, 299 Park Avenue, New York, New York 10171; Age:
46; Trustee; UBS Private Investor Funds, Inc., Trustee (February 1996-Present);
Ensemble Information Systems (software and electronic information provider),
Co-Founder, Chairman of the Board and Chief Executive Officer (1990-Present);
Amanda Venture Investors (AVI) (a San Francisco based venture capital firm),
Managing Partner (1995- Present); CoreLink Resources (provides mutual fund
related services to small and medium sized banks), Director (1993-Present);
Smith & Hawkin (mail order supplier of gardening tools and clothing), Director
and Chief Financial Officer (1990-1992); Concord Holding Corporation (provides
distribution and administrative services to mutual funds), Director (1989-1995);
active in civic/charitable organizations in the San Francisco, California area,
including Big Brothers/Big Sisters and United Way.
PETER LAWSON-JOHNSTON, 299 Park Avenue, New York, New York 10171; Age:
69; Trustee; UBS Private Investor Funds, Inc., Trustee (February 1996-Present);
Zemex Corporation (mining), Chairman of the Board and Director (1990-Present);
McGraw- Hill, Inc. (publishing), Director (1990-Present); National Review, Inc.
(publishing), Director (1990-Present); Guggenheim Brothers (real estate-venture
capital partnership), Partner (1990-Present); Elgerbar Corporation (holding
company), President and Director (1990-Present); The Solomon R. Guggenheim
Foundation (operates the Solomon R. Guggenheim Museum in New York and the Peggy
Guggenheim Collection in Venice, Italy), Chairman and Trustee (1990-Present);
The Harry Frank Guggenheim Foundation (charitable organization), Chairman of the
Board and Trustee (1990-Present).
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<PAGE>
TIMOTHY P. SULLIVAN, 437 Madison Avenue, New York, New York 10022; Age:
34; Vice President; UBS Private Investor Funds, Inc., President (February
1996-Present); Signature Financial Group, Inc.** (provides distribution and
administrative services to mutual funds), Vice President (1995-Present); Swiss
Bank Corporation, Vice President/Associate Director (1992-1995); EquitiLink USA,
Inc. (1989-1991).
JOHN R. ELDER, CPA, 6 St. James Avenue, Boston, Massachusetts 02116;
Age: 47; Treasurer; UBS Private Investor Funds, Inc., Treasurer (February
1996-Present); Signature Financial Group, Inc.**, Vice President (April
1995-Present); Phoenix Home Life Mutual Insurance Company (mutual funds
division), Treasurer (1983-1995).
THOMAS M. LENZ, ESQ., 6 St. James Avenue, Boston, Massachusetts 02116;
Age: 37; Secretary; UBS Private Investor Funds, Inc., Secretary (February
1996-Present); Signature Financial Group, Inc.**, Vice President and Associate
General Counsel (1989- Present).
<TABLE>
<CAPTION>
COMPENSATION TABLE***
Pension or Estimated Total Compensation
Aggregate Retirement Benefits Annual from Company and
Compensation from Accrued as Part of Benefits Upon Fund Complex Paid
NAME OF PERSON, POSITION PORTFOLIO TRUST FUND EXPENSES RETIREMENT TO DIRECTORS
------------------------ --------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Trustee
Mr. Spicer $12,000 0 0 $25,000
Trustee
Mr. Lawson-Johnston $12,000 0 0 $25,000
Trustee
</TABLE>
* "Interested person" within the meaning of the 1940 Act.
** Signature Broker-Dealer Services, Inc., the Company's principal
underwriter and administrator, is a wholly owned subsidiary of Signature
Financial Group, Inc.
*** The Portfolios Trust has not completed its first fiscal year since
its organization, and the noted amounts are estimates for the period January 1,
1996 through December 31, 1996. The Trustees are also reimbursed for all
reasonable expenses incurred in connection with the execution of their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of January 30, 1996, the following series of UBS Private Investor
Funds, Inc., a Maryland corporation (the "Company"), owned the sole outstanding
beneficial interest of the Portfolios listed below:
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SERIES OF THE COMPANY CORRESPONDING PORTFOLIO
UBS Bond Fund UBS Bond Portfolio
UBS U.S. Equity Fund UBS U.S. Equity Portfolio
UBS International Equity Fund UBS International Equity Portfolio
Because the Company controls each Portfolio, it may take actions
without the approval of any other investor in such Portfolio. As of the same
date, the Trustees and officers of the Portfolios Trust owned beneficially and
in the aggregate less than 1% of the outstanding beneficial interests of each
Portfolio. None of the Trustees receive compensation from the Portfolios Trust
exceeding $60,000 per fiscal year. None of the officers receive any compensation
from the Portfolios Trust.
The Company has informed the Portfolios Trust that whenever one of its
series is requested to vote on matters pertaining to a Portfolio, the Company
will hold a meeting of shareholders of that series and will cast its vote as
instructed by those shareholders. It is anticipated that other investors in the
Portfolios Trust will follow the same or a similar practice.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER AND FUND SERVICES AGENT
Pursuant to Investment Advisory Agreements between the Portfolios Trust
and Union Bank of Switzerland, New York Branch, the Branch serves as the
Portfolios' investment adviser. Pursuant to a Sub-Advisory Agreement between the
Branch and UBS International Investment London Limited, UBSII serves as the
sub-adviser to the International Equity Portfolio. The Branch, which operates
out of offices located at 299 Park Avenue, New York, New York, is licensed by
the Superintendent of Banks of the State of New York under the banking laws of
the State of New York and is subject to state and federal banking laws and
regulations applicable to a foreign bank that operates a state licensed branch
in the United States. UBSII is a wholly-owned subsidiary of the Bank. UBSII was
organized under the laws of the United Kingdom on June 19, 1986. (The Adviser
and the Sub-Adviser are collectively referred to as the "Advisers".) Subject to
the supervision of the Trustees, the Adviser, and in the case of the
International Equity Portfolio, UBSII, makes the Portfolios' day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages each Portfolio's investments and provides certain
administrative services.
The investment advisory services provided by the Advisers to the
Portfolios are not exclusive under the terms of the advisory agreements. The
Advisers are free to and do render similar investment advisory services to
others. The Advisers serve as investment advisers to personal investors and
offshore investment companies and act as fiduciaries for trusts, estates and
employee benefit plans. Certain of the assets of trusts and estates under
management are invested in common trust funds for which the Advisers serve as
trustees. The accounts managed
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<PAGE>
or advised by the Advisers have varying investment objectives and the Advisers
invest assets of such accounts in investments substantially similar to, or the
same as, those which are expected to constitute the principal investments of the
Portfolios. Such accounts are supervised by officers and employees of the
Advisers (or their affiliates) who may also be acting in similar capacities for
the Portfolios. See Item 17 below.
The Bank has branches, agencies, representative offices and
subsidiaries in Switzerland and in more than 40 cities outside Switzerland,
including, in the United States, New York City, Chicago, Houston, Los Angeles
and San Francisco. In addition to the receipt of deposits and the making of
loans and advances, the Bank, through its offices and subsidiaries (including
UBSII) engages in a wide range of banking and financial activities typical of
the world's major international banks, including fiduciary, investment advisory
and custodial services and foreign exchange in the United States, Swiss, Asian
and Euro-capital markets. The Bank is one of the world's leading asset managers
and has been active in New York City since 1946. At June 30, 1995, the Bank
(including its consolidated subsidiaries) had total assets of $307.4 billion
(unaudited) and equity capital and reserves of $19.7 billion (unaudited).
BOND FUND. The Adviser's fixed income analysts have extensive
experience in selecting bonds and monitoring their performance. These analysts
review the creditworthiness of individual issuers as well as the broad economic
trends likely to affect the bond markets.
U.S. EQUITY FUND. While many investment advisers evaluate companies
primarily on their earnings and their price/earnings ratio, the Adviser uses a
different investment approach. The Adviser believes that dividend yields, rather
than earnings, are the best indicators of future performance. Consequently, the
Adviser will select attractively priced stocks with high dividends. In addition,
the Adviser's analysts often meet with company managers, often contact a
company's suppliers, review the business operations and financial statements of
companies and try to "get behind" the numbers to gain a true sense of a
company's value.
INTERNATIONAL EQUITY FUND. The Sub-Adviser's analysts have extensive
experience in managing international portfolios. These analysts track the
performance of more than 1,600 companies around the world, and pay particular
attention to the energy, life sciences, technology and financial industries. The
Sub-Adviser is a registered investment adviser under the Investment Advisers Act
of 1940, as amended.
Under the Portfolios Trust's Advisory Agreement, each Portfolio will
pay the Adviser a fee, calculated daily and payable monthly, at an annual rate
of that Portfolio's average net assets, as shown below.
PORTFOLIO ANNUALIZED FEE RATE
UBS BOND PORTFOLIO 0.45% OF AVERAGE DAILY NET ASSETS
UBS U.S. EQUITY PORTFOLIO 0.60% OF AVERAGE DAILY NET ASSETS
UBS INTERNATIONAL EQUITY PORTFOLIO 0.85% OF AVERAGE DAILY NET ASSETS
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<PAGE>
Pursuant to the Sub-Advisory Agreement, the Sub-Adviser, under the
supervision of the Trustees and the Adviser, makes the day-to-day investment
decisions for the International Equity Portfolio. Under the Sub-Advisory
Agreement, the Adviser has agreed to pay the Sub-Adviser a fee, calculated daily
and payable monthly, at an annual rate of 0.75% of the International Equity
Portfolio's first $20 million of average net assets, plus 0.50% of the next $30
million of average net assets, plus 0.40% of this Portfolio's average net assets
in excess of $50 million. The Adviser is solely responsible for paying the
Sub-Adviser this fee.
The Investment Advisory Agreements and Sub-Advisory Agreement will each
continue in effect until February 1998, and thereafter will be subject to annual
approval by the Trustees or the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of each Portfolio provided that in
either case the continuance also is approved by a majority of the Trustees who
are not interested persons (as defined in the 1940 Act) of the Portfolios Trust
by vote cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory and Sub-Advisory Agreements will terminate
automatically if assigned and are terminable at any time without penalty by a
vote of a majority of the Trustees or by a vote of the holders of a majority (as
defined in the 1940 Act) of the Portfolio's outstanding shares on 60 days'
written notice to the Adviser or Sub-Adviser as applicable. Each Investment
Advisory Agreement and Sub-Advisory Agreement is also terminable by the Adviser
or Sub-Adviser, as applicable, on 60 days' written notice to the Portfolios
Trust.
In addition to the above noted investment advisory services, the
Adviser (but not the Sub-Adviser) also provides certain administrative services
to the Portfolios and subject to the supervision of the Trustees is responsible
for: establishing performance standards for the Portfolios' third-party service
providers and overseeing and evaluating the performance of such entities;
providing and presenting quarterly management reports to the Trustees; and
supervising the preparation of reports for Portfolio shareholders. These
administrative services are provided to the Portfolios by the Adviser pursuant
to the above discussed Investment Advisory Agreements.
The Glass-Steagall Act and other applicable laws generally prohibit
banks, such as Union Bank of Switzerland, from engaging in the business of
underwriting or distributing securities, and the Board of Governors of the
Federal Reserve System has issued an interpretation to the effect that under
these laws a bank holding company registered under the federal Bank Holding
Company Act or certain subsidiaries thereof may not sponsor, organize, or
control a registered open-end investment company continuously engaged in the
issuance of its shares. The interpretation does not prohibit a holding company
or a subsidiary thereof from acting as investment adviser or custodian to such
an investment company. The Advisers believe that they may perform the services
for the Portfolios contemplated by the Investment Advisory and Sub- Advisory
Agreements without violating the Glass-Steagall Act or other applicable banking
laws or regulations. State laws on this issue may differ from the interpretation
of relevant federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. However, it is possible
that future changes in either federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
further
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judicial or administrative decisions and interpretations of present and future
statutes and regulations, might prevent these entities from continuing to
perform such services. If the Adviser or Sub-Adviser were prohibited from
providing these services to the Funds or the Portfolios, it is expected that the
Directors and Trustees, as applicable, would recommend to shareholders that they
approve new agreements with other qualified service providers.
ADMINISTRATOR
Under an Administrative Services Agreement with the Portfolios Trust,
Signature-Cayman serves as the Administrator of the Portfolios (in such
capacity, the "Administrator"). In this capacity, Signature-Cayman administers
all aspects of the day-to-day operations of the Portfolios Trust, subject to the
supervision of the Trustees, except as set forth under the sections captioned
"Investment Adviser and Fund Services Agent," "Custodian" and "Private Placement
Agent." The Administrator (i) furnishes general office facilities and ordinary
clerical and related services for day-to-day operations, including
record-keeping responsibilities; (ii) takes responsibility for complying with
all applicable federal and state securities and other regulatory requirements
including, without limitation, preparing, mailing and filing (but not paying
for) registration statements and all required reports to the Portfolios'
shareholders and the SEC; and (iii) performs such administrative and managerial
oversight of the activities of the Portfolios' custodian, transfer agent and
other agents or independent contractors as the Trustees may direct from time to
time.
Under the Portfolios Trust's Administrative Services Agreement, each
Portfolio has agreed to pay Signature-Cayman a fee, calculated daily and payable
monthly, at an annual rate of 0.05% of its average net assets.
The Administrative Services Agreement may be renewed or amended by the
Trustees without shareholder vote. The Administrative Services Agreement is
terminable at any time without penalty by a vote of a majority of the Trustees
on not less than 60 days' written notice to the other party. The Administrator
may subcontract for the performance of its obligations under the Administrative
Services Agreement with the prior written consent of the Trustees. If the
Administrator subcontracts all or a portion of its duties to another party, the
Administrator shall be fully responsible for the acts and omissions of any such
subcontractor(s) as it would be for its own acts or omissions.
PLACEMENT AGENT
The placement agent for the Portfolios Trust is Signature-Cayman.
CUSTODIAN
Investors Bank & Trust Company ("IBT" or the "Custodian"), whose
principal offices are located at 89 South Street, Boston, Massachusetts 02111,
serves as the custodian and transfer and dividend disbursing agent for the
Portfolios. Pursuant to a Custodian Agreement with the
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Portfolios Trust, on behalf of each Portfolio, the Custodian is responsible for
maintaining the books and records of portfolio transactions and holding
portfolio securities and cash. As transfer agent and dividend disbursing agent,
the Custodian is responsible for maintaining account records detailing the
ownership of beneficial interests in each Portfolio, and for crediting income,
capital gains and other changes in share ownership to investors' accounts. The
Custodian will perform its duties as the Portfolios' transfer agent and dividend
disbursing agent from its offices located at 1 First Canadian Place, Suite 2800,
Toronto, Ontario M5X 1C8. Each Portfolio is responsible for its proportionate
share of the Portfolios Trust's transfer agency, custodial and dividend
disbursement fees.
INDEPENDENT ACCOUNTANTS
The Portfolios Trust's independent accounting firm is Price Waterhouse,
George Town, Grand Cayman, Cayman Islands, B.W.I. Price Waterhouse will conduct
an annual audit of the financial statements of each Portfolio, assist in the
review and filing of the federal and state income tax returns of the Portfolios
and consult with the Portfolios as to matters of accounting and federal and
state income taxation.
EXPENSES
Each Portfolio is responsible for the fees and expenses attributable to
it. Each investor in a Portfolio will bear its proportionate share of the
expenses of that Portfolio.
The Adviser paid the organizational expenses of the Portfolios Trust.
The costs of organizing the Portfolios Trust will be paid initially by the
Adviser and reimbursed by the Portfolios Trust at the time of the initial
offering of the shares of the Company. These costs in turn will be equitably
allocated to each Portfolio as provided for by the Trustees. Such organization
costs have been deferred and will be amortized ratably over a period of sixty
months from the commencement of operations of the Portfolios.
* * *
Statements contained in this registration statement regarding the
contents of any agreement or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such agreement
or other document filed as an exhibit to the registration statement of which
this document forms a part, each such statement being qualified in all respects
by such reference.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Advisers place orders for all purchases and sales of securities on
behalf of the Portfolios. The Advisers enter into repurchase agreements and
reverse repurchase agreements and effect loans of portfolio securities on behalf
of the Portfolios. See Item 13 above.
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Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. Occasionally,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
Portfolio transactions for the Bond Portfolio will be undertaken
principally to accomplish its objective in relation to expected movements in the
general level of interest rates. The Bond Portfolio may engage in short-term
trading consistent with its objectives.
In connection with portfolio transactions for the Bond Portfolio, the
Adviser intends to seek best price and execution on a competitive basis for both
purchases and sales of securities. Portfolio turnover may vary from year to
year, as well as within a year. The portfolio turnover rate for the Bond
Portfolio is expected to be under 100%.
In connection with portfolio transactions for the U.S. Equity and
International Equity Portfolios, the overriding objective is to obtain the best
possible execution of purchase and sale orders. Portfolio turnover may vary from
year to year, as well as within a year. The portfolio turnover rate for the U.S.
Equity and International Equity Portfolios is expected to be under 100%.
In selecting a broker, the Adviser or Sub-Adviser, as applicable,
considers a number of factors including: the price per unit of the security; the
broker's reliability for prompt, accurate confirmations and on-time delivery of
securities; the broker's financial condition; and the commissions charged. A
broker may be paid a brokerage commission greater than that another broker might
have charged for effecting the same transaction if, after considering the
foregoing factors, the Adviser or Sub-Adviser decides that the broker chosen
will provide the best possible execution and/or such a broker provides research
services to the Adviser or Sub-Adviser. The Advisers monitor the reasonableness
of the brokerage commissions paid in light of the execution received. The
Trustees regularly review the reasonableness of commissions and other
transaction costs incurred by the Portfolios in light of the facts and
circumstances deemed relevant, and, in that connection, will review reports and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Advisers have
allocated brokerage business in the past include economic statistics and
forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Advisers' clients and not solely or necessarily for the
benefit of the Portfolios. The Advisers believe that the value of research
services received is not determinable and does not significantly increase
expenses. The Portfolios do not reduce their fee to the Advisers by any amount
that might be attributable to the value of such services.
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Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisers may allocate a portion of a Portfolio's
brokerage transactions to their affiliates. In order for their affiliates to
effect any portfolio transactions for the Portfolios, the commissions, fees or
other remuneration received by such affiliates must be reasonable and fair
compared to the commissions, fees, or other remuneration paid to other brokers
in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
Furthermore, the Trustees, including a majority of the Trustees who are not
"interested persons", have adopted procedures that are reasonably designed to
ensure that any commissions, fees, or other remuneration paid to such affiliates
are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through the Portfolio's Adviser, Sub-Adviser, Distributor or any "affiliated
person" (as defined in the 1940 Act) or any affiliated person of such a person
when such entities are acting as principals, except to the extent permitted by
law. In addition, the Portfolios will not purchase securities during the
existence of any underwriting group relating thereto of which the Adviser,
Sub-Adviser or affiliate thereof is a member, except to the extent permitted by
law.
On those occasions when the Advisers deem the purchase or sale of a
security to be in the best interests of a Portfolio as well as other customers
including other Portfolios, the Advisers to the extent permitted by applicable
laws and regulations may, but are not obligated to, aggregate the securities to
be sold or purchased for a Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions if appropriate. In such an event, the securities so purchased or
sold as well as any expenses incurred in the transaction will be allocated by
the Advisers in a manner that is equitable and consistent with their fiduciary
obligations to their clients. In some instances, this procedure might adversely
affect a Portfolio.
If a Portfolio writes an option and effects a closing purchase
transaction with respect to an option written by it, such transaction will
normally be executed by the same broker-dealer who executed the sale of the
option. The writing of options by a Portfolio will be subject to limitations
established by each of the exchanges governing the maximum number of options in
each class that may be written by a single investor or group of investors acting
in concert, regardless of whether the options are written on the same or
different exchanges or are held or written in one or more accounts or through
one or more brokers. The number of options that a Portfolio may write may be
affected by options written by the Advisers for other investment advisory
clients. An exchange may order the liquidation of positions found to be in
excess of these limits and it may impose certain other sanctions.
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ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Each Portfolio is a series of UBS Investor Portfolios Trust, which is
organized as a series trust under the law of the State of New York. Under the
Declaration of Trust, the Trustees are authorized to issue beneficial interests
in one or more series (each a "Series"). Currently, there are three active
Series: UBS Bond Portfolio, UBS U.S. Equity Portfolio and UBS International
Equity Portfolio. Investors in a Series will be held personally liable for the
obligations and liabilities of that Series (and of no other Series), subject,
however, to indemnification by the Portfolios Trust in the event that there is
imposed upon an investor a greater portion of the liabilities and obligations of
the Series than its proportionate beneficial interest in the Series. The
Declaration of Trust also provides that the Portfolios Trust shall maintain
appropriate insurance (for example, a fidelity bond and errors and omissions
insurance) for the protection of the Portfolios Trust, its investors, Trustees,
officers, employees and agents, and covering possible tort and other
liabilities. Thus, the risk of an investor incurring financial loss on account
of investor liability is limited to circumstances in which both inadequate
insurance existed and the Portfolios Trust itself was unable to meet its
obligations.
Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Series only. Upon liquidation or dissolution of a Series, investors are entitled
to share pro rata in that Series' (and no other Series) net assets available for
distribution to its investors. The Portfolios Trust reserves the right to create
and issue additional Series of beneficial interests, in which case the
beneficial interests in each new Series would participate equally in the
earnings, dividends and assets of that particular Series only (and no other
Series). Any property of the Portfolios Trust is allocated and belongs to a
specific Series to the exclusion of all other Series. All consideration received
by the Portfolios Trust for the issuance and sale of beneficial interests in a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings and proceeds thereof, and any funds
or payments derived from any reinvestment of such proceeds, is held by the
Trustees in a separate subtrust (a Series) for the benefit of investors in that
Series and irrevocably belongs to that series for all purposes. Neither a Series
nor investors in that Series possess any right to or interest in the assets
belonging to any other Series.
Investments in a Series have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Investments in a Series may not be transferred. Certificates representing an
investor's beneficial interest in a Series are issued only upon the written
request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in each Series. Investors in a Series do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interests in all outstanding Series may elect all of the Trustees if they choose
to do so and in such event other investors would not be able to elect any
Trustees. Investors in each Series will vote as a separate class except as to
voting of Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of a particular Series, only
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investors in the one or more affected Series are entitled to vote. The
Portfolios Trust is not required and has no current intention of holding annual
meetings of investors, but the Portfolios Trust will hold special meetings of
investors when in the judgment of the Portfolios Trust's Trustees it is
necessary or desirable to submit matters for an investor vote. The Portfolios
Trust's Declaration of Trust may be amended without the vote of investors,
except that investors have the right to approve by affirmative majority vote any
amendment which would affect their voting rights, alter the procedures to amend
the Declaration of Trust of the Portfolios Trust, or as required by law or by
the Portfolios Trust's registration statement, or as submitted to them by the
Trustees. Any amendment submitted to investors which the Trustees determine
would affect the investors of any Series shall be authorized by vote of the
investors of such Series and no vote will be required of investors in a Series
not affected.
The Portfolios Trust or any Series may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved (a)
at a meeting of investors by investors representing the lesser of (i) 67% or
more of the beneficial interests in the affected Series present of represented
at such meeting, if investors in more than 50% of all such beneficial interests
are present or represented by proxy, or (ii) more than 50% of all such
beneficial interests, or (b) by an instrument in writing without a meeting,
consented to by investors representing not less than a majority of the
beneficial interests in the affected Series. The Portfolios Trust or any Series
may also be terminated (i) upon liquidation and distribution of its assets if
approved by the vote of two thirds of its investors (with the vote of each being
in proportion to the amount of its investment), (ii) by the Trustees by written
notice to its investors, or (iii) upon the bankruptcy or expulsion of an
investor in the affected Series, unless the investors in such Series, by
majority vote, agree to continue the Series. The Portfolios Trust will be
dissolved upon the dissolution of the last remaining Series.
The Portfolios Trust's Declaration of Trust provides that obligations
of the Portfolios Trust are not binding upon the Trustees individually but only
upon the property of the Portfolios Trust and that the Trustees will not be
liable for any action or failure to act, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The Portfolios Trust's Declaration of Trust further provides that it
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Portfolios Trust, unless, as to liability to the
Portfolios Trust or its investors, it is finally adjudicated that they engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any other matter it
is finally adjudicated that they did not act in good faith in the reasonable
belief that their actions were in the best interests of the Portfolios Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or
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in a written opinion of independent counsel, that such officers or Trustees have
not engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in each Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See Item 4 in Part A of this
registration statement.
Each investor in each Portfolio may add to or reduce its investment in
that Portfolio on each Portfolio Business Day. As of the Valuation Time on each
such day, the value of each investor's beneficial interest in each Portfolio
will be determined by multiplying the net asset value of a Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or reductions
which are to be effected on that day will then be effected. The investor's
percentage of the aggregate beneficial interests in each Portfolio will then be
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in a Portfolio as of the Valuation Time
on such day plus or minus, as the case may be, the amount of net additions to or
reductions in the investor's investment in the Portfolio effected as of the
Valuation Time, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the Valuation Time on such day, plus or minus, as
the case may be, the amount of net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in a Portfolio as of the Valuation Time on the following Portfolio
Business Day.
The following is a discussion of the procedures used by the Portfolios
in valuing their assets.
In the case of the Bond Portfolio, securities with a maturity of 60
days or more, including securities that are listed on an exchange or traded
over-the-counter, are valued by the Portfolio by using the average of at least
three bid quotes from dealers or, in all other cases, by taking into account
various factors affecting market value, including yields and prices of
comparable securities, indications as to values from dealers and general market
conditions. All portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method, whereby such securities are valued
at acquisition cost as adjusted for amortization of premium or accretion of
discount to maturity. Because many of the municipal bond issues outstanding do
not have large principal obligations and because of the varying risk factors
applicable to each issuer, no readily available market quotations exist for most
municipal securities.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when the Portfolio's net asset value is
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calculated, such securities will be valued at fair value in accordance with
procedures established by and under the general supervision of the Trustees.
In the case of the U.S. Equity and International Equity Portfolios,
securities listed on domestic exchanges, other than options on stock indices,
are valued using the last sales price on the most representative exchange at
4:00 p.m. New York time or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange or, in the
absence of such prices, at the readily available closing bid price on such
exchange. Securities listed on foreign exchanges are valued at the last quoted
sale price available before the time when net assets are valued or, in the
absence of such recorded sales, at the average of readily available closing bid
and asked prices on such exchange or, in the absence of such prices, at the
readily available closing bid price on such exchange. Unlisted securities are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative market
for such security. For purposes of calculating net asset value per share, all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the prevailing market rates available at the time
of valuation.
Options on stock indices traded on national securities exchanges are
valued at the close of options trading on such exchanges, which is currently
4:10 p.m., New York time. Stock index futures and related options traded on
commodities exchanges are valued at their last sales price as of the close of
such commodities exchanges, which is currently 4:15 p.m., New York time.
Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures established by and under
the general supervision of the Trustees. Such procedures include the use of
independent pricing services, indications as to values from dealers and general
market conditions. Short-term investments that mature in 60 days or less are
valued at amortized cost method (as discussed above) if their original maturity
was 60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their original maturity when acquired by a Portfolio was more than
60 days, unless this is determined not to represent fair value by the Trustees.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when a Portfolio's net asset value is calculated,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
If market quotations for the securities of any Portfolio are not
readily available, such securities will be valued at "fair value" as determined
in good faith by the Trustees.
A determination of value used in calculating net asset value must be a
fair value determination made in good faith utilizing procedures approved by the
Portfolios Trust's Board of Trustees. While no single standard for determining
fair value exists, as a general rule, the
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current fair value of a security would appear to be the amount which a Portfolio
could expect to receive upon its current sale. Some, but not necessarily all, of
the general factors which may be considered in determining fair value include:
(i) the fundamental analytical data relating to the investment; (ii) the nature
and duration of restrictions on disposition of the securities; and (iii) an
evaluation of the forces which influence the market in which these securities
are purchased and sold. Without limiting or including all of the specific
factors which may be considered in determining fair value, some of the specific
factors include: type of security, financial statements of the issuer, cost at
date of purchase, size of holding, discount from market value, 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 securities, price and extent of public trading in similar
securities of the issuer or comparable companies, and other relevant matters.
Each Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other transaction costs in converting the securities to cash.
In addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolios or the
investor's portfolio, as the case may be. A Portfolio will not make a
distribution in kind except in circumstances in which the owner of a beneficial
interest in that Portfolio is permitted to redeem in kind or unless requested by
such investor.
ITEM 20. TAX STATUS.
The Portfolios Trust is organized as a New York trust. The Portfolios
are not subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. However, each investor in a Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Portfolios Trust) of the Portfolio's ordinary income and capital gains in
determining its income tax liability. The determination of such share will be
made in accordance with the Code and regulations promulgated thereunder.
Under interpretations of the Internal Revenue Service (1) each
Portfolio will be treated for federal income tax purposes as a partnership which
is not a publicly traded partnership, and (2) for purposes of determining
whether an investor in a Portfolio satisfies requirements of Subchapter M of the
Code, the investor will be deemed to own a proportionate share of the
Portfolio's assets and will be deemed to be entitled to the Portfolio's income
attributable to that share. The Portfolios Trust has advised its initial
investors that it intends to conduct its operations so as to enable investors to
satisfy the requirements of Subchapter M of the Code.
Each Portfolio, since it is taxed as a partnership, is not subject to
federal income taxation. Instead, an investor must take into account, in
computing its federal income tax liability, its share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether it has received any cash distributions from the Portfolio.
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Each Portfolio's taxable year-end will be December 31st. Although, as
described above, a Portfolio will not be subject to federal income tax, it will
file appropriate income tax returns.
Withdrawals by investors from a Portfolio generally will not result in
their recognizing any gain or loss for federal income tax purposes, except that
(1) gain will be recognized to the extent that any cash distributed exceeds the
basis of the investor's interest in the Portfolio prior to the distribution, (2)
income or gain will be realized if the withdrawal is in liquidation of the
investor's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if the distribution is in liquidation of that entire interest and
consists solely of cash and/or unrealized receivables. The basis of an
investor's interest in a Portfolio generally equals the amount of cash and the
basis of any property that the investor invests in the Portfolio, increased by
the investor's share of income from the Portfolio and decreased by the amount of
any cash distributions and the basis of any property distributed from the
Portfolio.
Gains or losses on sales of securities by a Portfolio will be treated
as long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, the Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by a
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by a Portfolio pursuant to the exercise
of a put option written by it, the Portfolio will subtract the premium received
from its cost basis in the securities purchased.
Under the Code, gains or losses attributable to the disposition of
foreign currency or to foreign currency contracts, or to fluctuations in
exchange rates between the time a Portfolio accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Portfolio actually collects such income or pays such liabilities, are treated as
ordinary income or ordinary loss. Similarly, gains or losses on the disposition
of debt securities held by a Portfolio, if any, denominated in foreign currency,
to the extent attributable to fluctuations in exchange rates between the
acquisition and disposition dates, are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into
by a Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, a Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
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Certain options, futures and foreign currency contracts held by a
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes--i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long a Portfolio has held such options or
futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to a Portfolio. It is intended
that such segregated asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of assets will not
be taxable provided certain requirements are met. Such investors are advised to
consult their own tax advisors as to the tax consequences of an investment in a
Portfolio.
FOREIGN INVESTORS. Allocations of U.S. source dividend income to an
investor who, as to the United States, is a foreign trust, foreign corporation
or other foreign investor will be subject to United States withholding tax at
the rate of 30% (or lower treaty rate). Allocations of Portfolio interest or
short term or net long term capital gains to foreign investors will not be
subject to United States tax.
STATE AND LOCAL TAXES. A Portfolio may be subject to state or local
taxes in jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of a Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal income tax
laws. Investors should consult their own tax advisors with respect to any state
or local taxes.
FOREIGN TAXES. A Portfolio may be subject to foreign withholding taxes
with respect to income received from sources within foreign countries.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York. Investors are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Portfolio.
ITEM 21. UNDERWRITERS.
Not applicable.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
B-32
<PAGE>
ITEM 23. FINANCIAL STATEMENTS.
Not applicable.
B-33
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
Not applicable.
(b) EXHIBITS FILED HEREWITH:
1. Declaration of Trust of the Registrant.
2. By-Laws of the Registrant.
5(a). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS Bond Portfolio, and Union Bank of Switzerland, New York Branch.
5(b). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS U.S. Equity Portfolio, and Union Bank of Switzerland, New York
Branch.
5(c). Investment Advisory Agreement between the Registrant on behalf of its
series, UBS International Equity Portfolio, and Union Bank of Switzerland, New
York Branch.
5(d). Investment Sub-Advisory Agreement between Union Bank of Switzerland, New
York Branch, and UBS International Investment London Limited.
8(a). Custodian Agreement between the Registrant and Investors Bank and Trust.
9. Custodian Agreement Supplement between the Registrant and Investors Bank and
Trust.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
TITLE OF CLASSES (AS OF JANUARY 30, 1996)
- ----------------- ------------------------
UBS Bond Portfolio 0
UBS U.S. Equity Portfolio 0
UBS International Equity Portfolio 0
C-1
<PAGE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of the Registrant's Declaration of Trust,
filed as Exhibit 1 herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The name, position with Union Bank of Switzerland, New York Branch,
principal occupation and type of business are set forth below for the directors
and certain senior executive officers of Union Bank of Switzerland, including
those who are engaged in any other business, profession, vocation, or employment
of a substantial nature.
Thomas Messmore -- Managing Director, UBS Asset Management (New York),
Inc.; Member of Funds Management Committee, Union Bank of Switzerland, New York
Branch; Director, Energy Biosystems Corporation.
Ned Lord -- Vice President, Union Bank of Switzerland, New York Branch;
Director, Computer Associates.
Peter E. Guernsey, Jr. -- Managing Director, Union Bank of Switzerland,
New York Branch; Member of Advisory Board, Sedgewick James Insurance Co.
The information required by this Item 28 with respect to each director and
senior executive officer of UBS International Investment London Limited
("UBSII") is incorporated by reference to Form ADV filed by UBSII with the
Securities and Exchange Commission pursuant to the Investment Advisers Act of
1940, as amended (File No. 801-30165).
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
UBS Investors Portfolios Trust, P. O. Box 2494, Elizabethan Square, George Town,
Grand Cayman, Cayman Islands, B.W.I.
Signature Financial Group (Cayman) Limited, P. O. Box 2494, Elizabethan Square,
George Town, Grand Cayman, Cayman Islands, B.W.I.
Investors Bank & Trust Company (custodian, transfer agent and dividend
disbursing agent), 89 South Street, Boston, MA 02111; 1 First Canadian Place,
Suite 2800, Toronto, Ontario M5X 1C8.
Union Bank of Switzerland, New York Branch (adviser), 299 Park Avenue, New York,
NY 10171.
C-2
<PAGE>
UBS International Investment London Limited (subadviser), Triton Court, 14
Finsbury Square, London, England EC2A 1PD.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940 (the "Act") as though such provisions of the Act were
applicable to the Registrant.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, UBS
Investor Portfolios Trust has duly caused this registration statement on Form
N-1A to be signed on its behalf by the undersigned, thereto duly authorized, in
George Town, Grand Cayman, Cayman Islands, B.W.I. on the 27th day of February,
1996.
UBS INVESTOR PORTFOLIOS TRUST
By /S/ SUSAN JAKUBOSKI
Susan Jakuboski
Assistant Treasurer and Assistant Secretary
ubs016a
C-4
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust of the Registrant.
2. By-Laws of the Registrant.
5(a). Investment Advisory Agreement between the Registrant on
behalf of its series, UBS Bond Portfolio, and Union Bank of
Switzerland, New York Branch.
5(b). Investment Advisory Agreement between the Registrant on
behalf of its series, UBS U.S. Equity Portfolio, and Union
Bank of Switzerland, New York Branch.
5(c). Investment Advisory Agreement between the Registrant on
behalf of its series, UBS International Equity Portfolio,
and Union Bank of Switzerland, New York Branch.
5(d). Investment Sub-Advisory Agreement between Union Bank of
Switzerland, New York Branch, and UBS International
Investment London Limited.
8(a). Custodian Agreement between the Registrant and Investors
Bank and Trust.
9. Custodian Agreement Supplement between the Registrant and
Investors Bank and Trust.
C-5
<PAGE>
UBS INVESTOR PORTFOLIOS TRUST
DECLARATION OF TRUST
February 9, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------
Section 2.1 Number and Qualification . . . . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . . . . 4
Section 2.3 Resignation, Removal and Retirement . . . . . . . 4
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Chairman of the Board; Officers . . . . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III--POWERS OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . 6
------------------
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Investments . . . . . . . . . . . . . . . . . . . 6
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Sale and Increases of Interests . . . . . . . . . 7
Section 3.5 Decreases and Redemptions of Interests . . . . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . . . 8
Section 3.7 Delegation; Committees . . . . . . . . . . . . . . 8
Section 3.8 Collection and Payment . . . . . . . . . . . . . . 8
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . . . . 8
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . . . . 9
Section 3.11 Further Powers . . . . . . . . . . . . . . . . . . 9
ARTICLE IV--INVESTMENT ADVISORY, ADMINISTRATION AND PLACEMENT
AGENT ARRANGEMENTS; CUSTODIAN . . . . . . . . . . . . . . . 9
-----------------------------
Section 4.1 Investment Advisory and Other Arrangements . . . . 9
Section 4.2 Parties to Contract . . . . . . . . . . . . . . . 10
Section 4.3 Custodian . . . . . . . . . . . . . . . . . . . . 10
Section 4.4 1940 Act Governance . . . . . . . . . . . . . . . 10
ARTICLE V--LIABILITY OF HOLDERS; LIMITATIONS OF LIABILITY OF TRUSTEES,
OFFICERS, ETC. . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.1 Liability of Holders; Indemnification . . . . . . 11
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties . . . . . . . . . . . . . . . . 11
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. . . . . . . . . . . . . 11
Section 5.4 Mandatory Indemnification . . . . . . . . . . . . 11
Section 5.5 No Bond Required of Trustees . . . . . . . . . . . 12
i
<PAGE>
PAGE
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . . 12
Section 5.7 Reliance on Experts, etc. . . . . . . . . . . . . 13
Section 5.8 No Repeal or Modification . . . . . . . . . . . . 13
ARTICLE VI--INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------
Section 6.1 Interests . . . . . . . . . . . . . . . . . . . . 13
Section 6.2 Establishment and Designation of Series . . . . . 14
Section 6.3 Non-Transferability . . . . . . . . . . . . . . . 15
Section 6.4 Register of Interests . . . . . . . . . . . . . . 15
ARTICLE VII--INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS . . . . . . 15
ARTICLE VIII--DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 16
-----------------
Section 8.1 Book Capital Account Balances . . . . . . . . . . 16
Section 8.2 Allocations and Distributions to Holders . . . . . 16
Section 8.3 Power to Modify Foregoing Procedures . . . . . . . 16
ARTICLE IX--HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------
Section 9.1 Rights of Holders . . . . . . . . . . . . . . . . 16
Section 9.2 Meetings of Holders . . . . . . . . . . . . . . . 17
Section 9.3 Notice of Meetings . . . . . . . . . . . . . . . . 17
Section 9.4 Record Date for Meetings, Distributions, etc. . . 18
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . . . 18
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . . . 18
Section 9.7 Holder Action by Written Consent . . . . . . . . . 18
Section 9.8 Notices . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X--DURATION; TERMINATION; DISSOLUTION; AMENDMENT; MERGERS; ETC. . 19
Section 10.1 Duration . . . . . . . . . . . . . . . . . . . . . 19
Section 10.2 Dissolution . . . . . . . . . . . . . . . . . . . 19
Section 10.3 Termination . . . . . . . . . . . . . . . . . . . 20
Section 10.4 Amendment Procedure . . . . . . . . . . . . . . . 21
Section 10.5 Merger, Consolidation and Sale of Assets . . . . . 21
Section 10.6 Incorporation . . . . . . . . . . . . . . . . . . 22
ARTICLE XI--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------
Section 11.1 Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . . 22
Section 11.2 Governing Law . . . . . . . . . . . . . . . . . . 22
Section 11.3 Counterparts . . . . . . . . . . . . . . . . . . . 22
Section 11.4 Reliance by Third Parties . . . . . . . . . . . . 22
Section 11.5 Provisions in Conflict with Law or Regulations . . 23
ii
<PAGE>
UBS0003
DECLARATION OF TRUST
OF
UBS INVESTOR PORTFOLIOS TRUST
This DECLARATION OF TRUST of UBS Investor Portfolios Trust is
made as of the 9th day of February, 1996 by the parties signatory hereto, as
Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a master trust fund or
"Trust" (as defined in Section 1.2 hereof) under the laws of the State of New
York consisting of one or more subtrusts or "Series" (as defined in Section 1.2
hereof) for the investment and reinvestment of assets contributed thereto; and
WHEREAS, it is proposed that the trust assets be composed of
money and other property contributed to the Series, such assets to be held and
managed in trust for the benefit of the holders of beneficial interests in such
Series;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and other property contributed to the Trust and will
manage and dispose of the same for the benefit of such holders of beneficial
interests and subject to the provisions hereof, to wit:
ARTICLE I
THE TRUST
1.1. NAME. The name of the Trust shall be UBS Investor
Portfolios Trust and so far as may be practicable the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under that name,
which name (and the term "Trust" wherever hereinafter used) shall refer to the
Trustees as Trustees, and not individually, and shall not refer to the officers,
employees, agents or independent contractors of the Trust or its holders of
beneficial interests.
1.2. DEFINITIONS. As used in this Declaration, the following
terms shall have the following meanings:
"ADMINISTRATOR" shall mean any party furnishing services to
one or more Series pursuant to any administration contract described in Section
4.1 hereof.
"BOOK CAPITAL ACCOUNT" shall mean, for any Holder (as
hereinafter defined) at any time, the Book Capital Account of the Holder at such
time with respect to the Holder's beneficial interest in the Trust Property (as
hereinafter defined) of any Series, determined in accordance with the method
established by
1
<PAGE>
the Trustees pursuant to Section 8.1 hereof. The Trust shall maintain separate
records of Book Capital Accounts for each such Series.
"CODE" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, as well as any non-superseded provisions of
the Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
"COMMISSION" shall mean the United States Securities and
Exchange Commission.
"DECLARATION" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "DECLARATION", "HEREOF",
"HEREIN" and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"FISCAL YEAR" shall mean an annual period(s) of the Series
determined by the Trustees which ends on a date specified by the Trustees or on
such other day as is permitted or required by the Code.
"HOLDER" shall mean the record holder of any Interest.
"INSTITUTIONAL INVESTOR(S)" shall mean any regulated
investment company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual, S
corporation, partnership or grantor trust beneficially owned by any individual,
S corporation or partnership.
"INTERESTED PERSON" shall have the meaning given it in the
1940 Act (as hereinafter defined).
"INTEREST" shall mean the beneficial interest of a Holder in
the Trust Property of any Series, including all rights, powers and privileges
accorded to Holders by this Declaration, which interest may be expressed as a
percentage, determined by calculating for a particular Series, at such times and
on such basis as the Trustees shall from time to time determine, the ratio of
each Holder's Book Capital Account balance to the total of all Holders' Book
Capital Account balances. Reference herein to a specified percentage of, or
fraction of, Interests, means Holders whose combined Book Capital Account
balances represent such specified percentage or fraction of the combined Book
Capital Account balances of all, or a specified group of, Holders.
"INVESTMENT ADVISER" shall mean any party furnishing services
to one or more Series of the Trust pursuant to any investment advisory contract
described in Section 4.1 hereof.
"MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting of
Holders of one or more Series as the context may require, of (A) 67% or more of
the Interests present or represented at such meeting, if Holders of more than
50% of all Interests in such one or more Series are present or represented by
proxy, or (B) more than 50% of all Interests in such one or more Series,
whichever is less.
2
<PAGE>
"1940 ACT" shall mean the United States Investment Company Act
of 1940, as amended from time to time, and the rules and regulations thereunder.
"PERSON" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"REDEMPTION" shall mean the complete withdrawal of an Interest
of a Holder the result of which is to reduce the Book Capital Account balance of
that Holder to zero, and the term "redeem" shall mean to effect a Redemption.
"SERIES" shall mean the subtrusts of the Trust as the same are
established and designated pursuant to Article VI hereof, each of which shall be
a separate subtrust.
"TRUST" shall mean the master trust fund established hereby
and shall include each Series hereof.
"TRUST PROPERTY" shall mean as of any particular time any and
all assets or other property, real or personal, tangible or intangible, which at
such time is owned or held by or for the account of any Series or for the
account of the Trustees, each component of which shall be allocated and belong
to a specific Series to the exclusion of all other Series.
"TRUSTEES" shall mean each signatory to this Declaration, so
long as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been duly
elected or appointed and have qualified as Trustees in accordance with the
provisions hereof and are then in office, and reference in this Declaration to a
Trustee or Trustees shall refer to such individual or individuals in their
capacity as Trustees hereunder.
ARTICLE II
TRUSTEES
2.1. NUMBER AND QUALIFICATION. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three. Any vacancy created by an increase in the number of
Trustees may be filled by the appointment of an individual having the
qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing 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 this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
3
<PAGE>
2.2. TERM AND ELECTION. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the event
of resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. RESIGNATION, REMOVAL AND RETIREMENT. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
Chairman, if any, the President or the Secretary of the Trust and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any Trustee may be removed with or without cause
by the affirmative vote of Holders of two-thirds of the Interests or (provided
the aggregate number of Trustees, after such removal and after giving effect to
any appointment made to fill the vacancy created by such removal, shall not be
less than the number required by Section 2.1 hereof) by the action of two-thirds
of the remaining Trustees. Any Trustee who has attained a mandatory retirement
age, if any, established pursuant to any written policy adopted from time to
time by a majority of the Trustees shall, automatically and without action by
such Trustee or the remaining Trustees, be deemed to have retired in accordance
with the terms of such policy, effective as of the date determined in accordance
with such policy. Any Trustee who has become incapacitated by illness or injury
as determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee 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 such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
2.4. VACANCIES. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
retirement or removal of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
The Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only when or after the expected vacancy occurs. Subject
to the
4
<PAGE>
foregoing sentence, as soon as any Trustee has accepted such appointment in
writing, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. The power of appointment is subject to Section
16(a) of the 1940 Act.
2.5. MEETINGS. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, or any two Trustees or any
officer authorized to call such meetings by the By-Laws of the Trust. Regular
meetings of the Trustees may be held without call or notice at a time and place
fixed by the By-Laws or by resolution of the Trustees. Notice of any other
meeting shall be mailed or otherwise given not less than 24 hours before the
meeting but may be waived in writing by any Trustee either before or after such
meeting. The attendance of a Trustee at a meeting shall constitute a waiver of
notice of such meeting except in the situation in which a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting was not lawfully called or convened. The Trustees
may act with or without a meeting. A quorum for all meetings of the Trustees
shall be a majority of the Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority (or such larger percentage as may be specified
by the By-Laws) of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority (or such larger
percentage as may be specified by the By-Laws) of the members.
Any notice, waiver or written consent hereunder may be
provided and delivered to the Trust or a Trustee by facsimile or other similar
electronic mechanism.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
2.6. CHAIRMAN OF THE BOARD; OFFICERS. The Trustees may elect
or appoint, from time to time, a Chairman of the Board who shall preside at all
meetings of the Trustees and carry out such other duties as the Trustees may
designate. The Trustees may elect or appoint a President, a Secretary, a
Treasurer and such other officers, agents or independent contractors with such
5
<PAGE>
powers as the Trustees may deem to be advisable and may authorize such officers
to appoint such subordinate officers, agents or independent contractors with
such powers as the Trustees may deem to be advisable. The Chairman, if any,
shall be and each officer may, but need not, be a Trustee.
2.7. BY-LAWS. The Trustees may adopt and, from time to time,
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
POWERS OF TRUSTEES
3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust and each
Series to the same extent as if the Trustees were the sole owners of the Trust
Property and such business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees may perform
such acts as in their sole discretion they deem proper for conducting the
business of the Trust and any Series. The enumeration of or failure to mention
any specific power herein shall not be construed as limiting such exclusive and
absolute control. The powers of the Trustees may be exercised without order of
or resort to any court.
The Trustees shall have full power and authority to do any and all acts
and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust.
3.2. INVESTMENTS. The Trustees shall have the power with
respect to the Trust and each Series to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of United States and foreign currencies and
related instruments including forward contracts, and securities, including
common and preferred stock, warrants, bonds, debentures, time notes and all
other evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, futures contracts, and other securities, including,
without limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or by the United
States Government, any foreign government, or any agency, instrumentality or
political subdivision of the United States Government or any foreign government,
or any international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or any state or under any foreign laws; and to exercise any and all
rights, powers and privileges
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of ownership or interest in respect of any and all such investments of any kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more Persons
to exercise any of such rights, powers and privileges in respect of any of such
investments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional instruments in which the Trustees may determine to
invest;
(c) definitively interpret the investment objectives,
policies and limitations of any Series.
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.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have the
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 or any Series, or in
the name or nominee name of any other Person on behalf of the Trust or any
Series, on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased 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.
3.4. SALE AND INCREASES OF INTERESTS. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest in a Series, or increase such
Interest, for such type of consideration, including cash or property, at such
time or times (including, without limitation, each business day), 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. Individuals, S corporations,
partnerships and grantor trusts that are beneficially owned by any individual, S
corporation or partnership may not purchase Interests. The Trustees, in their
discretion, may refuse to sell an Interest in a Series to any person without any
cause or reason therefor. A Holder which has redeemed its Interest in a Series
may not be permitted to purchase an Interest in such Series until the later of
60 calendar days after the date of such Redemption or the first day of the
Fiscal Year next succeeding the Fiscal Year during which such Redemption
occurred.
3.5 DECREASES AND REDEMPTIONS OF INTERESTS. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest in a Series, or
decrease such Interest, for either cash or property, at such time or times
(including,
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without limitation, each business day), and on such terms as the Trustees may
deem best.
3.6. BORROW MONEY. The Trustees shall have power on behalf of
any Series to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets belonging to
such Series, as appropriate, including the lending of portfolio securities, and
to endorse, guarantee, or undertake the performance of any obligation, contract
or engagement of any other Person.
3.7. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust and any Series, to delegate from
time to time to such of their number or to officers, employees, agents or
independent contractors of the Trust or any Series the doing of such things and
the execution of such instruments in either the name of the Trust or any Series
or the names of the Trustees or otherwise as the Trustees may deem expedient.
3.8. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property on behalf of any Series; to prosecute, defend,
compromise or abandon any claims relating to the Trust or the Trust Property on
behalf of any Series; to foreclose any security interest securing any
obligation, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.9. EXPENSES. The Trustees shall have power to incur and pay
any expenses from the Trust Property 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 Trust Property to themselves as
Trustees. Permitted expenses of the Trust include, but are not limited to,
interest charges, taxes, brokerage fees and commissions; expenses of sales,
increases, decreases or redemptions of Interests; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, placement agents,
custodians transfer agents and fund accountants; fees of pricing, interest,
dividend, credit and other reporting services; costs of membership in trade
associations; telecommunications expenses; costs of forming the Trust and its
Series and maintaining its and their existence; costs of preparing and printing
the registration statements and Holder reports of the Trust and each Series and
delivering them to Holders; expenses of meetings of Holders; costs of
maintaining books and accounts; costs of reproduction, stationery and supplies;
fees and expenses of the Trustees; compensation of the Trust's officers and
employees and costs of other personnel performing services for the Trust or any
Series; costs of Trustee meetings; Commission registration fees and related
expenses; state or foreign securities laws registration fees and related
expenses; and for such non-recurring items as may arise, including litigation to
which the Trust or a Series (or a Trustee or officer of the Trust acting as
such) is a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of an expense allocable to more than
one Series, on the assets of each such Series, prior to any rights or interests
of the Holders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities.
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The Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal and brokerage services, as they in good faith may deem
reasonable, and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust or any Series.
3.10. MISCELLANEOUS POWERS. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem appropriate
for the transaction of the business of the Trust or any Series and terminate
such employees or contractual relationships as they consider appropriate; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property insurance policies
insuring the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents 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 the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement, incentive
and benefit plans for the Trustees, officers, employees or agents of the Trust
or any Series; (e) prosecute, defend and settle lawsuits in the name of the
Trust or any Series and pay settlements and judgments out of the Trust Property;
(f) to the extent permitted by law, indemnify any Person with whom the Trust has
dealings, including the Investment Adviser, Administrator, placement agent,
Holders, Trustees, officers, employees, agents or independent contractors of the
Trust, 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 and the method by which its accounts
shall be kept; and (i) adopt a seal for the Trust or any Series, but the absence
of such a seal shall not impair the validity of any instrument executed on
behalf of the Trust or such Series.
3.11. FURTHER POWERS. The Trustees shall have power to conduct
the business of the Trust or any Series and carry on its operations in any and
all of its branches and maintain offices, whether within or without the State of
New York, 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, appropriate or desirable in
order to promote the interests of the Trust or any Series although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust or any Series which is 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 Trustees
shall not be required to obtain any court order in order to deal with Trust
Property.
ARTICLE IV
Investment Advisory, Administration
AND PLACEMENT AGENT ARRANGEMENTS; CUSTODIAN
4.1. INVESTMENT ADVISORY AND OTHER ARRANGEMENTS. The Trustees
may in their discretion, from time to time, enter into investment advisory
contracts,
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administration contracts, placement agent agreements or other service agreements
whereby the other party to such contract or agreement shall undertake to furnish
with respect to one or more particular Series such investment advisory,
administration, placement agent and/or other services as the Trustees shall,
from time to time, consider appropriate or desirable and all upon such terms and
conditions as the Trustees may in their sole discretion determine. The other
party to any such investment advisory contract or administration contract is
referred to as an "Investment Adviser" or "Administrator," respectively.
Notwithstanding any provision of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to employ one or more subadvisers and to
effect purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (all without any further action by the Trustees).
4.2. PARTIES TO CONTRACT. Any contract of the character
described in Section 4.1 or Section 4.3 hereof or in the By-Laws of the Trust
may be entered into with any corporation, firm, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder or member of such other party to the contract,
and no such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any individual holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust or any Series under or by reason of any such contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract when entered into was reasonable and fair and not inconsistent
with the provisions of this Article IV or the By-Laws. The same Person may be
the other party to one or more contracts entered into pursuant to Section 4.1 or
Section 4.3 hereof or the By-Laws, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or all of
the contracts mentioned in this Section 4.2 or in the By-Laws.
4.3 CUSTODIAN. The Trustees shall at all times place and
maintain the securities and similar investments of the Trust on behalf of each
Series in custody meeting the requirements of Section 17(f) of the 1940 Act and
the rules thereunder. The Trustees, on behalf of the Trust or any Series, may
enter into an agreement with a custodian on terms and conditions acceptable to
the Trustees, providing for the custodian, among other things, (a) to hold the
securities owned by the Trust on behalf of any Series and deliver the same upon
written order or oral order confirmed in writing, (b) to receive and receipt for
any moneys due to the Trust on behalf of any Series and deposit the same in its
own banking department or elsewhere, (c) to disburse such funds upon orders or
vouchers, and (d) to employ one or more subcustodians.
4.4. 1940 ACT GOVERNANCE. Any contract referred to in Section
4.1 hereof shall be consistent with and subject to the applicable requirements
of Section 15 of the 1940 Act and the rules and orders thereunder with respect
to its continuance in effect, its termination, and the method of authorization
and approval of such contract or renewal. No amendment to a contract referred to
in Section 4.1 hereof shall be effective unless assented to in a manner
consistent with the requirements of Section 15 of the 1940 Act, and the rules
and orders thereunder.
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ARTICLE V
Liability of Holders; Limitations of
LIABILITY OF TRUSTEES, OFFICERS, ETC.
5.1. LIABILITY OF HOLDERS; INDEMNIFICATION. Each Holder of an
Interest in a Series shall be jointly and severally liable with every other
Holder of an Interest in that Series (with rights of contribution INTER SE in
proportion to their respective Interests in the Series) for the liabilities and
obligations of that Series (and of no other Series) in the event that the Trust
fails to satisfy such liabilities and obligations from the assets of that
Series; provided, however, that, to the extent assets of that Series are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of being or having been a Holder of an Interest in that Series to the
extent that such claim or liability imposes on the Holder an obligation or
liability which, when compared to the obligations and liabilities imposed on
other Holders of Interests in that Series, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all legal
and other expenses reasonably incurred by such Holder in connection with any
such claim or liability. The rights accruing to a Holder under this Section 5.1
shall not exclude any other right to which such Holder may be lawfully entitled,
nor shall anything contained herein restrict the right of the Trust to indemnify
or reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described above,
it is intended that each Holder of an Interest in a Series shall remain jointly
and severally liable to the creditors of that Series as a legal matter. The
liabilities of a particular Series and the right to indemnification granted
hereunder to Holders of Interests in such Series shall not be enforceable
against any other Series or Holders of Interests in any other Series.
5.2. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, INDEPENDENT CONTRACTORS TO THIRD PARTIES. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust or any Series shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in connection
with Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee, agent or independent contractor (except in the case
of an agent or independent contractor to the extent expressly provided by
written contract) of the Trust arising in connection with the affairs of the
Trust.
5.3. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS OR
EMPLOYEES TO TRUST, HOLDERS, ETC. No Trustee, officer or employee of the Trust
shall be liable to the Trust or the Holders 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 such Person's own bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. MANDATORY INDEMNIFICATION. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each Trustee,
officer or employee of the Trust (including any Person who serves at the Trust's
request
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as a director, officer or trustee of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) against all liabilities
and expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably incurred by
such Person in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person's being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to any
matter as to which such Person shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties, such liabilities and expenses being liabilities only of the
Series out of which such claim for indemnification arises; provided, however,
that as to any matter disposed of by a compromise payment by such Person,
pursuant to a consent decree or otherwise, no indemnification either for such
payment or for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts (as
opposed to a full trial- type inquiry), by written opinion from independent
legal counsel approved by the Trustees; or (iii) by a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the matter, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry). The rights accruing to any Person under these provisions shall not
exclude any other right to which such Person may be lawfully entitled; provided
that no Person may satisfy any right of indemnity or reimbursement granted in
this Section 5.4 or in Section 5.2 hereof or to which such Person may be
otherwise entitled except out of the Trust Property. The rights of
indemnification provided herein may be insured against by policies maintained by
the Trust. The Trust may make advance payments in connection with
indemnification under this Section 5.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification, and provided further that either (i) such Person shall have
provided appropriate security for such undertaking, or (ii) the Trust is insured
against losses arising out of any such advance payments, or (iii) either a
majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Person will not be disqualified from indemnification under this Section
5.4.
5.5. NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the performance of
any of such Trustee's duties hereunder.
5.6. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent contractor of the Trust or any Series shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by such Trustee, officer, employee, agent or independent contractor
or be liable for the application of money or property paid, loaned or delivered
to or on the order of such Trustee, officer, employee, agent or independent
contractor. Every
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obligation, contract, instrument, certificate or other interest or undertaking
of the Trust or any Series, and every other act or thing whatsoever executed in
connection with the Trust or any Series shall be conclusively taken to have been
executed or done by the executors thereof only in their capacity as Trustees,
officers, employees, agents or independent contractors of the Trust or any
Series. Every written obligation, contract, instrument, certificate or other
interest or undertaking of the Trust or any Series made or sold by any Trustee,
officer or employee of the Trust or any Series, in such capacity, shall contain
an appropriate recital to the effect that the Trustee, officer or employee of
the Trust or any Series shall not personally be bound by or liable thereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made therein
to the Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any Trustee, officer or employee of the Trust or any
Series. Subject to the provisions of the 1940 Act, the Trust may maintain
insurance for the protection of the Trust Property, the Holders, and the
Trustees, officers or employees of the Trust and any Series 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.
5.7. RELIANCE ON EXPERTS, ETC. Each Trustee, officer or
employee of the Trust and any Series shall, in the performance of such Person's
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 any Series (whether or not the Trust or
any Series would have the power to indemnify such Persons against such
liability), upon an opinion of counsel, or upon reports made to the Trust or any
Series by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants selected
with reasonable care by the Trustees, officers or employees of the Trust or any
Series, regardless of whether such counsel or expert may also be a Trustee.
5.8. NO REPEAL OR MODIFICATION. Any repeal or modification of
this Article V by the Holders, or adoption or modification of any other
provision of this Declaration or the By-Laws inconsistent with this Article V,
shall be prospective only, to the extent that such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
any Person or indemnification available to any indemnified Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
ARTICLE VI
INTERESTS
6.1. INTERESTS. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. Interests may be sold only to
Institutional Investors, as may be approved by the Trustees, for cash or other
consideration acceptable to the Trustees, subject to the requirements of the
1940 Act. The Interests shall be personal property giving only the rights in
this Declaration specifically set forth. The value of an Interest shall be equal
to the Book Capital Account balance of the Holder of the Interest.
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The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the Interests
in which shall be separate and distinct from the Interests in any other Series.
The Series shall include, without limitation, those Series specifically
established and designated pursuant to Section 6.2 hereof, and such other Series
as the Trustees may deem necessary or desirable. The Trustees shall have
exclusive power without the requirement of Holder approval to establish and
designate such separate and distinct Series, and, subject to the provisions of
this Declaration and the 1940 Act, to fix and determine the rights of Holders of
Interests in such Series, including with respect to the price, terms and manner
of purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have separate
voting rights or no voting rights.
6.2. ESTABLISHMENT AND DESIGNATION OF SERIES. The
establishment and designation of any Series shall be effective upon the
execution by the Secretary or an Assistant Secretary of the Trust, pursuant to
authorization by a majority of the Trustees, of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Interests in such Series, or as otherwise provided in such instrument. At any
time that there are no Interests outstanding of any particular Series previously
established and designated, the Trustees may by resolution adopted by a majority
of their number, and evidenced by an instrument executed by the Secretary or an
Assistant Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above
to establish and designate further Series, the Trustees hereby establish and
designate the Series set forth on Schedule A hereto. The Interests in each of
these Series and any Interests in any further Series that may from time to time
be established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Series at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) ASSETS BELONGING TO SERIES. All consideration
received by the Trust for the issue or sale of Interests in a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held by the Trustees in a separate trust for the benefit
of the Holders of Interests in that Series and shall irrevocably belong to that
Series for all purposes, and shall be so recorded upon the books of account of
the Trust. Such consideration, assets, 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, are herein referred to as "assets
belonging to" that Series. No Series shall have any right to or interest in the
assets belonging to any other Series, and no Holder shall have any right or
interest with respect to the assets belonging to any Series in which it does not
hold an Interest.
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(b) LIABILITIES BELONGING TO SERIES. The assets
belonging to each particular Series shall be charged with the liabilities in
respect of that Series and all expenses, costs, charges and reserves
attributable to that Series. The liabilities, expenses, costs, charges and
reserves so charged to a Series are herein referred to as "liabilities belonging
to" that Series. No Series shall be liable for or charged with the liabilities
belonging to any other Series, and no Holder shall be subject to any liabilities
belonging to any Series in which it does not hold an Interest.
(c) VOTING. On each matter submitted to a vote of the
Holders, each Holder shall be entitled to a vote proportionate to its Interest
as recorded on the books of the Trust. Each Series shall vote as a separate
class except as to voting for Trustees, as otherwise required by the 1940 Act,
or if determined by the Trustees to be a matter which affects all Series. As to
any matter which does not affect the interest of all Series, only the Holders in
the one or more affected Series shall be entitled to vote. On each matter
submitted to a vote of the Holders, a Holder may apportion its vote with respect
to a proposal in the same proportion as its own shareholders voted with respect
to that proposal.
6.3. NON-TRANSFERABILITY. A Holder may not transfer its
Interest.
6.4. REGISTER OF INTERESTS. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder in each Series. Such register
shall be conclusive as to the identity of the Holders. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given to it
as herein provided, until it has given its address to such officer or agent of
the Trust as is keeping such register for entry thereon.
ARTICLE VII
INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted by the
Trustees, each Holder may vary its Interest in any Series at any time by
increasing (through a capital contribution) or decreasing (through a capital
withdrawal) or by a Redemption of its Interest. An increase in the Interest of a
Holder in a Series shall be reflected as an increase in the Book Capital Account
balance of that Holder in that Series and a decrease in the Interest of a Holder
in a Series or the Redemption of the Interest of that Holder shall be reflected
as a decrease in the Book Capital Account balance of that Holder in that Series.
The Trust shall, upon appropriate and adequate notice from any Holder, increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the Trustees;
provided that (a) the amount received by the Holder upon any such decrease or
Redemption shall not exceed the decrease in the Holder's Book Capital Account
balance effected by such decrease or Redemption of its Interest, and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting any such decrease or Redemption, at such rates as the
Trustees may establish, and may, at any time and from time to time, suspend such
right of decrease or Redemption. The procedures for effecting decreases or
Redemptions shall be as determined by the Trustees from time to time.
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ARTICLE VIII
Determination of Book Capital Account
BALANCES AND DISTRIBUTIONS
8.1. BOOK CAPITAL ACCOUNT BALANCES. The Book Capital Account
balance of Holders with respect to a particular Series shall be determined on
such days and at such time or times as the Trustees may determine. The Trustees
shall adopt resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations pursuant
to such resolutions may be delegated by the Trustees to the Investment Adviser
or Administrator, custodian, or such other Person as the Trustees may determine.
Upon the Redemption of an Interest, the Holder of that Interest shall be
entitled to receive the balance of its Book Capital Account. A Holder may not
transfer its Book Capital Account balance.
8.2. ALLOCATIONS AND DISTRIBUTIONS TO HOLDERS. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall make
with respect to each Series (i) the allocation of unrealized gains and losses,
taxable income and tax loss, and profit and loss, or any item or items thereof,
to each Holder, (ii) the payment of distributions, if any, to Holders, and (iii)
upon liquidation, the final distribution of items of taxable income and expense.
Such procedures shall be set forth in writing and be furnished to the Trust's
accountants. The Trustees may amend the procedures adopted pursuant to this
Section 8.2 from time to time. The Trustees may retain from the net profits of
each Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
8.3. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income and net assets of the Trust and of each Series, the allocation of income
of the Trust and of each Series, the Book Capital Account balance of each
Holder, or the payment of distributions to the Holders as they may deem
necessary or desirable to enable the Trust or a Series to comply with any
provision of the 1940 Act or any order of exemption issued by the Commission or
with the Code.
ARTICLE IX
HOLDERS
9.1. RIGHTS OF HOLDERS. The ownership of the Trust Property
and the right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
power or right to call for any partition or division of any Trust Property.
The Trust shall be entitled to treat a Holder of record as the holder
in fact and shall not be bound to recognize any equitable or other claim of
interest in such Holder's Interest on the part of any other entity except as may
be otherwise expressly provided by law.
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In addition, the Holders shall have power to vote only with respect to
(a) the election of Trustees as provided in Article II, Section 2.4; (b) the
removal of Trustees as provided in Article II, Section 2.3; (c) any investment
advisory contract as provided in Article IV, Section 4.1; (d) any dissolution of
a Series as provided in Article X, Section 10.2; (e) the amendment of this
Declaration to the extent and as provided in Article X, Section 10.4; (f) any
merger, consolidation or sale of assets as provided in Article X, Section 10.5;
and (g) such additional matters relating to the Trust as may be required or
authorized by law, by this Declaration or the By-Laws or any registration
statement of the Trust filed with the Commission, or as the Trustees may
consider desirable.
9.2. MEETINGS OF HOLDERS. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in one or more Series (if the meeting relates solely to such Series),
or not less than 10% of the Interests in the Trust (if the meeting relates to
the Trust and not solely to one or more particular Series), such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or without the State of New York and within or
without the United States of America on such day and at such time as the
Trustees shall designate. Holders of at least one-third of the Interests in one
or more Series (if the meeting relates solely to such one or more Series) or
Holders of at least one-third of the Interests in the Trust (if the meeting
relates to the Trust and not solely to one or more particular Series), present
in person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other applicable
law, this Declaration or the By-Laws. If a quorum is present at a meeting, an
affirmative vote of the Holders present, in person or by proxy, holding more
than 50% of the total Interests of the Holders present in a Series or the Trust,
as applicable, either in person or by proxy, at such meeting constitutes the
action of the Holders in such Series or the Trust, as applicable, unless a
greater number of affirmative votes is required by the 1940 Act, other
applicable law, this Declaration or the By-Laws, and except that a plurality of
the total Interests of the Holders present shall elect a Trustee. All or any one
of more Holders may participate in a meeting of Holders by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and participation in a meeting
by means of such communications equipment shall constitute presence in person at
such meeting.
9.3. NOTICE OF MEETINGS. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder of the Series or the Trust, as the case may be,
at its registered address, mailed at least 10 days and not more than 60 days
before the meeting. Notice of any meeting may be waived in writing by any Holder
either before or after such meeting. The attendance of a Holder at a meeting
shall constitute a waiver of notice of such meeting except in the situation in
which a Holder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting was not lawfully
called or convened. At any meeting, any business properly before the meeting may
be considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
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9.4. RECORD DATE FOR MEETINGS, DISTRIBUTIONS, ETC. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders of the Series
or the Trust, as the case may be, for such purpose.
9.5. PROXIES, ETC. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote is to be taken. A
proxy may be revoked by a Holder at any time before it has been exercised by
placing on file with the Secretary, or with such other officer or agent of the
Trust as the Secretary may direct, a later dated proxy or written revocation.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of the Trust or of one or more Trustees or of one or more officers
of the Trust. Only Holders on the record date shall be entitled to vote. Each
such Holder shall be entitled to a vote proportionate to its Interest in the
Series or the Trust, as the case may be. When an Interest is held jointly by
several Persons, any one of them may vote at any meeting in person or by proxy
in respect of such Interest, but if more than one of them is present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Interest. A proxy purporting to be executed by or on behalf of a Holder,
including proxies received via telecopy, shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving invalidity shall rest on
the challenger.
9.6. REPORTS. As to each Series, the Trustees shall cause to
be prepared and furnished to each Holder thereof, at least annually as of the
end of each Fiscal Year, a report of operations containing a balance sheet and a
statement of income of such Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition, with
respect to each Series furnish to each Holder of such Series at least
semi-annually interim reports of operations containing an unaudited balance
sheet as of the end of such period and an unaudited statement of income for the
period from the beginning of the then-current Fiscal Year to the end of such
period.
9.7. HOLDER ACTION BY WRITTEN CONSENT. Any action which may be
taken on behalf of the Trust or any Series by Holders may be taken without a
meeting if Holders holding more than 50% of all Interests entitled to vote (or
such larger proportion thereof as shall be required by any express provision of
this Declaration or of applicable law) consent to the action in writing and the
written consents are filed with the records of the meetings of Holders. Such
consents shall be treated for all purposes as a vote taken at a meeting of
Holders. Each such written consent shall be executed by or on behalf of the
Holder delivering such consent and shall bear the date of such execution. No
such written consent shall be effective to take the action referred to therein
unless, within one year of the earliest dated consent, written consents executed
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by a sufficient number of Holders to take such action are filed with the records
of the meetings of Holders.
9.8. NOTICES. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly served or
given if mailed, postage prepaid, addressed to a Holder at its last known
address as recorded on the register of the Trust or if delivered to a Holder by
courier or by facsimile or other similar electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
AMENDMENT; MERGERS; ETC.
10.1. DURATION. Subject to possible dissolution or termination
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
<TABLE>
<CAPTION>
Date of
NAME ADDRESS BIRTH
<S> <C> <C>
Emily Shea O'Dette 256 Oldham Street
Pembroke, MA 02359 06/01/94
Gray Tilton Gibson c/o The Fay School
48 Main Street
Southboro, MA 01772-9106 5/27/94
Abigail Foote Coolidge 483 Pleasant Street, No. 9 05/04/94
Belmont, MA 02178
Michelle Muriel Rumery 18 Rio Vista Street 07/11/93
North Billerica, MA 01862
Nicole Catherine Rumery 18 Rio Vista Street 12/21/91
North Billerica, MA 01862
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Merrick, NY 11566
Amanda Jehan Sher Coolidge 483 Pleasant Street, No. 9 08/16/89
Belmont, MA 02178
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
Adriana L. Saldana 58 Newell Road 03/22/88
Newton, MA 02166
</TABLE>
10.2. DISSOLUTION. Any Series shall be dissolved (i) by the
affirmative vote of the Holders of not less than two-thirds of the Interests in
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the Series at any meeting of the Holders or by an instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to in writing by
the Holders of not less than two-thirds of such Interests, (ii) by the Trustees
by written notice of dissolution to the Holders of the Interests in the Series,
or (iii) upon the bankruptcy or withdrawal of a Holder of an Interest in the
Series, the Series shall be dissolved effective 120 days after the event.
However, the remaining Holders of Interests in such Series may, by majority of
vote, agree to continue the business of the Series even if there has been such a
dissolution. The Trust may be dissolved by action of the Trustees upon the
dissolution of the last remaining Series.
10.3. TERMINATION.
(a) Upon an event of dissolution of the Trust or a
Series, unless the Trust or Series is continued in accordance with the proviso
in Section 10.2 above, the Trust or Series, as applicable, shall be terminated
in accordance with the following provisions:
(i) the Trust or Series, as applicable,
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 Series, as applicable, and all of
the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or Series have been
wound up, including the power to fulfill or discharge the
contracts of the Trust or Series, collect the assets of the
Trust of Series, sell, convey, assign, exchange or otherwise
dispose of all or any part of the Trust Property affected 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 the
liabilities of the Trust or Series, and do all other acts
appropriate to liquidate the business of the Trust or Series;
provided that any sale, conveyance, assignment, exchange or
other disposition of all or substantially all the Trust
Property or substantially all of the assets belonging to a
particular Series, other than for cash, shall require approval
of the principal terms of the transaction and the nature and
amount of the consideration by the vote of Holders holding
more than 50% of the total Interests in the Trust or Series,
as applicable; and
(iii) after paying or adequately providing
for the payment of all liabilities of the Trust or of the
Series being terminated, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary
for their protection, the Trustees shall distribute the
remaining Trust Property of the Trust or Series, as
applicable, in cash or in kind or partly each, among the
Holders according to their respective rights as set forth in
the procedures established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust or Series and
distribution to the Holders as herein provided, a majority of the Trustees shall
execute and file with the records of the Trust an instrument in writing setting
forth the fact of such termination and distribution. Upon termination of the
Trust, the
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Trustees shall thereupon be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Holders shall thereupon cease.
10.4. AMENDMENT PROCEDURE.
(a) The Trustees may, without any vote of Holders,
amend or otherwise supplement this Declaration by an instrument in writing
executed by a majority of the Trustees, provided that Holders shall have the
right to vote on any amendment (i) which would affect the voting rights of
Holders granted in Article IX, Section 9.1, (ii) to this Section 10.4, (iii)
required to be approved by Holders by law or by the Trust's registration
statement filed with the Commission, or (iv) submitted to them by the Trustees.
Any amendment submitted to Holders which the Trustees determine would affect the
Holders of certain but not all Series shall be authorized by vote of the Holders
of such Series affected and no vote shall be required of Holders of a Series not
affected. Any amendment applicable to the Trust as a whole, unless otherwise
required by law or by this Declaration or the By-Laws, shall be authorized by
vote of the Holders of the Trust. Notwithstanding anything else herein, any
amendment to Article V which would have the effect of reducing the
indemnification and other rights provided thereby and any repeal or amendment of
this sentence shall each require the affirmative vote of the Holders of
two-thirds of the Interests entitled to vote thereon.
(b) No amendment may be made under Section 10.4(i) of
this Declaration which would change any rights with respect to any Interest by
reducing the amount payable thereon upon liquidation of the Trust or any Series
or by diminishing or eliminating any voting rights pertaining thereto, except
with the vote or consent of Holders of two-thirds of all Interests which would
be so affected by such amendment.
(c) A certification in recordable form executed by a
majority of the Trustees setting forth an amendment and reciting that it was
duly adopted by the Holders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, in recordable form, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when filed with the
records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or
any Series may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property, or assets belonging to such Series, as applicable,
including good will, upon such terms and conditions and for such consideration
when and as authorized at any meeting of Holders called for such purpose by
Majority Interests Vote of Interests in the Series affected by such action, or
by an instrument in writing without a meeting, consented to by Holders of not
less than a majority of the Interests in the Series affected by such action, and
any such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the law of the State of
New York,
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provided however that no such vote shall be required where by reorganization,
purchase of assets or otherwise, the Trust or any affected Series is the
surviving entity.
10.6. INCORPORATION. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to carry on
any business in which the Trust directly or indirectly has any interest, and to
sell, convey and transfer the Trust Property to any such corporation, trust,
partnership, association or other organization in exchange for the equity
interests thereof or otherwise, and to lend money to, subscribe for the equity
interests of, and enter into any contract with any such corporation, trust,
partnership, association or other organization, or any corporation, trust,
partnership, association or other organization in which the Trust holds or is
about to acquire equity interests. 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. Nothing contained herein shall be construed as
requiring approval of the Holders 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 one or more of such organizations or entities.
ARTICLE XI
MISCELLANEOUS
11.1. CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF
PROCESS. If required by New York law, the Trust shall file, with the Department
of State of the State of New York, a certificate, in the name of the Trust and
executed by an officer of the Trust, designating the Secretary of State of the
State of New York as an agent upon whom process in any action or proceeding
against the Trust or any Series may be served.
11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed in accordance with the
law of the State of New York and reference shall be specifically made to the
trust law of the State of New York as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any one such original
counterpart.
11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders, (b)
the due
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authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders 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 officer 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.
11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, or with other applicable law
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 provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Declaration of Trust of UBS Investor Portfolios Trust as of the day and year
first above written.
/S/ THOMAS M. LENZ
Thomas M. Lenz
As Trustee and not individually
/S/ MOLLY S. MUGLER
Molly S. Mugler
As Trustee and not individually
/S/ ANDRES E. SALDANA
Andres E. Saldana
As Trustee and not individually
UBS0003
24
<PAGE>
SCHEDULE A
UBS Investor Portfolios Trust
INITIAL SERIES
UBS Bond Portfolio
UBS U.S. Equity Portfolio
UBS International Equity Portfolio
UBS0003
UBS INVESTOR PORTFOLIOS TRUST
BY-LAWS
As Adopted February 9, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- MEETINGS OF HOLDERS . . . . . . . . . . . . . 1
-------------------
Section 1.1 Fixing Record Dates . . . . . . . 1
Section 1.2 Records at Holder Meetings . . . . . 1
Section 1.3 Inspectors of Election . . . . . . 1
Section 1.4 Proxies; Voting . . . . . . . . . 2
Section 1.5 Series Holders Meetings . . . . . . 2
ARTICLE II -- MEETINGS OF TRUSTEES . . . . . . . . . . . . 2
--------------------
Section 2.1 Annual and Regular Meetings . . . . . 2
Section 2.2 Notice . . . . . . . . . . . . 2
ARTICLE III -- OFFICERS . . . . . . . . . . . . . . . . 2
--------
Section 3.1 Officers of the Portfolio Trust . . . 2
Section 3.2 Election and Tenure . . . . . . . 3
Section 3.3 Removal of Officers . . . . . . . 3
Section 3.4 Bonds and Surety . . . . . . . . 3
Section 3.5 Chairman, President and Vice President . 3
Section 3.6 Secretary . . . . . . . . . . . 4
Section 3.7 Treasurer . . . . . . . . . . . 4
Section 3.8 Other Officers and Duties . . . . . 4
ARTICLE IV -- MISCELLANEOUS . . . . . . . . . . . . . . . 5
-------------
Section 4.1 Depositories . . . . . . . . . . 5
Section 4.2 Signatures . . . . . . . . . . 5
Section 4.3 Seal . . . . . . . . . . . . 5
Section 4.4 Indemnification . . . . . . . . . 5
Section 4.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . . 5
ARTICLE V -- REGULATIONS; AMENDMENT OF BY-LAWS . . . . . . . . 6
---------------------------------
Section 5.1 Regulations . . . . . . . . . . 6
Section 5.2 Amendment and Repeal of By-Laws . . . 6
i
<PAGE>
BY-LAWS
OF
UBS INVESTOR PORTFOLIOS TRUST
These By-Laws are made and adopted pursuant to Section 2.7 of
the Declaration of Trust establishing UBS Investor Portfolios Trust (the
"Portfolios Trust"), dated as of February 9, 1996, as from time to time amended
(the "Declaration"). All words and terms capitalized in these By-Laws shall have
the meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE I
MEETINGS OF HOLDERS
Section 1.1. FIXING RECORD DATES. If the Trustees do not,
prior to any meeting of the Holders, fix a record date, then the date of mailing
notice of the meeting shall be the record date.
Section 1.2. RECORDS AT HOLDER MEETINGS. At each meeting of
the Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Portfolios Trust and a list of the Holders of the
Portfolios Trust, certified to be true and correct by the Secretary or other
proper agent of the Portfolios Trust, as of the record date of the meeting. Such
list of Holders shall contain the name of each Holder in alphabetical order and
the address and Interest owned by such Holder on such record date.
Section 1.3. INSPECTORS OF ELECTION. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman, if any, of any meeting of the Holders may, and on the
request of any Holder or his proxy shall, appoint Inspectors of Election. The
number of Inspectors of Election shall be either one or three. If appointed at
the meeting on the request of one or more Holders or proxies, a Majority
Interests Vote shall determine whether one or three Inspectors of Election are
to be appointed, but failure to allow such determination by the Holders shall
not affect the validity of the appointment of Inspectors of Election. In case
any individual appointed as an Inspector of Election fails to appear or fails or
refuses to so act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the individual
acting as chairman of the meeting. The Inspectors of Election shall determine
the Interest owned by each Holder, the Interests represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies, shall
receive votes, ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall count
and tabulate all votes or consents, shall determine the results, and shall do
such other acts as may be proper to conduct the election or vote with fairness
to all Holders. If there are three Inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
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certificate of all. On request of the chairman, if any, of the meeting, or of
any Holder or his proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them.
Section 1.4. PROXIES; VOTING. No proxy shall be valid after
one year from the date of its execution, unless a longer period is expressly
stated in such proxy.
Section 1.5 SERIES HOLDERS MEETINGS. Whenever a matter is
required to be voted by Holders of the Portfolios Trust in the aggregate under
Section 9.1 and 9.2 of the Declaration, the Portfolios Trust may either hold a
meeting of Holders of all series to vote on such matter, or hold separate
meetings of Holders of each of the individual series to vote on such matter,
provided that (i) such separate meetings shall be held within one year of each
other, (ii) a quorum of the individual series entitled to vote in person or by
proxy shall be present at each such separate meeting, and (iii) a quorum shall
be present in the aggregate at such separate meetings, and the votes of Holders
at all such separate meetings shall be aggregated in order to determine if
sufficient votes have been cast for such matter to be voted.
When separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by Holders of the
Portfolios Trust in the aggregate, the record date of each such separate meeting
shall be determined in the manner described above in Section 1.1.
ARTICLE II
MEETINGS OF TRUSTEES
Section 2.1. ANNUAL AND REGULAR MEETINGS. The Trustees shall
hold an annual meeting for the election of officers and the transaction of other
business which may come before such meeting. The Board of Trustees shall elect a
Chairman from among the Trustees and such Chairman shall preside at all meetings
of the Holders and of the Trustees.
Section 2.2. NOTICE. Notice of a meeting shall be given by
mail, by telegram (which term shall include a cablegram), by telecopier or
delivered personally (which term shall include by telephone). Neither the
business to be transacted at, nor the purpose of, any meeting of the Trustees
need be stated in the notice or waiver of notice of such meeting, and no notice
need be given of action proposed to be taken by written consent.
ARTICLE III
OFFICERS
Section 3.1. OFFICERS OF THE PORTFOLIOS TRUST. The officers of
the Portfolios Trust shall consist of a President, a Secretary, a Treasurer and
such other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person. The Trustees may designate a Vice President as an Executive Vice
2
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President and may designate the order in which the other Vice Presidents may
act. No officer of the Portfolios Trust, including the President, need be a
Trustee.
Section 3.2. ELECTION AND TENURE. At the initial organization
meeting and thereafter at each annual meeting of the Trustees, the Trustees
shall elect the President, the Secretary, the Treasurer and such other officers
as the Trustees shall deem necessary or appropriate in order to carry out the
business of the Portfolios Trust. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors have been duly elected
and qualified. The Trustees may fill any vacancy in office or add any additional
officer at any time.
Section 3.3. REMOVAL OF OFFICERS. Any officer may be removed
at any time, with or without cause, by action of a majority of the Trustees.
This provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the Chairman, if any, the President or
the Secretary, and such resignation shall take effect immediately, or at a later
date according to the terms of such notice in writing.
Section 3.4. BONDS AND SURETY. Any officer may be required by
the Trustees to be bonded for the faithful performance of his duties in such
amount and with such sureties as the Trustees may determine.
Section 3.5. PRESIDENT AND VICE PRESIDENTS. The President
shall be the chief executive officer of the Portfolios Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Portfolios Trust and of its employees and shall exercise
such general powers of management as are usually vested in the office of
President of a corporation. In the absence of the Chairman, if any, the
President shall preside at all meetings of the Holders and, in the absence of
the Chairman, the President shall preside at all meetings of the Trustees. The
President shall be, ex officio, a member of all standing committees of Trustees.
Subject to the direction of the Trustees, the President shall have the power, in
the name and on behalf of the Trust, to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and to
employ and discharge employees and agents of the Portfolios Trust. Unless
otherwise directed by the Trustees, the President shall have full authority and
power to attend, to act and to vote, on behalf of the Portfolios Trust, at any
meeting of any business organization in which the Portfolios Trust holds an
interest, or to confer such powers upon any other person, by executing any
proxies duly authorizing such person. The President shall have such further
authorities and duties as the Trustees shall from time to time determine. In the
absence or disability of the President, the Vice Presidents in order of their
rank or the Vice President designated by the Trustees, shall perform all of the
duties of the President, and when so acting shall have all the powers of and be
3
<PAGE>
subject to all of the restrictions upon the President. Subject to the direction
of the President, each Vice President shall have the power in the name and on
behalf of the Portfolios Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in addition,
shall have such other duties and powers as shall be designated from time to time
by the Trustees or by the President.
Section 3.6. SECRETARY. The Secretary shall keep the minutes
of all meetings of, and record all votes of, Holders, Trustees and the Executive
Committee, if any. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary. The Secretary shall be custodian of the seal of the Portfolios Trust,
if any, and (and any other person so authorized by the Trustees) shall affix the
seal or, if permitted, a facsimile thereof, to any instrument executed by the
Portfolios Trust which would be sealed by a New York corporation executing the
same or a similar instrument and shall attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf of the
Portfolios Trust. The Secretary shall also perform any other duties commonly
incident to such office in a New York corporation, and shall have such other
authorities and duties as the Trustees shall from time to time determine.
Section 3.7. TREASURER. Except as otherwise directed by the
Trustees, the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Portfolios Trust, and shall have and exercise under the supervision of the
Trustees and of the President all powers and duties normally incident to his
office. The Treasurer may endorse for deposit or collection all notes, checks
and other instruments payable to the Portfolios Trust or to its order and shall
deposit all funds of the Portfolios Trust as may be ordered by the Trustees or
the President. The Treasurer shall keep accurate account of the books of the
Portfolios Trust's transactions which shall be the property of the Portfolios
Trust, and which together with all other property of the Portfolios Trust in his
possession, shall be subject at all times to the inspection and control of the
Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be
the principal accounting officer of the Portfolios Trust and shall also be the
principal financial officer of the Portfolios Trust. The Treasurer shall have
such other duties and authorities as the Trustees shall from time to time
determine. Notwithstanding anything to the contrary herein contained, the
Trustees may authorize the Investment Manager and Administrator to maintain bank
accounts and deposit and disburse funds on behalf of the Portfolios Trust.
Section 3.8. OTHER OFFICERS AND DUTIES. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of the
Portfolios Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of his
office. Each officer, employee and agent of the Portfolios Trust shall have such
other duties and authorities as may be conferred upon him by the Trustees or
delegated to him by the President.
4
<PAGE>
ARTICLE IV
MISCELLANEOUS
Section 4.1. DEPOSITORIES. The funds of the Portfolios Trust
shall be deposited in such depositories as the Trustees shall designate and
shall be drawn out on checks, drafts or other orders signed by such officer,
officers, agent or agents (including the Investment Manager and Administrator)
as the Portfolios Trustees may from time to time authorize.
Section 4.2. SIGNATURES. All contracts and other instruments
shall be executed on behalf of the Portfolios Trust by such officer, officers,
agent or agents as provided in these By-Laws or as the Portfolios Trustees may
from time to time by resolution provide.
Section 4.3. SEAL. The seal of the Portfolios Trust, if any,
may be affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with the same force
and effect as if it had been imprinted and attested manually in the same manner
and with the same effect as if done by a New York corporation.
Section 4.4. INDEMNIFICATION. Insofar as the conditional
advancing of indemnification monies under Section 5.4 of the Declaration for
actions based upon the 1940 Act may be concerned, such payments will be made
only on the following conditions: (i) the advances must be limited to amounts
used, or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on behalf of,
the recipient to repay the amount of the advance which exceeds the amount to
which it is ultimately determined that he is entitled to receive from the
Portfolios Trust by reason of indemnification; and (iii) (a) such promise must
be secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayment may be obtained by the Portfolios
Trust without delay or litigation, which bond, insurance or other form of
security must be provided by the recipient of the advance, or (b) a majority of
a quorum of the Portfolios Trust's disinterested, non-party Portfolios Trustees,
or an independent legal counsel in a written opinion, shall determine, based
upon a review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
Section 4.5. DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The
Portfolios Trustees shall have the power to employ and compensate such
distribution disbursing agents, warrant agents and agents for the reinvestment
of distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Portfolios Trustees.
5
<PAGE>
ARTICLE V
REGULATIONS; AMENDMENT OF BY-LAWS
Section 5.1. REGULATIONS. The Portfolios Trustees may make
such additional rules and regulations, not inconsistent with these By-Laws, as
they may deem expedient concerning the sale and purchase of Interests of the
Portfolios Trust.
Section 5.2. AMENDMENT AND REPEAL OF BY-LAWS. In accordance
with Section 2.7 of the Declaration, the Portfolios Trustees shall have the
power to alter, amend or repeal the By-Laws or adopt new By-Laws at any time.
Action by the Portfolios Trustees with respect to the By-Laws shall be taken by
an affirmative vote of a majority of the Portfolios Trustees. The Portfolios
Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration.
The Declaration refers to the Portfolios Trustees as
Portfolios Trustees, but not as individuals or personally; and no Portfolios
Trustee, officer, employee or agent of the Portfolios Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Portfolios Trust.
6
UBS018
UBS BOND PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this __ day February of 1996, between UBS
Investor Portfolios Trust, a trust organized under the laws of the State of New
York (the "Trust"), on behalf of its series known as UBS Bond Portfolio (the
"Portfolio"), and Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Portfolio, a diversified mutual fund, desires to
retain the Adviser to render investment advisory and certain related
administrative services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as
investment adviser to the Portfolio for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the
Trust, the Adviser shall manage the investment operations of the Portfolio and
the composition of the Portfolio's holdings of securities and other investments,
including commodities and commodities contracts, cash, the purchase, retention
and disposition thereof and agreements relating thereto, in accordance with the
Portfolio's investment objective and policies as stated in the Registration
Statement (as defined in paragraph 3(d) of this Agreement) and subject to the
following understandings:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and determine from time to time the
securities, commodities, commodity contracts and other investments to
be purchased, retained, sold or lent by the Portfolio, and the
NY12527\21685.5
<PAGE>
portion of the assets to be invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in
the management of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, Bylaws and Registration Statement of the Trust
and with the instructions and directions of the Trustees of the Trust
and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations;
(d) the Adviser shall determine the securities to be
purchased, sold or lent by the Portfolio and as agent for the Portfolio
will effect portfolio transactions pursuant to its determinations
either directly with the issuer or with any broker and/or dealer in
such securities, commodities or commodities contracts; in placing
orders, the Adviser will select the brokers and/or dealers as it shall
deem appropriate in conformity with the policy with respect to
brokerage as set forth in the Registration Statement; and the Adviser
shall also determine whether or not the Portfolio shall enter into
repurchase or reverse repurchase agreements;
On occasions when the Adviser deems the purchase or
sale of a security, commodity or commodity contract to be in the best
interest of the Portfolio as well as other customers of the Adviser and
to the extent permitted by applicable law, the Adviser may, but shall
not be obligated to, aggregate the securities to be so sold or
purchased in order to obtain best execution, including lower brokerage
commissions, if applicable. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to
the Portfolio;
The Adviser may execute the Portfolio's brokerage
(but not principal) transactions through an affiliate, provided that
such transactions are effected in accordance with Rule 17e-1 under the
1940 Act and
-2-
NY12527\21685.5
<PAGE>
the Trust's procedures adopted thereunder as such may be amended from
time to time;
(e) the Adviser shall maintain records with respect
to the Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the extent
such records are necessary or appropriate to record the Adviser's
transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards
for the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the Adviser
assumes no liabilities or responsibilities for the performance of the
third-party service providers it is overseeing or any other
responsibilities under this Agreement other than to render the services
called for hereunder, on the terms and conditions provided herein; and
(g) the investment management services of the Adviser
to the Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to others.
3. The Portfolio has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Trust (such
Declaration of Trust, as presently in effect and as amended from time
to time, is herein called the "Declaration of Trust");
(b) Bylaws of the Trust (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
(c) Certified resolutions of the Trustees of the
Trust authorizing the appointment of the Adviser and approving the form
of this Agreement;
(d) The Trust's Notification of Registration on Form
N-8A and its Registration Statement on Form N-1A (No. 811-____) under
the 1940 Act (the "Registration Statement"), each as filed with the
-3-
NY12527\21685.5
<PAGE>
Commission on February ___, 1996, and all amendments thereto.
4. The Adviser agrees that all records that it maintains for
the Portfolio pursuant to paragraphs 2(e) and 2(f) of this Agreement are the
property of the Portfolio and it will promptly surrender copies of any of such
records to the Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased or sold for the
Portfolio (including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Portfolio will pay to the Adviser as full compensation
therefor a fee at an annual rate equal to .45% of the Portfolio's average daily
net assets. This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of
its affiliates in the registration statement or other material relating to the
Trust and the Portfolio in a manner not approved by the Adviser prior thereto in
writing; PROVIDED, HOWEVER, that the approval of the Adviser shall not be
required for any use of its or any affiliate's name that merely refers in
accurate and factual terms to the Adviser's appointment hereunder or that is
required by the Securities and Exchange Commission or any other appropriate
regulatory, governmental or judicial authority; PROVIDED, FURTHER, that in no
event shall such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. This Agreement shall continue in effect for a
period of more than two years from the date hereof only so
-4-
NY12527\21685.5
<PAGE>
long as such continuance is specifically approved at least annually in
conformity with the requirements of the 1940 Act; provided, however, that this
Agreement may be terminated by the Trust on behalf of the Portfolio at any time,
without the payment of any penalty, by vote of a majority of all the Trustees of
the Trust or by "vote of a majority of the outstanding voting securities" of the
Portfolio (as defined in the 1940 Act and a rule thereunder) on 60 days' written
notice to the Adviser, or by the Adviser at any time, without the payment of any
penalty, on 60 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of the Trust from time to time, have no authority
to act for or represent the Portfolio in any way or otherwise be deemed an agent
of the Portfolio.
11. Notices of any kind to be given to the Adviser by the
Trust shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 299 Park Avenue, New York, New York 10171, Attention: General
Counsel, with a copy to Richard A. Fabietti, or at such other address or to such
other individual as shall be specified by the Adviser to the Trust. Notices of
any kind to be given to the Trust by the Adviser shall be in writing and shall
be duly given if mailed or delivered to the Trust c/o Signature Financial Group
(Cayman) Limited at P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman
BWI or at such other address or to such other individual as shall be specified
by the Trust to the Adviser.
12. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually, and the Adviser
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Trust shall be personally liable upon, or shall
resort be had to their private property for the satisfaction of, obligations
given, executed or delivered on behalf of or by the Portfolio and that the Trust
shall look solely to the property of the Portfolio for the satisfaction of any
claim hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
-5-
NY12527\21685.5
<PAGE>
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the __ day of
February, 1996.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS BOND PORTFOLIO
By: __________________________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: __________________________
By: __________________________
-6-
NY12527\21685.5
UBS019
UBS U.S. EQUITY PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this __ day of February 1996, between UBS
Investor Portfolios Trust, a trust organized under the laws of the State of New
York (the "Trust"), on behalf of its series known as UBS U.S. Equity Portfolio
(the "Portfolio"), and Union Bank of Switzerland, New York Branch (the
"Adviser").
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Portfolio, a diversified mutual fund, desires to
retain the Adviser to render investment advisory and certain related
administrative services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as
investment adviser to the Portfolio for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the
Trust, the Adviser shall manage the investment operations of the Portfolio and
the composition of the Portfolio's holdings of securities and other investments,
including commodities and commodities contracts, cash, the purchase, retention
and disposition thereof and agreements relating thereto, in accordance with the
Portfolio's investment objective and policies as stated in the Registration
Statement (as defined in paragraph 3(d) of this Agreement) and subject to the
following understandings:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and determine from time to time the
securities, commodities, commodity contracts and other investments to
be purchased, retained, sold or lent by the Portfolio, and the
NY12527\22092.5
<PAGE>
portion of the assets to be invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in
the management of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, Bylaws and Registration Statement of the Trust
and with the instructions and directions of the Trustees of the Trust
and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations;
(d) the Adviser shall determine the securities to be
purchased, sold or lent by the Portfolio and as agent for the Portfolio
will effect portfolio transactions pursuant to its determinations
either directly with the issuer or with any broker and/or dealer in
such securities, commodities or commodities contracts; in placing
orders, the Adviser will select the brokers and/or dealers as it shall
deem appropriate in conformity with the policy with respect to
brokerage as set forth in the Registration Statement; and the Adviser
shall also determine whether or not the Portfolio shall enter into
repurchase or reverse repurchase agreements;
On occasions when the Adviser deems the purchase or
sale of a security, commodity or commodity contract to be in the best
interest of the Portfolio as well as other customers of the Adviser and
to the extent permitted by applicable law, the Adviser may, but shall
not be obligated to, aggregate the securities to be so sold or
purchased in order to obtain best execution, including lower brokerage
commissions, if applicable. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to
the Portfolio;
-2-
NY12527\22092.5
<PAGE>
The Adviser may execute the Portfolio's brokerage
(but not principal) transactions through an affiliate, provided that
such transactions are effected in accordance with Rule 17e-1 under the
1940 Act and the Trust's procedures adopted thereunder as such may be
amended from time to time;
(e) the Adviser shall maintain records with respect
to the Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the extent
such records are necessary or appropriate to record the Adviser's
transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards
for the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the Adviser
assumes no liabilities or responsibilities for the performance of the
third-party service providers it is overseeing or any other
responsibilities under this Agreement other than to render the services
called for hereunder, on the terms and conditions provided herein; and
(g) the investment management services of the Adviser
to the Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to others.
3. The Portfolio has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Trust (such
Declaration of Trust, as presently in effect and as amended from time
to time, is herein called the "Declaration of Trust");
(b) Bylaws of the Trust (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
(c) Certified resolutions of the Trustees of the
Trust authorizing the appointment of the Adviser and approving the form
of this Agreement;
-3-
NY12527\22092.5
<PAGE>
(d) The Trust's Notification of Registration on Form
N-8A and its Registration Statement on Form N-1A (No. 811-____) under
the 1940 Act (the "Registration Statement"), each as filed with the
Commission on February __, 1996, and all amendments thereto.
4. The Adviser agrees that all records that it maintains for
the Portfolio pursuant to paragraphs 2(e) and 2(f) of this Agreement are the
property of the Portfolio and it will promptly surrender copies of any of such
records to the Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased or sold for the
Portfolio (including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Portfolio will pay to the Adviser as full compensation
therefor a fee at an annual rate equal to .60% of the Portfolio's average daily
net assets. This fee will be computed daily and payable monthly.
7. The Trust shall not use the name of the Adviser or any of
its affiliates in the registration statement or other material relating to the
Trust and the Portfolio in a manner not approved by the Adviser prior thereto in
writing; PROVIDED, HOWEVER, that the approval of the Adviser shall not be
required for any use of its or any affiliate's name that merely refers in
accurate and factual terms to the Adviser's appointment hereunder or that is
required by the Securities and Exchange Commission or any other appropriate
regulatory, governmental or judicial authority; PROVIDED, FURTHER, that in no
event shall such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless
-4-
NY12527\22092.5
<PAGE>
disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Trust on behalf of the Portfolio at any time, without the payment of any
penalty, by vote of a majority of all the Trustees of the Trust or by "vote of a
majority of the outstanding voting securities" of the Portfolio (as defined in
the 1940 Act and a rule thereunder) on 60 days' written notice to the Adviser,
or by the Adviser at any time, without the payment of any penalty, on 60 days'
written notice to the Trust. This Agreement will automatically and immediately
terminate in the event of its "assignment" (as defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of the Trust from time to time, have no authority
to act for or represent the Portfolio in any way or otherwise be deemed an agent
of the Portfolio.
11. Notices of any kind to be given to the Adviser by the
Trust shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 299 Park Avenue, New York, New York 10171, Attention: General
Counsel, with a copy to Richard A. Fabietti, or at such other address or to such
other individual as shall be specified by the Adviser to the Trust. Notices of
any kind to be given to the Trust by the Adviser shall be in writing and shall
be duly given if mailed or delivered to the Trust c/o Signature Financial Group
(Cayman) Limited at P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman
BWI or at such other address or to such other individual as shall be specified
by the Trust to the Adviser.
12. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually, and the Adviser
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Trust shall be personally liable upon, or shall
resort be had to their private property for the satisfaction of, obligations
given, executed or delivered on behalf of or by the Portfolio and that the Trust
shall look solely to the property of the Portfolio for the satisfaction of any
claim hereunder.
-5-
NY12527\22092.5
<PAGE>
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day of
1996.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS U.S. EQUITY PORTFOLIO
By: __________________________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: __________________________
By: __________________________
-6-
NY12527\22092.5
UBS020
UBS INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this __ day of February, 1996, between UBS
Investor Portfolios Trust, a trust organized under the laws of the State of New
York (the "Trust"), on behalf of its series known as UBS International Equity
Portfolio (the "Portfolio"), and Union Bank of Switzerland, New York Branch (the
"Adviser").
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Portfolio, a diversified mutual fund, desires to
retain the Adviser to render investment advisory and certain related
administrative services, and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as
investment adviser to the Portfolio for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided. The Adviser may
enter into an agreement (the "Sub-Advisory Agreement") with UBS International
Investment London Limited ("Sub-Adviser") pursuant to which the Sub-Adviser
shall furnish to the Portfolio the investment advisory services specified in
such agreement. In such event, the Adviser will continue to have responsibility
for all investment advisory services furnished pursuant to the Sub-Advisory
Agreement.
2. Subject to the general supervision of the Trustees of the
Trust and subject to the terms of the Sub- Advisory Agreement, if any, the
Adviser shall oversee the investment operations of the Portfolio and the
composition of the Portfolio's holdings of securities and other investments,
including commodities and commodities contracts, cash, the purchase, retention
and disposition thereof and agreements relating thereto, in accordance with the
Portfolio's investment objective and policies as stated
NY12527\22093.5
<PAGE>
in the Registration Statement (as defined in paragraph 3(d) of this Agreement)
and in particular in conjunction with the Sub-Adviser:
(a) the Adviser shall furnish a continuous investment
program for the Portfolio and review from time to time the
determination by its Sub-Adviser of the securities, commodities,
commodity contracts and other investments to be purchased, retained,
sold or lent by the Portfolio, and the portion of the assets to be
invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in
the overseeing of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust, Bylaws and Registration Statement of the Trust
and with the instructions and directions of the Trustees of the Trust
and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations;
(d) the Adviser shall oversee the performance of the
Sub-Adviser in connection with its responsibility as agent of the
Portfolio to effect portfolio transactions, all as provided in
paragraph 2(d) of the Sub-Advisory Agreement.
(e) the Adviser shall maintain records with respect
to the Portfolio's securities transactions as required by Section 31 of
the 1940 Act and the rules and regulations thereunder, to the extent
such records are necessary or appropriate to record the Adviser's
transactions with respect to the Portfolio;
(f) the Adviser shall establish performance standards
for the Portfolio's third-party service providers and oversee and
evaluate the performance of such entities, provide and present
quarterly management reports to the Trustees and supervise the
preparation of reports for Portfolio shareholders, and the Adviser
assumes no liabilities or responsibilities for the performance of the
third-party service providers it is overseeing or any other
responsibilities under this Agreement other than to render the services
called for hereunder, on the terms and conditions provided herein; and
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NY12527\22093.5
<PAGE>
(g) the investment management services of the Adviser
to the Portfolio under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services to others.
3. The Portfolio has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Trust (such
Declaration of Trust, as presently in effect and as amended from time
to time, is herein called the "Declaration of Trust");
(b) Bylaws of the Trust (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
(c) Certified resolutions of the Trustees of the
Trust authorizing the appointment of the Adviser and approving the form
of this Agreement;
(d) The Trust's Notification of Registration on Form
N-8A and its Registration Statement on Form N-1A (No. 811-____) each
under the 1940 Act (the "Registration Statement"), each as filed with
the Commission on February __, 1996, and all amendments thereto.
4. The Adviser agrees that all records that it maintains for
the Portfolio pursuant to paragraphs 2(e) and 2(f) of this Agreement are the
property of the Portfolio and it will promptly surrender copies of any of such
records to the Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased or sold for the
Portfolio (including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Portfolio will pay to the Adviser as full compensation
therefor a fee at an annual rate equal to .85% of the Portfolio's average daily
net assets. This fee will be computed daily and payable monthly.
-3-
NY12527\22093.5
<PAGE>
7. The Trust shall not use the name of the Adviser or any of
its affiliates in the registration statement or other material relating to the
Trust and the Portfolio in a manner not approved by the Adviser prior thereto in
writing; PROVIDED, HOWEVER, that the approval of the Adviser shall not be
required for any use of its or any affiliate's name that merely refers in
accurate and factual terms to the Adviser's appointment hereunder or that is
required by the Securities and Exchange Commission or any other appropriate
regulatory, governmental or judicial authority; PROVIDED, FURTHER, that in no
event shall such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Trust on behalf of the Portfolio at any time, without the payment of any
penalty, by vote of a majority of all the Trustees of the Trust or by "vote of a
majority of the outstanding voting securities" of the Portfolio (as defined in
the 1940 Act and a rule thereunder) on 60 days' written notice to the Adviser,
or by the Adviser at any time, without the payment of any penalty, on 60 days'
written notice to the Trust. This Agreement will automatically and immediately
terminate in the event of its "assignment" (as defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of the Trust from time to time, have no authority
to act for or represent the Portfolio in any way or otherwise be deemed an agent
of the Portfolio.
11. Notices of any kind to be given to the Adviser by the
Trust shall be in writing and shall be duly
-4-
NY12527\22093.5
<PAGE>
given if mailed or delivered to the Adviser at 299 Park Avenue, New York, New
York 10171, Attention: General Counsel, with a copy to Richard A. Fabietti, or
at such other address or to such other individual as shall be specified by the
Adviser to the Trust. Notices of any kind to be given to the Trust by the
Adviser shall be in writing and shall be duly given if mailed or delivered to
the Trust c/o Signature Financial Group (Cayman) Limited at P.O. Box 2494,
Elizabethan Square, George Town, Grand Cayman BWI or at such other address or to
such other individual as shall be specified by the Trust to the Adviser.
12. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually, and the Adviser
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Trust shall be personally liable upon, or shall
resort be had to their private property for the satisfaction of, obligations
given, executed or delivered on behalf of or by the Portfolio and that the Trust
shall look solely to the property of the Portfolio for the satisfaction of any
claim hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
-5-
NY12527\22093.5
<PAGE>
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day of
1996.
UBS INVESTOR PORTFOLIOS TRUST
on behalf of
UBS INTERNATIONAL EQUITY
PORTFOLIO
By: __________________________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: __________________________
By: __________________________
-6-
NY12527\22093.5
UBS021
UBS INTERNATIONAL EQUITY PORTFOLIO
SUB-ADVISORY AGREEMENT
Agreement made as of February __, 1996 by and between Union
Bank of Switzerland, New York Branch (the "Adviser") and UBS International
Investment London Limited, a private limited company organized under the laws of
England (hereinafter called the "Sub-Adviser").
W I T N E S S E T H:
WHEREAS, the Adviser has entered into an Investment Advisory
Agreement dated February __, 1996 (the "Advisory Agreement") with UBS
Investor Portfolios Trust, an open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act") and organized as a
trust under the law of the State of New York (the "Trust") on behalf of one of
its diversified mutual fund series, UBS International Equity Portfolio (the
"Portfolio"), pursuant to which the Adviser will act as investment adviser to
the Portfolio;
WHEREAS, the Advisory Agreement contemplates that the Adviser
may retain the Sub-Adviser to provide certain investment advisory services to
the Portfolio in connection with the management of the Portfolio, and the
Sub-Adviser is willing to render such investment advisory services; and
WHEREAS, the Sub-Adviser is registered as an investment
adviser under the Investment Advisers Act of 1940 and is regulated in the United
Kingdom in the conduct of its investment advisory business by Investment
Management Regulatory Organization ("IMRO").
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Adviser hereby appoints the Sub-Adviser to act as
sub-adviser to the Portfolio for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the
Trust and the Adviser, the Sub-Adviser shall
LAN12527\22247.5
<PAGE>
manage the investment operations of the Portfolio and the composition of the
Portfolio's holdings of securities and other investments, including commodities
and commodities contracts, cash, the purchase, retention and disposition thereof
and agreements relating thereto, in accordance with the Portfolio's investment
objective and policies as stated in the Registration Statement (as defined in
paragraph 3(d) of this Agreement) and subject to the following understandings:
a. the Sub-Adviser shall furnish a continuous
investment program for the Portfolio and determine from time to time
the securities, commodities, commodity contracts and other investments
to be purchased, retained, sold or lent by the Portfolio, and the
portion of the assets to be invested or held uninvested as cash;
b. the Sub-Adviser shall use the same skill and care
in the management of the Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
c. the Sub-Adviser, in the performance of its duties
and obligations under this Agreement, shall act in conformity with the
Declaration of Trust, Bylaws and Registration Statement of the Trust
and with the instructions and directions of the Trustees of the Trust
and the Adviser and will conform to and comply with the requirements of
the 1940 Act and all other applicable laws and regulations;
d. the Sub-Adviser shall determine the securities to
be purchased, sold or lent by the Portfolio and as agent for the
Portfolio will effect portfolio transactions pursuant to its
determinations either directly with the issuer or with any broker
and/or dealer in such securities, commodities or commodities contracts;
in placing orders, the Sub- Adviser will select the brokers and/or
dealers as it shall deem appropriate in conformity with the policy with
respect to brokerage as set forth in the Registration Statement; and
the Sub-Adviser shall also determine whether or not the Portfolio shall
enter into repurchase or reverse repurchase agreements;
On occasions when the Sub-Adviser deems the purchase
or sale of a security, commodity or commodity contract to be in the
best interest of the Portfolio as well as other customers of the
Sub-Adviser and to the
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LAN12527\22247.5
<PAGE>
extent permitted by applicable law, the Sub-Adviser may, but shall not
be obligated to, aggregate the securities to be so sold or purchased in
order to obtain best execution, including lower brokerage commissions,
if applicable. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Sub-Adviser in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the
Portfolio;
The Sub-Adviser may execute the Portfolio's brokerage
(but not principal) transactions through an affiliate, provided that
such transactions are effected in accordance with Rule 17e-1 under the
1940 Act and the Trust's procedures adopted thereunder as such may be
amended from time to time;
e. the Sub-Adviser shall maintain books and records
with respect to the Portfolio's securities transactions in accordance
with Rule 204-2 under the Investment Advisers Act of 1940 and shall
render to the Trust's Trustees such periodic and special reports as the
Trustees may reasonably request; and
f. the investment advisory services of the
Sub-Adviser to the Portfolio under this Agreement are not to be deemed
exclusive, and the Sub-Adviser shall be free to render similar services
to others.
3. The Adviser has delivered copies of each of the following
documents to the Sub-Adviser and will promptly notify and deliver to it all
future amendments and supplements, if any:
a. Declaration of Trust of the Trust (such
Declaration of Trust, as presently in effect and as amended from time
to time, is herein called the "Declaration of Trust");
b. Bylaws of the Trust (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
c. Certified resolutions of the Trustees of the Trust
authorizing the appointment of the Sub- Adviser and approving the form
of this Agreement;
d. The Trust's Notification of Registration on Form
N-8A and its Registration Statement on Form N-1A (No. 811-____) each
under the 1940 Act (the
-3-
LAN12527\22247.5
<PAGE>
"Registration Statement"), each as filed with the Commission on
February __, 1996, and all amendments thereto.
4. The Sub-Adviser shall keep the Portfolio's books and
records required to be maintained by it pursuant to paragraph 2(e) of this
Agreement. The Sub-Adviser agrees that all records that it maintains for the
Portfolio are the property of the Portfolio and it will promptly surrender any
of such records to the Portfolio upon the Portfolio's request.
5. During the term of this Agreement the Sub- Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement, other than the cost of securities and investments purchased or sold
for the Portfolio (including taxes and brokerage commissions, if any).
6. The Adviser shall continue to have responsibility for all
services to be provided to the Portfolio pursuant to the Advisory Agreement and
shall oversee and review the Sub-Adviser's performance of its duties under this
Agreement.
7. For the services provided and the expenses borne pursuant
to this Agreement, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate equal to 0.75% of the Portfolio's first $20
million of average daily net assets, plus 0.50% of the next $30 million of
average daily net assets, plus 0.40% of the Portfolio's average daily net assets
in excess of $50 million. This fee will be computed daily and payable monthly.
8. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Adviser or the
Portfolio in connection with the matters to which this Agreement relates, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance is
specifically approved at least
-4-
LAN12527\22247.5
<PAGE>
annually in conformity with the requirements of the 1940 Act; provided, however,
that this Agreement may be terminated by the Adviser or by the Trust on behalf
of the Portfolio at any time, without the payment of any penalty, on 60 days'
written notice to the Sub-Adviser. Termination by the Trust shall be effected by
vote of a majority of all the Trustees of the Trust or by "vote of a majority of
the outstanding voting securities" of the Portfolio (as defined in the 1940 Act
and a rule thereunder). The Sub-Adviser may also terminate this Agreement at any
time, without the payment of any penalty, on 60 days' written notice to the
Adviser and to the Trust. This Agreement will automatically and immediately
terminate in the event of its "assignment" (as defined in the 1940 Act) or upon
termination of the Advisory Agreement.
10. The Sub-Adviser shall for all purposes herein be deemed to
be an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Trustees of the Trust and the Adviser from time to
time, have no authority to act for or represent the Portfolio in any way or
otherwise be deemed an agent of the Portfolio.
11. Notices of any kind to be given hereunder shall be in
writing and shall be duly given if mailed or delivered as follows: (a) to the
Adviser at 299 Park Avenue, New York, New York 10171, Attention: General
Counsel, with a copy to Richard A. Fabietti; (b) to the Sub- Adviser at Triton
Court, 14 Finsbury Square, London, England EC2A 1PD, Attention: President; (c)
to the Trust, c/o Signature Financial Group (Cayman) Limited, P.O. Box 268,
Elizabethan Square, George Town, Grand Cayman BWI; or (d) at such other address
or to such other individual as any of the foregoing shall designate by notice to
the others.
12. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
-5-
LAN12527\22247.5
<PAGE>
13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day of
1996.
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: __________________________
By: __________________________
UBS INTERNATIONAL INVESTMENT
LONDON LIMITED
By: __________________________
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LAN12527\22247.5
<PAGE>
IMRO Schedule
The following provisions hereby form part of the Agreement to which this
schedule is attached, and are incorporated in accordance with the IMRO rule
requirements for agreements with customers who are treated as Non Private
Customers.
1. Sub-Adviser is a member of the Investment Management Regulatory
Organisation ("IMRO") and is subject to the rules and regulations of
IMRO in the conduct of its investment business. It is also a registered
investment adviser under the Investment Advisers Act of 1940.
2. Sub-Adviser hereby notifies the Adviser that it will provide services
to the Adviser on the basis that the Adviser is a Non Private Customer
and in consequence will not receive the benefit of certain IMRO rules.
3. Should the Adviser wish to register any complaint in respect of
services performed by Sub-Adviser under this Agreement, written details
of same should be sent to the Compliance Officer of Sub-Adviser. Where
appropriate, the nature and progress of such complaint will be reported
to IMRO. The Adviser shall at all times have a right of direct
complaint to the Investment Ombudsman.
4. The investments comprising the Portfolio may at any time be subject to
the effect of fluctuations in exchange rates. Where investments in the
Portfolio are denominated in a currency other than U.S. dollars, a
movement of exchange rates may have an unfavourable as well as
favourable effect upon the gain or loss otherwise experienced on the
investment.
5. To the extent permitted by the U.S. Securities Laws, Sub-Adviser may
effect transactions in securities issued by an associated company and
in investments the price of which may have been stabilised, and
further, Sub-Adviser may subscribe to any issue or offer for sale
managed or arranged or underwritten by any associated company.
LAN12527\22247.5
<PAGE>
6. Sub-Adviser may from time to time effect transactions in investments
that are not readily realisable. The Adviser accepts due notice of the
fact that market makers may at any time not be prepared to deal in
certain investments and that proper information for the determination
of the current value of same may not be available.
------------------------ ------------------------
For and on behalf of For and on behalf of
THE ADVISER SUB-ADVISER
-2-
LAN12527\22247.5
CUSTODIAN AGREEMENT
between
UBS INVESTOR PORTFOLIOS TRUST
and
INVESTORS BANK & TRUST COMPANY
UBS036.edg
<PAGE>
TABLE OF CONTENTS
PAGE
1. Bank Appointed Custodian.......................................... 1
2. Definitions....................................................... 1
2.1 Authorized Person.............................................. 1
2.2 Board.......................................................... 1
2.3 Security....................................................... 1
2.4 Portfolio Security............................................. 2
2.5 Officers' Certificate.......................................... 2
2.6 Book-Entry System.............................................. 2
2.7 Depository..................................................... 2
2.8 Proper Instructions............................................ 2
2.9 Foreign Securities............................................. 2
2.10 Series......................................................... 2
3. Separate Accounts................................................. 3
4. Certification as to Authorized Persons............................ 3
5. Custody of Cash................................................... 3
5.1 Purchase of Securities......................................... 3
5.2 Withdrawals.................................................... 4
5.3 Distributions and Expenses of Fund............................. 4
5.4 Payment in Respect of Securities............................... 4
5.5 Repayment of Loans............................................. 4
5.6 Repayment of Cash.............................................. 4
5.7 Foreign Exchange Transactions.................................. 4
5.8 Other Authorized Payments...................................... 4
5.9 Termination.................................................... 4
6. Securities........................................................ 5
6.1 Segregation and Registration................................... 5
6.2 Voting and Proxies............................................. 5
6.3 Book-Entry System.............................................. 5
6.4 Use of a Depository............................................ 6
6.5 Use of Book-Entry System for Commercial Paper.................. 8
6.6 Use of Immobilization Programs................................. 8
6.7 Eurodollar CDs................................................. 9
<PAGE>
PAGE
6.8 Options and Futures Transactions............................... 9
6.9 Segregated Account............................................. 10
6.10 Interest Bearing Call or Time Deposits......................... 11
6.11 Transfer of Securities......................................... 11
7. Withdrawals....................................................... 13
8. Merger, Dissolution, etc. of one or more Series of the Trust 13
9. Actions of Bank Without Prior Authorization....................... 13
10. Collection and Defaults.......................................... 14
11. Maintenance of Records........................................... 15
12. Fund Evaluation.................................................. 15
13. Concerning the Bank.............................................. 16
13.1 Performance of Duties and
Standard of Care............................................ 16
13.2 Agents and Subcustodians with Respect to Property
Held in the United States................................... 17
13.3 Duties of the Bank with Respect to Property
Held Outside of the United States........................... 17
13.4 Insurance..................................................... 20
13.5 Fees and Expenses of Bank..................................... 20
13.6 Advances by Bank............................................. 21
14. Termination...................................................... 21
15. Confidentiality.................................................. 22
16. Notices.......................................................... 22
17. Amendments....................................................... 23
18. Parties.......................................................... 23
19. Governing Law.................................................... 23
20. Counterparts..................................................... 23
21. Limitation of Liability........................................ 23
22. Entire Agreement............................................... 23
23. Attachments:...................................................
1 Schedule A - List of Series
1 Schedule B - Income Collection Standards
1 Schedule C - Fee Schedule
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this [ ]day of February, 1996, between the UBS
INVESTOR PORTFOLIOS TRUST, an unincorporated business trust organized under the
laws of the state of New York (the "Trust") and INVESTORS BANK & TRUST COMPANY
(the "Bank").
The Trust, an open-end management investment company, (the Series of
which are listed in Schedule A herein), desires to place and maintain all of its
portfolio securities and cash in the custody of the Bank. The Bank has at least
the minimum qualifications required by Section 17(f)(1) of the Investment
Company Act of 1940, as amended (the "1940 Act"), to act as custodian of the
portfolio securities and cash of the Trust, and has indicated its willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Trust hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Trust by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Trustees of the Trust.
2.3 SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of
<PAGE>
deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any security,
certificate of deposit, or group or index of securities (including any interest
therein or based on the value thereof), or any put, call, straddle, option, or
privilege entered into on a national securities exchange relating to a foreign
currency, or, in general, any interest or instrument commonly known as a
"security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 PORTFOLIO SECURITY. Portfolio Security will mean any Security
owned by the Trust.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Trust.
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, as amended
("Exchange Act"), its successor or successors and its nominee or nominees. The
term "Depository" shall further mean and include any other person authorized to
act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by two Authorized Persons
as shall have been designated in an Officers' Certificate, such instructions to
be given in such form and manner as the Bank and the Trust shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by such one or more persons from
time to time designated in an Officers' Certificate as having been authorized by
the Board. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall cause all
oral instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Trust. The Trust shall be responsible, at the Trust's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act, the Trust shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Trust, Proper Instructions may include communication effected
directly between electro-
<PAGE>
mechanical or electronic devices provided that the Board and the Bank are
satisfied that such procedures afford adequate safeguards for the Trust's
assets.
2.9 FOREIGN SECURITIES. The term Foreign Securities as used herein will
have the same meaning as when such term is used in Rule 17f-5 of the 1940 Act.
2.10 SERIES. Series shall mean any Series or portfolio of the Trust
wherein shareholders of such Series have a pro rata interest in the assets of
that Series, but have no interest in the assets of any other Trust Series.
3. SEPARATE ACCOUNTS. The Bank will segregate the assets of each Series
or portfolio to which this Agreement relates into a separate account for each
such Series or portfolio containing the assets of such Series or portfolio (and
all investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Trust shall be
deemed to refer to the Trust acting on behalf of one or more of its Series, any
reference in this Agreement to any assets of the Trust, including, without
limitation, any Portfolio Securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable Series, any duty or obligation
of the Bank hereunder to the Trust shall be deemed to refer to duties and
obligations with respect to the individual Series and any obligation or
liability of the Trust hereunder shall be binding only with respect to the
individual Series, and shall be discharged only out of the assets of such
Series.
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Trust will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Trust will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Trust which has been signed by Authorized Persons named in the most recent
certification.
5. CUSTODY OF CASH. As custodian for the Trust, the Bank will open and
maintain a separate account or accounts in the name of each Series of the Trust
or in the name of the Bank, as Custodian of the Trust, and will deposit to the
account of the Trust all of the cash of the Trust, except for cash held by a
subcustodian appointed pursuant to subsections 13.2 or 13.3 hereof, including
borrowed funds, delivered to the Bank, subject only to draft or order by the
Bank acting pursuant to the terms of this Agreement. Upon receipt by the Bank of
Proper Instructions (which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding shares of common stock
of the Trust, notification from the Trust's transfer agent as provided in
Section 7, requesting such payment, designating the payee or the account or
accounts to which the Bank will release funds for deposit, and stating that it
is for a purpose permitted under the terms of this Section 5, specifying the
applicable subsection, the Bank will make payments of cash held for the accounts
of the Trust, insofar as funds are available for that purpose, only as permitted
in subsections 5.1-5.9 below.
<PAGE>
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Trust, against contemporaneous receipt of such securities by the Bank registered
in the name of the Trust or in the name of, or properly endorsed and in form for
transfer to, the Bank, or a nominee of the Bank, or receipt for the account of
the Bank pursuant to the provisions of Section 6 below, each such payment to be
made at the purchase price shown on a broker's confirmation (or transaction
report in the case of Book-Entry Paper) of purchase of the securities received
by the Bank before such payment is made, as confirmed in the Proper Instructions
received by the Bank before such payment is made.
5.2 WITHDRAWALS. In such amount as may be necessary for the
withdrawal of beneficial interests in the Trust in accordance with Section 7 of
this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the
account of the Trust of dividends or other distributions to investors as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, shareholder servicing fees, fees of the
Bank for its services hereunder and reimbursement of the expenses and
liabilities of the Bank as provided hereunder, fees of any transfer agent, fees
for legal, accounting, and auditing services, or other operating expenses of the
Trust. Each disbursement made pursuant to this subsection and subsection 5.8
effected by wire transfer must be subject to the prior authorization of the
Trust (or an Authorized Person) from outside the United States and any such
disbursements made by the mailing of a check shall be mailed to the payee from
outside of the United States.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments, in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Trust held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Trust,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan.
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Trust for
the purpose of collateralizing the obligation to return to the Trust
certificates borrowed from the Trust representing Portfolio Securities, but only
upon redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Trust upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting as principal) with which the
contract or option is made, and the Bank shall have no duty with respect to the
selection of such currency brokers or banking institutions with which the Trust
deals or for their failure to comply with the terms of any contract or option.
<PAGE>
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of
the Trust, or other obligations of the Trust incurred for proper Trust purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Trust, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper purpose of the Trust.
5.9 TERMINATION. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to subsections 13.2 or 13.3 hereof, the Bank as custodian, will receive
and hold pursuant to the provisions hereof, in a separate account or accounts
and physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Trust. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Trust
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, and will execute and deliver all
such certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Bank will use its best efforts
to the end that the specific Portfolio Securities held by it hereunder will be
at all times identifiable.
The Trust will from time to time furnish to the Bank
appropriate instruments to enable it to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Portfolio
Securities which may from time to time be registered in the name of the Trust.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Trust all notices,
proxies and proxy soliciting materials with respect to such Portfolio
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Trust), but without
indicating the manner in which such proxies are to be voted.
<PAGE>
6.3 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such system which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Trust's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Trust. Where securities are
transferred to the account of each Series, the Bank shall also, by book entry or
otherwise, identify as belonging to that Series a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Trust or shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Trust. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Trust upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Trust has been transferred to the
Account; and
(ii) the making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment for the account of the
Trust. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Trust shall identify the Trust, be maintained
for the Trust by the Bank and shall be provided to the Trust at its request. The
Bank shall send the Trust a confirmation, as defined by Rule 17f-4 of the 1940
Act, of any transfers to or from the account of the Trust;
(d) The Bank will promptly provide the Trust with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System; and
(e) The Bank shall be liable to the Trust for any loss or
damage to the Trust resulting from use of the Book-Entry System by reason of any
gross negligence, willful misfeasance or bad faith of the Bank or any of its
agents or of any of its or their employees or
<PAGE>
from any reckless disregard by the Bank or any such agent of its duty to use its
best efforts to enforce such rights as it may have against the Book-Entry
System; at the election of the Trust, it shall be entitled to be subrogated for
the Bank in any claim against the Book-Entry System or any other person which
the Bank or its agent may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole for any loss or damage.
6.4 USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officers' Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Trust all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof,
provided that such securities are maintained in an account which does not
include any assets of the Bank other than assets held as fiduciary, custodian or
otherwise for customers;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Trust and the Trust shall pay cash collateral against the return of
Portfolio Securities loaned by the Trust only upon delivery of the Securities to
or for the account of the Trust; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment thereof or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Trust;
(d) The Bank shall be liable to the Trust for any loss or
damage to the Trust resulting from use of a Depository by reason of any gross
negligence, willful misfeasance or bad faith of the Bank or its employees or
from any reckless disregard by the Bank of its duty to use its best efforts to
enforce such rights as it may have against a Depository. The Trust, at its
option, shall be entitled to be subrogated to the rights of the Bank with
respect to any claims against a Depository as a consequence of any loss, damage,
cost, expense, liability or claim if and to the extent that the Trust has not
been made whole for any such loss, damage, cost, expense, liability or claim. In
this connection, the Bank shall use its best efforts to ensure that:
(i) the Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
<PAGE>
(ii) any proxy materials received by a Depository
with respect to Portfolio Securities deposited with such Depository are
forwarded immediately to the Bank for prompt transmittal to the Trust;
(iii) such Depository immediately forwards to the
Bank confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Trust's account;
(iv) such Depository prepares and delivers to the
Bank such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Trust to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and the rules and
regulations thereunder; and
(v) such Depository delivers to the Bank and the
Trust all internal accounting control reports, whether or not audited by an
independent public accountant, as well as such other reports as the Trust may
reasonably request in order to verify the Portfolio Securities held by such
Depository.
6.5 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book- Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Trust has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Trust,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-Entry Paper
system, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Trust in an account of the Bank that includes only assets held by it for
customers.
(b) The records of the Bank with respect to the Trust's
purchase of Book- Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Trust which is included in the Book-Entry
Paper system and shall at all times during the regular business hours of the
Bank be open for inspection by duly authorized officers, employees or agents of
the Trust.
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Trust upon the contemporaneous (i) receipt of advice from the
Issuer that such sale of Book- Entry Paper has been effected, and (ii) making of
an entry on the records of the Bank to reflect such payment and transfer for the
account of the Trust.
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon the contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Trust, and (ii)
making of an entry on the records of the Bank to reflect such payment for the
account of the Trust.
<PAGE>
(e) The Bank shall transmit to the Trust a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Trust on
the next business day following the transaction.
(f) The Bank will send to the Trust such reports on its system
of internal accounting control with respect to the Book-Entry Paper system as
the Trust may reasonably request from time to time.
6.6 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.7 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Securities are identified on the books of the Bank as
belonging to a Series of the Trust and that the books of the Bank identify the
European Branch holding such Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.7, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Trust, and shall have no liability to the Trust
or its shareholders with respect to the actions, inactions, whether negligent or
otherwise of such European Branch in connection with such Eurodollar CDs, except
for any loss or damage to the Trust resulting from the Bank's own gross
negligence, willful misfeasance or bad faith in the performance of its duties
hereunder.
6.8 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Trust regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Trust relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Trust has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Trust.
The Bank shall have no responsibility for the legality of any put or call
purchased
<PAGE>
or sold on behalf of the Trust, the propriety of any such purchase or sale, or
the adequacy of any collateral delivered to a broker in connection with an
option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.9 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Trust that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker of the Trust against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Trust that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Trust.
(b) Puts, Calls and Futures Traded on Commodities Exchanges.
1. The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Trust in accordance with the
provisions of any agreement among the Trust, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, as defined in the Commodity Exchange Act, or any similar organization or
organizations, regarding account deposits in connection with transactions by the
Trust.
2. The responsibilities and liabilities of the Bank as to
futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
subparagraph (a)(2) of this subsection 6.8 as if such subparagraph referred to
Futures Commission Merchants rather than brokers, and Futures and puts and calls
thereon instead of options.
6.9 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Trust, into which Account or Accounts may be transferred upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among
the Trust, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Trust;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Trust or commodity futures
purchased or written by the Trust;
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Trust's then
outstanding forward commitment or "when-issued" agreements relating to the
<PAGE>
purchase of Portfolio Securities and all the Trust's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(d) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(e) for other proper corporate purposes, but only, in the case
of this clause (e), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such Segregated Account and
declaring such purposes to be proper corporate purposes; and
(f) assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
(i) with respect to assets deposited in accordance
with the provisions of any agreements referenced in (a) or (b) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (c)
or (d) above, for sale or delivery to meet the Trust's obligations under
outstanding firm commitment or when- issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal
or greater value deposited in the Segregated Account;
(iv) to the extent that the Trust's outstanding
forward commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other parties or the
Trust's obligations thereunder are met from assets of the Trust other than those
in the Segregated Account;
(v) for delivery upon settlement of a forward
commitment agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.10 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Trust of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Trust appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of
<PAGE>
advice or receipt evidencing the deposit, if any, as may be forwarded to the
Bank by the Deposit Bank. Such deposits shall be deemed Portfolio Securities of
the Trust and the responsibility of the Bank therefore shall be the same as and
no greater than the Bank's responsibility in respect of other Portfolio
Securities of the Trust.
6.11 TRANSFER OF SECURITIES. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this subsection the Bank will
receive Proper Instructions requesting such transfer, exchange or delivery
stating that it is for a purpose permitted under the terms of this subsection
6.11, specifying the applicable subsection, or describing the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection, only
(a) upon sales of Portfolio Securities for the account of the
Trust, against contemporaneous receipt by the Bank of payment therefor in full,
each such payment to be in the amount of the sale price shown in a broker's
confirmation, DTC confirmation or such other evidence as agreed upon by the
Company and the Bank, of sale of the Portfolio Securities received by the Bank
before such payment is made, as confirmed in the Proper Instructions received by
the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) for the purpose of withdrawing in-kind beneficial
interests in the Trust upon authorization from the Trust;
(e) in the case of option contracts owned by the Trust, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Trust by
any bank, including the Bank;
<PAGE>
provided, however, that such Portfolio Securities will be released only upon
payment to the Bank for the account of the Trust of the moneys borrowed, except
that in cases where additional collateral is required to secure a borrowing
already made, and such fact is made to appear in the Proper Instructions,
further Portfolio Securities may be released for that purpose without any such
payment. In the event that any such pledged Portfolio Securities are held by the
Bank, they will be so held for the account of the lender. After notice to the
Trust from the lender, in accordance with the normal procedures of the lender,
that an event of deficiency or default on the loan has occurred, the Bank may
deliver such pledged Portfolio Securities to or for the account of the lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Trust
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Trust and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Trust;
(j) for other authorized transactions of the Trust or for
other proper corporate purposes; provided that before making such transfer, the
Bank will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Trust (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Trust or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) for delivery in accordance with the provisions of any
agreement among the Trust, the Bank and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Trust; and
(l) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b),
(c), (e), (f), (g), (h) and (i) hereof securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. WITHDRAWALS. In the case of payment of assets of the Trust held by
the Bank in connection with withdrawal of beneficial interests in the Trust, the
Bank will rely on notification by the Trust's transfer agent of receipt of a
request for withdrawal before such payment is made. Payment shall be made in
accordance with the Articles and By-laws of the Trust, from assets available for
said purpose. Each withdrawal effected by wire transfer must be subject to the
prior
<PAGE>
authorization of the Trust (or an Authorized Person) from outside the United
States; any disbursements made by the mailing of a check shall be mailed to the
payee from outside of the United States; any withdrawal effected by the transfer
of securities held in a Book-Entry system (or its equivalent) must be subject to
the prior authorization of the Trust (or an Authorized Person) from outside the
United States; and any withdrawals effected by the physical transfer of
definitive securities shall be sent to the transferee from outside the United
States.
All notices and correspondence to the Trust shall be sent to the Trust
at its office outside the United States.
8. MERGER, DISSOLUTION, ETC. OF ONE OR MORE SERIES OF THE TRUST. In the
case of the following transactions, not in the ordinary course of business,
namely, the merger of the Trust into or the consolidation of such Series of the
Trust with another investment company, the sale by the Trust of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Trust and distribution of its assets, the Bank
will deliver the Portfolio Securities held by it under this Agreement and
disburse cash only upon the order of the Trust set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of the fees, disbursements and expenses of the
Bank, this Agreement will terminate.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Trust or the transfer agent:
(a) endorse for collection and collect on behalf of and in the
name of the Trust all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Trust and hold for the account of the Trust all income,
dividends, interest and other payments or distribution of cash with respect to
the Portfolio Securities held thereunder;
(b) present for payment all coupons and other income items
held by it for the account of the Trust which call for payment upon presentation
and hold the cash received by it upon such payment for the account of the Trust;
(c) receive and hold for the account of the Trust all
securities received as a distribution on Portfolio Securities as a result of a
stock dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
(d) execute as agent on behalf of the Trust all necessary
ownership and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Trust's name on
such certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so and as may be required to obtain payment in respect
thereof. The Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue
<PAGE>
Code and any Regulations of the Treasury Department issued thereunder, or under
the laws of any State;
(e) present for payment all Portfolio Securities which are
called, redeemed, retired or otherwise become payable, and hold cash received by
it upon payment for the account of the Trust; and
(f) exchange interim receipts or temporary securities for
definitive securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use all reasonable efforts
to collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Trust notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. Absent the default of the payer of such income, the
Bank will credit the Trust with the appropriate amount if such income remains
past due beyond a specified number of days. The exact number of days may be
agreed upon and modified from time to time by written agreement between the Bank
and the Trust. Such agreement will be attached to this Agreement as Schedule B.
If Portfolio Securities upon which such income is payable are in default or
payment is refused after due demand or presentation, the Bank will notify the
Trust in writing of any default or refusal to pay within two business days from
the day on which it receives knowledge of such default or refusal. In addition,
the Bank will send the Trust a written report once each month showing any income
on any Portfolio Security held by it which is more than ten days overdue on the
date of such report.
11. MAINTENANCE OF RECORDS. The Bank will maintain records with respect
to transactions for which the Bank is responsible pursuant to the terms and
conditions of this Agreement, and in compliance with the applicable rules and
regulations of the 1940 Act and will furnish the Trust daily with a statement of
condition of the Trust, a portfolio of investments and other reports as may be
requested. The Bank will furnish to the Trust at the end of every month, and at
the close of each quarter of the Trust's fiscal year, a list of the Portfolio
Securities and the aggregate amount of cash held by it for the Trust along with
a month-end statement of condition and other reports and financial statements as
may be agreed upon from time to time between the parties. The books and records
of the Bank pertaining to its actions under this Agreement and reports by the
Bank or its independent accountants concerning its accounting system, procedures
for safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Trust and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act. The Bank recognizes
that the books and records it maintains for the Trust, pursuant to this
Agreement, are the property of the Trust and the Bank agrees to surrender such
books and records upon the request of the Trust or any Authorized Person of the
Trust. The information forwarded to the Trust daily pursuant to this Section 11
and subsection 13.3(f) shall be sufficiently detailed to enable the Trust to
maintain detailed amortized accounting and tax books on a daily basis. The
records contemplated by this Section 11 shall be forwarded to the Trust at its
Cayman Islands offices used by the Trust in compiling and maintaining its
corporate records and books of account.
<PAGE>
12. FUND EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board the net asset value of the Trust, such determination to be made in
accordance with the provisions of the Articles and By-laws of the Trust and
Prospectus and Statement of Additional Information relating to the Trust, as
they may from time to time be amended, and any applicable resolutions of the
Board at the time in force and applicable; and promptly notify the Trust, or
such other persons as the Trust may request of the results of such computation
and determination. In computing the net asset value hereunder, the Bank may rely
in good faith upon information furnished to it by any Authorized Person in
respect of (i) the manner of accrual of the liabilities of the Trust and in
respect of liabilities of the Trust not appearing on its books of account kept
by the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the net asset value, and the Bank shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any quotations
received from a source pursuant to (iii) above.
In addition, the Bank shall determine daily the net asset value of each
investor's interest in the Trust and shall allocate daily on a book basis and
annually or as mutually agreed on a tax basis among the investors in the Trust
on a pro rata basis all incremental investment activity.
All services and activities provided for in this Section 12 shall be
undertaken from and occur at a location outside the United States.
13. CONCERNING THE BANK.
13.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE.
In performing its duties hereunder and any other duties listed on any Schedule
hereto, if any, the Bank will be entitled to receive and act upon the advice of
independent counsel of its own selection, which may be counsel for the Trust,
and will be without liability for any action taken or thing done or omitted to
be done in accordance with this Agreement in good faith in conformity with such
advice. In the performance of its duties hereunder, the Bank will be protected
and not be liable, and will be indemnified and held harmless for any action
taken or omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Trust except in
the case of its gross negligence, willful misfeasance or bad faith in the
performance of its duties or reckless disregard of its obligations and duties
hereunder.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Trust, the legality of the purchases thereof or the
propriety of the price incurred therefor;
<PAGE>
(b) the legality of any sale of any Portfolio Securities by or
for the Trust or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of beneficial interests
in the Trust;
(d) the legality of the withdrawal of any beneficial interests
in the Trust;
(e) the legality of the declaration of any dividend by the
Trust or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Trust unless and until
received by it or its agent, and any such property or moneys delivered or paid
by it pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of the Trust are such as may properly be held by the Trust
under the provisions of its Articles, By-laws, any federal or state statutes or
any rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Bank be liable hereunder or to any third party for any losses or
damages of any kind resulting from acts of God, earthquakes, fires, floods,
storms or other disturbances of nature, epidemics, strikes, riots,
nationalization, expropriation, currency restrictions, acts of war, civil war or
terrorism, insurrection, nuclear fusion, fission or radiation, the interruption,
loss or malfunction of utilities, transportation, or computers (hardware or
software) and computer facilities, the unavailability of energy sources and
other similar happenings or events except as results from the Bank's own gross
negligence. The Bank agrees however, to maintain adequate backup facilities and
disaster recovery programs in an effort to minimize disruption of service caused
by any of the conditions noted above.
13.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE TRUST
HELD IN THE UNITED STATES. The Bank, upon written consent of the Board, may
employ agents in the performance of its duties hereunder and shall be
responsible for the acts and omissions of such agents as if performed by the
Bank hereunder. Without limiting the foregoing, certain duties of the Bank
hereunder may be performed by one or more affiliates of the Bank.
AT THE REQUEST OF THE TRUST, AND Upon receipt of Proper Instructions,
the Bank will employ subcustodians, designated by the Trust, provided that any
such subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Trust's assets with
respect to property of the Trust held in the United States, and has previously
been approved by the Board. The Bank shall have no liability to the Trust or any
other person by reason of any act or omission of any such subcustodian and the
Trust shall indemnify the Bank and hold it harmless from and against any and all
actions, suits and claims, arising directly or indirectly out of the performance
of any such subcustodian. Upon request of the Bank, the Trust shall assume the
entire defense of any action, suit, or claim subject to the foregoing indemnity.
The Trust shall pay all fees and expenses of any such subcustodian.
<PAGE>
13.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE TRUST HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Trust hereby
authorizes and instructs the Bank to employ as sub-custodians for the Trust's
Foreign Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated by
the Board (each, a "Selected Foreign Sub-Custodian"). Upon receipt of Proper
Instructions, together with a certified resolution of the Board, the Bank and
the Trust may agree to designate additional foreign banking institutions and
foreign securities depositories to act as Selected Foreign Sub-Custodians
hereunder. Upon receipt of Proper Instructions, the Trust may instruct the Bank
to cease the employment of any one or more such Selected Foreign Sub-Custodians
for maintaining custody of the Trust's assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have been
implemented.
(b) FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise
be agreed upon in writing by the Bank and the Trust, assets of the Trust shall
be maintained in foreign securities depositories that qualify as eligible
foreign custodians under rule 17f-5 of the 1940 Act, pursuant to written
agreement between such depositories and the Bank. Where possible, such
arrangements shall include entry into agreements containing the provisions set
forth in subparagraph (d) hereof. Notwithstanding the foregoing, except as may
otherwise be agreed upon in writing by the Bank and the Trust, the Trust
authorizes the deposit in Euro-clear, the securities clearance and depository
facilities operated by Morgan Guaranty Trust Company of New York in Brussels,
Belgium, of Foreign Securities eligible for deposit therein and to utilize such
securities depository in connection with settlements of purchases and sales of
securities and deliveries and returns of securities, until notified to the
contrary pursuant to subparagraph (a) hereunder.
(c) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as belonging to the Trust the Foreign Securities held by each Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Securities and
other assets of the Trust, and, in the event that such institution deposits
Foreign Securities in a foreign securities depository, that it shall identify on
its books as belonging to the Bank the securities so deposited.
(d) AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Trust (each, a "Foreign Sub- Custodian Agreement") shall be substantially in the
form previously made available to the Trust and shall provide that: (a) the
Trust's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Trust's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to Bank;
(d) officers of or auditors employed by, or other representatives of the Bank,
including to the extent permitted under applicable law, the independent public
<PAGE>
accountants for the Trust, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Bank; and (e) assets of the Trust held by the Selected Foreign Sub-Custodian
will be subject only to the instructions of the Bank or its agents.
(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE TRUST. Upon
request of the Trust, the Bank will use its best efforts to arrange for the
independent accountants of the Trust to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) REPORTS BY BANK. The Bank will supply to the Trust from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Trust held by Selected Foreign Sub-Custodians, including
but not limited to an identification of entities having possession of the
Foreign Securities and other assets of the Trust.
(g) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Trust held by a Selected Foreign Sub-Custodian
shall be effected pursuant to Proper Instructions from the Trust to the Bank and
shall be effected in accordance with the applicable Foreign Sub-Custodian
Agreement. If at any time any Foreign Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Trust agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Securities received for the account of the
Trust and delivery of Foreign Securities maintained for the account of the Trust
may be effected in accordance with the customary established securities trading
or securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Securities held hereunder, including, without limitation, the exercise of any
voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Trust such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Trust pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Trust is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Trust or by the
applicable
<PAGE>
Foreign Sub-Custodian will comply with all applicable terms and conditions of
any such Rights or any applicable laws or regulations, or market practices
within the market in which such action is to be taken or omitted.
(h) LIABILITY OF SELECTED FOREIGN SUB-CUSTODIANS. Each Foreign
Sub- Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Trust acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Trust. The Trust acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Trust's securities and
other assets.
(i) LIABILITY OF BANK. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank provided that this provision shall not protect the
Bank in the event of the Bank's own negligence or bad faith and, without
limiting the foregoing, the Bank shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism, political risk (including,
but not limited to, exchange control restrictions, confiscation, insurrection,
civil strife or armed hostilities) other losses due to Acts of God, nuclear
incident or any loss where the Selected Foreign Sub-Custodian has otherwise
exercised reasonable care.
(j) MONITORING RESPONSIBILITIES. The Bank, shall furnish at
the organizational meeting of the Board and annually thereafter to the Trust,
information concerning the Selected Foreign Sub-Custodians employed hereunder
for use by the Trust in evaluating such Selected Foreign Sub-Custodians to
ensure compliance with the requirements of Rule 17f-5 of the 1940 Act. In
addition, the Bank will promptly inform the Trust in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Trust held by a Foreign Sub-Custodian. In
addition the Bank will, upon request by the Trust, furnish shareholder equity
reports to the Trust. The Bank will not add to or otherwise modify the schedule
of foreign sub-custodians without appropriate notification to the Trust,
including information concerning new or proposed foreign sub-custodians to
ensure compliance with the requirements of rule 17f-5 of the 1940 Act.
(k) TAX LAW. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Trust or the Bank
as custodian of the Trust by the
<PAGE>
tax laws of any jurisdiction, and it shall be the responsibility of the Trust to
notify the Bank of the obligations imposed on the Trust or the Bank as the
custodian of the Trust by the tax law of any non-U.S. jurisdiction, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Trust with respect to any claim for exemption
or refund under the tax law of jurisdictions for which the Trust has provided
such information.
13.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Trust held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Trust.
13.5. FEES AND EXPENSES OF BANK. The Trust will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Trust will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Trust for all reasonable expenses incurred in conjunction
with termination of this Agreement.
13.6 ADVANCES BY BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Trust to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Trust. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Trust's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness, a loan made by the Bank to the Trust payable on demand and
bearing interest at the current rate charged by the Bank for such loans unless
the Trust shall provide the Bank with agreed upon compensating balances. The
Trust agrees that the Bank shall have a continuing lien and security interest to
the extent of any overdraft or indebtedness, in and to any property at any time
held by it for the Trust's benefit or in which the Trust has an interest and
which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Trust authorizes
the Bank, in its sole discretion, at any time to charge any overdraft or
indebtedness, together with interest due thereon against any balance of account
standing to the credit of the Trust on the Bank's books. The Bank agrees to
credit the Trust for interest on any cash balances left uninvested at the Bank.
The Bank will present an accounting of all interest owed by the Trust on
overdrafts and to the Trust on uninvested cash balances on a monthly basis with
its bill for custody services.
14. TERMINATION.
<PAGE>
(a) This Agreement may be terminated at any time after one
year from the date of this Agreement without penalty upon sixty days written
notice delivered by either party to the other by means of registered mail, and
upon the expiration of such sixty days this Agreement will terminate; provided,
however, that the effective date of such termination may be postponed to a date
not more than ninety days from the date of delivery of such notice (i) by the
Bank in order to prepare for the transfer by the Bank of all of the assets of
the Trust held hereunder, and (ii) by the Trust in order to give the Trust an
opportunity to make suitable arrangements for a successor custodian. The Trust
may, however, immediately terminate this Agreement if a conservator or receiver
is appointed for the Bank by the Commonwealth of Massachusetts, Division of
Banks or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. At any time after the
termination of this Agreement, the Trust will, at its request, have access to
the records of the Bank relating to the performance of its duties as custodian.
(b) In the event of the termination of this Agreement, the
Bank will immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all Portfolio Securities duly endorsed and all
records maintained under Section 11 to the successor custodian when appointed by
the Trust. The obligation of the Bank to deliver and transfer over the assets of
the Trust held by it directly to such successor custodian will commence as soon
as such successor is appointed and will continue until completed as aforesaid.
If the Trust does not select a successor custodian within ninety (90) days from
the date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 14(c), deliver the Portfolio Securities and cash of the
Trust held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Trust under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Trust with the
same effect as though selected by the Board.
(c) Prior to the expiration of ninety (90) days after notice
of termination has been given, the Trust may furnish the Bank with an order of
the Trust advising that a successor custodian cannot be found willing and able
to act upon reasonable and customary terms and that there has been submitted to
the investors of the Trust the question of whether the Trust will be liquidated
or will function without a custodian for the assets of the Trust held by the
Bank. In that event the Bank will deliver the Portfolio Securities and cash of
the Trust held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of investors, upon
receipt by the Bank of a copy of the minutes of the meeting of investors at
which action was taken, certified by the Trust's Secretary and an opinion of
counsel to the Trust in form and content satisfactory to the Bank.
15. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
<PAGE>
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust to:
UBS INVESTORS PORTFOLIOS TRUST c/o Signature Financial Group (Cayman) Limited
P.O. Box 2494
Elizabethan Square
George Town, Grand Cayman
Cayman Islands, British West Indies
with copies to:
Union Bank of Switzerland, New York Branch
299 Park Avenue
New York, NY 10171-0026
Attn.: Richard A. Fabietti
and
Union Bank of Switzerland, New York Branch
299 Park Avenue
New York, NY 10171-0026
Attn.: Joe Hamilton
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Carol Lowd
or at such other place as such party may from time to time designate in writing.
17. AMENDMENTS. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties, and in the case of the
Trust, such alteration or amendment will be authorized and approved by its
Board.
<PAGE>
18. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Trust
without the written consent of the Bank or by the Bank without the written
consent of the Trust, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. LIMITATION OF LIABILITY. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of the Trust and notice is hereby given that
this Agreement has been executed on behalf of the Trust by an officer of the
Trust as an officer and not individually and the obligations of the Trust
arising out of this Agreement are not binding upon any of the trustees, officers
or investors of the Trust individually but are binding only upon the assets and
property of the Trust.
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supercedes and terminates, as of the date hereof, all
prior agreements between the Bank and the Trust, whether written or oral,
relating to the custody of the Trust's assets.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first written above.
UBS INVESTOR PORTFOLIOS TRUST
By:
Name:
Title:
ATTEST:______________________
INVESTORS BANK & TRUST COMPANY
By:
Name:
Title:
ATTEST:______________________
<PAGE>
SCHEDULE A
UBS BOND PORTFOLIO
UBS U.S. EQUITY PORTFOLIO
UBS INTERNATIONAL EQUITY PORTFOLIO
CUSTODIAN AGREEMENT SUPPLEMENT
WHEREAS, UBS Investor Portfolios Trust (the "Trust") and Investors Bank
& Trust Company (the "Bank") have entered into a Custodian Agreement dated as of
February __, 1996 (the "Custodian Agreement"), pursuant to which the Trust has
appointed the Bank as Custodian of the Trust;
WHEREAS, the Trust also desires to appoint the Bank as transfer agent
of the Trust, and the Bank, which is registered as a transfer agent in
accordance with Section 17A(c) of the Securities Exchange Act of 1934, as
amended, has indicated its willingness to so act, subject to the terms and
conditions of the Custodian Agreement;
NOW, THEREFORE, the Trust and the Bank hereby amend the Custodian
Agreement, effective as of February __, 1996, in order for the Bank to perform
the following additional duties as transfer agent.
1. MAINTAINING REGISTER OF INTERESTS. The Bank shall maintain
a register which shall contain the name, address and Book Capital
Account Balance of each investor in the Trust, or any series thereof,
and shall maintain continuous proof of all outstanding interests in the
Trust.
2. PROCESSING OF INVESTMENTS. Upon an increase by an investor
of its interest in the Trust (through a capital contribution) the Bank
shall reflect such increase as an increase in the Book Capital Account
Balance of such investor as of the close of business each business day.
3. PROCESSING WITHDRAWALS. Upon a capital withdrawal by any
investor, the Bank shall reflect such withdrawal by a decrease in the
Book Capital Account Balance of such investor as of the close of
business on each business day.
4. PROCESSING REDEMPTIONS. In the event that an investor
elects a complete withdrawal of its interest in the Trust (a
"Redemption"), the Bank shall process such Redemption in accordance
with Proper Instructions, which may include, if so determined by the
Board and included in Proper Instructions, charging fees for effecting
such Redemption, and shall reduce the Book Capital Account of such
investor to zero.
5. SUSPENSION OF WITHDRAWALS AND REDEMPTIONS. Upon receipt of
Proper Instructions indicating that the Board has determined to suspend
the right of withdrawal or Redemption, the Bank shall cease processing
any such withdrawals or Redemptions, until the Bank has received Proper
Instructions indicating that such suspension has been rescinded.
6. BOOK CAPITAL ACCOUNT BALANCE. For the purposes of this
Agreement, the term Book Capital Account Balance for any investor shall
mean that amount as shall be determined by the Bank, as adjusted by the
Bank for any additional investments or withdrawals by such investor in
accordance with paragraphs (2) and (3) above.
7. COMMUNICATIONS WITH INVESTORS. The Bank will promptly
respond
<PAGE>
to communications from investors with respect to its duties hereunder.
8. NO OBLIGATIONS ON PART OF BANK. The Bank shall not be
liable for and shall be under no obligation or duty to (i) determine
whether any investor has satisfied any requirement for investment in
the Trust, either under federal law or the laws of any state or under
the Trust's Declaration of Trust, By-laws, registration statement or
other offering materials; (ii) monitor any purchase with respect to the
securities laws of any state, or any federal securities laws or to make
any filing under the same in connection therewith, or (iii) determine
whether the procedures established by the Board with respect to the
Book Capital Account Balance of any investor are in compliance with any
requirements under federal law or the laws of any state or other
governmental authority, including, without limitation, the requirements
of the Securities and Exchange Commission or any taxing authority.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized.
UBS Investor Portfolios Trust
By:
Name:
Title:
Investors Bank & Trust Company
By:
Name:
Title:
UBS012A
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