As filed via EDGAR with the Securities and Exchange Commission on October
17, 1996.
File No. 811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
EMERGING GROWTH PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, New York 10178
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number, including Area Code: (212) 492-1600
Linda T. Gibson
6 St. James Avenue, Suite 900
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copies to:
Niall L. O'Toole, Esq. Gary S. Schpero, Esq.
The Chase Manhattan Bank Simpson Thacher & Bartlett
270 Park Avenue 425 Lexington Avenue
New York, New York 10017 New York, New York 10017
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EXPLANATORY NOTE
This Registration Statement of Emerging Growth Portfolio has been filed by
the Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended (the "1940 Act"). However, beneficial interests in the Registrant are
not being registered under the Securities Act of 1933, as amended (the "1933
Act"), since such interests will be offered solely in private placement
transactions which 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 which are "accredited
investors" as defined in 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
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.
Emerging Growth Portfolio (the "Portfolio") is a non-diversified, open-end
management investment company which was organized in the United States as a
trust under the laws of the State of New York pursuant to a Declaration of Trust
dated as of August 16, 1996.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in 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.
The Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser
(the "Adviser") and Administrator (the "Administrator"). The address of Chase is
270 Park Avenue, New York, New York 10017. Chase Asset Management, Inc. ("CAM")
is the Portfolio's investment sub-adviser (the "Sub-adviser"). The address of
CAM is 1211 Avenue of the Americas, New York, New York 10036.
Emerging Growth Portfolio seeks long-term capital growth. The Portfolio is
not intended to be a complete investment program, and there is no assurance it
will achieve its objective.
Under normal market conditions, the Portfolio will invest at least 80% of
its total assets in equity securities and at least 65% of its total assets in
equity securities of small to mid cap companies. The Portfolio's advisers
classify small to mid cap companies as those with market capitalizations of $300
million to $4 billion at the time of purchase by the Portfolio. To pursue the
Portfolio's objective the Portfolio's advisers will seek to invest in companies
with consistent, accelerating earnings and attractive stock in companies with
consistent, accelerating earnings and attractive stock valuations. The
Portfolio's advisers utilize a disciplined process involving quantitative
pre-screening techniques, fundamental company research, and a proprietary
company earnings model which identifies the potential for positive earnings.
Current income is an incidental consideration to the Portfolio's objective. You
should be aware that an investment in small to mid cap companies may be more
volatile than investments in companies with greater capitalization, as described
under "Risk Factors" below.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase agreements.
In addition, at times when the Portfolio's advisers deem it advisable to limit
the Portfolio's exposure to the equity markets, the Portfolio may invest up to
20% of its total assets in U.S. Government obligations other than money market
instruments. For temporary defensive
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purposes, the Portfolio may invest without limitation in money market
instruments and repurchase agreements. To the extent that the Portfolio departs
from its investment policies during temporary defensive periods, its investment
objective may not be achieved.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in Part B, below.
Foreign Securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Portfolio's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies, and
they are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. The securities of
foreign companies may be less liquid and more volatile than the securities of
comparable U.S. companies. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Portfolio's assets held abroad) and expenses. It is
possible that nationalization or expropriation of assets, imposition of currency
exchange controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Portfolio's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain countries or issuers and special tax considerations will apply to
foreign securities. The risks can increase if the Portfolio invests in
securities of issuers in emerging markets.
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts or other
similar securities representing securities of foreign issuers (collectively,
"Depositary Receipts"). The Portfolio treats Depositary Receipts as interests in
the underlying securities for purposes of its investment policies. The Portfolio
will limit its investment in Depositary Receipts not sponsored by the issuer of
the underlying securities to no more than 5% of the value of its net assets (at
the time of investment).
U.S. Government Obligations. The Portfolio may invest in obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized at
all times. The Portfolio may purchase securities for delivery at a future date,
which may increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if
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the other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction.
Borrowing and Reverse Repurchase Agreements. The Portfolio may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Portfolio may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Portfolio enters into a reverse repurchase agreement,
it will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowing
under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to money market instruments in its portfolio. In these transactions, the
Portfolio would acquire the right to sell a security at an agreed upon price
within a specified period prior to its maturity date. These transactions involve
some risk to the Portfolio if the other party should default on its obligation
and the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Convertible Securities. The Portfolio may invest up to 20% of its net
assets in convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price or
stated rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objectives and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
STRIPS. The Portfolio may invest up to 20% of its total assets in
separately traded principal and interest components of securities backed by the
full faith and credit of the U.S. Government, including instruments known as
"STRIPS". The value of these instruments tends to fluctuate more in response to
changes in interest rates than the value of ordinary interest-paying debt
securities with similar maturities. The risk is greater when the period to
maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
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There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a hedging
instrument and in the portfolio assets being hedged. The Portfolio is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in more risk to the Portfolio than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a time
when the Portfolio seeks to close out a derivatives position. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater potential
that a counterparty or broker may default. In the event of a default, the
Portfolio may experience a loss. For additional information concerning
derivatives, related instruments and the associated risks, see Part B, below.
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for its shareholders. These restrictions prohibit the Portfolio from: (a)
investing more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of Trustees)
or (b) investing more than 25% of its total assets in any one industry. A
complete description of these and other investment policies is included in Part
B. Except for restriction (b) above and investment policies designated as
fundamental in Part B, the Portfolio's investment policies (including its
investment objective) are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval. However, in the
event of a change in the Portfolio's investment objective, shareholders will be
given at least 30 days' prior written notice.
Risk Factors
The net asset value of the Portfolio's beneficial interests can be expected
to fluctuate based on the value of the securities held by the Portfolio. The
Portfolio is aggressively managed and, therefore, the value of its beneficial
interests is subject to greater fluctuation and an investment in the Portfolio's
beneficial interests involves a higher degree of risk than an investment in a
conservative equity portfolio or a growth portfolio investing entirely in proven
growth equities. An investment in the Portfolio should not be considered a
complete investment program and may not be appropriate for all investors. The
Portfolio is subject to the general risks and considerations associated with
equity investing, as well as the risks discussed herein.
The securities of small to mid cap companies often trade less frequently
and in more limited volume, and may be subject to more abrupt or erratic price
movements, than securities of larger, more established companies. Such companies
may have limited product lines, markets or financial resources, or may depend on
a limited management group.
Because the Portfolio is "non-diversified," the value of its beneficial
interests is more susceptible to developments affecting issuers in which the
Portfolio invests.
To the extent the Portfolio invests in longer-term U.S. Government
obligations, the performance of the Portfolio may also be affected by interest
rate changes. As interest rates increase, the value of any fixed income
securities held by the Portfolio will tend to decrease.
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For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
Item 5. Management of the Fund.
The Portfolio's Board of Trustees provides broad supervision over the
affairs of the Portfolio. See "Trustees and Officers" in Item 14 of Part B for a
complete description of the Trustees of the Portfolio.
The Portfolio's Advisers. Chase acts as investment adviser to the Portfolio
pursuant to an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Portfolio, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Portfolio,
Chase is entitled to receive an annual fee computed daily and paid monthly based
at an annual rate equal to 0.65% of the Portfolio's average daily net assets.
Chase is located at 270 Park Avenue, New York, New York 10017.
CAM, a registered investment adviser, is the sub-investment adviser to the
Portfolio pursuant to an Investment Sub-Advisory Agreement between CAM and
Chase. CAM is a wholly-owned operating subsidiary of Chase. CAM makes investment
decisions for the Portfolio on a day-to-day basis. For these services, CAM is
entitled to receive a fee, payable by Chase from its advisory fee, at an annual
rate equal to 0.30% of the Portfolio's average daily net assets. CAM was
recently formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function. The same individuals who serve as portfolio managers for
Chase also serve as portfolio managers for CAM. CAM is located at 1211 Avenue of
the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management at
Chase, has been responsible for the day-to-day management of the Portfolio since
its inception. Mr. Klassen joined Chase in March 1992 and, in addition to
managing the Portfolio, is a manager of the Vista Small Cap Equity Fund, the
Vista Capital Growth Portfolio and the Vista Growth and Income Portfolio. Prior
to joining Chase, Mr. Klassen was a vice president and portfolio manager at Dean
Witter Reynolds, responsible for managing several mutual funds and other
accounts.
The Administrator. Chase acts as the administrator for the Portfolio and is
entitled to receive from the Portfolio a fee computed daily and paid monthly at
an annual rate equal to 0.05% of its average daily net assets.
Certain Regulatory Matters. Banking laws, including the Glass-Steagall Act
as currently interpreted, prohibit bank holding companies and their affiliates
from sponsoring, organizing, controlling, or distributing shares of, mutual
funds, and generally prohibit banks from issuing, underwriting, selling or
distributing securities. These laws do not prohibit banks or their affiliates
from acting as investment adviser, administrator or custodian to mutual funds or
from purchasing mutual fund shares as agent for a customer. Chase and the
Portfolio believe that Chase (including its affiliates) may perform the services
to be performed by it as described in this Part A without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of
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banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Portfolio, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Portfolio's placement agent or affiliates of the placement
agent or the Portfolio. Chase will not invest the Portfolio's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which Chase
or an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Portfolio. Chase has informed the
Portfolio that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of Chase, including the division that performs services for the
Portfolio as custodian, or in the possession of any affiliate of Chase.
Investors in the Portfolio should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the investor and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
Expenses. The Portfolio pays the expenses incurred in its operations. These
expenses include investment advisory and administrative fees; the compensation
of the Trustees; registration fees; interest charges; taxes; expenses connected
with the execution, recording and settlement of security transactions; fees and
expenses of the Portfolio's custodian for all services to the Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees and
expenses of independent accountants, of legal counsel and of any transfer agent,
registrar or dividend disbursing agent of the Portfolio; insurance premiums; and
expenses of calculating the net asset value of, and the net income on,
beneficial interests of the Portfolio. Service providers to the Portfolio may,
from time to time, voluntarily waive all or a portion of any fees to which they
are entitled.
Item 6. Capital Stock and Other Securities.
The Portfolio is organized as a trust under the laws of the State of New
York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
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 the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the 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.
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Investments in the Portfolio have no preemptive or conversion rights and
are fully paid and nonassessable, except as set forth below. The Portfolio is
not required to hold annual meetings of investors but the Portfolio 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. Investors have
the right to communicate with other investors to the extent provided in Section
16(c) of the Investment Company Act of 1940, as amended (the "1940 Act"), in
connection with requesting a meeting of investors for the purpose of removing
one or more Trustees, which removal requires a two-thirds vote of the
Portfolio's beneficial interests. Investors also have under certain
circumstances the right to remove one or more Trustees without a meeting. Upon
liquidation of the Portfolio, investors would be entitled to share pro rata in
the net assets of the Portfolio available for distribution to investors.
The Portfolio does not intend to distribute to its investors its net
investment income or its net realized capital gains, if any. The end of the
Portfolio's fiscal year is October 31.
Under the anticipated method of operation of the Portfolio, the Portfolio
will not be subject to any income tax. However, each investor in the Portfolio
will be taxable on its share (as determined in accordance with the governing
instruments of the Portfolio) of the Portfolio's taxable income, gain, loss,
deductions and credits 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 the Portfolio's assets, income and distributions will
be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to the Portfolio's exclusive placement
agent, Signature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston,
Massachusetts 02116 or to the Portfolio's transfer agent, DST Systems, Inc. at
210 W. 10th Street, Kansas City, Missouri 64105.
Item 7. Purchase of Securities Being Offered.
Beneficial interests in the 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 "General Description of the
Registrant" above.
An investment in the Portfolio may be made in U.S. dollars without a sales
load at the net asset value next determined after an order is received in "good
order" by the Portfolio. There is no minimum initial or subsequent investment in
the Portfolio. No money may be paid to any intermediary in Hong Kong who is not
a dealer or exempt dealer.
The Portfolio reserves the right to cease accepting investments at any time
or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day the New York Stock Exchange is open for trading. At the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time; however options are priced at 4:15 p.m., Eastern time) on each
such day, the value of each investor's beneficial interest in the Portfolio will
be determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any
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additions or reductions, which are to be effected as of the close of regular
trading on such day, will then be effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of regular trading on
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
close of regular trading and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of the close of regular trading 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 the Portfolio as of the close of regular trading on the
following day the New York Stock Exchange is open for trading.
Item 8. Redemption or Repurchase.
An investor in the Portfolio may reduce any portion or all of its
investment at any time without charge at the net asset value next determined
after a request in "good order" is furnished by the investor to the Portfolio.
The proceeds of a reduction will be paid in U.S. dollars by the Portfolio
normally on the next business day after the reduction 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 reduction
may be suspended or the payment of the proceeds therefrom postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on such Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
Not applicable.
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PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History ............................. B-1
Investment Objective and Policies ........................... B-1
Management of the Fund ...................................... B-15
Control Persons and Principal Holders of Securities ......... B-18
Investment Advisory and Other Services ...................... B-19
Brokerage Allocation and Other Practices .................... B-21
Capital Stock and Other Securities .......................... B-23
Purchase, Redemption and Pricing of Securities .............. B-24
Tax Status .................................................. B-26
Underwriters ................................................ B-26
Calculation of Performance Data ............................. B-26
Financial Statements ........................................ B-26
Item 12. General Information and History.
Not applicable
Item 13. Investment Objective and Policies.
Part A sets forth the investment objective and various investment policies
of the Portfolio. This Part B supplements and should be read in conjunction with
the related section of Part A. For descriptions of the securities ratings of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("Standard & Poor's") and Fitch Investors Service, Inc. ("Fitch"), see Appendix
B.
Investment Policies.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities of
one year or less), U.S. Treasury notes (maturities of one to ten years) and U.S.
Treasury bonds (generally maturities of greater than ten years); and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow any
amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the U.S. Government agency or instrumentality or (d) the credit of the agency
or instrumentality. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Student Loan Marketing Association, United States
Postal Service, Chrysler Corporate Loan Guarantee Board, Small Business
Administration, Tennessee Valley Authority and any other enterprise established
or sponsored by the U.S. Government. Certain U.S. Government Securities,
including U.S. Treasury bills, notes and bonds, Government National Mortgage
Association certificates and Federal Housing Administration debentures, are
supported by the full faith and
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credit of the United States. Other U.S. Government Securities are issued or
guaranteed by federal agencies or government sponsored enterprises and are not
supported by the full faith and credit of the United States. These securities
include obligations that are supported by the right of the issuer to borrow from
the U.S. Treasury, such as obligations of the Federal Home Loan Banks, and
obligations that are supported by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small Business
Administration, Federal Aviation Administration, Department of Defense, Bureau
of Indian Affairs and Private Export Funding Corporation, which often provide
higher yields than are available from the more common types of government-backed
instruments. However, such specialized instruments may only be available from a
few sources, in limited amounts, or only in very large denominations; they may
also require specialized capability in portfolio servicing and in legal matters
related to government guarantees. While they may frequently offer attractive
yields, the limited-activity markets of many of these securities means that, if
the Portfolio were required to liquidate any of them, it might not be able to do
so advantageously; accordingly, the Portfolio investing in such securities
normally to hold such securities to maturity or pursuant to repurchase
agreements, and would treat such securities (including repurchase agreements
maturing in more than seven days) as illiquid for purposes of its limitation on
investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation, and foreign banks (including their
U.S. branches) having total assets in excess of $10 billion (or the equivalent
in other currencies), and such other U.S. and foreign commercial banks which are
judged by the advisers to meet comparable credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit is
a short-term negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased on a discount
basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by
a borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Fixed time
deposits are obligations of branches of United States banks or foreign banks
which are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. Fixed time deposits subject to withdrawal penalties and with
respect to which the Portfolio cannot realize the proceeds thereon within seven
days are deemed "illiquid" for the purposes of its restriction on investments in
illiquid securities. Deposit notes are notes issued by commercial banks which
generally bear fixed rates of interest and typically have original maturities
ranging from eighteen months to five years.
Banks are subject to extensive governmental regulations that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an
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important part in the operations of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations. Bank obligations may be general obligations of
the parent bank or may be limited to the issuing branch by the terms of the
specific obligations or by government regulation. Investors should also be aware
that securities of foreign banks and foreign branches of United States banks may
involve foreign investment risks in addition to those relating to domestic bank
obligations.
Depositary Receipts. The Portfolio will limit its investment in Depository
Receipts not sponsored by the issuer of the underlying security to no more than
5% of the value of its net assets (at the time of investment). A purchaser of an
unsponsored Depositary Receipt may not have unlimited voting rights and may not
receive as much information about the issuer of the underlying securities as
with a sponsored Depositary Receipt.
Corporate Reorganizations. In general, securities that are the subject of a
tender or exchange offer or proposal sell at a premium to their historic market
price immediately prior to the announcement of the offer or proposal. The
increased market price of these securities may also discount what the stated or
appraised value of the security would be if the contemplated action were
approved or consummated. These investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of these contingencies requires unusually broad knowledge and experience on the
part of the advisers that must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offeror as well as the dynamics of the business
climate when the offer or proposal is in progress. Investments in reorganization
securities may tend to increase the turnover ratio of the Portfolio and increase
its brokerage and other transaction expenses.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants but normally have a shorter duration and are distributed
directly by the issuer to shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
Repurchase Agreements. The Portfolio will enter into repurchase agreements
only with member banks of the Federal Reserve System and securities dealers
believed creditworthy, and only if fully collateralized by securities in which
the Portfolio is permitted to invest. Under the terms of a typical repurchase
agreement, the Portfolio would acquire an underlying instrument for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase the instrument and the Portfolio to resell the instrument
at a fixed price and time, thereby determining the yield during the Portfolio's
holding period. This procedure results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement
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is subject to the risk that the seller may fail to repurchase the security.
Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements entered
into by the Portfolio will be fully collateralized at all times during the
period of the agreement in that the value of the underlying security will be at
least equal to the amount of the loan, including the accrued interest thereon,
and the Portfolio or its custodian or sub-custodian will have possession of the
collateral, which the Board of Trustees believes will give it a valid, perfected
security interest in the collateral. Whether a repurchase agreement is the
purchase and sale of a security or a collateralized loan has not been
conclusively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. In the event of default by the
seller under a repurchase agreement construed to be a collateralized loan, the
underlying securities would not be owned by the Portfolio, but would only
constitute collateral for the seller's obligation to pay the repurchase price.
Therefore, the Portfolio may suffer time delays and incur costs in connection
with the disposition of the collateral. The Board of Trustees believes that the
collateral underlying repurchase agreements may be more susceptible to claims of
the seller's creditors than would be the case with securities owned by the
Portfolio. Repurchase agreements maturing in more than seven days are treated as
illiquid for purposes of the Portfolio's restrictions on purchases of illiquid
securities. Repurchase agreements are also subject to the risks described below
with respect to stand-by commitments.
Forward Commitments. In order to invest the Portfolio's assets immediately,
while awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will normally
be purchased. When a commitment to purchase a security on a forward commitment
basis is made, procedures are established consistent with the General Statement
of Policy of the Securities and Exchange Commission concerning such purchases.
Since that policy currently recommends that an amount of the Portfolio's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, a separate account of the Portfolio consisting of cash,
cash equivalents or high quality debt securities equal to the amount of the
Portfolio's commitments securities will be established at the Portfolio's
custodian bank. For the purpose of determining the adequacy of the securities in
the account, the deposited securities will be valued at market value. If the
market value of such securities declines, additional cash, cash equivalents or
highly liquid securities will be placed in the account daily so that the value
of the account will equal the amount of such commitments by the Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the Portfolio's portfolio
are subject to changes in value based upon the public's perception of the issuer
and changes, real or anticipated, in the level of interest rates. Purchasing
securities on a forward commitment basis can involve the risk that the yields
available in the market when the delivery takes place may actually be higher or
lower than those obtained in the transaction itself. On the settlement date of
the forward commitment transaction, the Portfolio will meet its obligations from
then available cash flow, sale of securities held in the separate account, sale
of other securities or, although it would not normally expect to do so, from
sale of the forward commitment securities themselves (which may have a value
greater or lesser than the Portfolio's payment obligations). The sale of
securities to meet such obligations may result in the realization of capital
gains or losses.
To the extent the Portfolio engages in forward commitment transactions, it
will do so for the purpose of acquiring securities consistent with its
investment objective and policies and not for the purpose of investment
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leverage, and settlement of such transactions will be within 90 days from the
trade date.
Reverse Repurchase Agreements. Reverse Repurchase Agreements involve the
sale of securities held by the Portfolio with an agreement to repurchase the
securities at an agreed upon price and date. The repurchase price is generally
equal to the original sales price plus interest. Reverse repurchase agreements
are usually for seven days or less and cannot be repaid prior to their
expiration dates. Reverse repurchase agreements involve the risk that the market
value of the portfolio securities transferred may decline below the price at
which the Portfolio is obliged to purchase the securities.
Stripped Obligations. The principal and interest components of United
States Treasury bonds with remaining maturities of longer than ten years are
eligible to be traded independently under the Separate Trading of Registered
Interest and Principal of Securities ("STRIPS") program. Under the STRIPS
program, the principal and interest components are separately issued by the
United States Treasury at the request of depository financial institutions,
which then trade the component parts separately. The interest component of
STRIPS may be more volatile than that of United States Treasury bills with
comparable maturities.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, the Portfolio may elect to treat as liquid, in accordance
with procedures established by the Board of Trustees, certain investments in
restricted securities for which there may be a secondary market of qualified
institutional buyers as contemplated by Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Rule 144A
provides an exemption from the registration requirements of the Securities Act
for the resale of certain restricted securities to qualified institutional
buyers. Section 4(2) paper is restricted as to disposition under the federal
securities laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale of Section 4(2) paper by the
purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid market
for Rule 144A securities or Section 4(2) paper will develop or be maintained.
The Trustees have adopted policies and procedures for the purpose of determining
whether securities that are eligible for resale under Rule 144A and Section 4(2)
paper are liquid or illiquid for purposes of the limitation on investment in
illiquid securities. Pursuant to those policies and procedures, the Trustees
have delegated to the advisers the determination as to whether a particular
instrument is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell the security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature of
the security and the time needed to dispose of the security. The Trustees will
periodically review the Portfolio's purchases and sales of Rule 144A securities
and Section 4(2) paper.
Stand-By Commitments. In a put transaction, the Portfolio acquires the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date, and a stand-by commitment entitles the Portfolio to
same-day settlement and to receive an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. Stand-by commitments are subject to certain risks, which include the
inability of the issuer of the commitment to pay for the securities at the time
the commitment is exercised, the fact that the commitment is not marketable by
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the Portfolio, and that the maturity of the underlying security will generally
be different from that of the commitment.
Securities Loans. To the extent specified in Part A, the Portfolio is
permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of the Portfolio's total assets. In
connection with such loans, the Portfolio will receive collateral consisting of
cash, cash equivalents, U.S. Government securities or irrevocable letters of
credit issued by financial institutions. Such collateral will be maintained at
all times in an amount equal to at least 102% of the current market value plus
accrued interest of the securities loaned. The Portfolio can increase its income
through the investment of such collateral. The Portfolio continues to be
entitled to the interest payable or any dividend-equivalent payments received on
a loaned security and, in addition, to receive interest on the amount of the
loan. However, the receipt of any dividend-equivalent payments by the Portfolio
on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with the Portfolio. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delays in
receiving additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower experience financial
difficulty. Loans will be made only to firms deemed by the advisers to be of
good standing and will not be made unless, in the judgment of the advisers, the
consideration to be earned from such loans justifies the risk.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Portfolio may employ
derivative and related instruments as tools in the management of portfolio
assets. Put briefly, a "derivative" instrument may be considered a security or
other instrument which derives its value from the value or performance of other
instruments or assets, interest or currency exchange rates, or indexes. For
instance, derivatives include futures, options, forward contracts, structured
notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: First,
to reduce risk by hedging (offsetting) an investment position. Second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for the Portfolio.
The Portfolio may invest its assets in derivative and related instruments
subject only to the Portfolio's investment objective and policies and the
requirement that the Portfolio maintain segregated accounts consisting of liquid
assets, such as cash, U.S. Government securities, or other high-grade debt
obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under such instruments with
respect to positions where there is no underlying portfolio asset so as to avoid
leveraging the Portfolio.
The value of some derivative or similar instruments in which the Portfolio
may invest may be particularly sensitive to changes in prevailing interest rates
or other economic factors, and--like other investments of the
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Portfolio--the ability of the Portfolio to successfully utilize these
instruments may depend in part upon the ability of the advisers to forecast
interest rates and other economic factors correctly. If the advisers
inaccurately forecast such factors and has taken positions in derivative or
similar instruments contrary to prevailing market trends, the Portfolio could be
exposed to the risk of a loss. The Portfolio might not employ any or all of the
strategies described herein, and no assurance can be given that any strategy
used will succeed.
Set forth below is an explanation of the various derivatives strategies and
related instruments the Portfolio may employ along with risks or special
attributes associated with them. This discussion is intended to supplement Part
A as well as provide useful information to prospective investors.
Risk Factors
As explained more fully below and in the discussions of particular
strategies or instruments, there are a number of risks associated with the use
of derivatives and related instruments. There can be no guarantee that there
will be a correlation between price movements in a hedging vehicle and in the
portfolio assets being hedged. An incorrect correlation could result in a loss
on both the hedged assets in the Portfolio and the hedging vehicle so that the
portfolio return might have been greater had hedging not been attempted. This
risk is particularly acute in the case of "cross-hedges" between currencies. The
advisers may inaccurately forecast interest rates, market values or other
economic factors in utilizing a derivatives strategy. In such a case, the
Portfolio may have been in a better position had it not entered into such
strategy. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains. Strategies not involving hedging may increase
the risk to the Portfolio. Certain strategies, such as yield enhancement, can
have speculative characteristics and may result in more risk to the Portfolio
than hedging strategies using the same instruments. There can be no assurance
that a liquid market will exist at a time when the Portfolio seeks to close out
an option, futures contract or other derivative or related position. Many
exchanges and boards of trade limit the amount of fluctuation permitted in
option or futures contract prices during a single day; once the daily limit has
been reached on particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain instruments are relatively new and
without a significant trading history. As a result, there is no assurance that
an active secondary market will develop or continue to exist. Finally,
over-the-counter instruments typically do not have a liquid market. Lack of a
liquid market for any reason may prevent the Portfolio from liquidating an
unfavorable position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in these markets. In certain instances, particularly
those involving over-the-counter transactions, forward contracts there is a
greater potential that a counterparty or broker may default or be unable to
perform on its commitments. In the event of such a default, the Portfolio may
experience a loss. In transactions involving currencies, the value of the
currency underlying an instrument may fluctuate due to many factors, including
economic conditions, interest rates, governmental policies and market forces.
Specific Uses and Strategies
Set forth below are explanations of various strategies involving
derivatives and related instruments which may be used by the Portfolio.
Options on Securities, Securities Indexes and Debt Instruments. The
Portfolio may PURCHASE, SELL or EXERCISE call and put options on (i) securities,
(ii) securities indexes, and (iii) debt instruments.
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Although in most cases these options will be exchange-traded, the Portfolio
may also purchase, sell or exercise over-the-counter options. Over-the-counter
options differ from exchange-traded options in that they are two-party contracts
with price and other terms negotiated between buyer and seller. As such,
over-the-counter options generally have much less market liquidity and carry the
risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Portfolio intends to purchase pending its
ability to invest in such securities in an orderly manner. The Portfolio may
also use combinations of options to minimize costs, gain exposure to markets or
take advantage of price disparities or market movements. For example, the
Portfolio may sell put or call options it has previously purchased or purchase
put or call options it has previously sold. These transactions may result in a
net gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call option
which is sold. The Portfolio may write a call or put option in order to earn the
related premium from such transactions. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of a similar option.
The Portfolio will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, the
Portfolio writing a covered call (i.e., where the underlying securities are held
by the Portfolio) has, in return for the premium on the option, given up the
opportunity to profit from a price increase in the underlying securities above
the exercise price, but has retained the risk of loss should the price of the
underlying securities decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price.
If a put or call option purchased by the Portfolio is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price or, in the case of
a call, remains less than or equal to the exercise price, the Portfolio will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when the Portfolio seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, the Portfolio may be unable to close out a position.
Futures Contracts and Options on Futures Contracts. The Portfolio may
purchase or sell (i) interest-rate futures contracts, (ii) futures contracts on
specified instruments or indices, and (iii) options on these futures contracts
("futures options").
The futures contracts and futures options may be based on various
instruments or indices in which the Portfolio may invest such as foreign
currencies, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For example,
the Portfolio may sell a futures contract--or buy a futures option--to protect
against a decline in value, or reduce the duration, of portfolio holdings.
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Likewise, these instruments may be used where the Portfolio intends to acquire
an instrument or enter into a position. For example, the Portfolio may purchase
a futures contract--or buy a futures option--to gain immediate exposure in a
market or otherwise offset increases in the purchase price of securities or
currencies to be acquired in the future. Futures options may also be written to
earn the related premiums.
When writing or purchasing options, the Portfolio may simultaneously enter
into other transactions involving futures contracts or futures options in order
to minimize costs, gain exposure to markets, or take advantage of price
disparities or market movements. Such strategies may entail additional risks in
certain instances. The Portfolio may engage in cross-hedging by purchasing or
selling futures or options on a security or currency different from the security
or currency position being hedged to take advantage of relationships between the
two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Portfolio
will only enter into futures contracts or options on futures contracts which are
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system.
Forward Contracts. The Portfolio may use foreign currency and interest-rate
forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. The Portfolio that
may invest in securities denominated in foreign currencies may, in addition to
buying and selling foreign currency futures contracts and options on foreign
currencies and foreign currency futures, enter into forward foreign currency
exchange contracts to reduce the risks or otherwise take a position in
anticipation of changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be a fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency contract, the Portfolio "locks in"
the exchange rate between the currency it will deliver and the currency it will
receive for the duration of the contract. As a result, the Portfolio reduces its
exposure to changes in the value of the currency it will deliver and increases
its exposure to changes in the value of the currency it will exchange into. The
effect on the value of the Portfolio is similar to selling securities
denominated in one currency and purchasing securities denominated in another.
Transactions that use two foreign currencies are sometimes referred to as
"cross-hedges."
The Portfolio may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from the Portfolio's investments or
anticipated investments in securities denominated in foreign currencies. The
Portfolio may also enter into these contracts for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another.
The Portfolio may also use forward contracts to hedge against changes in
interest rates, increase exposure to a market or otherwise take advantage of
such changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future date.
Interest Rate and Currency Transactions. The Portfolio may employ currency
and interest rate management techniques, including transactions in options
(including yield curve options), futures, options on futures, forward
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foreign currency exchange contracts, currency options and futures and currency
and interest rate swaps. The aggregate amount of the Portfolio's net currency
exposure will not exceed the total net asset value of its portfolio. However, to
the extent that the Portfolio is fully invested while also maintaining currency
positions, it may be exposed to greater combined risk.
The Portfolio will only enter into interest rate and currency swaps on a
net basis, i.e., the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate and currency swaps do not involve the delivery of
securities, the underlying currency, other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate and currency swaps
is limited to the net amount of interest or currency payments that the Portfolio
is contractually obligated to make. If the other party to an interest rate or
currency swap defaults, the Portfolio's risk of loss consists of the net amount
of interest or currency payments that the Portfolio is contractually entitled to
receive. Since interest rate and currency swaps are individually negotiated, the
Portfolio expects to achieve an acceptable degree of correlation between their
portfolio investments and their interest rate or currency swap positions.
The Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
The Portfolio may purchase or sell without limitation as to a percentage of
its assets forward foreign currency exchange contracts when the advisers
anticipate that the foreign currency will appreciate or depreciate in value, but
securities denominated in that currency do not present attractive investment
opportunities and are not held by the Portfolio. In addition, the Portfolio may
enter into forward foreign currency exchange contracts in order to protect
against adverse changes in future foreign currency exchange rates. The Portfolio
may engage in cross-hedging by using forward contracts in one currency to hedge
against fluctuations in the value of securities denominated in a different
currency if its advisers believe that there is a pattern of correlation between
the two currencies. Forward contracts may reduce the potential gain from a
positive change in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Portfolio than if it had not entered into such
contracts. The use of foreign currency forward contracts will not eliminate
fluctuations in the underlying U.S. dollar equivalent value of the prices of or
rates of return on the Portfolio's foreign currency denominated portfolio
securities and the use of such techniques will subject the Portfolio to certain
risks.
The matching of the increase in value of a forward contract and the decline
in the U.S. dollar equivalent value of the foreign currency denominated asset
that is the subject of the hedge generally will not be precise. In addition, the
Portfolio may not always be able to enter into foreign currency forward
contracts at attractive prices, and this will limit the Portfolio's ability to
use such contract to hedge or cross-hedge its assets. Also, with regard to the
Portfolio's use of cross-hedges, there can be no assurance that historical
correlations between the movement of certain foreign currencies relative to the
U.S. dollar will continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies underlying the
Portfolio's cross-hedges and the movements in the exchange rates of the foreign
currencies in which the Portfolio's assets that are the subject of such
cross-hedges are denominated.
The Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. The Portfolio will typically use
interest rate swaps to shorten the effective duration of its portfolio. Interest
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rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Currency swaps involve the exchange of
their respective rights to make or receive payments in specified currencies.
Structured Products. The Portfolio may invest in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of certain other investments. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, or specified instruments (such as commercial bank loans) and the issuance
by that entity of one or more classes of securities ("structured products")
backed by, or representing interests in, the underlying instruments. The cash
flow on the underlying instruments may be apportioned among the newly issued
structured products to create securities with different investment
characteristics such as varying maturities, payment priorities and interest rate
provisions, and the extent of the payments made with respect to structured
products is dependent on the extent of the cash flow on the underlying
instruments. The Portfolio may invest in structured products which represent
derived investment positions based on relationships among different markets or
asset classes.
The Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by a
formula to the price of an underlying instrument. Inverse floaters have coupon
rates that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost of
Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon rate
while any drop in the reference rate of an inverse floater causes an increase in
the coupon rate. A spread trade is an investment position relating to a
difference in the prices or interest rates of two securities where the value of
the investment position is determined by movements in the difference between the
prices or interest rates, as the case may be, of the respective securities. When
the Portfolio invests in notes linked to the price of an underlying instrument,
the price of the underlying security is determined by a multiple (based on a
formula) of the price of such underlying security. A structured product may be
considered to be leveraged to the extent its interest rate varies by a magnitude
that exceeds the magnitude of the change in the index rate of interest. Because
they are linked to their underlying markets or securities, investments in
structured products generally are subject to greater volatility than an
investment directly in the underlying market or security. Total return on the
structured product is derived by linking return to one or more characteristics
of the underlying instrument. Because certain structured products of the type in
which the Portfolio may invest may involve no credit enhancement, the credit
risk of those structured products generally would be equivalent to that of the
underlying instruments. The Portfolio may invest in a class of structured
products that is either subordinated or unsubordinated to the right of payment
of another class. Subordinated structured products typically have higher yields
and present greater risks than unsubordinated structured products. Although the
Portfolio's purchase of subordinated structured products would have similar
economic effect to that of borrowing against the underlying securities, the
purchase will not be deemed to be leverage for purposes of the Portfolio's
fundamental investment limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be, "investment
companies" as defined in the 1940 Act. As a result, the Portfolio's investments
in these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private
B-11
<PAGE>
placement transactions and there currently is no action trading market for
structured products. As a result, certain structured products in which the
Portfolio invests may be deemed illiquid and subject to its limitation on
illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there currently is no active trading market for structured
products.
Additional Restrictions on the Use of Futures and Option Contracts
The Portfolio is not a "commodity pool" (i.e., a pooled investment vehicle
which trades in commodity futures contracts and options thereon and the operator
of which is registered with the CFTC) and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that the Portfolio may enter into such transactions for purposes other
than bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5% of
the liquidation value of the Portfolio's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation.
When the Portfolio purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be deposited in a segregated
account with the Portfolio's custodian so that the amount so segregated, plus
the initial deposit and variation margin held in the account of its broker, will
at all times equal the value of the futures contract, thereby insuring that the
use of such futures is unleveraged.
The Portfolio's ability to engage in the transactions described herein may
be limited by the current federal income tax requirement that the Portfolio
derive less than 30% of its gross income from the sale or other disposition of
stock or securities held for less than three months.
Investment Restrictions
The Portfolio has adopted the following investment restrictions which may
not be changed without approval by a "majority of the outstanding shares" of the
Portfolio which, as used in this Statement of Additional Information, means the
vote of the lesser of (i) 67% or more of the total beneficial interests of a
Portfolio present at a meeting, if the holders of more than 50% of the
outstanding total beneficial interests of a Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding total beneficial interests of
a Portfolio.
The Portfolio may not:
(1) borrow money, except that the Portfolio may borrow money for
temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings.
Any borrowings representing more than 5% of the Portfolio's total assets
must be repaid before the Portfolio may make additional investments;
(2) make loans, except that the Portfolio may: (i) purchase and hold
debt instruments (including without limitation, bonds, notes, debentures or
other obligations and certificates of deposit, bankers' acceptances and
fixed time deposits) in accordance with its investment objectives and
policies; (ii) enter into repurchase agreements with respect to portfolio
B-12
<PAGE>
securities; and (iii) lend portfolio securities with a value not in excess
of one-third of the value of its total assets;
(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Portfolio's total assets would be invested in
the securities of companies whose principal business activities are in the
same industry. Notwithstanding the foregoing, with respect to the
Portfolio's permissible futures and options transactions in U.S. Government
securities, positions in such options and futures shall not be subject to
this restriction;
(4) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments but this shall not prevent
the Portfolio from (i) purchasing or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities or (ii) engaging in forward purchases or sales of foreign
currencies or securities;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Portfolio from investing in securities or other instruments backed by
real estate or securities of companies engaged in the real estate
business). Investments by the Portfolio in securities backed by mortgages
on real estate or in marketable securities of companies engaged in such
activities are not hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except
that (a) the Portfolio may engage in transactions that may result in the
issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order; (b)
the Portfolio may acquire other securities, the acquisition of which may
result in the issuance of a senior security, to the extent permitted under
applicable regulations or interpretations of the 1940 Act; and (c) subject
to the restrictions set forth above, the Portfolio may borrow money as
authorized by the 1940 Act. For purposes of this restriction, collateral
arrangements with respect to permissible options and futures transactions,
including deposits of initial and variation margin, are not considered to
be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as
the Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.
For purposes of investment restriction (5) above, real estate includes Real
Estate Limited Partnerships. For purposes of investment restriction (3) above,
industrial development bonds, where the payment of principal and interest is the
ultimate responsibility of companies within the same industry, are grouped
together as an "industry." Investment restriction (3) above, however, is not
applicable to investments in municipal obligations where the issuer is regarded
as a state, city, municipality or other public authority since such entities are
not members of an "industry". Supranational organizations are collectively
considered to be members of a single "industry" for purposes of restriction (3)
above.
In addition, the Portfolio is subject to the following nonfundamental
restrictions which may be changed without investor approval:
(1) The Portfolio may not, with respect to 50% of its assets, hold
more than 10% of the outstanding voting securities of any issuer.
B-13
<PAGE>
(2) The Portfolio may not make short sales of securities, other than
short sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment program
of the Portfolio.
(3) The Portfolio may not purchase or sell interests in oil, gas or
mineral leases.
(4) The Portfolio may not invest more than 15% of its net assets in
illiquid securities.
(5) The Portfolio may not write, purchase or sell any put or call
option or any combination thereof, provided that this shall not prevent (i)
the writing, purchasing or selling of puts, calls or combinations thereof
with respect to portfolio securities or (ii) with respect to the
Portfolio's permissible futures and options transactions, the writing,
purchasing, ownership, holding or selling of futures and options positions
or of puts, calls or combinations thereof with respect to futures.
(6) The Portfolio may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than 3% of
the securities of any one investment company or invest more than 10% of its
total assets in the securities of other investment companies.
It is the Portfolio's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Portfolio has been
advised that the staff of the Securities and Exchange Commission's Division of
Investment Management does not consider these to be United States Government
securities, as defined under the Investment Company Act of 1940, as amended.
For purposes of the Portfolio's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
In order to permit the sale of its beneficial interests in certain states,
the Portfolio may make commitments more restrictive than the investment policies
and limitations described above and in Part A. Should the Portfolio determine
that any such commitment is no longer in its best interests, it will revoke the
commitment by terminating sales of its beneficial interests in the state
involved. In order to comply with certain federal and state statutes and
regulatory policies, as a matter of operating policy, the Portfolio will not:
(i) invest more than 5% of its assets in companies which, including
predecessors, have a record of less than three years' continuous operation, (ii)
invest in warrants, valued at the lower of cost or market, in excess of 5% of
the value of its net assets, and no more than 2% of such value may be warrants
which are not listed on the New York or American Stock Exchanges, or (iii)
purchase or retain in its portfolio any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or Trustee
of the Trust or Portfolio, or is an officer or director of the Adviser, if after
the purchase of the securities of such issuer by the Portfolio one or more of
such persons owns 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.
If a percentage or rating restriction on investment or use of assets set
forth herein or in Part A is adhered to at the time a transaction is
B-14
<PAGE>
effected, later changes in percentage resulting from any cause other than
actions by the Portfolio will not be considered a violation. If the value of the
Portfolio's holdings of illiquid securities at any time exceeds the percentage
limitation applicable at the time of acquisition due to subsequent fluctuations
in value or other reasons, the Board of Trustees will consider what actions, if
any, are appropriate to maintain adequate liquidity.
Item 14. Management of the Fund.
The Trustees and officers of the Portfolio and their principal occupations
for at least the past five years are set forth below. Their titles may have
varied during that period. Asterisks indicate those Trustees who are "interested
persons" (as defined in the 1940 Act) of the Portfolio. Unless otherwise
indicated below, the address of each officer other than the Chairman is 6 St.
James Avenue, Suite 900, Boston, Massachusetts 02116.
<TABLE>
<CAPTION>
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- -------------------------------------------------------------------------------------------
<S> <C>
Stuart W. Cragin, Jr. Trustee. Retired; formerly, President,
Trustee Fairfield Testing Laboratory, Inc. He has
108 Valley Road previously served in a variety of
Cos Cob, CT 06807 marketing, manufacturing and general
Age: 63 management positions with Union Camp
Corp., Trinity Paper & Plastics Corp., and
Conover Industries.
Irving L. Thode Trustee. Retired; formerly Vice President of
Trustee Quotron Systems. He has previously served
80 Perkins Road in a number of executive positions with
Greenwich, CT 06830 Control Data Corp., including President of
Age: 64 its Latin American Operations, and General
Manager of its Data Services
business.
*H. Richard Vartabedian Trustee, Chairman and President.
Chairman and President Consultant, Republic Bank of New York;
P.O. Box 296, Beach Road, formerly, Senior Investment Officer,
Hendrick's Head Division Executive of the Investment
Southport, ME 04576 Management Division of The Chase Manhattan
Age: 60 Bank, N.A., 1980 through 1991.
Fergus Reid, III Trustee. Chairman of the Board of Trustees
Trustee of Mutual Fund Group and Mutual Fund
202 June Road Trust. Chairman and Chief Executive
Stamford, CT 06903 Officer, Lumelite Corporation, since
Age: 63 September 1985; Trustee, Morgan Stanley
Funds.
Joseph J. Harkins Trustee. Retired; Commercial Sector
Trustee Executive and Executive Vice President of
257 Plantation Circle South The Chase Manhattan Bank, N.A. from 1985
Ponte Vedra Beach, FL 32082 through 1989. He has been employed by Chase in
Age: 64 numerous capacities and offices since 1954.
Director of Blessings Corporation, Jefferson
Insurance Company of New York, Monticello
Insurance Company and National.
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- -------------------------------------------------------------------------------------------
<S> <C>
Richard E. Ten Haken Trustee. Formerly District Superintendent
Trustee of Schools, Monroe No. 2 and Orleans
4 Barnfield Road Counties, New York; Chairman of the Board
Pittsfield, NY 14534 and President, New York State Teachers'
Age: 61 Retirement System.
William J. Armstrong Trustee. Vice President and Treasurer,
Trustee Ingersoll-Rand Company.
49 Aspen Way
Upper Saddle River, NJ 07458
Age: 54
John R.H. Blum Trustee. Attorney in private practice;
Trustee formerly, partner in the law firm of
322 Main Street Richards, O'Neil & Allegaert; Commissioner
Lakeville, CT 06039 of Agriculture - State of Connecticut,
Age: 66 1992-1995.
*W. Perry Neff Trustee. Independent Financial Consultant;
Trustee Director of North America Life Assurance
RR 1 Box 102 Co., Petroleum & Resources Corp. and The
Weston, VT 05181 Adams Express Co.; formerly Director and
Age: 68 Chairman of The Hanover Funds Inc.; formerly
Director, Chairman and President of The
Hanover Investments Funds Inc.
Roland R. Eppley, Jr. Trustee. Retired; formerly President and
Trustee Chief Executive Officer, Eastern States
105 Coventry Place Bankcard Association Inc. (1971-1988);
Palm Beach Gardens, FL 33418 Director, Janel Hydraulics, Inc.; formerly
Age: 63 Director of The Hanover Funds, Inc.
W.D. MacCallan Trustee. Director of The Adams Express Co.
Trustee and Petroleum & Resources Corp.; formerly
624 East 45th Street Chairman of the Board and Chief Executive
Savannah, GA 31405 Officer of The Adams Express Co. and
Age: 68 Petroleum & Resources Corp.; formerly
Director of The Hanover Funds, Inc. and
The Hanover Investment Funds, Inc.
John R. Elder Treasurer of the Portfolio; Vice
Treasurer President, Signature Financial Group, Inc.
Age: 48 (since April 1995); Treasurer, Phoenix
Family of Mutual Funds (prior to
April, 1995); Audit Manager,
Price Waterhouse (prior to 1988).
Linda T. Gibson Secretary of the Portfolio; Attorney,
Secretary Signature Financial Group, Inc. (since
Age: 31 June 1991); Assistant Secretary, Signature
Broker-Dealer Services, Inc. (since
November 1992); graduate student, Boston
University School of Law (from September
1989 to May 1992).
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- -------------------------------------------------------------------------------------------
<S> <C>
Susan Jakuboski Assistant Treasurer of the Portfolio;
Assistant Treasurer Manager and Senior Fund Administrator,
Age: 32 Signature Financial Group, Inc. (since
August 1994); Assistant Treasurer,
Signature Broker-Dealer Services, Inc.
(since September 1994); Fund Compliance
Administrator, Concord Financial Group,
Inc. (prior to September 1994).
Molly S. Mugler Assistant Secretary of the Portfolio;
Assistant Secretary Legal Counsel and Assistant Secretary,
Age: 44 Signature Financial Group, Inc. (since
December, 1988); Assistant Secretary,
Signature Broker-Dealer Services, Inc.
(since April, 1989).
</TABLE>
The Board of Trustees of the Portfolio presently has an Audit Committee.
The members of the Audit Committee are Messrs. Vartabedian, Cragin, Thode and
Reid. The function of the Audit Committee is to recommend independent auditors
and monitor accounting and financial matters.
Remuneration of Trustees and Certain Executive Officers.
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the Adviser is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. Each Trustee
receives a fee, allocated among all investment companies for which the Trustee
serves, which consists of an annual retainer component and a meeting fee
component. Each Trustee of the Vista Funds receives a quarterly retainer of
$12,000 and an additional per meeting fee of $1,500. Members of the Committee
receive a meeting fee only if the committee meeting is held on a day other than
the day on which a regularly scheduled meeting is held. The Chairman of the
Trustees receives a 50% increment over regular Trustee total compensation for
serving in such capacity.
Vista Funds Retirement Plan for Eligible Trustees
The Trustees have instituted a Retirement Plan for Eligible Trustees (the
"Plan") pursuant to which each Trustee (who is not an employee of any of the
funds advised by the advisers, the advisers, Administrator or Distributor or any
of their affiliates) may be entitled to certain benefits upon retirement from
the Board of Trustees. Pursuant to the Plan, the normal retirement date is the
date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the Adviser or Sub-Adviser (collectively, the "Covered
Portfolios"). Each Eligible Trustee is entitled to receive from the Covered
Portfolios an annual benefit commencing on the first day of the calendar quarter
coincident with or following his date of retirement equal to 10% of the highest
annual compensation received from the Covered Portfolios multiplied by the
number of such Trustee's years of service (not in excess of 10 years) completed
with respect to any of the Covered Portfolios. Such benefit is payable to each
eligible Trustee in monthly installments for the life of the Trustee.
Set forth in the table below are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of September 30, 1996, the estimated credited years
of service for Messrs. Reid, Harkins, Ten Haken, Armstrong, Blum,
B-17
<PAGE>
Vartabedian, Cragin, Thode, Neff, Eppley and MacCallan are 11, 5, 3, 3, 3, 3, 3,
3, 6, 7, and 6, respectively.
Highest Annual Compensation Paid by All Vista Funds
------------------------------------------------------
$40,000 $45,000 $50,000 $55,000
Years of
Service Estimated Annual Benefit Upon Retirement
- ----------- ------------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000
9 36,000 40,500 45,000 49,500
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
The Trustees have also instituted a Deferred Compensation Plan for Eligible
Trustees (the "Deferred Compensation Plan") pursuant to which each Trustee (who
is not an employee of any of the Covered Portfolios, the advisers, Administrator
or Distributor or any of their affiliates) may enter into agreements with the
Funds whereby payment of the Trustees' fees are deferred until the payment date
elected by the Trustee (or the Trustee's termination of service). The deferred
amounts are invested in shares of a Fund on whose Board the Trustee sits,
subject to the Trustee's election. The deferred amounts are paid out in a lump
sum or over a period of several years as elected by the Trustee at the time of
deferral. If a deferring Trustee dies prior to the distribution of amounts held
in the deferral account, the balance of the deferral account will be distributed
to the Trustee's designated beneficiary in a single lump sum payment as soon as
practicable after such deferring Trustee's death. Messrs. Ten Haken, Thode and
Vartabedian have each executed a deferred compensation agreement for the 1996
calendar year and as of September 30, 1996, they had contributed $15,200,
$39,500 and $59,250, respectively.
Ownership of Shares of the Portfolios. As of October 1, 1996, the Trustees and
officers as a group directly or beneficially own no interest in the Portfolio.
The Declaration of Trust provides that the Portfolio 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
Portfolio, unless, as to liability to the Portfolio 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 with
respect to any matter. 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 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.
The Portfolio pays no direct remuneration to any officer of the Portfolio.
Item 15. Control Persons and Principal Holders of Securities.
It is proposed that on or about the commencement of operations Vista
Emerging Growth Fund and either Vista Fund Distributors, Inc. (a Delaware
Corporation) or Signature Broker-Dealer Services, Inc. (a Delaware Corporation)
will own all of the value of the outstanding interests in the Portfolio. Vista
Emerging Growth Fund, a portfolio of a Massachusetts business trust, would then
control the Portfolio and will take actions without the approval of any other
investor. Vista Fund Distributors, Inc. and Signature Broker-Dealer Services,
Inc. are indirect wholly-owned subsidiaries of BYSIS Fund Services, Inc. and
Signature Financial Group, Inc., respectively.
B-18
<PAGE>
Vista Emerging Growth Fund has informed the Portfolio that whenever it is
requested to vote on any proposal of the Portfolio, it will hold a meeting of
shareholders and will cast its vote as instructed by its shareholders. The other
investor in the Portfolio follows the same or a similar practice.
Item 16. Investment Advisory and Other Services.
Adviser and Sub-Adviser
Chase acts as investment adviser to the Portfolio pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Subject to such policies as the
Board of Trustees may determine, Chase is responsible for investment decisions
for the Portfolio. Pursuant to the terms of the Advisory Agreement, Chase
provides the Portfolio with such investment advice and supervision as it deems
necessary for the proper supervision of the Portfolio's investments. The Adviser
continuously provides investment programs and determines from time to time what
securities shall be purchased, sold or exchanged and what portion of the
Portfolio's assets shall be held uninvested. The Adviser to the Portfolio
furnishes, at its own expense, all services, facilities and personnel necessary
in connection with managing the investments and effecting portfolio transactions
for the Portfolio. The Advisory Agreement for the Portfolio will continue in
effect from year to year only if such continuance is specifically approved at
least annually by the Board of Trustees or by vote of a majority of the
Portfolio's outstanding voting securities and by a majority of the Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on such Advisory Agreement.
Under the Advisory Agreement, the Adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Portfolio
with greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement and the Sub-adviser's
agreement with the Adviser, the Adviser and Sub-adviser are permitted to render
services to others. Each advisory agreement is terminable without penalty by the
Portfolio on not more than 60 days', nor less than 30 days', written notice when
authorized either by a majority vote of the Portfolio's investors or by a vote
of a majority of the Board of Trustees of the Portfolio, or by the Adviser or
Sub-adviser on not more than 60 days', nor less than 30 days', written notice,
and will automatically terminate in the event of its "assignment" (as defined in
the 1940 Act). The advisory agreements provide that the Adviser or Sub-adviser
under such agreement shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution of portfolio transactions for the Portfolio, except for wilful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties thereunder.
With respect to the Portfolio, the equity research team of the Adviser
looks for two key variables when analyzing stocks for potential investment by
equity portfolios: value and momentum. To uncover these qualities, the team uses
a combination of quantitative analysis, fundamental research and computer
technology to help identify undervalued stocks.
In the event the operating expenses of the Portfolio, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Portfolio imposed by the securities laws or
regulations thereunder of any state in which the beneficial interests of the
Portfolio are qualified for sale, as such limitations may be raised or lowered
from time to time, the Adviser shall reduce its advisory fee (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Adviser shall be deducted from the
monthly advisory fee otherwise payable with respect to the Portfolio during such
fiscal year; and if such amounts should exceed the monthly fee, the Adviser
shall pay to the Portfolio its share of such excess expenses no later than the
last day of the first month of the next succeeding fiscal year.
B-19
<PAGE>
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a Sub-adviser. In addition, the Advisory Agreement provides
that Chase may render services through its own employees or the employees of one
or more affiliated companies that are qualified to act as an investment adviser
of the Portfolio and are under the common control of Chase as long as all such
persons are functioning as part of an organized group of persons, managed by
authorized officers of Chase.
Chase, on behalf of the Portfolio, has entered into an investment
sub-advisory agreement with Chase Asset Management, Inc. ("CAM"). With respect
to the day-to-day management of the Portfolio, under the sub-advisory agreement,
the Sub-adviser makes decisions concerning, and places all orders for, purchases
and sales of securities and helps maintain the records relating to such
purchases and sales. The Sub-adviser may, in its discretion, provide such
services through its own employees or the employees of one or more affiliated
companies that are qualified to act as an investment adviser to the Portfolio
under applicable laws and are under the common control of Chase; provided that
(i) all persons, when providing services under the sub-advisory agreement, are
functioning as part of an organized group of persons, and (ii) such organized
group of persons is managed at all times by authorized officers of the
Sub-adviser. This arrangement will not result in the payment of additional fees
by the Portfolio.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Also included among Chase's accounts are commingled trust
funds and a broad spectrum of individual trust and investment management
portfolios. These accounts have varying investment objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment adviser
and was formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function, and the same individuals who serve as portfolio managers
for CAM also serve as portfolio managers for Chase.
In consideration of the services provided by the Adviser pursuant to the
Advisory Agreement, the Adviser is entitled to receive from the Portfolio an
investment advisory fee computed daily and paid monthly based on a rate equal to
a percentage of the Portfolio's average daily net assets specified in Part A.
However, the Adviser may voluntarily agree to waive a portion of the fees
payable to it on a month-to-month basis. For its services under its sub-advisory
agreement, CAM will be entitled to receive such compensation, payable by the
Adviser out of its advisory fee, as is described in Part A.
Administrator
Pursuant to an Administrative Services Agreement (the "Administration
Agreement"), Chase serves as administrator of the Portfolio. Chase provides
certain administrative services to the Portfolio, including, among other
responsibilities, coordinating the negotiation of contracts and fees with, and
the monitoring of performance and billing of, the Portfolio's independent
contractors and agents; preparation for signature by an officer of the Portfolio
of all documents required to be filed for compliance by the Portfolio with
applicable laws and regulations excluding those of the securities laws of
various states; arranging for the computation of performance data, including net
asset value and yield; responding to investor inquiries; and arranging for the
maintenance of books and records of the Portfolio and providing, at its own
expense, office facilities, equipment and personnel necessary to carry out its
duties. The administrator does not have any responsibility or authority for the
management of the Portfolio, the determination of investment policy, or for any
matter pertaining to the distribution of beneficial interests.
Under the Administration Agreement, Chase is permitted to render
administrative services to others. The Administration Agreement will continue in
effect from year to year with respect to the Portfolio only if such continuance
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is specifically approved at least annually by the Board of Trustees of the
Portfolio or by vote of a majority of the Portfolio's outstanding voting
securities and in either case, by a majority of the Trustees who are not parties
in the Administration Agreement or "interested persons" (as defined in the 1940
Act) of any such party. The Administration Agreement is terminable without
penalty by the Portfolio on not more than 60 days' nor less than 30 days'
written notice when authorized either by a majority vote of the Portfolio's
investors or by vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Portfolio, or by Chase on not more than 60 days' nor less than
30 days' written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The Administration Agreement also
provides that neither Chase nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration of
the Portfolio except for willful misfeasance, bad faith or gross negligence in
the performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Administration Agreement.
In addition, the Administration Agreement provides that, in the event the
operating expenses of the Portfolio, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Portfolio imposed by the securities laws or regulations thereunder of any state
in which the beneficial interests of the Portfolio are qualified for sale, as
such limitations may be raised or lowered from time to time, Chase shall reduce
its administration fee (which fee is described below) to the extent of its share
of such excess expenses. The amount of any such reduction to be borne by Chase
shall be deducted from the monthly administration fee otherwise payable to Chase
during such fiscal year; and if such amounts should exceed the monthly fee,
Chase shall pay to the Portfolio its share of such excess expenses no later than
the last day of the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreement, Chase receives from the Portfolio a fee computed daily
and paid monthly at an annual rate equal to 0.05% of its average daily net
assets. Chase may voluntarily waive a portion of the fees payable to it with
respect to the Portfolio on a month-to-month basis.
Custodian
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of the Portfolio and receives such compensation as is from time to time
agreed upon by the Portfolio and Chase. As custodian, Chase provides oversight
and record keeping for the assets held in the portfolio of the Portfolio. Chase
also provides or arranges for the provision of fund accounting services for the
income, expenses and beneficial interests outstanding for the Portfolio. Chase
is located at 3 Metrotech Center, Brooklyn, NY 11245.
Independent Accountants
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, NY 10036,
independent accountants of the Portfolio, provides the Portfolio with audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the SEC.
Counsel
Counsel to the Portfolio is Simpson Thacher & Bartlett (a partnership which
includes professional corporations), 425 Lexington Avenue, New York, NY 10017.
Item 17. Brokerage Allocation and Other Practices.
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the Adviser or Sub-adviser
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and who is appointed and supervised by senior officers of the Adviser or
Sub-adviser. Changes in the Portfolio's investments are reviewed by the Board of
Trustees. The portfolio manager may serve other clients of the advisers in a
similar capacity.
The frequency of portfolio transactions--the portfolio turnover rate--will
vary from year to year depending upon market conditions. Because a high turnover
rate may increase transaction costs and the possibility of taxable short-term
gains, the advisers will weigh the added costs of short-term investment against
anticipated gains. The Portfolio will engage in portfolio trading if its
advisers believe a transaction, net of costs (including custodian charges), will
help it achieve its investment objectives. For the fiscal year ending October
31, 1997, the annual portfolio turnover for the Emerging Growth Portfolio is not
expected to exceed 100%.
Under the Advisory Agreement and the sub-advisory agreement, the Adviser
and Sub-adviser shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Portfolio. In assessing the best
overall terms available for any transaction, the Adviser and Sub-adviser
consider all factors they deem relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to the Adviser or
Sub-adviser, and the reasonableness of the commissions, if any, both for the
specific transaction and on a continuing basis. The Adviser and Sub-adviser are
not required to obtain the lowest commission or the best net price for the
Portfolio on any particular transaction, and are not required to execute any
order in a fashion either preferential to the Portfolio relative to other
accounts they manage or otherwise materially adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser or
Sub-adviser to the Portfolio normally seeks to deal directly with the primary
market makers unless, in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser or Sub-adviser on the
tender of the Portfolio's portfolio securities in so-called tender or exchange
offers. Such soliciting dealer fees are in effect recaptured for the Portfolio
by the Adviser and Sub-adviser. At present, no other recapture arrangements are
in effect.
Under the Advisory Agreement and sub-advisory agreement and as permitted by
Section 28(e) of the Securities Exchange Act of 1934, the Adviser or Sub-adviser
may cause the Portfolio to pay a broker-dealer which provides brokerage and
research services to the Adviser or Sub-adviser, the Portfolio and/or other
accounts for which they exercise investment discretion an amount of commission
for effecting a securities transaction for the Portfolio in excess of the amount
other broker-dealers would have charged for the transaction if they determine in
good faith that the greater commission is reasonable in relation to the value of
the brokerage and research services provided by the executing broker-dealer
viewed in terms of either a particular transaction or their overall
responsibilities to accounts over which they exercise investment discretion. Not
all of such services are useful or of value in advising the Portfolio. The
Adviser and Sub-adviser report to the Board of Trustees regarding overall
commissions paid by the Portfolio and their reasonableness in relation to the
benefits to the Portfolio. The term "brokerage and research services" includes
advice as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or of
purchasers or sellers of securities, furnishing analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts, and effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
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<PAGE>
The management fees that the Portfolio pays to the Adviser will not be
reduced as a consequence of the Adviser's or Sub-adviser's receipt of brokerage
and research services. To the extent the Portfolio's portfolio transactions are
used to obtain such services, the brokerage commissions paid by the Portfolio
will exceed those that might otherwise be paid by an amount which cannot be
presently determined. Such services generally would be useful and of value to
the Adviser or Sub-adviser in serving one or more of their other clients and,
conversely, such services obtained by the placement of brokerage business of
other clients generally would be useful to the Adviser and Sub-adviser in
carrying out their obligations to the Portfolio. While such services are not
expected to reduce the expenses of the Adviser or Sub-adviser, they would,
through use of the services, avoid the additional expenses which would be
incurred if they should attempt to develop comparable information through their
own staffs.
In certain instances, there may be securities that are suitable for the
Portfolio as well as one or more of the Adviser's or Sub-adviser's other
clients. Investment decisions for the Portfolio and for other clients are made
with a view to achieving their respective investment objectives. It may develop
that the same investment decision is made for more than one client or that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When the Portfolio and one or more other clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Portfolio is
concerned. However, it is believed that the ability of the Portfolio to
participate in volume transactions will generally produce better executions for
the Portfolio.
No portfolio transactions are executed with the Adviser, or with any
affiliate of the Adviser, acting either as principal or as broker. Similarly, no
securities transactions are executed with any person or entity which directly or
indirectly controls a beneficial interest in the Portfolio equal to 20% or more
of the net asset value of the Portfolio.
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio 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 the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees of the Portfolio if they
choose to do so and in such event the other investors in the Portfolio would not
be able to elect any Trustee. The Portfolio is not required to hold annual
meetings of investors but the Portfolio will hold special meetings of investors
when in the judgment of the Portfolio's Trustees it is necessary or desirable to
submit matters for an investor vote. No material amendment may be made to the
Portfolio's Declaration of Trust without the affirmative majority vote of
investors (with the vote of each being in proportion to the amount of its
investment).
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<PAGE>
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all 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 their
investment), except that if the Trustees of the Portfolio recommend such sale of
assets, the approval by vote of a majority of the investors (with the vote of
each being in proportion to the amount of its investment) will be sufficient.
The Portfolio 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), or (ii) by
the Trustees of the Portfolio by written notice to its investors.
The Portfolio is organized as a trust under the laws of the State of New
York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents 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 Portfolio itself was unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the Portfolio
are not binding upon the Trustees individually but only upon the property of the
Portfolio 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 willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Declaration of Trust provides that
the trustees and officers will be indemnified by the Portfolio against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the Portfolio, unless, as to
liability to the Portfolio or its investors, it is finally adjudicated that they
engaged in willful 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
Portfolio. 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 in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
The Portfolio will continue in existence until 20 years after the death of
the last survivor of certain specified individuals listed in its Declaration of
Trust unless it is terminated or dissolved earlier in accordance with the
provisions of that Declaration.
The Portfolio will furnish to each of its investors at least annually as of
the end of its fiscal year a report of operations containing a balance sheet and
a statement of income prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. The Portfolio will also furnish to each of its investors at least
semiannually an interim report of operations containing an unaudited balance
sheet and an unaudited statement of income.
Item 19. Purchase, Redemption and Pricing of Securities Being Offered.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
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meaning of Section 4(2) of the 1933 Act. See "Purchase of Securities" and
"Redemption or Repurchase" in Part A.
The Portfolio's portfolio securities and other assets are valued as
follows:
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities in which there
were no sales during the day or for unlisted securities not reported on the
NASDAQ system. Bonds and other fixed income securities (other than short-term
obligations, but including listed issues) are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the Board
of Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between issue price and stated redemption price at maturity) and premiums
(generally, the excess of purchase price over stated redemption price at
maturity). Interest income on short-term obligations is determined on the basis
of interest and discount accrued less amortization of premium.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day that the New York Stock Exchange is open for business. As
of the close of regular trading on the New York Stock Exchange on each such day
(normally 4:00 p.m. Eastern time; however, options are priced at 4:15 p.m.,
Eastern time), the value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or reductions which are to be effected on that day will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of regular trading on such day plus
or minus, as the case may be, the amount of net additions to or reductions in
the investor's investment in the Portfolio effected on such day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of regular trading on 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 the
Portfolio as of the close of regular trading on the following day the New York
Stock Exchange is open for trading.
The Portfolio reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption by making payment in
whole or in part in readily marketable securities chosen by the Portfolio and
valued as they are for purposes of computing the Portfolio's net asset value (a
redemption in kind). If payment is made in securities, an investor may incur
transaction expenses in converting these securities into cash.
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The Portfolio will not redeem in kind except in circumstances in which the
owner of a beneficial interest in the Portfolio is permitted to redeem in kind
or unless requested by such owner.
Item 20. Tax Status.
The Portfolio will be classified for federal income tax purposes as a
partnership that will not be a "publicly traded partnership." As a result, the
Portfolio will not be subject to federal income taxation. Instead, the investors
in the Portfolio will take into account, in computing their federal income tax
liability, their share of the Portfolio's income, gains, losses, deductions,
credits and tax preference items for the taxable year of the Portfolio ending
within or with the taxable year of the investor, without regard to whether they
have received any cash distributions from the Portfolio. The Portfolio's taxable
year end is October 31. The Portfolio is organized as a New York trust. The
Portfolio is not subject to any income or franchise tax in the State of New
York.
Under interpretations of the Internal Revenue Service, for purposes of
determining whether an investor in a Portfolio satisfies the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (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 Portfolio intends to conduct its operations so as to enable investors
to satisfy those requirements.
Distributions received by investors in the Portfolio generally will not
result in the investor's 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 investor's basis in its interest in the Portfolio prior
to the distribution, (2) income or gain may be recognized if the distribution is
made in liquidation of the investor's entire interest in the Portfolio and
includes a disproportionate share of any unrealized receivables held by the
Portfolio, (3) loss may be recognized if the distribution is made in liquidation
of the investor's entire interest in the Portfolio and consists solely of cash
and/or unrealized receivables and the investor's share of the Portfolio's
losses, and (4) gain or loss may be recognized on a distribution to an investor
that contributed property to the Portfolio. The investor's basis in its interest
in the Portfolio generally will equal the amount of cash and the basis of any
property which the investor invests in the Portfolio, increased by the
investor's share of net income and gains from the Portfolio, and decreased by
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
The foregoing is intended to be a general summary of certain United States
federal income tax considerations affecting the Portfolio and its investors.
Accordingly, investors are advised to consult their own tax advisers with
respect to the particular federal, state, local and foreign tax consequences of
an investment in the Portfolio.
Item 21. Underwriters.
Not applicable.
Item 22. Calculation of Performance Data.
Not applicable.
Item 23. Financial Statements.
None.
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APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds -- are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds -- are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA Bonds -- are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures -- are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S. Government.
FHA Insured Notes -- are bonds issued by the Farmers Home Administration,
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates -- are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA and
the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-insured
mortgages underlying the Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures may result in the return of the greater part of principal invested
far in advance of the maturity of the mortgages in the pool. Foreclosures impose
no risk to principal investment because of the GNMA guarantee. As the prepayment
rate of individual mortgage pools will vary widely, it is not possible to
accurately predict the average life of a particular issue of GNMA Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates. Principal which is so prepaid will be reinvested although possibly
at a lower rate. In addition, prepayment of mortgages included in the mortgage
pool underlying a GNMA Certificate purchased at a premium could result in a loss
to the Portfolio. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on, among
other things, the level of market rates, the Certificate's coupon rate and the
prepayment experience of the pool of mortgages backing each Certificate. If
agency securities are purchased at a premium above principal, the premium is not
guaranteed by the issuing agency and a decline in the market value to par may
result in a loss of the premium, which may be particularly likely in the event
of a prepayment. When and if available, U.S. Government obligations may be
purchased at a discount from face value.
<PAGE>
GNMA FHLMC Bonds and GNMA FNMA Bonds -- are mortgage-backed bonds issued by
the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association, respectively, and are guaranteed by the U.S. Government.
GSA Participation Certificates -- are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed by
the U.S. Government.
New Communities Debentures -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds -- are bonds issued by public housing and urban
renewal agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates -- are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures -- are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
U.S. Government.
FHLMC Bonds -- are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds -- are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds -- are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds -- are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates -- are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import Bank
of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
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APPENDIX B
DESCRIPTION OF RATINGS
A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative
in high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security
<PAGE>
ranks in the higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
AA--Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and differs from "AAA"
issues only in small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
B-2
<PAGE>
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the bigger designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated F-1+ by Fitch
A--Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
B-3
<PAGE>
interest and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have adverse
consequences on these bonds, and therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of
a credit within a rating category. Plus and minus signs, however, are not used
in the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1--Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance
for timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term adverse
changes could cause these securities to be rated below investment grade.
LOC--The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds.
After purchase by the Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require a sale of such security by the Portfolio. However,
the Portfolio's investment manager will consider such event in its determination
of whether the Portfolio should continue to hold the security. To the extent the
ratings given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, the Portfolio will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in Part A and Part B.
B-4
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
None.
Financial Statements Included in Part C:
None.
(b) Exhibits:
1 Declaration of Trust. (1)
2 By-Laws. (1)
3 None.
4 Not Applicable.
5(a) Form of Investment Advisory Agreement between Emerging Growth
Portfolio and The Chase Manhattan Bank. (1)
5(b) Form of Investment Sub-Advisory Agreement between The Chase
Manhattan Bank and Chase Asset Management, Inc. (1)
7(a) Form of Retirement Plan for Eligible Trustees. (2)
7(b) Form of Deferred Compensation Plan for Eligible Trustees. (2)
8(a) Form of Custodian Agreement between Emerging Growth Portfolio and
The Chase Manhattan Bank. (1)
8(b) Form of Sub-Custodian Agreement. (2)
9(a) Form of Exclusive Placement Agent Agreement between Signature
Broker-Dealer Services, Inc. and Emerging Growth Portfolio. (1)
9(b) Form of Administrative Services Agreement between Emerging Growth
Portfolio and The Chase Manhattan Bank. (1)
10 Not Applicable.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
14 None.
15 None.
16 Not Applicable.
17 Not Applicable.
18 Not Applicable.
19 Powers of Attorney for: H. Richard Vartabedian, Stuart W. Cragin,
Jr., Fergus Reid, III, Irving Thode, Joseph J. Harkins, William
J. Armstrong, Richard E. Ten Haken, John R. H. Blum, W. Perry
Neff, Roland R. Eppley, Jr., W. D. MacCallan. (1)
------------------
(1) Filed herewith.
(2) Incorporated by reference to Amendment No. 6 to the Registration
Statement on Form N-1A of Mutual Fund Group (File No. 33-14196)
as filed with the Securities and Exchange Commission on
March 23, 1990.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not applicable
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of October 17, 1996
Beneficial Interests 0
Item 27. Indemnification.
Reference is hereby made to Article V of the Registrant's Declaration of
Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser and 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 Chase Manhattan Bank (the "Adviser") is a commercial bank providing a
wide range of banking and investment services.
To the knowledge of the Registrant, none of the directors or executive
officers of the Adviser, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain directors
and executive officers of the Adviser also hold or have held various positions
with bank and non-bank affiliates of the Adviser, including its parent, The
Chase Manhattan Corporation. Each director listed below is also a director of
The Chase Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ----------------------------- ----------------------- ------------------------------------
<S> <C> <C>
Thomas G. Labreque Chairman of the Chairman, Chief Executive
Board, Chief Officer and a Director of The
Executive Officer Chase Manhattan Corporation and
and Director a Director of AMAX, Inc.
M. Anthony Burns Director Chairman of the Board, President
and Chief Executive Officer of
Ryder System, Inc.
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director
of Amoco Corporation and
Director of Abbott Laboratories
Paul W. MacAvoy Director Dean of the Yale School of
Organization and Management
C-2
<PAGE>
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ----------------------------- ----------------------- ------------------------------------
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of
each of ARCO Chemical Company
and Westinghouse Electric
Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer Inc.,
Celgene Corp., General Motors
Corporation and International
Paper Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone and
Telegraph Company and CBS Inc.
Donald H. Trautlein Director Retired Chairman and Chief
Executive Officer of Bethlehem
Steel Corporation
James L. Ferguson Director Retired Chairman and Chief
Executive Officer of General
Foods Corporation
William H. Gray III Director President and Chief Executive
Officer of the United Negro
College Fund, Inc.
David T. Kearns Director Retired Chairman and Chief
Executive Officer of the Xerox
Corporation
Delano E. Lewis Director President and Chief Executive
Officer of National Public Radio
John H. McArthur Director Dean of the Harvard Graduate
School of Business
Administration
Frank A. Bennack, Jr. Director President and Chief Executive
Officer of The Hearst
Corporation
Michael C. Bergerac Director Chairman of the Board and Chief
Executive Officer of Bergerac &
Co., Inc.
Susan V. Berresford Director President, The Ford Foundation
Randolph W. Bromery Director President, Springfield College;
President, Geoscience
Engineering Corporation
C-3
<PAGE>
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ----------------------------- ----------------------- ------------------------------------
Charles W. Duncan, Jr. Director Private Investor
Melvin R. Goodes Director Chairman of the Board and Chief
Executive Officer, The Warner-
Lambert Company
George V. Grune Director Retired Chairman and Chief
Executive Officer, The Reader's
Digest Association, Inc.;
Chairman, The DeWitt Wallace-
Reader's Digest Fund, The Lila-
Wallace Reader's Digest Fund
William B. Harrison, Jr. Vice Chairman of the
Board
Harold S. Hook Director Chairman and Chief Executive
Officer, General Corporation
Helen L. Kaplan Director Of Counsel, Skadden, Arps,
Slate, Meagher & Flom
E. Michael Kruse Vice Chairman of the
Board
J. Bruce Llewellyn Director Chairman of the Board, The Philadelphia
Coca-Cola Bottling Company, The Coca-Cola
Bottling Company of Wilmington, Inc.,
Queen City Broadcasting, Inc.
John P. Mascotte Director Chairman, The Missouri
Corporation of Johnson & Higgins
John F. McGillicuddy Director Retired Chairman of the Board
and Chief Executive Officer of
Chemical Bank
Edward D. Miller Senior Vice Chairman
of the Board
Walter V. Shipley Chairman of the
Board and Chief
Executive Officer
Andrew C. Sigler Director Chairman of the Board and Chief
Executive Officer, Champion
International Corporation
Michael I. Sovern Director President, Emeritus and
Chancellor Kent, Professor of
Law, Columbia University
John R. Stafford Director Chairman, President and Chief
Executive Officer, American Home
Products Corporation
W. Bruce Thomas Director Private Investor
C-4
<PAGE>
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ----------------------------- ----------------------- ------------------------------------
Marina V. N. Whitman Director Professor of Business
Administration and Public
Policy, University of Michigan
Richard D. Wood Director Retired Chairman of the Board,
Eli Lilly and Company
</TABLE>
Chase Asset Management, Inc. (the "Sub-Adviser") is a registered investment
adviser and was formed for the purpose of providing discretionary investment
advisory services to institutional clients and to consolidate Chase's investment
management function.
The list required by this Item 28 of officers and directors of the
Sub-Adviser, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV filed by the Sub-Adviser pursuant to the Investment Advisers
Act of 1940 (SEC File No. 801-50256).
Item 29. Principal Underwriters.
Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
The Chase Manhattan Bank One Chase Square, Tower 7
(investment adviser and administrator) Rochester, New York 14643
Signature Broker-Dealer Services, Inc. 6 St. James Avenue, Suite 900
(exclusive placement agent) Boston, MA 02116
The Chase Manhattan Bank 3 Metrotech Center
(custodian) Brooklyn, New York 11245
</TABLE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Not applicable.
C-5
<PAGE>
SIGNATURES
Emerging Growth Portfolio has duly caused this Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York on the 17th day of October 1996.
EMERGING GROWTH PORTFOLIO
By /s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
Chairman and President
This Registration Statement on Form N-1A of Emerging Growth Portfolio has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ H. Richard Vartabedian Trustee, Chairman
- -------------------------- and President October 17, 1996
H. Richard Vartabedian
/s/ Stuart W. Cragin, Jr. Trustee October 17, 1996
- --------------------------
Stuart W. Cragin, Jr.
/s/ Fergus Reid, III Trustee October 17, 1996
- --------------------------
Fergus Reid, III
/s/ Irving Thode Trustee October 17, 1996
- --------------------------
Irving Thode
/s/ Joseph J. Harkins Trustee October 17, 1996
- --------------------------
Joseph J. Harkins
/s/ William J. Armstrong Trustee October 17, 1996
- --------------------------
William J. Armstrong
/s/ Richard E. Ten Haken Trustee October 17, 1996
- --------------------------
Richard E. Ten Haken
/s/ John R. H. Blum Trustee October 17, 1996
- --------------------------
John R. H. Blum
/s/ W. Perry Neff Trustee October 17, 1996
- --------------------------
W. Perry Neff
/s/ Roland R. Eppley, Jr. Trustee October 17, 1996
- --------------------------
Roland R. Eppley, Jr.
/s/ W. D. MacCallan Trustee October 17, 1996
- --------------------------
W. D. MacCallan
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER
- --------------
1 Declaration of Trust. (1)
2 By-Laws. (1)
3 None.
4 Not Applicable.
5(a) Form of Investment Advisory Agreement between
Emerging Growth Portfolio and The Chase Manhattan
Bank. (1)
5(b) Form of Investment Sub-Advisory Agreement between
The Chase Manhattan Bank and Chase Asset
Management, Inc. (1)
7(a) Form of Retirement Plan for Eligible Trustees. (2)
7(b) Form of Deferred Compensation Plan
for Eligible Trustees. (2)
8(a) Form of Custodian Agreement between Emerging
Growth Portfolio and The Chase Manhattan Bank. (1)
8(b) Form of Sub-Custodian Agreement. (2)
9(a) Form of Exclusive Placement Agent Agreement
between Signature Broker-Dealer Services, Inc.
and Emerging Growth Portfolio. (1)
9(b) Form of Administrative Services Agreement between
Emerging Growth Portfolio and The Chase Manhattan
Bank. (1)
10 Not Applicable.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
14 None.
15 None.
16 Not Applicable.
17 Not Applicable.
18 Not Applicable.
19 Powers of Attorney for: H. Richard Vartabedian,
Stuart W. Cragin, Jr., Fergus Reid, III, Irving
Thode, Joseph J. Harkins, William J. Armstrong,
Richard E. Ten Haken, John R. H. Blum, W. Perry
Neff, Roland R. Eppley, Jr., W. D. MacCallan. (1)
----------------------------
(1) Filed herewith.
(2) Incorporated by reference to Amendment No. 6 to Registration Statement
on Form N-1A of Mutual Fund Group (File No. 33-14196) as filed with the
Securities and Exchange Commission on March 23, 1990.
EMERGING GROWTH PORTFOLIO
-------------------------
DECLARATION OF TRUST
Dated as of August 16, 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 ..................................... 3
Section 2.3 Resignation, Removal and Retirement ................... 3
Section 2.4 Vacancies ............................................. 4
Section 2.5 Meetings .............................................. 4
Section 2.6 Officers; Chairman of the Board ....................... 5
Section 2.7 By-Laws ............................................... 5
ARTICLE III--Powers of Trustees ............................................. 5
Section 3.1 General ............................................... 5
Section 3.2 Investments ........................................... 6
Section 3.3 Legal Title ........................................... 6
Section 3.4 Sale and Increases of Interests ....................... 7
Section 3.5 Decreases and Redemptions of Interests ................ 7
Section 3.6 Borrow Money .......................................... 7
Section 3.7 Delegation; Committees ................................ 7
Section 3.8 Collection and Payment ................................ 7
Section 3.9 Expenses .............................................. 7
Section 3.10 Miscellaneous Powers .................................. 7
Section 3.11 Further Powers ........................................ 8
ARTICLE IV--Investment Management and Administration and Placement
Agent Arrangements ...................................... 8
Section 4.1 Investment Management and Other Arrangements .......... 8
Section 4.2 Parties to Contract ................................... 9
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. .............................................. 9
Section 5.1 Liability of Holders; Indemnification ................ 9
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties .................................. 10
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. ........................... 10
Section 5.4 Mandatory Indemnification ............................. 10
Section 5.5 No Bond Required of Trustees .......................... 11
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. ................................. 11
Section 5.7 Reliance on Experts, etc. ............................. 11
ARTICLE VI--Interests ...................................................... 12
Section 6.1 Interests ............................................ 12
Section 6.2 Non-Transferability ................................... 12
Section 6.3 Register of Interests ................................. 12
ARTICLE VII--Increases, Decreases And Redemptions of Interests .............. 12
<PAGE>
PAGE
----
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions ................................. 13
Section 8.1 Book Capital Account Balances ......................... 13
Section 8.2 Allocations and Distributions to Holders .............. 13
Section 8.3 Power to Modify Foregoing Procedures .................. 13
ARTICLE IX--Holders ......................................................... 13
Section 9.1 Rights of Holders ..................................... 13
Section 9.2 Meetings of Holders ................................... 13
Section 9.3 Notice of Meetings .................................... 14
Section 9.4 Record Date for Meetings, Distributions, etc. ......... 14
Section 9.5 Proxies, etc. ......................................... 14
Section 9.6 Reports .............................................. 15
Section 9.7 Inspection of Records ................................ 15
Section 9.8 Holder Action by Written Consent ...................... 15
Section 9.9 Notices .............................................. 15
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc.................... 15
Section 10.1 Duration .............................................. 15
Section 10.2 Termination ........................................... 16
Section 10.3 Dissolution ........................................... 17
Section 10.4 Amendment Procedure ................................... 17
Section 10.5 Merger, Consolidation and Sale of Assets .............. 18
Section 10.6 Incorporation ......................................... 18
ARTICLE XI--Miscellaneous ................................................... 19
Section 11.1 Certificate of Designation; Agent for
Service of Process .................................. 19
Section 11.2 Governing Law ........................................ 19
Section 11.3 Counterparts .......................................... 19
Section 11.4 Reliance by Third Parties ............................ 19
Section 11.5 Provisions in Conflict With Law or Regulations ........ 19
<PAGE>
DECLARATION OF TRUST
OF
EMERGING GROWTH PORTFOLIO
This DECLARATION OF TRUST of the Emerging Growth Portfolio is made as of
the 16th day of August, 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 trust fund under the law of the
State of New York for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the trust assets be composed of money and
property contributed thereto by the holders of interests in the trust entitled
to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund and will manage and dispose
of the same for the benefit of the holders of interests in the Trust and subject
to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust") shall be the
Emerging Growth Portfolio 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 word "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
holders of interests in the Trust.
1.2. Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The term "Interested Person" shall have the meaning given it in the 1940
Act.
"Book Capital Account" shall mean, for any Holder at any time, the Book
Capital Account of the Holder for such day, determined in accordance with
Section 8.1 hereof.
"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).
<PAGE>
"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 determined by the Trustees which
ends on October 31 of each year or on such other day as is permitted or required
by the Code.
"Holders" shall mean as of any particular time all holders of record of
Interests in the Trust.
"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.
"Interest(s)" shall mean the interest of a Holder in the Trust, including
all rights, powers and privileges accorded to Holders by this Declaration, which
interest may be expressed as a percentage, determined by calculating, 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 Manager and Administrator" shall mean any party furnishing
services to the Trust pursuant to any investment management or administration
contract described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of Holders, of
(A) 67% or more of the Interests present or represented at such meeting, if
Holders of more than 50% of all Interests are present or represented by proxy,
or (B) more than 50% of all Interests, whichever is less.
"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.
"Trustees" shall mean each signatory to this Declaration, so long as such
signatory shall continue in office in accordance with the terms hereof, and
<PAGE>
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.
"Trust Property" shall mean as of any particular time any and all property,
real or personal, tangible or intangible, which at such time is owned or held by
or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the United States Investment Company Act of 1940,
as amended from time to time, and the rules and regulations thereunder.
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 or more than 15. 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.
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 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
<PAGE>
required by Section 2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Removal with cause includes, but is not limited to, the
removal of a Trustee due to physical or mental incapacity or failure to comply
with such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory retirement age,
if any, established pursuant to any written policy adopted from time to time by
at least two-thirds 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,
adjudicated incompetence or other incapacity to perform the duties of the
office, 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.
2.5. Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary, an
Assistant Secretary or any two Trustees. 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 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 of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust or otherwise
<PAGE>
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. Officers; Chairman of the Board. The Trustees shall, from time to
time, elect a President, a Secretary and a Treasurer. 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 or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other 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 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. 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.
<PAGE>
3.2. Investments. The Trustees shall have power 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 under
any foreign laws; and to exercise any and all rights, powers and privileges 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.
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 in the name or nominee name of any
other Person on behalf of the Trust, 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.
<PAGE>
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, or increase its 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. A Holder which has redeemed its Interest
may not be permitted to purchase an Interest 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, or decrease its Interest, for
either cash or property, at such time or times (including, without limitation,
each business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, 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, to delegate from time to time to such of their number
or to officers, employees, agents or independent contractors of the Trust the
doing of such things and the execution of such instruments in either the name of
the Trust 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; to prosecute, defend, compromise or abandon any claims relating
to the Trust or the Trust Property; 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
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. 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.
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 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
Manager and 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
<PAGE>
Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Manager and 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 and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. Further Powers. The Trustees shall have power to conduct the business
of the Trust and carry on its operations in any and all of its branches and
maintain offices, 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 although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust 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 Management and Administration
and Placement Agent Arrangements
4.1. Investment Management and Other Arrangements. The Trustees may in
their discretion, from time to time, enter into investment management and
administration contracts or placement agent agreements whereby the other party
to such contract or agreement shall undertake to furnish the Trustees such
investment management and 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. Notwithstanding any provision of this Declaration, the Trustees may
authorize any Investment Manager and Administrator (subject to such general or
specific instructions as the Trustees may, from time to time, adopt) to effect
purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such Investment
Manager and Administrator (all without any further action by the Trustees). Any
such purchase, sale, loan or exchange shall be deemed to have been authorized by
the Trustees.
4.2. Parties to Contract. Any contract of the character described in
Section 4.1 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 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 of the Trust. The same Person may be the other party to one or
more contracts entered into
<PAGE>
pursuant to Section 4.1 hereof or the By-Laws of the Trust, 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 of the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each Holder shall be jointly
and severally liable (with rights of contribution inter se in proportion to
their respective Interests in the Trust) for the liabilities and obligations of
the Trust in the event that the Trust fails to satisfy such liabilities and
obligations; provided, however, that, to the extent assets 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 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, 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 shall remain jointly and severally liable to the
Trust's creditors as a legal matter.
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
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, Employees, Agents,
Independent Contractors to Trust, Holders, etc. 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
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,
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 (including any Person who serves at the Trust's request 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
<PAGE>
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 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;
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 by the court or other body approving the
settlement or other disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that such Person did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. 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 Trustees 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.
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 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
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust, and every other act or thing whatsoever executed in connection
with the Trust 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. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by any Trustee, officer, employee, agent or independent contractor
of the Trust, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent contractor of
the Trust 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, employee, agent or independent
contractor of the Trust. 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, employees, agents and independent contractors of the
Trust 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, employee, agent or
independent contractor of the Trust 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
<PAGE>
books of account or other records of the Trust (whether or not the Trust would
have the power to indemnify such Persons against such liability), upon an
opinion of counsel, or upon reports made to the Trust by any of its officers or
employees or by any Investment Manager and Administrator, accountant, appraiser
or other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.
<PAGE>
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property shall consist
of non-transferable Interests. 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.
6.2. Non-Transferability. A Holder may not transfer, sell or exchange its
Interest.
6.3. 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. 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 shall have the right to vary its investment in the Trust at any time
without limitation by increasing (through a capital contribution) or decreasing
(through a capital withdrawal) or by a Redemption of its Interest. An increase
in the investment of a Holder in the Trust shall be reflected as an increase in
the Book Capital Account balance of that Holder and a decrease in the investment
of a Holder in the Trust or the Redemption of the Interest of a Holder shall be
reflected as a decrease in the Book Capital Account balance of that Holder. 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.
<PAGE>
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account balance of
each Holder 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 Manager and 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, sell or exchange 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 (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 such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet obligations
of the Trust, and as they may deem desirable to use in the conduct of the
affairs of the Trust or to retain for future requirements or extensions of the
business.
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
of the Trust, the allocation of income of the Trust, 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 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.
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, 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 one-third of the
Interests, 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 of the Trust. 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, either in person or by proxy, at such meeting constitutes the action of
the
<PAGE>
Holders, unless a greater number of affirmative votes is required by the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust. 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, 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.
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 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. 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
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. The Trustees shall cause to be prepared and furnished to each
Holder, 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 the Trust
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, furnish to each Holder 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. Inspection of Records. The records of the Trust shall be open to
inspection by Holders during normal business hours for any purpose not harmful
to the Trust.
<PAGE>
9.8. Holder Action by Written Consent. Any action which may be taken 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) 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 by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
9.9. 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.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible termination or dissolution 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:
<PAGE>
Date of
Name Address Birth
---- ------- -----
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 05/27/94
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
10.2. Termination.
(a) The Trust may be terminated (i) by the affirmative vote of
Holders of not less than two-thirds of all Interests at any meeting of Holders
or by an instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by Holders of not less than two-thirds of all
Interests, or (ii) by the Trustees by written notice to the Holders. Upon any
such termination,
(i) the Trust shall carry on no business except for the purpose
of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust have been wound up,
including the power to fulfill or discharge the contracts of the
Trust, collect the assets of the Trust, sell, convey, assign, exchange
or otherwise dispose of all or any part of the Trust Property to one
or more Persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property of
any kind, discharge or pay the liabilities of the Trust, and do all
other acts appropriate to liquidate the business of the Trust;
provided that any sale, conveyance, assignment, exchange or other
disposition of all or substantially all the Trust Property 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 all Interests; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases,
<PAGE>
indemnities and refunding agreements as they deem necessary for
their protection, the Trustees shall distribute the remaining Trust
Property, 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 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 Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Holders shall thereupon cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon the
Redemption of any Interest, the Trust shall be dissolved effective 120 days
after the event. However, the Holders (other than such bankrupt or redeeming
Holder) may, by a unanimous affirmative vote at any meeting of such Holders or
by an instrument in writing without a meeting executed by a majority of the
Trustees and consented to by all such Holders, agree to continue the business of
the Trust even if there has been such a dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders of
more than 50% of all Interests at any meeting of Holders or by an instrument in
writing without a meeting, executed by a majority of the Trustees and consented
to by the Holders of more than 50% of all Interests. Notwithstanding any other
provision hereof, this Declaration may be amended by an instrument in writing
executed by a majority of the Trustees, and without the vote or consent of
Holders, for any one or more of the following purposes: (i) to change the name
of the Trust, (ii) to supply any omission, or to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations or the
requirements of the applicable provisions of the Code, (iv) to change the state
or other jurisdiction designated herein as the state or other jurisdiction whose
law shall be the governing law hereof, (v) to effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the law of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the Code,
(C) to permit the Trust to comply with fiscal or other statutory or official
requirements of any government authority, or (D) to permit the transfer of
Interests (or to permit the transfer of any other beneficial interest in or
share of the Trust, however denominated), and (vi) in conjunction with any
amendment contemplated by the foregoing clause (iv) or the foregoing clause (v)
to make any and all such further changes or modifications to this Declaration as
the Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (iv) or the foregoing clause (v) to be
conclusively evidenced by the execution of any such amendment by a majority of
the Trustees; provided, however, that unless effected in compliance with the
provisions of Section 10.4(b) hereof, no amendment otherwise authorized by this
sentence may be made which would reduce the amount payable with respect to any
Interest upon liquidation of the Trust and; provided, further, that the Trustees
shall not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof which
would change any rights with respect to any Interest by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of Holders
of two-thirds of all Interests.
<PAGE>
(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 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,
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 the
affirmative vote of Holders of not less than two-thirds of all Interests, or by
an instrument in writing without a meeting, consented to by Holders of not less
than two-thirds of all Interests, and any such merger, consolidation, sale,
lease or exchange shall be deemed for all purposes to have been accomplished
under and pursuant to the statutes of the State of New York.
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. 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 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.
<PAGE>
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
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.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the day and year first above written.
/s/ Philip Coolidge
-------------------------------
Philip Coolidge
As Trustee and not individually
/s/ Thomas M. Lenz
-------------------------------
Thomas M. Lenz
As Trustee and not individually
/s/ Andres E. Saldana
-------------------------------
Andres E. Saldana
As Trustee and not individually
EMERGING GROWTH PORTFOLIO
-------------------------------
BY-LAWS
As Adopted August 16, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Meetings of Holder..................................... 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
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 Trust......................................... 2
Section 3.2. Election and Tenure........................................... 2
Section 3.3. Removal of Officers........................................... 3
Section 3.4. Bonds and Surety.............................................. 3
Section 3.5. Chairman, President and Vice Presidents....................... 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
EMERGING GROWTH PORTFOLIO
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing EMERGING GROWTH PORTFOLIO (the "Trust"), dated
as of August 16, 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 Holder
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 Trust and a list of the Holders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
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
<PAGE>
2
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 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.
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.
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 Trust. The officers of the Trust shall
consist of a Chairman, if any, 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
President and may designate the order in which the other Vice Presidents may
act. The Chairman shall be a Trustee, but no other officer of the 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 Chairman, if any, 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 Trust. Such officers shall hold
<PAGE>
3
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. Chairman, President and Vice Presidents. The Chairman, if
any, shall, if present, preside at all meetings of the Holders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustees to the Chairman, if any, the
President shall be the chief executive officer of the Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the 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. 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 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 Trust, at any meeting of any business organization
in which the 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 subject to all of the restrictions upon the
President. Subject to the direction of the President, each Vice President
<PAGE>
4
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, 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 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 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 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
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 Trust or to its order and shall deposit all funds of
the Trust as may be ordered by the Trustees or the President. The Treasurer
shall keep accurate account of the books of the Trust's transactions which shall
be the property of the Trust, and which together with all other property of the
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 Trust and shall also
be the principal financial officer of the 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 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 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 Trust shall have such
<PAGE>
5
other duties and authorities as may be conferred upon him by the Trustees or
delegated to him by the President.
ARTICLE IV
Miscellaneous
Section 4.1. Depositories. The funds of the 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 Trustees may from
time to time authorize.
Section 4.2. Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents as
provided in these By-Laws or as the Trustees may from time to time by resolution
provide.
Section 4.3. Seal. The seal of the 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 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 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 Trust's disinterested,
non-party 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 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
<PAGE>
6
necessary or desirable. Any of such agents shall have such power and authority
as is delegated to any of them by the Trustees.
ARTICLE V
Regulations; Amendment of By-Laws
Section 5.1. Regulations. The 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 Trust.
Section 5.2. Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of the
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 Trust.
-------------------------------
INVESTMENT ADVISORY AGREEMENT
BETWEEN
EMERGING GROWTH PORTFOLIO
AND
THE CHASE MANHATTAN BANK
AGREEMENT made as of the __th day of ________, 1996, by and between
Emerging Growth Portfolio, a New York business trust (hereinafter the "Trust"),
and The Chase Manhattan Bank, a New York State chartered bank (hereinafter the
"Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Trust, and the Adviser represents that it is willing
and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Trust has delivered to the Adviser
copies of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of this Agreement;
(d) The most recent Registration Statement under the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission") (the "Registration Statement");
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission.
2. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Trust for the period and on the terms
set forth in this Agreement. The
<PAGE>
2
Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as
an investment adviser to the Trust under applicable laws and are
under the control of The Chase Manhattan Corporation, the parent
of the Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized group
of persons, and (ii) such organized group of persons is managed at
all times by authorized officers of the Adviser.
(c) Sub-Advisers. It is understood and agreed that the Adviser may
from time to time employ or associate with such other entities or
persons as the Adviser believes appropriate to assist in the
performance of this Agreement with respect to the Trust (each a
"Sub-Adviser"), and that any such Sub-Adviser shall have all of
the rights and powers of the Adviser set forth in this Agreement;
provided that the Trust shall not pay any additional compensation
for any Sub- Adviser and the Adviser shall be as fully responsible
to the Trust for the acts and omissions of the Sub-Adviser as it
is for its own acts and omissions; and provided further that the
retention of any Sub-Adviser shall be approved in advance by (i)
the Board of Trustees of the Trust and (ii) the investors of the
Trust if required under any applicable provisions of the 1940 Act.
The Adviser will review, monitor and report to the Trust's Board
of Trustees regarding the performance and investment procedures of
any Sub-Adviser. In the event that the services of any Sub-Adviser
are terminated, the Adviser may provide investment advisory
services pursuant to this Agreement to the Trust without a
Sub-Adviser and without further investor approval, to the extent
consistent with the 1940 Act. A Sub-Adviser may be an affiliate of
the Adviser.
3. Investment Advisory Services.
(a) Management of the Trust. The Adviser hereby undertakes to act as
investment adviser to the Trust. The Adviser shall regularly
provide investment advice to the Trust and continuously supervise
the investment and reinvestment of cash, securities and other
property composing the assets of the Trust and, in furtherance
thereof, shall:
(i) supervise all aspects of the operations of the Trust;
(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, the
Trust's investment programs, and the issuers of securities
included in the Trust's portfolio and the industries in
which they engage, or which may relate to securities or
other investments which the Adviser may deem desirable for
inclusion in the Trust's portfolio;
<PAGE>
3
(iii) determine which issuers and securities shall be included in
the portfolio of the Trust;
(iv) furnish a continuous investment program for the Trust;
(v) in its discretion and without prior consultation with the
Trust, buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on behalf of
the Trust; and
(vi) take, on behalf of the Trust, all actions the Adviser may
deem necessary in order to carry into effect such investment
program and the Adviser's functions as provided above,
including the making of appropriate periodic reports to the
Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment advisory and
supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
the Registration Statement as revised and in effect from time to
time; (ii) the Trust's Declaration of Trust, By-Laws or other
governing instruments, as amended from time to time; (iii) the
1940 Act; (iv) other applicable laws; and (v) such other
investment policies, procedures and/or limitations as may be
adopted by the Trust and provided to the Adviser in writing. The
Adviser agrees to use reasonable efforts to manage the Trust so
that each of its investors will qualify, and continue to qualify,
as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended, and regulations issued
thereunder (the "Code"), except as may be authorized to the
contrary by the Trust's Board of Trustees. The management of the
Trust by the Adviser shall at all times be subject to the review
of the Trust's Board of Trustees.
(c) Books and Records. The Adviser shall keep the Trust's books and
records required by applicable law to be maintained by the Trust
with respect to advisory services. The Adviser agrees that all
records which it maintains for the Trust are the property of the
Trust and it will promptly surrender any of such records to the
Trust upon the Trust's request. The Adviser further agrees to
preserve for the periods prescribed by the 1940 Act any such
records of the Trust required to be preserved by such Rule.
(d) Reports, Evaluations and other services. The Adviser shall furnish
reports, evaluations, information or analyses to the Trust and in
connection with the Adviser's services hereunder as the Trust's
Board of Trustees may request from time to time or as the Adviser
may otherwise deem to be desirable. The Adviser shall make
recommendations to the Trust's Board of Trustees with respect to
Trust policies, and shall carry out such policies as are adopted
by the Board of Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the Adviser
shall from time to time determine to be necessary or useful to
perform its obligations under this Agreement.
<PAGE>
4
(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for the
Trust with brokers or dealers selected by the Adviser, which may
include brokers or dealers affiliated with the Adviser to the
extent permitted by the 1940 Act and the Trust's policies and
procedures. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the most
favorable to the Trust. In assessing the best overall terms
available for any transaction, the Adviser shall consider all
factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition
and execution capability of the broker or dealer, research
services provided to the Adviser, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In no event shall the Adviser be under any duty
to obtain the lowest commission or the best net price for the
Trust on any particular transaction, nor shall the Adviser be
under any duty to execute any order in a fashion either
preferential to the Trust Fund relative to other accounts managed
by the Adviser or otherwise materially adverse to such other
accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Adviser, the Trust and/or the other
accounts over which the Adviser exercises investment discretion.
The Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a
portfolio transaction for the Trust which is in excess of the
amount of commission another broker or dealer would have charged
for effecting that transaction if the Adviser determines in good
faith that the total commission is reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with
respect to accounts over which it exercises investment discretion.
The Adviser shall report to the Board of Trustees of the Trust
regarding overall commissions paid by the Trust and their
reasonableness in relation to the benefits to the Trust.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for the Trust, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of its other clients if, in the Adviser's reasonable
judgment, such aggregation (i) will result in an overall economic
benefit to the Trust, taking into consideration the advantageous
selling or purchase price, brokerage commission and other
expenses, and trading requirements, and (ii) is not inconsistent
with the policies set forth in the Trust's Registration Statement.
In such event, the Adviser will allocate the securities so
purchased or sold, and the expenses incurred in the transaction,
in an equitable manner, consistent with its fiduciary obligations
to the Trust and such other clients.
<PAGE>
5
4. Expenses. (a) The Adviser shall, at its expense, provide the Trust
with office space, furnishings and equipment and personnel required by it to
perform the services to be provided by the Adviser pursuant to this Agreement.
The Adviser also hereby agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of the Trust all necessary financial
information in connection with the Administrator's duties under any Agreement
between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all its expenses and liabilities, including, but
not limited to, taxes; interest; fees (including fees paid to its
trustees who are not affiliated with the Adviser or any of its
affiliates); fees payable to the Securities and Exchange
Commission; state securities qualification fees, if any;
association membership dues; costs of preparing and printing
Registration Statements for regulatory purposes and for
distribution to existing investors; advisory and administration
fees; charges of the custodian and transfer agent; insurance
premiums; auditing and legal expenses; costs of investors' reports
and investors' meetings; any extraordinary expenses; and brokerage
fees and commissions, if any, in connection with the purchase or
sale of portfolio securities.
5. Compensation. (a) In consideration of the services to be rendered
by the Adviser under this Agreement, the Trust shall pay the Adviser monthly
fees on the first Business Day (as defined in the Prospectus) of each month
based upon the average daily net assets of the Trust during the preceding month
(as determined on the days and at the time set forth in the Registration
Statement for determining net asset value) at the annual rate of 0.65%. If the
fees payable to the Adviser pursuant to this paragraph begin to accrue before
the end of any month or if this Agreement terminates before the end of any
month, the fees for the period from such date to the end of such month or from
the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs. For purposes of
calculating each such monthly fee, the value of the Trust's net assets shall be
computed in the manner specified in the Registration Statement or the
Declaration of Trust and the Articles for the computation of the value of the
Trust's net assets in connection with the determination of the net asset value
of the Trust's shares of beneficial interest.
(b) If the aggregate expenses incurred by, or allocated to, the Trust
in any fiscal year shall exceed the lowest expense limitation, if
applicable to the Trust, imposed by state securities laws or
regulations thereunder, as such limitations may be raised or
lowered from time to time, the Adviser shall reduce its investment
advisory fee, but not below zero, to the extent of its share of
such excess expenses; provided, however, there shall be excluded
from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited
to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Trust.
Such reduction, if any, shall be computed and accrued daily, shall
be settled on a monthly basis and shall be based upon the expense
limitation applicable to the Trust as at the end of the last
business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of
the month, that expense limitation which results in the largest
reduction in the Adviser's fee shall be applicable. For the
purposes of this paragraph, the Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by
a fraction, the numerator of which is the amount of the investment
advisory fee which would otherwise be payable to the Adviser for
such fiscal year were it not for this subsection 6(b) and the
<PAGE>
6
denominator of which is the sum of all investment advisory and
administrative fees which would otherwise be payable by the Trust
were it not for the expense limitation provisions of any
investment advisory or administrative agreement to which the Trust
is a party.
(c) In consideration of the Adviser's undertaking to render the
services described in this Agreement, the Trust agrees that the
Adviser shall not be liable under this Agreement for any error of
judgment or mistake of law or for any act or omission or loss
suffered by the Trust in connection with the performance of this
Agreement, provided that nothing in this Agreement shall be deemed
to protect or purport to protect the Investment Adviser against
any liability to the Trust or its stockholders to which the
Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
the Adviser's duties under this Agreement or by reason of the
Adviser's reckless disregard of its obligations and duties
hereunder or breach of fiduciary duty with respect to receipt of
compensation.
6. Non-Exclusive Services. Except to the extent necessary to perform
the Investment Adviser's obligations under this Agreement, nothing herein shall
be deemed to limit or restrict the right of the Adviser, or any affiliate of the
Adviser, including any employee of the Adviser, to engage in any other business
or to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual or association.
7. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and investors of the Trust are or
may be or become interested in the Adviser as directors, officers or otherwise
and that directors, officers and shareholders of the Adviser are or may be or
become similarly interested in the Trust.
8. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date") provided that it
shall have been approved by a majority of the outstanding voting securities of
the Trust, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year
thereafter for successive annual periods, provided such
continuance is specifically approved at least annually (i) by a
vote of the majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by a vote of the Board of Trustees of the
Trust or a majority of the outstanding voting securities of the
Trust.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
<PAGE>
7
(c) Notwithstanding the foregoing provisions of this Paragraph 8,
either party hereto may terminate this Agreement at any time on
sixty (60) days' prior written notice to the other, without
payment of any penalty. A termination of this Agreement on behalf
of the Trust may be effected by a vote of the Trust's Board of
Trustees or by vote of a majority of the outstanding voting
securities of the Trust. This Agreement shall terminate
automatically in the event of its assignment.
9. Board of Trustees Meetings. The Trust agrees that notice of each
meeting of the Board of Trustees of the Trust will be sent to the Adviser and
that the Trust will make appropriate arrangements for the attendance (as persons
present by invitation) of such person or persons as the Adviser may designate.
10. Limitation of Liability of Trustees and Investors. The Adviser
acknowledges the following limitation of liability:
The terms "Emerging Growth Portfolio" and "Trustees of Emerging Growth
Portfolio" refer, respectively, to the trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust, to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of the State of New York, such
reference being inclusive of any and all amendments thereto so filed or
hereafter filed. The obligations of "Emerging Growth Portfolio" entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities and are not binding upon any
of the Trustees, investors or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with the Trust must look
solely to the assets of the Trust for the enforcement of any claims against the
Trust.
11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. 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 Board of Trustees of the Trust from time to
time, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
13. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
14. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
<PAGE>
8
15. Notices. Notices of any kind to be given to the Adviser hereunder
by the Trust shall be in writing and shall be duly given if mailed or delivered
to the Adviser at 270 Park Avenue, New York, New York 10017 or at such other
address or to such individual as shall be so specified by the Adviser to the
Trust. Notices of any kind to be given to the Trust hereunder by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the Trust
at 101 Park Avenue, New York, New York 10178 or at such other address or to such
individual as shall be so specified by the Trust to the Adviser. Notices shall
be effective upon delivery.
<PAGE>
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.
THE CHASE MANHATTAN BANK EMERGING GROWTH PORTFOLIO
By: ________________________ By: ________________________
Name: Name:
Title: Title:
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the __th day of ________, 1996, by and between
The Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and
Chase Asset Management, Inc., a Delaware Corporation (the "Sub-Adviser").
WHEREAS, the Adviser provides investment advisory services to the
Emerging Growth Portfolio, a New York business trust (the "Trust"), which is
registered as an open-end, non-diversified, management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to an
Investment Advisory Agreement dated ________ __, 1996 (the "Advisory
Agreement"); and
WHEREAS, the Sub-Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the Trust and the Sub-Adviser
represents that it is willing and possesses legal authority to so furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Trust for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth
for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as
an investment subadviser to the Trust under applicable laws and
are under the control of The Chase Manhattan Corporation, the
indirect parent of the Sub-Adviser; provided that (i) all persons,
when providing services hereunder, are functioning as part of an
organized group of persons, and (ii) such organized group of
persons is managed at all times by authorized officers of the
Sub-Adviser.
<PAGE>
2. Delivery of Documents. The Adviser has delivered to the Sub-Adviser
copies of each of the following documents along with all amendments thereto
through the date hereof, and will promptly deliver to it all future amendments
and supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of the Advisory Agreement and this
Agreement;
(d) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the 1940 Act, on Form N-1A as filed
with the Securities and Exchange Commission (the "Commission");
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission.
3. Investment Advisory Services.
(a) Management of the Trust. The Sub-Adviser hereby undertakes to act
as investment subadviser to the Trust. The Sub-Adviser shall
regularly provide investment advice to the Trust and continuously
supervise the investment and reinvestment of cash, securities and
other property composing the assets of the Trust and, in
furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, the
Trust's investment programs, and the issuers of securities
included in the Trust's portfolio and the industries in
which they engage, or which may relate to securities or
other investments which the Sub-Adviser may deem desirable
for inclusion in the Trust's portfolio;
(ii) determine which issuers and securities shall be included in
the portfolio of the Trust;
(iii) furnish a continuous investment program for the Trust;
(iv) in its discretion, and without prior consultation, buy,
sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of the
Trust, and
(v) take, on behalf of the Trust, all actions the Sub-Adviser
may deem necessary in order to carry into effect such
investment program and the Sub-Adviser's functions as
provided above, including the making of
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<PAGE>
appropriate periodic reports to the Adviser and the Trust's
Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i)
the Trust's Registration Statement as revised and in effect from
time to time; (ii) the Trust's Declaration of Trust, By-Laws or
other governing instruments, as amended from time to time; (iii)
the 1940 Act; (iv) other applicable laws; and (v) such other
investment policies, procedures and/or limitations as may be
adopted by the Trust or the Adviser and provided to the
Sub-Adviser in writing. The Sub-Adviser agrees to use reasonable
efforts to manage the Trust so that each of its investors will
qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986,
as amended, and regulations issued thereunder (the "Code"), except
as may be authorized to the contrary by the Trust's Board of
Trustees. The management of the Trust by the Sub-Adviser shall at
all times be subject to the review of the Adviser and the Trust's
Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep the Trust's books and records required to be maintained
by, or on behalf of, the Trust with respect to subadvisory
services rendered hereunder. The Sub-Adviser agrees that all
records which it maintains for the Trust are the property of the
Trust and it will promptly surrender any of such records to the
Trust upon the Trust's request. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any such records of the Trust required to be preserved by such
Rule.
(d) Reports, Evaluations and other services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Trust and in connection with the Sub-Adviser's
services hereunder as the Adviser and/or the Trust's Board of
Trustees may request from time to time or as the Sub-Adviser may
otherwise deem to be desirable. The Sub-Adviser shall make
recommendations to the Adviser and the Trust's Board of Trustees
with respect to the Trust's policies, and shall carry out such
policies as are adopted by the Board of Trustees. The Sub-Adviser
may, subject to review by the Adviser, furnish such other services
as the Sub-Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this
Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for the
Trust with brokers or dealers selected by the Sub-Adviser, which
may include brokers or dealers affiliated with the Adviser or the
Sub-Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures. The Sub-Adviser shall use its
best efforts to seek to execute portfolio transactions at prices
which, under the circumstances, result in total costs or proceeds
being the most favorable to the Trust. In assessing the
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<PAGE>
best overall terms available for any transaction, the Sub-Adviser
shall consider all factors it deems relevant, including the
breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or
dealer, research services provided to the Sub-Adviser, and the
reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. In no event shall the
Sub-Adviser be under any duty to obtain the lowest commission or
the best net price for the Trust on any particular transaction,
nor shall the Sub-Adviser be under any duty to execute any order
in a fashion either preferential to the Trust relative to other
accounts managed by the Sub-Adviser or otherwise materially
adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Sub-Adviser, the Trust and/or the
other accounts over which the Sub-Adviser exercises investment
discretion. The Sub-Adviser is authorized to pay a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Trust
which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the
Sub-Adviser determines in good faith that the total commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities
of the Sub-Adviser with respect to accounts over which it
exercises investment discretion. The Sub-Adviser shall report to
the Board of Trustees of the Trust regarding overall commissions
paid by the Trust and their reasonableness in relation to their
benefits to the Trust.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for the Trust, the Sub-Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of other clients if, in the Sub-Adviser's reasonable
judgment, such aggregation (i) will result in an overall economic
benefit to the Trust, taking into consideration the advantageous
selling or purchase price, brokerage commission and other
expenses, and trading requirements, and (ii) is not inconsistent
with the policies set forth in the Trust's Registration Statement.
In such event, the Sub-Adviser will allocate the securities so
purchased or sold, and the expenses incurred in the transaction,
in an equitable manner, consistent with its fiduciary obligations
to the Trust and such other clients.
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<PAGE>
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a corporation duly organized and in good
standing under the laws of the State of Delaware and is
fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
(ii) The Sub-Adviser is registered as an investment adviser with
the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The Sub-Adviser shall maintain
such registrations or licenses in effect at all times during
the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best judgment
and effort to the Adviser in carrying out the Sub-Adviser's
obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
(i) The Adviser is a national banking association duly organized
and in good standing under the laws of the United States of
America and is fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
(ii) The Trust has been duly organized as a business trust under
the laws of the State of New York.
(iii) The Trust is registered as an investment company with the
Commission under the 1940 Act. Such registration will be
kept in effect during the term of this Agreement.
5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, the
Adviser shall pay to the Sub-Adviser (or cause to be paid by the Trust directly
to the Sub-Adviser) a fee, which shall be accrued daily and paid in arrears on
the first business day of each month, at an annual rate of 0.30% of the average
daily net assets of the Trust during the preceding month (computed in the manner
set forth in the Trust's Registration Statement). Average daily net assets shall
be based upon determinations of net assets made as of the close of business on
each business day throughout such month. The fee for any partial month shall be
calculated on a proportionate basis, based upon average daily net assets for
such partial month.
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(b) The Sub-Adviser shall have the right, but not the obligation, to
voluntarily waive any portion of the sub-advisory fee from time to
time. Any such voluntary waiver will be irrevocable and determined
in advance of rendering sub-investment advisory services by the
Sub-Adviser, and shall be in writing and signed by the parties
hereto.
(c) If the aggregate expenses incurred by, or allocated to, the Trust
in any fiscal year shall exceed the lowest expense limitation, if
applicable to the Trust, imposed by state securities laws or
regulations thereunder, as such limitations may be raised or
lowered from time to time, the Sub-Adviser shall reduce its
investment advisory fee, but not below zero, to the extent of its
share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but
not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto) paid or payable by the
Trust. Such reduction, if any, shall be computed and accrued
daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Trust as at the end of
the last business day of the month. Should two or more of such
expense limitations be applicable at the end of the last business
day of the month, that expense limitation which results in the
largest reduction in the Sub-Adviser's fee shall be applicable.
For the purposes of this paragraph, the Sub-Adviser's share of any
excess expenses shall be computed by multiplying such excess
expenses by a fraction, the numerator of which is the amount of
the investment advisory fee which would otherwise be payable to
the Sub-Adviser for such fiscal year were it not for this
subsection 5(b) and the denominator of which is the sum of all
investment advisory and administrative fees which would otherwise
be payable by the Trust were it not for the expense limitation
provisions of any investment advisory or administrative agreement
to which the Trust is a party.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and investors of the Trust or the
Adviser are or may be or become interested in the Sub-Adviser as directors,
officers or otherwise and that directors, officers and shareholders of the
Sub-Adviser are or may be or become similarly interested in the Trust or the
Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the Trust.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Trust or the Adviser for providing additional services to the
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Trust or the Adviser which are not covered by this Agreement, and to receive
additional compensation for such services. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser, or a breach of fiduciary duty
with respect to receipt of compensation, neither the Sub-Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Adviser, the Trust or to any investor for any error of
judgment or mistake of law or for any act or omission in the course of, or
connected with, rendering services hereunder or for any loss suffered by the
Adviser, the Trust, or any investor in connection with the performance of this
Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date") provided that it
shall have been approved by a majority of the outstanding voting securities of
the Trust, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year
thereafter for successive annual periods, provided such
continuance is specifically approved at least annually (i) by a
vote of the majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by a vote of the Board of
Trustees of the Trust or a majority of the outstanding voting
securities of the Trust.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement at any time on
sixty (60) days' prior written notice to the other, without
payment of any penalty. A termination of the Sub-Adviser may be
effected by the Adviser, by a vote of the Trust's Board of
Trustees, or by vote of a majority of the outstanding voting
securities of the Trust. This Agreement shall terminate
automatically in the event of its assignment.
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10. Limitation of Liability of Trustees and Investors. The Sub-Adviser
acknowledges the following limitation of liability:
The terms "Emerging Growth Portfolio" and "Trustees of Emerging Growth
Portfolio" refer, respectively, to the trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust, to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of the State of New York, such
reference being inclusive of any and all amendments thereto so filed or
hereafter filed. The obligations of "Emerging Growth Portfolio" entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities and are not binding upon any
of the Trustees, investors or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with the Trust must look
solely to the assets of the Trust for the enforcement of any claims against the
Trust.
11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. 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 Board of Trustees of the Trust
from time to time, have no authority to act for or represent the Trust in any
way or otherwise be deemed an agent of the Trust.
13. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
14. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
15. Notices. Notices of any kind to be given to the Adviser hereunder
by the Sub-Adviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 270 Park Avenue, New York, New York 10017 or at such
other address or to such individual as shall be so specified by the Adviser to
the Sub-Adviser. Notices of any kind to be given to the Sub-Adviser hereunder by
the Adviser shall be in writing and shall be duly given if mailed or
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delivered to the Sub-Adviser at 1211 Avenue of the Americas, New York, New York
10036 or at such other address or to such individual as shall be so specified by
the Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
THE CHASE MANHATTAN BANK CHASE ASSET MANAGEMENT, INC.
By: __________________________ By: _________________________
Name: Name:
Title: Title:
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MUTUAL FUND CUSTODY AGREEMENT
THIS AGREEMENT is effective as of the __th day of August, 1996 by and
between Emerging Growth Portfolio (the "Trust"), an open-end management
investment company organized as a New York trust on _________ __, 1996, and The
Chase Manhattan Bank (the "Custodian"), a New York State chartered bank.
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, non-diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Custodian to serve as the
Trust's custodian and the Custodian is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) The Trust hereby appoints the Custodian to act as custodian of its
portfolio securities, cash and other property and to act as agent to act as a
liaison with the fund accountants and perform certain recordkeeping functions
required of a duly registered investment company in compliance with applicable
provisions of federal, state and local laws, rules and regulations including, as
may be required:
(i) Provide information necessary for the Trust to file required
financial reports; maintaining and preserving required books,
accounts and records as the basis for such reports; and performing
certain
<PAGE>
daily functions in connection with such accounts and records, and
(ii) Acting as liaison with independent auditors.
(b) The Custodian accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in
Paragraph 25 of this Agreement. The Custodian agrees to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder.
2. Delivery of Documents. The Trust has furnished the Custodian with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Custodian as custodian of the portfolio securities, cash and
other property of the Trust;
(b) Schedule A identifying and containing the signatures of the
Trust's officers and/or other persons authorized to issue Oral Instructions and
to sign Written Instructions, as hereinafter defined, on behalf of the Trust;
(c) Schedule B setting forth the names and signatures of the present
officers of the Trust;
(d) The Trust's current Registration Statement on Form N-1A under the
1940 Act as filed with the Securities and Exchange Commission ("the SEC"),
relating to the Trust's shares of beneficial interest, no par value (the
"Shares");
(e) A copy of the notice filed with the Commodity Futures Trading
Commission ("CFTC") of eligibility to claim the exclusion from the definition of
"commodity pool operator"
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contained in Section 2(a)(1)(A) of the Commodity Exchange Act ("CEA") that is
provided in Rule 4.5 under the CEA, together with all supplements as are
required by the CFTC.
The Trust will furnish Custodian from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Trust's officers, and any other person,
whether or not any such person is an officer or employee of the Trust, duly
authorized by the Board of Trustees of the Trust to give Oral and Written
Instructions on behalf of the Trust and listed on Schedule A, which may be
amended from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person. The Trust agrees to deliver to the Custodian, at the
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time and in the manner specified in Paragraph 9 of this Agreement, Written
Instructions confirming Oral Instructions.
(d) "Officer's Certificate". The term "Officer's Certificate" as used
in this Agreement means instructions delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device and received by the Custodian signed by
two officers of the Fund.
(e) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Trust which
the Trust may from time to time deposit, or cause to be
deposited, with the Custodian or which the Custodian may
from time to time hold for the Trust;
(ii) all income in respect of any other such securities or other
property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Trust,
which are received by the Custodian from time to time from
or on behalf of the Trust.
(f) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean the Depository Trust Company or Participants
Trust Company, each a clearing agency registered with the SEC or, their
successor or successors and their nominee or nominees; and shall also mean any
other registered or industry recognized clearing agency, its successor or
successors specifically identified in a certified
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<PAGE>
copy of a resolution of the Trust's Board of Trustees approving deposits by the
Custodian therein.
(g) "Written Instructions". As used in this Agreement, "Written
Instructions" means instructions delivered by hand, mail, tested telegram,
cable, telex, facsimile sending device, and received by the Custodian, signed by
two Authorized Persons.
4. Delivery and Registration of the Property. The Trust will deliver
or cause to be delivered to the Custodian all securities and all moneys owned by
it, including cash received for the issuance of its Shares, at any time during
the period of this Agreement, except for securities and monies to be delivered
to any subcustodian appointed pursuant to Paragraph 7 hereof. The Custodian will
not be responsible for such securities and such monies until actually received
by it. All securities delivered to the Custodian or to any such subcustodian
(other than in bearer form) shall be registered in the name of the Trust or in
the name of a nominee of the Trust or in the name of the Custodian or any
nominee of the Custodian (with or without indication of fiduciary status) or in
the name of any subcustodian or any nominee of such subcustodian appointed
pursuant to Paragraph 7 hereof or shall be properly endorsed and in form for
transfer satisfactory to the Custodian.
5. Domestic and Foreign Corporate Actions and Proxies. With respect to
all securities, however registered, it is understood that the voting and other
rights and powers shall be exercised by the Trust. The Custodian shall transmit
promptly to the Trust any proxy statement, proxy materials,
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notice of a call or conversation or similar communications received by it as
Custodian for the Trust as follows:
(i) With respect to domestic U.S. and Canadian securities (the latter
if held in DTC), the Custodian will send to the Trust or the proper authorized
person, such proxies (signed in blank, if issued in the name of the Custodian's
nominee or the nominee of a central depository) and communications with respect
to securities in the Trust's Account as call for voting or relate to legal
proceedings within a reasonable time after sufficient copies are received by the
Custodian for forwarding to its customers. In addition, the Custodian will
follow coupon payments, redemptions, exchanges or similar matters with respect
to securities in the Trust's Account and advise the Trust or the proper
authorized person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such securities, in each case, of which the
Custodian has received notice from the issuer of the securities, or as to which
notice is published in publications routinely utilized by the Custodian for this
purpose.
Where warrants, options, tenders or other securities have fixed
expiration dates, the Trust understands that in order for the Custodian to act,
the Custodian must receive the Trust's instructions at its offices in New York
City, addressed as the Custodian may from time to time request, by no later than
noon (NY City time) at least one business day prior to the last scheduled date
to act with respect thereto (or such earlier date
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or time as the Custodian may reasonably notify the Trust). Absent the
Custodian's timely receipt of such instructions, such instructions will expire
without liability to the Custodian. Corporate reports need not be forwarded to
the Trust.
(ii) With respect to securities held or settled through the Chase
global custody network, whenever the Custodian receives information which
requires discretionary action by the Trust (other than a proxy), such as
subscription rights, bonus issues, stock repurchase plans and rights offerings,
or legal notices or other material intended to be transmitted to securities
holders ("Corporate Actions"), the Custodian will give the Trust notice of such
Corporate Actions to the extent that the Custodian's central corporate actions
department has actual knowledge of a Corporate Action in time to notify its
customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Custodian will endeavor to obtain
Instructions from the Trust, but if Instructions are not received in time for
the Custodian to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Custodian is authorized to sell
such rights entitlement or fractional interest and to credit the proper Fund
account with the proceeds or take any other action it deems, in good faith, to
be appropriate in which case it shall be held harmless for any such action.
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<PAGE>
The Custodian will deliver proxies to the Trust or its designated
agent pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
portfolio securities in the Custody Account registered in the name of such
nominee but without indicating the manner in which such proxies are to be voted;
and where bearer securities are involved, proxies will be delivered in
accordance with Instructions.
6. Receipt and Disbursement of Money.
(a) The Custodian shall open and maintain a custody account for the
Trust, subject only to draft or order by the Custodian acting pursuant to the
terms of this Agreement, and shall hold in such account, subject to the
provisions hereof, all cash received by it from or for the Trust. The Custodian
shall make payments of cash to, or for the account of, the Trust from such cash
only (i) for the purchase of securities for the Trust as provided in paragraph
15 hereof; (ii) upon receipt of an Officer's Certificate, for the payment of
dividends or other distributions of shares, or for the payment of interest,
taxes, administration, distribution or advisory fees or expenses which are to be
borne by the Trust under the terms of this Agreement, and, with respect to the
Trust, any Investment Advisory Agreement, Administration Agreement or
Distribution and Sub-administration Agreement; (iii) upon receipt of Written
Instructions for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust and held by or to be
delivered to the Custodian; (iv) to a
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<PAGE>
subcustodian pursuant to Paragraph 7 hereof; or (v) for the redemption of Trust
Shares; or (vi) upon receipt of an Officer's Certificate for other corporate
purposes. No payment pursuant to (i) other than pursuant to Instruction and in
accordance with local market practice.
(b) the Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the Trust.
7. Receipt of Securities.
(a) Except as provided by Paragraph 8 hereof, the Custodian shall hold
and physically segregate in a separate account, identifiable from those of any
other person, all securities and non-cash property received by it for the Trust.
All such securities and non-cash property are to be held or disposed of by the
Custodian for the Trust pursuant to the terms of this Agreement. In the absence
of Written Instructions accompanied by a certified resolution authorizing the
specific transaction by the Trust's Board of Trustees, the Custodian shall have
no power or authority to withdraw, deliver, assign, hypothecate, pledge or
otherwise dispose of any such securities and investments, except in accordance
with the express terms provided for in this Agreement. In no case may any
trustee, officer, employee or agent of the Trust withdraw any securities except
as provided in this Agreement and pursuant to a duly adopted resolution of the
Board of Trustees. In connection with its duties under this Paragraph 7, the
Custodian may, at its own expense, except to the extent the Custodian is
instructed to
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<PAGE>
engage a subcustodian it would not otherwise have engaged, enter into
subcustodian agreements with other banks or trust companies for the receipt of
certain securities and cash to be held by the Custodian for the account of the
Trust pursuant to this Agreement; provided that each such bank or trust company
has an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than one million dollars ($1,000,000) for a
Custodian Subsidiary or affiliate, or of not less than twenty million dollars
($20,000,000) for a subcustodian that is not a Custodian Subsidiary or affiliate
and that in either case such bank or trust company agrees with the Custodian to
comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Custodian will provide the Trust with a copy of each
subcustodian agreement it executes relating to the Trust. The Custodian will be
liable for acts or omissions of any such subcustodian, except to the extent the
Custodian is instructed by the Trust to engage a subcustodian it would not
otherwise have engaged and the Trust is a party to the agreement with such
sub-custodian, under the standards of care provided for herein, of any bank or
trust company that it chooses pursuant to this Paragraph 7.
(b) Notwithstanding any other provisions of this Agreement, the
foreign securities of the Trust (as defined in Rule 17f-5(c)(1) under the 1940
Act) and the Trust's cash or cash equivalents, in amounts reasonably necessary
to effect the Trust's foreign securities transactions, may be held in the
custody of one or more banks or trust companies acting as
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subcustodians; and thereafter, pursuant to a written contract or contracts as
approved by Trust's Board of Trustees, may be transferred to an account
maintained by such subcustodian with an eligible foreign custodian, as defined
in Rule 17f-5(c)(2), provided that any such arrangement involving a foreign
custodian shall be in accordance with the provisions of Rule 17f-5 under the
1940 Act or any exemptive order issued to the Custodian under the 1940 Act.
(c) Promptly after the close of business on each day the Custodian
shall furnish the Trust with a summary of all transfers to or from the account
of the Trust during said day. Where securities are transferred to the account of
the Trust established at a Securities Depository or the Book Entry System
pursuant to Paragraph 8 herein, the Custodian shall also by book-entry or
otherwise identify as belonging to the Trust the quantity of securities in a
fungible bulk of securities registered in the name of the Custodian (or its
nominee) or shown in the Custodian's account on the books of a Securities
Depository or the Book-Entry System. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement of the Property held
under this Agreement.
8. Use of Securities Depository or the Book-Entry System. The Trust
shall deliver to the Custodian a certified resolution of the Board of Trustees
of the Trust approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by Oral or Written
Instructions actually received by the Custodian (i) to
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deposit in a Securities Depository or the Book-Entry System all securities of
the Trust eligible for deposit therein and (ii) to utilize a Securities
Depository or the Book-Entry System to the extent possible in connection with
the performance of its duties hereunder, including without limitation
settlements of purchases and sales of securities by the Trust, and deliveries
and returns of securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. Without limiting the generality of
such use, it is agreed that the following provisions shall apply thereto:
(a) Securities and any cash of the Trust deposited in a Securities
Depository or the Book-Entry System will at all times be segregated from any
assets and cash controlled by the Custodian in other than a fiduciary or
custodian capacity. The Custodian and its subcustodians, if any, will pay out
money only upon receipt of securities and will deliver securities only upon
receipt of money, unless the Trust has given the Custodian Written Instructions
to the contrary.
(b) All Books and records maintained by the Custodian that relate to
the Trust participation in a Securities Depository or the Book-Entry System will
at all times during the Custodian's regular business hours be open to the
inspection of the Trust's duly authorized employees or agents, the Trust's
independent auditors in accordance with applicable regulations, and the Trust
will be furnished with all information in respect of the services rendered to it
as it may require.
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(c) The Custodian will provide the Trust with copies of any report
obtained by the Custodian on the system of internal accounting control of the
Securities Depository or Book-Entry System promptly after receipt of such a
report by the Custodian. The Custodian will also provide the Trust with such
reports on its own system of internal control as the Trust may reasonably
request from time to time.
9. Instructions Consistent With the Charter, etc. Unless otherwise
provided in this Agreement, the Custodian shall act only upon Oral and Written
Instructions. The Custodian may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with any provision of the
Charter, By-Laws, the Trust's Registration Statement, any rule or regulation of
any applicable regulatory body or governmental agency or any vote or resolution
of the Trust's Board of Trustees, or any committee thereof. The Custodian shall
be entitled to rely upon any Oral or Written Instructions actually received by
the Custodian pursuant to this Agreement. The Trust agrees to forward to the
Custodian Written Instructions confirming Oral Instructions in such manner that
the Written Instructions are received by the Custodian at the close of business
of the same day that such Oral Instructions are given to the Custodian. The
Trust agrees that the fact that such confirming Written Instructions are not
received by the Custodian shall in no way affect the validity of any of the
transactions authorized by the Trust by giving Oral Instructions nor shall
receipt of conflicting Written Instructions affect the validity
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of transactions undertaken based on Oral Instructions or the Custodian's
obligations or responsibilities with respect thereto if such actions have been
taken prior to the receipt of such Written Instructions. The Trust agrees that
the Custodian shall incur no liability in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Authorized Person, unless any
liability to the Trust results from the negligence or willful misconduct of the
Custodian. In accord with instructions from the Trust, as required by accepted
industry practice or as the Custodian may elect in effecting the execution of
Trust instructions, advances of cash or other Property made by the Custodian,
arising from the purchase, sale, redemption, transfer or other disposition of
Property of the Trust, or in connection with the disbursement of funds to any
party, or in payment of fees, expenses, claims or liabilities owed to the
Custodian by the Trust, or to any other party which has secured judgment in a
court of law against the Trust which creates an overdraft in the accounts or
overdelivery of Property shall be deemed a loan by the Custodian to the Trust,
payable on demand, bearing interest at such rate customarily charged by the
Custodian for similar loans.
10. Transactions Not Requiring Instructions. The Custodian is
authorized to take the following action without Written Instructions:
(a) Collection of Income and Other Payments. The Custodian shall:
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(i) collect and receive for the account of the Trust, all income
and other payments and distributions, including (without limitation)
stock dividends, rights, warrants and similar items, included or to be
included in the Property of the Trust, and promptly advise the Trust
of such receipt and shall credit such income, as collected, to the
Trust. With respect to non-foreign issuers, the Custodian shall credit
the account with interest, dividends or principal payments on the
payable date, in anticipation of receiving same from a payor, central
depository, broker or other agent employed by the Trust or the
Custodian (each advance made hereunder shall be subject to reversal in
the event that (i) payment to which it relates is not made within a
reasonable time after its due date and (2) the Custodian notifies the
Trust within 30 days of such due date that it anticipates a delay in
collection).
(ii) with respect to securities of foreign issue, effect
collection of dividends, interest and other income, and to notify the
Trust of any call for redemption, offer of exchange, right of
subscription, reorganization, or other proceedings affecting such
securities, or any default in payments due thereon. It is understood,
however, the Custodian shall be under no responsibility for any
failure or delay in effecting such collections or giving such notice
with respect to securities of foreign issue, regardless of whether or
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not the relevant information is published in any financial service
available to it unless such failure or delay is due to its negligence.
Collections of income in foreign currency are, to the extent possible,
to be converted into United States dollars unless otherwise instructed
in writing, and in effecting such conversion the Custodian may use
such methods or agencies as it may see fit, including the facilities
of its own foreign division at customary rates. All risk and expenses
incident to such collection and conversion is for the account of the
Trust and the Custodian shall have no responsibility for fluctuations
in exchange rates affecting any such conversion.
(iii) endorse and deposit for collection in the name of the Trust,
checks, drafts, or other orders for the payment of money on the same
day as received;
(iv) receive and hold for the account of the Trust all securities
received by the Trust as a result of a stock dividend, share split-up
or reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
with respect to any portfolio securities of the Trust held by the
Custodian hereunder;
(v) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
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(vi) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts and
other negotiable instructions;
(vii) to exchange securities in temporary form for securities in
definitive form, to effect an exchange of the shares where the par
value of stock is changed, and to surrender securities at maturity or
when advised of earlier call for redemption, against payment therefor
in accordance with accepted local industry practice. When fractional
shares of stock of a declaring corporation are received as a stock
distribution, the Custodian is authorized to sell the fraction
received and credit the Trust's account. Unless specifically
instructed to the contrary in writing, the Custodian is authorized to
exchange securities in bearer form for securities in registered form.
If any Property registered in the name of a nominee of the Custodian
is called for partial redemption by the issuer of such Property, the
Custodian is authorized to allot the called portion to the respective
beneficial holders of the Property in such manner deemed to be fair
and equitable by the Custodian in its sole discretion.
(b) Miscellaneous Transactions. The Custodian is authorized to deliver
or cause to be delivered Property against
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payment or other consideration or written receipt therefor in the following
cases:
(i) for examination by a broker selling for the
account of the Trust in accordance with local industry
practice;
(ii) for the exchange of interim receipts or
temporary securities for definitive securities;
(iii) for transfer of securities into the name of
the Trust or the Custodian or a nominee of either, or
for exchange or securities for a different number of
bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing
the same interest rate, maturity date and call
provisions, if any; provided that, in any such case, the
new securities are to be delivered to the Custodian.
11. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, the Custodian, directly or through the
use of a Securities Depository or the Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Trust as owner of any securities may be
exercised;
(b) Deliver any securities held for the Trust against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger,
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consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege;
(c) Deliver any securities held for the Trust to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, against receipt of such certificates or deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Trust and
take such other steps as shall be stated in said instructions to be for the
purpose of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust;
(e) Release securities belonging to the Trust to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Trust; provided, however, that securities shall be released only upon
payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, subject to
proper prior authorization, further securities may be released for that purpose;
and pay such loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or notes evidencing the
loan;
(f) Deliver any securities held for the Trust upon the exercise of a
covered call option written by the Trust on such securities;
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(g) Release and deliver securities owned by the Trust in connection
with any repurchase agreement entered into on behalf of the Trust, but only on
receipt of payment therefor; and pay out moneys of the Trust in connection with
such repurchase agreements, but only upon the delivery of the securities;
(h) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
12. Segregated Accounts. The Custodian shall upon receipt of Written
or Oral Instructions establish and maintain a segregated account or accounts on
its records for and on behalf of the Trust, into which account or accounts may
be transferred cash and/or securities, including securities in the Book-Entry
System (i) for the purposes of compliance by the Trust with the procedures
required by a securities or option exchange, providing such complies with the
Investment Company Act and Release No. 10666 or any subsequent release or
releases of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (ii) for other proper corporate purposes,
but only, in the case of clause (ii), upon receipt of, Written Instructions.
13. Dividends and Distributions. The Trust shall furnish the Custodian
with appropriate evidence of action by the Trust's Board of Trustees declaring
and authorizing the payment of any dividends and distributions. The amounts of
Dividends and/or distributions will be calculated by the Custodian in accordance
with the procedures attached as Schedule C. Upon receipt by the Custodian of an
Officer's Certificate with respect
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to dividends and distributions declared by the Trust's Board of Trustees and
payable to investors who are entitled to receive cash for fractional shares and
those who have elected in the proper manner to receive their distributions on
dividends in cash, and in conformance with the procedures mutually agreed upon
by the Custodian, the Trust, and the Trust's Administrator or Transfer Agent,
the Custodian shall pay to the Trust's transfer agent, as agent for the
investors, an amount equal to the amount indicated in said Officer's Certificate
as payable by the Trust to such shareholders for distribution in cash by the
transfer agent to such shareholders. In lieu of paying the Trust's transfer
agent cash dividends and distributions, the Custodian may arrange for the direct
payment of cash dividends and distributions to shareholders by the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time by and among the Trust, the Custodian and the Trust's Administrator
and transfer agent.
(b) The Custodian may enter into separate custodial agreements with
various futures commission merchants ("FCMs") that the Trust uses (each an "FCM
Agreement"), pursuant to which the Trust's margin deposits in any transactions
involving futures contracts and options on futures contracts will be held by
Custodian in accounts (each an "FCM Account") subject to the disposition by the
FCM involved in such contracts in accordance with the customer contract between
FCM and the Trust ("FCM Contract"), SEC rules governing such segregated
accounts, CFTC rules and the rules of the applicable commodities exchange. Such
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FCM Agreements shall only be entered into upon receipt of Written Instructions
from the Trust. Transfers of initial margin shall be made into an FCM Account
only upon Written Instructions; transfers of premium and variation margin may be
made into an FCM Account pursuant to Oral Instructions. Transfers of funds from
an FCM Account to the FCM for which Custodian holds such an account may only
occur upon certification by the FCM to the Custodian that pursuant to the FCM
Agreement and the FCM Contract, all conditions precedent to its right to give
the Custodian such instruction have been satisfied.
14. Purchase of Securities. Promptly after each purchase of securities
by the Investment Adviser on behalf of the Trust, the Trust shall deliver to the
Custodian Oral or Written Instructions specifying with respect to each such
purchase: (a) the name of the issuer and the title of the securities, (b) the
number of shares or the principal amount purchased and accrued interest, if any,
(c) the dates of purchase and settlement, (d) the purchase price per unit, (e)
the total amount payable upon such purchase, (f) the name of the person from
whom or the broker through whom the purchase was made and (g) the CUSIP number
or other industry standard identification when available. The Custodian shall
upon receipt of securities purchased by or for the Trust pay out of the moneys
held for the account of such Trust the total amount payable to the person from
whom or the broker through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such Oral or Written
Instructions.
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15. Notation Pursuant to Section 17f-2 of the 1940 Act. With respect
to each deposit or withdrawal of securities or when ordering the deposit or
withdrawal of securities from safekeeping, the Custodian shall sign a notation
in respect of each such deposit, withdrawal or order that shall show: (a) the
date and time of the deposit, withdrawal or order; (b) the title and amount of
the securities or other investments deposited, withdrawn or ordered to be
withdrawn, and the identification thereof by certificate numbers or otherwise;
(c) the manner of acquisition of the securities or similar investments deposited
or the purpose for which they have been withdrawn, or ordered to be withdrawn;
and (d) if withdrawn and delivered to another person, the name of such person.
The time of any deposit, withdrawal or order means the time of the formal
recording of such transactions on the books of the Custodian at the Custodian's
close of business. Such notation shall be transmitted promptly to an officer or
trustee of the Trust designated by the Board of Trustees who shall not otherwise
be authorized to have access to the Trust's securities. Such notation shall be
on serially numbered forms and shall be preserved for at least one year.
16. Sales of Securities. Promptly after each sale of securities by the
investment manager, the Trust shall deliver to the Custodian Oral or Written
Instructions, specifying with respect to each such sale: (a) the name of the
issuer and the title of the security, (b) the number of shares or principal
amount sold, and accrued interest, if any, (c) the date of sale, (d) the sale
price per unit, (e) the total amount payable to the
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Trust upon such sale, (f) the name of the broker through whom or the person to
whom the sale was made and (g) the CUSIP number or other industry standard
identification when available. The Custodian shall deliver the securities upon
receipt of the total amount payable to the Trust upon such sale, provided that
the same conforms to the total amount payable as set forth in such Oral or
Written Instructions. Subject to the foregoing, the Custodian may accept payment
in such form as shall be satisfactory to it, and may deliver securities and
arrange for payment in accordance with the local customs prevailing among
dealers in securities.
17. Records. The books and records pertaining to the Trust shall be
prepared and maintained as required by the 1940 Act, as amended, and other
applicable securities laws and rules and regulations. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at all
times during the Custodian's normal business hours, and such books and records
shall be surrendered to the Trust promptly upon request. Upon reasonable request
of the Trust, copies of any such books and records shall be provided by the
Custodian to the Trust or the Trust's authorized representative at the Trust's
expense.
18. Reports.
(a) The Custodian shall furnish the Trust the following reports:
(1) such periodic and special reports as the Trust may reasonably
request;
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(2) a monthly statement summarizing all transactions and entries for
the account of the Trust;
(3) a monthly report of portfolio securities belonging to the Trust
showing the adjusted average cost of each issue and the market
value at the end of such month;
(4) a monthly report of the cash account of the Trust showing
disbursements;
(5) the reports to be furnished to the Trust pursuant to Rule 17f-4;
(6) the reports to be furnished to the Trust pursuant to Rule 17f-5;
and
(7) such other information as may be agreed upon from time to time
between the Trust and the Custodian.
(b) The Custodian with the direction and as interpreted by the Trust,
the Trust's accountants and/or other tax advisors will prepare and maintain as
complete, accurate, and current all accounts and records required to be
maintained by the Trust under the Internal Revenue Code of 1986, as amended,
under the rules and regulations of the 1940 Act and as agreed upon between the
parties and will preserve such records in the manner and for the periods
required by law.
(c) Unless the information necessary to perform the above functions is
furnished in writing or its electronic or digital equivalent to the Custodian in
a timely manner prior to the next calculation of the Trust's net asset value,
the Custodian shall incur no liability except as provided in
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Paragraph 9 herein and the Trust shall indemnify and hold the Custodian harmless
from and against any liability arising from any discrepancy between the
information received by the Custodian and used in such calculation and any
subsequent information received from the Trust.
(d) The Custodian shall assist the Trust's independent auditors, or
upon approval of the Trust or upon demand, any regulatory body, in any requested
review of the Trust's accounts and records maintained by the Custodian but shall
be reimbursed by the Trust for all expenses and employee time invested in any
such review outside of routine and normal periodic reviews.
(e) Upon receipt from the Trust of the necessary information, the
Custodian shall provide information for tax returns, questionnaires, or periodic
reports to shareholders and such other reports and information requests as the
Trust and the Custodian shall agree upon from time to time.
19. Cooperation with Accountants. The Custodian shall cooperate with
the Trust's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement and
under Rule 17f-2 to assure that the necessary information is made available to
such accountants for the expression of their unqualified opinion with respect
to, including without limitation, the three audits required each year, the
certificates with respect to such annual audits and the opinion included in the
Trust's semi-annual report on Form N-SAR, and will require each sub-custodian
appointed pursuant to paragraph 7 hereof to
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grant such access to the information to the Trust's independent certified public
accountant. The Custodian shall require any sub-custodian it appoints with
respect to the Trust to comply with the provisions of this Paragraph 19.
20. Confidentiality. The Custodian agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential shareholders and relative to the managers and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
21. Equipment Failures. In the event of equipment failures beyond the
Custodian's control, the Custodian shall, at no additional expense to the Trust,
take reasonable steps to minimize service interruptions but shall not have
liability with respect thereto. The Custodian shall make and maintain reasonable
provisions for back up emergency use of electronic data processing equipment to
the extent appropriate equipment is available.
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22. Right to Receive Advice.
(a) Advice of Trust. If the Custodian shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from the
Trust clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If the Custodian shall be in doubt as to any
question of law involved in any action to be taken or omitted by the Custodian,
it may request advice from counsel of its own choosing (who may be counsel for
the Trust or the Custodian, at the option of the Custodian).
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by the Custodian pursuant to
subparagraph (a) of this paragraph and advice received by the Custodian pursuant
to subparagraph (b) of this paragraph, the Custodian shall be entitled to rely
on and follow the advice received pursuant to the latter provision alone.
(d) Protection of The Custodian. The Custodian shall be protected in
any action or inaction which it takes or omits to take in reliance on any
directions, advice or Oral or Written Instructions received pursuant to
subparagraphs (a) or (b) of this section which the Custodian, after receipt of
any such directions, advice or Oral or Written Instructions, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Nothing in this paragraph shall be construed
as imposing upon the Custodian any obligation (i) to seek such directions,
advice or Oral or Written
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Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions when received, unless, under the terms or another
provision of this Agreement, the same is a condition to the Custodian's properly
taking or omitting to take such action. Nothing in this subparagraph shall
excuse the Custodian when an action or omission on the part of the Custodian
constitutes willful misfeasance, bad faith, negligence or reckless disregard by
the Custodian of its duties under this Agreement.
23. Compliance with Governmental Rules and Regulations. The Custodian
undertakes to comply with all applicable requirements of the 1933 Act, the 1934
Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties and obligations to be
performed by the Custodian hereunder. The Custodian acknowledges that it is
subject to Rule 17f-2 under the 1940 Act with respect to its duties to be
performed pursuant to this Agreement.
24. Compensation. As compensation for the services rendered by the
Custodian during the term of this Agreement, the Trust will pay to the
Custodian, in addition to reimbursement of its reasonable out-of-pocket
expenses, including reasonable counsel fees, monthly fees as outlined in
Schedule D, or as otherwise agreed upon from time to time in writing by the
Custodian and the Trust.
25. Indemnification. The Trust, as sole owner of the Property, agrees
to indemnify and hold harmless the Custodian and its nominees from all taxes,
charges, expenses, assessments,
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claims, and liabilities (including, without limitation, liabilities arising
under the 1933 Act, the Act of 1934, the 1940 Act, the CEA, and any state and
foreign securities and blue sky laws, all as or to be amended from time to time)
and expenses, including (without limitation) attorney's fees and disbursements,
arising directly or indirectly (a) from the fact that securities included in the
Property are registered in the name of any such nominee or (b) without limiting
the generality of the foregoing clause (a) from any action or thing which the
Custodian takes or does or omits to take or do (i) at the request or on the
direction of or in reliance on the advice of the Trust, or (ii) upon Oral or
Written Instructions, provided, that neither the Custodian nor any of its
nominees or subcustodian shall be indemnified against any liability to any Fund
of the Trust or to its shareholders (or any expenses incident to such liability)
arising out of (x) the Custodian's or such nominee's or subcustodian's own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
under this Agreement or (y) the Custodian's own negligent failure to perform its
duties under this Agreement. In the event of any advance of cash for any purpose
made by the Custodian resulting from Oral or Written Instructions of the Trust,
or in the event that the Custodian or its nominee or subcustodian shall incur or
be assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or subcustodian's own negligent action, negligent failure
to act, willful misconduct,
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or reckless disregard, the Trust shall promptly reimburse the Custodian for such
advance of cash or such taxes, charges, expenses, assessment claims or
liabilities.
26. Responsibility of The Custodian. The Custodian shall be under no
duty to take any action on behalf of the Trust except as specifically set forth
herein or as may be specifically agreed to by the Custodian in writing. In the
performance of its duties hereunder, the Custodian shall be obligated to
exercise reasonable care and diligence and to act in good faith to insure the
accuracy of all services performed under this Agreement. The Custodian shall be
responsible for its own negligent failure or that of any subcustodian it shall
appoint to perform its duties under this Agreement but to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Agreement, the Custodian shall not be liable for any act or omission which does
not constitute willful misfeasance, bad faith, or negligence on the part of the
Custodian or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, the Custodian in connection with its duties
under this Agreement shall not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any advice, direction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which the Custodian believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the
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Trust, the legality of the purchase or sale thereof or the propriety of the
amount paid or received therefore, (c) the legality of the issue or sale of any
Shares, or the sufficiency of the amount to be received therefore, (d) delays or
errors or loss of data occurring by reason of circumstances beyond the
Custodian's control, including acts of civil or military authority, national
emergencies, strikes or work stoppages, fire, mechanical breakdown (except as
provided in Paragraph 22), flood or catastrophe, acts of God, insurrection, acts
of war or terrorism, riots, revolutions, nuclear fusion, fission or radiation,
or failure of the mail, transportation, communication or power supply. Without
limiting the foregoing, the Custodian shall not be liable for any loss which
results from: (1) the general risk of investing, or (2) investing or holding
Trust assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of assets.
27. Collection. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by the Custodian) shall be at the sole risk of the Trust.
In any case in which the Custodian does not receive any payment due the Trust
within a reasonable time after the Custodian has made proper demands for the
same, it shall so notify the Trust in writing, including
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copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto, and to telephonic demands, and await instructions
from the Trust. The Custodian shall not be obliged to take legal action for
collection unless and until reasonably indemnified to its satisfaction. The
Custodian shall also notify the Trust as soon as reasonably practicable whenever
income due on securities is not collected in due course.
28. Duration and Termination. This Agreement shall be effective as of
the date hereof and shall continue until termination by the Trust or by the
Custodian on 90 days' written notice. Upon any termination of this Agreement,
pending appointment of a successor to the Custodian or a vote of the
shareholders of the Trust to dissolve or to function without a custodian of its
cash, securities or other property, the Custodian shall not deliver cash,
securities or other property of the Trust to the Trust, but may deliver them to
a bank or trust company of its own selection, having aggregate capital, surplus
and undivided profits, as shown by its last published report of not less than
twenty million dollars ($20,000,000) as a custodian for the Trust to be held
under terms similar to those of this Agreement, provided, however, that the
Custodian shall not be required to make any such delivery or payment until full
payment shall have been made by the Trust of all liabilities constituting a
charge on or against the properties then held by the Custodian or on or against
the Custodian and until full payment shall have been made to the Custodian of
all of its fee, compensation, costs
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and expenses, subject to the provisions of Paragraph 22 of this Agreement.
29. Notices. All notices and other communications (collectively
referred to as "Notice" or "Notices" in this paragraph) hereunder shall be in
writing or by confirmed telegram, cable, telex, or facsimile sending device.
Notices shall be addressed (a) if to the Custodian, The Chase Manhattan Bank,
Institutional Custody & Escrow, One Chase Manhattan Plaza Floor 3B, New York,
New York 10081, Attention: Gene Gemelli; (b) if to the Trust, at the address of
the Trust, Attention: Thomas M. Lenz, Assistant Secretary; or (c) if to neither
of the foregoing, at such other address as shall have been notified to the
sender of any such Notice or other communication. Notice shall be deemed to have
been given when actually received by the other party. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending of
a Notice hereunder shall be paid by the sender.
30. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
31. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
32. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to
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the subject matter hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in New York and governed by New
York law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below as of the day and year first
above written.
EMERGING GROWTH PORTFOLIO
By: _________________________ ATTEST: ______________________
Title Title
THE CHASE MANHATTAN BANK
By: _________________________ ATTEST: ______________________
Title Title
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SCHEDULE B
H. Richard Vartabedian Chairman of the Board
David G. Danielson Assistant Treasurer
Linda T. Gibson Assistant Secretary
Susan Jakuboski Assistant Treasurer
Thomas M. Lenz Vice President and Assistant
Secretary
Beth A. Remy Assistant Treasurer
Andres E. Saldana Assistant Secretary
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EXCLUSIVE PLACEMENT AGENT AGREEMENT
______________, 1996
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
9th Floor
Boston, MA 02116
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Emerging Growth Portfolio (the
"Portfolio"), an open-end, non-diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), organized as a New York trust, has agreed that Signature Broker-Dealer
Services, Inc. ("SBDS") shall be the exclusive placement agent (the "Exclusive
Placement Agent") of interests of the Portfolio ("Portfolio Interests").
1. Services as Exclusive Placement.
1.1 SBDS will act as Exclusive Placement Agent of the Portfolio
Interests covered by the registration statement then in effect under the 1940
Act. In acting as Exclusive Placement Agent under this Exclusive Placement Agent
Agreement, neither SBDS nor its employees or any agents thereof shall make any
offer or sale of Portfolio Interests in a manner which would require the
Interests to be registered under the Securities Act of 1933, as amended (the
"1933 Act").
1.2 All activities by SBDS and its agents and employees as Exclusive
Placement Agent of Portfolio Interests shall comply with all applicable laws,
rules and regulations, including, without limitation, all rules and regulations
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission").
1.3 Nothing herein shall be construed to require the Portfolio to
accept any offer to purchase any Portfolio Interests, all of which shall be
subject to approval by the Portfolio's Board of Trustees.
1.4 The Portfolio shall furnish from time to time for use in
connection with the sale of Portfolio Interests such information with respect to
the Portfolio and Portfolio Interests as SBDS may reasonably request. The
Portfolio shall also furnish SBDS upon request with: (a) unaudited semiannual
statements of the Portfolio's books and accounts prepared by the Portfolio, and
(b) from time to time such additional information regarding the Portfolio's
financial or regulatory condition as SBDS may reasonably request.
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 2
1.5 The Portfolio represents to SBDS that all registration statements
filed by the Portfolio with the Commission under the 1940 Act with respect to
Portfolio Interests have been prepared in conformity with the requirements of
such statute and the rules and regulations of the Commission thereunder. As used
in this Agreement the term "registration statement" shall mean any registration
statement filed with the Commission, as modified by any amendments thereto that
at any time shall have been filed with the Commission by or on behalf of the
Portfolio. The Portfolio represents and warrants to SBDS that any registration
statement will contain all statements required to be stated therein in
conformity with both such statute and the rules and regulations of the
Commission; that all statements of fact contained in any registration statement
will be true and correct in all material respects at the time of filing of such
registration statement or amendment thereto; and that no registration statement
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of Portfolio Interests. The Portfolio may but
shall not be obligated to propose from time to time such amendment to any
registration statement as in the light of future developments may, in the
opinion of the Portfolio's counsel, be necessary or advisable. If the Portfolio
shall not propose such amendment and/or supplement within fifteen days after
receipt by the Portfolio of a written request from SBDS to do so, SBDS may, at
its option, terminate this Agreement. The Portfolio shall not file any amendment
to any registration statement without giving SBDS reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall in
any way limit the Portfolio's right to file at any time such amendment to any
registration statement as the Portfolio may deem advisable, such right being in
all respects absolute and unconditional.
1.6 The Portfolio agrees to indemnify, defend and hold SBDS, its
several officers and directors, and any person who controls SBDS within the
meaning of Section 15 of the 1933 Act or Section 20 of the Securities and
Exchange Act of 1934 (the "1934 Act") (for purposes of this paragraph 1.6,
collectively, "Covered Persons") free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which any Covered Person may incur under the 1933 Act,
the 1934 Act, otherwise, arising out of or based on any untrue statement of a
material fact contained in any registration statement, private placement
memorandum or other offering material ("Offering Material") or arising out of or
based on any omission to state a material fact required to be stated in any
Offering Material or necessary to make the statements in any Offering Material
not misleading; provided, however, that the Portfolio's agreement to
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 3
indemnify Covered Persons shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any financial and other statements as are
furnished in writing to the Portfolio by SBDS in its capacity as Exclusive
Placement Agent for use in the answers to any items of any registration
statement or in any statements made in any Offering Material, or arising out of
or based on any omission or alleged omission to state a material fact in
connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Portfolio's agreement to indemnify SBDS and the Portfolio's
representations and warranties hereinbefore set forth in paragraph 1.5 shall not
be deemed to cover any liability to the Portfolio or its investors to which a
Covered Person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of a
Covered Person's reckless disregard of its obligations and duties under this
Agreement. The Portfolio should be notified of any action brought against a
Covered Person, such notification to be given by letter or by telegram addressed
to the Portfolio, 6 St. James Avenue, 9th Floor, Boston, Massachusetts 02116,
with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY
10017, Attention: Robert M. Kaner, promptly after the summons or other first
legal process shall have been duly and completely served upon such Covered
Person. The failure to so notify the Portfolio of any such action shall not
relieve the Portfolio from any liability except to the extent the Portfolio
shall have been prejudiced by such failure or from any liability that the
Portfolio may have to the Covered Person against whom such action is brought by
reason of any such untrue statement or omission, otherwise than on account of
the Portfolio's indemnity agreement contained in this paragraph. The Portfolio
will be entitled to assume the defense of any suit brought to enforce any such
claim, demand or liability, but in such case such defense shall be conducted by
counsel of good standing chosen by the Portfolio and approved by SBDS, which
approval shall not be unreasonably withheld. In the event the Portfolio elects
to assume the defense of any such suit and retain counsel of good standing
approved by SBDS, the defendant or defendants in such suit shall bear the fees
and expenses of any additional counsel retained by any of them; but in case the
Portfolio does not elect to assume the defense of any such suit, or in case SBDS
reasonably does not approve of counsel chosen by the Portfolio, the Portfolio
will reimburse the Covered Person named as defendant in such suit, for the fees
and expenses of any counsel retained by SBDS or the Covered Persons. The
Portfolio's indemnification agreement contained in this paragraph and the
Portfolio's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Covered Persons, and shall survive the delivery of any Portfolio
Shares. This agreement of indemnity will inure
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 4
exclusively to Covered Persons and their successors. The Portfolio agrees to
notify SBDS promptly of the commencement of any litigation or proceedings
against the Portfolio or any of its officers or Trustees in connection with the
issue and sale of any Portfolio Shares.
1.7 SBDS agrees to indemnify, defend and hold the Portfolio, its
several officers and trustees, and any person who controls the Portfolio within
the meaning of Section 15 of the 1933 Act or Section 20, of the 1934 Act (for
purposes of this paragraph 1.7, collectively, "Covered Persons") free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands,
liabilities and any counsel fees incurred in connection therewith) that Covered
Persons may incur under the 1933 Act, the 1934 Act or common law or otherwise,
but only to the extent that such liability or expense incurred by a Covered
Person resulting from such claims or demands shall arise out of or be based on
any untrue statement of a material fact contained in information furnished in
writing by SBDS in its capacity as Exclusive Placement Agent to the Portfolio
for use in the answers to any of the items of any registration statement or in
any statements in any other Offering Material or shall arise out of or be based
on any omission to state a material fact in connection with such information
furnished in writing by SBDS to the Portfolio required to be stated in such
answers or necessary to make such information not misleading. SBDS shall be
notified of any action brought against a Covered Person, such notification to be
given by letter or telegram addressed to SBDS at 6 St. James Avenue, Suite 900,
Boston, MA 02116, Attention: Secretary, promptly after the summons or other
first legal process shall have been duly and completely served upon such Covered
Person. SBDS shall have the right of first control of the defense of the action
with counsel of its own choosing satisfactory to the Portfolio if such action is
based solely on such alleged misstatement or omission on SBDS's part, and in any
other event each Covered Person shall have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify SBDS of any such action shall not relieve SBDS from any liability except
to the extent the Portfolio shall have been prejudiced by such failure, or from
any liability that SBDS may have to Covered Persons by reason of any such untrue
or alleged untrue statement, or omission or alleged omission, otherwise than on
account of SBDS's indemnity agreement contained in this paragraph.
1.8 No Portfolio Interests shall be offered by either SBDS or the
Portfolio under any of the provisions of this Agreement and no orders for the
purchase or sale of Portfolio Interests hereunder shall be accepted by the
Portfolio if and so long as the effectiveness of the registration statement or
any
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 5
necessary amendments thereto shall be suspended under any of the provisions of
the 1940 Act; provided, however, that nothing contained in this paragraph shall
in any way restrict or have an application to or bearing on the Portfolio's
obligation to redeem Portfolio Interests from any investor in accordance with
the provisions of the Portfolio's registration statement or Declaration of
Trust, as amended from time to time.
1.9 The Portfolio agrees to advise SBDS as soon as reasonably
practical by a notice in writing delivered to SBDS or its counsel:
(a) of any request by the Commission for amendments to
the registration statement then in effect or for additional
information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then
in effect or the initiation by service of process on the Portfolio of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement then in
effect or that requires the making of a change in such registration
statement in order to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement that may from time to time be
filed with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts of
the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.10 SBDS agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Portfolio all records and
other information not otherwise publicly available relative to the Portfolio and
its prior, present or potential investors and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Portfolio, which approval shall not be unreasonably withheld and may not be
withheld where SBDS may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Portfolio.
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 6
1.11 In addition to SBDS's duties as Exclusive Placement Agent, the
Portfolio understands that SBDS may, in its discretion, perform additional
functions in connection with transactions in Portfolio Interests.
The processing of Portfolio Interest transactions may include, but is
not limited to, compilation of all transactions from SBDS's various offices;
creation of a transaction tape and timely delivery of it to the Portfolio's
transfer agent for processing; reconciliation of all transactions delivered to
the Portfolio's transfer agent; and the recording and reporting of these
transactions executed by the Portfolio's transfer agent in customer statements;
rendering of periodic customer statements; and the reporting of IRS Form 1099
information at year end if required.
SBDS may also provide other investor services, such as communicating
with Portfolio investors and other functions in administering customer accounts
for Portfolio investors.
SBDS understands that these services may result in cost savings to the
Portfolio or to the Portfolio's investment manager and neither the Portfolio nor
the Portfolio's investment manager will compensate SBDS for all or a portion of
the costs incurred in performing functions in connection with transactions in
Portfolio Interests. Nothing herein is intended, nor shall be construed, as
requiring SBDS to perform any of the foregoing functions.
2. Term.
This Agreement shall become effective on the date first above written
and, unless sooner terminated as provided herein, shall continue until ________
__, 1997 and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually
by, (i) the Portfolio's Board of Trustees or (ii) by a vote of a majority (as
defined in the 1940 Act) of the Portfolio's outstanding voting securities,
provided that in either event the continuance is also approved by the majority
of the Portfolio's Trustees who are not interested persons (as defined in the
1940 Act) of the Portfolio and who have no direct or indirect financial interest
in this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable without penalty, on not
less than 60 days' notice, by the Board, by vote of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting securities, or by SBDS. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 7
3. Representations and Warranties.
SBDS and the Portfolio each hereby represents and warrants to the
other that it has all requisite authority to enter into, execute, deliver and
perform its obligations under this Agreement and that, with respect to it, this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
4. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of law,
including the applicable provisions of the 1940 Act and to the extent that any
provisions herein contained conflict with any such applicable provisions of law,
the latter shall control.
The laws of the State of New York shall, except to the extent that any
applicable provisions of Federal Law shall be controlling, govern the
construction, validity and effect of this Agreement, without reference to
principles of conflicts of law.
The undersigned officer of the Portfolio has executed this
Agreement not individually, but as President under the Portfolio's Declaration
of Trust. The obligations of this Agreement are not binding upon any of the
Trustees or investors of the Portfolio individually, but bind only the trust
estate.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this
<PAGE>
Signature Broker-Dealer Services, Inc.
___________, 1996
Page 8
Agreement and returning the same to the undersigned, whereupon this Agreement
shall constitute a binding contract between the parties hereto effective at the
closing of business on the date hereof.
Yours very truly,
EMERGING GROWTH PORTFOLIO
By: _____________________
President
Accepted:
SIGNATURE BROKER-DEALER SERVICES, INC.
By: _______________________
Secretary
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of _________ __, 1996 by
and between Emerging Growth Portfolio, a New York trust (the "Portfolio"), and
The Chase Manhattan Bank, a New York State chartered bank (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Portfolio is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act");
WHEREAS, the Portfolio wishes to engage the Administrator to provide
certain administrative and management services, and the Administrator is willing
to provide such administrative and management services to the Portfolio, on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant and
agree as follows:
1. Duties of the Administrator. Subject to the direction and control
of the Board of Trustees of the Portfolio, the Administrator shall perform such
administrative and management services as may from time to time be reasonably
requested by the Portfolio, which shall include without limitation: (a)
providing office space, equipment and clerical personnel necessary for
maintaining the organization of the Portfolio and for performing the
administrative and management functions herein set forth; (b) arranging, if
desired by the Portfolio, for Directors, officers and employees of the
Administrator to serve as Trustees, officers or agents of the Portfolio if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law; (c) supervising the overall
administration of the Portfolio, including negotiation of contracts and fees
with and the monitoring of performance and billings of the Portfolio's transfer
agent, custodian and other independent contractors or agents; (d) preparing and,
if applicable, filing all documents required for compliance by the Portfolio
with applicable laws and regulations, including registration statements,
registration fee filings, semi-annual and annual reports to investors, proxy
statements and tax returns; (e) preparation of agendas and supporting documents
for and minutes of meetings of Trustees, committees of Trustees and investors;
and (f) maintaining books and records of the Portfolio. Notwithstanding the
foregoing, the Administrator shall not be deemed to have assumed any duties with
respect to, and shall not be responsible for, the management of the Portfolio's
assets or the rendering of investment advice and supervision with respect
thereto, nor shall the Administrator be
<PAGE>
-2-
deemed to have assumed or have any responsibility with respect to functions
specifically assumed by any transfer agent or custodian of the Portfolio.
2. Allocation of Charges and Expenses. The Administrator shall pay the
entire salaries and wages of all of the Portfolio's Trustees, officers and
agents who devote part or all of their time to the affairs of the Administrator
or its affiliates, and the wages and salaries of such persons shall not be
deemed to be expenses incurred by the Portfolio for purposes of this Section 2.
Except as provided in the foregoing sentence, the Portfolio will pay all of its
own expenses including, without limitation, compensation of Trustees not
affiliated with the Administrator; governmental fees; interest charges; taxes;
membership dues in the Investment Company Institute allocable to the Portfolio;
fees and expenses of the Portfolio's independent auditors, of legal counsel and
of any transfer agent or registrar of the Portfolio; expenses of preparing,
printing and mailing reports, notices, proxy statements and reports to investors
and governmental officers and commissions; expenses of preparing and mailing
agendas and supporting documents for meetings of Trustees and committees of
Trustees; expenses connected with the execution, recording and settlement of
security transactions; insurance premiums; fees and expenses of the Portfolio's
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of interests of the Portfolio; expenses of meetings of
investors in the Portfolio; and expenses relating to the issuance, registration
and qualification of interests in the Portfolio.
3. Compensation of Administrator. For the services to be rendered and
the facilities to be provided by the Administrator hereunder, the Portfolio
shall pay to the Administrator an administrative fee computed and paid monthly
at an annual rate of 0.05% of the Portfolio's average daily net assets for its
then-current fiscal year. If the Administrator serves as Administrator for less
than the whole of any period specified in this Section 3, the compensation to
the Administrator shall be prorated. For purposes of computing the fees payable
to the Administrator hereunder, the value of the Portfolio's net assets shall be
computed in the manner specified in the Portfolio's then-current Registration
Statement under the 1940 Act.
4. Limitation of Liability of the Administrator. The Administrator
shall not be liable for any error of judgment or mistake of law or for any act
or omission in the administration or management of the Portfolio or the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 4, the term "Administrator" shall include The Chase Manhattan Bank, N.A.
and/or any of its affiliates and
<PAGE>
-3-
the Directors, officers and employees of The Chase Manhattan Bank, N.A. and/or
of its affiliates.
5. Activities of the Administrator. The services of the Administrator
to the Portfolio are not to be deemed to be exclusive, the Administrator being
free to render administrative and/or other services to other parties. It is
understood that Trustees, officers, and investors of the Portfolio are or may
become interested in the Administrator and/or any of its affiliates, as
Directors, officers, employees, or otherwise, and that Directors, officers and
employees of the Administrator and/or any of its affiliates are or may become
similarly interested in the Portfolio and that the Administrator and/or any of
its affiliates may be or become interested in the Portfolio as an investor or
otherwise.
6. Duration, Termination and Amendments of this Agreement. This
Agreement may be terminated at any time, without the payment of any penalty, by
the Board of Trustees of the Portfolio or by the "vote of a majority of the
outstanding voting securities" of the Portfolio, or by the Administrator, in
each case on not more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement shall automatically terminate in the event of its
"assignment".
The terms "vote of a majority of the outstanding voting securities"
and "assignment", when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
7. Subcontracting by the Administrator. The Administrator may
subcontract for the performance of its obligations hereunder with any one or
more persons; provided, however, that the Administrator shall not enter into any
such subcontract unless the Trustees of the Portfolio shall have approved such
subcontract and found the subcontracting party to be qualified to perform the
obligations sought to be subcontracted; and provided, further, that, unless the
Portfolio otherwise expressly agrees in writing, the Administrator shall be as
fully responsible to the Portfolio for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Portfolio has executed this Agreement not
individually, but as Secretary and Treasurer under the Portfolio's Declaration
of Trust, and the obligations of this Agreement are not binding upon any of the
Trustees or investors of the Portfolio individually, but bind only the trust
estate.
<PAGE>
-4-
EMERGING GROWTH PORTFOLIO
By: ____________________________
Name:
Title:
As [Title] and not Individually
THE CHASE MANHATTAN BANK
By: ____________________________
Name:
Title:
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints H. Richard
Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and each of
them, with full powers of substitution as his true and lawful attorneys and
agents to execute in his name and on his behalf in any and all capacities the
Registration Statement on Form N-1A, and any and all amendments thereto, filed
by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed Income
Portfolio, Growth and Income Portfolio or International Equity Portfolio (the
"Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 22nd
day of August, 1996.
/s/ Fergus Reid, III
-----------------------------------
Fergus Reid, III
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, Lee
Schultheis, Thomas M. Lenz and Andres E. Saldana and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statement
on Form N-1A, and any and all amendments thereto, filed by Capital Growth
Portfolio, Emerging Growth Portfolio, Global Fixed Income Portfolio, Growth and
Income Portfolio or International Equity Portfolio (the "Trusts") with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable the Trusts to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ H. Richard Vartabedian
-----------------------------------
H. Richard Vartabedian
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ William J. Armstrong
-----------------------------------
William J. Armstrong
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ John R.H. Blum
-----------------------------------
John R.H. Blum
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Stuart W. Cragin, Jr.
-----------------------------------
Stuart W. Cragin, Jr.
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Joseph J. Harkins
-----------------------------------
Joseph J. Harkins
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Richard E. Ten Haken
-----------------------------------
Richard E. Ten Haken
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Irving L. Thode
-----------------------------------
Irving L. Thode
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ W. Perry Neff
-----------------------------------
W. Perry Neff
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Roland R. Eppley, Jr.
-----------------------------------
Roland R. Eppley, Jr.
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ W.D. MacCallan
-----------------------------------
W.D. MacCallan
