As filed with the Securities and Exchange Commission on March 31, 1997
1940 Act File No. 811-07939
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
---------------------------------------------
MERRIMAC FUNDS
(Exact Name of Registrant as Specified in Charter)
200 Clarendon Street, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (888) 637-7622
Susan C. Mosher, Secretary
Merrimac Funds
200 Clarendon Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to:
Philip H. Newman
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
<PAGE>
MERRIMAC FUNDS
EXPLANATORY NOTE
This Registration Statement 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 issued 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's series may only be made by "accredited
investors" within the meaning of Regulation D under the 1933 Act which generally
includes institutional investors and high net worth individuals. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any beneficial interests in any series of the Registrant.
--------------
Pursuant to General Instruction F4 of Form N-1A, a registration statement filed
under only the 1940 Act shall consist of the facing sheet of the Form, responses
to all items of Parts A and B except Items 1, 2, 3 and 5A of Part A thereof,
responses to all items of Part C except Items 24(b)(6), 24(b)(10), 24(b)(11)
and 24(b)(12) required signatures, and all other documents that are
required or which the Registrant may file as part of the registration statement.
(i)
<PAGE>
PART A
A-1
<PAGE>
PART A
March 28, 1997
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
The Merrimac Funds (the "Trust") is an open-end management investment company
registered with the Securities and Exchange Commission (the "SEC") under the
1940 Act. The Trust was organized as a business trust under the laws of the
State of Delaware on October 30, 1996. The Trust has established two series of
beneficial interest: Merrimac Cash Fund (the "Cash Fund") and Merrimac Treasury
Fund (the "Treasury Fund") (collectively, the "Funds" and singly, a "Fund"). The
beneficial interests of each series shall hereinafter be referred to as "shares"
and holders of such interests shall hereinafter be referred to as
"shareholders." Each Fund is diversified within the meaning of the 1940 Act. The
Treasury Fund has not yet commenced operations. Beneficial interests in each
Fund 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.
Investments in a Fund may only be made by investors that qualify as "accredited
investors" within the meaning of Regulation D under the 1933 Act, which
generally includes institutional investors and high net worth individuals
("Eligible Investors"), seeking liquidity, preservation of capital and current
income, and for whom growth of capital is not a consideration. 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.
Each Fund offers two classes of shares to investors, Institutional Class and
Premium Class shares, which both represent interests in such Fund. The two
classes differ in (i) the imposition of a shareholder servicing fee for
Institutional Class shares equal to a maximum of 0.25% of average daily net
assets of the Institutional Class shares; and (ii) the maximum initial
investment for each Class.
Investment Objective
The investment objective of each Fund is to obtain as high a level of current
income as is consistent with the preservation of capital and liquidity. Unlike
other mutual funds which directly acquire and manage their own portfolios of
securities, the Cash Fund and the Treasury Fund each seeks to achieve its
investment objective by investing all of their investable assets in the Merrimac
Cash Portfolio (the "Cash Portfolio" or a "Portfolio") and the Merrimac Treasury
Portfolio (the "Treasury Portfolio" or a "Portfolio"), respectively, which are
each a series of the Merrimac Master Portfolio (the "Portfolio Trust"), a newly
formed open-end management investment company established as a New York common
law trust on October 30, 1996. The Portfolio Trust will be treated as a
partnership for federal tax purposes. Each Portfolio has the same investment
objective and policies as its corresponding Fund. There is no assurance that
either Fund or either Portfolio will achieve its investment objective. Neither
Fund's and neither Portfolio's investment objective is fundamental and therefore
may be changed at any time by the
A-2
<PAGE>
Board of Trustees of the Trust or the Portfolio Trust, respectively, upon at
least 30 days prior written notice to shareholders of the particular Fund or
Portfolio.
Investment Policies
Each Portfolio seeks to achieve the same objective as its corresponding Fund by
investing in high quality U.S. dollar denominated money market instruments.
Since the characteristics of the Funds will correspond directly to those of
their Portfolio, the following is a discussion of the various investment
policies of the Portfolios. Except as otherswise provided below, the Funds'
investment policies are not "fundamental policies" as such term is defined in
the 1940 Act and may therefore be changed by the Trust's Board of Trustees
without a shareholder vote.
The Cash Portfolio may invest in U.S. Government Obligations (such as U.S.
Treasury bills, notes and bonds, and instruments issued by U.S. Government
agencies or instrumentalities); securities of U.S. and non-U.S. banks or thrift
organizations (such as bankers' acceptances, time deposits and certificates of
deposit); corporate debt obligations, including commercial paper, notes and
bonds and other money market instruments; asset-backed securities; and variable
rate obligations (defined as a security whose coupon rate resets at least every
six months). The Cash Portfolio also may invest in repurchase agreements that
are collateralized by the securities listed above with no restrictions on the
maturity of obligations collateralizing such repurchase agreements and may
engage in securities lending.
The Treasury Portfolio will invest substantially all, but not less than 65% of
its assets in U.S. Government Obligations (as defined above) which are backed by
the "full faith and credit" of the U.S. Government. To maximize the
tax-effective yield for shareholders, under normal circumstances, the Treasury
Portfolio will invest primarily in obligations that qualify for the exemption
from state taxation.
The Portfolios will each operate as a "money market mutual fund" and all
investments will qualify as "eligible securities" within the meaning of Rule
2a-7 under the 1940 Act. Consistent with Rule 2a-7, a Portfolio will not
purchase securities of any issuer (except securities issued or guaranteed by the
United States, its agencies or instrumentalities and repurchase agreements
involving such securities) if as a result more than 5% of the total assets of
the Portfolio would be invested in the securities of such issuer or the
Portfolio would own more than 10% of the outstanding voting securities of such
issuer.
Additional Investment Policies
Maturity and Quality. Each Portfolio will manage interest rate risk by
maintaining a dollar-weighted average maturity of 90 days or less and will not
invest in securities with remaining maturities of more than 397 days (as
determined in accordance with Rule 2a-7 under the 1940 Act.) Each Portfolio may
invest in variable or floating rate securities which bear interest at rates
subject to periodic adjustment or which provide for periodic recovery of
principal on demand. Each Portfolio intends to incur only limited credit risk.
The Portfolios may only purchase securities, in addition to U.S. Government
Obligations (as defined above), that are rated
A-3
<PAGE>
in the highest or second highest rating categories for short-term obligations by
at least two nationally recognized statistical rating organizations ("NRSROs").
As a matter of operating policy, however, the Portfolios will only invest in
securities, exclusive of U.S. Government Obligations, that are rated in the
highest rating category for short-term obligations by at least two NRSROs.
Investments in high quality, short term instruments may, in many circumstances,
result in a lower yield than would be available from investments in instruments
with a lower quality or a longer term.
Investment Restrictions. Part B of this Registration Statement contains
a list of specific investment restrictions which govern the investment policies
of the Funds and the Portfolios. These specific restrictions are "fundamental
policies" as such term is defined in the 1940 Act and may not be changed without
shareholder approval. Except as otherwise indicated, each Fund's and each
Portfolio's investment policies are not "fundamental policies" and may be
changed at any time by the respective Board of Trustees upon at least 30 days
prior written notice to shareholders of the particular Fund or Portfolio. If a
percentage or rating restriction is adhered to at the time an investment is
made, a later change in percentage or rating resulting from changes in a
Portfolio's securities will not be a violation of policy.
Investment Practices
Money Market Instruments. An investment in a Portfolio is subject to
interest rate risk and credit risk of the issuers of the money market
instruments. All money market instruments can change in value when interest
rates or an issuer's creditworthiness changes, or if an issuer or guarantor of a
security fails to pay interest or principal when due.
U.S. Government Obligations. Each Portfolio may invest in U.S.
Government money market obligations, which are debt securities issued or
guaranteed by the U.S. Treasury, including bills, certificates of indebtedness,
notes and bonds, or by an agency or instrumentality of the U.S. Government
established under the authority of an act of Congress. Not all U.S. Government
obligations are backed by the full faith and credit of the United States. For
example, securities issued by the Federal Farm Credit Bank or by the Federal
National Mortgage Association are supported by the agency's right to borrow
money from the U.S. Treasury under certain circumstances. Securities issued by
the Federal Home Loan Bank are supported only by the credit of the agency. There
is no guarantee that the U.S. Government will support these types of securities,
and therefore they involve more risk than "full faith and credit" Government
obligations. The Treasury Portfolio will primarily invest in "full faith and
credit" U.S. Government Obligations.
Bankers' Acceptances. The Cash Portfolio may invest in bankers'
acceptances which are bills of exchange or time drafts drawn on and accepted by
a commercial bank. They are used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
Time Deposits. The Cash Portfolio may invest in time deposits ("TDs"),
which are non-negotiable receipts issued by a bank in exchange for the deposit
of funds. Like a certificate
A-4
<PAGE>
of deposit, a TD earns a specified rate of interest over a definite period of
time; however, it cannot be traded in the secondary market. The Portfolio may
make time deposits in commercial banks, savings banks, thrifts, and in foreign
banks if the institution has total assets in excess of $1 billion. Such
instruments include Eurodollar TDs, which are U.S. dollar denominated deposits
in a foreign branch of a U.S. or foreign bank.
Certificates of Deposit. The Cash Portfolio also may invest in
certificates of deposit ("CDs"), which are negotiable interest bearing
instruments with a specific maturity. CDs are issued by banks and thrift
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. The Portfolio may invest in CDs of
domestic and foreign branches of U.S. commercial banks and domestic thrifts that
are FDIC insured and that have total assets in excess of $1 billion. The
Portfolio also may invest in U.S. dollar-denominated CDs issued by foreign banks
having total assets in excess of $1 billion. Such instruments include Eurodollar
CDs, which are issued by branches of foreign and domestic banks located outside
the U.S., and Yankee CDs, which are issued by a U.S. branch of a foreign bank
and held in the U.S.
Commercial Paper. The Cash Portfolio may invest in commercial paper,
which is the term used to designate unsecured short-term promissory notes issued
by corporations and other entities. Maturities on these issues vary from a few
days to nine months. The Portfolio may also purchase Europaper that is U.S.
dollar-denominated commercial paper of a foreign issuer and may buy bonds with
remaining maturities of under thirteen months.
Asset-Backed Securities. The Cash Portfolio also may invest in
asset-backed securities, which consist of securities secured by company
receivables, home equity loans, truck and auto loans, leases, credit card
receivables and other securities backed by other types of receivables or other
assets. Credit support for asset-backed securities may be based on the
underlying assets and/or provided through credit enhancements such as letters of
credit, insurance bonds, limited issuer guarantees, senior-subordinated
structures and over collateralization. Asset-backed securities are normally
traded over-the-counter and typically have a short-intermediate maturity
structure depending on the paydown characteristics of the underlying financial
assets which are passed through to the security holder. Asset-backed securities
may be subject to prepayment risk, particularly in a period of declining
interest rates. Prepayments, which occur when unscheduled payments are made on
the underlying debt instruments, may shorten the effective maturities of these
securities and may lower their total returns. There is no limit on the extent to
which the Cash Portfolio may invest in asset-backed securities; however, the
Portfolio will only invest in asset-backed securities that carry a rating in the
highest category from at least two NRSROs.
When-Issued and Delayed Delivery Transactions. Each Portfolio may
invest in when-issued securities, which are securities purchased for delivery
beyond the normal settlement date at a stated price and yield, thereby involving
the risk that the yield obtained will be less then that available in the market
at delivery. Although the purchase of securities on a when-issued basis is not
considered leveraging, it has the effect of leveraging. When such a security is
purchased, the Custodian will set aside cash or liquid securities to satisfy the
purchase
A-5
<PAGE>
commitment. These segregated securities will be valued at market and additional
cash or securities will be segregated if necessary so that the market value of
the account will continue to satisfy the purchase commitment. A Portfolio
generally will not pay for such securities or earn interest on them until
received. Commitments to purchase when-issued securities will not, under normal
market conditions, exceed 25% of the Portfolio's total assets, and a commitment
will not exceed 90 days. A Portfolio will only purchase when-issued securities
for the purpose of acquiring portfolio securities and not for speculative
purposes. However, a Portfolio may sell these securities or dispose of the
commitment before the settlement date if it is deemed advisable as a matter of
investment strategy.
Variable and Floating Rate Instruments. Certain of the obligations
purchased by the Portfolios may carry variable or floating rates of interest and
may include variable rate master demand notes. A floating rate security provides
for the automatic adjustment of its interest rate whenever a specified interest
rate changes. A variable rate security provides for the automatic establishment
of a new interest rate on set dates. Variable and floating rate instruments may
include variable amount master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. There may be no active secondary market with respect to a
particular variable or floating rate instrument. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to a
Portfolio will approximate their par value. Further, some of the demand
instruments purchased by a Portfolio derive their liquidity from the ability of
the holder to demand repayment from the issuer or from a third party providing
credit support.
Repurchase Agreements. The Cash Portfolio may enter into repurchase
agreements, which are agreements by which a person obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. In substance, a repurchase agreement is a
loan by the Portfolio collateralized with securities. The Portfolio's custodian
or its agent will hold the security as collateral for the repurchase agreement.
All repurchase transactions must be collateralized initially at a value at least
equal to 102% of the repurchase price and counterparties are required to deliver
additional collateral in the event the market value of the collateral falls
below 100%. The Portfolio bears the risk of loss in the event the other party
defaults on its obligations and the Portfolio is delayed or prevented from its
right to dispose of the collateral securities or if the Portfolio realizes a
loss on the sale of the collateral securities. The Portfolio will enter into
repurchase agreements with financial institutions deemed to present minimal risk
of bankruptcy during the term of the agreement based on guidelines established
and periodically reviewed by the Trustees. The Portfolio will not invest more
than 10% of its net assets in repurchase agreements maturing in more than seven
days because such agreements would be considered "illiquid securities" see also
Private Placements and Illiquid Securities" below.
Reverse Repurchase Agreements. The Cash Portfolio may borrow funds for
temporary purposes by entering into reverse repurchase agreements. Pursuant to
such agreements, the Portfolio would sell its securities to financial
institutions such as banks and broker-dealers and agree to repurchase them at a
mutually agreed-upon date and price. The Portfolio will enter into
A-6
<PAGE>
reverse repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time the Portfolio
enters into a reverse repurchase agreement, it would place in a segregated
custodial account, assets such as liquid high grade securities, consistent with
the Portfolio's investment restrictions and having a value equal to the
repurchase price (including accrued interest), and would subsequently monitor
the account to ensure that such equivalent value was maintained. Reverse
repurchase agreements involve the risk that the market value of securities sold
by the Portfolio may decline below the price at which the Portfolio is obligated
to repurchase the securities. Reverse repurchase agreements are considered by
the SEC to be borrowings by the Portfolio under the 1940 Act.
Securities Lending. The Cash Portfolio may lend up to 33 1/3% of its
portfolio of securities pursuant to agreements requiring that the loan be
continuously secured by cash or equivalent collateral or by a letter of credit
or bank guarantee in favor of the Portfolio at least equal at all times to 100%
of the market value plus accrued interest on the securities lent. The Portfolio
will continue to receive interest on the securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Collateral is
marked to market daily. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will only be made to borrowers
deemed to be of good standing under guidelines established by the Trustees. In
addition, the Portfolio will bear the risk of any decline in value of securities
acquired with cash collateral. Loans are subject to termination by the Portfolio
or the borrower at any time and are, therefore, not considered to be illiquid
investments.
Private Placements and Illiquid Investments. The Cash Portfolio may
invest up to 10% of its net assets in securities for which there is no readily
available market. These illiquid securities may include privately placed
restricted securities for which no institutional market exists. The absence of a
trading market can make it difficult to value such securities and disposing of
the securities may involve negotiation and expense. The valuation of these
securities generally reflects limits on their liquidity. At times it may be
difficult for the Portfolio to sell restricted securities promptly at an
acceptable price.
Rule 144A Securities. The Cash Portfolio may purchase certain
restricted securities ("Rule 144A securities") for which there is a secondary
market of qualified institutional buyers, as contemplated by Rule 144A under the
1933 Act. Rule 144A provides an exemption from the registration requirements of
the 1933 Act for the resale of certain restricted securities to qualified
institutional buyers.
One effect of Rule 144A is that certain restricted securities may now be liquid,
though there is no assurance that a liquid market for Rule 144A securities will
be maintained. The Board of Trustees of the Portfolio has adopted policies and
procedures for the purpose of determining whether securities that are eligible
for resale under Rule 144A are liquid or illiquid for purposes of the
Portfolio's limitation on investment in illiquid securities. Within those
policies is the delegation to the Portfolio's investment sub-adviser the
determination as to whether a particular security is liquid or illiquid. The
Portfolio's Board of Trustees also periodically reviews Portfolio purchases and
sales of Rule 144A securities.
A-7
<PAGE>
To the extent that liquid Rule 144A securities within the Portfolio become
illiquid due to the lack of sufficient qualified institutional buyers or due to
market or other conditions, the percentage of the Portfolio's assets invested in
illiquid assets would increase. In that event, these securities would be deemed
illiquid securities for purposes of the Portfolio's 10% limitation on investment
in illiquid securities.
Futures Contracts and Related Options. The Cash Portfolio may enter
into futures contracts, options on futures contracts, index futures and options
thereon that are traded on an exchange regulated by the Commodities Futures
Trading Commission ("CFTC") to the extent that obligations under such contracts
or transactions, together with options on securities, represent not more than
10% of that Portfolio's total assets.
The Cash Portfolio may buy and sell futures contracts and related options to
manage its exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
that Portfolio's exposure to price fluctuations. Other strategies, including
buying futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio of securities of the Cash
Portfolio. The Cash Portfolio expects to enter into these transactions to "lock
in" a return or spread on a particular investment or portion of its assets, to
protect against any increase in the price of securities that Portfolio
anticipates purchasing at a later date, or for other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If a
hedge is applied at an inappropriate time or interest rates are judged
incorrectly, options and futures strategies may lower the Cash Portfolio's
return. The Portfolio could also experience losses if the prices of its options
and futures positions were poorly correlated with its other instruments, or if
it could not close out its positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Cash Portfolio to deposit
with the applicable exchange or other specified financial intermediary as a good
faith deposit for its obligations, known as "initial margin", an amount of cash
or specified debt securities that initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Portfolio must make additional deposits
equal to any net losses due to unfavorable price movements of the contract and
will be credited with an amount equal to any net gains due to favorable price
movements. These additional deposits or credits are calculated and required
daily and are known as "variation margin".
The SEC requires that when an investment company such as the Cash Portfolio
effects transactions of the foregoing nature, it must either segregate cash or
other liquid portfolio securities with its custodian in the amount of its
obligations under the foregoing transactions or must cover such obligations by
maintaining positions in portfolio securities, futures contracts or options that
would serve to satisfy or offset the risk of such obligations. When effecting
transactions of the foregoing nature, the Portfolio will comply with such
segregation or cover
A-8
<PAGE>
requirements. No limitation exists on the amount of the Portfolio's assets that
may be used to comply with such segregation or cover requirements.
Swaps, Caps and Floors. In order to protect the value of the Cash
Portfolio from interest rate fluctuations and to hedge against fluctuations in
the floating rate market in which that Portfolio's investments are traded, the
Cash Portfolio may enter into swaps, caps, and floors on various securities
(such as U.S. Government securities), securities indexes, interest rates,
prepayment rates or other financial instruments or indexes, for bona fide
hedging purposes. While swaps, caps, and floors (sometimes hereinafter
collectively referred to as "swap contracts") are different from futures
contracts (and options on futures contracts) in that swap contracts are
individually negotiated with specific counterparties, the Cash Portfolio will
use swap contracts for purposes similar to the purposes for which it uses
options, futures, and options on futures. Those uses of swap contracts (i.e.,
risk management and hedging) present the Cash Portfolio with risks and
opportunities similar to those associated with options contracts, futures
contracts, and options on futures. See "Futures Contracts and Related Options".
Because swap contracts are individually negotiated, they remain the obligation
of the respective counterparties, and there is a risk that a counterparty will
be unable to meet its obligations under a particular swap contract. If a
counterparty defaults on a swap contract with the Cash Portfolio, the Portfolio
may suffer a loss. To address this risk, the Cash Portfolio will usually enter
into interest rate swaps on a net basis, which means that the two payment
streams (one from the Portfolio to the counterparty, one to the Portfolio from
the counterparty) are netted out, with the Cash Portfolio receiving or paying,
as the case may be, only the net amount of the two payments. Interest rate swaps
do not involve the delivery of securities, other underlying assets, or
principal, except for purposes of collateralization, as discussed below.
Accordingly, the risk of loss with respect to interest rate swaps entered into
on a net basis would be limited to the net amount of the interest payments that
the Cash Portfolio is contractually obligated to make. If the other party to an
interest rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive. To protect against losses related to counterparty default, the
Portfolio may enter into swaps that require transfers of collateral for changes
in market value. In contrast, currency swaps and other types of swaps may
involve the delivery of the entire principal value of one designated currency or
financial instrument in exchange for the other designated currency or financial
instrument. Therefore, the entire principal value of such swaps may be subject
to the risk that the other party will default on its contractual delivery
obligations.
Securities of Foreign Issuers. The Cash Portfolio may invest in
dollar-denominated commercial paper of foreign issuers and dollar-denominated
obligations of foreign branches of U.S. banks, U.S. branches of foreign banks
and foreign branches of foreign banks. Securities of foreign issuers involve
risks that are different from investments in securities of U.S. issuers. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions that might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. Various provisions of federal law
governing the establishment and operation of domestic branches do not apply to
foreign branches
A-9
<PAGE>
of domestic banks. The obligations of U.S. branches of foreign banks may be
general obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation as well as by federal and state
regulation and governmental action in the country in which the foreign bank has
its head office. Foreign branches of foreign banks are not regulated by U.S.
banking authorities and generally are not bound by accounting, loan limitations,
auditing and financial reporting standards comparable to U.S. banks.
Other Investment Policies. Although the Portfolios usually intend to
hold securities purchased until maturity, at which time they will be redeemable
at their full principal value plus accrued interest, they may, at times, engage
in short-term trading to attempt to take advantage of yield variations in the
short-term market. Each Portfolio also may sell portfolio securities prior to
maturity based on a revised evaluation of the creditworthiness of the issuer or
to meet redemptions. In the event there are unusually heavy redemption requests
due to changes in interest rates or otherwise, a Portfolio may have to sell a
portion of its investment portfolio at a time when it may be disadvantageous to
do so. However, each Portfolio believes that its ability to borrow funds to
accommodate redemption requests may mitigate in part the necessity for such
portfolio sales during these periods.
Risk Factors
The shares of the Funds have not been registered under the 1933 Act and, because
they will be offered only to qualified investors, it is anticipated that they
will be exempt from the registration provisions thereof. Shares of the Funds may
not be transferred or resold without registration under the 1933 Act or pursuant
to an exemption from such registration. Investments in Fund shares or Portfolio
shares are neither insured nor guaranteed by the government. There is no
assurance that a Fund or a Portfolio will maintain a stable net asset value of
$1.00 per share. Shares of either Fund and either Portfolio are not deposits or
obligations of, or guaranteed or endorsed by, Investors Bank & Trust Company
("Investors Bank") or The Bank of New York ("BNY"), and shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency, and involve investment risks including the possible loss of
principal.
A Fund may withdraw its investment from its corresponding Portfolio at any time,
if the Fund's Board of Trustees determines that it is in the best interest of
the Fund to do so. Upon any such withdrawal, the Board of Trustees would
consider what action might be taken, including the investment of all of the
investable assets of the Fund in another pooled investment entity having
substantially the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described herein. In the event the Fund's Trustees were unable to find
a substitute investment company in which to invest the Fund's assets or were
unable to secure directly the services of an investment adviser, the Trustees
would determine the best course of action.
A-10
<PAGE>
Additional Information Concerning Investment Structure
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Funds seek to achieve their investment objective by investing
all of their investable assets in their corresponding Portfolio, each of which
is registered as an open-end investment management company under the 1940 Act.
The Portfolios have the same investment objective and policies as their
corresponding Fund. In addition to selling its beneficial interests or shares to
the Fund, a Portfolio may sell shares to other mutual funds, collective
investment vehicles, or institutional investors. These investors will invest in
the Portfolio on the same terms and conditions and will pay a proportionate
share of the Portfolio's expenses. However, these other investors may be subject
to different operating expenses. Therefore, investors in each Fund should be
aware that these differences may result in differences in returns experienced by
investors in the different funds and other pooled investment vehicles that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures.
Certain changes in a Portfolio's investment objective, policies or restrictions
may preclude its corresponding Fund from investing its investable assets in the
Portfolio or require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in an "in kind" distribution of securities (as
opposed to a cash distribution) from the Portfolio. If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. The in-kind distribution may result in the Fund having a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in a Portfolio. For example, if a large fund withdraws
from the Portfolio, the remaining funds may subsequently experience higher
pro-rata operating expenses, thereby producing lower returns. Additionally,
because the Portfolio would become smaller, it may become less diversified,
resulting in increased portfolio risk; however, these possibilities exist for
traditionally structured funds which have large or institutional investors who
may withdraw from a fund. Also, funds with a greater pro-rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, if a Fund is requested to vote on
matters pertaining to its corresponding Portfolio (other than a vote by the Fund
to continue the operation of the Portfolio upon the withdrawal of another
investor in the Portfolio), the Fund will hold a meeting of its shareholders and
will cast all of its votes proportionately as instructed by such shareholders. A
Fund will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of a Fund who do not vote will have no
effect on the outcome of such matters. Information concerning other holders of
interests in the Portfolio Trust may be obtained by calling the Trust at (888)
637-7622.
A-11
<PAGE>
Item 5. Management of the Funds and the Portfolios
The Board of Trustees of the Trust and the Portfolio Trust
The business and affairs of each Fund are managed under the direction of the
Board of Trustees of the Trust. The business and affairs of each Portfolio are
managed under the direction of the Board of Trustees of the Portfolio Trust.
Each Board of Trustees approves all significant agreements between each Fund or
Portfolio and the persons and companies that furnish services to each Fund or
Portfolio, including (when applicable) agreements with its investment adviser,
administator, fund accountant, custodian and transfer agent. The day-to-day
operations of each Fund are delegated to its corresponding Portfolio's
investment manager and such Fund's administrator. Each Board of Trustees has
approved contracts with Investors Bank, BNY and Aeltus Investment Management,
Inc. ("Aeltus") to provide day-to-day management of the Portfolio Trust's
operations. More information regarding the Trustees and Officers of the Trust
appears in Part B of this Registration Statement.
The Adviser
The Board of Trustees of the Portfolio Trust have authorized Investors Bank to
serve as the investment adviser to each Portfolio of the Trust pursuant to an
investment adviser agreement (the "Adviser Agreement"). Under the Adviser
Agreement, Investors Bank continuously reviews and supervises each Portfolio's
investment program. Investors Bank discharges its responsibilities subject to
the supervision of, and policies established by, the Trustees of the Portfolio
Trust. Investors Bank was organized in 1969 as a Massachusetts-chartered trust
company and provides domestic and global custody, multi currency accounting,
institutional transfer agency, performance measurement, foreign exchange,
securities lending and mutual fund administration services to a variety of
financial asset managers, including mutual fund complexes, investment advisers,
banks and insurance companies. Investors Bank is a wholly-owned subsidiary of
Investors Financial Services Corp., a publicly-held corporation and holding
company registered under the Bank Holding Company Act of 1956. The business
address of Investors Bank is 89 South Street, Boston, Massachusetts 02111.
Investors Bank began acting as investment adviser at the commencement of
operations of the Cash Portfolio (November 21, 1996) but otherwise has no
previous experience in providing investment advisory services.
The Sub-Advisers
BNY serves as the Cash Portfolio's sub-adviser pursuant to its Investment
Sub-Adviser Agreement (the "BNY Sub-Adviser Agreement") with Investors Bank.
Under the BNY Sub-Adviser Agreement, BNY manages the Portfolio, selects
investments and places all orders for the purchase and sale of the Portfolio's
securities, subject to the general supervision of the Portfolio Trust's Board of
Trustees and Investors Bank and in accordance with the Portfolio's and Fund's
investment objective, policies and restrictions. BNY is a wholly owned
subsidiary of The Bank of New York Company, Inc. BNY has discretionary
investment authority for the short-term money management of accounts exceeding
$30 billion. The business address of BNY
A-12
<PAGE>
is 48 Wall Street, New York, New York 10286. For its services to the Portfolio,
BNY is paid by Investors Bank a monthly fee computed at an annual rate of .08%
of the average daily net assets of the Cash Portfolio.
Aeltus serves as the Treasury Portfolio's sub-adviser pursuant to its Investment
Sub-Adviser Agreement (the "Aeltus Sub-Adviser Agreement") with Investors Bank.
Under the Aeltus Sub-Adviser Agreement, Aeltus manages the Portfolio, selects
investments and places all orders for the purchase and sale of the Portfolio's
securities, subject to the general supervision of the Portfolio Trust's Board of
Trustees and Investors Bank and in accordance with the Portfolio's and Fund's
investment objective, policies and restrictions. Aeltus is an indirect wholly
owned subsidiary of Aetna Inc. As of December 31, 1996, Aeltus managed
approximately $38 billion in assets for various individual and institutional
accounts, including registered investment companies. The business address of
Aeltus is 242 Trumbull Street, Hartford, Connecticut 06103-1205. For its
services to the Treasury Portfolio, Aeltus is paid by Investors Bank a monthly
fee computed at an annual rate of .08% of the average daily net assets of the
Treasury Portfolio.
The Administrator, Transfer Agent, Custodian and Fund Accountant
Each Portfolio and each Fund employs Investors Fund Services (Ireland) Limited
("IBT Ireland"), a subsidiary of Investors Bank, and Investors Bank,
respectively, as Administrators pursuant to Administration Agreements (the
"Administration Agreements") to provide certain administrative services. The
services provided by IBT Ireland and Investors Bank under the Administration
Agreements include certain accounting, clerical and bookkeeping services,
corporate secretarial services and assistance in the preparation and filing of
tax returns and reports to shareholders and the SEC. In addition, Investors Bank
provides assistance in preparing state "blue sky" filings on behalf of the Funds
and otherwise assists the Funds in complying with state securities law
requirements.
Investors Bank also acts as transfer agent for each Fund and IBT Fund Services
(Canada) Inc. ("IBT Canada"), a subsidiary of Investors Bank, acts as transfer
agent for each Portfolio pursuant to Transfer Agency Agreements. As transfer
agent, Investors Bank is responsible for the issuance, transfer and redemption
of shares and the establishment and maintenance of shareholder accounts for each
Fund and IBT Canada is responsible for maintaining records of shareholder
interests for the Portfolios. IBT Canada also serves as fund accountant to the
Funds and the Portfolios. In such capacity, IBT Canada performs certain
accounting, clerical and bookkeeping services, and the daily calculation of net
asset value for each Portfolio and Fund.
Investors Bank acts as custodian for each Fund and each Portfolio. As custodian,
Investors Bank holds cash, securities and other assets of the Funds and the
Portfolios as required by the 1940 Act.
For its services under the Adviser Agreement, Administration Agreement, Transfer
Agency Agreement, Custodian Agreement and the Fund Accounting Agreement, the
Portfolios each pay Investors Bank an aggregate fee which is calculated daily
and paid monthly, at an annual rate of
A-13
<PAGE>
0.17% of the average daily net assets of the respective Portfolio. For its
services under the Administration Agreement, Transfer Agency Agreement,
Custodian Agreement and Fund Accounting Agreement, the Cash Fund and the
Treasury Fund each pays Investors Bank a fee which is calculated daily and paid
monthly, at an annual rate of 0.01% of the average daily net assests of such
Fund. Investors Bank is solely responsible for the payment of all fees to BNY,
Aeltus and to its subsidiaries. For the fiscal year ended December 31, 1996, the
compensation paid to Investors Bank by the Cash Fund and the Cash Portfolio was
0.01% and 0.08%, respectively, of the Fund's and Portfolio's average net assets.
Trust and Portfolio Trust Expenses
The Trust and the Portfolio Trust will each pay all of their expenses other than
those expressly assumed by Investors Bank. The principal expenses of the Trust
and the Portfolio Trust are the fees for advisory services (for the Portfolio
Trust only), administration, custody, fund accounting and transfer agency
services, all of which are payable to Investors Bank. Other expenses include:
(i) amortization of deferred organizational costs; (ii) taxes, if any; (iii)
expenses for legal, auditing and financial accounting services; (iv) expense of
preparing (including typesetting, printing and mailing) reports and notices to
existing shareholders; (v) expense of issuing and redeeming Trust and Portfolio
Trust, shares; (vi) the fees, travel expenses and other out-of-pocket expenses
of the independent Trustees of the respective Board; (vii) extraordinary
expenses as may arise, including expenses incurred in connection with litigation
proceedings and claims and the legal obligations of the Trust and the Portfolio
Trust, respectively, to indemnify the Trustees, shareholders and agents of the
Trust and the Portfolio Trust, respectively; and (viii) other expenses properly
payable by the Trust or the Portfolio Trust, as the case may be.
Item 6. Capital Stock and Other Securities
Attributes of Fund Shares
[Investments in the Funds have no preferences, pre-emptive or conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Neither Fund is required and neither has a current intention to hold annual
meetings of shareholders. Special meetings of shareholders may be called by the
Board of Trustees of the Trust from time to time for the purpose of taking
action upon any matter requiring the vote or authority of the shareholders as
provided in the Trust's Master Trust Agreement or as deemed necessary or
desirable by the Trustees. Changes in fundamental policies will be submitted to
shareholders. Shareholders have under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified percentage of the aggregate value of the Trust's outstanding shares
(or of a Fund's outstanding shares on matters relating solely to one Fund) the
right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have the right to remove one or more Trustees without a
meeting by a declaration in writing by a specified number of shareholders. Upon
liquidation or dissolution of a Fund, shareholders would be entitled to share
pro rata in the net assets of the Fund available for distribution to
shareholders.]
A-14
<PAGE>
The Trust is organized as a business trust under the laws of the State of
Delaware. Under the Master Trust Agreement, the Trustees are authorized to issue
shares (i.e., beneficial interests) in the Funds. Each Fund share entitles the
shareholder of record to one vote. Investments in a Fund may not be transferred,
but a shareholder may withdraw all or any portion of its investment at any time
at net asset value. Shareholders in a Fund are each liable for all obligations
of the Fund. However, it is not expected that the liabilities of a Fund would
ever exceed its assets.
Fund shares and Portfolio shares are not registered under the 1933 Act and are
sold in reliance upon an exemption from registration. Shares may not be
transferred or resold without registration under the 1933 Act, except pursuant
to an exemption from registration. However, Fund shares and Portfolio shares may
be redeemed on any day that both the New York Stock Exchange and the New York
Federal Reserve Bank are open for business (a "Business Day").
Control Persons
As of March 26, 1997, BNY As Agent For Its Securities Lending Customers and
Investors Bank As Security Lending Agent FBO, beneficially owned more than 25%
of the voting securities of the Premium Class of the Cash Fund and therefore
controls, as such term is defined under the 1940 Act, the Premium Class of the
Cash Fund. As of March 26, 1997, Saturn & Co, C/O Investors Bank, beneficially
owned more than 25% of the voting securities of the Institutional Class of the
Cash Fund and therefore controls, as such term is defined under the 1940 Act,
the Institutional Class of the Cash Fund. As of March 26, 1997, the Treasury
Fund had not commenced operations.
Shareholder Inquiries
All shareholder inquiries should be directed to Investors Bank.
Dividends and Distributions
Each Fund intends to declare as a dividend substantially all of its net
investment income at the close of each Business Day to such Fund's shareholders
of record at 2:00 p.m., Eastern time, on that day, and will pay such dividends
monthly. Distributions of net long term capital gains, if any, for the year are
made at least annually. Dividends and/or capital gain distributions will be
reinvested automatically in additional shares of a Fund at net asset value and
such shares will be automatically credited to a shareholder's account, unless a
shareholder elects to receive either dividends or capital gains distributions
(or both) in cash. Shareholders may change their distribution option at any time
by notification to Investors Bank prior to the record date of any such dividend
or distribution.
It is intended that the Portfolios' assets, income and capital gain
distributions will be managed in such a way that each Fund, as a shareholder in
a Portfolio, will be able to satisfy the requirements of Subchapter M of the
Code to be treated as a "regulated investment company", assuming that the Fund
invested all of its investable assets in the Portfolio although no assurance can
be given in this regard. As a regulated investment company, each Fund would not
be liable for U.S.
A-15
<PAGE>
Federal income taxes on its net investment income and capital gains
distributions to the Shareholders in accordance with the U.S. Internal Revenue
Code of 1986, as amended.
Item 7. Purchase of Securities Being Offered
Shares of each Fund are sold at the net asset value of such shares next
determined after an order and payment for the investment is received by the
Trust or its agent by the time designated herein. The net asset value of each
Fund's share will be determined at 2:00 p.m. (ET) on each day that both the New
York Stock Exchange and the New York Federal Reserve Bank are open for business.
Shares of each Fund are sold on a private placement basis in accordance with
Regulation D under the 1933 Act, directly by the Fund without a distributor and
are not subject to a sales load or redemption fee; assets of the Institutional
Class of shares of each Fund are subject to a shareholder servicing fee of up to
0.25% of average daily net assets. The assets of the Premium Class of shares are
not subject to a Rule 12b-1 or shareholder servicing fee. Shares of each Fund
may be purchased by Eligible Investors that have opened accounts with the Fund.
The minimum initial investment for Institutional Class shares is $10,000. The
minimum initial investment for Premium Class shares is $10 million. Institutions
may satisfy the minimum investment by aggregating their fiduciary accounts.
Subsequent purchases may be in any amount. Each Fund reserves the right to waive
the minimum initial investment. If an account balance falls below $1 million for
Premium Class and $10,000 for Institutional Class due to redemption, a Fund may
close the account. Investors will be notified if the minimum balance is not
being maintained and will be allowed 60 days to make additional investments
before the account is closed.
Share purchase orders are effective on the date a Fund receives a completed
Subscription Agreement (and other required documents) and immediately available
funds are received by the Fund in the Fund's account with Investors Bank, the
Fund's transfer agent and dividend-disbursing agent. Purchases may be made only
by wire.
A bank may impose a charge to execute a wire transfer. A purchaser must call
Investors Bank at 1-888-MERRMAC to notify the transfer agent of an incoming wire
transfer. A purchase order for shares received in proper form by 2:00 p.m.,
Eastern time, on a Business Day will be executed at the net asset value per
share next determined after receipt of the order and will receive the dividend
declared on the day of purchase, provided that Investors Bank receives the wire
by the close of the Federal Reserve wire system on the day the purchase order is
received.
Each Fund reserves the right to reject any purchase order. Purchase orders may
be refused if, for example, they are of a size that could disrupt management of
a Portfolio.
Item 8. Redemption or Repurchase
Shareholders may redeem all or a portion of their shares on any Business Day.
Redemptions will be made at the net asset value next determined after Investors
Bank has received a proper notice of redemption. If notice of redemption is
received prior to 2:00 p.m., Eastern time, on any
A-16
<PAGE>
Business Day, the redemption will be effective on the date of receipt and the
shareholder will not receive the dividend for that day. Proceeds of the
redemption will ordinarily be made by wire on the same Business Day, but in any
event within seven Business Days from the date of receipt. Shareholders
liquidating their account after 2:00 p.m., Eastern time, on any Business Day
will receive upon redemption all dividends reinvested through the date preceding
the effective date of redemption and payment will ordinarily be made by wire on
the next Business Day, but, in any case, within seven Business Days from the
date of receipt of a proper notice of redemption.
A shareholder may elect to receive payment in the form of a wire or check. There
is no charge imposed by either Fund to redeem; however, in the case of
redemption by wire, a shareholder's bank may impose its own wire transfer fee
for receipt of the wire.
Item 9. Pending Legal Proceedings
None.
A-17
<PAGE>
PART B
B-1
<PAGE>
Item 10. Cover Page
MERRIMAC FUNDS
PART B
MARCH 28, 1997
Merrimac Funds (the "Trust") is a registered open-end investment company
organized as a Delaware business trust offering beneficial interests in two
series: Merrimac Cash Fund (the "Cash Fund") and Merrimac Treasury Fund (the
"Treasury Fund"). Each Fund is diversified as defined in the Investment Company
Act of 1940 (the "1940 Act").
This Part B supplements information concerning the Trust, the Cash Fund and the
Treasury Fund contained in Part A of the Trust's Registration Statement dated
March 28, 1997. This Part B should be read in conjunction with Part A, which may
be obtained by telephoning or writing the Trust at 200 Clarendon Street, Boston,
Massachusetts 02116, telephone 1-888-MERRMAC.
B-2
<PAGE>
Item 11. Table of Contents
Page
General Information and History B-4
Investment Objectives and Policies B-4
Management of the Funds and the Portfolios B-7
Control Persons and Principal Holders of Securities B-8
Investment Advisory and Other Services B-9
Brokerage Allocation and Other Practices B-11
Capital Stock and Other Securities B-12
Purchase, Redemption and Pricing of Securities Being Offered B-13
Tax Status B-14
Underwriters B-15
Calculation of Performance Data B-15
Financial Statements B-16
B-3
<PAGE>
Item 12. General Information and History
The Trust has no prior business history.
Item 13. Investment Objectives and Policies
Part A contains additional information about the investment objectives and
policies of the Portfolios. This Part B should be read only in conjunction with
Part A.
Investment Limitations
As noted in Part A, each Fund will invest all of its investable assets in its
corresponding series (the "Portfolio") of the Merrimac Master Portfolio (the
"Portfolio Trust"). The following investment limitations are fundamental
policies applicable to the Portfolios. These fundamental investment restrictions
may not be changed except by the affirmative vote of a majority of the
Portfolios' outstanding voting securities as defined in the 1940 Act. Under the
1940 Act, a "vote of the majority of the outstanding voting securities" means
the vote, at the annual or a special meeting of security holders duly called,
(i) of 67% or more of the voting securities present at the meeting if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy or (ii) of more than 50% of the outstanding voting
securities, whichever is less. Under these restrictions, the Portfolios may not:
(1) purchase any securities that would cause more than 25% of the
total assets of the Portfolio at the time of such purchase to be
invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that
there is no limitation with respect to U.S. Government Obligations or
to bank obligations or with respect to repurchase agreements
collateralized by any of such obligations;
(2) borrow money, except as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions, provided that
borrowing does not exceed an amount equal to 33 1/3% of the current
value of the Portfolio's assets taken at market value, less
liabilities, other than borrowings;
(3) purchase securities on margin (except for delayed delivery or
when-issued transactions or such short-term credits as are necessary
for the clearance of transactions);
(4) make loans to any person or firm; provided, however, that the
making of a loan shall not include entering into repurchase
agreements, and provided further that the Cash Portfolio may lend its
portfolio securities to broker-dealers or other institutional
investors if the aggregate value of all securities loaned does not
exceed 33 1/3% of the value of the Portfolio's total assets;
B-4
<PAGE>
(5) engage in the business of underwriting the securities issued by
others, except that the Portfolio will not be deemed to be engaging in
the business of underwriting with respect to the purchase or sale of
securities subject to legal or contractual restrictions on
disposition;
(6) issue senior securities, except as permitted by its investment
objective, policies and restrictions, and except as permitted by the
1940 Act; and
(7) purchase or sell real estate, commodities, or commodity contracts
unless acquired as a result of ownership of securities, and provided
further that the Portfolio may invest in securities backed by real
estate and in financial futures contracts and options thereon.
The foregoing percentages will apply at the time of the purchase of a security.
The above limitations also apply to each Fund, with the exception that a Fund
may invest all of its investable assets without limitation in its respective
Portfolio.
Investment Policies
See Item 4 in Part A for a description of the Portfolio's investment policies.
Description of Ratings
Description of Commercial Paper Ratings
The following descriptions of short-term debt ratings have been published by
Standard & Poor's Rating Service, a division of McGraw-Hill Companies ("S&P"),
Moody's Investors Service ("Moody's"), Fitch's Investors Service ("Fitch"), Duff
and Phelps ("Duff"), and IBCA Limited ("IBCA"), respectively. These obligations
have an original maturity not exceeding thirteen months, unless explicitly
noted.
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. Commercial
paper issues rated A-1 by S&P reflect a very strong degree of safety of timely
payment. Commercial paper issues rated A-2 reflect a strong degree of safety of
timely payment but not as strong as for issues designated A-1.
Commercial paper issues rated Prime-1 by Moody's are judged by Moody's to be of
the "highest" quality on the basis of relative repayment capacity with a
superior ability for repayment of senior short-term debt obligations. Commercial
paper issues rated Prime-2 are judged by Moody's to be of the "second highest"
quality with a strong ability for repayment of senior short-term debt
obligations.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment.
B-5
<PAGE>
Commercial paper issues rated Fitch-2 are regarded as having only a slightly
less assurance of timely payment than those issues rated Fitch-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors that are supported by ample asset protection. Risk
factors are minor. The rating Duff-2 is regarded as having good certainty of
timely payment with sound liquidity factors supported by good asset protection.
Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. The designation A2 by IBCA indicates that
the obligation is supported by a strong capacity for timely repayment.
Description of Long-Term Debt Ratings
The following is a description of Moody's debt instrument ratings:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". 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 risk appear somewhat larger than the Aaa securities.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification. The modifier 1 indicates that the obligation ranks in the higher
end of its generic rating category; the modifier 2 indicates a midrange ranking;
and the modifier 3 indicates a ranking in the lower end of that generic rating
category.
The following is a description of S&P's debt instrument ratings:
S&P's ratings are based, in varying degrees, on the following considerations:
(i) the likelihood of default -- capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligations; (ii) the nature of and provisions of the obligation;
and (iii) the protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
B-6
<PAGE>
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
Plus (+) or minus (-): The ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Item 14. Management of the Funds and the Portfolios
The business and affairs of each Fund are managed under the direction of the
Board of Trustees of the Trust. The business and affairs of each Portfolio are
managed under the direction of the Board of Trustees of the Portfolio Trust.
Each Board of Trustees approves all significant agreements between the Trust or
Portfolio Trust (on behalf of each Fund or Portfolio) and the persons and
companies that furnish services to the particular Fund or Portfolio, including
(when applicable) agreements with its investment adviser, administrator, fund
accountant, custodian and transfer agent. The day-to-day operations of each Fund
are delegated to its corresponding Portfolio's investment manager and such
Fund's administrator.
The following are the names, addresses and ages of the Trustees and officers of
the Trust and the Portfolio Trust, their positions with the Trust and the
Portfolio Trust, and their present and principal occupations during the past
five years. An asterisk (*) indicates that a Trustee is an "interested person"
of the Trust and the Portfolio Trust, as defined in the 1940 Act.
Kevin J. Sheehan, Trustee* (45), Director since 1990, President since 1992,
Chairman and Chief Executive Officer since June 1995, Investors Bank & Trust
Company. Chairman and Chief Executive Officer since June 1995, Investors
Financial Services Corp.
Francis J. Gaul, Jr., Trustee (56), Vice President, Triad Mutual Fund Investors
Corp. (Registered Investment Adviser) July 1996 - present; Vice President &
Resident Manager, Goldman Sachs & Co. (Investment Banking & Institutional Sales)
December 1990 - January 1996.
Edward F. Hines, Jr., Trustee (51), Partner 1977 - present, Managing Partner
1983-87, Choate, Hall & Stewart.
Thomas E. Sinton, Trustee (64), Retired; Managing Director, Corporate Accounting
Policy, April 1993 - October 1996 and Consultant, November 1992 - March 1993,
Bankers Trust Company; General Partner, 1967 - 1992, Ernst & Young.
Sean P. Brennan, President (35), Director, Marketing, Investors Bank & Trust
Company, 1996 to present; Executive Vice President, Aspen Capital Management,
1995-96; Director of International Mutual Funds, CS First Boston, 1993-94; Vice
President of Sales, Concord Financial Corp. 1989-93.
Paul J. Jasinski, Treasurer and Chief Financial Officer (50), Managing Director,
Investors Bank & Trust Company, 1990 - present.
B-7
<PAGE>
Susan C. Mosher, Secretary (42), Director, Mutual Fund Administration - Legal
and Regulatory, Investors Bank & Trust Company, 1995 - present; Associate
Counsel, 440 Financial Group of Worcester, Inc., 1993 - 95; Associate and
Partner, Gallagher, Callahan & Gartrell, P.A., 1986 - 1992.
Raymond O'Neil, Assistant Treasurer and Assistant Secretary (Portfolio Trust
only) (34), Managing Director, Dublin, Investors Fund Services (Ireland) Limited
1994 - present; Vice President, Atlantic Corporate Management Limited,
1991-1994.
Compensation
The following table describes the compensaton to be received by the Trustees
(with the exception of Mr. Sheehan, who receives no remuneration from the Funds
or the Portfolios).
<TABLE>
<CAPTION>
Total
Aggregate Pension of Compensation
tion From Retirement From Registrant
Name of Compensa- Benefits Accrued Estimated Annual and Fund
Person, tion From As Part of Port- Benefits Upon Complex* Paid
Position Registrant folio Expenses Retirement to Trustees
- - -------- ---------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
Francis J. Gaul, Jr., $5,000 None None $25,000
Trustee
Edward F. Hines, Jr., $5,000 None None $25,000
Trustee
Thomas E. Sinton, $5,000 None None $25,000
Trustee
</TABLE>
* The term "Fund Complex" refers to the series of the Trust, the series of the
Portfolio Trust and Merrimac Global Cash Fund (a Cayman company established in
1997).
Item 15. Control Persons and Principal Holders of Securities
As of March 26, 1997, BNY As Agent For Its Securities Lending Customers and
Investors Bank As Security Lending Agent FBO, beneficially owned more than 25%
of the voting securities of the Premium Class of the Cash Fund and therefore
controls, as such term is defined under the 1940 Act, the Premium Class of the
Cash Fund. As of March 26, 1997, Saturn & Co, C/O Investors Bank, beneficially
owned more than 25% of the voting securities of the Institutional Class of the
Cash Fund and therefore controls, as such term is defined under the 1940 Act,
the Institutional Class of the Cash Fund. As of March 26, 1997, the Treasury
Fund had not commenced operations.
The Trustees and officers of the Trust and the Portfolio Trust, as a group, own
less than 1% of the Funds' and the Portfolios' beneficial interests,
respectively.
B-8
<PAGE>
Item 16. Investment Advisory and Other Services
Most of the Funds' or the Portfolios' day-to-day operations are performed by
separate business organizations under contractual agreement with the Portfolios
or the Portfolio Trust, as the case may be. The principal service providers are:
<TABLE>
<S> <C>
Investment Adviser (Portfolios) Investors Bank & Trust Company
Investment Sub-Adviser (Cash Portfolio) The Bank of New York
Investment Sub-Adviser (Treasury Portfolio) Aeltus Investment Management, Inc.
Administrator (Funds) Investors Bank & Trust Company
Administrator (Portfolios) Investors Fund Services (Ireland) Limited
Transer Agent (Funds) Investors Bank & Trust Company
Transfer Agent (Portfolios) IBT Fund Services (Canada) Inc.
Custodian Investors Bank & Trust Company
Independent Auditors Ernst & Young LLP
</TABLE>
Adviser
Each Portfolio and Investors Bank & Trust Company ("Investors Bank") have
entered into an investment adviser agreement (the "Adviser Agreement"). Under
the Adviser Agreement, Investors Bank continuously reviews and supervises the
Portfolio's investment program. Investors Bank discharges its responsibilities
subject to the supervision of, and policies established by, the Trustees of the
Portfolio Trust. Investors Bank was organized in 1969 as a
Massachusetts-chartered trust company and provides domestic and global custody,
multi currency accounting, institutional transfer agency, performance
measurement, foreign exchange, securities lending and mutual fund administration
services to a variety of financial asset managers, including mutual fund
complexes, investment advisers, banks and insurance companies. Investors Bank is
a wholly-owned subsidiary of Investors Financial Services Corp., a publicly-held
corporation and holding company registered under the Bank Holding Company Act of
1956. The business address of Investors Bank is 89 South Street, Boston,
Massachusetts 02111. Investors Bank began acting as an investment adviser at the
commencement of operations of the Cash Portfolio (November 21, 1996) but
otherwise has no previous experience in providing investment advisory services.
Sub-Advisers
The Bank of New York ("BNY") serves as the Cash Portfolio's sub-adviser pursuant
to its Investment Sub-Adviser Agreement (the "BNY Sub-Adviser Agreement") with
Investors Bank. Under the BNY Sub-Adviser Agreement, BNY manages the Portfolio,
selects investments and places all orders for the purchase and sale of the
Portfolio's securities, subject to the general supervision of the Trust's Board
of Trustees and Investors Bank and in accordance with the Portfolio's investment
objective, policies and restrictions. BNY is a wholly owned subsidiary of The
Bank of New York Company, Inc. BNY has discretionary investment authority for
the short-term money management of accounts exceeding $30 billion. The business
address of BNY is 48 Wall Street, New York, New York 10286. For its services to
the Portfolio, BNY is paid by
B-9
<PAGE>
Investors Bank a monthly fee computed at an annual rate of .08% of the average
daily net assets of the Cash Portfolio.
Aeltus Investment Management, Inc. ("Aeltus") serves as the Treasury Portfolio's
sub-adviser pursuant to its Investment Sub-Adviser Agreement (the "Aeltus
Sub-Adviser Agreement") with Investors Bank. Under the Aeltus Sub-Adviser
Agreement, Aeltus manages the Portfolio, selects investments and places all
orders for the purchase and sale of the Portfolio's securities, subject to the
general supervision of the Trust's Board of Trustees and Investors Bank and in
accordance with the Portfolio's investment objective, policies and restrictions.
Aeltus is an indirect wholly owned subsidiary of Aetna Inc. As of December 31,
1996, Aeltus managed approximately $38 billion in assets for various individual
and institutional accounts, including registered investment companies. The
business address of Aeltus is 242 Trumbull Street, Hartford, Connecticut
06103-1205. For its services to the Treasury Portfolio, Aeltus is paid by
Investors Bank a monthly fee computed at an annual rate of .08% of the average
daily net assets of the Treasury Portfolio.
Administrator
Each Portfolio and each Fund employs Investors Fund Services (Ireland) Limited
("IBT Ireland"), a subsidiary of Investors Bank, and Investors Bank,
respectively, as Administrators under Administration Agreements (the
"Administration Agreements") to provide certain administrative services. The
services provided by IBT Ireland and Investors Bank include certain accounting,
clerical and bookkeeping services, Blue Sky (for the Funds only), corporate
secretarial services and assistance in the preparation and filing of tax returns
and reports to shareholders and the Securities and Exchange Commission.
Investors Bank also assists the Funds in preparing state "blue sky" filings and
otherwise assists the Funds in complying with state securities law requirements.
Transfer Agent
Investors Bank acts as transfer agent for each Fund and IBT Fund Services
(Canada) Inc. ("IBT Canada"), a subsidiary of Investors Bank, acts as transfer
agent for each Portfolio pursuant to Transfer Agency Agreements. As transfer
agent, Investors Bank is responsible for the issuance, transfer and redemption
of shares and the establishment and maintenance of shareholders accounts for
each Fund, and IBT Canada is responsible for maintaining records of shareholder
interests for each Portfolio.
Custodian and Fund Accountant
Investors Bank acts as custodian for each Fund and each Portfolio and IBT Canada
acts as fund accountant for the Portfolios. As custodian, Investors Bank holds
cash, securities and other assets of each Fund and each Portfolio as required by
the 1940 Act. As fund accountant for each Fund and each Portfolio, IBT Canada
performs certain accounting, clerical and bookkeeping services, and the daily
calculation of net asset value for each Portfolio and Fund.
B-10
<PAGE>
For its services under the Adviser Agreement, Administration Agreement, Transfer
Agency Agreement, Custodian Agreement and the Fund Accounting Agreement, each
Portfolio pays Investors Bank an aggregate fee which is calculated daily and
paid monthly, at an annual rate of 0.17% of the average daily net assets of the
particular Portfolio. For its services under the Administration Agreement, the
Transfer Agency Agreement, the Custodian Agreement and the Fund Accounting
Agreement, each Fund pays Investors Bank an aggregate fee which is calculated
daily and paid monthly, at an annual rate of .01% of the average daily net
assets of the Fund. Investors Bank is solely responsible for the payment of all
fees to BNY, Aeltus and to its subsidiaries.
For the fiscal period ended December 31, 1996, the fee paid to Investors Bank by
the Trust (on behalf of the Cash Fund) for all services rendered by Investors
Bank to the Cash Fund was $6,416. The Treasury Fund had not commenced operations
as of December 31, 1996.
Independent Auditors
For the period ended December 31, 1996, the Boston, Massachusetts office of
Ernst & Young LLP ("Ernst & Young LLP") served as independent auditors to the
Trust and the Portfolio Trust. For the year ending December 31, 1997, the Grand
Cayman office of Ernst & Young ("Ernst & Young") will serve as independent
auditors to the Trust and the Portfolio Trust. Ernst & Young LLP and Ernst &
Young are responsible for performing, for the respective periods noted above,
annual audits of the financial statements and financial highlights in accordance
with generally accepted accounting standards, a review of the Federal tax
returns, and, pursuant to Rule 17f-2 of the 1940 Act, three security counts.
The mailing address of Ernst & Young LLP is 200 Clarendon Street, Boston,
Massachusetts 02116. The mailing address of Ernst & Young is One Capital Place,
Shedden Road, Georgetown, Grand Cayman, Cayman Islands, British West Indies.
Item 17. Brokerage Allocation and Other Practices
Each Portfolio's purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases. The Portfolios do
not anticipate paying brokerage commissions. Any transaction for which a
Portfolio pays a brokerage commission will be effected at the best price and
execution available. Subject to this requirement, securities may be bought from
or sold to brokers or dealers who have furnished statistical, reseach and other
information or services to Investors Bank, BNY or Aeltus. Purchases from
underwriters of portfolio securities include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers serving as market
makers include the spread between the bid and asked price.
Allocation of transactions, including their frequency, to various dealers is
determined by BNY and Aeltus in their best judgment and in a manner deemed to be
in the best interest of
B-11
<PAGE>
shareholders of the particular Portfolio rather than by any formula. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price.
Investment decisions for each Portfolio will be made independently from those
for any other account that is or may in the future become managed by BNY or
Aeltus. If, however, a Portfolio and other accounts managed by BNY or Aeltus are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by a Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for the
Portfolio and for other accounts managed by BNY or Aeltus occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
For the fiscal year ended December 31, 1996, the Cash Portfolio paid no
brokerage commissions and the Treasury Portfolio has not commenced operations.
No transactions are executed with BNY, Aeltus or Investors Bank, or with any
affiliate of either entity, acting either as principal or as broker.
Item 18. Capital Stock and Other Securities
The Trust was organized as a Delaware business trust on October 30, 1996 and
operates under a Master Trust Agreement, dated October 30, 1996. The Trust is
authorized to issue beneficial interests only to accredited investors, as such
term is defined under Rule 501 of the Securities Act of 1933. The beneficial
interests of each series shall hereinafter be referred to as "shares" and the
holders of such interests shall hereinafter be referred to as "shareholders."
The value of a share shall be equal to the Book Capital Account balance of the
shareholder. The Trustees shall have the authority to establish series, each of
which shall be a separate subtrust and the shares of which shall be separate and
distinct from the shares of any other series and shall evidence ownership
interest in a different investment portfolio (hereinafter referred to as a
"Series"). The shares in each Series may have such rights as the Trustees may
establish from time to time, including with respect to price, terms and manner
of purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the shareholders of the several Series shall have
separate voting rights or no voting rights.
As of the date of this Part B, the Trust is comprised of the following Series,
each of which commenced operations on the date set forth opposite the Fund's
name:
Merrimac Cash Fund November 21, 1996
Merrimac Treasury Fund Has not commenced operations
The Trust is authorized, without shareholder approval, to divide shares of any
Series into two or more classes, each class having such different dividend,
liquidation, voting and other rights as the Trustees may determine. Currently,
the Funds offer two classes of shares, the Premium Class and the Institutional
Class, which are described in Part A.
B-12
<PAGE>
The Trustees may, without any vote of the shareholders, amend or otherwise
supplement the Master Trust Agreement by an instrument in writing executed by a
majority of the Trustees, provided that shareholders shall have the right to
vote with respect to the election or removal of Trustees, any investment
advisory contract, any dissolution of a Series, certain amendments to this
Master Trust Agreement, any merger, consolidation or sale of assets, such
additional matters relating to the Trust as may be required by the 1940 Act or
otherwise required or authorized by law or by any registration statement of the
Trust filed with the SEC, or as the Trustees may consider desirable.
Shareholders of a Series are each liable for all obligations of such Series;
however, it is not expected that the liabilities of a Series would ever exceed
its assets. If any present or past shareholder of any Series of the Trust is
charged or held personally liable for any obligation or liability of the Trust
solely by reason of being or having been a shareholder and not because of such
shareholder's acts or omissions or for some other reason, the Series, upon
request, shall assume the defense against such charge and satisfy any judgment
thereon, and the shareholder or former shareholder shall be entitled out of the
assets of such Series, to be held harmless from and indemnified against all loss
and expense arising from such liability. Thus, the risk to shareholders of
incurring financial loss beyond their investment is limited to circumstances in
which the Series itself would be unable to meet its obligations.
The Trust will not have an Annual Meeting of Shareholders. Special Meetings may
be convened: (i) by the Board of Trustees; (ii) upon written request to the
Board of Trustees by the holders of at least 10% of the outstanding shares of
the Trust (if such matter relates to the Trust as a whole) or a Fund (if such
matter relates only to such Fund); or (iii) upon the Board of Trustee's failure
to honor the shareholder's request described above, by shareholders of at least
10% of the outstanding shares giving notice of the Special Meeting to the
shareholders.
Item 19. Purchase, Redemption and Pricing of Securities Being Offered
Manner In Which Shares Are Offered
Shares of each Fund and each Portfolio are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in a Portfolio may only be made by
"accredited investors" within the meaning of Regulation D under the 1933 Act.
Fund Shares are sold directly by the Trust without a distributor and are not
subject to a sales load or redemption fee; assets of the Premium Class are not
subject to a Rule 12b-1 or shareholder servicing fee while assets of the
Institutional Class are subject to a 0.25% shareholder servicing fee. Portfolio
Shares are sold directly by the Portfolio Trust without a distributor and are
not subject to a sales load or redemption fee; assets of the Portfolio Trust are
not subject to a Rule 12b-1 or shareholder servicing fee.
B-13
<PAGE>
Valuation of Shares
The net asset value per share of each Fund is determined each day that both the
New York Stock Exchange ("NYSE") and the New York Federal Reserve Bank are open
(a "Business Day"). This determination is made once each day as of 2:00 p.m.,
Eastern time.
The assets in each Fund are valued based upon the amortized cost method which
involves valuing a security at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. Although the amortized cost
method provides consistency in valuation, it may result in periods during which
the stated value of a security is higher or lower than the price the Portfolio
would receive if the security were sold. This method of valuation is used in
order to stabilize the net asset value of shares of a Fund at $1.00; however,
there can be no assurance that a Fund's net asset value will always remain at
$1.00 per share.
The net asset value per share of the Fund is determined by dividing the value of
the Fund's net assets (i.e., its value of its investment in the Portfolio and
other assets, including accrued but undistributed net investment income less
liabilities) by the total number of the shares of the Fund outstanding. As a
result of the Portfolio's use of the amortized cost method, it is anticipated
that the Fund's net asset value per share will be stabilized at $1.00; however
there can be no assurance that the Fund's net asset value per share will always
remain at $1.00.
Item 20. Tax Status
Each Fund intends to qualify and elect to be treated as a "regulated investment
company'" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). If it so qualifies, a Fund will not be subject to U.S. federal
income taxes on its net investment income (i.e., its investment company taxable
income, as that term is defined in the Code, determined without regard to the
deduction for dividends paid) and net long-term capital gain (the excess of net
realized long-term capital gain over net realized short-term capital loss), if
any, that it distributes to its shareholders in each taxable year, provided that
it distributes to its shareholders at least 90% of its net investment income for
such taxable year. If in any year a Fund fails to qualify as a regulated
investment company, the Fund would incur regular corporate federal income tax on
its taxable income for that year and be subject to certain additional
distribution requirements upon requalification.
Each Fund is subject to a nondeductible 4% excise tax calculated as a percentage
of certain undistributed amounts of ordinary income and capital gain net income.
To the extent possible, each Fund intends to make sufficient distributions to
avoid the application of both the corporate income and excise taxes.
All dividends and distributions to shareholders of each Fund of investment
company taxable income will be taxable to shareholders whether paid in cash or
reinvested in additional shares. For federal income tax purposes, distributions
of net investment income which includes the excess of a Fund's net realized
short-term capital gains over net realized long-term capital losses, are taxable
to shareholders as ordinary income.
B-14
<PAGE>
Distributions of net realized long-term capital gains designated by a Fund as
"capital gain dividends" will be taxable as long-term capital gains, whether
paid in cash or additional shares, regardless of how long the shares have been
held by such shareholders, and such distributions will not be eligible for the
dividends received deduction. A portion of a Fund's dividends may qualify for
the dividends received deduction available to corporations. Long-term capital
gains currently are taxed at the same federal income tax rates as ordinary
income and short-term capital gains.
Gain or loss, if any, recognized on the sale or other disposition of shares of a
Fund will be taxed as capital gain or loss if the shares are capital assets in
the shareholder's hands. Generally, a shareholder's gain or loss will be a long
term gain or loss if the shares have been held for more than one year. If a
shareholder sells or otherwise disposes of shares of a Fund before holding them
for more than six months, any loss on the sale or other disposition of such
shares shall be (i) treated as a long-term capital loss to the extent of any
capital gain dividends received by the shareholder with respect to such shares
or (ii) disallowed to the extent of any exempt-interest dividends received by
the shareholder with respect to such shares. A loss realized on a sale or
exchange of shares may be disallowed if other shares are acquired within a
61-day period beginning 30 days before and ending 30 days after the date that
the shares are sold.
The above discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or foreign tax laws that may be
applicable to certain investors. Investors should consult their own tax advisers
with respect to the special tax rules that may apply in their particular
situations, as well as the state, local, or foreign tax consequences to them of
investing in a Fund.
Item 21. Underwriters
Not Applicable.
Item 22. Calculation of Performance Data
The yield for each Fund is calculated daily based upon the seven days ending on
the date of calculation ("base period"). The yield is computed by determining
the net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to the nearest hundredth of one percent. An effective yield is computed
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, substracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum
B-15
<PAGE>
to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN +1) [SUP{365/7}]]-1
The following is the current yield and effective yield for the Cash Fund for the
seven-day period ended December 31, 1996:
<TABLE>
<S> <C>
Premium Class Yield 5.51% Institutional Class Yield 5.26%
Premium Class Effective Yield 5.65% Institutional Class Effective Yield 5.40%
</TABLE>
The yields quoted are not indicative of future results. Yields of a Fund will
depend on the type, quality, maturity, and interest rate of money market
instruments held by the respective Portfolio in which such Fund invests.
Item 23. Financial Statements
The financial statements contained in the Annual Report of the Cash Fund
(Accession Number 000089 7436-97-000035) for the period ended December 31, 1996
(and filed via the SEC's EDGAR electronic filing system on February 27, 1997)
are incorporated by reference into this Part B. The annual report of the Cash
Fund may be obtained from the Trust by calling 1-888-MERRMAC.
B-16
<PAGE>
PART C
C-1
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial Statements included in PART A of this Registration
Statement:
None
(2) Financial Statements of the Merrimac Cash Fund included in
PART B of this Registration Statement:
Portfolio of Investments at December 31, 1996*
Statement of Assets and Liabilities at December 31, 1996*
Statement of Operations for the period ended December 31, 1996*
Statement of Changes in Net Assets for the period ended
December 31, 1996*
Financial Highlights for the period from November 21, 1996
(commencement of operations) to December 31, 1996*
Supplemental Data*
Notes to Financial Statements - December 31, 1996*
Independent Auditors' Report - February 21, 1997*
- - ----------------------
*Incorporated herein by reference to the Annual Report of the Registrant for the
fiscal year ended December 31, 1996, filed with the Securities and Exchange
Commission on the EDGAR system on February 27, 1997 (Accession Number 000089
7436-97-000035)
(b) Exhibits:
Exhibit No. Description
----------- -----------
1(a) Master Trust Agreement, effective as of
October 30, 1996
1(b) Amendment No. 1 to the Master Trust Agreement
2 By-Laws
3 None
C-2
<PAGE>
4 None
5(a) Investment Adviser Agreement between Merrimac
Master Portfolio and Investors Bank & Trust
Company ("Investors Bank")
5(b) Investment Sub-Adviser Agreement between Investors
Bank and The Bank of New York
5(c) Investment Sub-Adviser Agreement between Investors
Bank and Aeltus Investment Management, Inc.
6 *
7 Not Applicable
8 Custodian Agreement between Registrant and
Investors Bank
9(a) Administration Agreement between Registrant and
Investors Bank
9(b) Transfer Agency Agreement between Registrant and
Investors Bank
10 *
11 *
12 *
13 None
14 Not Applicable
15(a) Shareholder Servicing Plan
15(b) Shareholder Servicing Agreement
16 Not Applicable
18 Multiple Class Expense Allocation Plan (Rule 18f-3)
27 Financial Data Schedules for the Cash Fund
C-3
<PAGE>
- - -------------------
*Pursuant to General Instructions F4 of Form N-1A, a registration statement
filed under only the Investment Company Act of 1940 shall consist of the facing
sheet of the Form, responses to all items of Part A and B except Items 1, 2, 3,
and 5A of Part A thereof, responses to all items of Part C except Items
24(b)(6), 24(b)(10), 24(b)(11) and 24(b)(12), required signatures and all
other documents that are required or which the Registrant may file as part of
the registration statement.
Item 25. Persons Controlled by or Under Common Control with Registrant
As of the close of business on March 26, 1997, the following are owners of 25%
or more of the value of the outstanding shares of the Merrimac Cash Fund. The
Merrimac Treasury Fund has not yet commenced operations.
Merrimac Cash Fund (Premium Class)
----------------------------------
Record Owner Percent Ownership
------------ -----------------
The Bank of New York 74.2%
As Agent for its Securities Lending
Customers
101 Barclay Street
New York, NY 10286
Investors Bank & Trust Company 25.8 %
As Security Lending Agent FBO
89 South Street
Boston, MA 02111
Merrimac Cash Fund (Institutional Class)
----------------------------------------
Record Owner Percent Ownership
------------ -----------------
Saturn & Co 76%
C/O Investors Bank & Trust Company
P.O. Box 1537
Boston, MA 02205-1537
Since, as of March 26, 1997, the Merrimac Cash Fund is the owner of greater than
25% of the interests in the Merrimac Cash Portfolio, a series of the Merrimac
Master Trust, it controls the Cash Portfolio and the shareholders listed above
may also be deemed to control the Merrimac Cash Portfolio.
Item 26. Number of Holders of Securities
As of March 26, 1997, the record holders of each class of Registrant's
securities were as follows:
Title of Class Number of Record Holders
-------------- ------------------------
Merrimac Cash Fund (Premium Class) 3
Merrimac Cash Fund (Institutional Class) 3
Merrimac Treasury Fund (Premium Class) 0
Merrimac Treasury Fund (Institutional Class) 0
C-4
<PAGE>
Item 27. Indemnification
Under Article V of the Registrant's Declaration of Trust, the Trust shall
indemnify, to the fullest extent permitted by law (including the 1940 Act), each
Trustee, officer or employee of the Trust (including any Person who serves at
the Trust's request as a director, officer or trustee of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise)
against all liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel fees)
reasonably incurred by such Person in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, in which
such Person may be involved or with which such Person may be threatened, while
in office or thereafter, by reason of such Person being or having been such a
Trustee, officer, employee, except with respect to any matter as to which such
Person shall have been adjudicated to have acted with bad faith, willful
misfeasance, gross negligence or reckless disregard of such Person's duties,
such liabilities and expenses being liabilities only of the Portfolio Series out
of which such claim for indemnificaiton arises; provided, however, that as to
any matter disposed of by a compromise payment by such Person, pursuant to a
consent decree or otherwise, no indemnification either for such payment of for
any other expenses shall be provided unless there has been a determination that
such Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Person's
office (i) by the court or other body approving the settlement or other
disposition; or (ii) based upon a review of readily available facts (as opposed
to a full trial-type inquiry), by written opinion from independent legal counsel
approved by the Trustees; or (iii) by a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, based upon a review
of readily available facts (as opposed to a full trial-type inquiry).
Item 28. Business and Other Connections of Investment Adviser
Investors Bank serves as investment adviser to the Merrimac Cash Portfolio (in
which the Merrimac Cash Fund has invested all of its assets) and the Merrimac
Trasury Portfolio (in which the Merrimac Trasury Portfolio (in which the
Merrimac Treasury Fund will invest all of its assets). Investors Bank was
organized in 1969 as a Massachusetts-chartered trust company and provides
domestic and global custody, multi-currency accounting, institutional transfer
agency, performance measurement, foreign exchange, securities lending and mutual
fund administration services to a variety of financial asset managers, including
mutual fund complexes, investment advisers, banks and insurance companies. The
business, profession, vocation or employment of a substantial nature that each
director or officer of Investors Bank is or has been, at any time during the
past two fiscal years, engaged in for his own account or in the capacity of
director, officer, employee, partner or trustee, is as follows:
<TABLE>
<CAPTION>
Business and Other
Position With Positions Within
Name Adviser Last Two Years
- - ---- ------- --------------
<S> <C> <C>
Kevin J. Sheehan President & Chief Executive President since June 1992
Officer Chief Executive Officer since
June 1995
Michael F. Rogers Executive Managing Director since September 1993
Karen C. Keenan Chief Financial Officer & since June 1995
Secretary Vice President September 1992
to June 1995
Earl W. Zimmerman Treasurer since May 1994
C-5
<PAGE>
<CAPTION>
Business and Other
Position With Positions Within
Name Adviser Last Two Years
- - ---- ------- --------------
<S> <C> <C>
Edmund J. Maroney Managing Director - Systems since July 1991
Robert D. Mancuso Managing Director-Marketing since September 1993
and Client Management
David F. Flynn Managing Director-Lending since April 1992
James M. Oates Director Chairman of IBEX Capital
Markets, LLC since 1996;
Managing Director of The
Wydown Group 1994-1996
Thomas P. McDermott Director Managing Director of TPM
Associates since 1994
Frank B. Condon Director Chief Executive Officer & Chairman
of The Woodstock Corporation since
1993
Phyllis S. Swersky Director President & Chief Executive Officer
of The NET Collaborative since 1996;
President of The Meltech Group
1995-1996; Acting President of Object
Design and I-Cube
Donald G. Friedl Director President of All Seasons Services
since 1996
Robert B. Fraser Director Partner at Goodwin, Procter & Hoar,
L.L.P. since 1994
</TABLE>
Item 29. Principal Underwriters
Not Applicable
C-6
<PAGE>
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 locations set forth below. (The Merrimac
Cash Funds and the Merrimac Treasury Fund are referred to as the "Funds" and the
Merrimac Cash Portfolio and the Merrimac Treasury Portfolio are referred to as
the Portfolios.)
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(Investment Adviser to the Merrimac Cash Portfolio and Merrimac Treasury
Portfolio; Administrator, and Transfer Agent for the Funds; Custodian for the
Funds and the Portfolios)
The Bank of New York
48 Wall Street
New York, NY 10286
(Investment Sub-Adviser to the Merrimac Cash Portfolio)
Aeltus Investment Management, Inc.
242 Trumbull Street
Hartford, CT 06103
(Investment Sub-Adviser to the Merrimac Treasury Portfolio)
Investors Fund Services (Ireland) Limited
Deloitte & Touche House
29 Earlsfort Terrace
Dublin 2, Ireland
(Administrator to the Portfolios)
IBT Fund Services (Canada) Inc.
1 First Canadian, King Street West
Suite 2800 P.O. Box 231
Toronto, CA M5X1C8
(Transfer Agent for the Portfolios and Fund Accountant for the Portfolios and
the Funds)
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Not Applicable
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Boston, and Commonwealth of Massachusetts as of the 27th day of March,
1997.
MERRIMAC FUNDS
/s/ Sean P. Brennan
-------------------
Sean P. Brennan
President
C-8
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1(a) Master Trust Agreement, effective as of
October 30, 1996
1(b) Amendment No. 1 to the Master Trust Agreement
2 By-Laws
5(a) Investment Adviser Agreement between Merrimac
Master Portfolio and Investors Bank & Trust
Company ("Investors Bank")
5(b) Investment Sub-Adviser Agreement between
Investors Bank and The Bank of New York
5(c) Investment Sub-Adviser Agreement between
Investors Bank and Aeltus Investment
Management, Inc.
8 Custodian Agreement between Registrant and
Investors Bank
9(a) Administration Agreement between Registrant
and Investors Bank
9(b) Transfer Agency Agreement between Registrant
and Investors Bank
15(a) Shareholder Servicing Plan
15(b) Shareholder Servicing Agreement
18 Multiple Class Expense Allocation Plan (Rule
18f-3)
27 Financial Data Schedules for the Cash Fund
C-9
Exhibit 1a
MERRIMAC FUNDS
MASTER TRUST AGREEMENT
October 30, 1996
(C)1996 Goodwin, Procter & Hoar LLP
All Rights Reserved
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I - NAME AND DEFINITIONS................................................................................1
Section 1.1 Name and Principal Office..............................................................1
Section 1.2 Definitions............................................................................1
(a) "Act"..................................................................................1
(b) "By-Laws"..............................................................................2
(c) "class"................................................................................2
(d) "Commission"...........................................................................2
(e) "Declaration of Trust".................................................................2
(f) "Majority of the Outstanding Voting Shares"............................................2
(g) "1940 Act".............................................................................2
(h) "person"...............................................................................2
(i) "Shareholder"..........................................................................2
(j) "Shares"...............................................................................2
(k) "Sub-Trust" or "Series"................................................................2
(l) "Trust"................................................................................2
(m) "Trustees".............................................................................2
ARTICLE II - PURPOSE OF TRUST...................................................................................3
ARTICLE III - THE TRUSTEES......................................................................................3
Section 3.1 Number, Designation, Election, Term, etc...............................................3
(a) Trustees...............................................................................3
(b) Number.................................................................................3
(c) Election and Term......................................................................3
(d) Resignation and Retirement.............................................................3
(e) Removal................................................................................3
(f) Vacancies..............................................................................4
(g) Effect of Death, Resignation, etc......................................................4
(h) No Accounting..........................................................................4
Section 3.2 Powers of Trustees.....................................................................4
(a) Investments............................................................................5
(b) Disposition of Assets..................................................................6
(c) Ownership Powers.......................................................................6
(d) Subscription...........................................................................6
(e) Form of Holding........................................................................6
(f) Reorganization, etc....................................................................6
(g) Voting Trusts, etc.....................................................................6
(h) Compromise.............................................................................6
(i) Partnerships, etc......................................................................6
(i)
<PAGE>
Page
----
<S> <C>
(j) Borrowing and Security.................................................................7
(k) Guarantees, etc........................................................................7
(l) Insurance..............................................................................7
(m) Pensions, etc..........................................................................7
(n) Distribution Plans.....................................................................7
Section 3.3 Certain Contracts......................................................................7
(a) Advisory...............................................................................8
(b) Administration.........................................................................8
(c) Distribution...........................................................................8
(d) Custodian and Depository...............................................................8
(e) Transfer and Dividend Disbursing Agency................................................8
(f) Shareholder Servicing..................................................................8
(g) Accounting.............................................................................8
Section 3.4 Payment of Trust Expenses and Compensation of Trustees.................................9
Section 3.5 Ownership of Assets of the Trust......................................................10
Section 3.6 Action by Trustees....................................................................10
ARTICLE IV - SHARES............................................................................................10
Section 4.1 Description of Shares.................................................................10
Section 4.2 Establishment and Designation of Sub-Trusts and Classes...............................12
(a) Assets Belonging to Sub-Trusts........................................................12
(b) Liabilities Belonging to Sub-Trusts...................................................12
(c) Dividends.............................................................................13
(d) Liquidation...........................................................................14
(e) Voting................................................................................14
(f) Redemption by Shareholder.............................................................14
(g) Redemption by Trust...................................................................15
(h) Net Asset Value.......................................................................15
(i) Transfer..............................................................................15
(j) Equality..............................................................................16
(k) Fractions.............................................................................16
(l) Conversion Rights.....................................................................16
(m) Class Differences.....................................................................16
Section 4.3 Ownership of Shares...................................................................16
Section 4.4 Investments in the Trust..............................................................17
Section 4.5 No Pre-emptive Rights.................................................................17
Section 4.6 Status of Shares and Limitation of Personal Liability.................................17
Section 4.7 No Appraisal Rights...................................................................17
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS...........................................................17
Section 5.1 Voting Powers.........................................................................17
Section 5.2 Meetings..............................................................................18
(ii)
<PAGE>
Page
----
<S> <C>
Section 5.3 Record Dates..........................................................................18
Section 5.4 Quorum and Required Vote..............................................................19
Section 5.5 Action by Written Consent.............................................................19
Section 5.6 Inspection of Records.................................................................19
Section 5.7 Additional Provisions.................................................................19
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION..........................................................19
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice............................19
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety.........................20
Section 6.3 Indemnification of Shareholders.......................................................21
Section 6.4 Indemnification of Trustees, Officers, etc............................................21
Section 6.5 Compromise Payment....................................................................22
Section 6.6 Indemnification Not Exclusive, etc....................................................22
Section 6.7 Liability of Third Persons Dealing with Trustees......................................22
Section 6.8 Discretion............................................................................22
ARTICLE VII - MISCELLANEOUS....................................................................................23
Section 7.1 Duration and Termination of Trust.....................................................23
Section 7.2 Reorganization........................................................................23
Section 7.3 Amendments............................................................................24
Section 7.4 Filing of Copies; References; Headings................................................24
Section 7.5 Applicable Law........................................................................25
Section 7.6 Registered Agent......................................................................25
Section 7.7 Integration...........................................................................25
</TABLE>
(iii)
<PAGE>
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made as of this 30th day of
October,1996, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided. This
Declaration of Trust shall be effective upon the filing of the Certificate of
Trust in the office of the Secretary of State of the State of Delaware.
W I T N E S S E T H:
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust hereunder,
and to issue classes of Shares of any Sub-Trust or divide Shares of any
Sub-Trust into two or more classes, all in accordance with the provisions
hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. ss.3801, et seq.), as
from time to time amended and including any successor statute of similar import
(the "Act"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust and the Sub-Trusts created
hereunder as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
--------------------------------
Section 1.1 Name and Principal Office. This Trust shall be known as
"Merrimac Funds" and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
The principal office of the Trust shall be located at 200 Clarendon Street,
Boston, Massachusetts 02116, or such other location as the Trustees may from
time to time determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Act" shall have the meaning given to it in the recitals
of this Declaration of Trust.
<PAGE>
(b) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
(c) "class" refers to any class of Shares of any Series or
Sub-Trust established and designated under or in accordance with the provisions
of Article IV;
(d) "Commission" shall have the meaning given it in the 1940
Act;
(e) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
(f) "Majority of the Outstanding Voting Shares" of the Trust
or Sub-Trust or of a class of a Sub-Trust shall mean the vote, at the annual or
a special meeting of Shareholders duly called, (A) of 67 per centum or more of
the Shares of the Trust or Sub-Trust present at such meeting, (or of a class of
a Sub-Trust, as the case may be) if holders of more than 50 per centum of the
outstanding Shares of the Trust or Sub-Trust (or of a class of a Sub-Trust, as
the case may be) are present or represented by proxy; or (B) of more than 50 per
centum of the outstanding voting Shares of the Trust or Sub-Trust or of a class
of a Sub-Trust, as the case may be, whichever is the less.
(g) "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time;
(h) "person" means a natural person, corporation, limited
liability company, trust, association, partnership (whether general, limited or
otherwise), joint venture or any other entity.
(i) "Shareholder" means a beneficial owner of record of
Shares;
(j) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust and each Sub-Trust of the Trust
and/or any class of any Sub-Trust (as the context may require) shall be divided
from time to time;
(k) "Sub-Trust" or "Series" refers to a series of Shares
established and designated under or in accordance with the provisions of Article
IV;
(l) "Trust" refers to the Delaware business trust established
by this Declaration of Trust, inclusive of each and every Sub-Trust established
hereunder; and
(m) "Trustees" refers to the trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III.
2
<PAGE>
ARTICLE II - PURPOSE OF TRUST
-----------------------------
The purposes of the Trust are (i) to operate as an investment company
and to offer Shareholders of the Trust and each Sub-Trust of the Trust one or
more investment programs primarily in securities and debt instruments, and (ii)
to engage in such activities that are necessary, suitable, incidental or
convenient to the accomplishment of the foregoing.
ARTICLE III - THE TRUSTEES
--------------------------
Section 3.1 Number, Designation, Election, Term, etc.
-----------------------------------------
(a) Trustees. The initial Trustees hereof and of each
Sub-Trust hereunder shall be Edward F. Hines, Jr., Francis J. Gaul, Jr., Thomas
E. Sinton and Kevin J. Sheehan.
(b) Number. The Trustees serving as such, whether named above
or hereafter becoming Trustees, may increase or decrease the number of Trustees
to a number other than the number theretofore determined. No decrease in the
number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of such Trustee's term, but the number of Trustees may
be decreased in conjunction with the removal of a Trustee pursuant to subsection
(e) of this Section 3.1.
(c) Election and Term. Trustees, in addition to those named
above, may become such by election by Shareholders or the Trustees in office
pursuant to Section 3.1(f). Each Trustee, whether named above or hereafter
becoming a Trustee, shall serve as a Trustee of the Trust and of each Sub-Trust
hereunder during the lifetime of this Trust and until its termination as
hereinafter provided except as such Trustee sooner dies, resigns, retires or is
removed. Subject to Section 16(a) of the 1940 Act, the Trustees may elect
successors and may, pursuant to Section 3.1(f) hereof, appoint Trustees to fill
vacancies.
(d) Resignation and Retirement. Any Trustee may resign or
retire as a trustee of the Trust, by written instrument signed by such Trustee
and delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to the
Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least a majority of the
number of Trustees in office immediately prior to such removal, specifying the
date upon which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then outstanding,
cast in person or by proxy at any meeting called for the purpose; or (iii) by a
written declaration signed by Shareholders holding not less than two-thirds of
the Shares then outstanding
3
<PAGE>
and filed with the minutes of the Trust. Any such removal shall be effective as
to the Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting from an
increase in the number of Trustees by the other Trustees may (but so long as
there are at least two remaining Trustees, need not unless required by the 1940
Act) be filled by a majority of the remaining Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, through the appointment in writing
of such other person as such remaining Trustees in their discretion shall
determine and such appointment shall be effective upon the written acceptance of
the person named therein to serve as a trustee of the Trust and agreement by
such person to be bound by the provisions of this Declaration of Trust, except
that any such appointment in anticipation of a vacancy to occur by reason of
voluntary or mandatory retirement, resignation or increase in number of Trustees
to be effective at a later date shall be deemed effective upon the effective
date of said retirement, resignation or increase in number of Trustees. As soon
as any Trustee so appointed shall have accepted such appointment and shall have
agreed in writing to be bound by this Declaration of Trust and the appointment
is effective, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
voluntary or mandatory retirement, removal or incapacity of the Trustees, or any
one of them, shall cause a Trustee to cease to be a trustee of the Trust but
shall not operate to annul or terminate the Trust or any Sub-Trust hereunder or
to revoke or terminate any existing agency or contract created or entered into
pursuant to the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940
Act or under circumstances which would justify removal for cause, no person
ceasing to be a trustee of the Trust as a result of death, resignation,
voluntary or mandatory retirement, removal or incapacity (nor the estate of any
such person) shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
Section 3.2 Powers of Trustees. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees in all instances
shall act as principals, and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and all
acts and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall not be bound or limited by present or future laws or
customs with regard to investment by trustees or fiduciaries, but shall have
full authority and absolute power and control over the assets of the Trust and
the business of the Trust to the same extent as if the Trustees were the sole
owners of the assets of the Trust and the business in their own right, including
such authority, power and control to do all acts and
4
<PAGE>
things as they, in their sole discretion, shall deem proper to accomplish the
purposes of this Trust. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section 4.1
hereof establish Sub-Trusts, each such Sub-Trust to operate as a separate and
distinct investment medium and with separately defined investment objectives and
policies and distinct investment purposes; they may from time to time in
accordance with the provisions of Section 4.1 hereof establish Series or
establish classes of Shares of any Series or Sub-Trust or divide the Shares of
any Series or Sub-Trust into classes; they may as they consider appropriate
designate employees and agents who may be denominated as officers with titles,
including, but not limited to, "president," "vice-president," "treasurer,"
"secretary," "assistant secretary," "assistant treasurer," "managing director,"
"chairman of the board" and "vice chairman of the board" and who in such
capacity may act for and on behalf of the Trust, as and to the extent authorized
by the Trustees, and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees, including without implied limitation an executive
committee, which may, when the Trustees are not in session and subject to the
1940 Act, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one or
more advisers, administrators, depositories and custodians and may authorize any
depository or custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central handling of
securities and debt instruments, retain transfer, dividend, accounting or
Shareholder servicing agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more distributors, principal
underwriters or otherwise, and subject to Section 5.3, set record dates or times
for the determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and duties as
they consider desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation, the power and
authority to act in the name of the Trust and any Sub-Trust and of the Trustees,
to sign documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) Investments. To invest and reinvest cash and other
property, including, without implied limitation, to invest any and all of the
assets of the Trust in the securities of one
5
<PAGE>
or more open-end management investment companies, and to hold cash or other
property uninvested without in any event being bound or limited by any present
or future law or custom in regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument of which is or was held in the Trust; to
consent to any contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect to any
security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee, depositary, voting
trustee or otherwise, and in that connection to deposit any security or debt
instrument with, or transfer any security or debt instrument to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security or debt instrument (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to agree to
pay, and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general
or limited partnerships, limited liability companies and any other combinations
or associations;
6
<PAGE>
(j) Borrowing and Security. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of
any notes or other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to mortgage
and pledge the Trust property or any part thereof to secure any of or all such
obligations;
(l) Insurance. To purchase and pay for entirely out of Trust
property such insurance and/or bonding as they may deem necessary or appropriate
for the conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith), of
the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or position,
or by reason of any action alleged to have been taken or omitted by any such
person in any such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability;
(m) Pensions, etc. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
(n) Distribution Plans. To adopt on behalf of the Trust or any
Sub-Trust, including with respect to any class thereof, a plan of distribution
and related agreements thereto pursuant to the terms of Rule 12b-1 of the 1940
Act and to make payments from the assets of the Trust or the relevant Sub-Trust
or Sub-Trusts pursuant to said Rule 12b-1 Plan.
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth herein, enter into
one or more contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, limited liability companies, other type of
organizations, or individuals (a "Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any Sub-Trust, and/or
the Trustees, and to provide for the performance and assumption of such other
7
<PAGE>
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees with respect
to the investments of the Trust or of the assets belonging to any Sub-Trust of
the Trust (as that phrase is defined in subsection (a) of Section 4.2), to
manage such investments and assets, make investment decisions with respect
thereto, and to place purchase and sale orders for portfolio transactions
relating to such investments and assets;
(b) Administration. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust (including each class thereof), to
supervise all or any part of the operations of the Trust and each Sub-Trust, and
to provide all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) Distribution. To distribute the Shares of the Trust and
each Sub-Trust (including any classes thereof), to be principal underwriter of
such Shares, and/or to act as agent of the Trust and each Sub-Trust in the sale
of Shares and the acceptance or rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and each Sub-Trust and accounting
records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the issuance and redemption and
the transfer thereof, and to disburse any dividends declared by the Trustees and
in accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to
the relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust
8
<PAGE>
or a Contracting Party from entering into sub-contractual arrangements relating
to any of the matters referred to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party, or of or for any parent or affiliate of any
Contracting Party or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships,
limited liability companies or other organizations, or have other
business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares thereof that may be
established and designated pursuant to Article IV, as the Trustees deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, any Sub-Trust and/or any class of Shares thereof, or
in connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, Shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary
9
<PAGE>
or proper to incur. Without limiting the generality of any other provision
hereof, the Trustees shall be entitled to reasonable compensation from the Trust
for their services as trustees of the Trust and may fix the amount of such
compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust and of each Sub-Trust shall at all times be considered as
vested in the Trust.
Section 3.6 Action by Trustees. Except as otherwise provided by the
1940 Act or other applicable law, this Declaration of Trust or the By-Laws, any
action to be taken by the Trustees on behalf of or with respect to the Trust or
any Sub-Trust or class thereof may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least one-half of
the Trustees then in office, being present), within or without Delaware,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
ARTICLE IV - SHARES
-------------------
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall be divided into Shares, all with $0.001 par value, but the Trustees shall
have the authority from time to time to issue Shares in one or more Series (each
of which Series of Shares shall represent the beneficial interest in a separate
and distinct Sub-Trust of the Trust, including without limitation each Sub-Trust
specifically established and designated in Section 4.2), as they deem necessary
or desirable. For all purposes under this Declaration of Trust or otherwise,
including, without implied limitation, (i) with respect to the rights of
creditors and (ii) for purposes of interpreting the relevant rights of each
Sub-Trust and the Shareholders of each Sub-Trust, each Sub-Trust established
hereunder shall be deemed to be a separate trust. Notice of the limitation of
liabilities of a Sub-Trust shall be set forth in the certificate of trust of the
Trust, and debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular Sub-Trust shall be
enforceable against the assets of such Sub-Trust only, and not against the
assets of the Trust generally or any other Sub-Trust. The Trustees shall have
exclusive power without the requirement of Shareholder approval to establish and
designate such separate and distinct Sub-Trusts, and to fix and determine the
relative rights and preferences as between the shares of the separate Sub-Trusts
as to right of redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and on liquidation,
sinking or purchase fund provisions, conversion rights, and conditions under
which the several Sub-Trusts shall have separate voting rights or no voting
rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-Trust
or divide the Shares of any
10
<PAGE>
Sub-Trust into classes, each class having such different dividend, liquidation,
voting and other rights as the Trustees may determine in their sole discretion,
and may establish and designate the specific classes of Shares of each
Sub-Trust. The fact that a Sub-Trust shall have initially been established and
designated without any specific establishment or designation of classes (i.e.,
that all Shares of such Sub-Trust are initially of a single class), or that a
Sub-Trust shall have more than one established and designated class, shall not
limit the authority of the Trustees to establish and designate separate classes,
or one or more further classes, of said Sub-Trust without approval of the
holders of the initial class thereof, or previously established and designated
class or classes thereof.
The number of authorized Shares and the number of Shares of each
Sub-Trust or class thereof that may be issued is unlimited, and the Trustees may
issue Shares of any Sub-Trust or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on such
terms as they may determine, or cancel, at their discretion from time to time,
any Shares of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders of
Shares entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation of
the relative rights and preferences of the Shares of such Sub-Trust or class,
(ii) upon the execution of an instrument in writing by an officer of the Trust
pursuant to the vote of a majority of the Trustees, or (iii) as otherwise
provided in either such instrument. At any time that there are no Shares
outstanding of any particular Sub-Trust or class previously established and
designated, the Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust pursuant to the
vote of a majority of the Trustees) abolish that Sub-Trust or class and the
establishment and designation thereof. Each instrument establishing and
designating any Sub-Trust shall have the status of an amendment to this
Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the same
extent as if such person were not a Trustee, officer or
11
<PAGE>
other agent of the Trust; and the Trust may issue and sell or cause to be issued
and sold and may purchase Shares of any Sub-Trust (including any classes
thereof) from any such person or any such organization subject only to the
general limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Sub-Trust (including any classes thereof) generally.
Section 4.2 Establishment and Designation of Sub-Trusts and Classes.
Without limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate one Sub-Trust identified as Merrimac Cash Funds, which Sub-Trust
shall consist of two classes of Shares identified as the "Premium Class" and the
"Institutional Class" Shares. The Shares of such Sub-Trust and any Shares of any
further Sub-Trust or class thereof that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Sub-Trust at the time of establishing and designating
the same) have the following relative rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration received
by the Trust for the issue or sale of Shares of a particular Sub-Trust or any
classes thereof, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Sub-Trust or class thereof and shall
irrevocably belong to that Sub-Trust (and be allocable to any classes thereof)
for all purposes, and shall be so recorded upon the books of account of the
Trust. Separate and distinct records shall be maintained for each Sub-Trust and
the assets associated with a Sub-Trust shall be held and accounted for
separately from the other assets of the Trust, or any other Sub-Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items (as
hereinafter defined) allocated to that Sub-Trust as provided in the following
sentence, are herein referred to as "assets belonging to" that Sub-Trust (and
allocable to any classes thereof). In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Sub-Trust (collectively
"General Items"), the Trustees shall allocate such General Items to and among
any one or more of the Sub-Trusts established and designated from time to time
in such manner and on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to a particular Sub-Trust
shall belong to that Sub-Trust (and be allocable to any classes thereof). Each
such allocation by the Trustees shall be conclusive and binding upon the holders
of all Shares of all Sub-Trusts (including any classes thereof) for all
purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging
to each particular Sub-Trust shall be charged with the liabilities in respect of
that Sub-Trust and all expenses, costs, charges and reserves belonging to that
Sub-Trust, and any general liabilities, expenses, costs,
12
<PAGE>
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Sub-Trust shall be allocated and charged by the Trustees to
and among any one or more of the Sub-Trusts established and designated from time
to time in such manner and on such basis as the Trustees in their sole
discretion shall determine. In addition, the liabilities in respect of a
particular class of Shares of a particular Sub-Trust and all expenses, costs,
charges and reserves belonging to that class of Shares, and any general
liabilities, expenses, costs, charges or reserves of that particular Sub-Trust
which are not readily identifiable as belonging to any particular class of
Shares of that Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the classes of Shares of that Sub-Trust established and
designated from time to time in such manner and on such basis as the Trustees in
their sole discretion shall determine. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a Sub-Trust or class thereof are herein
referred to as "liabilities belonging to" that Sub-Trust or class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders, creditors and any other
persons dealing with the Trust or any Sub-Trust (including any classes thereof)
for all purposes. Any creditor of any Sub-Trust may look only to the assets of
that Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a
particular Sub-Trust or any class thereof may be paid with such frequency as the
Trustees in their sole discretion may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees in their sole discretion may determine, to the holders
of Shares of that Sub-Trust or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Sub-Trust, or in the case
of a class, belonging to that Sub-Trust and allocable to that class, as the
Trustees in their sole discretion may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees in their sole discretion may
determine that no dividend or distribution shall be payable on Shares as to
which the Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or procedure.
Such dividends and distributions may be made in cash or Shares of that Sub-Trust
or class or a combination thereof as determined by the Trustees in their sole
discretion or pursuant to any program that the Trustees may have in effect at
the time for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or distribution
paid in Shares will be paid at the net asset value thereof as determined in
accordance with subsection (h) of this Section 4.2.
13
<PAGE>
The Trustees shall have full discretion to the extent not inconsistent
with the 1940 Act to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, subject to Section 7.1 hereof, the holders of Shares
of each Sub-Trust or any class thereof that has been established and designated
shall be entitled to receive, when and as declared by the Trustees, the excess
of the assets belonging to that Sub-Trust, or in the case of a class, belonging
to that Sub-Trust and allocable to that class, over the liabilities belonging to
that Sub-Trust or class. The assets so distributable to the holders of Shares of
any particular Sub-Trust or class thereof shall be distributed among such
holders in proportion to the number of Shares of that Sub-Trust or class thereof
held by them and recorded on the books of the Trust. The liquidation of any
particular Sub-Trust or class thereof may be authorized at any time by vote of a
majority of the Trustees then in office.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share shall be entitled to one vote for each
whole Share standing in such Shareholder's name on the books of the Trust
irrespective of the Series thereof or class thereof and all Shares of all Series
and classes thereof shall vote together as a single class; provided, however,
that as to any matter (i) with respect to which a separate vote of one or more
Series or classes thereof is required by the 1940 Act or the provisions of the
writing establishing and designating the Sub-Trust or class, such requirements
as to a separate vote by such Series or class thereof shall apply in lieu of all
Shares of all Series and classes thereof voting together; and (ii) as to any
matter which affects the interests of one or more particular Series or classes
thereof, only the holders of Shares of the one or more affected Series or
classes shall be entitled to vote, and each such Series or class shall vote as a
separate class.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Sub-Trust or any class thereof shall have the right at such times as
may be permitted by the Trust to require the Trust to redeem all or any part of
such holder's Shares of that Sub-Trust or class thereof at a redemption price
equal to the net asset value per Share of that Sub-Trust or class thereof next
determined in accordance with subsection (h) of this Section 4.2 after the
Shares are properly tendered for redemption, subject to any contingent deferred
sales charge or redemption charge in effect at the time of redemption. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require
14
<PAGE>
the Trust to redeem Shares of that Sub-Trust during any period or at any time
when and to the extent permissible under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust or class
thereof that has been established and designated is subject to redemption by the
Trust at the redemption price which would be applicable if such Share was then
being redeemed by the Shareholder pursuant to subsection (f) of this Section
4.2: (i) at any time, in the sole discretion of the Trustees, or (ii) upon such
other conditions as may from time to time be determined by the Trustees and set
forth in the then current Prospectus of the Trust. Upon such redemption the
holders of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any
Sub-Trust shall be (i) in the case of a Sub-Trust whose Shares are not divided
into classes, the quotient obtained by dividing the value of the net assets of
that Sub-Trust (being the value of the assets belonging to that Sub-Trust less
the liabilities belonging to that Sub-Trust) by the total number of Shares of
that Sub-Trust outstanding, and (ii) in the case of a class of Shares of a
Sub-Trust whose Shares are divided into classes, the quotient obtained by
dividing the value of the net assets of that Sub-Trust allocable to such class
(being the value of the assets belonging to that Sub-Trust allocable to such
class less the liabilities belonging to such class) by the total number of
Shares of such class outstanding; all determined in accordance with the methods
and procedures, including without limitation those with respect to rounding,
established by the Trustees from time to time.
The Trustees may in their sole discretion determine to maintain the net
asset value per Share of any Sub-Trust at a designated constant dollar amount
and in connection therewith may adopt procedures not inconsistent with the 1940
Act for the continuing declarations of income attributable to that Sub-Trust as
dividends payable in additional Shares of that Sub-Trust at the designated
constant dollar amount and for the handling of any losses attributable to that
Sub-Trust. Such procedures may provide that in the event of any loss each
Shareholder shall be deemed to have contributed to the capital of the Trust
attributable to that Sub-Trust such Shareholder's pro rata portion of the total
number of Shares required to be cancelled in order to permit the net asset value
per Share of that Sub-Trust to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of the Trust shall be deemed
to have agreed, by making an investment in any Sub-Trust with respect to which
the Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust or class
thereof shall be transferable, but transfers of Shares of a particular Sub-Trust
or class thereof will be recorded on the Share transfer records of the Trust
applicable to that Sub-Trust or class only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of that Sub-Trust or class
and at such other times as may be permitted by the Trustees.
15
<PAGE>
(j) Equality. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares of
each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the case
of a class, belonging to that Sub-Trust and allocable to that class, subject to
the liabilities belonging to that Sub-Trust or class, and each Share of any
particular Sub-Trust or class shall be equal to each other Share of that
Sub-Trust or class; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that may exist
with respect to dividends and distributions on Shares of the same Sub-Trust or
class. The Trustees in their sole discretion may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a greater or lesser
number of Shares of that Sub-Trust or class without thereby changing the
proportionate beneficial interest in the assets belonging to that Sub-Trust or
class or in any way affecting the rights of Shares of any other Sub-Trust or
class.
(k) Fractions. Any fractional Share of any Sub-Trust or class,
if any such fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Sub-Trust or class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to provide
that holders of Shares of any Sub-Trust or class thereof shall have the right to
convert said Shares into Shares of one or more other Sub-Trust or class thereof
in accordance with such requirements and procedures as may be established by the
Trustees.
(m) Class Differences. Subject to Section 4.1, the relative
rights and preferences of the classes of any Sub-Trust may differ in such other
respects as the Trustees may determine to be appropriate in their sole
discretion, provided that such differences are set forth in the instrument
establishing and designating such classes and executed by a majority of the
Trustees (or by an instrument executed by an officer of the Trust pursuant to a
vote of a majority of the Trustees).
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Sub-Trust and each class thereof that has been established and designated. No
certificates certifying the ownership of Shares need be issued except as the
Trustees in their sole discretion may otherwise determine from time to time. The
Trustees may make such rules as they consider appropriate for the issuance of
Share certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders and as to the number of Shares of each Sub-Trust and class
thereof held from time to time by each such Shareholder.
16
<PAGE>
Section 4.4 Investments in the Trust. The Trustees may accept or reject
investments in the Trust and each Sub-Trust from such persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize or determine. The Trustees may
authorize any distributor, principal underwriter, custodian, transfer agent or
other person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no
pre-emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Sub-Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this Declaration of Trust. Every Shareholder by virtue of acquiring Shares
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death, incapacity, dissolution, termination or
bankruptcy of a Shareholder during the continuance of the Trust shall not
operate to dissolve or terminate the Trust or any Sub-Trust thereof nor entitle
the representative of such Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but only to the rights of
such Shareholder under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
Section 4.7 No Appraisal Rights. Shareholders shall have no right to
demand payment for their shares or to any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenters' rights by a shareholder of a corporation
organized under the General Corporation Law of the State of Delaware, or
otherwise.
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------------------
Section 5.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust to the extent and
as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Section 7.3, and (v) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration of Trust, the By-Laws
17
<PAGE>
or any registration of the Trust with the Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. Proxies may be given orally or in writing or pursuant to
any computerized or mechanical data gathering process specifically approved by
the Trustees. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the
By-Laws to be taken by Shareholders.
Section 5.2 Meetings. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees in their sole discretion to be necessary or desirable.
Shareholder meetings may be held at such time and place within the continental
United States as may be fixed by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days and not more than 90 days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares then outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after written application
by Shareholders holding at least 10% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the By-Laws, then Shareholders holding at least 10% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 90 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action,
18
<PAGE>
even though such Shareholder has since that date and time disposed of such
Shareholder's Shares, and no Shareholder becoming such after that date and time
shall be so entitled to vote at such meeting or any adjournment thereof or to be
treated as a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. Except as otherwise provided by
the 1940 Act or other applicable law, thirty percent of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any meeting
of shareholders, whether or not a quorum is present, may be adjourned for any
lawful purpose provided that no meeting shall be adjourned for more than six
months beyond the originally scheduled meeting date. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting without the necessity of further notice. A majority of the
Shares voted at a meeting at which a quorum is present, shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders for any lawful purpose reasonably related to
a Shareholder's interest as a Shareholder. The Trustees may from time to time
establish reasonable standards, including standards governing what information
and documents are to be furnished, at what time and location and at whose
expense, with respect to Shareholders' inspection of Trust records.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION
-----------------------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and
19
<PAGE>
every other act or thing whatsoever executed or done by or on behalf of the
Trust, any Sub-Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only by or for the
Trust (or the Sub-Trust) or the Trustees and not personally. The Trustees and
the Trust's officers, employees and agents shall not be liable to the Trust or
the Shareholders; provided however, that nothing in this Declaration of Trust
shall protect any Trustee or officer, employee or agent against any liability to
the Trust or the Shareholders to which such Trustee or officer, employee or
agent would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee or of such officer, employee or agent.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officers or officer shall give notice that
the same was executed or made by or on behalf of the Trust or by them as
Trustees or Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, or the particular Sub-Trust in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually or otherwise invalidate
any such note, bond, contract, instrument, certificate or undertaking.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable to the
Trust and the Shareholders for such Trustee's own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (a)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrator,
distributor or principal underwriter, custodian or transfer, dividend
disbursing, Shareholder servicing or accounting agent of the Trust, nor shall
any Trustee be responsible for the act or omission of any other Trustee; (b) the
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees, and
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (c) in discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant, and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the Trustees pursuant
to Section 3.3. The Trustees as such shall not be required to give any bond or
surety or any other security for the performance of their duties. To the extent
that, at law or in equity, a Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to a Shareholder, any such Trustee
acting under this Declaration of Trust shall not be liable to the Trust or to
any such Shareholder for the Trustee's good faith reliance on the provisions of
this Declaration of Trust. The provisions of this Declaration of Trust, to the
extent that they restrict
20
<PAGE>
the duties and liabilities of a Trustee otherwise existing at law or in equity,
are agreed by the Shareholders to replace such other duties and liabilities of
such Trustee.
Section 6.3 Indemnification of Shareholders. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or held
to be personally liable for any obligation or liability of the Trust solely by
reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, the Trust on behalf of
said Sub-Trust (upon proper and timely request by the Shareholder) shall assume
the defense against such charge and satisfy any judgment thereon, and, to the
fullest extent permitted by law, the Shareholder or former Shareholder (or such
Shareholder's heirs, executors, administrators or other legal representatives or
in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of said Sub-Trust estate to be
held harmless from and indemnified against all loss and expense arising from
such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. To the fullest
extent permitted by law, the Trust shall indemnify (from the assets of the
Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a "Covered
Person"]) against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, except with respect
to any matter as to which it has been determined that such Covered Person had
acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(such conduct referred to hereafter as "Disabling Conduct"). A determination
that the Covered Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before whom the proceeding
was brought that the person to be indemnified was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the facts,
that the Covered Person was not liable by reason of Disabling Conduct by (a) a
vote of a majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time from funds attributable to
the Sub-Trust in question in advance of the final disposition of any such
action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
21
<PAGE>
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, an "interested Covered Person" is one against whom the
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 6.8 Discretion. Whenever in this Declaration of Trust the
Trustees are permitted or required to make a decision (a) in their "sole
discretion," "sole and absolute discretion," "full discretion" or "discretion,"
or under a similar grant of authority or latitude, the Trustees shall be
entitled to consider only such interests and factors as they desire, whether
reasonable or unreasonable, and may consider their own interests, and shall have
no duty or obligation to give any consideration to any interests of or factors
affecting the Trust or the
22
<PAGE>
Shareholders, or (b) in their "good faith" or under another express standard,
the Trustees shall act under such express standard and shall not be subject to
any other or different standards imposed by this Declaration of Trust or by law
or any other agreement contemplated herein. Each Shareholder and Trustee hereby
agrees that any standard of care or duty imposed in this Declaration of Trust or
any other agreement contemplated herein or under the Act or any other applicable
law, rule or regulation shall be modified, waived or limited in each case as
required to permit the Trustees to act under this Declaration of Trust or any
other agreement contemplated herein and to make any decision pursuant to the
authority prescribed in this Declaration of Trust.
ARTICLE VII - MISCELLANEOUS
---------------------------
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority of
the Trustees then in office subject to a favorable vote of a Majority of the
Outstanding Voting Shares of the Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 Reorganization. The Trust, or any one or more Sub-Trusts,
may, either as the successor, survivor, or non-survivor, (1) consolidate or
merge with one or more other trusts, Sub-Trusts, partnerships, limited liability
companies, associations or corporations organized under the laws of the State of
Delaware or any other state of the United States, to form a consolidated or
merged trust, partnership, limited liability company, association or corporation
under the laws of which any one of the constituent entities is organized, with
the Trust in the case of a merger to be the survivor or non-survivor of such
merger, or (2) transfer a substantial portion of its assets to one or more other
trusts, Sub-Trusts, partnerships, limited liability companies, associations or
corporations organized under the laws of the State of Delaware or any other
state of the United States, or have one or more such trusts, Sub-Trusts,
partnerships, limited liability companies, associations or corporations merged
into or transfer a substantial portion of its assets to it, any such
consolidation, merger or transfer to be upon such terms and conditions as are
specified in an agreement and plan of reorganization authorized and approved by
the Trustees and entered into by the Trust, or one or more Sub-Trusts as the
case may be, in connection therewith. Any such consolidation, merger or transfer
shall require the affirmative vote of the holders of a Majority of the
Outstanding Voting Shares of the Trust (or each Sub-Trust affected thereby, as
the case may be), except that (a) such affirmative vote of the holders of Shares
shall not be required if the Trust
23
<PAGE>
(or Sub-Trust affected thereby, as the case may be) shall be the survivor of
such consolidation or merger or transferee of such assets; (b) the Trustees may,
without shareholder approval, cause the Trust or any series of the Trust to
invest any or all of its assets in securities issued by a registered investment
company or series thereof, subject to the provisions of the 1940 Act; and (c)
the Trustees may, without shareholder approval, cause the Trust, or any series
of the Trust, to transfer all or substantially all of its assets and liabilities
to another registered investment company having substantially identical
investment objectives and policies in exchange for shares of such other
investment company if, but only if, the Trust or series, as the case may be,
retains the shares of such other investment company as an investment.
Section 7.3 Amendments. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be applicable and so long
as such amendment is not in contravention of applicable law, including the 1940
Act, by an instrument in writing signed by a majority of the then Trustees (or
by an officer of the Trust pursuant to the vote of a majority of such Trustees).
Any amendment to this Declaration of Trust that materially adversely affects the
rights of Shareholders may be adopted at any time by an instrument in writing
signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when authorized to do so by
the vote in accordance with subsection (e) of Section 4.2 of Shareholders as
specified in Section 5.4 hereof. Subject to the foregoing, any such amendment
shall be effective as of any past or future time as provided in the instrument
containing the terms of such amendment or, if there is no provision therein with
respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may be inspected by any Shareholder. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified by
an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect
24
<PAGE>
of this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Delaware. The Trust shall be of the type referred to in Section
3801 of the Act and of the type commonly called a business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust.
Section 7.6 Registered Agent. The Corporation Trust Company of 1209
Orange Street, City of Wilmington, County of New Castle, Delaware 19801 is
hereby designated as the initial registered agent for service of process on the
Trust in Delaware. The address of the registered office of the Trust in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, Delaware 19801.
Section 7.7 Integration. This Declaration of Trust constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understandings pertaining
thereto.
[END OF TEXT]
25
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals for themselves and their assigns, as of the day and year first above
written.
/s/ Edward F. Hines, Jr.
--------------------------
Edward F. Hines, Jr.
/s/ Francis J. Gaul, Jr.
--------------------------
Francis J. Gaul, Jr.
/s/ Thomas E. Sinton
--------------------------
Thomas E. Sinton
/s/ Kevin J. Sheehan
--------------------------
Kevin J. Sheehan
26
Exhibit 1b
AMENDMENT NO. 1 TO
MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the Master Trust Agreement dated October 30, 1996
made at Tucker's Town, Bermuda as of this 6th day of February, 1997.
WHEREAS, Section 7.3 of the Master Trust Agreement dated October 30,
1996 (the "Agreement") of Merrimac Funds (the "Trust") provides that the
Agreement may be amended at any time by an instrument in writing signed by a
majority of Trustees of the Trust without the vote of the Shareholders of the
Trust, so long as such amendment does not adversely affect the rights of any
shareholder;
WHEREAS, Section 4.1 of the Agreement of the Trust provides that the
Trustees of the Trust may establish and designate additional Series of Shares by
an instrument in writing signed by a majority of Trustees of the Trust; and
WHEREAS, the Trustees of the Trust desire to establish an additional
Series of Shares to be identified as the "Merrimac Treasury Fund."
NOW, THEREFORE, the Trustees hereby state that:
1. Section 4.2 of the Agreement and all other appropriate references in
the Agreement are amended to designate and establish a new Series of shares (in
addition to the Merrimac Cash Fund series heretofore established and designed)
to be known as the Merrimac Treasury Fund, effective as of this date, such new
Series to have the relative rights and preferences set forth in Section 4.2 of
the Agreement.
2. The initial paragraph of Section 4.2 of the agreement, as heretofore
in effect, is amended to read as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts and Classes.
--------------------------------------------------------
Without limiting the authority of the Trustees set forth in Section 4.1
to
<PAGE>
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate two Sub-Trusts identified as "Merrimac Cash
Fund" and "Merrimac Treasury Fund," which Sub-Trusts shall consist of
two classes of shares identified as the "Premim Class" and the
"Institutional Class" Shares. The Shares of such Sub-Trusts and any
Shares of any further Sub-Trusts that may from time to time be
established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-Trust at the time
of establishing and designating the same) have the following relative
rights and preferences:"
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seal for themselves and their assigns, as of this 6th day of February, 1997.
/s/ Edward F. Hines, Jr.
--------------------------
Edward F. Hines, Jr.
/s/ Francis J. Gaul, Jr.
--------------------------
Francis J. Gaul, Jr.
/s/ Thomas E. Sinton
--------------------------
Thomas E. Sinton
/s/ Kevin J. Sheehan
--------------------------
Kevin J. Sheehan
2
Exhibit 2
BY-LAWS
OF
MERRIMAC FUNDS
(A Delaware Business Trust)
ARTICLE 1
---------
Agreement and Declaration of Trust and Principal Office
-------------------------------------------------------
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject
to the Master Trust Agreement, as from time to time in effect (the "Declaration
of Trust"), of Merrimac Funds, the Delaware business trust established by the
Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust
shall be located in Boston, Massachusetts.
ARTICLE 2
---------
Meetings of Trustees
--------------------
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places either within or without the State of
Delaware and at such times as the Trustees may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trust calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram or
facsimile at least twenty-four hours before the meeting addressed to the Trustee
at his or her usual or last known business or residence address or to give
notice to him or her in person or by telephone at least twenty-four hours before
the meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before or after the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
2.4 Quorum; Adjournment; Vote Required for Action. At any meeting of
the Trustees a majority of the Trustees then in office shall constitute a
quorum. Any meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned without further notice. At the
<PAGE>
adjourned meeting, the Trustees may transact any business which might have been
transacted at the original meeting. Except in cases where the Declaration of
Trust or these By-Laws otherwise provide, the vote of a majority of the Trustees
present at a meeting at which a quorum is present shall be the act of the
Trustees.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
---------
Officers
--------
3.1 Enumeration; Qualification. The officers of the Trust may be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, Assistant Treasurers and Assistant
Secretaries, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The Chairman of the Board shall be a Trustee and
may but need not be a beneficial owner of the Trust (a "Shareholder"); and any
other officer may be but none need be a Trustee or Shareholder. Any two or more
offices may be held by the same person.
3.2 Election. The officers of the Trust shall be elected at such time,
and at such intervals, as the Board of Trustees, in its sole discretion, may
determine to be appropriate or necessary. Vacancies in any office may be filled
at any time.
3.3 Tenure. The Chairman of the Board, the President, the Treasurer,
and the Secretary shall hold office until their respective successors are chosen
and qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each other officer shall hold office and each agent
shall retain authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Delaware business corporation and such other duties and powers as the Trustees
may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is none, or in the absence of the Chairman,
the President shall preside at all meetings of the shareholders and of the
Trustees.
3.6 Vice President. The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination,
2
<PAGE>
then in the order of their election) shall in the absence of the President or in
the event of his or her inability or refusal to act, perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. The Vice Presidents shall perform such
other duties and have such other powers as the Trustees may from time to time
prescribe.
3.7 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.8 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
3.9 Secretary. The Secretary shall record all proceedings of the
Shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the Shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.10 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
3.11 Resignations and Removals. Any Trustee or officer may resign at
any time by written instrument signed by him or her and delivered to the
Chairman, the President or the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
3
<PAGE>
ARTICLE 4
---------
Committees
----------
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
ARTICLE 5
---------
Reports
-------
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
---------
Fiscal Year
-----------
6.1 General. The fiscal year of the Trust shall be fixed by resolution
of the Trustees.
ARTICLE 7
---------
Seal
----
7.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Delaware", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
4
<PAGE>
ARTICLE 8
---------
Execution of Papers
-------------------
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
---------
Issuance of Share Certificates
------------------------------
9.1 Share Certificates. In lieu of issuing certificates for shares of
the Trust, the Trustees or the transfer agent may either issue receipts therefor
or may keep accounts upon the books of the Trust for the record holders of such
shares, who shall in either case be deemed, for all purposes hereunder, to be
the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all Shareholders. In that event, a
Shareholder may receive a certificate stating the number of shares owned by him
or her, in such form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the President or a Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe. The Trust may
require the owner of the lost, destroyed or mutilated share certificate, or his
or her legal representative, to give the Trust a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
destruction or mutilation of any such certificate or the issuance of such new
certificate.
9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a Shareholder, and entitled to vote
thereon.
5
<PAGE>
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each Shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
----------
Dealings with Trustees and Officers
-----------------------------------
10.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he or
she were not a Trustee, officer or agent; and the Trustees may accept
subscriptions to shares or repurchase shares from any firm or company in which
any Trustee, officer or other agent of the Trust may have an interest.
ARTICLE 11
----------
Amendments to the By-Laws
-------------------------
11.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
Adopted: October 30, 1996
6
Exhibit 5(a)
INVESTMENT ADVISER AGREEMENT
Agreement made as of this 30th day of October, 1996, by and between
Merrimac Master Portfolio, a New York Trust (the "Trust") and Investors Bank and
Trust Company (the "Adviser"), a Massachusetts banking corporation.
WHEREAS, the Merrimac Cash Portfolio (the "Portfolio") is a series of
the Trust, which is an open-end diversified management investment company
registered as such with the Securities and Exchange Commission (the "SEC")
pursuant to the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Merrimac Cash Fund (the "Fund"), which is an open-end
diversified management investment company registered as such with the SEC
pursuant to the 1940 Act, will invest all of its investable assets in the
Portfolio;
WHEREAS, the Trust, on behalf of the Portfolio, desires to appoint the
Adviser to render, or contract to obtain as hereinafter provided, investment
advisory services to the Portfolio and to administer the Portfolio's day to day
business affairs and the Adviser is willing to act in such capacity upon the
terms herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Trust, on behalf of the Portfolio, and the
Adviser, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Appointment
-----------
(a) The Trust, on behalf of the Portfolio, hereby appoints the Adviser
as the investment adviser of the Portfolio to administer its business affairs
and to perform for the Portfolio such other duties and functions as are
hereinafter set forth. The Adviser hereby accepts such appointment and agrees to
give the Portfolio and the Trust's Board of Trustees (the "Trustees"), the
benefit of the Adviser's best judgment, effort, advice and recommendations in
respect of its duties as defined in Section 2.
(b) The Trust hereby represents and warrants to the Adviser, which
representations and warranties shall be deemed to be continuing, that (i) it has
full power and authority to enter into this Agreement, and (ii) it has taken all
necessary and proper action to authorize the execution and delivery of this
Agreement.
(c) The Adviser hereby represents and warrants to the Trust, which
representations and warranties shall be deemed to be continuing, that (i) it has
full power and authority to enter into this Agreement, and (ii) it has taken all
necessary and proper action to authorize the execution and delivery of this
Agreement.
<PAGE>
2. Adviser Duties
--------------
(a) The Adviser shall, subject to the direction and control of the
Trustees and in accordance with the objective and policies of the Portfolio and
the implementation thereof as set forth in the Fund's Confidential Offering
Circular, the Portfolio's Registration Statement on Form N-1A and any federal
and state laws: (i) regularly provide investment advice and recommendations to
the Portfolio, with respect to the Portfolio's investments, investment policies
and the purchase and sale of securities; (ii) supervise and monitor continuously
the investment program of the Portfolio and the composition of its portfolio and
determine what securities shall be purchased and sold by the Portfolio; (iii)
arrange, subject to the provision of Section 4 hereof, for the purchase of
securities and other investments for the Portfolio and the sale of securities
and other investments of the Portfolio; (iv) provide reports on the foregoing to
the Trust in such detail as the Trust may reasonably deem to be appropriate in
order to permit the Trust to determine the adherence by the Adviser to the
investment policies and legal requirements of the Portfolio; and (v) make its
officers and employees available to the Trust's officers at reasonable times to
review the investment policies of the Portfolio and to consult with the Trust's
officers regarding the investment affairs of the Portfolio.
(b) The Adviser is further authorized to enter into a sub-adviser
arrangement for the investment advisory services outlined in Section 2 (a) of
this Agreement in connection with the management of the Portfolio, provided that
no such arrangement shall be made until a sub-adviser agreement has been
approved by the Trustees. Should the Adviser enter into such a sub-adviser
agreement, the Adviser shall, nevertheless, retain supervisory responsibility
for all investment advisory services furnished pursuant to any such sub-advisory
arrangements and the Adviser's duties shall then include: (i) supervise and
monitor continuously the investment advisory services furnished pursuant to any
such sub-adviser arrangements; (ii) review the performance of the sub-adviser,
and make recommendations to the Trustees with respect to the retention and
renewal of such sub-adviser arrangements; (iii) provide reports on the foregoing
to the Trustees for each Board meeting; (iv) make its officers and employees
available to review the investment policies of the Portfolio and to consult with
the sub-adviser regarding the investment affairs of the Portfolio; (v) supervise
relationships with and monitor the performance of the custodian, depositories,
transfer agent, accountants, attorneys, insurers and other persons in any
capacity deemed to be necessary or desirable; and (vi) make recommendations to
the Trustees with respect to Portfolio policies and carry out such policies as
are adopted by the Trustees.
3. Compensation of the Adviser
---------------------------
The Portfolio will pay to the Adviser as compensation for the Adviser's
services rendered and for the expenses borne by the Adviser, including personnel
expenses, a fee, determined as described in Schedule A which is attached hereto
and made a part hereof.
4. Portfolio Transactions and Brokerage
------------------------------------
The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with issuers, brokers or
dealers selected by the Adviser, which may include
2
<PAGE>
where permissible under the 1940 Act, brokers or dealers affiliated with the
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Adviser always shall seek best execution, which is to place
transactions where the Portfolio can obtain the most favorable combination of
price and execution services in particular transactions or provided on a
continuing basis by a broker or dealer, and to deal directly with a principal
market in connection with over-the-counter transactions, except when it is
believed that best execution is obtainable elsewhere.
5. Interested Trustees or Parties
------------------------------
It is understood that Trustees, officers, and shareholders of the Trust
may be or become interested in the Adviser as directors, officers or employees
and that directors, officers and stockholders of the Adviser may be or become
similarly interested in the Trust, and that the Adviser may be or become
interested in the Trust as a shareholder or otherwise.
6. Services Not Exclusive
----------------------
The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage in
other activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner, with
the Adviser's ability to meet all of its obligations hereunder.
7. Compliance; Books and Records
-----------------------------
(a) The Adviser agrees to maintain adequate compliance procedures to
ensure its compliance with the applicable provisions of the 1940 Act and any
rules or regulations thereunder, the investment objective, policies and
restrictions of the Portfolio as set forth in the current Fund Confidential
Offering Circular and any other applicable provisions of state or federal law.
(b) The Adviser shall furnish to the Portfolio, at the Portfolio's
expense, copies of all records prepared in connection with the performance of
this Agreement and the maintenance of compliance procedures pursuant to this
Section 7 as the Portfolio may reasonably request.
(c) The Adviser agrees to provide upon reasonable request of the
Portfolio, information regarding the Adviser, including but not limited to,
background information about the Adviser and its personnel, for use in
connection with efforts to promote the Fund and the sale of its shares.
(d) In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Adviser hereby agrees that all records which it maintains for the Trust
are the property of the Trust and further agrees to surrender promptly to the
Trust any of such records upon the Trust's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act. The Adviser
will treat confidentially and as proprietary information of the Trust all
records and other information
3
<PAGE>
relative to the Fund and prior, present or potential shareholders, except as
otherwise required by law.
8. Limitation of Liability of Adviser
----------------------------------
In consideration of the Adviser's undertaking to render the services
described in this Agreement, the Trust, on behalf of the Portfolio, agrees that
the Adviser shall not be liable under this Agreement for any 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
Adviser against any liability to the Trust or its shareholders to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement.
9. Duration, Amendment and Termination
-----------------------------------
(a) Subject to prior termination as provided in sub-section (d) of this
Section 9, this Agreement shall continue in effect until two years from the date
hereof and for successive annual periods thereafter, but only so long as the
continuance after such initial two year period shall be specifically approved at
least annually by vote of the Trustees or by vote of a majority of the
outstanding voting securities of the Portfolio and the Fund.
(b) This Agreement may be modified by the written Agreement of the
Adviser and the Portfolio, such consent on the part of the Portfolio to be
authorized by vote of a majority of the outstanding voting securities of the
Portfolio and the Fund if required by law. The execution of any such
modification or amendment by a party shall constitute a representation and
warranty to the other party that all necessary consents or approvals with
respect to such modification or amendment have been obtained.
(c) In addition to the requirements of sub-sections (a) and (b) of this
Section 9, the terms of any continuance or modification of the Agreement must
have been approved by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(d) Either the Adviser or the Portfolio may, at any time on sixty (60)
days' prior written notice to the other party, terminate this Agreement, without
payment of any penalty, and in the case of the Portfolio, by action of its
Trustees, or by vote of a majority of its outstanding voting securities.
(e) This Agreement shall terminate automatically in the event of its
assignment.
(f) Termination of this Agreement shall not relieve the Adviser nor the
Trust from any liability or obligation in respect of any matters, undertakings
or conditions which shall not have been done, observed or performed prior to
such termination. All records of the Portfolio in the possession of the Adviser
shall be returned to the Portfolio as soon as reasonably practicable after the
termination of this Agreement.
4
<PAGE>
10. Disclaimer of Liability; Several Obligations
--------------------------------------------
The Adviser understands that the obligations of the Trust under this
Agreement are not binding upon any Trustee or shareholder of the Trust
personally, but bind only the Trust and the Trust's property.
This Agreement is an agreement entered into between the Adviser and the
Trust on behalf of the Portfolio. With respect to any obligation of the Trust on
behalf of any other Portfolio arising out of this Agreement, the Adviser shall
look for payment or satisfaction of such obligation solely to the assets of the
Portfolio to which such obligation relates as though the Adviser had separately
contracted with the Trust by separate written instrument with respect to each
Portfolio.
11. Miscellaneous
-------------
(a) The terms "vote of a majority of the outstanding voting
securities," "assignment," and "interested persons," when used herein, shall
have the respective meanings specified in the 1940 Act as now in effect or as
hereafter amended.
(b) 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.
(c) 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.
(d) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors.
(e) The Adviser's duties and responsibilities are solely those set
forth herein and no other covenant or obligation shall be implied against the
Adviser in connection with this Agreement.
(f) This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
(g) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice. No notice shall be
effective until received.
5
<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their respective officers designated below as of the day and year
first above written.
Merrimac Master Portfolio ("TRUST") on behalf of
the Merrimac Cash Portfolio ("PORTFOLIO")
By: /s/ Sean P. Brennan
--------------------------------------------
Title: President
-----------------------------------------
INVESTORS BANK & TRUST COMPANY
("ADVISER")
By: /s/ Kevin J. Sheehan
--------------------------------------------
Title: President & CEO
-----------------------------------------
6
<PAGE>
MERRIMAC CASH PORTFOLIO
FEE SCHEDULE
OCTOBER 30, 1996
================================================================================
INVESTMENT ADVISER
================================================================================
17 Basis Points Annually on Net Assets of Portfolio
Investment Adviser will pay from its fees the cost of Sub-Adviser fees,
portfolio custody, fund accounting, transfer agency and fund administration
(excluding transaction costs and out-of-pocket charges related to these services
as detailed below).
================================================================================
TRANSACTION COSTS
================================================================================
Per Transaction
---------------
DTC/Fed Book Entry $12.00
Non-DTC, Boston Settlements $20.00**
Non-DTC, New York Settlement $35.00
Non-DTC, New York Maturities $10.00
GNMA Securities $40.00
Government Paydown $5.00
Futures $18.00
Incoming Wires $6.00
Outgoing Wires $8.00
** There is no charge for maturities of these items.
================================================================================
OUT-OF-POCKET & BALANCE CREDITS
================================================================================
Out-of-Pocket
- - -------------
These charges consist of:
-Pricing & Verification Services
-Systems Customization (if required)
-Ad hoc Reports
-All local duties, script fees and any other market standard fee levied in
accordance with local market practices.
Balance Credits
- - ---------------
We allow balance credits against fees (excluding out-of-pocket charges) for
collected fund balances arising out of the custody relationship. The monthly
earnings allowance will equal 75% of the 90 day Treasury Bill rate.
Exhibit 5b
INVESTMENT SUB-ADVISER AGREEMENT
Agreement made as of this 30th day of October, 1996, between Investors
Bank and Trust Company (the "Adviser"), a Massachusetts banking corporation, and
The Bank of New York (the "Sub-Adviser"), a New York banking corporation.
WHEREAS, Merrimac Cash Portfolio (the "Portfolio") is a series of the
Merrimac Master Portfolio (the "Trust"), which is an open-end diversified
management investment company registered as such with the Securities and
Exchange Commission (the "SEC") pursuant to the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Trust has appointed the Adviser as the
investment adviser for the Fund, pursuant to the terms of an Investment Adviser
Agreement (the "Adviser Agreement");
WHEREAS, the Merrimac Cash Fund (the "Fund"), which is an open-end
diversified management investment company registered as such with the SEC
pursuant to the 1940 Act, will invest all of its investable assets in the
Portfolio;
WHEREAS, the Adviser Agreement provides that the Adviser may, at its
option, subject to approval by the Trustees of the Trust and, to the extent
necessary, shareholders of the Portfolio, appoint a sub-adviser to assume
certain responsibilities and obligations of the Adviser under the Adviser
Agreement;
WHEREAS, the Adviser desires to appoint the Sub-Adviser as its
sub-adviser for the Portfolio and the Sub-Adviser is willing to act in such
capacity upon the terms herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Adviser and the Sub-Adviser, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment
-----------
(a) The Adviser hereby appoints the Sub-Adviser as the investment
sub-adviser of the Portfolio to provide investment advice and to perform for the
Portfolio such other duties and functions as are hereinafter set forth. The
Sub-Adviser hereby accepts such appointment and agrees to give the Portfolio and
the Trust's Board of Trustees (the "Trustees"), directly or through the Adviser,
the benefit of the Sub-Adviser's best judgment, effort, advice and
recommendations in respect of its duties as defined in Section 2.
(b) The Adviser hereby represents and warrants to the Sub-Adviser,
which representations and warranties shall be deemed to be continuing, that (i)
it has full power and authority to enter into this Agreement and to delegate
investment management discretion on behalf of the Portfolio to the Sub-Adviser,
and (ii) it has taken all necessary and proper action to authorize the execution
and delivery of this Agreement.
<PAGE>
(c) The Sub-Adviser hereby represents and warrants to the Adviser,
which representations and warranties shall be deemed to be continuing, that (i)
it has full power and authority to enter into this Agreement, and (ii) it has
taken all necessary and proper action to authorize the execution and delivery of
this Agreement.
2. Delivery of Documents
---------------------
Prior to the execution of this Agreement or at such later date as
specified in this Section 2, the Adviser will furnish the Sub-Adviser with
copies, properly certified or authenticated, of each of the following documents:
(a) The Trust's Agreement and Declaration; and all amendments thereto
or restatements thereof;
(b) The Trust's By-Laws; and all amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) The Trust's original Notification of Registration on Form N-8A
under the 1940 Act when filed with the SEC;
(e) The Trust's initial Registration Statement on Form N-1A under the
1940 Act when filed with the SEC and all amendments thereto;
(f) The current Confidential Offering Circular for the Fund;
(g) The policies and procedures applicable to the Portfolio as adopted
by the Trustees; and all amendments and supplements thereto.
The Adviser will promptly furnish the Sub-Adviser with copies of all
amendments of or supplements to the foregoing documents. The Sub-Adviser shall
be entitled to rely on all such documents furnished to it by the Adviser and
shall not be responsible for its failure to perform its duties in accordance
therewith if any such document is not furnished to it.
3. Sub-Adviser Duties
------------------
The Sub-Adviser shall, subject to the direction and control of the
Trustees or the Adviser, and in accordance with the objective and policies of
the Portfolio and the implementation thereof as set forth in the Fund's
Confidential Offering Circular, the Portfolio's Registration Statement on Form
N-1A and any applicable federal and state laws: (i) regularly provide investment
advice and recommendations to the Portfolio, with respect to the Portfolio's
investments, investment policies and the purchase and sale of securities; (ii)
supervise and monitor continuously the investment program of the Portfolio and
the composition of its portfolio and determine what securities shall be
purchased and sold by the Portfolio; (iii) arrange, subject to the provisions of
2
<PAGE>
Section 5 hereof, for the purchase of securities and other investments for the
Portfolio and the sale of securities and other investments of the Portfolio;
(iv) provide reports on the foregoing to the Adviser in such detail as the
Adviser may reasonably deem to be appropriate in order to permit the Adviser to
determine the adherence by the Sub-Adviser to the investment policies and legal
requirements of the Portfolio; and (v) make its officers and employees available
to the Adviser at reasonable times to review the investment policies of the
Portfolio and to consult with the Adviser regarding the investment affairs of
the Portfolio.
4. Compensation of the Sub-Adviser
-------------------------------
The Adviser will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser, a
fee, determined as described in Schedule A which is attached hereto and made a
part hereof. Such fee shall be paid by the Adviser and the Trust shall have no
liability therefor.
5. Portfolio Transactions and Brokerage
------------------------------------
The Sub-Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with issuers, brokers or
dealers selected by the Sub-Adviser, which may include where permissible under
the 1940 Act, brokers or dealers affiliated with the Sub-Adviser, although the
Portfolio will pay the actual transaction costs, including without limitation,
brokerage commissions on portfolio transactions. In executing portfolio
transactions and selecting brokers or dealers, the Sub-Adviser shall seek on
behalf of the Portfolio the best overall terms available. In assessing the 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, and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). In evaluating the best overall
terms available, and in selecting the broker or dealer to execute a particular
transaction, the Sub-Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Sub-Adviser or an affiliate of the Sub-Adviser in
respect of accounts over which it exercises investment discretion. The
Sub-Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction 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 such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of that particular transaction or in terms of all of the
accounts over which investment discretion is so exercised by the Sub-Adviser or
its affiliates. Nothing in this Agreement shall preclude the combining of orders
for the sale or purchase of securities or other investments with other accounts
managed by the Sub-Adviser or its affiliates, provided that the Sub-Adviser does
not favor any account over any other account and provided that any purchase or
sale orders executed contemporaneously shall be allocated in an equitable manner
among the accounts involved in accordance with procedures adopted by the
Sub-Adviser and reviewed and approved by the Adviser (such approval not to be
unreasonably withheld).
3
<PAGE>
6. Interested Trustees or Parties
------------------------------
It is understood that Trustees, officers, and shareholders of the Trust
may be or become interested in the Adviser or the Sub-Adviser as directors,
officers or employees and that directors, officers and stockholders of the
Adviser or the Sub-Adviser may be or become similarly interested in the Trust,
and that the Adviser or the Sub-Adviser may be or become interested in the Trust
as a shareholder or otherwise.
7. Services Not Exclusive
----------------------
The services of the Sub-Adviser to the Adviser are not to be deemed
exclusive, the Sub-Adviser being free to render services to others and engage in
other activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner, with
the Sub-Adviser's ability to meet all of its obligations with respect to
rendering investment advice hereunder. The Sub-Adviser, its affiliates and its
other clients may at any time acquire or dispose of securities which are at the
same time being acquired or disposed of for the account of the Portfolio. The
Sub-Adviser shall not be obligated to acquire for the Portfolio any security or
other investment which the Sub-Adviser or its affiliates may acquire for its or
their own accounts or for the account of another client.
8. Compliance; Books and Records
-----------------------------
(a) The Sub-Adviser agrees to maintain adequate compliance procedures
to ensure its compliance with the applicable provisions of the 1940 Act and any
rules or regulations thereunder, the investment objective, policies and
restrictions of the Portfolio as set forth in the current Fund Confidential
Offering Circular and any other applicable provisions of state or federal law.
(b) The Sub-Adviser shall furnish to the Adviser, at the Adviser's
expense, copies of all records prepared and maintained in connection with the
performance of this Agreement and the maintenance of compliance procedures
pursuant to this Section 8 as the Adviser may reasonably request.
(c) The Sub-Adviser agrees to provide upon reasonable request of the
Adviser, information regarding the Sub-Adviser, including but not limited to,
background information about the Sub-Adviser and its personnel and performance
data, for use in connection with efforts to promote the Fund and the sale of its
shares.
(d) In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act. The
Sub-Adviser will treat confidentially and as proprietary information of the
Trust all records and
4
<PAGE>
other information relative to the Fund and prior, present or potential
shareholders, except as otherwise required by law.
9. Limitation of Liability of Sub-Adviser; Indemnification
-------------------------------------------------------
(a) In consideration of the Sub-Adviser's undertaking to render the
services described in this Agreement, the Adviser agrees that the Sub-Adviser
shall not be liable for any loss suffered by the Adviser, the Trust, the Fund or
the Portfolio in connection with the performance of this Agreement, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
the Sub-Adviser against any liability to the Adviser, the Trust, the Fund or the
Portfolio to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or negligence in the performance of its duties
under this Agreement.
(b) Notwithstanding Section 9(a) hereof, the Trust shall indemnify the
Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any,
who within the meaning of Section 15 of the Securities Act of 1933, as amended
(the "'33 Act"), controls the Sub-Adviser (all of such persons being referred to
as "Indemnified Persons") against any and all losses, expenses, damages,
liabilities or claims (including attorneys' fees and expenses) to which an
Indemnified Person may become subject under the '33 Act, the 1940 Act, any other
statute, common law or otherwise, which may be based upon any untrue statement
or alleged untrue statement of a material fact contained in the Trust's
Notification of Registration on Form N-8A under the 1940 Act, the Trust's
Registration Statement on Form N-1A under the 1940 Act, the Confidential
Offering Circular for the Fund and any amendment of, or supplement to, any of
the foregoing documents, or the omission or alleged omission or failure to state
therein a material fact known or which should have been known to the Trust and
was required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that no Indemnified Person shall be entitled
to indemnification hereunder for any such statements, omissions, or failures
that are (i) based upon information provided to the Trust by the Sub-Adviser in
writing, or (ii) attributable to investments made by the Sub-Adviser which are
not in accordance with the investment objectives and policies of the Portfolio.
This indemnity shall be a continuing obligation of the Trust, notwithstanding
the termination of this Agreement.
(c) The Sub-Adviser shall indemnify the Trust, and each person, if any,
who within the meaning of Section 15 of the '33 Act controls the Trust (all such
persons being referred to as "Trust Indemnified Persons") against any and all
losses, expenses, damages, liabilities or claims (including attorneys' fees and
expenses) to which the Trust Indemnified Person may become subject under the '33
Act, the 1940 Act, any other statute, common law or otherwise, which may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Trust's Notification of Registration on Form N-8A under the
1940 Act, the Trust's Registration Statement on Form N-1A under the 1940 Act,
the Confidential Offering Circular for the Fund and any amendment of, or
supplement to, any of the foregoing documents, or the omission or alleged
omission or failure to state therein a material fact known or which should have
been known to the Trust and was required to be stated therein or necessary to
make the statements therein not misleading and was (i) based upon information
provided to the Trust by the Sub-Adviser in writing, or (ii) attributable to
investments made by the Sub-Adviser which are
5
<PAGE>
not in accordance with the investment objectives and policies of the Portfolio.
This indemnity shall be a continuing obligation of the Sub-Adviser,
notwithstanding the termination of this Agreement.
(d) The Adviser shall indemnify the Sub-Adviser and hold it harmless
from and against any and all losses, expenses, damages, liabilities or claims
(including attorneys' fees and expenses), sustained or incurred by it which may
be based upon misfeasance, bad faith or negligence by the Adviser in the
discharge of its duties and performance of its obligations under this Agreement
or the Investment Adviser Agreement. This indemnity shall be a continuing
obligation of the Adviser, notwithstanding the termination of this Agreement.
(e) The Sub-Adviser shall indemnify the Adviser and hold it harmless
from and against any and all losses, expenses, damages, liabilities or claims
(including attorneys' fees and expenses), sustained or incurred by it which may
be based upon misfeasance, bad faith or negligence by the Sub-Adviser in the
discharge of its duties and performance of its obligations under this Agreement.
This indemnity shall be a continuing obligation of the Sub-Adviser,
notwithstanding the termination of this Agreement.
10. Duration, Amendment and Termination
-----------------------------------
(a) Subject to prior termination as provided in sub-section (d) of this
Section 10, this Agreement shall continue in effect until two years from the
date hereof and for successive annual periods thereafter, but only so long as
the continuance after such initial two year period shall be specifically
approved at least annually by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio and the Fund.
Unless the Sub-Adviser receives a written notice of termination, the Sub-Adviser
shall be entitled to presume without further inquiry that all consents or
approvals required by Section 15 of the 1940 Act with respect to the
continuation of the Agreement have been obtained.
(b) This Agreement may be modified by the written agreement of the
Adviser, the Sub-Adviser and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the outstanding voting
securities of the Portfolio and the Fund if required by law. The execution of
any such modification or amendment by a party shall constitute a representation
and warranty to the other parties that all necessary consents or approvals with
respect to such modification or amendment have been obtained.
(c) In addition to the requirements of sub-sections (a) and (b) of this
Section 10, the terms of any continuance, modification or amendment of the
Agreement must have been approved by the vote of a majority of those Trustees
who are not parties to such Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
Upon execution by the Sub-Adviser of any modification or amendment agreement,
the Sub-Adviser shall be entitled to presume without further inquiry that all
consents or approvals required by Section 15 of the 1940 Act with respect to
such modification or amendment have been obtained.
6
<PAGE>
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, and in the case of the
Portfolio, by action of its Board of Trustees, or by vote of a majority of its
outstanding voting securities. Upon receipt by the Sub-Adviser of a termination
notice from the Portfolio, the Sub-Adviser shall be entitled to presume without
further inquiry that all consents or approvals required by Section 15 of the
1940 Act with respect to such termination have been obtained.
(e) This Agreement shall terminate automatically in the event of its
assignment.
(f) Termination of this Agreement shall not relieve the Adviser nor the
Sub-Adviser from any liability or obligation in respect of any matters,
undertakings or conditions which shall not have been done, observed or performed
prior to such termination. All records of the Portfolio in the possession of the
Sub-Adviser shall be returned to the Portfolio as soon as reasonably practicable
after the termination of this Agreement.
11. Disclaimer of Shareholder Liability
-----------------------------------
The Adviser and the Sub-Adviser understand that the obligations of the
Trust under this Agreement are not binding upon any Trustee or shareholder of
the Trust personally, but bind only the Trust and the Trust's property.
12. Miscellaneous
-------------
(a) The terms "vote of a majority of the outstanding voting
securities," "assignment," and "interested persons," when used herein, shall
have the respective meanings specified in the 1940 Act as now in effect or as
hereafter amended.
(b) 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.
(c) 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.
(d) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors.
(e) The Sub-Adviser's duties and responsibilities are solely those set
forth herein and no other covenant or obligation shall be implied against the
Sub-Adviser in connection with this Agreement.
(f) This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
7
<PAGE>
(g) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
No notice shall be effective until received.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their respective officers designated below as of the day and year
first above written.
INVESTORS BANK & TRUST COMPANY
("ADVISER")
By: /s/ Kevin J. Sheehan
--------------------------
Title: President and C.E.O.
-----------------------
THE BANK OF NEW YORK
("SUB-ADVISER")
By: /s/ Thomas Price
--------------------------
Title: Senior Vice President
-----------------------
The Merrimac Master Portfolio
on behalf of the Merrimac Cash
Portfolio hereby agrees to be bound
by the provisions of Sections 9(b), 9(c)
and 11 of this Agreement.
Merrimac Master Portfolio
("THE TRUST")
By: /s/ Sean P. Brennan
-------------------------
Title: President
----------------------
8
<PAGE>
SCHEDULE A
The Adviser will pay to the Sub-Adviser as full compensation for the
Sub-Adviser's services rendered a fee, computed and paid monthly at an annual
rate of .08% of the average daily net assets of the Portfolio. The fee for each
month shall be payable within 30 business days after the end of the month.
If the Sub-Adviser shall serve for any period less than a full month,
the foregoing compensation shall be prorated according to the proportion which
such period bears to a full month.
9
INVESTMENT SUB-ADVISER AGREEMENT
Agreement made as of this 24th day of February, 1997, between Investors
Bank and Trust Company (the "Adviser"), a Massachusetts banking corporation, and
Aeltus Investment Management, Inc. (the "Sub-Adviser"), a Connecticut
corporation.
WHEREAS, Merrimac Treasury Portfolio (the "Portfolio") is a series of
the Merrimac Master Portfolio (the "Trust"), which is an open-end diversified
management investment company registered as such with the Securities and
Exchange Commission (the "SEC") pursuant to the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Trust has appointed the Adviser as the
investment adviser for the Portfolio, pursuant to the terms of an Investment
Adviser Agreement (the "Adviser Agreement");
WHEREAS, the Merrimac Treasury Fund (the "Fund"), which is an open-end
diversified management investment company registered as such with the SEC
pursuant to the 1940 Act, will invest all of its investable assets in the
Portfolio;
WHEREAS, the Adviser Agreement provides that the Adviser may, at its
option, subject to approval by the Trustees of the Trust and, to the extent
necessary, shareholders of the Portfolio, appoint a sub-adviser to assume
certain responsibilities and obligations of the Adviser under the Adviser
Agreement;
WHEREAS, the Adviser desires to appoint the Sub-Adviser as its
sub-adviser for the Portfolio and the Sub-Adviser is willing to act in such
capacity upon the terms herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Adviser and the Sub-Adviser, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Appointment
-----------
(a) The Adviser hereby appoints the Sub-Adviser as the investment
sub-adviser of the Portfolio to provide investment advice and to perform for the
Portfolio such other duties and functions as are hereinafter set forth. The
Sub-Adviser hereby accepts such appointment and agrees to give the Portfolio and
the Trust's Board of Trustees (the "Trustees"), directly or through the Adviser,
the benefit of the Sub-Adviser's best judgment, effort, advice and
recommendations in respect of its duties as defined in Section 2.
(b) The Adviser hereby represents and warrants to the Sub-Adviser,
which representations and warranties shall be deemed to be continuing, that (i)
it has full power and authority to enter into this Agreement and to delegate
investment management discretion on behalf of the Portfolio to the Sub-Adviser,
and (ii) it has taken all necessary and proper action to authorize the execution
and delivery of this Agreement.
<PAGE>
(c) The Sub-Adviser hereby represents and warrants to the Adviser,
which representations and warranties shall be deemed to be continuing, that (i)
it has full power and authority to enter into this Agreement, and (ii) it has
taken all necessary and proper action to authorize the execution and delivery of
this Agreement.
2. Delivery of Documents
---------------------
Prior to the execution of this Agreement or at such later date as
specified in this Section 2, the Adviser will furnish the Sub-Adviser with
copies, properly certified or authenticated, of each of the following documents:
(a) The Trust's Agreement and Declaration; and all amendments thereto
or restatements thereof;
(b) The Trust's By-Laws; and all amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) The Trust's original Notification of Registration on Form N-8A
under the 1940 Act ;
(e) The Trust's initial Registration Statement on Form N-1A under the
1940 Act when filed with the SEC and all amendments thereto;
(f) The current Confidential Offering Circular, Prospectus or similar
document of any entity which the Trust has authorized as an investor (the
"Authorized Investor") in the Portfolio (the "Investor Offering Documents");
(g) The policies and procedures applicable to the Portfolio as adopted
by the Trustees; and all amendments and supplements thereto.
3. Sub-Adviser Duties
------------------
The Sub-Adviser shall, subject to the direction and control of the
Trustees or the Adviser, and in accordance with the objective and policies of
the Portfolio and the implementation thereof as set forth in the Investor
Offering Documents, the Portfolio's Registration Statement on Form N-1A and any
applicable federal and state laws: (i) regularly provide investment advice and
recommendations to the Portfolio, with respect to the Portfolio's investments,
investment policies and the purchase and sale of securities; (ii) supervise and
monitor continuously the investment program of the Portfolio and the composition
of its portfolio and determine what securities shall be purchased and sold by
the Portfolio; (iii) arrange, subject to the provisions of Section 5 hereof, for
the purchase of securities and other investments for the Portfolio and the sale
of securities and other investments of the Portfolio; (iv) provide reports on
the foregoing to the Adviser in such detail as the Adviser may reasonably deem
to be appropriate in order to permit the Adviser to determine the adherence by
the Sub-Adviser to the investment policies and legal requirements of
2
<PAGE>
the Portfolio; and (v) make its officers and employees available to the Adviser
at reasonable times to review the investment policies of the Portfolio and to
consult with the Adviser regarding the investment affairs of the Portfolio.
4. Compensation of the Sub-Adviser
-------------------------------
The Adviser will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser, a
fee, determined as described in Schedule A which is attached hereto and made a
part hereof. Such fee shall be paid by the Adviser and the Trust shall have no
liability therefor.
5. Portfolio Transactions and Brokerage
------------------------------------
The Sub-Adviser shall place all orders for the purchase and sale of
portfolio securities for the Portfolio's account with issuers, brokers or
dealers selected by the Sub-Adviser, which may include where permissible under
the 1940 Act, brokers or dealers affiliated with the Sub-Adviser, although the
Portfolio will pay the actual transaction costs, including without limitation,
brokerage commissions on portfolio transactions. In executing portfolio
transactions and selecting brokers or dealers, the Sub-Adviser shall seek on
behalf of the Portfolio the best overall terms available. In assessing the 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, and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). Nothing in this Agreement shall
preclude the combining of orders for the sale or purchase of securities or other
investments with other accounts managed by the Sub-Adviser or its affiliates,
provided that the Sub-Adviser does not favor any account over any other account
and provided that any purchase or sale orders executed contemporaneously shall
be allocated in an equitable manner among the accounts involved in accordance
with procedures adopted by the Sub-Adviser and reviewed and approved by the
Adviser.
6. Interested Trustees or Parties
------------------------------
It is understood that Trustees, officers, and shareholders of the Trust
may be or become interested in the Adviser or the Sub-Adviser as directors,
officers or employees and that directors, officers and stockholders of the
Adviser or the Sub-Adviser may be or become similarly interested in the Trust,
and that the Adviser or the Sub-Adviser may be or become interested in the Trust
as a shareholder or otherwise.
7. Services Not Exclusive
----------------------
The services of the Sub-Adviser to the Adviser are not to be deemed
exclusive, the Sub-Adviser being free to render services to others and engage in
other activities, provided, however, that such other services and activities do
not, during the term of this Agreement, interfere, in a material manner, with
the Sub-Adviser's ability to meet all of its obligations with respect to
rendering investment advice hereunder. The Sub-Adviser, its affiliates and its
other
3
<PAGE>
clients may at any time acquire or dispose of securities which are at the same
time being acquired or disposed of for the account of the Portfolio. The
Sub-Adviser shall not be obligated to acquire for the Portfolio any security or
other investment which the Sub-Adviser or its affiliates may acquire for its or
their own accounts or for the account of another client.
8. Compliance; Books and Records
-----------------------------
(a) The Sub-Adviser agrees to maintain adequate compliance procedures
to ensure its compliance with the applicable provisions of the 1940 Act and any
rules or regulations thereunder, the investment objective, policies and
restrictions of the Portfolio as set forth in the current Investor Offering
Documents and any other applicable provisions of state or federal law.
(b) The Sub-Adviser shall furnish to the Adviser, at the Adviser's
expense, copies of all records prepared and maintained in connection with the
performance of this Agreement and the maintenance of compliance procedures
pursuant to this Section 8 as the Adviser may reasonably request.
(c) The Sub-Adviser agrees to provide upon reasonable request of the
Adviser, information regarding the Sub-Adviser, including but not limited to,
background information about the Sub-Adviser and its personnel and performance
data, for use in connection with efforts to promote the Fund and the sale of its
shares.
(d) In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act. The
Sub-Adviser will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Authorized Investors and
prior or potential shareholders, except as otherwise required by law.
9. Limitation of Liability of Sub-Adviser; Indemnification
-------------------------------------------------------
In consideration of the Sub-Adviser's undertaking to render the
services described in this Agreement, the Adviser agrees that the Sub-Adviser
shall not be liable for any loss suffered by the Adviser, the Trust, the
Authorized Investors or the Portfolio in connection with the performance of this
Agreement, provided that nothing in this Agreement shall be deemed to protect or
purport to protect the Sub-Adviser against any liability to the Adviser, the
Trust, the Authorized Investors or the Portfolio to which the Sub-Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
in the performance of its duties under this Agreement.
4
<PAGE>
10. Duration, Amendment and Termination
-----------------------------------
(a) Subject to prior termination as provided in sub-section (d) of this
Section 10, this Agreement shall continue in effect until two years from the
date hereof and for successive annual periods thereafter, but only so long as
the continuance after such initial two year period shall be specifically
approved at least annually by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio and the
Authorized Investors.
(b) This Agreement may be modified by the written agreement of the
Adviser, the Sub-Adviser and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the outstanding voting
securities of the Portfolio and the Authorized Investors if required by law. The
execution of any such modification or amendment by a party shall constitute a
representation and warranty to the other parties that all necessary consents or
approvals with respect to such modification or amendment have been obtained.
(c) In addition to the requirements of sub-sections (a) and (b) of this
Section 10, the terms of any continuance, modification or amendment of the
Agreement must have been approved by the vote of a majority of those Trustees
who are not parties to such Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
(d) Either the Adviser, the Sub-Adviser or the Portfolio may, at any
time on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, and in the case of the
Portfolio, by action of its Board of Trustees, or by vote of a majority of its
outstanding voting securities.
(e) This Agreement shall terminate automatically in the event of its
assignment.
(f) Termination of this Agreement shall not relieve the Adviser nor the
Sub-Adviser from any liability or obligation in respect of any matters,
undertakings or conditions which shall not have been done, observed or performed
prior to such termination. All records of the Portfolio in the possession of the
Sub-Adviser shall be returned to the Portfolio as soon as reasonably practicable
after the termination of this Agreement.
11. Disclaimer of Shareholder Liability
-----------------------------------
The Adviser and the Sub-Adviser understand that the obligations of the
Trust under this Agreement are not binding upon any Trustee or shareholder of
the Trust personally, but bind only the Trust and the Trust's property.
12. Miscellaneous
-------------
(a) The terms "vote of a majority of the outstanding voting
securities," "assignment," and "interested persons," when used herein, shall
have the respective meanings specified in the 1940 Act as now in effect or as
hereafter amended.
5
<PAGE>
(b) 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.
(c) 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.
(d) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors.
(e) This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
(f) Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
No notice shall be effective until received.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed by their respective officers designated below as of the day and year
first above written.
INVESTORS BANK & TRUST COMPANY
("ADVISER")
By: /s/ Kevin J. Sheehan
------------------------------
Title: President
---------------------------
AELTUS INVESTMENT MANAGEMENT, INC.
("SUB-ADVISER")
By: /s/ John Y. Kim
------------------------------
Title: President
---------------------------
The Merrimac Master Portfolio
on behalf of the Merrimac Treasury
Portfolio hereby acknowledges
the execution of this Agreement
Merrimac Master Portfolio
("THE TRUST")
By: /s/ Sean P. Brennan
--------------------------------
Title: President
-----------------------------
6
<PAGE>
SCHEDULE A
The Adviser will pay to the Sub-Adviser as full compensation for the
Sub-Adviser's services rendered a fee, computed and paid monthly at an annual
rate of 0.08% of the average daily net assets of the Portfolio. The fee for each
month shall be payable within 30 business days after the end of the month.
If the Sub-Adviser shall serve for any period less than a full month,
the foregoing compensation shall be prorated according to the proportion which
such period bears to a full month.
7
Exhibit 8
CUSTODIAN AGREEMENT
BETWEEN
THE MERRIMAC FUNDS
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
1. Bank Appointed Custodian....................................................................... 1
2. Definitions.................................................................................... 1
2.1 Authorized Person............................................................ 1
2.2 Board .................................................................... 1
2.3 Security .................................................................... 1
2.4 Portfolio Security........................................................... 1
2.5 Officers' Certificate........................................................ 2
2.6 Book-Entry System............................................................ 2
2.7 Depository................................................................... 2
2.8 Proper Instructions.......................................................... 2
3. Separate Accounts ............................................................................. 2
4. Certification as to Authorized Persons......................................................... 2
5. Custody of Cash ............................................................................. 3
5.1 Purchase of Securities....................................................... 3
5.2 Redemptions ............................................................ 3
5.3 Distributions and Expenses of Fund........................................... 3
5.4 Payment in Respect of Securities............................................. 3
5.5 Repayment of Loans........................................................... 4
5.6 Repayment of Cash............................................................ 4
5.7 Foreign Exchange Transactions................................................ 4
5.8 Other Authorized Payments.................................................... 4
5.9 Termination.................................................................. 4
6. Securities..................................................................................... 4
6.1 Segregation and Registration................................................. 4
6.2 Voting and Proxies........................................................... 5
6.3 Corporate Action ............................................................ 5
6.4 Book-Entry System............................................................ 6
6.5 Use of a Depository.......................................................... 6
6.6 Use of Book-Entry System for Commercial Paper................................ 7
6.7 Use of Immobilization Programs............................................... 8
6.8 Eurodollar CDs ........................................................... 8
6.9 Options and Futures Transactions............................................. 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter............................................ 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges.............................................. 9
6.10 Segregated Account........................................................... 9
i
<PAGE>
Page
----
<S> <C>
6.11 Interest Bearing Call or Time Deposits....................................... 10
6.12 Transfer of Securities....................................................... 11
7. Redemptions ................................................................................... 12
8. Merger, Dissolution, etc. of Fund ............................................................ 12
9. Actions of Bank Without Prior Authorization.................................................... 12
10. Collection and Defaults........................................................................ 13
11. Maintenance of Records and Accounting Services................................................. 13
12. Fund Evaluation and Yield Calculation.......................................................... 14
12.1 Fund Evaluation.............................................................. 14
12.2 Yield Calculation............................................................ 14
13. Additional Services .......................................................................... 15
14. Duties of the Bank .......................................................................... 15
14.1 Performance of Duties and
Standard of Care ............................................................ 15
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States........................................ 16
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States............................................ 16
14.4 Insurance.................................................................... 18
14.5 Fees and Expenses of Bank.................................................... 18
14.6 Advances by Bank............................................................ 19
15. Limitation of Liability........................................................................ 19
16. Termination.................................................................................... 20
17. Confidentiality................................................................................ 21
18. Notices ..................................................................................... 21
19. Amendments..................................................................................... 21
20. Parties ...................................................................................... 22
21. Governing Law.................................................................................. 22
ii
<PAGE>
Page
----
<S> <C>
22. Counterparts................................................................................... 22
23. Entire Agreement............................................................................... 22
24. Limitation of Liability........................................................................ 22
25. Several Obligations of the Portfolios.......................................................... 22
</TABLE>
<TABLE>
<CAPTION>
APPENDICES
<S> <C>
Appendix A ................................... Fee Schedule
Appendix B ................................... Portfolios
Appendix C ................................... Additional Services
Appendix D ................................... Select Foreign Sub-Custodians
Appendix E ................................... Reports
</TABLE>
iii
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of November, 1996, between THE
MERRIMAC FUNDS, a company organized under the laws of Delaware (the "Fund"), and
INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company on behalf of the
portfolios listed on Appendix B hereto (as such Appendix B may be amended from
time to time) (each a "Portfolio" and collectively, the "Portfolios"), desires
to place and maintain all of its portfolio securities and cash in the custody of
the Bank. The Bank has at least the minimum qualifications required by Section
17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to act as
custodian of the portfolio securities and cash of the Fund, and has indicated
its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix A
hereto.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
<PAGE>
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Fund shall cause all oral instructions to be promptly confirmed in writing.
The Bank shall act upon and comply with any subsequent Proper Instruction which
modifies a prior instruction and the sole obligation of the Bank with respect to
any follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action requires
the Bank to act, the Fund shall give the Bank specific Proper Instructions as to
the action required. Upon receipt by the Bank of an Officers' Certificate as to
the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided that
the Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all investment
earnings thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to the
Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information
2
<PAGE>
set forth in the most recent certification on file (including without limitation
any person named in the most recent certification who is no longer an Authorized
Person as designated therein), the Secretary or Assistant Secretary of the Fund
will sign a new or amended certification setting forth the change and the new,
additional or omitted names or signatures. The Bank will be entitled to rely and
act upon any Officers' Certificate given to it by the Fund which has been signed
by Authorized Persons named in the most recent certification received by the
Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7) days notice prior to
withdrawal of cash from such an account. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
3
<PAGE>
5.5 Repayment of Loans. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and
hold pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all
4
<PAGE>
Portfolio Securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such certificates
in connection therewith as may be required by such laws or regulations or under
the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials delivered to the Bank with respect to such
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Fund via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action within twenty-four (24) hours of receipt of such materials by
the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00 p.m.
on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to use its best
efforts in such circumstances shall in no way create any duty upon the Bank to
complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
5
<PAGE>
(d) Section 14.3(g) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank shall also, by book
entry or otherwise, identify as belonging to the Fund a quantity of securities
in a fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank
(or its agent) to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Book-Entry System of transfers of securities for
the account of the Fund shall identify the Fund, be maintained for the Fund by
the Bank and shall be provided to the Fund at its request. The Bank shall send
the Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any
transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
6
<PAGE>
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of
7
<PAGE>
the Fund, commercial paper issued by issuers with whom the Bank has entered into
a book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the Fund
may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to the Fund and that the books of the Bank identify the European
Branch holding such Portfolio Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options
("puts") and call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing
8
<PAGE>
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
(ii) Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has deposited or
is maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Fund, the propriety of any such purchase
or sale, or the adequacy of any collateral delivered to a broker in connection
with an option or deposited to or withdrawn from a Segregated Account (as
defined in subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (i) periodically check
or notify the Fund that the amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect such broker or the Fund against
any loss; (ii) effect the return of any collateral delivered to a broker; or
(iii) advise the Fund that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance with
the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(2) of this Section 6.8 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement
among the Fund, the Bank and a broker-dealer registered under the Exchange Act
and a member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(ii) for the purpose of segregating cash or securities
in connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash,
U.S. Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's
9
<PAGE>
then outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in
the case of this clause (e), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or of the executive
committee of the Board signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such Segregated Account and declaring such purposes to be proper corporate
purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with
the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to
(a)(iii) or (a)(iv) above, for sale or delivery to meet the Fund's obligations
under outstanding forward commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or
greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward
commitment or when-issued agreements for the purchase of portfolio securities or
reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in the
Segregated Account;
(v) for delivery upon settlement of a forward commitment
or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
10
<PAGE>
6.12 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section only upon receipt of
Proper Instructions. The Proper Instructions shall state that such transfer,
exchange or delivery is for a purpose permitted under the terms of this Section
6.11, and shall specify the applicable subsection, or describe the purpose of
the transaction with sufficient particularity to permit the Bank to ascertain
the applicable subsection. After receipt of such Proper Instructions, the Bank
will transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
or against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund
upon authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of the
lender;
11
<PAGE>
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles of Incorporation or Declaration of Trust
and By-laws of the Fund (the "Articles"), from assets available for said
purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable instruments
or other orders for the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio Securities
held thereunder;
12
<PAGE>
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code or
the regulations of the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The Bank will furnish to
the Fund such reports at such times as are set forth on Appendix E hereto. The
books and records of the Bank pertaining to its actions under this Agreement and
reports by the Bank or its independent accountants concerning its accounting
system, procedures for safeguarding securities and internal accounting controls
will be open to inspection and audit at reasonable times by officers of or
auditors employed by the Fund and will be preserved by the Bank in the manner
and in accordance with the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of
account and render statements or copies from time to time as reasonably
requested by the Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
13
<PAGE>
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of the Fund, such determination to be made in accordance with the
provisions of the Articles and By-laws of the Fund and the Confidential Offering
Circular relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and the Bank
shall not be responsible for any loss occasioned by such reliance or for any
good faith reliance on any quotations received from a source pursuant to (iii)
above.
12.2. Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the provisions
of Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the
"Releases") promulgated by the Securities and Exchange Commission, and any
subsequent amendments to, published interpretations of or general conventions
accepted by the staff of the Securities and Exchange Commission with respect to
such releases or the subject matter thereof ("Subsequent Staff Positions"),
subject to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund
for the stated periods of time as shall be mutually agreed upon, and communicate
in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive
the items of data necessary for the computation from the records it generates
and maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of the Bank, the Fund shall provide, and
the Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
14
<PAGE>
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and of any non-public advice, or information obtained by
the Fund from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and the
Bank shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix A shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Articles, By-laws, any federal or state statutes or
any rule or regulation of any governmental agency.
15
<PAGE>
14.2 Agents and Subcustodians with Respect to Property of the Fund
Held in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in the
United States. The Bank shall have no liability to the Fund or any other person
by reason of any act or omission of any subcustodian and the Fund shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
subcustodian. Upon request of the Bank, the Fund shall assume the entire defense
of any action, suit, or claim subject to the foregoing indemnity. The Fund shall
pay all fees and expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Bank to employ as sub-custodians for the Fund's
Portfolio Securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated on
the Schedule attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon
receipt of Proper Instructions, together with a certified resolution of the
Fund's Board of Trustees, the Bank and the Fund may agree to designate
additional foreign banking institutions and foreign securities depositories to
act as Selected Foreign Sub-Custodians hereunder. Upon receipt of Proper
Instructions, the Fund may instruct the Bank to cease the employment of any one
or more such Selected Foreign Sub-Custodians for maintaining custody of the
Fund's assets, and the Bank shall so cease to employ such sub-custodian as soon
as alternate custodial arrangements have been implemented.
(b) Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Selected Foreign
Sub-Custodians pursuant to the terms hereof. Where possible, such arrangements
shall include entry into agreements containing the provisions set forth in
subparagraph (d) hereof. Notwithstanding the foregoing, except as may otherwise
be agreed upon in writing by the Bank and the Fund, the Fund authorizes the
deposit in Euro-clear, the securities clearance and depository facilities
operated by Morgan Guaranty Trust Company of New York in Brussels, Belgium, of
Foreign Portfolio Securities eligible for deposit therein and the use of
Euro-clear in connection with settlements of purchases and sales of securities
and deliveries and returns of securities, until notified to the contrary
pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian
16
<PAGE>
Agreement") shall be substantially in the form attached as Appendix D hereto and
shall provide that: (a) the Fund's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the foreign
banking institution or its creditors or agent, except a claim of payment for
their safe custody or administration (including, without limitation, any fees or
taxes payable upon transfers or reregistration of securities); (b) beneficial
ownership of the Fund's assets will be freely transferable without the payment
of money or value other than for custody or administration (including, without
limitation, any fees or taxes payable upon transfers or reregistration of
securities); (c) adequate records will be maintained identifying the assets as
belonging to the Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under applicable
law, the independent public accountants for the Fund, will be given access to
the books and records of the foreign banking institution relating to its actions
under its agreement with the Bank; and (e) assets of the Fund held by the
Selected Foreign Sub-Custodian will be subject only to the instructions of the
Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance of
such foreign banking institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Fund held by Selected Foreign Sub-Custodians, including
but not limited to an identification of entities having possession of the
Foreign Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received for
the account of the Fund and delivery of Foreign Portfolio Securities maintained
for the account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such securities from such
purchaser or dealer.
In connection with any action to be taken with respect to
the Foreign Portfolio Securities held hereunder, including, without limitation,
the exercise of any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any other action in
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit to the
Fund such information in connection therewith as is made available to the Bank
by the Foreign Sub-Custodian, and shall promptly forward to the applicable
Foreign Sub-Custodian any instructions, forms or certifications with respect to
such Rights, and any instructions relating to the actions to be taken in
connection therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of
17
<PAGE>
whether the Fund is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Fund or by the applicable Foreign
Sub-Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within the
market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(i) Monitoring Responsibilities. The Bank shall furnish
annually to the Fund information concerning the Selected Foreign Sub-Custodians
employed hereunder for use by the Fund in evaluating such Selected Foreign
Sub-Custodians to ensure compliance with the requirements of Rule 17f-5 of the
Act. In addition, the Bank will promptly inform the Fund in the event that the
Bank is notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below US$200
million (or the equivalent thereof) or that its shareholders' equity has
declined below US$200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Bank has actual knowledge of
any material loss of the assets of the Fund held by a Foreign Sub-Custodian.
(j) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Selected Foreign Sub-custodian with
regard to such tax law shall be to use reasonable efforts to assist the Fund
with respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or reimburse
the Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper disbursements,
expenses and charges made or incurred by the Bank in the performance of this
Agreement (including any duties listed on any Schedule hereto, if any) including
any indemnities for any loss, liabilities or expense to the Bank as provided
above. For the services rendered by the Bank hereunder, the Fund will pay to the
Bank such compensation or fees at such rate and at such times as shall be agreed
upon in writing by the parties from time to time. The Bank will also be entitled
to
18
<PAGE>
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Fund. Should such a payment or payments, with advanced
funds, result in an overdraft (due to insufficiencies of the Fund's account with
the Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Fund payable on demand. Such
overdraft shall bear interest at the current rate charged by the Bank for such
loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness, in and to any
property at any time held by it for the Fund's benefit or in which the Fund has
an interest and which is then in the Bank's possession or control (or in the
possession or control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in the Bank's sole discretion, at any time to charge any
overdraft or indebtedness, together with interest due thereon, against any
balance of account standing to the credit of the Fund on the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the negligence, willful
misfeasance or bad faith of the Bank or any Indemnified Party. Without limiting
the foregoing, neither the Bank nor the Indemnified Parties shall be liable for,
and the Bank and the Indemnified Parties shall be indemnified against, any Claim
arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party
in good faith reliance upon the terms of this Agreement, any Officer's
Certificate, Proper Instructions, resolution of the Board, telegram, telecopier,
notice, request, certificate or other instrument reasonably believed by the Bank
to genuine;
(b) Any act or omission of any subcustodian selected by or at
the direction of the Fund;
(c) Any act or omission of a Selected Foreign Sub-Custodian to
the extent which such Selected Foreign Sub-Custodian is not liable to the Bank;
(d) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(e) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of capital stock of the
Fund or (ii) the Yield Calculation; or
19
<PAGE>
(g) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software) and
computer facilities, the unavailability of energy sources and other similar
happenings or events.
15.2 Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
16. Termination.
16.1 The term of this Agreement shall be three years commencing upon
November 1, 1996 (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive one-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the other
party no later than sixty days prior to the expiration of the Initial Term or
any Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other party. Any termination
pursuant to this paragraph 16.1(b) shall be effective upon expiration of such
sixty days, provided, however, that the effective date of such termination may
be postponed to a date not more than ninety days after delivery of the written
notice: (i) at the request of the Bank, in order to prepare for the transfer by
the Bank of all of the assets of the Fund held hereunder; or (ii) at the request
of the Fund, in order to give the Fund an opportunity to make suitable
arrangements for a successor custodian.
16.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (16.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board. Thereafter, the Bank
shall be released from any and all obligations under this Agreement.
20
<PAGE>
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at low or in equal to an injunction or injunctions without
bond or other security to prevent breaches of this provision.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) had delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Merrimac Funds
200 Clarendon Street
Boston, MA 02111
Attention: Paul Jasinski
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street, P.O. Box 1537
Boston, Massachusetts 02205-1537
Attention: John E. Henry, General Counsel
or at such other place as such party may from time to time
designate in writing.
19. Amendments. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties.
21
<PAGE>
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. The Bank is hereby expressly put on notice
of the limitation of liability set forth in the Master Trust Agreement of the
Fund and agrees that the obligations assumed by the Fund hereunder shall be
limited in all cases to the assets of the Fund and that the Bank shall not seek
satisfaction of any such obligation from the officers, agents, employees,
trustees, or shareholders of the Fund.
25. Several Obligations of the Portfolios. This Agreement is an
agreement entered into between the Bank and the Fund with respect to each
Portfolio. With respect to any obligation of the Fund on behalf of any Portfolio
arising out of this Agreement, the Bank shall look for payment or satisfaction
of such obligation solely to the assets of the Portfolio to which such
obligation relates as though the Bank had separately contracted with the Fund by
separate written instrument with respect to each Portfolio.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
THE MERRIMAC FUNDS
By: /s/ Sean P. Brennan
--------------------------
Name: Sean P. Brennan
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Kevin J. Sheehan
--------------------------
Name: Kevin J. Sheehan
Title: President & C.E.O.
23
<PAGE>
Appendix B
----------
Portfolios
Merrimac Cash Fund
Exhibit 9a
ADMINISTRATION AGREEMENT
Between
THE MERRIMAC FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of November 1, 1996 by and
between The Merrimac Funds, a corporation organized under the laws of Delaware
(the "Fund"), and Investors Bank & Trust Company, a Massachusetts trust company
("IBT").
WHEREAS, the Fund is registered as a management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and is
entering into this Agreement on behalf of the portfolios listed on Appendix 3
hereto, as such Appendix 3 may be amended from time to time (each a "Portfolio"
and collectively, the "Portfolios"); and
WHEREAS, the Fund desires to retain IBT to render certain
administrative services to the Fund and IBT is willing to render such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints IBT to act as Administrator
of the Fund on the terms set forth in this Agreement. IBT accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Fund has furnished IBT with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of IBT to provide certain administrative services to the Fund
and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of
Delaware on November 1, 1996 and all amendments thereto (the "Articles");
(c) The Fund's by-laws and all amendments thereto (the
"By-Laws");
(d) The Fund's agreements with all service providers which
include any investment advisory agreements, sub-investment advisory agreements,
custody agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Fund's most recent Registration Statement under the
1940 Act and all amendments thereto; and
(f) The Fund's most recent confidential offering circular (the
"Offering Circular"); and
(g) Such other certificates, documents or opinions as may
mutually be deemed necessary or appropriate for IBT in the proper performance of
its duties hereunder.
The Fund will immediately furnish IBT with copies of all
amendments of or supplements to the foregoing. Furthermore, the Fund will notify
IBT as soon as possible of any matter which may materially affect the
performance by IBT of its services under this Agreement.
<PAGE>
2
3. Duties of Administrator. Subject to the supervision and direction of
the Board of Directors of the Fund, IBT, as Administrator, will assist in
conducting various aspects of the Fund's administrative operations and
undertakes to perform the services described in Appendix 1 hereto. IBT may, from
time to time, perform additional duties and functions which shall be set forth
in an amendment to such Appendix 1 executed by both parties. At such time, the
fee schedule included in Appendix 2 hereto shall be appropriately amended.
In performing all services under this Agreement, IBT shall act
in conformity with the Fund's Articles and By-Laws and the 1940 Act, as the same
may be amended from time to time, and the investment objectives, investment
policies and other practices and policies set forth in the Fund's Registration
Statement, as the same may be amended from time to time. Notwithstanding any
item discussed herein, IBT has no discretion over the Fund's assets or choice of
investments and cannot be held liable for any problem relating to such
investments.
4. Duties of the Fund.
(a) The Fund is solely responsible (through its transfer agent
or otherwise) for (i) providing timely and accurate reports ("Daily Sales
Reports") which will enable IBT as Administrator to monitor the total number of
shares sold in each state on a daily basis and (ii) identifying any exempt
transactions ("Exempt Transactions") which are to be excluded from the Daily
Sales Reports.
(b) The Fund agrees to make its legal counsel available to IBT
for instruction with respect to any matter of law arising in connection with
IBT's duties hereunder, and the Fund further agrees that IBT shall be entitled
to rely on such instruction without further investigation on the part of IBT.
5. Fees and Expenses.
(a) For the services to be rendered and the facilities to be
furnished by IBT, as provided for in this Agreement, the Fund will compensate
IBT in accordance with the fee schedule attached as Appendix 2 hereto. Such fees
do not include out-of-pocket disbursements (as delineated on the fee schedule or
other expenses with the prior approval of the Fund's management) of IBT for
which IBT shall be entitled to bill the Fund separately and for which the Fund
shall reimburse IBT.
(b) IBT shall not be required to pay any expenses incurred by
the Fund.
6. Limitation of Liability.
(a) IBT, its directors, officers, employees and agents shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its obligations and
duties under this Agreement, except a loss resulting from willful misfeasance,
bad faith or negligence in the performance of such obligations and duties, or by
reason of its reckless disregard thereof. The Fund will indemnify IBT, its
directors, officers, employees and agents against and hold it and them harmless
from any and all losses, claims, damages, liabilities or expenses (including
legal fees and expenses) resulting from any claim, demand, action or suit (i)
arising out of the actions or omissions of the Fund, including, but not limited
to, inaccurate Daily Sales Reports and misidentification of Exempt Transactions;
(ii) arising out of the offer or sale of any securities of the Fund in violation
of (x) any requirement under the federal securities laws or regulations, (y) any
requirement under the securities laws or regulations of any state, or (z) any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such securities; or (iii) not resulting from the
willful misfeasance, bad faith or negligence of IBT in the performance of such
obligations and duties or by reason of its reckless disregard thereof.
<PAGE>
3
(b) IBT may apply to the Fund at any time for instructions and
may consult counsel for the Fund, or its own counsel, and with accountants and
other experts with respect to any matter arising in connection with its duties
hereunder, and IBT shall not be liable or accountable for any action taken or
omitted by it in good faith in accordance with such instruction, or with the
opinion of such counsel, accountants, or other experts. IBT shall not be liable
for any act or omission taken or not taken in reliance upon any document,
certificate or instrument which it reasonably believes to be genuine and to be
signed or presented by the proper person or persons. IBT shall not be held to
have notice of any change of authority of any officers, employees, or agents of
the Fund until receipt of written notice thereof has been received by IBT from
the Fund.
(c) In the event IBT is unable to perform, or is delayed in
performing, its obligations under the terms of this Agreement because of acts of
God, strikes, legal constraint, government actions, war, emergency conditions,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control or other causes reasonably
beyond its control, IBT shall not be liable to the Fund for any damages
resulting from such failure to perform, delay in performance, or otherwise from
such causes.
(d) In no event shall IBT be liable for special, incidental or
consequential damages, even if advised of the possibility of such damages.
7. Termination of Agreement.
(a) The term of this Agreement shall be three years commencing
upon the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive one-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the other
party no later than sixty days prior to the expiration of the Initial Term or
any Renewal Term, as the case may be.
(i) Either party hereto may terminate this Agreement
prior to the expiration of the Initial Term in the event the other party
violates any material provision of this Agreement, provided that the violating
party does not cure such violation within 90 days of receipt of written notice
from the non-violating party of such violation.
(ii) Either party may terminate this Agreement during
any Renewal Term upon sixty days written notice to the other party. Any
termination pursuant to this paragraph 7(a)(ii) shall be effective upon
expiration of such sixty days, provided, however, that the effective date of
such termination may be postponed, at the request of the Fund, to a date not
more than ninety days after delivery of the written notice in order to give the
Fund an opportunity to make suitable arrangements for a successor administrator.
(b) At any time after the termination of this Agreement, the
Fund may, upon written request, have reasonable access to the records of IBT
relating to its performance of its duties as Administrator.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or IBT shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
<PAGE>
4
To the Fund: Merrimac Funds
200 Clarendon Street
Boston, MA 02116
Attn: Paul Jasinski
To IBT: Investors Bank & Trust Company
89 South Street, P.O. Box 1537
Boston, MA 02205-1537
Attention: John E. Henry, General Counsel
(b) This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its conflict of
laws provisions.
(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
9. Confidentiality. All books, records, information and data pertaining
to the business of the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by law.
10. Use of Name. The Fund shall not use the name of IBT or any of its
affiliates in any Offering Circular, sales literature or other material relating
to the Fund in a manner not approved by IBT prior thereto in writing; provided
however, that the approval of IBT shall not be required for any use of its name
which merely refers in accurate and factual terms to its appointment hereunder
or which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; provided further, that in no event shall such approval be
unreasonably withheld or delayed.
11. Limitation of Liability. IBT is hereby expressly put on notice of
the limitation of liability set forth in the Master Trust Agreement of the Fund
and agrees that the obligations assumed by the Fund hereunder shall be limited
in all cases to the assets of the Fund and that IBT shall not seek satisfaction
of any such obligation from the officers, agents, employees, trustees, or
shareholders of the Fund.
12. Several Obligations of the Portfolios. This Agreement is an
agreement entered into between IBT and the Fund with respect to each Portfolio.
With respect to any obligation of the Fund on behalf of any Portfolio arising
out of this Agreement, IBT shall look for payment or satisfaction of such
obligation solely to the assets of the Portfolio to which such obligation
relates as though IBT had separately contracted with the Fund by separate
written instrument with respect to each Portfolio.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
THE MERRIMAC FUNDS
By: /s/ Sean P. Brennan
-------------------------------
Name: Sean P. Brennan
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Kevin J. Sheehan
-------------------------------
Name: Kevin J. Sheehan
Title: President & C.E.O.
<PAGE>
Appendix 1
----------
Services to be Performed by IBT
<PAGE>
Appendix 2
----------
Fee Schedule
<PAGE>
Appendix 3
----------
Portfolios
----------
The Merrimac Cash Fund
Exhibit 9b
TRANSFER AGENCY AND SERVICE AGREEMENT
Between
THE MERRIMAC FUNDS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the 1st day of November, 1996 by and between
the Merrimac Funds, a corporation organized under the laws of Delaware (the
"Company"), and Investors Bank & Trust Company, a Massachusetts trust company
("IBT").
WHEREAS, the Company desires to appoint IBT as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and IBT desires to accept such appointment;
WHEREAS, IBT is duly registered as a transfer agent as provided in
Section 17A(c) of the Securities Exchange Act of 1934, as amended, (the "1934
Act");
WHEREAS, the Company is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Company intends to initially offer shares in one Series,
the Merrimac Prime Cash Fund, and two classes, the Institutional Class and the
Premium Class (such classes, together with all other series and classes
subsequently established by the Company and made subject to this Agreement in
accordance with Article 17, being herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the Company and IBT agree as follows:
ARTICLE 1. Terms of Appointment; Duties of IBT
- - -----------------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement,
the Company on behalf of the Funds hereby employs and appoints IBT to act, and
IBT agrees to act, as transfer agent for each of the Fund(s)' authorized and
issued shares of beneficial interest ("Shares"), dividend disbursing agent and
agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of the Company ("Shareholders") and set out in the
most recent Confidential Offering Circular, as such may be amended from time to
time, (the "Offering Circular") of the Company, including without limitation any
periodic investment plan or periodic withdrawal program.
1.02 IBT agrees that it will perform the following services:
(a) In connection with procedures established from time to
time by agreement between the Company and IBT, IBT shall:
(i) Receive for acceptance orders for the purchase of
Shares and promptly deliver payment and appropriate documentation therefor to
the custodian of the Company appointed by the Board of Directors of the Company
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation therefor to the
Custodian;
<PAGE>
2
(iv) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Company on behalf of a Fund;
(vii) Create and maintain all necessary records
including those specified in Article 10 hereof, in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the Investment Company Act of 1940, as amended (the
"1940 Act"), and those records pertaining to the various functions performed by
it hereunder. All records shall be available for inspection and use by the
Company. Where applicable, such records shall be maintained by IBT for the
periods and in the places required by Rule 31a-2 under the 1940 Act;
(viii) Make available during regular business hours all
records and other data created and maintained pursuant to this Agreement for
reasonable audit and inspection by the Company, or any person retained by the
Company. Upon reasonable notice by the Company, IBT shall make available during
regular business hours its facilities and premises employed in connection with
its performance of this Agreement for reasonable visitation by the Company, or
any person retained by the Company;
(ix) At the expense of and at the request of the
Company, maintain an adequate supply of blank share certificates for each Fund
providing for the issuance of certificates to meet IBT's requirements therefor.
Such share certificates shall be properly signed by facsimile. The Company
agrees that, notwithstanding the death, resignation, or removal of any officer
of the Company whose signature appears on such certificates, IBT may continue to
countersign certificates which bear such signatures until otherwise directed by
the Company. Share certificates may be issued and accounted for entirely by IBT
and do not require any third party registrar or other endorsing party;
(x) Issue replacement share certificates in lieu of
certificates which have been lost, stolen, mutilated or destroyed, without any
further action by the Board of Directors or any officer of the Company, upon
receipt by IBT of properly executed affidavits and lost certificate bonds, in
form satisfactory to IBT with the Company and IBT as obligees under the bond. At
the discretion of IBT, and at its sole risk, IBT may issue replacement
certificates without requiring the affidavits and lost certificate bonds
described above and the Company agrees to indemnify IBT against any and all
losses or claims which may arise by reason of the issuance of such new
certificates in the place of the ones allegedly lost, stolen or destroyed; and
(xi) Record the issuance of Shares of the Company and
maintain, pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total
number of Shares of the Company which are authorized, based upon data provided
to it by the Company, and issued and outstanding. IBT shall also provide the
Company on a regular basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which functions shall
be the sole responsibility of the Company.
<PAGE>
3
(b) In addition to and not in lieu of the services set forth
in the above paragraph (a) or in any Schedule hereto, IBT shall: (i) perform all
of the customary services of a transfer agent, dividend disbursing agent and, as
relevant, agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program); including but not limited to maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and offering circulars to
current Shareholders, withholding taxes on all accounts, including nonresident
alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, responding to Shareholder telephone calls and Shareholder
correspondence, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information; and (ii) provide a system which will
enable the Company to monitor the total number of shares sold in each State. The
Company shall (i) identify to IBT in writing those transactions and assets to be
treated as exempt from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State. The responsibility of
IBT for a Fund's blue sky state registration status is solely limited to the
initial establishment of transactions subject to blue sky compliance by such
Fund(s) and the reporting of such transactions to the Fund(s) as provided above.
(c) Additionally, IBT shall utilize a system to identify all
share transactions which involve purchase and redemption orders that are
processed at a time other than the time of the computation of net asset value
per share next computed after receipt of such orders, and shall compute the net
effect upon the Fund(s) of such transactions so identified on a daily and
cumulative basis.
ARTICLE 2. Sale of Company Shares
- - ----------------------------------
2.01 Whenever the Company shall sell or cause to be sold any Shares of
a Fund, the Company shall deliver or cause to be delivered to IBT a document
duly specifying: (i) the name of the Fund whose Shares were sold; (ii) the
number of Shares sold, trade date, and price; (iii) the amount of money to be
delivered to the Custodian for the sale of such Shares and specifically
allocated to such Fund; and (iv) in the case of a new account, a new account
application or sufficient information to establish an account.
2.02 IBT will, upon receipt by it of a check or other payment
identified by it as an investment in Shares of one of the Funds and drawn or
endorsed to IBT as agent for, or identified as being for the account of, one of
the Funds, promptly deposit such check or other payment to the appropriate
account postings necessary to reflect the investment. IBT will notify the
Company, or its designee, and the Custodian of all purchases and related account
adjustments.
2.03 Under procedures as established by mutual agreement between the
Company and IBT, IBT shall issue to the purchaser or its authorized agent such
Shares, computed to the nearest three decimal points, as he is entitled to
receive, based on the appropriate net asset value of the Funds' Shares,
determined in accordance with the Offering Circular and any applicable federal
law or regulation. In issuing Shares to a purchaser or its authorized agent, IBT
shall be entitled to rely upon the latest directions, if any, previously
received by IBT from the purchaser or its authorized agent concerning the
delivery of such Shares.
<PAGE>
4
2.04 IBT shall not be required to issue any Shares of the Company where
it has received a written instruction from the Company or written notification
from any appropriate federal or state authority that the sale of the Shares of
the Fund(s) in question has been suspended or discontinued, and IBT shall be
entitled to rely upon such written instructions or written notification.
2.05 Upon the issuance of any Shares of any Fund(s) in accordance with
foregoing provisions of this Section, IBT shall not be responsible for the
payment of any original issue or other taxes, if any, required to be paid by the
Company in connection with such issuance.
2.06 IBT may establish such additional rules and regulations governing
the transfer or registration of Shares as it may deem advisable and consistent
with such rules and regulations generally adopted by transfer agents, or with
the written consent of the Company, any other rules and regulations.
ARTICLE 3. Returned Checks
- - --------------------------
3.01 In the event that any check or other order for the transfer of
money is returned unpaid for any reason, IBT will take such steps as IBT may, in
its discretion, deem appropriate to protect the Company from financial loss or
as the Company or its designee may instruct. Provided that the standard
procedures, as agreed upon from time to time, between the Company and IBT,
regarding purchases and redemptions of Shares, are adhered to by IBT, IBT shall
not be liable for any loss suffered by a Fund as a result of returned or unpaid
purchase or redemption transactions. Legal or other expenses incurred to collect
amounts owed to a Fund as a consequence of returned or unpaid purchase or
redemption transactions shall be an expense of that Fund.
ARTICLE 4. Redemptions
- - ----------------------
4.01 Shares of any Fund may be redeemed in accordance with the
procedures set forth in the Offering Circular of the Company and IBT will duly
process all redemption requests.
ARTICLE 5. Transfers and Exchanges
- - ----------------------------------
5.01 IBT is authorized to review and process transfers of Shares of
each Fund, exchanges between Funds on the records of the Funds maintained by
IBT, and exchanges between the Company and any other entity as may be permitted
by the Offering Circular of the Company. If Shares to be transferred are
represented by outstanding certificates, IBT will, upon surrender to it of the
certificates in proper form for transfer, and upon cancellation thereof,
countersign and issue new certificates for a like number of Shares and deliver
the same. If the Shares to be transferred are not represented by outstanding
certificates, IBT will, upon an order therefor by or on behalf of the registered
holder thereof in proper form, credit the same to the transferee on its books.
If Shares are to be exchanged for Shares of another Fund, IBT will process such
exchange in the same manner as a redemption and sale of Shares, except that it
may in its discretion waive requirements for information and documentation.
ARTICLE 6. Right to Seek Assurances
- - -----------------------------------
6.01 IBT reserves the right to refuse to transfer or redeem Shares
until it is satisfied that the requested transfer or redemption is legally
authorized, and it shall incur no liability for the refusal, in good faith, to
make transfers or redemptions which IBT, in its judgment, deems improper or
unauthorized, or until it is satisfied that there is no basis for any claims
adverse to such transfer or redemption. IBT may, in effecting transfers, rely
upon the provisions of the Uniform Act for the
<PAGE>
5
Simplification of Fiduciary Security Transfers or the Uniform Commercial Code,
as the same may be amended from time to time, which in the opinion of legal
counsel for the Company or IBT's own legal counsel, do not require certain
documents in connection with the transfer or redemption of Shares of any Fund,
and the Company shall indemnify IBT for any act done or omitted by it in
reliance upon such laws or opinions of counsel of the Company or of IBT.
ARTICLE 7. Distributions
- - ------------------------
7.01 The Company will promptly notify IBT of the declaration of any
dividend or distribution. The Company shall furnish to IBT a resolution of the
Board of Directors of the Company certified by the Secretary (a "Certificate"):
(i) authorizing the declaration of dividends on a specified periodic basis and
authorizing IBT to rely on oral instructions or a Certificate specifying the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which Shareholders entitled to payment shall be
determined and the amount payable per share to Shareholders of record as of such
record date and the total amount payable to IBT on the payment date; or (ii)
setting forth the date of the declaration of any dividend or distribution by a
Fund, the date of payment thereof, the record date as of which Shareholders
entitled to payment shall be determined, and the amount payable per share to the
Shareholders of record as of that date and the total amount payable to IBT on
the payment date.
7.02 IBT, on behalf of the Company, shall instruct the Custodian to
place in a dividend disbursing account funds equal to the cash amount of any
dividend or distribution to be paid out. IBT will calculate, prepare and mail
checks to (at the address as it appears on the records of IBT), or (where
appropriate) credit such dividend or distribution to the account of, Fund
Shareholders, and maintain and safeguard all underlying records.
7.03 IBT will replace lost checks at its discretion and in conformity
with regular business practices.
7.04 IBT will maintain all records necessary to reflect the crediting
of dividends which are reinvested in Shares of the Company, including without
limitation daily dividends.
7.05 IBT shall not be liable for any improper payments made in
accordance with a resolution of the Board of Directors of the Company.
7.06 If IBT shall not receive from the Custodian sufficient cash to
make payment to all Shareholders of the Company as of the record date, IBT
shall, upon notifying the Company, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is provided to IBT and
shall not be liable for any claim arising out of such withholding.
ARTICLE 8. Other Duties
- - -----------------------
8.01 In addition to the duties expressly provided for herein, IBT shall
perform such other duties and functions and shall be paid such amounts therefor
as may from time to time be agreed to in writing.
ARTICLE 9. Taxes
- - ----------------
9.01 It is understood that IBT shall file such appropriate information
returns concerning the payment of dividends and capital gain distributions and
tax withholding with the proper Federal, State
<PAGE>
6
and local authorities as are required by law to be filed by the Company and
shall withhold such sums as are required to be withheld by applicable law.
ARTICLE 10. Books and Records
- - -----------------------------
10.01 IBT shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax identification
numbers; (ii) numbers of Shares held; (iii) historical information (as available
from prior transfer agents) regarding the account of each Shareholder, including
dividends paid and date and price of all transactions on a Shareholder's
account; (iv) any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings; (vi) any capital gain or
dividend reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a Shareholder's account;
(vii) certificate numbers and denominations for any Shareholders holding
certificates; (viii) any information required in order for IBT to perform the
calculations contemplated or required by this Agreement; and (ix) such other
information and data as may be required by applicable law.
10.02 Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act. Such records may be inspected by the Company during regular business
hours upon reasonable notice. IBT may, at its option at any time, and shall
forthwith upon the Company's demand, turn over to the Company and cease to
retain in IBT's files, records and documents created and maintained by IBT in
performance of its service or for its protection. At the end of the six-year
retention period, such documents will either be turned over to the Company, or
destroyed in accordance with the Company's authorization.
10.03 Procedures applicable to the services to be performed hereunder
may be established from time to time by agreement between the Fund(s) and IBT.
IBT shall have the right to utilize any shareholder accounting and recordkeeping
systems which, in its opinion, qualifies to perform any services to be performed
hereunder. IBT shall keep records relating to the services performed hereunder,
in the form and manner as it may deem advisable.
ARTICLE 11. Fees and Expenses.
- - ------------------------------
11.01 For performance by IBT pursuant to this Agreement, the Fund(s)
agree to pay IBT an annual maintenance fee for each Shareholder account as set
out in the initial fee schedule attached as Appendix A hereto. Such fees and
out-of-pocket expenses and advances identified under Section 11.02 below may be
changed from time to time subject to mutual written agreement between the
Fund(s) and IBT.
11.02 In addition to the fee paid under Section 11.01 above, the
Fund(s) agree to reimburse IBT for out-of-pocket expenses or advances incurred
by IBT for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by IBT at the request or with the consent of the
Fund(s) including, without limitation, any equipment or supplies which the
Company specifically orders or requires IBT to purchase, will be reimbursed by
the Fund(s).
11.03 The Fund(s) agree to pay all fees and reimbursable expenses
within thirty days following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to IBT by the Fund(s) at least seven
(7) days prior to the mailing date of such materials. Any waiver or extension by
IBT of the thirty and seven day
<PAGE>
7
time periods enumerated in this section 11.03 shall not constitute a dismissal
of any monies due under this Agreement nor shall such waiver or extension apply
to any future monies due to IBT hereunder.
ARTICLE 12. Representations and Warranties of IBT
- - -------------------------------------------------
IBT represents and warrants to the Company that:
12.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
12.02 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
12.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
ARTICLE 13. Representations and Warranties of the Company
- - ---------------------------------------------------------
The Company represents and warrants to IBT that:
13.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of its incorporation as set forth in the
preamble hereto.
13.02 It is empowered under applicable laws and by its charter
documents and by-laws to enter into and perform this Agreement.
13.03 All proceedings required by said charter documents and by-laws
have been taken to authorize it to enter into and perform this Agreement.
13.04 It is a open-end investment company registered under the 1940
Act.
13.05 Appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Company being offered for
sale.
13.06 When Shares are hereafter issued in accordance with the terms of
the Offering Circular, such Shares shall be validly issued, fully paid and
nonassessable by the Fund(s).
ARTICLE 14. Indemnification
- - ---------------------------
14.01 Except as set forth in Section 14.02 hereof, IBT shall not be
responsible for, and the Company shall indemnify and hold IBT harmless from and
against, any and all losses, damages, costs, charges, legal fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions taken or omitted to be taken by IBT or its
agents or subcontractors in good faith in reliance on or use by IBT or its
agents or subcontractors of information, records and
<PAGE>
8
documents which (i) are received by IBT or its agents or subcontractors and
furnished to such party by or on behalf of the Fund(s), (ii) have been prepared
and/or maintained by the Fund(s) or any other person or firm on behalf of the
Fund(s), or (iii) were received by IBT or its agents or subcontractors from a
prior transfer agent.
(b) Any action taken or omitted to be taken by IBT in good
faith reliance upon any law, act, regulation (a "Regulation") or interpretation
of a Regulation even though such Regulation may thereafter have been altered,
changed, amended or repealed.
(c) The Fund(s)' refusal or failure to comply with the terms
of this Agreement, or which arise out of the Funds' lack of good faith,
negligence or willful misconduct or which arise out of the breach of any
representation or warranty of the Fund(s) hereunder.
(d) The reliance on, or the carrying out by IBT or its agents
or subcontractors of any instructions or requests, whether written or oral, of
the Fund(s).
(e) The offer or sale of Shares by the Company in violation of
(i) any requirement under the federal securities laws or regulations; (ii) any
requirement under the securities laws or regulations of any state; or (iii) any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such Shares.
14.02 IBT shall indemnify and hold the Fund(s) harmless from and
against any and all losses, damages, costs, charges, legal fees, payments,
expenses and liability arising out of or attributed to any action or failure or
omission to act by IBT as a result of IBT's lack of good faith, negligence,
willful misconduct, knowing violation of law or fraud.
14.03 At any time IBT may apply to any officer of the Company for
instructions, and may consult with legal counsel of IBT or the Company with
respect to any matter arising in connection with the services to be performed by
IBT under this Agreement, and IBT and its agents or subcontractors shall not be
liable and shall be indemnified by the Company for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such counsel
except for a knowing violation of law. IBT, its agents and subcontractors shall
be protected and indemnified in acting upon any paper or document furnished by
or on behalf of the Fund(s), reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records or documents provided to IBT or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund(s), and IBT, its agents and subcontractors shall not be held to have
notice of any change of authority of any person, until receipt of written notice
thereof from the Fund(s). IBT, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of an officer of the
Company, and one proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
14.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, interruption
of electrical power or other utilities, equipment or transmission failure or
damage reasonably beyond its control, or other causes reasonably beyond its
control, such party shall not be liable to the other for any damages resulting
from such failure to perform or otherwise from such causes.
<PAGE>
9
14.05 Neither party to this Agreement shall be liable to the other
party for special, incidental or consequential damages, even if the other party
has been advised of the possibility of such damages, under any provision of this
Agreement or for any act or failure to act hereunder as contemplated by this
Agreement.
14.06 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
seeking indemnification shall give the indemnifying party full and complete
authority, information and assistance to defend such claim or proceeding, and
the indemnifying party shall have, at its option, sole control of the defense of
such claim or proceeding and all negotiations for its compromise or
settlement. The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent, which consent
shall not be unreasonably withheld.
ARTICLE 15. Covenants of the Company and IBT
- - --------------------------------------------
15.01 The Company shall promptly furnish to IBT the following:
(a) A certified copy of the resolution of the Directors of the
Company authorizing the appointment of IBT and the execution and delivery of
this Agreement.
(b) A copy of the charter documents and by-laws of the Company
and all amendments thereto.
(c) Copies of each vote of the Directors designating
authorized persons to give instructions to IBT, and a Certificate providing
specimen signatures for such authorized persons.
(d) Certificates as to any change in any officer or Director
of the Company.
(e) If applicable a specimen of the certificate of Shares in
each Fund of the Company in the form approved by the Directors, with a
Certificate as to such approval.
(f) Specimens of all new certificates for Shares, accompanied
by the Directors' resolutions approving such forms.
(g) All account application forms and other documents relating
to shareholder accounts or relating to any plan, program or service offered by
the Company.
(h) A list of all Shareholders of the Fund(s) with the name,
address and tax identification number of each Shareholder, and the number of
Shares of the Fund(s) held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any account against which stops
have been placed, together with the reasons for said stops, and the number of
Shares redeemed by the Fund(s).
(i) An opinion of counsel for the Company with respect to the
validity of the Shares and the status of such Shares under the Securities Act of
1933.
<PAGE>
10
(j) Copies of the Fund(s) registration statement on Form N-1A
(if applicable) as amended and declared effective by the Securities and Exchange
Commission and all post-effective amendments thereto.
(k) Such other certificates, documents or opinions as IBT may
deem necessary or appropriate for IBT in the proper performance of its duties
hereunder.
15.02 IBT hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
15.03 IBT shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act and the Rules thereunder, IBT agrees that
all such records prepared or maintained by IBT relating to the services to be
performed by IBT hereunder are the confidential property of the Company and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered to the Company on and in accordance with its
request.
15.04 IBT and the Company agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
15.05 In case of any requests or demands for the inspection of the
Shareholder records of the Company, IBT will endeavor to notify the Company and
to secure instructions from an authorized officer of the Company as to
such request or demand. IBT reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be subject to enforcement or other action by any court or regulatory body
for the failure to exhibit the Shareholder records to such person.
ARTICLE 16. Term of Agreement
- - -----------------------------
16.01 Termination of Agreement. The term of this Agreement shall be
three years commencing upon the date first above written (the "Initial Term"),
unless earlier terminated as provided herein. After the expiration of the
Initial Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless notice of non-renewal
is delivered by the non-renewing party to the other party no later than sixty
days prior to the expiration of the Initial Term or any Renewal Term, as the
case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon sixty days written notice to the other party. Any termination
pursuant to this paragraph 16.01(b) shall be effective upon expiration of such
sixty days, provided, however, that the effective date of such termination may
be postponed to a date not more than ninety days after delivery of the written
notice:
<PAGE>
11
(i) at the request of IBT, in order to prepare for the transfer by IBT of its
duties hereunder; or (ii) at the request of the Fund, in order to give the Fund
an opportunity to make suitable arrangements for a successor transfer agent.
16.02 Should the Company exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Company. Additionally, IBT reserves the right to recover from
the Company any other reasonable expenses associated with such termination.
ARTICLE 17. Additional Funds
- - ----------------------------
17.01 In the event that the Company establishes one or more series of
Shares in addition to the initial series, or one or more classes in addition to
the initial classes, with respect to which it desires to have IBT render
services as transfer agent under the terms hereof, it shall so notify IBT in
writing, and if IBT agrees in writing to provide such services, such series or
classes of Shares shall become a Fund hereunder.
ARTICLE 18. Assignment
- - ----------------------
18.01 Except as provided in Section 18.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
18.03 IBT, may without further consent on the part of the Company,
subcontract for the performance of any of the services to be provided hereunder
to third parties, including any affiliate of IBT.
ARTICLE 19. Amendment
- - ----------------------
19.01 This Agreement may be amended or modified only by a written
agreement executed by both parties.
ARTICLE 20. Governing Law
- - -------------------------
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts, without regard to its conflict of laws provisions.
ARTICLE 21. Merger of Agreement and Severability
- - ------------------------------------------------
21.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement shall
remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such counterparts shall
together, constitute only one instrument.
<PAGE>
12
ARTICLE 22. Notices
- - -------------------
22. 01 Any notice or other instrument in writing authorized or required
by this Agreement to be given to either party hereto will be sufficiently given
if addressed to such party and mailed or delivered to it at its office at the
address set forth below:
For the Fund(s): Merrimac Funds
200 Clarendon Street
Boston, MA 02116
Attention: Paul Jasinski
For IBT: Investors Bank & Trust Company
89 South Street, P.O. Box 1537
Boston, MA 02205-1537
Attention: John E. Henry, General Counsel
ARTICLE 23. Regarding the Fund
- - ------------------------------
23. 01 Limitation of Liability. IBT is hereby expressly put on notice
of the limitation of liability set forth in the Master Trust Agreement of the
Fund and agrees that the obligations assumed by the Fund hereunder shall be
limited in all cases to the assets of the Fund and that IBT shall not seek
satisfaction of any such obligation from the officers, agents, employees,
trustees, or shareholders of the Fund.
23.03 Several Obligations of the Portfolios. This Agreement is an
agreement entered into between IBT and the Funds with respect to each Fund. With
respect to any obligation of the Funds on behalf of any Fund arising out of this
Agreement, IBT shall look for payment or satisfaction of such obligation solely
to the assets of the Fund to which such obligation relates as though IBT had
separately contracted with the Funds by separate written instrument with respect
to each Fund.
<PAGE>
13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and the year first above written.
THE MERRIMAC FUNDS
By: /s/ Sean P. Brennan
-------------------------------
Name: Sean P. Brennan
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Kevin J. Sheehan
-------------------------------
Name: Kevin J. Sheehan
Title: President & C.E.O.
Exhibit 15a
MERRIMAC FUNDS
(Institutional Class Shares)
Shareholder Servicing Plan
WHEREAS, Merrimac Funds, an unincorporated association of the type
commonly known as a business trust organized under the laws of the State of
Delaware (the "Trust"), engages in business as an open-end management investment
company and is or will be registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (ii)
to divide the shares within each such series into two or more classes;
WHEREAS, the Trust has established one portfolio series, Merrimac Cash
Fund (the Merrimac Cash Fund portfolio being referred to herein as the "Initial
Series" -- such series, together with all other series subsequently established
by the Trust and made subject to this Plan, being referred to herein
individually as a "Series" and collectively as the "Series");
WHEREAS, the Trust has established two classes of shares, such classes
being referred to as the "Institutional Class" and the "Premium Class"; and
WHEREAS, the Trust desires to adopt a Shareholder Servicing Plan and
has adopted a related form of Shareholder Servicing Agreement with respect to
the Institutional Class shares (the "Shares") of the Initial Series for certain
service organizations that wish to act as agent of their customers (the "Agent")
(respectively, the "Plan" and the "Agreement"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
and any agreements relating to it (the "Qualified Trustees"), having determined,
in the exercise of their reasonable business judgment and in light of their
fiduciary duties under state law and in keeping with the requirements of Section
36(a) and (b) of the Act, that there is a reasonable likelihood that this Plan
and the Agreement will benefit the Premium Class shares of the Initial Series
and its shareholders, have accordingly approved this Plan and the Agreement by
votes cast in person at a meeting called for the purpose of voting on this Plan
and the Agreement and any agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan on the following
terms and conditions:
1. Shareholder Servicing Activities. Subject to the supervision of the
Board of Trustees, the Trust may engage, directly or indirectly, in financing
any activities relating to shareholder account administrative and servicing
functions, including without limitation making payments to Agents for one or
more of the following activities: (a) answering inquiries regarding
<PAGE>
account status and history, the manner in which purchases and redemptions of the
Shares may be effected, and certain other matters pertaining to the Trust; (b)
assisting in designating and changing dividend options, account designations and
addresses; (c) providing necessary personnel and facilities to establish and
maintain certain shareholder accounts and records, as requested from time to
time by the Trust; (d) assisting in processing purchase and redemption
transactions; (e) arranging for the wiring of funds; (f) transmitting and
receiving funds in connection with orders to purchase or redeem Shares; (g)
verifying and guaranteeing signatures in connection with redemption orders,
transfers among and changes in designated accounts; (h) providing periodic
statements showing account balances and, to the extent practicable, integration
of such information with other client transactions otherwise effected with or
through the Agent; (i) furnishing (either separately or on an integrated basis
with other reports sent by the Agent) monthly and annual statements and
confirmations of all purchases and redemptions of Shares in an account; (j)
transmitting proxy statements, annual reports, prospectuses and other
communications from the Trust; (k) receiving, tabulating and transmitting to the
Trust proxies executed with respect to annual and special meetings of
shareholders of the Trust; and (l) providing such other related services as the
Trust or customers of the Agent may reasonably request.
The Trust is authorized to engage in the activities listed above either
directly or through other persons with which the Trust has entered into
Agreements pursuant to the Plan.
2. Maximum Expenditures. The expenditures to be made by the Initial
Series pursuant to this Plan and the basis upon which payment of such
expenditures will be made shall be determined from time to time by the Trustees,
but in no event may such expenditures exceed the following: (i) with respect to
Shares of the Initial Series, an annual rate of .25% of the average daily value
of net assets represented by such Shares, and (ii) with respect to Shares of any
Series subsequently established by the Trust and made subject to this Agreement,
the annual rate as agreed upon and specified in an addendum hereto. The
expenditures to be made pursuant to this Plan shall commence with respect to
Shares of a Series as of the date on which this Plan becomes effective with
respect to each such Series.
3. Payments. Pursuant to this Plan, the Trust shall make periodic
payments to the Agent at the annual rate provided for in the Agreement with
respect to the Shares of each Series. The servicing expenses of a particular
class will be borne solely by that class and no Series will use fees charged to
one class within a Series to support the marketing or servicing relating to any
other class within that Series or any other Series.
4. Term and Termination.
(a) Initial Series. This Plan shall become effective with
respect to the Shares of the Initial Series as of the later of (i) the date
hereof, or (ii) the date on which the Initial Series commences offering the
Shares to investors and shall continue in effect with respect to the Shares
(subject to Section 4(c) hereof) until one year from the date of such
effectiveness, unless the continuation of this Plan shall have been approved
with respect to the Shares in accordance with the provisions of Section 4(c)
hereof.
2
<PAGE>
(b) Additional Series. This Plan shall become effective with
respect to the Shares of each additional Series established by the Trust after
the date hereof and made subject to this Plan upon commencement of the offering
thereof to investors (provided that the Plan has previously been approved with
respect to the Series by votes of a majority of both (i) the Board of Trustees
of the Trust and (ii) the Qualified Trustees, cast in person at a meeting held
before the initial public offering of such additional Series thereof and called
for the purpose of voting on such approval), and shall continue in effect with
respect to each such additional Series (subject to Section 4(c) hereof) for one
year thereafter, unless the continuation of this Plan shall have been approved
with respect to such additional Series in accordance with the provisions of
Section 4(c) hereof.
(c) Continuation. This Plan and the Agreement shall continue
in effect with respect to each Series subsequent to the initial term specified
in Section 4(a) and (b) for so long as such continuance is specifically approved
at least annually by votes of a majority of both (i) the Board of Trustees of
the Trust and (ii) the Qualified Trustees, cast in person at a meeting called
for the purpose of voting on this Plan, subject to any shareholder approval
requirements existing under applicable law.
(d) Termination.
(i) This Plan may be terminated at any time with
respect to the Trust or any Series thereof, as the case may be, by vote
of a majority of the Qualified Trustees, or by vote of a majority of
the outstanding voting Shares of any class of Shares of that Series to
which this Plan applies. For purposes of this Agreement, the term "vote
of a majority of the outstanding voting Shares" of any Series shall
mean the vote of the lesser of (A) 67 percent or more of the
outstanding voting Shares of a class of Shares to which this plan
applies present at such meeting, if the holders of more than 50 percent
of the outstanding voting Shares of such class are present and
represented by proxy; or (B) 50 percent or more of the Shares . The
Plan may remain in effect with respect to a Series even if it has been
terminated in accordance with this Section 4(e) with respect to one or
more other Series of the Trust of a class of Shares to which this plan
applies.
(ii) The Agreement may be terminated at any time,
without penalty, with respect to any class of Shares to which this Plan
applies of any Series by vote of a majority of the Qualified Trustees
or by vote of a majority of the outstanding voting Shares such a class
to which this Plan applies of that Series on sixty days' written notice
to the Agent.
5. Amendments. This Plan may not be amended to increase materially the
amount of expenditures provided for in Section 2 hereof unless such amendment is
approved by a vote of a majority of the outstanding Shares to which this Plan
applies of each Series with respect to which a material increase in the amount
of distribution expenditures is proposed, and no material amendment to the Plan
shall be made unless approved in the manner provided for annual renewal in
Section 4(c) hereof. Otherwise, this Plan may be amended with respect to a class
of the Shares
3
<PAGE>
to which this Plan applies of a Series by vote of a majority of the Qualified
Trustees or the outstanding voting of such a class of Shares of that Series.
6. Independent Trustees. While this Plan is in effect with respect to
any Series, the selection and nomination of Trustees who are not interested
persons (as defined in the Act) of the Trust shall be committed to the
discretion of the Trustees who are not interested persons.
7. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review, at least quarterly, a
written report of the amounts expended pursuant to this Plan and the purposes
for which such expenditures were made.
8. Recordkeeping. The Trust shall preserve copies of this Plan, the
Agreement and any related agreements and all reports made pursuant to Section 7
hereof, for a period of not less than six years from the date of this Plan and
the Agreement, the agreements or such reports, as the case may be, the first two
years in an easily accessible place.
Dated: October 30, 1996
4
Exhibit 15(b)
[Letterhead of Merrimac Funds]
Shareholder Servicing Agreement
Boston, Massachusetts
Gentlemen:
We are hereby inviting you, subject to the terms and conditions set
forth below, to serve as the agent of your customers ("Customers") for purposes
of performing certain administrative functions in connection with purchases and
redemptions of Institutional Class shares of beneficial interest ("Shares") of
Merrimac Funds (the "Trust") from time to time upon the order and for the
account of Customers, and to provide related services to your Customers in
connection with their investments in the Trust.
1. Appointment. You hereby agree to perform certain services for
Customers as hereinafter set forth. Your appointment hereunder is non-exclusive,
and the parties recognize and agree that, from time to time, the Trust may enter
into other shareholder servicing agreements, with other financial institutions.
2. Services to be Performed. You shall be responsible for performing
shareholder account administrative and servicing functions, which shall include,
without limitation, one or more of the following activities: (a) answering
Customer inquiries regarding account status and history, the manner in which
purchases and redemptions of the Shares may be effected, and certain other
matters pertaining to the Trust; (b) assisting Customers in designating and
changing dividend options, account designations and addresses; (c) providing
necessary personnel and facilities to establish and maintain certain shareholder
accounts and records, as requested from time to time by the Trust; (d) assisting
in processing purchase and redemption transactions; (e) arranging for the wiring
of funds; (f) transmitting and receiving funds in connection with Customer
orders to purchase or redeem Shares; (g) verifying and guaranteeing Customer
signatures in connection with redemption orders, transfers among and changes in
Customer-designated accounts; (h) providing periodic statements showing a
Customer's account balances and, to the extent practicable, integration of such
information with other client transactions otherwise effected with or through
you; (i) furnishing (either separately or on an integrated basis with other
reports sent to a Customer by you) monthly and annual statements and
confirmations of all purchases and redemptions of Shares in a Customer's
account; (j) transmitting proxy statements, annual reports, prospectuses and
other communications from the Trust to Customers; (k) receiving, tabulating and
transmitting to the Trust proxies executed by Customers with respect to annual
and special meetings of shareholders of the Trust; and (l) providing such other
related services as the Trust or a Customer may reasonably request. You shall
provide all personnel and facilities necessary in order for you to perform one
or more of the functions described in this paragraph with respect to your
Customers. You shall exercise reasonable care in performing all such services
and shall be liable for any failure to exercise such reasonable care.
[Bottom of Merrimac letterhead showing address and telephone number]
<PAGE>
3. Fees.
3.1. Fees from the Trust. In consideration for the services
described in section 2 hereof and the incurring of expenses in connection
therewith, you shall receive fees at an annual rate of 0.25% of the average
daily value of all Shares owned by or for all Customers with whom you maintain a
servicing relationship, such fee to be paid in arrears at the end of each
calendar quarter.
3.2. Fees from Customers. It is agreed that you may impose
certain conditions on Customers, in addition to or different from those imposed
by the Trust, such as requiring a minimum initial investment or charging
Customers direct fees for the same or similar services as are provided hereunder
by you (which fees may either relate specifically to your services with respect
to the Trust or generally cover services not limited to those with respect to
the Trust). You shall bill Customers directly for such fees. In the event you
charge Customers such fees, you shall make appropriate prior written disclosure
(such disclosure to be in accordance with all applicable laws) to Customers both
of any direct fees charged to the Customer and of the fees received or to be
received by you from the Trust pursuant to section 3.1 of this Agreement. It is
understood, however, that in no event shall you have recourse or access to the
account of any shareholder of the Trust except to the extent expressly
authorized by law or by the Trust or by such shareholder for payment of any
direct fees referred to in this section 3.2.
4. Capacity and Authority to Act. You and your officers, employees and
agents are not authorized to make any representations concerning the Trust or
the Shares to Customers or prospective Customers, excepting only accurate
communication of factual information contained in the then-current prospectus
and statement of additional information or such other communications as may be
expressly authorized by the Trust. In performing your services under this
Agreement, you shall act as agent for the Customer and shall have no authority
to act as agent for the Trust. Upon request by the Trust, you shall provide the
Trust with copies of any materials which are generally circulated by you to your
Customers or prospective Customers.
5. Use of the Agent's Name. The Trust shall not use your name in any
prospectus, sales literature or other material relating to the Trust in a manner
not approved by you prior thereto in writing; provided, however, that your
approval shall not be required for any use of its name which merely refers
accurately to your appointment hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
6. Use of the Trust's Name. You shall not use the name of the Trust
(other than for internal use in connection with performing its duties under this
agreement) in a manner not approved by the Trust prior thereto in writing;
provided, however, that the approval of the Trust shall not be required for the
use of the Trust's name in connection with communications permitted by section 4
hereof or for any use of the Trust's name which merely refers accurately to your
role hereunder or which is required by the Securities and Exchange Commission or
any state securities authority or any other appropriate regulatory, governmental
or judicial authority; provided, further, that in no event shall such approval
be unreasonably withheld or delayed.
7. Security. You represent and warrant that, to the best of your
knowledge, the various procedures and systems which you have implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any
<PAGE>
other cause the Trust's records and other data and your records, data,
equipment, facilities and other property used in the performance of your
obligations hereunder are adequate and that you will make such changes therein
from time to time as in its judgment are required for the secure performance of
your obligations hereunder. The parties shall review such systems and procedures
on a periodic basis, and the Trust may from time to time specify the types of
records and other data of the Trust to be safeguarded in accordance with this
section 7.
8. Compliance with Laws; Etc. You shall comply with all applicable
federal and state laws and regulations, including securities laws. You hereby
agree to maintain all records required by law relating to transactions on the
Shares, and upon our request, or of the Trust, promptly make such of these
records available to us or the Trust's administrator as are requested. In
addition, you hereby agree to establish appropriate procedures and reporting
forms and/or mechanisms and schedules in conjunction with us and the Trust's
administrator, to enable the Trust to identify the location, type of, and sales
to all accounts opened and maintained by your customers or by you on behalf of
your customers. You represent and warrant to the Trust that the performance of
all its obligations hereunder will comply with all applicable laws and
regulations, the provisions of your charter documents and by-laws and all
material contractual obligations binding upon you. You furthermore undertakes
that you will promptly inform the Trust of any change in applicable laws or
regulations (or interpretations thereof) or in your charter or by-laws or
material contracts which would prevent or impair full performance of any of your
obligations hereunder.
9. Reports. To the extent requested by the Trust from time to time, you
agree that you will provide the Trust with a written report of the amounts
expended by you pursuant to this Agreement and the purposes for which such
expenditures were made. Such written reports shall be in a form satisfactory to
the Trust and shall supply all information necessary for the Trust to discharge
its responsibilities under applicable laws and regulations.
10. Record Keeping.
10.1. Section 31(a), Etc. You shall maintain records in a form
acceptable to the Trust and in compliance with applicable laws and the rules and
regulations of the Securities and Exchange Commission, including but not limited
to the record-keeping requirements of section 31(a) of the Investment Company
Act 1940, as amended (the "1940 Act"), and the rules thereunder. Such records
shall be deemed to be the property of the Trust and will be made available, at
the Trust's reasonable request, for inspection and use by the Trust,
representatives of the Trust and governmental authorities. You agree that, for
so long as you retain any records of the Trust, you will meet all reporting
requirements pursuant to the 1940 Act with respect to such records.
10.2. Transfer of Customer Data. In the event this Agreement
is terminated or a successor to you are appointed, you shall, at the expense of
the Trust, transfer to such designee as the Trust may direct a certified list of
the shareholders of the Trust serviced by you (with name, address and tax
identification or Social Security number), a complete record of the account of
each such shareholder and the status thereof, and all other relevant books,
records, correspondence and other data established or maintained by you under
this Agreement. In the event this Agreement is terminated, you will use your
best efforts to cooperate in the orderly transfer of such duties and
responsibilities, including assistance in the establishment of books, records
and other data by the successor.
10.3. Survival of Record-Keeping Obligations. The
record-keeping obligations imposed in this section 10 shall survive the
termination of this Agreement.
<PAGE>
11. Force Majeure. You shall not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including, but not limited
to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
12. Indemnification.
12.1. Indemnification of the Agent. The Trust shall indemnify
and hold you harmless from and against any and all losses, claims, damages,
liabilities and expenses incurred by you and resulting from any claim, demand,
action or suit (collectively, "Claims") brought against you and arising out of
or in connection with the performance of your obligations hereunder, other than
any Claim resulting from (i) the bad faith or negligence of you, your officers,
employees or agents, or (ii) any breach of your obligation under this Agreement
or applicable law by you, your officers, employees or agents, or (iii) any false
or misleading statement contained in any communication by you to any Customer or
prospective Customer not prepared by or expressly authorized by the Trust for
your use.
In any case in which the Trust may be asked to indemnify or hold you
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and you shall use reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have the
option to defend you against any Claim which may be the subject of
indemnification hereunder. In the event that the Trust elects to defend against
such claim the defense shall be conducted by counsel chosen by the Trust and
satisfactory to you. You may retain additional counsel at its expense. Except
with the prior written consent of the Trust, you shall not confess any Claim or
make any compromise in any case in which the Trust will be asked to indemnify
you.
12.2. Indemnification of the Trust. You shall indemnify and
hold the Trust harmless from and against any and all losses, claims, damages,
liabilities and expenses incurred by the Trust and resulting from any Claim
brought against the Trust and resulting from (i) the bad faith or negligence of
you, your officers, employees or agents, or (ii) any breach of your obligations
under this Agreement or applicable law by you, your officers, employees or
agents, or (iii) any false or misleading statement contained in any
communication by you to any Customer or prospective Customer not prepared by or
expressly authorized by the Trust for your use.
In any case in which you may be asked to indemnify or hold the Trust
harmless, you shall be advised of all pertinent facts concerning the situation
in question and the Trust shall use reasonable care to identify and notify you
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against you. You shall have the option to defend the
Trust against any Claim which may be the subject of indemnification hereunder.
In the event that you elect to defend against such Claim, the defense shall be
conducted by counsel chosen by you and satisfactory to the Trust. The Trust may
retain additional counsel at its expense. Except with the prior written consent
of the agent, the Trust shall not confess any Claim or make any compromise in
any case in which you will be asked to indemnify the Trust.
12.3. Survival of Indemnities. The indemnities granted by the
parties in this section 12 shall survive the termination of this Agreement.
<PAGE>
13. Insurance. You shall maintain reasonable insurance coverage against
any and all liabilities which may arise in connection with the performance of
its duties hereunder. You shall provide information with respect to the extent
of such coverage upon our request.
14. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed sufficient if mailed to such party
at the address of such party set forth in this Agreement or at such other
address as such party may have designated by written notice to the other.
15. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
16. Termination. This Agreement may be terminated by the Trust, without
the payment of any penalty, at any time upon not more than 60 days' nor less
than 30 days' notice to you, by a vote of a majority of the Board of Trustees of
the Trust who are not "interested persons" of the Trust (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of the
Trust's Shareholder Servicing Plan (the "Plan"), this Agreement or any other
agreement related to such Plan, or by "a vote of a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Trust. You may terminate
this Agreement upon not more than 60 days' nor less than 30 days' notice to the
Trust. Notwithstanding anything herein to the contrary, this Agreement may not
be assigned and shall terminate automatically without notice to either party
upon any assignment. Upon termination hereof, the Trust shall pay such
compensation as may be due you as of the date of such termination.
17. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
18. Limitation of Liability. The First Amended and Restated Master
Trust Agreement dated October 30, 1996, as amended from time to time,
establishing the Trust, which is hereby referred to and a copy of which is on
file at the offices of the Trust, provides that the name of the Trust means the
Trustees from time to time serving (as Trustees but not personally) under said
Master Trust Agreement. It is expressly acknowledged and agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the Trust, personally,
but shall bind only the trust property of the Trust, as provided in its Master
Trust Agreement. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in its Master Trust
Agreement.
19. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of The Commonwealth of Massachusetts
without giving effect to the conflicts of laws provisions thereof. The captions
in this Agreement are included for convenience of reference only and in no way
define or limit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement has been executed on behalf of the Trust
by the undersigned not individually, but in the capacity indicated. This
Agreement shall be effective when accepted by you below.
<PAGE>
Please confirm your agreement hereto by signing and returning the
enclosed counterpart of this Agreement at once to: Merrimac Funds, 89 South
Street, Boston, Massachusetts 02111, Attention: President. Upon receipt thereof,
this Agreement and such signed duplicate copy will evidence the agreement
between us.
Merrimac Funds
By: /s/ Sean P. Brennan
----------------------------------
Name:
Title:
ACCEPTED:
Investors Bank & Trust Company
(Shareholder Servicing Agent)
By: /s/ Kevin J. Sheehan
---------------------------------
Name: Kevin J. Sheehan
Title: President
Dated: 12/20/96
------------------------------
Exhibit 18
Multiple Class Expense Allocation Plan
Adopted Pursuant to Rule 18f-3
WHEREAS, Merrimac Funds, an unincorporated association of the type
commonly known as a business trust organized under the laws of the State of
Delaware (the "Trust"), engages in business as an open-end management investment
company and is or will be registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Trust is authorized to (i) issue shares of beneficial
interest ("Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets, and (ii) divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established one or more portfolio series as of
the date hereof (such portfolios being referred to collectively herein as the
"Initial Series" -- such series, together with all other series subsequently
established by the Trust and made subject to this Plan, being referred to herein
individually as a "Series" and collectively as the "Series"), and two classes
thereof designated as the "Institutional Class" and "Premium Class" shares; and
WHEREAS, the Trustees have determined to operate pursuant to Rule 18f-3
under the Act and pursuant to such Rule the Board of Trustees as a whole, and
the Trustees who are not interested persons of each Trust (as defined in the
Act) (the "Qualified Trustees"), has determined in the exercise of their
reasonable business judgment that this Plan is in the best interest of each
class of the Initial Series individually and the Initial Series as a whole.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 18f-3 under the Act, on the following terms and conditions:
1. Class Differences. Each class of Shares of each Initial Series shall
represent interests in the same portfolio of investments of the Initial Series
and shall be identical in all respects, and except as otherwise set forth in
this Plan, shall differ solely with respect to: (i) arrangements for shareholder
services of Shares, or both, as provided for in Sections 2 and 3 of this Plan;
(ii) the exclusive right of a Class to vote on certain matters relating to any
Shareholder Servicing Plan adopted by the Trust with respect to such Class;
(iii) such differences relating to purchase minimums, sales charges and eligible
investors as may be set forth in the prospectuses and Statement of Additional
Information of the Initial Series, as the same may be amended or supplemented
from time to time (the "Prospectuses" and "SAI"); (iv) the differences in any
exchange privileges or conversion features of the classes of Shares in effect
from time to time; and (v) the designation of each Class of shares.
2. Differences in Shareholder Services. Each Class of Shares of the
Initial Series shall have a different arrangement for shareholder services, or
both, as follows:
<PAGE>
Premium Class Shares shall be sold without a sales charge and
such Shares shall not be subject to a shareholder servicing plan. Institutional
Class Shares shall be sold without a sales charge but shall be subject to a
shareholder servicing fee of up to 0.25% of the nets assets of the Initial
Series allocable to such class of Shares.
3. Allocation of Expenses. Expenses of the Series shall be allocated as
follows:
(a) Class Expenses. Expenses relating to different
arrangements for shareholder services shall be allocated to and paid by that
class.
(b) Other Allocations. All expenses of the Series not
allocated to a particular class pursuant to Sections 2 and 3(a) of this Plan
shall be allocated to each class on the basis of the net asset value of that
class in relation to the net asset value of the Series. Notwithstanding the
foregoing, the underwriter, adviser, or other provider of services to a Series
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under Rule 18f-3 under the Act; provided, however, that the Board
shall monitor the use of such waivers or reimbursements intended to differ by
class.
4. Term and Termination.
(a) Initial Series. This Plan shall become effective with
respect to the Initial Series as of October 30, 1996, and shall continue in
effect with respect to each class of Shares of the Initial Series (subject to
Section 4(c) hereof) until terminated in accordance with the provisions of
Section 4(c) hereof.
(b) Additional Series or Classes. This Plan shall become
effective with respect to any class of the Initial Series other than the
Institutional and Premium Class shares and with respect to each additional
Series or class thereof established by the Trust after the date hereof and made
subject to this Plan, upon commencement of operations thereof or as otherwise
determined, and shall continue in effect with respect to each such additional
Series or class (subject to Section 4(c) hereof) until terminated in accordance
with the provisions of Section 4(c) hereof. An addendum hereto setting forth
such specific and different terms of such additional series of classes shall be
attached to this Plan.
(c) Termination. This Plan may be terminated at any time with
respect to the Trust or any Series or class thereof, as the case may be, by vote
of a majority of both the Trustees of the Trust and the Qualified Trustees. The
Plan may remain in effect with respect to a Series or class thereof even if it
has been terminated in accordance with this Section 4(e) with respect to such
Series or class or one or more other Series of the Trust.
2
<PAGE>
5. Amendments. Any material amendment to this Plan shall require the
affirmative vote of a majority of both the Trustees of the Trust and the
Qualified Trustees.
Dated: October 30, 1996
3
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Merrimac Cash Fund Premium Class,
form N-SAR for the period ended December 31, 1996
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> Merrimac Cash Fund Premium Class
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,006,310,145
<INVESTMENTS-AT-VALUE> 1,006,310,145
<RECEIVABLES> 0
<ASSETS-OTHER> 68,427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,006,378,572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 875,936,001
<SHARES-COMMON-STOCK> 875,936,001
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 875,936,001
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 632,709
<OTHER-INCOME> 0
<EXPENSES-NET> 45,118
<NET-INVESTMENT-INCOME> 587,591
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 587,591
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 587,591
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 916,936,001
<NUMBER-OF-SHARES-REDEEMED> 41,000,000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 875,936,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,427
<AVERAGE-NET-ASSETS> 469,665,172
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.006
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.006)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information
extracted from Merrimac Cash Fund Institutional Class,
form N-SAR for the period ended December 31, 1996
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> Merrimac Cash Fund Institutional Class
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,006,310,145
<INVESTMENTS-AT-VALUE> 1,006,310,145
<RECEIVABLES> 0
<ASSETS-OTHER> 68,427
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,006,378,572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127,409,933
<SHARES-COMMON-STOCK> 127,409,933
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 127,409,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,939,956
<OTHER-INCOME> 0
<EXPENSES-NET> 80,427
<NET-INVESTMENT-INCOME> 2,859,529
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,859,529
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,859,529
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155,789,923
<NUMBER-OF-SHARES-REDEEMED> 23,379,990
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 127,409,933
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 45,118
<AVERAGE-NET-ASSETS> 101,473,916
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.006
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.006)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
