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As filed with the Securities and Exchange Commission on May 30, 1997
FILE NO. 811-08077
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
SERIES PORTFOLIO II
(Formerly The Global Strategic Income Portfolio)
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 557-0700
John E. Pelletier, c/o Funds Distributor, Inc.,
60 State Street, Suite 1300, Boston Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: Steven K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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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. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests will
be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by other investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in the Registrant.
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PART A (THE TREASURY MONEY MARKET PORTFOLIO)
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
Series Portfolio II (formerly The Global Strategic Income
Portfolio)(the "Portfolio Trust") is an open-end management investment company
which was organized as a trust under the laws of the State of New York on
January 9, 1997. Beneficial interests of the Portfolio Trust are divided into
subtrust (or series), one of which, The Treasury Money Market Portfolio (the
"Portfolio") is described herein. The Portfolio is diversified for purposes of
the Investment Company Act of 1940, as amended (the "1940 Act"). Beneficial
interests in the Portfolio are issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933 (the "1933 Act"). Investments in the Portfolio may
only be made by other investment companies, insurance company separate accounts,
common or commingled trust funds or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
Investments in the Portfolio are not deposits or obligations of, or
guaranteed or endorsed by, Morgan or any other bank. Interests in the Portfolio
are not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other governmental agency. An investment in the
Portfolio is subject to risk, as the net asset value of the Portfolio will
fluctuate with changes in the value of the Portfolio's holdings.
Part B contains more detailed information about the Portfolio,
including information related to (i) the investment policies and restrictions of
the Portfolio, (ii) the Trustees, officers, Advisor and administrators of the
Portfolio, (iii) portfolio transactions and (iv) rights and liabilities of
investors.
The investment objective of the Portfolio is described below, together
with the policies it employs in its efforts to achieve this objective.
Additional information about the investment policies of the Portfolio appears in
Part B under Item 13. There can be no assurance that the investment objective of
the Portfolio will be achieved.
The Portfolio's investment objective is to provide current income,
maintain a high level of liquidity and preserve capital.
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The Portfolio is designed to be an economical and convenient means of
making substantial investments in money market instruments for investors who are
interested in current income, preserving capital and maintaining liquidity.
The Portfolio seeks to achieve its investment objective by investing in
direct obligations of the U.S. Treasury and engaging in repurchase agreement
transactions with respect to those obligations. The market value of obligations
in which the Portfolio invests is not guaranteed and may rise and fall in
response to changes in interest rates. The Portfolio maintains a dollar-weighted
average portfolio maturity of not more than 90 days and invests in the following
securities which have effective maturities of 397 calendar days or less.
TREASURY SECURITIES. The Portfolio will invest in Treasury bills,
notes, and bonds, all of which are backed as to principal and interest payments
by the full faith and credit of the United States ("Treasury Securities").
Treasury bills have initial maturities of one year or less; Treasury notes have
initial maturities of one to ten years; and Treasury bonds generally have
initial maturities of greater than ten years. Each such obligation must have a
remaining maturity of 397 days or less at the time of purchase by the Portfolio.
The Portfolio will not invest in U.S. Government agency obligations.
The Portfolio also may purchase Treasury Securities on a when-issued or
delayed delivery basis and may engage in repurchase and reverse repurchase
agreement transactions involving such securities. For a discussion of these
tranactions, see "Additional Investment Information and Risk Factors."
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement a when-issued security may
be valued at less than its purchase price. The Portfolio maintains with the
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to these commitments. When entering into a when-issued or
delayed delivery transaction, the Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the Portfolio may
be disadvantaged.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio Trust's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The Portfolio will only enter into repurchase
agreements involving Treasury Securities. The term of these
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agreements is usually from overnight to one week. A repurchase agreement may be
viewed as a fully collateralized loan of money by the Portfolio to the seller.
The Portfolio always receives securities as collateral with a market value at
least equal to the purchase price plus accrued interest and this value is
maintained during the term of the agreement. If the seller defaults and the
collateral value declines, the Portfolio might incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, the Portfolio's
realization upon the disposition of collateral may be delayed or limited.
Investments in certain repurchase agreements and certain other investments which
may be considered illiquid are limited. See "Illiquid Investments, Privately
Placed and other Unregistered Securities" below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment
restrictions, the Portfolio is permitted to lend its securities in an amount up
to 33 1/3% of the value of the Portfolio's net assets. The Portfolio may lend
its securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Portfolio
any income accruing thereon. Loans will be subject to termination by the
Portfolio in the normal settlement time, generally three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Portfolio and its respective investors. The Portfolio may pay reasonable
finders' and custodial fees in connection with a loan. In addition, the
Portfolio will consider all facts and circumstances including the
creditworthiness of the borrowing financial institution, and the Portfolio will
not make any loans in excess of one year.
Loans of portfolio securities may be considered extensions of credit by
the Portfolio. The risks to the Portfolio with respect to borrowers of its
portfolio securities are similar to the risks to the Portfolio with respect to
sellers in repurchase agreement transactions. See "Repurchase Agreements" above.
The Portfolio will not lend its securities to any officer, Trustee, director,
employee or other affiliate of the Portfolio, the Advisor or the placement
agent, unless otherwise permitted by applicable law.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may (1)
borrow money from banks solely for temporary or emergency (but not for leverage)
purposes and (2) enter into reverse repurchase agreements for any purpose. The
aggregate amount of such borrowings and reverse repurchase agreements may not
exceed one-third of the Portfolio's total assets less liabilities (other than
borrowings). For the purposes of the 1940 Act, reverse repurchase agreements are
considered a form of borrowing by the Portfolio and, therefore, a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Item 13 in Part B.
ILLIQUID INVESTMENTS, PRIVATELY PLACED AND OTHER UNREGISTERED
SECURITIES. The Portfolio may not acquire any illiquid securities if, as a
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result thereof, more than 10% of the Portfolio's total assets would be in
illiquid investments. Subject to this policy limitation, the Portfolio may
acquire investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the 1933 Act, and cannot
be offered for public sale in the United States without first being registered
under the 1933 Act. An illiquid investment is any investment that cannot be
disposed of within seven days in the normal course of business at approximately
the amount at which it is valued by the Portfolio. The price the Portfolio pays
for illiquid securities or receives upon resale may be lower than the price paid
or received for similar securities with a more liquid market. Accordingly the
valuation of these securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to
institutional investors without registration under the 1933 Act. These
securities may be determined to be liquid in accordance with guidelines
established by the Advisor and approved by the Trustees. The Trustees will
monitor the Advisor's implementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
Investment Policies and Restrictions. Except as otherwise stated in
this Part A or in Part B, the Portfolio's investment objective, policies and
restrictions are not fundamental and may be changed without investor approval.
The Portfolio is diversified and therefore may not, with respect to 75% of its
total assets (1) invest more than 5% of its total assets in the securities of
any one issuer, other than U.S. Government securities, or (2) acquire more than
10% of the outstanding voting securities of any one issuer. The Portfolio will
not concentrate (invest 25% or more of its total assets) in the securities of
issuers in any one industry (other than U.S. Government securities or repurchase
agreements collateralized by such securities).
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see Item 13 in
Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIO TRUST
The Board of Trustees provides broad supervision over the affairs of
the Portfolio Trust. The Portfolio Trust has retained the services of Morgan as
investment adviser and administrative services agent for the Portfolio. The
Portfolio Trust has retained the services of Funds Distributor, Inc. ("FDI") as
co-administrator (the "Co-Administrator").
The Portfolio Trust has not retained the services of a principal
underwriter or distributor, since interests in the Portfolio are offered solely
in private placement transactions. FDI, acting as agent for the Portfolio,
serves as exclusive placement agent of interests in the Portfolio. FDI receives
no additional compensation for serving as exclusive placement agent to the
Portfolio.
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INVESTMENT ADVISOR. The Portfolio has retained the services of Morgan
as investment advisor. Morgan, with principal offices at 60 Wall Street, New
York, New York 10260, is a New York trust company which conducts a general
banking and trust business. Morgan is a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated ("J.P. Morgan"), a bank holding company organized under the
laws of Delaware. Through offices in New York City and abroad, J.P. Morgan,
through the Advisor and other subsidiaries, offers a wide range of services to
governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of over $208 billion. Morgan provides investment advice and
portfolio management services to the Portfolio. Subject to the supervision of
the Portfolio Trust's Trustees, Morgan, as Advisor, makes the Portfolio's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the Portfolio's investments. See Item 16 in
Part B.
The Advisor uses a sophisticated, disciplined, collaborative process
for managing all asset classes. The following persons are primarily responsible
for the day-to-day management and implementation of Morgan's process for the
Portfolio since its inception (business experience for the past five years is
indicated parenthetically): Robert R. Johnson, Vice President (employed by
Morgan since prior to 1992) and Daniel B. Mulvey, Vice President (employed by
Morgan since 1992).
As compensation for the services rendered and related expenses borne by
Morgan under the Investment Advisory Agreement with the Portfolio Trust, the
Portfolio has agreed to pay Morgan a fee, which is computed daily and may be
paid monthly, at the annual rate of 0.20% of the Portfolio's average daily net
assets up to $1 billion, and 0.10% of average daily net assets in excess of $1
billion.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio Trust. See Administrative Services Agent
below.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the
Portfolio Trust, FDI serves as the Co-Administrator for the Portfolio. FDI,
directly or through a sub-administrator, (i) provides office space, equipment
and clerical personnel for maintaining the organization and books and records of
the Portfolio; (ii) provides officers for the Portfolio Trust; (iii) files
Portfolio regulatory documents and mails Portfolio communications to Trustees
and investors; and (iv) maintains related books and records. See Administrative
Services Agent below.
For its services under the Co-Administration Agreement, the Portfolio
Trust has agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the Portfolio is based on the ratio of its net assets to the
aggregate net assets of the Portfolio Trust and certain other registered
investment companies subject to similar agreements with FDI.
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ADMINISTRATIVE SERVICES AGENT. Pursuant to the Administrative Services
Agreement with the Portfolio Trust, Morgan provides administrative and related
services to the Portfolio, including services related to tax compliance,
preparation of financial statements, calculation of performance data, oversight
of service providers and certain regulatory and Board of Trustees matters.
Under the Administrative Services Agreement, the Portfolio has agreed
to pay Morgan fees equal to its allocable share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Portfolio and certain other registered investment companies managed by the
Advisor in accordance with the following annual schedule: 0.09% on the first $7
billion of their aggregate average daily net assets and 0.04% of their aggregate
average daily net assets in excess of $7 billion, less the complex- wide fees
payable to FDI.
PLACEMENT AGENT. FDI, a registered broker-dealer, also serves as
exclusive placement agent for the Portfolio. FDI is a wholly owned indirect
subsidiary of Boston Institutional Group, Inc. FDI's principal business address
is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
FUND SERVICES AGREEMENT. Pursuant to an Amended and Restated Portfolio
Fund Services Agreement with the Portfolio Trust, Pierpont Group, Inc.
("Pierpont Group"), 461 Fifth Avenue, New York, New York 10017, assists the
Trustees in exercising their overall supervisory responsibilities for the
affairs of the Portfolio Trust. Pierpont Group provides these services for a fee
approximating its reasonable cost. See Item 14 in Part B.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston Massachusetts 02110, serves as the Portfolio's custodian
and fund accounting and transfer agent. State Street keeps the books of account
for the Portfolio.
EXPENSES. In addition to the fees payable to the service providers
identified above, the Portfolio is responsible for usual and customary expenses
associated with its operations. Such expenses include organization expenses,
legal fees, accounting and audit expenses, insurance costs, the compensation and
expenses of the Trustees, costs asociated with its registration under federal
securities laws, extraordinary expenses, custodian fees and brokerage expenses.
Morgan has agreed that it will reimburse the Portfolio through at least
November 30, 1998 to the extent necessary to maintain the Portfolio's total
operating expenses at the annual rate of 0.20% of the Portfolio's average daily
net assets. This limit does not cover extraordinary expenses during the period.
There is no assurance that Morgan will continue this waiver beyond the specified
period.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
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The Portfolio is a subtrust of the Portfolio Trust, which is organized
as a trust under the laws of the State of New York. Under the Declaration of
Trust, the Trustees are authorized to issue beneficial interests in one or more
subtrusts. Currently, there are two active subtrusts of the Portfolio Trust.
Investments in the Portfolio may not be transferred, but an investor may
withdraw all or any portion of its investment at any time at net asset value.
The Declaration of Trust provides that investors in the Portfolio (other
investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Each investor in the Portfolio is entitled to a vote in proportion to
the amount of its investment in the Portfolio. Investors in the Portfolio will
vote as a separate class, except as to voting of Trustees, as otherwise required
by the 1940 Act, or if determined by the Trustees to be a matter which affects
all subtrusts. As to any matter which only affects a specific subtrust, only
investors in that subtrust are entitled to vote. Investments in the Portfolio
have no preemptive or conversion rights and are fully paid and nonassessable,
except as set forth below. The Portfolio is not required and has no current
intention of holding annual meetings of investors, but the Portfolio will hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies will be submitted to investors for approval. Investors have
under certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees by a specified percentage of the outstanding
interests in the Portfolio Trust) the right to communicate with other investors
in connection with requesting a meeting of investors for the purpose of removing
one or more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified percentage
of the outstanding interests in the Portfolio Trust. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
The net asset value of the Portfolio is determined each business day
other than the holidays listed in Part B ("Portfolio Business Day"). This
determination is made once each Portfolio Business Day as of 4:00 p.m. New York
time (the "Valuation Time").
The "net income" of the Portfolio will consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Income includes
dividends and interest, including discount earned (including both original issue
and market discount) on discount paper accrued ratably to the date of maturity
and any net realized and unrealized gains or losses on the assets of the
Portfolio. All the net income of the Portfolio is allocated pro rata among the
investors in the Portfolio.
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The end of the Portfolio's fiscal year is July 31.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to FDI at 60 State Street, Boston,
Massachusetts 02109, or by calling FDI at (617) 557-0700.
ITEM 7. PURCHASE OF SECURITIES
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by other investment companies, insurance company separate accounts,
common or commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio Trust. The net asset value of the
Portfolio is determined at the Valuation Time on each Portfolio Business Day.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Custodian by a Federal Reserve bank).
The Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interests. The securities delivered in kind are
valued by the method described in Item 19 of Part B as of the business day prior
to the day the Portfolio receives the securities. Securities may be accepted in
payment for beneficial interests only if they are, in the judgment of Morgan,
appropriate investments for the Portfolio. In addition, securities accepted in
payment for beneficial interests must: (i) meet the investment objective and
policies of the Portfolio; (ii) be acquired by the Portfolio for investment and
not for resale; (iii) be liquid securities which are not restricted as to
transfer either by law or liquidity of market; and (iv) have
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a value which is readily ascertainable as evidenced by a listing on an exchange,
over-the-counter market or by readily available market quotations from a dealer
in such securities. The Portfolio reserves the right to accept or reject at its
own option any and all securities offered in payment for beneficial interests.
The Portfolio and FDI reserve the right to cease accepting investments
at any time or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day. At the Valuation Time on each such
day, the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected at the Valuation Time on such day, will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio at the Valuation Time on such day plus or minus, as
the case may be, the amount of net additions to or reductions in the investor's
investment in the Portfolio effected as of the Valuation Time, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
Valuation Time on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of the
Valuation Time on the following Portfolio Business Day.
ITEM 8. REDEMPTION OR REPURCHASE
An investor in the Portfolio may reduce all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio Trust in federal funds normally on the
next Portfolio Business Day after the reduction is effected, but in any event
within seven days. Investments in the Portfolio may not be transferred.
The Portfolio may suspend the right of redemption or withdrawal or
postpone the date of such payment or withdrawal during any period in which the
New York Stock Exchange (the "NYSE") is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act if an emergency exists. In the event that trading in the money
markets is scheduled to end earlier than the close of the NYSE, the Portfolio
would expect to close for purchases and withdrawals an hour in advance of the
end of trading in the money markets. The Portfolio may also close for purchases
and withdrawals at such other times as may be determined by the Trustees to the
extent permitted by applicable law.
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The Portfolio Trust, on behalf of the Portfolio, reserves the right
under certain circumstances, such as accommodating requests for substantial
withdrawals or liquidations, to pay distributions in kind to investors (i.e., to
distribute portfolio securities as opposed to cash). If securities are
distributed, an investor could incur brokerage, tax or other charges in
converting the securities to cash. In addition, distribution in kind may result
in a less diversified portfolio of investments or adversely affect the liquidity
of the Portfolio or the investor's portfolio, as the case may be.
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS PAGE
General Information and History................ B-1
Investment Objective and Policies.............. B-1
Management of the Portfolio Trust ............. B-6
Control Persons and Principal Holders
of Securities.................................. B-11
Investment Advisory and Other Services......... B-11
Brokerage Allocation and Other Practices....... B-16
Capital Stock and Other Securities............. B-17
Purchase, Redemption and Pricing of
Securities Being Offered....................... B-18
Tax Status..................................... B-19
Underwriters................................... B-20
Calculations of Performance Data............... B-20
Financial Statements........................... B-20
Appendix A - Description of Security Ratings... B-21
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
The Portfolio is designed to be an economical and convenient means of
making substantial investments in U.S. Treasury obligations and repurchase
agreement transactions with respect to those obligations. The Portfolio's
investment objective is to provide current income, maintain a high level of
liquidity and preserve capital.
The Portfolio attempts to achieve its investment objective by
maintaining a dollar-weighted average portfolio maturity of not more than 90
days and by investing in U.S. Treasury securities and related repurchase
agreement transactions as described in Part A and in this Part B that have
effective maturities of not more than 397 days. See "Quality and Diversification
Requirements."
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
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The following discussion supplements the information regarding the
investment objective of the Portfolio and the policies the Portfolio employs to
achieve its objective as set forth above and in Part A.
MONEY MARKET INSTRUMENTS
As discussed in Part A, the Portfolio may invest in money market
instruments to the extent consistent with its investment objective and
policies. A description of the various types of money market instruments that
may be purchased by the Portfolio appears below. Also see "Quality and
Diversification Requirements."
U.S. TREASURY SECURITIES. The Portfolio may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds,
all of which are backed as to principal and interest payments by the full
faith and credit of the United States.
Repurchase Agreements. The Portfolio may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the Portfolio Trust's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. The resale price normally is
in excess of the purchase price, reflecting an agreed upon interest rate. This
interest rate is effective for the period of time the Portfolio is invested in
the agreement and is not related to the coupon rate on the underlying security.
A repurchase agreement may also be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The period of these repurchase agreements
will usually be short, from overnight to one week, and at no time will the
Portfolio invest in repurchase agreements for more than 397 days. The securities
which are subject to repurchase agreements, however, may have maturity dates in
excess of 397 days from the effective date of the repurchase agreement. The
Portfolio will only enter into repurchase agreements involving U.S. Treasury
securities. The Portfolio will always receive securities as collateral whose
market value is, and during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Portfolio in each agreement
plus accrued interest, and the Portfolio will make payment for such securities
only upon physical delivery or upon evidence of book entry transfer to the
account of the Custodian. The Portfolio will be fully collateralized within the
meaning of paragraph (a)(4) of Rule 2a-7 under the Investment Company Act of
1940, as amended (the "1940 Act"). If the seller defaults, the Portfolio might
incur a loss if the value of the collateral securing the repurchase agreement
declines and might incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with respect to
the seller of the security, realization upon disposal of the collateral by the
Portfolio may be delayed or limited.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. For example, delivery
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of and payment for these securities can take place a month or more after the
date of the purchase commitment. The purchase price and the interest rate
payable, if any, on the securities are fixed on the purchase commitment date or
at the time the settlement date is fixed. The value of such securities is
subject to market fluctuation and no interest accrues to the Portfolio until
settlement takes place. At the time the Portfolio makes the commitment to
purchase securities on a when-issued or delayed delivery basis, it will record
the transaction, reflect the value each day of such securities in determining
its net asset value and, if applicable, calculate the maturity for the purposes
of average maturity from that date. At the time of its acquisition, a
when-issued security may be valued at less than the purchase price. To
facilitate such acquisitions, the Portfolio will maintain with the Custodian a
segregated account with liquid assets, consisting of cash, U.S. government
securities or other appropriate securities, in an amount at least equal to such
commitments. On delivery dates for such transactions, the Portfolio will meet
its obligations from maturities or sales of the securities held in the
segregated account and/or from cash flow. If the Portfolio chooses to dispose of
the right to acquire a when-issued security prior to its acquisition, it could,
as with the disposition of any other portfolio obligation, incur a gain or loss
due to market fluctuation.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by the Portfolio to the extent permitted under the 1940 Act.
These limits require that, as determined immediately after a purchase is made,
(i) not more than 5% of the value of the Portfolio's total assets will be
invested in the securities of any one investment company, (ii) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group, and (iii) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio. As a shareholder of another investment company, the Portfolio would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Portfolio bears directly
in connection with its own operations. The Portfolio has applied for exemptive
relief from the Securities and Exchange Commission (the "SEC") to permit the
Portfolio to invest in affiliated investment companies. If the requested relief
is granted, the Portfolio would then be permitted to invest in affiliated funds,
subject to certain conditions specified in the applicable order.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, a reverse repurchase agreement is
also considered as the borrowing of money by the Portfolio and, therefore, a
form of leverage. The Portfolio will invest the proceeds of borrowings under
reverse repurchase agreements. In addition, the Portfolio will enter into a
reverse repurchase agreement only when the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. The Portfolio will not invest the proceeds of a reverse repurchase
agreement for a period which exceeds the duration of the
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reverse repurchase agreement. The Portfolio may not enter into reverse
repurchase agreements exceeding in the aggregate one-third of the market value
of its total assets, less liabilities other than the obligations created by
reverse repurchase agreements. The Portfolio will establish and maintain with
the Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to its purchase obligations under its reverse repurchase
agreements. See Investment Restrictions for the Portfolio's limitation on
reverse repurchase agreements and on bank borrowings.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities if
such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year. The Portfolio will not lend its securities to any officer, Trustee,
Director, employee or other affiliate of the Portfolio, the Advisor or the
exclusive placement agent unless otherwise permitted by applicable law.
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Portfolio intends to meet the diversification requirements of the
1940 Act. To meet these requirements, 75% of the assets of the Portfolio is
subject to the following fundamental limitations: (1) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government, its agencies and instrumentalities,
and (2) the Portfolio may not own more than 10% of the outstanding voting
securities of any one issuer.
The Portfolio will limit its investments to direct obligations of the
U.S. Treasury, including Treasury bills, notes and bonds, and related repurchase
agreement transactions, each having a remaining maturity of thirteen months or
less at the time of purchase and will maintain a dollar-weighted average
portfolio maturity of not more than 90 days so that investors can maintain a
stable net asset value per share.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio
Trust with respect to the Portfolio. Except where otherwise noted, these
investment restrictions are "fundamental" policies which, under the 1940 Act,
may not be changed without the vote of a majority of the outstanding voting
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securities of the Portfolio. A "majority of the outstanding voting securities"
is defined in the 1940 Act as the lesser of (a) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (b) more
than 50% of the outstanding voting securities. The percentage limitations
contained in the restrictions below apply at the time of the purchase of
securities.
The Portfolio may not:
1. Enter into reverse repurchase agreements which together with any other
borrowing exceed in the aggregate one-third of the market value of the
Portfolio's total assets, less liabilities other than the obligations
created by reverse repurchase agreements;
2. Borrow money, except in amounts not to exceed one-third of the
Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings) (i) from banks for temporary or
short-term purposes or for the clearance of transactions, (ii) in
connection with reduction of Portfolio interests or to finance failed
settlements of portfolio trades without immediately liquidating
portfolio securities or other assets, (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets and (iv)
pursuant to reverse repurchase agreements entered into by the
Portfolio.1
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the
Portfolio's total assets would be invested in securities or other
obligations of any one such issuer. This limitation shall not apply to
issues of the U.S. Government and repurchase agreements related
thereto;
4. Purchase the securities or other obligations of issuers conducting
their principal business activity in the same industry if, immediately
after such purchase, the value of its investment in such industry would
exceed 25% of the value of the Portfolio's total assets. For purposes
of industry concentration, there is no percentage limitation with
respect to investments in U.S. Government securities and repurchase
agreements related thereto;
5. Make loans, except through purchasing or holding debt obligations,
repurchase agreements, or loans of portfolio securities in accordance
with the Portfolio's investment objective and policies (see "Investment
Objective and Policies");
- --------
1Although the Portfolio is permitted to fulfill plans to purchase
additional securities pending the anticipated sale of other portfolio
securities or assets, the Portfolio has no current intention of
engaging in this form of leverage.
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6. Purchase or sell puts, calls, straddles, spreads, or any combination
thereof, real estate, commodities, or commodity contracts or interests
in oil, gas, or mineral exploration or development programs;
7. Purchase securities on margin, make short sales of securities, or
maintain a short position, provided that this restriction shall not be
deemed to be applicable to the purchase or sale of when-issued
securities or of securities for delivery at a future date;
8. Acquire securities of other investment companies, except as permitted by
the 1940 Act or in connection with a merger, consolidation, reorganization,
acquisition of assets or an offer of exchange;
9. Act as an underwriter of securities; or
10. Issue senior securities, except as may otherwise be permitted by the
foregoing investment restrictions or under the 1940 Act or any rule,
order or interpretation thereunder.
Non-Fundamental Investment Restrictions. The investment restriction
described below is not a fundamental policy of the Portfolio and may be
changed by the Trustees. This non-fundamental investment policy requires that
the Portfolio may not:
(i) acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over seven
calendar days, if as a result thereof, more than 10% of the market value of the
Portfolio's total assets would be in investments that are illiquid.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, the Advisor may classify issuers by industry in accordance with
classifications set forth in the Directory of Companies Filing Annual Reports
With The Securities and Exchange Commission or other sources. In the absence of
such classification or if the Advisor determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Advisor may classify accordingly. For instance, personal credit finance
companies and business credit finance companies are deemed to be separate
industries and wholly owned finance companies are considered to be in the
industry of their parents if their activities are primarily related to financing
the activities of their parents.
ITEM 14. MANAGEMENT OF THE PORTFOLIO TRUST.
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The Trustees and officers of the Portfolio Trust, their addresses and
principal occupations during the past five years and dates of birth are set
forth below. Their titles may have varied during that period. An asterisk
indicates that a Trustee is an "interested person" (as defined in the 1940 Act)
of the Portfolio.
TRUSTEES AND OFFICERS
FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer from January 1990 to April 1994, Amoco Corporation. His
address is 5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January
1, 1932.
WILLIAM G. BURNS--Trustee; Retired; Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL
32779, and his date of birth is November 2, 1932.
ARTHUR C. ESCHENLAUER--Trustee; Retired; Senior Vice President, Morgan
Guaranty Trust Company of New York until 1987. His address is 14 Alta Vista
Drive, RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.
MATTHEW HEALEY (*)--Trustee; Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc. ("Pierpont Group") since 1989. His address is
Pine Tree Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436, and
his date of birth is August 23, 1937.
MICHAEL P. MALLARDI--Trustee; Retired; Senior Vice President, Capital
Cities/ ABC, Inc., and President, Broadcast Group, since 1986. His address is 10
Charnwood Drive, Suffern, NY 10910, and his date of birth is March 17, 1934.
- -------------------------
(*) Mr. Healey is an "interested person" of the Portfolio Trust as that
term is defined in the 1940 Act.
Each Trustee is currently paid an annual fee of $75,000 for serving as
Trustee of the Master Portfolios (as defined below), The JPM Pierpont Funds, The
JPM Institutional Funds and JPM Series Trust and is reimbursed for expenses
incurred in connection with service as a Trustee. The Trustees may hold various
other directorships unrelated to the Portfolio Trust.
The compensation paid to each Trustee for the calendar year ended
December 31, 1996 is set forth below.
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TOTAL TRUSTEE
COMPENSATION ACCRUED
BY THE MASTER
PORTFOLIOS (*), THE
JPM INSTITUTIONAL
FUNDS, THE JPM
PIERPONT FUNDS AND
JPM SERIES TRUST
NAME OF TRUSTEE DURING 1996 (***)
Frederick S. Addy, Trustee $65,000
William G. Burns, Trustee $65,000
Arthur C. Eschenlauer, Trustee $65,000
Matthew Healey, Trustee (**) $65,000
Chairman and Chief Executive
Officer
Michael P. Mallardi, Trustee $65,000
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(*) Includes the Portfolio and 22 other portfolios (collectively, the
"Master Portfolios") for which Morgan acts as investment adviser.
(**) During 1996, Pierpont Group paid Mr. Healey, in his role as Chairman of
Pierpont Group, compensation in the amount of $140,000, contributed
$21,000 to a defined contribution plan on his behalf, and paid $21,500
in insurance premiums for his benefit.
(***) No investment company within the fund complex has a pension or
retirement plan. Currently there are 18 investment companies (15
investment companies comprising the Master Portfolios, The JPM Pierpont
Funds, The JPM Institutional Funds and JPM Series Trust) in the fund
complex.
The Trustees of the Portfolio Trust are the same as the Trustees of
each of the other Master Portfolios, The JPM Pierpont Funds, The JPM
Institutional Funds and JPM Series Trust. In accordance with applicable state
requirements, a majority of the disinterested Trustees have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that the same individuals are Trustees of the Master
Portfolios, The JPM Pierpont Funds and The JPM Institutional Funds, up to and
including creating a separate board of trustees.
The Trustees of the Portfolio Trust, in addition to reviewing actions
of the Portfolio Trust's service providers, decide upon matters of general
policy. The Portfolio Trust has entered into a Portfolio Fund Services Agreement
with Pierpont Group to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio Trust's affairs. Pierpont Group
was organized in July 1989 to provide services for The JPM Pierpont Funds. The
Portfolio Trust has agreed to pay Pierpont Group a fee in
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an amount representing its reasonable costs in performing these services to the
Portfolio Trust and certain other registered investment companies subject to
similar agreements with Pierpont Group, Inc. These costs are periodically
reviewed by the Trustees.
The Portfolio Trust has no employees; its executive officers (listed
below), other than the Chief Executive Officer, are provided and compensated by
Funds Distributor, Inc. ("FDI"), a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The Portfolio Trust's officers conduct and supervise
the business operations of the Portfolio Trust. The Trustees of the Portfolio
Trust are equal and sole shareholders of Pierpont Group.
The officers of the Portfolio Trust, their principal occupations during
the past five years and their dates of birth are set forth below. The business
address of each of the officers unless otherwise noted is 60 State Street, Suite
1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1992. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies advised or administered by the Dreyfus
Corporation ("Dreyfus") or its affiliates. From December 1991 to July 1994, she
was President and Chief Compliance Officer of FDI. Her date of birth is August
1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant
Vice President and Manager of Treasury Services and Administration of FDI and
an officer of certain investment companies advised or administered by Dreyfus
or its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of Treasury
Services and Administration of FDI. From April 1993 to January 1995, Mr.
Conroy was a Senior Fund Accountant for Investors Bank & Trust Company. Prior
to March 1993, Mr. Conroy was employed as a fund accountant at The Boston
Company, Inc. His date of birth is March 31, 1969.
RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or Harris Trust and
Savings Bank ("Harris") or their respective affiliates. Prior to April 1997, Mr.
Ingram was Senior Vice President and Director of Client Service and Treasury
Administration of FDI. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. His date of birth is
September 15, 1955.
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KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant
Vice President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity
Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and Harris or
their respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-
Wood was a Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From
1988 to May 1994, Ms. Jacoppo-Wood was a senior paralegal at The Boston
Company Advisors, Inc. ("TBCA"). Her date of birth is December 29, 1966.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice
President and Senior Counsel of FDI and Premier Mutual and an officer of RCM
Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by Dreyfus or Harris or their respective affiliates. Prior to August 1996,
Ms. Keeley was Assistant Vice President and Counsel of FDI and Premier Mutual.
Prior to September 1995, Ms. Keeley was enrolled at Fordham University School
of Law and received her JD in May 1995. Prior to September 1992, Ms. Keeley
was an assistant at the National Association for Public Interest Law.
Address: 200 Park Avenue, New York, New York 10166. Her date of birth is
September 14, 1969.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Harris or its affiliates.
From April 1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum
Financial Group. From 1992 to 1994, Mr. Kelley was employed by Putnam
Investments in legal and compliance capacities. Prior to September 1992, Mr.
Kelley was enrolled at Boston College Law School and received his JD in May
1992. His date of birth is December 24, 1964.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President
and Manager of Treasury Services and Administration of FDI and Premier Mutual,
an officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse
Investors Cash Management Fund, Inc. and certain investment companies advised
or administered by Dreyfus or Harris or their respective affiliates. From
1989 to 1994, Ms. Nelson was an Assistant Vice President and Client Manager
for The Boston Company, Inc. Her date of birth is April 22, 1964.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of FDI and Premier Mutual and an officer
of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by Dreyfus or Harris or their respective affiliates. From February 1992 to
April 1994, Mr. Pelletier served as Counsel for TBCA. From August 1990 to
February 1992, Mr. Pelletier was employed as an Associate at Ropes & Gray.
His date of birth is June 24, 1964.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior
Vice President and Director of Strategic Client Initiatives for FDI since
December 1996. From December 1989 through November 1996, Mr. Petrucelli was
employed with GE Investments where he held various financial, business
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development and compliance positions. He also served as Treasurer of the GE
Funds and as Director of GE Investment Services. Address: 200 Park Avenue,
New York, New York, 10166. His date of birth is May 18, 1961.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive
Vice President, Treasurer and Chief Financial Officer, Chief Administrative
Officer and Director Of FDI. Senior Vice President, Treasurer and Chief
Financial Officer Chief Administrative Officer and Director of Premier Mutual
and an officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or its affiliates.
Prior to April 1997, Mr. Tower was Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of FDI. From
July 1988 to November 1993, Mr. Tower was Financial Manager of The Boston
Company, Inc. His date of birth is June 13, 1962.
The Portfolio Trust's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio, unless, as to liability to the Portfolio or its
investors, it is finally adjudicated that they engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
their offices, or unless with respect to any other matter it is finally
adjudicated that they did not act in good faith in the reasonable belief that
their actions were in the best interests of the Portfolio. In the case of
settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
Not applicable.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISOR. The investment advisor to the Portfolio is Morgan
Guaranty Trust Company of New York, a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated ("J.P. Morgan"), a bank holding company organized under the
laws of the State of Delaware. The Advisor, whose principal offices are at 60
Wall Street, New York, New York 10260, is a New York trust company which
conducts a general banking and trust business. The Advisor is subject to
regulation by the New York State Banking Department and is a member bank of the
Federal Reserve System. Through offices in New York City and abroad, the Advisor
offers a wide range of services, primarily to governmental, institutional,
corporate and high net worth individual customers in the United States and
throughout the world.
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J.P. Morgan, through the Advisor and other subsidiaries, acts as
investment advisor to individuals, governments, corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of $208 billion.
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm was founded in and has been managing investments
since 1913.
The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, London,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The Advisor's fixed income investment process is based on analysis of real
rates, sector diversification and quantitative and credit analysis.
The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Investment Advisory Agreement. The
Advisor is free to and does render similar investment advisory services to
others. The Advisor serves as investment advisor to personal investors and other
investment companies and acts as fiduciary for trusts, estates and employee
benefit plans. Certain of the assets of trusts and estates under management are
invested in common trust funds for which the Advisor serves as trustee. The
accounts which are managed or advised by the Advisor have varying investment
objectives and the Advisor invests assets of such accounts in investments
substantially similar to, or the same as, those which are expected to constitute
the principal investments of the Portfolio. Such accounts are supervised by
officers and employees of the Advisor who may also be acting in similar
capacities for the Portfolio. See Item 17.
Sector weightings are generally similar to a benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio is IBC/Donoghue's
Treasury and Repo Money Fund Average.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds of corporations,
labor unions and state and local governments and the accounts of other
institutional investors, including investment companies. Certain of the assets
of employee benefit accounts under its management are invested in commingled
pension trust funds for which the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.
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The Portfolio is managed by officers of the Advisor who, in acting for
their customers, including the Portfolio, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
Morgan Investment Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to 0.20% of net assets up to $1
billion and 0.10% of net assets in excess of $1 billion of the Portfolio's
average daily net assets.
The Investment Advisory Agreement provides that it will continue in
effect with respect to the Portfolio for a period of two years after execution
only if specifically approved annually thereafter (i) by a vote of the holders
of a majority of the Portfolio's outstanding securities or by the Portfolio
Trust's Trustees and (ii) by a vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" as defined by the 1940 Act cast
in person at a meeting called for the purpose of voting on such approval. The
Investment Advisory Agreement will terminate automatically if assigned and is
terminable at any time without penalty by a vote of a majority of the Trustees
of the Portfolio Trust or by a vote of the holders of a majority of the
Portfolio's outstanding securities on 60 days' written notice to Morgan and by
Morgan on 90 days' written notice to the Portfolio.
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as Morgan from engaging in the business of underwriting or
distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize or control a registered open-end
investment company continuously engaged in the issuance of its securities, such
as the Portfolio Trust. The interpretation does not prohibit a holding company
or a subsidiary thereof from acting as investment advisor and custodian to such
an investment company. Morgan believes that it may perform the services for the
Portfolio contemplated by the Investment Advisory Agreement without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. State
laws on this issue may differ from the interpretation of relevant federal law,
and banks and financial institutions may be required to register as dealers
pursuant to state securities laws. However, it is possible that future changes
in either federal or state statutes and regulations concerning the permissible
activities of banks or trust companies, as well as further judicial or
administrative decisions and interpretations of present and future statutes and
regulations, might prevent Morgan from continuing to perform such services for
the Portfolio.
If Morgan were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio Trust would
recommend to investors that they approve the Portfolio Trust's entering into a
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new investment advisory agreement with another qualified investment advisor
selected by the Trustees.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio. See "Administrative Services Agreement" in
Part A above.
CO-ADMINISTRATOR. Under the Portfolio Trust's Co-Administration
Agreement dated August 1, 1996, FDI serves as the Portfolio Trust's
Co-Administrator. The Co-Administration Agreement may be renewed or amended by
the Trustees without an investor vote. The Co-Administration Agreement is
terminable at any time without penalty by a vote of a majority of the Trustees
of the Portfolio Trust on not more than 60 days' written notice nor less than 30
days' written notice to the other party. The Co-Administrator may, subject to
the consent of the Trustees of the Portfolio Trust, subcontract for the
performance of its obligations, provided, however, that unless the Portfolio
Trust expressly agrees in writing, the Co-Administrator shall be fully
responsible for the acts and omissions of any subcontractor as it would for its
own acts or omissions. See Administrative Services Agent below.
For its services under the Co-Administration Agreement, the Portfolio
Trust has agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the Portfolio is based on the ratio of its net assets to the
aggregate net assets of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios, JPM Series Trust and JPM Series Trust II.
ADMINISTRATIVE SERVICES AGENT. The Portfolio Trust has entered into a
Restated Administrative Services Agreement (the "Services Agreement") with
Morgan, pursuant to which Morgan is responsible for certain administrative and
related services provided to the Portfolio.
Under the Services Agreement the Portfolio Trust has agreed to pay
Morgan fees equal to its allocable share of an annual complex-wide charge. This
charge is calculated daily based on the aggregate net assets of the Master
Portfolios and JPM Series Trust in accordance with the following annual
schedule: 0.09% on the first $7 billion of their aggregate average daily net
assets and 0.04% of their average daily net assets in excess of $7 billion, less
the complex-wide fees payable to FDI. The portion of this charge payable by the
Portfolio is determined by the proportionate share that its net assets bear to
the total net assets of The JPM Pierpont Funds, The JPM Institutional Funds, the
Master Portfolios, the other investors in the Master Portfolios for which Morgan
provides similar services and JPM Series Trust.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston, Massachusetts 02110, serves as
the Portfolio Trust's custodian and accounting and transfer agent. Pursuant to
the Custodian Contract, State Street is responsible for maintaining the books of
account and records of portfolio transactions and holding portfolio securities
and cash. The Custodian maintains portfolio transaction records, calculates book
and tax allocations for the Portfolio and computes the value
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of the interest of each investor. The Portfolio is responsible for the fees
of State Street as the custodian for the Portfolio.
INDEPENDENT ACCOUNTANTS. The independent accountants of the Portfolio
Trust are Price Waterhouse, LLP, 1177 Avenue of the Americas, New York, New York
10036. Price Waterhouse LLP conducts an annual audit of the financial statements
of the Portfolio, assists in the preparation and/or review of the Portfolio's
federal and state income tax returns and consults with the Portfolio Trust as to
matters of accounting and federal and state income taxation.
EXPENSES. In addition to the fees payable to the service providers
identified above, the Portfolio is responsible for usual and customary expenses
associated with its operations. Such expenses include organization expenses,
legal fees, accounting and audit expenses, insurance costs, the compensation and
expenses of the Trustees, costs associated with its registration under federal
securities laws, extraordinary expenses and brokerage expenses applicable to the
Portfolio Trust.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Advisor places orders for the Portfolio for all purchases and sales
of portfolio securities, enters into repurchase agreements, may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See Item 13 above.
Fixed income securities are generally traded at a net price with
dealers acting as principal for their own accounts without a stated commission.
The price of the security usually includes profit to the dealers. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.
In connection with portfolio transactions for the Portfolio, the
Advisor intends to seek best price and execution on a competitive basis for both
purchases and sales of securities.
In selecting a broker, the Advisor considers a number of factors
including: the price per unit of the security; the broker's reliability for
prompt, accurate confirmations and on-time delivery of securities; and the
firm's financial condition. The Trustees of the Portfolio Trust review regularly
the reasonableness of transaction costs incurred by the Portfolio in light of
facts and circumstances deemed relevant from time to time, and, in that
connection, will receive reports from the Advisor and published data concerning
transaction costs incurred by institutional investors generally. Research
services provided by brokers to which the Advisor has allocated brokerage
business in the past include economic statistics and forecasting services,
industry and company analyses, portfolio strategy services, quantitative data,
and consulting services from economists and political analysts. Research
services furnished by brokers are used for the benefit of
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all the Advisor's clients and not solely or necessarily for the benefit of the
Portfolio. The Advisor believes that the value of research services received is
not determinable and does not significantly reduce its expenses. The Portfolio
does not reduce its fee to the Advisor by any amount that might be attributable
to the value of such services.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisor may allocate a portion of the Portfolio's
brokerage transactions to affiliates of the Advisor. In order for affiliates of
the Advisor to effect any portfolio transactions for the Portfolio, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Trustees of the Portfolio Trust,
including a majority of the Trustees who are not "interested persons," have
adopted procedures which are reasonably designed to provide that any
commissions, fees, or other remuneration paid to such affiliates are consistent
with the foregoing standard.
The Portfolio Trust's portfolio securities will not be purchased from
or through or sold to or through the exclusive placement agent or Advisor or any
other "affiliated person" (as defined in the 1940 Act) of the exclusive
placement agent or Advisor when such entities are acting as principals, except
to the extent permitted by law. In addition, the Portfolio will not purchase
securities during the existence of any underwriting group relating thereto of
which the Advisor or an affiliate of the Advisor is a member, except to the
extent permitted by law.
On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other
customers, including other Master Portfolios, the Advisor, to the extent
permitted by applicable laws and regulations may, but is not obligated to,
aggregate the securities to be sold or purchased for the Portfolio with those to
be sold or purchased for other customers in order to obtain best execution,
including lower brokerage commissions if appropriate. In such event, allocation
of the securities so purchased or sold as well as any expenses incurred in the
transaction will be made by the Advisor in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Portfolio. In
some instances, this procedure might adversely affect the Portfolio.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is a subtrust (or series) of the Portfolio Trust, which
is organized as a trust under the laws of the State of New York. Under the
Portfolio Trust's Declaration of Trust, the Trustees are authorized to issue
beneficial interests in one or more series (each a "Series"), including the
Portfolio. Investors in a Series will be held personally liable for the
obligations and liabilities of that Series (and of no other Series), subject,
however, to indemnification by the Portfolio Trust in the event that there is
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imposed upon an investor a greater portion of the liabilities and obligations of
the Series than its proportionate beneficial interest in the Series. The
Declaration of Trust also provides that the Portfolio Trust shall maintain
appropriate insurance (for example, a fidelity bond and errors and omissions
insurance) for the protection of the Portfolio Trust, its investors, Trustees,
officers, employees and agents, and covering possible tort and other
liabilities. Thus, the risk of an investor incurring financial loss on account
of investor liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio Trust itself was unable to meet its
obligations.
Investors in a Series are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
Series only. Upon liquidation or dissolution of a Series, investors are entitled
to share pro rata in that Series' (and no other Series) net assets available for
distribution to its investors. The Portfolio Trust reserves the right to create
and issue additional Series of beneficial interests, in which case the
beneficial interests in each new Series would participate equally in the
earnings, dividends and assets of that particular Series only (and no other
Series). Any property of the Portfolio Trust is allocated and belongs to a
specific Series to the exclusion of all other Series. All consideration received
by the Portfolio Trust for the issuance and sale of beneficial interests in a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings and proceeds thereof, and any funds
or payments derived from any reinvestment of such proceeds, is held by the
Trustees in a separate Series for the benefit of investors in that Series and
irrevocably belongs to that Series for all purposes. Neither a Series nor
investors in that Series possess any right to or interest in the assets
belonging to any other Series.
Investments in a Series have no preference, preemptive, conversion or
similar rights and are fully paid and nonassessable, except as set forth below.
Investments in a Series may not be transferred. Certificates representing an
investor's beneficial interest in a Series are issued only upon the written
request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in each Series. Investors in a Series do not have cumulative voting
rights, and investors holding more than 50% of the aggregate beneficial
interests in all outstanding Series may elect all of the Trustees if they choose
to do so and in such event other investors would not be able to elect any
Trustees. Investors in each Series will vote as a separate class except as to
voting of Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of a particular Series, only investors in the one
or more affected Series are entitled to vote. The Portfolio Trust is not
required and has no current intention of holding annual meetings of investors,
but the Portfolio Trust will hold special meetings of investors when in the
judgment of the Portfolio Trust's Trustees it is necessary or desirable to
submit matters for an investor vote. The Portfolio Trust's Declaration of Trust
may be amended without the vote of investors,
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except that investors have the right to approve by affirmative majority vote any
amendment which would affect their voting rights, alter the procedures to amend
the Declaration of Trust of the Portfolio Trust, or as required by law or by the
Portfolio Trust's registration statement, or as submitted to them by the
Trustees. Any amendment submitted to investors which the Trustees determine
would affect the investors of any Series shall be authorized by vote of the
investors of such Series and no vote will be required of investors in a Series
not affected.
The Portfolio Trust or any Series (including the Portfolio) may enter
into a merger or consolidation, or sell all or substantially all of its assets,
if approved by the vote of two-thirds of its investors (with the vote of each
being in proportion to its percentage of the beneficial interests in the
Series), except that if the Trustees recommend such sale of assets, the approval
by vote of a majority of the investors (with the vote of each being in
proportion to its percentage of the beneficial interests in the Series) will be
sufficient. The Portfolio Trust or any Series may also be terminated (i) upon
liquidation and distribution of its assets if approved by the vote of two-thirds
of its investors (with the vote of each being in proportion to the amount of its
investment) or (ii) by the Trustees by written notice to its investors.
The Portfolio Trust's Declaration of Trust provides that obligations of
the Portfolio Trust are not binding upon the Trustees individually but only upon
the property of the Portfolio Trust and that the Trustees will not be liable for
any action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
All portfolio securities for the Portfolio are valued by the amortized
cost method, as permitted by a rule adopted by the SEC. The purpose of this
method of calculation is to allow certain investors in the Portfolio to maintain
a constant net asset value per share. No assurances can be given that this goal
can be attained. The amortized cost method of valuation values a security at its
cost at the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. If a difference of more
than 1/2 of 1% occurs between valuation based on the amortized cost method and
valuation based on market value, the Trustees will take steps necessary to
reduce such deviation, such as shortening the average portfolio maturity,
realizing gains or losses, or reducing the aggregate outstanding interests. Any
reduction of outstanding interests will be effected by having each investor in
the Portfolio contribute to the Portfolio's capital in necessary amounts on a
pro rata basis. Each investor in the Portfolio will
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be deemed to have agreed to such a contribution in these circumstances by his
investment in the Portfolio.
If the Portfolio determines that it would be detrimental to the best
interest of the remaining investors in the Portfolio to make payment wholly or
partly in cash, payment of the redemption price may be made in whole or in part
by a distribution in kind of securities from the Portfolio, in lieu of cash, in
conformity with the applicable rule of the SEC. If interests are redeemed in
kind, the redeeming investor might incur transaction costs in converting the
assets into cash. The method of valuing portfolio securities is described above
and such valuation will be made as of the same time the redemption price is
determined. The Portfolio will not redeem in kind except in circumstances in
which an investor is permitted to redeem in kind.
ITEM 20. TAX STATUS.
The Portfolio Trust is organized as a New York trust. The Portfolio
Trust should not be subject to any income or franchise tax in the State of New
York. The Portfolio should be taxed as a partnership for federal income tax
purposes and should not be subject to federal income tax. Each investor in the
Portfolio will be required to include in its own tax return its share (as
determined in accordance with the governing instruments of the Portfolio) of the
Portfolio's ordinary income, capital gains and losses, deductions and other
items of income in determining its income tax liability. The determination of
such share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
Although, as described above,the Portfolio will not be subject to
federal income tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets will be managed in such a
way that an investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Code. To ensure that investors will be able to satisfy
the requirements of Subchapter M, the Portfolio must satisfy certain gross
income and diversification requirements, including, among other things, a
requirement that the Portfolio derive less than 30% of its gross income from the
sale of stock, securities, options, futures or forward contracts held less than
three months.
Gains or losses on sales of securities by the Portfolio will be treated
as long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where straddle rules are otherwise
applicable. Other gains or losses on the sale of securities will be short-term
capital gains or losses.
STATE AND LOCAL TAXES. The Portfolio may be subject to state or local
taxes in jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of the Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal
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income tax laws. Investors should consult their own tax advisors with respect
to any state or local taxes.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York arising solely from such investment. Investors are advised to consult
their own tax advisors with respect to the particular tax consequences to them
of an investment in the Portfolio.
ITEM 21. UNDERWRITERS.
Not Applicable.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
Not applicable.
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APPENDIX A
Description of Security Ratings
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA- Debt rated AAA has the highest ratings assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest
rating assigned by Standard & Poor's and has a very strong or
strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are
given a "plus" (+) designation.
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SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory
capacity to pay principal and interest.
MOODY'S
CORPORATE AND MUNICIPAL BONDS
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 edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1- Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
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- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well established access to a range of financial markets and
assured sources of alternate liquidity.
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes
with this rating enjoy strong protection from established cash
flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of
protection not as large as MIG-1.
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PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
Not applicable.
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE INTO PART B:
Not Applicable.
(B) EXHIBITS
1 Restated Declaration of Trust of the Registrant.1
2 Restated By-Laws of the Registrant.2
5 Form of Investment Advisory Agreement between The Global Strategic
Income Portfolio and Morgan Guaranty Trust Company of New York
("Morgan").2
5(a) Form of Investment Advisory Agreement between the Registrant and Morgan
with respect to The Treasury Money Market Portoflio.1
8 Form of Custodian Contract between the Registrant and State Street Bank
and Trust Company ("State Street").2
9(a) Co-Administration Agreement between the Registrant and Funds
Distributor, Inc. dated August 1, 1996.2
9(b) Transfer Agency and Service Agreement between the Registrant and State
Street.2
9(c) Restated Administrative Services Agreement between the Registrant and
Morgan dated August 1, 1996.2
9(d) Amended and Restated Portfolio Fund Services Agreement between the
Registrant and Pierpont Group, Inc. dated July 11, 1996.2
13 Purchase Agreement with respect to initial capital.2
- -------------------
1 Filed herewith.
2 Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A as filed with the Securities and Exchange Commission on
February 28, 1997 (Accession Number 0001016964-97-000040).
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ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Beneficial Interests
As of May 21, 1997, the number of record holders were as follows:
The Global Strategic Income Portfolio 2
The Treasury Money Market Portfolio 0
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an exhibit to its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Morgan is a New York trust company which is a wholly owned subsidiary of
J.P. Morgan & Co. Incorporated. Morgan conducts a general banking and trust
business.
To the knowledge of the Registrant, none of the directors, except those
set forth below, or executive officers of Morgan is or has been during the past
two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain officers and directors
of Morgan also hold various positions with, and engage in business for J.P.
Morgan & Co. Incorporated, which owns all of the outstanding stock of Morgan.
Set forth below are the names, addresses, and principal business of each
director of Morgan who is engaged in another business, profession, vocation or
employment of a substantial nature.
Riley P. Bechtel: Chairman and Chief Executive Officer, Bechtel Group,
Inc. (architectural design and construction). His address is Bechtel Group,
Inc., P.O. Box 193965, San Francisco, CA 94119-3965.
Martin Feldstein: President and Chief Executive Officer, National Bureau of
Economic Research, Inc. (national research institution). His address is National
Bureau of Economic Research, Inc., 1050 Massachusetts Avenue, Cambridge, MA
02138-5398.
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Hanna H. Gray: President Emeritus, The University of Chicago (academic
institution). Her address is The University of Chicago, Department of History,
1126 East 59th Street, Chicago, IL 60637.
James R. Houghton: Retired Chairman, Corning Incorporated (glass
products). His address is R.D.#2 Spencer Hill Road, Corning, NY 14830.
James L. Ketelsen: Retired Chairman and Chief Executive Officer,
Tenneco Inc. (oil, pipe-lines, and manufacturing). His address is 10 South
Briar Hollow 7, Houston, TX 77027.
John A. Krol: President and Chief Executive Officer, E.I. Du Pont de
Nemours & Company (chemicals and energy company). His address is E.I. Du Pont
de Nemours & Company, 1007 Market Street, Wilmington, DE 19898.
Lee R. Raymond: Chairman and Chief Executive Officer, Exxon Corporation
(oil, natural gas, and other petroleum products). His address is Exxon
Corporation, 5959 Las Colinas Boulevard, Irving, TX 75039-2298.
Richard D. Simmons: Retired; Former President, The Washington Post
Company and International Herald Tribune (newspapers). His address is P.O. Box
242, Sperryville, VA 22740.
Douglas C. Yearley: Chairman, President and Chief Executive Officer,
Phelps Dodge Corporation (chemicals). His address is Phelps Dodge Corporation,
2600 N. Central Avenue, Phoenix, AZ 85004-3014.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York,
New York 10260-0060 or 522 Fifth Avenue, New York, New York 10036 (records
relating to its functions as investment adviser and administrative services
agent).
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 or 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as custodian and fund accounting and transfer
agent).
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109 (records relating to its functions as co-administrator and
exclusive placement agent).
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Pierpont Group, Inc., 461 Fifth Avenue, New York, New York 10017
(records relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
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SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused its registration statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of New
York, State of New York, on the 30th day of May, 1997.
SERIES PORTFOLIO II
By: /S/ ELIZABETH A. KEELEY
-----------------------------
Elizabeth A. Keeley
Vice President and Assistant Secretary
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-99.B1 Restated Declaration of Trust of the Registrant
EX-99.B5a Form of Investment Advisory Agreement between the Registrant
and Morgan with respect to The Treasury Money Market Portfolio
I:\dsfndlgl\tspii\amend1.edg
SERIES PORTFOLIO II
(Formerly The Global Strategic Income Portfolio)
DECLARATION OF TRUST
Amended and Restated as of April 10, 1997
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TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust...................................................... 1
Section 1.1 Name.................................. 1
Section 1.2 Definitions........................... 1
ARTICLE II--Trustees...................................................... 3
Section 2.1 Number and Qualification.............. 3
Section 2.2 Term and Election..................... 3
Section 2.3 Resignation, Removal and Retirement... 3
Section 2.4 Vacancies............................. 4
Section 2.5 Meetings.............................. 4
Section 2.6 Chairman of the Board; Officers....... 5
Section 2.7 By-Laws............................... 5
ARTICLE III--Powers of Trustees........................................... 5
Section 3.1 General............................... 5
Section 3.2 Investments........................... 5
Section 3.3 Legal Title........................... 6
Section 3.4 Sale and Increases of Interests....... 6
Section 3.5 Decreases and Redemptions of Interests 6
Section 3.6 Borrow Money............................7
Section 3.7 Delegation; Committees..................7
Section 3.8 Collection and Payment..................7
Section 3.9 Expenses................................7
Section 3.10 Miscellaneous Powers....................7
Section 3.11 Further Powers..........................8
ARTICLE IV--Investment Advisory, Administration and Placement
Agent Arrangements; Custodian...........................8
Section 4.1 Investment Advisory and Other
Arrangements.......................... 8
Section 4.2 Parties to Contract.....................8
Section 4.3 Custodian...............................9
Section 4.4 1940 Act Governance.....................9
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc...............................................9
Section 5.1 Liability of Holders; Indemnification...9
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties............10
Section 5.3 Limitations of Liability of Trustees,
Officers or Employees to Trust, Holders,
etc.....................................10
Section 5.4 Mandatory Indemnification 10
Section 5.5 No Bond Required of Trustees............11
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Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc......................11
Section 5.7 Reliance on Experts, etc................11
Section 5.8 No Repeal or Modification...............11
ARTICLE VI--Interests.......................................................11
Section 6.1 Interests...............................11
Section 6.2 Establishment and Designation of Series.12
Section 6.3 Non-Transferability.....................13
Section 6.4 Register of Interests...................13
ARTICLE VII--Increases, Decreases and Redemptions of Interests..............13
ARTICLE VIII--Determination of Book Capital Account Balances
and Distributions.....................................13
Section 8.1 Book Capital Account Balances...........13
Section 8.2 Allocations and Distributions to Holders13
Section 8.3 Power to Modify Foregoing Procedures....14
ARTICLE IX--Holders.........................................................14
Section 9.1 Rights of Holders.......................14
Section 9.2 Meetings of Holders.....................14
Section 9.3 Notice of Meetings......................15
Section 9.4 Record Date for Meetings, Distributions,
etc................................. 15
Section 9.5 Proxies, etc............................15
Section 9.6 Reports.................................15
Section 9.7 Holder Action by Written Consent........16
Section 9.8 Notices.................................16
ARTICLE X--Duration; Termination; Dissolution; Amendment; Mergers; Etc......16
Section 10.1 Duration................................16
Section 10.2 Dissolution.............................16
Section 10.3 Termination.............................16
Section 10.4 Amendment Procedure.....................17
Section 10.5 Merger, Consolidation and Sale of Assets18
Section 10.6 Incorporation...........................18
ARTICLE XI--Miscellaneous...................................................18
Section 11.1 Certificate of Designation; Agent for
Service of Process....................18
Section 11.2 Governing Law...........................18
Section 11.3 Counterparts............................18
Section 11.4 Reliance by Third Parties...............19
Section 11.5 Provisions in Conflict with Law or
Regulations.............................19
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DECLARATION OF TRUST
OF
SERIES PORTFOLIO II
This DECLARATION OF TRUST of Series Portfolio II is amended
and restated as of the 10th day of April, 1997 by the parties signatory hereto,
as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees have formed The Global Strategic Income
Portfolio as a trust fund under the law of the State of New York pursuant to a
Declaration of Trust dated as of January 9, 1997; and
WHEREAS, the Trustees desire to amend and restate The Global
Strategic Income Portfolio's declaration of trust, pursuant to its Section
10.4(a)(ii), to form a master trust fund or "Trust" (as defined in Section 1.2
hereof) under the law of the State of New York consisting of one or more
subtrusts or "Series" (as defined in Section 1.2 hereof) for the investment and
reinvestment of assets contributed thereto; and
WHEREAS, it is proposed that the trust assets be composed of
money and other property contributed to the Series, such assets to be held and
managed in trust for the benefit of the holders of beneficial interests in such
Series;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and other property contributed to the Trust and will
manage and dispose of the same for the benefit of such holders of beneficial
interests and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the Trust shall be Series Portfolio II
and so far as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and sue or be sued under that name, which name
(and the term "Trust" wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to the officers, employees,
agents or independent contractors of the Trust or its holders of beneficial
interests.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"Administrator" shall mean any party furnishing services to
one or more Series pursuant to any administration contract described in Section
4.1 hereof.
"Book Capital Account" shall mean, for any Holder (as
hereinafter defined) at any time, the Book Capital Account of the Holder at such
time with respect to the Holder's beneficial interest in the Trust Property (as
hereinafter defined) of any Series, determined in accordance with the method
established by the Trustees pursuant to Section 8.1 hereof. The Trust shall
maintain separate records of Book Capital Accounts for each such Series.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, as well as any non-superseded provisions of
the Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
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"Commission" shall mean the United States Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"Fiscal Year" shall mean an annual period(s) of the Series
determined by the Trustees which ends on a date specified by the Trustees or on
such other day as is permitted or required by the Code.
"Holder" shall mean the record holder of any Interest.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual, S
corporation, partnership or grantor trust beneficially owned by any individual,
S corporation or partnership.
"Interested Person" shall have the meaning given it in the 1940 Act
(as hereinafter defined).
"Interest" shall mean the beneficial interest of a Holder in
the Trust Property of any Series, including all rights, powers and privileges
accorded to Holders by this Declaration, which interest may be expressed as a
percentage, determined by calculating for a particular Series, at such times and
on such basis as the Trustees shall from time to time determine, the ratio of
each Holder's Book Capital Account balance to the total of all Holders' Book
Capital Account balances. Reference herein to a specified percentage of, or
fraction of, Interests, means Holders whose combined Book Capital Account
balances represent such specified percentage or fraction of the combined Book
Capital Account balances of all, or a specified group of, Holders.
"Investment Adviser" shall mean any party furnishing services
to one or more Series of the Trust pursuant to any investment advisory contract
described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders of one or more Series as the context may require, of (A) 67% or more of
the Interests present or represented at such meeting, if Holders of more than
50% of all Interests in such one or more Series are present or represented by
proxy, or (B) more than 50% of all Interests in such one or more Series,
whichever is less.
"1940 Act" shall mean the United States Investment Company Act
of 1940, as amended from time to time, and the rules and regulations thereunder.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Redemption" shall mean the complete withdrawal of an Interest
of a Holder the result of which is to reduce the Book Capital Account balance of
that Holder to zero, and the term "redeem" shall mean to effect a Redemption.
"Series" shall mean the subtrusts of the Trust as the same are
established and designated pursuant to Article VI hereof, each of which shall be
a separate subtrust.
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"Trust" shall mean the master trust fund established hereby
and shall include each Series hereof.
"Trust Property" shall mean as of any particular time any and
all assets or other property, real or personal, tangible or intangible, which at
such time is owned or held by or for the account of any Series or for the
account of the Trustees, each component of which shall be allocated and belong
to a specific Series to the exclusion of all other Series.
"Trustees" shall mean each signatory to this Declaration, so
long as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been duly
elected or appointed and have qualified as Trustees in accordance with the
provisions hereof and are then in office, and reference in this Declaration to a
Trustee or Trustees shall refer to such individual or individuals in their
capacity as Trustees hereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three. Any vacancy created by an increase in the number of
Trustees may be filled by the appointment of an individual having the
qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
2.2. Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the event
of resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
Chairman, if any, the President or the Secretary of the Trust and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any Trustee may be removed with or without cause
by the affirmative vote of Holders of two-thirds of the Interests or (provided
the aggregate number of Trustees, after such removal and after giving effect to
any appointment made to fill the vacancy created by such removal, shall not be
less than the number required by Section 2.1 hereof) by the action of two-thirds
of the remaining Trustees. Any Trustee who has attained a mandatory retirement
age, if any, established pursuant to any written policy adopted from time to
time by a majority of the Trustees shall, automatically and without action by
such Trustee or the remaining Trustees, be deemed to have retired in accordance
with the terms of such policy, effective as of the date determined in accordance
with such policy. Any Trustee who has become incapacitated by illness or injury
as
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determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
retirement or removal of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
The Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only when or after the expected vacancy occurs. Subject
to the foregoing sentence, as soon as any Trustee has accepted such appointment
in writing, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. The power of appointment is subject to Section
16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, or any two Trustees or any
officer authorized to call such meetings by the By-Laws of the Trust. Regular
meetings of the Trustees may be held without call or notice at a time and place
fixed by the By-Laws or by resolution of the Trustees. Notice of any other
meeting shall be mailed or otherwise given not less than 24 hours before the
meeting but may be waived in writing by any Trustee either before or after such
meeting. The attendance of a Trustee at a meeting shall constitute a waiver of
notice of such meeting except in the situation in which a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting was not lawfully called or convened. The Trustees
may act with or without a meeting. A quorum for all meetings of the Trustees
shall be a majority of the Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority (or such larger percentage as may be specified
by the By-Laws) of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority (or such larger
percentage as may be specified by the By-Laws) of the members.
Any notice, waiver or written consent hereunder may be
provided and delivered to the Trust or a Trustee by facsimile or other similar
electronic mechanism.
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With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
2.6. Chairman of the Board; Officers. The Trustees may elect
or appoint, from time to time, a Chairman of the Board who shall preside at all
meetings of the Trustees and carry out such other duties as the Trustees may
designate. The Trustees may elect or appoint a President, a Secretary, a
Treasurer and such other officers, agents or independent contractors with such
powers as the Trustees may deem to be advisable and may authorize such officers
to appoint such subordinate officers, agents or independent contractors with
such powers as the Trustees may deem to be advisable. The Chairman, if any,
shall be and each officer may, but need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time, amend
or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust and each
Series to the same extent as if the Trustees were the sole owners of the Trust
Property and such business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees may perform
such acts as in their sole discretion they deem proper for conducting the
business of the Trust and any Series. The enumeration of or failure to mention
any specific power herein shall not be construed as limiting such exclusive and
absolute control. The powers of the Trustees may be exercised without order of
or resort to any court.
The Trustees shall have full power and authority to do any and all acts
and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust.
3.2. Investments. The Trustees shall have the power with respect
to the Trust and each Series to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of United States and foreign currencies and related
instruments, including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, including whole loans, loan participations, direct mortgages
and mortgage-related securities, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible securities,
forward contracts, options, futures contracts, and other securities, including,
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without limitation, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or by the United
States Government, any foreign government, or any agency, instrumentality or
political subdivision of the United States Government or any foreign government,
or any international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or any state or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any and all
such investments of any kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more Persons to exercise any of such rights, powers and privileges in
respect of any of such investments; and the Trustees shall be deemed to have the
foregoing powers with respect to any additional instruments in which the
Trustees may determine to invest; and
(c) definitively interpret the investment objectives, policies
and limitations of any Series.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have the
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series, or in
the name or nominee name of any other Person on behalf of the Trust or any
Series, on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased Trustee
in the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest in a Series, or increase such
Interest, for such type of consideration, including cash or property, at such
time or times (including, without limitation, each business day), and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. Individuals, S corporations,
partnerships and grantor trusts that are beneficially owned by any individual, S
corporation or partnership may not purchase Interests. The Trustees, in their
discretion, may refuse to sell an Interest in a Series to any person without any
cause or reason therefor. A Holder which has redeemed its Interest in a Series
may not be permitted to purchase an Interest in such Series until the later of
60 calendar days after the date of such Redemption or the first day of the
Fiscal Year next succeeding the Fiscal Year during which such Redemption
occurred.
3.5 Decreases and Redemptions of Interests. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest in a Series, or
decrease such Interest, for either cash or property, at such time or times
(including, without limitation, each business day), and on such terms as the
Trustees may deem best.
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3.6. Borrow Money. The Trustees shall have power on behalf of
any Series to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets belonging to
such Series, as appropriate, including the lending of portfolio securities, and
to endorse, guarantee, or undertake the performance of any obligation, contract
or engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust and any Series, to delegate from
time to time to such of their number or to officers, employees, agents or
independent contractors of the Trust or any Series the doing of such things and
the execution of such instruments in either the name of the Trust or any Series
or the names of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property on behalf of any Series; to prosecute, defend,
compromise or abandon any claims relating to the Trust or the Trust Property on
behalf of any Series; to foreclose any security interest securing any
obligation, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay
any expenses from the Trust Property which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of this Declaration,
and to pay reasonable compensation from the Trust Property to themselves as
Trustees. Permitted expenses of the Trust include, but are not limited to,
interest charges, taxes, brokerage fees and commissions; expenses of sales,
increases, decreases or redemptions of Interests; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, placement agents,
custodians transfer agents and fund accountants; fees of pricing, interest,
dividend, credit and other reporting services; costs of membership in trade
associations; telecommunications expenses; costs of forming the Trust and its
Series and maintaining its and their existence; costs of preparing and printing
the registration statements and Holder reports of the Trust and each Series and
delivering them to Holders; expenses of meetings of Holders; costs of
maintaining books and accounts; costs of reproduction, stationery and supplies;
fees and expenses of the Trustees; compensation of the Trust's officers and
employees and costs of other personnel performing services for the Trust or any
Series; costs of Trustee meetings; Commission registration fees and related
expenses; state or foreign securities laws registration fees and related
expenses; and for such non-recurring items as may arise, including litigation to
which the Trust or a Series (or a Trustee or officer of the Trust acting as
such) is a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of an expense allocable to more than
one Series, on the assets of each such Series, prior to any rights or interests
of the Holders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities. The Trustees shall fix the compensation
of all officers, employees and Trustees. The Trustees may pay themselves such
compensation for special services, including legal and brokerage services, as
they in good faith may deem reasonable, and reimbursement for expenses
reasonably incurred by themselves on behalf of the Trust or any Series.
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem appropriate
for the transaction of the business of the Trust or any Series and terminate
such employees or contractual relationships as they consider appropriate; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property insurance policies
insuring the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers,
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employees, agents or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
the Trustees, officers, employees or agents of the Trust or any Series; (e)
prosecute, defend and settle lawsuits in the name of the Trust or any Series and
pay settlements and judgments out of the Trust Property; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the Trust,
to such extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the Fiscal Year of
the Trust or any Series and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust or any Series, but the absence of such a seal
shall not impair the validity of any instrument executed on behalf of the Trust
or such Series.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust or any Series and carry on its operations in any and
all of its branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the District
of Columbia, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other things and execute
all such instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust or any Series although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust or any Series which is made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The Trustees
shall not be required to obtain any court order in order to deal with Trust
Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The Trustees
may in their discretion, from time to time, enter into investment advisory
contracts, administration contracts, placement agent agreements or other service
agreements whereby the other party to such contract or agreement shall undertake
to furnish with respect to one or more particular Series such investment
advisory, administration, placement agent and/or other services as the Trustees
shall, from time to time, consider appropriate or desirable and all upon such
terms and conditions as the Trustees may in their sole discretion determine. The
other party to any such investment advisory contract or administration contract
is referred to as an "Investment Adviser" or "Administrator," respectively.
Notwithstanding any provision of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to employ one or more subadvisers and to
effect purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (all without any further action by the Trustees).
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 or Section 4.3 hereof or in the By-Laws of the Trust
may be entered into with any corporation, firm, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder or member of such other party to the contract,
and no such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any individual holding such
relationship be
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liable merely by reason of such relationship for any loss or expense to the
Trust or any Series under or by reason of any such contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 or Section
4.3 hereof or the By-Laws, and any individual may be financially interested or
otherwise affiliated with Persons who are parties to any or all of the contracts
mentioned in this Section 4.2 or in the By-Laws.
4.3 Custodian. The Trustees shall at all times place and
maintain the securities and similar investments of the Trust on behalf of each
Series in custody meeting the requirements of Section 17(f) of the 1940 Act and
the rules thereunder. The Trustees, on behalf of the Trust or any Series, may
enter into an agreement with a custodian on terms and conditions acceptable to
the Trustees, providing for the custodian, among other things, (a) to hold the
securities owned by the Trust on behalf of any Series and deliver the same upon
written order or oral order confirmed in writing, (b) to receive and receipt for
any moneys due to the Trust on behalf of any Series and deposit the same in its
own banking department or elsewhere, (c) to disburse such funds upon orders or
vouchers, and (d) to employ one or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in Section
4.1 hereof shall be consistent with and subject to the applicable requirements
of Section 15 of the 1940 Act and the rules and orders thereunder with respect
to its continuance in effect, its termination, and the method of authorization
and approval of such contract or renewal. No amendment to a contract referred to
in Section 4.1 hereof shall be effective unless assented to in a manner
consistent with the requirements of Section 15 of the 1940 Act, and the rules
and orders thereunder.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each Holder of an
Interest in a Series shall be jointly and severally liable with every other
Holder of an Interest in that Series (with rights of contribution inter se in
proportion to their respective Interests in the Series) for the liabilities and
obligations of that Series (and of no other Series) in the event that the Trust
fails to satisfy such liabilities and obligations from the assets of that
Series; provided, however, that, to the extent assets of that Series are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of being or having been a Holder of an Interest in that Series to the
extent that such claim or liability imposes on the Holder an obligation or
liability which, when compared to the obligations and liabilities imposed on
other Holders of Interests in that Series, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all legal
and other expenses reasonably incurred by such Holder in connection with any
such claim or liability. The rights accruing to a Holder under this Section 5.1
shall not exclude any other right to which such Holder may be lawfully entitled,
nor shall anything contained herein restrict the right of the Trust to indemnify
or reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described above,
it is intended that each Holder of an Interest in a Series shall remain jointly
and severally liable to the creditors of that Series as a legal matter. The
liabilities of a particular Series and the right to indemnification granted
hereunder to Holders of Interests in such Series shall not be enforceable
against any other Series or Holders of Interests in any other Series.
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5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Third Parties. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust or any Series shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in connection
with Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee, agent or independent contractor (except in the case
of an agent or independent contractor to the extent expressly provided by
written contract) of the Trust arising in connection with the affairs of the
Trust.
5.3. Limitations of Liability of Trustees, Officers or
Employees to Trust, Holders, etc. No Trustee, officer or employee of the Trust
shall be liable to the Trust or the Holders for any action or failure to act
(including, without limitation, the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for such Person's own bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each Trustee,
officer or employee of the Trust (including any Person who serves at the Trust's
request 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, agent or independent contractor, except with respect to any
matter as to which such Person shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties, such liabilities and expenses being liabilities only of the
Series out of which such claim for indemnification arises; provided, however,
that as to any matter disposed of by a compromise payment by such Person,
pursuant to a consent decree or otherwise, no indemnification either for such
payment or for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts (as
opposed to a full trial- type inquiry), by written opinion from independent
legal counsel approved by the Trustees; or (iii) by a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the matter, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry). The rights accruing to any Person under these provisions shall not
exclude any other right to which such Person may be lawfully entitled; provided
that no Person may satisfy any right of indemnity or reimbursement granted in
this Section 5.4 or in Section 5.2 hereof or to which such Person may be
otherwise entitled except out of the Trust Property. The rights of
indemnification provided herein may be insured against by policies maintained by
the Trust. The Trustees may make advance payments in connection with
indemnification under this Section 5.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification, and provided further that either (i) such Person shall have
provided appropriate security for such undertaking, or (ii) the Trust is insured
against losses arising out of any such advance payments, or (iii) either a
majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Person will not be disqualified from indemnification under this Section
5.4.
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5.5. No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent contractor of the Trust or any Series shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by such Trustee, officer, employee, agent or independent contractor
or be liable for the application of money or property paid, loaned or delivered
to or on the order of such Trustee, officer, employee, agent or independent
contractor. Every obligation, contract, instrument, certificate or other
interest or undertaking of the Trust or any Series, and every other act or thing
whatsoever executed in connection with the Trust or any Series shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees, officers, employees, agents or independent
contractors of the Trust or any Series. Every written obligation, contract,
instrument, certificate or other interest or undertaking of the Trust or any
Series made or sold by any Trustee, officer or employee of the Trust or any
Series, in such capacity, shall contain an appropriate recital to the effect
that the Trustee, officer or employee of the Trust or any Series shall not
personally be bound by or liable thereunder, nor shall resort be had to their
private property for the satisfaction of any obligation or claim thereunder, and
appropriate references shall be made therein to the Declaration, and may contain
any further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee, officer
or employee of the Trust or any Series. Subject to the provisions of the 1940
Act, the Trust may maintain insurance for the protection of the Trust Property,
the Holders, and the Trustees, officers or employees of the Trust and any Series
in such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer or
employee of the Trust and any Series shall, in the performance of such Person's
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or any Series (whether or not the Trust or
any Series would have the power to indemnify such Persons against such
liability), upon an opinion of counsel, or upon reports made to the Trust or any
Series by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants selected
with reasonable care by the Trustees, officers or employees of the Trust or any
Series, regardless of whether such counsel or expert may also be a Trustee.
5.8. No Repeal or Modification. Any repeal or modification of
this Article V by the Holders, or adoption or modification of any other
provision of this Declaration or the By-Laws inconsistent with this Article V,
shall be prospective only, to the extent that such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
any Person or indemnification available to any indemnified Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. Interests may be sold only to
Institutional Investors, as may be approved by the Trustees, for cash or other
consideration acceptable to the Trustees, subject to the requirements of the
1940 Act. The Interests shall be personal property giving only the rights in
this Declaration specifically set forth. The value of an Interest shall be equal
to the Book Capital Account balance of the Holder of the Interest.
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The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the Interests
in which shall be separate and distinct from the Interests in any other Series.
The Series shall include, without limitation, those Series specifically
established and designated pursuant to Section 6.2 hereof, and such other Series
as the Trustees may deem necessary or desirable. The Trustees shall have
exclusive power without the requirement of Holder approval to establish and
designate such separate and distinct Series, and, subject to the provisions of
this Declaration and the 1940 Act, to fix and determine the rights of Holders of
Interests in such Series, including with respect to the price, terms and manner
of purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have separate
voting rights or no voting rights.
6.2. Establishment and Designation of Series. The
establishment and designation of any Series shall be effective upon the
execution by the Secretary or an Assistant Secretary of the Trust, pursuant to
authorization by a majority of the Trustees, of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Interests in such Series, or as otherwise provided in such instrument. At any
time that there are no Interests outstanding of any particular Series previously
established and designated, the Trustees may by resolution adopted by a majority
of their number, and evidenced by an instrument executed by the Secretary or an
Assistant Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above
to establish and designate further Series, the Trustees hereby establish and
designate the Series set forth on Schedule A hereto. The Interests in each of
these Series and any Interests in any further Series that may from time to time
be established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Series at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by
the Trust for the issue or sale of Interests in a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall be held by the Trustees in a separate trust for the benefit of the Holders
of Interests in that Series and shall irrevocably belong to that Series for all
purposes, and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. No Series shall have any right to or interest in the
assets belonging to any other Series, and no Holder shall have any right or
interest with respect to the assets belonging to any Series in which it does not
hold an Interest.
(b) Liabilities Belonging to Series. The assets belonging to
each particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series. The liabilities, expenses, costs, charges and reserves so charged to a
Series are herein referred to as "liabilities belonging to" that Series. No
Series shall be liable for or charged with the liabilities belonging to any
other Series, and no Holder shall be subject to any liabilities belonging to any
Series in which it does not hold an Interest.
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(c) Voting. On each matter submitted to a vote of the Holders,
each Holder shall be entitled to a vote proportionate to its Interest as
recorded on the books of the Trust. Each Series shall vote as a separate class
except as to voting for Trustees, as otherwise required by the 1940 Act, or if
determined by the Trustees to be a matter which affects all Series. As to any
matter which does not affect the interest of all Series, only the Holders in the
one or more affected Series shall be entitled to vote. On each matter submitted
to a vote of the Holders, a Holder may apportion its vote with respect to a
proposal in the same proportion as its own shareholders voted with respect to
that proposal.
6.3. Non-Transferability. A Holder may not transfer its Interest.
6.4. Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder in each Series. Such register
shall be conclusive as to the identity of the Holders. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given to it
as herein provided, until it has given its address to such officer or agent of
the Trust as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases and Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted by the
Trustees, each Holder may vary its Interest in any Series at any time by
increasing (through a capital contribution) or decreasing (through a capital
withdrawal) or by a Redemption of its Interest. An increase in the Interest of a
Holder in a Series shall be reflected as an increase in the Book Capital Account
balance of that Holder in that Series and a decrease in the Interest of a Holder
in a Series or the Redemption of the Interest of that Holder shall be reflected
as a decrease in the Book Capital Account balance of that Holder in that Series.
The Trust shall, upon appropriate and adequate notice from any Holder, increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the Trustees;
provided that (a) the amount received by the Holder upon any such decrease or
Redemption shall not exceed the decrease in the Holder's Book Capital Account
balance effected by such decrease or Redemption of its Interest, and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting any such decrease or Redemption, at such rates as the
Trustees may establish, and may, at any time and from time to time, suspend such
right of decrease or Redemption. The procedures for effecting decreases or
Redemptions shall be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of Holders with respect to a particular Series shall be determined on
such days and at such time or times as the Trustees may determine. The Trustees
shall adopt resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations pursuant
to such resolutions may be delegated by the Trustees to the Investment Adviser
or Administrator, custodian, or such other Person as the Trustees may determine.
Upon the Redemption of an Interest, the Holder of that Interest shall be
entitled to receive the balance of its Book Capital Account. A Holder may not
transfer its Book Capital Account balance.
8.2. Allocations and Distributions to Holders. The Trustees shall,
in compliance with the Code, the 1940 Act and generally accepted accounting
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principles, establish the procedures by which the Trust shall make with respect
to each Series (i) the allocation of unrealized gains and losses, taxable income
and tax loss, and profit and loss, or any item or items thereof, to each Holder,
(ii) the payment of distributions, if any, to Holders, and (iii) upon
liquidation, the final distribution of items of taxable income and expense. Such
procedures shall be set forth in writing and be furnished to the Trust's
accountants. The Trustees may amend the procedures adopted pursuant to this
Section 8.2 from time to time. The Trustees may retain from the net profits of
each Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
8.3. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income and net assets of the Trust and of each Series, the allocation of income
of the Trust and of each Series, the Book Capital Account balance of each
Holder, or the payment of distributions to the Holders as they may deem
necessary or desirable to enable the Trust or a Series to comply with any
provision of the 1940 Act or any order of exemption issued by the Commission or
with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property
and the right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
power or right to call for any partition or division of any Trust Property.
The Trust shall be entitled to treat a Holder of record as the holder
in fact and shall not be bound to recognize any equitable or other claim of
interest in such Holder's Interest on the part of any other entity except as may
be otherwise expressly provided by law.
In addition, the Holders shall have power to vote only with respect to
(a) the election of Trustees as provided in Article II, Section 2.4; (b) the
removal of Trustees as provided in Article II, Section 2.3; (c) any investment
advisory contract as provided in Article IV, Section 4.1; (d) any dissolution of
a Series as provided in Article X, Section 10.2; (e) the amendment of this
Declaration to the extent and as provided in Article X, Section 10.4; (f) any
merger, consolidation or sale of assets as provided in Article X, Section 10.5;
and (g) such additional matters relating to the Trust as may be required or
authorized by law, by this Declaration or the By-Laws or any registration
statement of the Trust filed with the Commission, or as the Trustees may
consider desirable.
9.2. Meetings of Holders. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests in one or more Series (if the meeting relates solely to such Series),
or not less than 10% of the Interests in the Trust (if the meeting relates to
the Trust and not solely to one or more particular Series), such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or without the State of New York and within or
without the United States of America on such day and at such time as the
Trustees shall designate. Holders of at least one-third of the Interests in one
or more Series (if the meeting relates solely to such one or more Series) or
Holders of at least one-third of the Interests in the Trust (if the meeting
relates to the Trust and not solely to one or more particular Series), present
in person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other applicable
law, this Declaration or the By-Laws. If a quorum is present at a meeting, an
affirmative vote of the
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Holders present, in person or by proxy, holding more than 50% of the total
Interests of the Holders present in a Series or the Trust, as applicable, either
in person or by proxy, at such meeting constitutes the action of the Holders in
such Series or the Trust, as applicable, unless a greater number of affirmative
votes is required by the 1940 Act, other applicable law, this Declaration or the
By-Laws, and except that a plurality of the total Interests of the Holders
present shall elect a Trustee. All or any one of more Holders may participate in
a meeting of Holders by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting by means of such
communications equipment shall constitute presence in person at such meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder of the Series or the Trust, as the case may be,
at its registered address, mailed at least 10 days and not more than 60 days
before the meeting. Notice of any meeting may be waived in writing by any Holder
either before or after such meeting. The attendance of a Holder at a meeting
shall constitute a waiver of notice of such meeting except in the situation in
which a Holder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting was not lawfully
called or convened. At any meeting, any business properly before the meeting may
be considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders of the Series
or the Trust, as the case may be, for such purpose.
9.5. Proxies, etc. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote is to be taken. A
proxy may be revoked by a Holder at any time before it has been exercised by
placing on file with the Secretary, or with such other officer or agent of the
Trust as the Secretary may direct, a later dated proxy or written revocation.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of the Trust or of one or more Trustees or of one or more officers
of the Trust. Only Holders on the record date shall be entitled to vote. Each
such Holder shall be entitled to a vote proportionate to its Interest in the
Series or the Trust, as the case may be. When an Interest is held jointly by
several Persons, any one of them may vote at any meeting in person or by proxy
in respect of such Interest, but if more than one of them is present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Interest. A proxy purporting to be executed by or on behalf of a Holder,
including proxies received via telecopy, shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving invalidity shall rest on
the challenger.
9.6. Reports. As to each Series, the Trustees shall cause to
be prepared and furnished to each Holder thereof, at least annually as of the
end of each Fiscal Year, a report of operations containing a balance sheet and a
statement of income of such Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition, with
respect to each Series furnish to each Holder of such Series at least
semi-annually interim reports of operations containing an unaudited balance
sheet as of the end of such
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period and an unaudited statement of income for the period from the beginning of
the then-current Fiscal Year to the end of such period.
9.7. Holder Action by Written Consent. Any action which may be
taken on behalf of the Trust or any Series by Holders may be taken without a
meeting if Holders holding more than 50% of all Interests entitled to vote (or
such larger proportion thereof as shall be required by any express provision of
this Declaration or of applicable law) consent to the action in writing and the
written consents are filed with the records of the meetings of Holders. Such
consents shall be treated for all purposes as a vote taken at a meeting of
Holders. Each such written consent shall be executed by or on behalf of the
Holder delivering such consent and shall bear the date of such execution. No
such written consent shall be effective to take the action referred to therein
unless, within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the records
of the meetings of Holders.
9.8. Notices. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly served or
given if mailed, postage prepaid, addressed to a Holder at its last known
address as recorded on the register of the Trust or if delivered to a Holder by
courier or by facsimile or other similar electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or termination
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of lives now in being.
10.2. Dissolution. Any Series shall be dissolved (i) by the
affirmative vote of the Holders of not less than two-thirds of the Interests in
the Series at any meeting of the Holders or by an instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to by the Holders
of not less than two-thirds of such Interests, (ii) by the Trustees by written
notice of dissolution to the Holders of the Interests in the Series, or (iii)
upon the bankruptcy or withdrawal of a Holder of an Interest in the Series,
unless the remaining Holders of Interests in such Series, by majority vote,
agree to continue the Series. The Trust may be dissolved by action of the
Trustees upon the dissolution of the last remaining Series.
10.3. Termination.
(a) Upon an event of dissolution of the Trust or a Series,
unless the Trust or Series is continued in accordance with the proviso to
Section 10.2 above, the Trust or Series, as applicable, shall be terminated in
accordance with the following provisions:
(i) the Trust or Series, as applicable, shall carry on
no business except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up
the affairs of the Trust or Series, as applicable, and all of
the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or Series have been
wound up, including the power to fulfill or discharge the
contracts of the Trust or Series, collect the assets of the
Trust of Series, sell, convey, assign, exchange or otherwise
dispose of all or any part of the Trust Property affected to
one or more Persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other
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property of any kind, discharge or pay the liabilities of the
Trust or Series, and do all other acts appropriate to
liquidate the business of the Trust or Series; provided that
any sale, conveyance, assignment, exchange or other
disposition of all or substantially all the Trust Property or
substantially all of the assets belonging to a particular
Series, other than for cash, shall require approval of the
principal terms of the transaction and the nature and amount
of the consideration by the vote of Holders holding more than
50% of the total Interests in the Trust or Series, as
applicable; and
(iii) after paying or adequately providing
for the payment of all liabilities of the Trust or of the
Series being terminated, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary
for their protection, the Trustees shall distribute the
remaining Trust Property of the Trust or Series, as
applicable, in cash or in kind or partly each, among the
Holders according to their respective rights as set forth in
the procedures established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust or Series and distribution
to the Holders as herein provided, a majority of the Trustees shall execute and
file with the records of the Trust an instrument in writing setting forth the
fact of such termination and distribution. Upon termination of the Trust, the
Trustees shall thereupon be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Holders shall thereupon cease.
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of Holders, amend or
otherwise supplement this Declaration by an instrument in writing executed by a
majority of the Trustees, provided that Holders shall have the right to vote on
any amendment (a) which would affect the voting rights of Holders granted in
Article IX, Section 9.1, (b) to this Section 10.4, (c) required to be approved
by Holders by law or by the Trust's registration statement filed with the
Commission, or (d) submitted to them by the Trustees. Any amendment submitted to
Holders which the Trustees determine would affect the Holders of certain but not
all Series shall be authorized by vote of the Holders of such Series affected
and no vote shall be required of Holders of a Series not affected. Any amendment
applicable to the Trust as a whole, unless otherwise required by law or by this
Declaration or the By-Laws, shall be authorized by vote of the Holders of the
Trust. Notwithstanding anything else herein, any amendment to Article V which
would have the effect of reducing the indemnification and other rights provided
thereby and any repeal or amendment of this sentence shall each require the
affirmative vote of the Holders of two-thirds of the Interests entitled to vote
thereon.
(b) No amendment may be made under Section 10.4(a) hereof which
would change any rights with respect to any Interest by reducing the amount
payable thereon upon liquidation of the Trust or any Series or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of Holders of two-thirds of all Interests which would be so affected by
such amendment.
(c) A certification in recordable form executed by a majority
of the Trustees setting forth an amendment and reciting that it was duly adopted
by the Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when filed with the records of the
Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
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respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust or
any Series may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property, or assets belonging to such Series, as applicable,
including good will, upon such terms and conditions and for such consideration
when and as authorized at any meeting of Holders called for such purpose by
Majority Interests Vote of Interests in the Series affected by such action, or
by an instrument in writing without a meeting, consented to by Holders of not
less than a majority of the Interests in the Series affected by such action, and
any such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the law of the State of
New York, provided however that no such vote shall be required where by
reorganization, purchase of assets or otherwise, the Trust or any affected
Series is the surviving entity.
10.6. Incorporation. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to carry on
any business in which the Trust directly or indirectly has any interest, and to
sell, convey and transfer the Trust Property to any such corporation, trust,
partnership, association or other organization in exchange for the equity
interests thereof or otherwise, and to lend money to, subscribe for the equity
interests of, and enter into any contract with any such corporation, trust,
partnership, association or other organization, or any corporation, trust,
partnership, association or other organization in which the Trust holds or is
about to acquire equity interests. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service of
Process. If required by New York law, the Trust shall file, with the Department
of State of the State of New York, a certificate, in the name of the Trust and
executed by an officer of the Trust, designating the Secretary of State of the
State of New York as an agent upon whom process in any action or proceeding
against the Trust or any Series may be served.
11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed in accordance with the
law of the State of New York and reference shall be specifically made to the
trust law of the State of New York as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
11.3. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
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11.4. Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Holders, (d) the fact that
the number of Trustees or Holders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officer elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, or with other applicable law and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this
Declaration of Trust of Series Portfolio II as of the day and year first above
written.
Frederick S. Addy
As Trustee and not individually
William G. Burns
As Trustee and not individually
Arthur C. Eschenlauer
As Trustee and not individually
Matthew Healey
As Trustee and not individually
Michael P. Mallardi
As Trustee and not individually
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SCHEDULE A
Series Portfolio II
Initial Series
The Global Strategic Income Portfolio
The Treasury Money Market Portfolio
SERIES PORTFOLIO II
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 30th day of May, 1997, between Series Portfolio
II, a master trust organized under the law of the State of New York and Morgan
Guaranty Trust Company of New York, a New York trust company authorized to
conduct a general banking business (the "Advisor"),
WHEREAS, Series Portfolio II is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, Series Portfolio II desires to retain the Advisor to render
investment advisory services to Series Portfolio II's existing separate and
distinct subtrusts or series (each, a "Portfolio") and other future Portfolios
as agreed to from time to time between Series Portfolio II and the Advisor, and
the Advisor is willing to render such services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. Series Portfolio II hereby appoints the Advisor to act as
investment adviser to the Portfolios for the period and on the terms set forth
in this Agreement. The Advisor accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of
Series Portfolio II, the Advisor shall manage the investment operations of each
Portfolio and the composition of the Portfolio's holdings of securities and
investments, including cash, the purchase, retention and disposition thereof and
agreements relating thereto, in accordance with the Portfolio's investment
objectives and policies as stated in Series Portfolio II's registration
statement on Form N-1A, as such may be amended from time to time (the
"Registration Statement"), with respect to the Portfolio, under the Investment
Company Act of 1940, as amended (the "1940 Act"), and subject to the following
understandings:
(a) the Advisor shall furnish a continuous investment program
for each Portfolio and determine from time to time what investments or
securities will be purchased, retained, sold or lent by the Portfolio,
and what portion of the assets will be invested or held uninvested as
cash;
(b) the Advisor shall use the same skill and care in the
management of each Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Advisor, in the performance of its duties and
obligations under this Agreement, shall act in conformity with Series
Portfolio II's Declaration of Trust (such Declaration of Trust, as
presently in effect and as amended from time to time, is herein called
the "Declaration of Trust"), Series Portfolio II's By-Laws (such
By-Laws, as presently in effect and as amended from time to time, are
herein called the "By-Laws") and the Registration Statement and with
the instructions and directions of the Trustees of Series Portfolio II
and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal and state laws and regulations;
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(d) the Advisor shall determine the securities to be
purchased, sold or lent by each Portfolio and as agent for the
Portfolio will effect portfolio transactions pursuant to its
determinations either directly with the issuer or with any broker
and/or dealer in such securities; in placing orders with brokers and/or
dealers the Advisor intends to seek best price and execution for
purchases and sales; the Advisor shall also determine whether the
Portfolio shall enter into repurchase or reverse repurchase agreements;
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of one of the Portfolios as well as
other customers of the Advisor, including any other of the Portfolios,
the Advisor may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to
be so sold or purchased in order to obtain best execution, including
lower brokerage commissions, if applicable. In such event, allocation
of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Portfolio;
(e) the Advisor shall maintain books and records with respect
to each Portfolio's securities transactions and shall render to Series
Portfolio II's Trustees such periodic and special reports as the
Trustees may reasonably request; and
(f) the investment management services of the Advisor to any
of the Portfolios under this Agreement are not to be deemed exclusive,
and the Advisor shall be free to render similar services to others.
3. Series Portfolio II has delivered copies of each of the
following documents to the Advisor and will promptly notify and deliver to it
all future amendments and supplements, if any:
(a) The Declaration of Trust;
(b) The By-Laws;
(c) Certified resolutions of the Trustees of Series Portfolio
II authorizing the appointment of the Advisor and
approving the form of this Agreement;
(d) Series Portfolio II's Notification of Registration on Form
N-8A and Registration Statement as filed with the Securities and
Exchange Commission (the "Commission").
4. The Advisor shall keep each Portfolio's books and records
required to be maintained by it pursuant to paragraph 2(e). The Advisor agrees
that all records which it maintains for any Portfolio are the property of Series
Portfolio II and it will promptly surrender any of such records to Series
Portfolio II upon Series Portfolio II's request. The Advisor further agrees to
preserve for the periods prescribed by Rule 31a-2 of the Commission under the
1940 Act any such records as are required to be maintained by the Advisor with
respect to any Portfolio by Rule 31a-1 of the Commission under the 1940 Act.
5. During the term of this Agreement the Advisor will pay all
expenses incurred by it in connection with its activities under this Agreement,
other than the cost of securities and investments purchased for a Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, each Portfolio will pay to the Advisor as full compensation
therefor a fee at an annual rate set forth on Schedule A attached hereto. Such
fee will be computed daily and payable as agreed by Series Portfolio II and the
Advisor, but no more frequently than monthly.
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7. The Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by any Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
8. This Agreement shall continue in effect with respect to
each Portfolio for a period of more than two years from the Portfolio's
commencement of investment operations only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated with
respect to each Portfolio at any time, without the payment of any penalty, by
vote of a majority of all the Trustees of Series Portfolio II or by vote of a
majority of the outstanding voting securities of that Portfolio on 60 days'
written notice to the Advisor, or by the Advisor at any time, without the
payment of any penalty, on 90 days' written notice to Series Portfolio II. This
Agreement will automatically and immediately terminate in the event of its
"assignment" (as defined in the 1940 Act).
9. The Advisor shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided herein
or authorized by the Trustees of Series Portfolio II from time to time, have no
authority to act for or represent Series Portfolio II in any way or otherwise be
deemed an agent of the Portfolios.
10. This Agreement may be amended, with respect to any
Portfolio, by mutual consent, but the consent of Series Portfolio II must be
approved (a) by vote of a majority of those Trustees of Series Portfolio II who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such amendment, and
(b) by vote of a majority of the outstanding voting securities of the Portfolio.
11. Notices of any kind to be given to the Advisor by Series
Portfolio II shall be in writing and shall be duly given if mailed or delivered
to the Advisor at 522 Fifth Avenue, New York, New York 10036, Attention: Funds
Management, or at such other address or to such other individual as shall be
specified by the Advisor to Series Portfolio II. Notices of any kind to be given
to Series Portfolio II by the Advisor shall be in writing and shall be duly
given if mailed or delivered to Series Portfolio II c/o Funds Distributor, Inc.
at 60 State Street, Suite 1300, Boston, Massachusetts 02109 or at such other
address or to such other individual as shall be specified by Series Portfolio II
to the Advisor.
12. The Trustees of Series Portfolio II have authorized the
execution of this Agreement in their capacity as Trustees and not individually,
and the Advisor agrees that neither the Trustees nor any officer or employee of
Series Portfolio II nor any Portfolio's investors nor any representative or
agent of Series Portfolio II or of the Portfolio(s) shall be personally liable
upon, or shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by Series Portfolio II
or the Portfolio(s), that such Trustees, officers, employees, investors,
representatives and agents shall not be personally liable hereunder, and that it
shall look solely to the trust property for the satisfaction of any claim
hereunder.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the 30th day
of May, 1997.
SERIES PORTFOLIO II
By:
NAME
TITLE
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
NAME
TITLE
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Schedule A
Series Portfolio II
Investment Advisory Fees
The Treasury Money Market Portfolio1
.20% of the average daily net assets of the Portfolio up to $1 billion, .10% of
the average daily net assets of the Portfolio in excess of $ 1 billion
1Approved April 10, 1997
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