As filed with the Securities and Exchange Commission on February 28, 1997
FILE NO. 811-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
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
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
The Global Strategic Income Portfolio (the "Portfolio") is a
diversified, 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 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, as amended (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, (iv) rights and liabilities of
investors and (v) the audited statement of assets and liabilities of the
Portfolio at February 20, 1997.
The investment objective of the Portfolio is described below, together
with the policies employed to attempt to achieve this objective. Additional
information about the investment policies of the Portfolio appears in Part B,
under Item 13. THE PORTFOLIO INVESTS IN LOWER QUALITY DEBT INSTRUMENTS ("JUNK
BONDS"), WHICH ARE SUBJECT TO HIGHER RISKS OF UNTIMELY INTEREST AND PRINCIPAL
PAYMENTS, DEFAULT AND PRICE VOLATILITY THAN HIGHER QUALITY SECURITIES AND MAY
PRESENT LIQUIDITY AND VALUATION PROBLEMS. THE PORTFOLIO'S INVESTMENTS IN
SECURITIES OF FOREIGN ISSUERS, INCLUDING ISSUERS IN EMERGING MARKETS,
INVESTMENTS IN UNRATED AND LOWER RATED DEBT OBLIGATIONS AND INVESTMENTS
DENOMINATED OR QUOTED IN FOREIGN CURRENCIES, AS WELL AS THE PORTFOLIO'S USE OF
INTEREST RATE AND CURRENCY MANAGEMENT TECHNIQUES, ENTAIL RISKS IN ADDITION TO
THOSE THAT ARE CUSTOMARILY ASSOCIATED WITH INVESTING IN DOLLAR-DENOMINATED FIXED
INCOME SECURITIES OF U.S. ISSUERS. INVESTMENTS IN DIRECTLY PLACED MORTGAGES AND
MORTGAGE-BACKED SECURITIES MAY SUBJECT THE PORTFOLIO TO SOME OF THE RISKS
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ASSOCIATED WITH INVESTMENTS IN REAL ESTATE. INTEREST RATE AND CURRENCY
MANAGEMENT TECHNIQUES MAY BE UNAVAILABLE OR INEFFECTIVE IN MITIGATING RISKS
INHERENT IN THE PORTFOLIO. THE PORTFOLIO MAY NOT BE ABLE TO ACHIEVE ITS
INVESTMENT OBJECTIVE. THE PORTFOLIO IS INTENDED FOR INVESTORS WHO CAN ACCEPT A
HIGH DEGREE OF RISK AND IS NOT SUITABLE FOR ALL INVESTORS.
The Portfolio's investment objective is high total return from a
portfolio of fixed income securities of foreign and domestic issuers.
PRIMARY INVESTMENTS. The Portfolio invests primarily in the following
sectors of foreign and domestic fixed income markets: mortgage-backed securities
and direct mortgage obligations; below investment grade debt obligations of U.S.
and non-U.S. issuers; investment grade U.S. dollar-denominated debt obligations
of U.S. and non-U.S. issuers; investment grade non-dollar denominated debt
obligations of non-U.S. issuers; and obligations of emerging markets issuers.
Within such sectors, the Portfolio may invest in a broad range of issuers and
securities with varying maturities. Under normal market conditions,
substantially all and at least 65% of the Portfolio's total assets will be
invested in fixed income securities in at least three countries, including the
United States.
The Portfolio may invest up to 60% of its assets in fixed income
securities rated below investment grade by one or more internationally
recognized rating agencies such as Standard & Poor's Ratings Group ("S&P") or
Moody's Investors Service, Inc. ("Moody's") or in unrated securities determined
to be of comparable credit quality by the Advisor. The Portfolio will not invest
in securities rated below B by S&P or Moody's. The Portfolio is not required to
dispose of securities whose ratings fall below B. Below investment grade
securities, commonly called "junk bonds," are considered speculative and include
securities that are unrated or in default. See Additional Investment Practices
and Risks.
The Portfolio's non-U.S. investments include obligations of government
and corporate issuers in developed and emerging markets. These securities may be
denominated in foreign currencies or the U.S. dollar. The Portfolio generally
attempts to hedge into the U.S. dollar the currency risks resulting from its
investments in securities denominated in currencies of developed countries. The
Portfolio will not routinely hedge the currency exposure resulting from its
emerging market investments. The Advisor may from time to time decide to
maintain unhedged foreign currency positions in any currency or engage in
foreign currency transactions if the Advisor believes the foreign currency
exposure or transaction will benefit the Portfolio.
HOW INVESTMENTS ARE SELECTED. The Portfolio seeks to achieve its
objective through sector allocation and security selection. Under normal
circumstances, the Portfolio allocates its assets among the market sectors
described above on the basis of relative investment opportunities. Using a
variety of analytical tools and based on experienced judgment, the Advisor
assesses the relative attractiveness of each market sector and seeks to optimize
the allocation among them. Specific securities within the sectors which the
Advisor believes are undervalued are selected for purchase using fundamental and
quantitative analysis, analysis of credit and liquidity risk, the expertise of a
dedicated
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trading desk and the judgment of fixed income portfolio managers and analysts
specializing in each market sector.
The Portfolio's duration will generally be approximately equal to the
duration of the Lehman Brothers Aggregate Bond Index (the "Index"). In addition
to securities selection, the Advisor may use futures contracts to adjust the
Portfolio's duration. Currently the Index's duration is approximately four and
one-half years. The maturities of the securities in the Portfolio may vary
widely, however.
Duration is a measure of the weighted average maturity of the debt
obligations held by the Portfolio and the sensitivity of the Portfolio's market
value to changes in interest rates. Generally, the longer the duration of the
Portfolio, the more sensitive it will be to changes in interest rates.
ADDITIONAL INVESTMENT PRACTICES AND RISKS
Investments in fixed income securities entail certain risks, including
adverse income and principal value fluctuations associated with general economic
conditions affecting the fixed income securities markets, as well as adverse
interest rate changes and volatility of yields. The value of fixed income
securities generally will increase when interest rates decline and decline as
interest rates increase. As a result of this price volatility, an investment in
the Portfolio could go down in value.
INVESTMENT IN LOWER RATED FIXED INCOME SECURITIES. While generally
providing higher coupons or interest rates than investments in higher quality
securities, lower quality fixed income securities involve greater risk of loss
of principal and income, including the possibility of default or bankruptcy of
the issuers of such securities, and have greater price volatility, especially
during periods of economic uncertainty or change. These lower quality fixed
income securities tend to be affected by economic changes and short-term
corporate and industry developments to a greater extent than higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. To the extent that the Portfolio invests in such lower quality
securities, the achievement of its investment objective may be more dependent on
the Advisor's own credit analysis.
Lower quality fixed income securities are affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. Economic downturns or an
increase in interest rates may cause a higher incidence of default by the
issuers of these securities, especially issuers that are highly leveraged. The
market for these lower quality fixed income securities is generally less liquid
than the market for investment grade fixed income securities. It may be more
difficult to sell these lower rated securities to meet redemption requests, to
respond to changes in the market, or to value accurately the Portfolio's
portfolio securities for the purposes of determining the Portfolio's net asset
value.
MORTGAGES AND MORTGAGE-BACKED SECURITIES. Mortgages are debt instruments
secured by real property. Mortgage-backed securities represent direct or
indirect participations in, or are collateralized by and payable from, mortgage
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loans secured by real property. Mortgagors can generally prepay interest or
principal on their mortgages whenever they choose. Therefore, mortgages and
mortgage-backed securities are often subject to more rapid repayment than their
stated maturity dates would indicate as a result of principal prepayments on the
underlying loans. This can result in significantly greater price and yield
volatility than with traditional fixed income securities. During periods of
declining interest rates, prepayments can be expected to accelerate and thus
impair the Portfolio's ability to reinvest the returns of principal at
comparable yields. Conversely, in a rising interest rate environment, a
declining prepayment rate will extend the average life of many mortgage-backed
securities and prevent the Portfolio from taking advantage of such higher
yields. Unlike mortgage-backed securities, which generally represent an interest
in a pool of mortgages, direct investments in mortgages involve prepayment and
credit risks of an individual issuer and real property. Consequently, these
investments require different investment and credit analysis by the Advisor.
The Portfolio may invest in publicly and privately issued
mortgage-backed securities including mortgage-backed securities issued or
guaranteed by the U.S. Government or any of its agencies, instrumentalities or
sponsored enterprises, including but not limited to Government National Mortgage
Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae")
and Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae
securities are backed by the full faith and credit of the U.S. Government, which
means that the U.S. Government guarantees that the interest and principal will
be paid when due. Fannie Mae securities and Freddie Mac securities are not
backed by the full faith and credit of the U.S. Government; however, these
enterprises have the ability to obtain financing from the U.S. Treasury.
The Portfolio may also invest in multiple class securities, including
collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment
Conduit ("REMIC") pass-through or participation certificates. CMOs provide an
investor with a specified interest in the cash flow from a pool of underlying
mortgages or other mortgage-backed securities. CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate and a final
scheduled distribution date. In most cases, payments of principal are applied to
the CMO classes in the order of their respective stated maturities, so that no
principal payments will be made on a CMO class until all other classes having an
earlier stated maturity date are paid in full. A REMIC is a CMO that qualifies
for special tax treatment under the Internal Revenue Code of 1986, as amended
(the "Code"), and invests in certain mortgages principally secured by interests
in real property and other permitted investments. The Portfolio does not intend
to purchase residual interests in REMICs.
Stripped mortgage-backed securities ("SMBS") are derivative multiple
class mortgage-backed securities. SMBS are usually structured with two different
classes: one that receives 100% of the interest payments and the other that
receives 100% of the principal payments from a pool of mortgage loans. If the
underlying mortgage loans experience different than anticipated prepayments of
principal, the Portfolio may fail to fully recoup its initial investment in
these securities. Although the market for SMBS is increasingly liquid, certain
SMBS may not be readily marketable and will be considered illiquid for purposes
of the Portfolio's limitation on investments in illiquid securities. The market
value
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of the class consisting entirely of principal payments generally is unusually
volatile in response to changes in interest rates. The yields on a class of SMBS
that receives all or most of the interest from mortgage loans are generally
higher than prevailing market yields on other mortgage-backed securities because
their cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped.
The directly placed mortgages in which the Portfolio invests may
include residential mortgages, multifamily mortgages, mortgages on cooperative
apartment buildings, commercial mortgages, and sale-leasebacks. These
investments are backed by assets such as office buildings, shopping centers,
retail stores, warehouses, apartment buildings and single-family dwellings. In
the event that the Portfolio forecloses on any non-performing mortgage, and
acquires a direct interest in the real property, the Portfolio will be subject
to the risks generally associated with the ownership of real property. There may
be fluctuations in the market value of the foreclosed property and its occupancy
rates, rent schedules and operating expenses. There may also be adverse changes
in local, regional or general economic conditions, deterioration of the real
estate market and the financial circumstances of tenants and sellers,
unfavorable changes in zoning, building, environmental and other laws, increased
real property taxes, rising interest rates, reduced availability and increased
cost of mortgage borrowings, the need for unanticipated renovations, unexpected
increases in the cost of energy, environmental factors, acts of God and other
factors which are beyond the control of the Portfolio or the Advisor. Hazardous
or toxic substances may be present on, at or under the mortgaged property and
adversely affect the value of the property. In addition, the owners of property
containing such substances may be held responsible, under various laws, for
containing, monitoring, removing or cleaning up such substances. The presence of
such substances may also provide a basis for other claims by third parties.
Costs of clean-up or of liabilities to third parties may exceed the value of the
property. In addition, these risks may be uninsurable. In light of these and
similar risks, it may be impossible to dispose profitably of properties in
foreclosure.
MORTGAGE DOLLAR ROLLS. The Portfolio may enter into mortgage dollar
rolls in which the Portfolio sells securities for delivery in the current month
and simultaneously contracts with the same counterparty to repurchase similar
(same type, coupon and maturity) but not identical securities on a specified
future date. During the roll period, the Portfolio loses the right to receive
principal (including prepayments of principal) and interest paid on the
securities sold. However, the Portfolio may benefit from the interest earned on
the cash proceeds of the securities sold until the settlement date of the
forward purchase. The Portfolio will hold and maintain in a segregated account
until the settlement date cash or liquid securities in an amount equal to the
forward purchase price. The benefits derived from the use of mortgage dollar
rolls depend upon the Advisor's ability to manage mortgage prepayments. There is
no assurance that mortgage dollar rolls can be successfully employed.
CORPORATE FIXED INCOME SECURITIES. The Portfolio may invest in publicly and
privately issued debt obligations of U.S. and non-U.S. corporations, including
obligations of industrial, utility, banking and other financial issuers. These
securities are subject to the risk of an issuer's inability to
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meet principal and interest payments on the obligation and may also be subject
to price volatility due to such factors as market interest rates, market
perception of the creditworthiness of the issuer and general market liquidity.
The Portfolio may purchase privately issued corporate fixed income
securities pursuant to Rule 144A of the Securities Act of 1933 ("Rule 144A") or
pursuant to a directly negotiated agreement between the investors, including the
Portfolio, and the corporate issuer. At times, the Portfolio may be the only
investor in a privately issued fixed income security, or one of only a few
institutional investors. In this circumstance, there may be restrictions on the
Portfolio's ability to resell the privately issued fixed income security that
result from contractual limitations in the offering agreement and a limited
trading market. The Advisor will monitor the liquidity of privately issued fixed
income securities in accordance with guidelines established by the Advisor and
monitored by the Trustees. See Restricted and Illiquid Securities.
ASSET-BACKED SECURITIES. The principal and interest payments on
asset-backed securities are collateralized by pools of assets such as auto
loans, credit card receivables, leases, installment contracts and personal
property. Such asset pools are securitized through the use of special purpose
trusts or corporations. Principal and interest payments may be credit enhanced
by a letter of credit, a pool insurance policy or a senior/subordinated
structure. Like mortgage-backed securities, asset-backed securities are subject
to more rapid prepayment of principal than indicated by their stated maturity
which may greatly increase price and yield volatility.
INVESTING IN FOREIGN SECURITIES. Investing in the securities of foreign
issuers involves risks that are not typically associated with investing in U.S.
dollar-denominated securities of domestic issuers. In addition to changes
affecting securities markets generally, these investments may be affected by
changes in currency exchange rates, changes in foreign or U.S. laws or
restrictions applicable to these investments and in exchange control regulations
(e.g., currency blockage). Transaction costs for foreign securities may be
higher than those for similar transactions in the United States. In addition,
clearance and settlement procedures may be different in foreign countries and,
in certain markets, these procedures have on occasion been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
securities transactions.
Foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
U.S. issuers. There may be less publicly available information about a foreign
issuer than about a U.S. issuer. In addition, there is generally less government
regulation of foreign markets, companies and securities dealers than in the
United States. Foreign securities markets may have substantially less volume
than U.S. securities markets and securities of many foreign issuers are less
liquid and more volatile than securities of comparable U.S. issuers.
Furthermore, there is a possibility of nationalization, expropriation or
confiscatory taxation, imposition of withholding taxes on interest payments,
limitations on the removal of funds or other assets, political or social
instability or diplomatic developments which could affect investments in certain
foreign countries.
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CURRENCY RISKS. The U.S. dollar value of securities denominated in a
foreign currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of the currencies in which the
Portfolio's investments are denominated relative to the U.S. dollar will affect
the Portfolio's net asset value. Exchange rates are generally affected by the
forces of supply and demand in the international currency markets, the relative
merits of investing in different countries and the intervention or failure to
intervene of U.S. or foreign governments and central banks. Some countries in
emerging markets also may have managed currencies, which are not free floating
against the U.S. dollar. In addition, emerging markets are subject to the risk
of restrictions upon the free conversion of their currencies into other
currencies. Any devaluations relative to the U.S. dollar in the currencies in
which the Portfolio's securities are quoted would reduce the Portfolio's net
asset value.
The Portfolio may invest any portion of its assets in securities
denominated in a particular currency. The portion of the Portfolio's assets
invested in securities denominated in non-U.S. currencies will vary depending on
market conditions. The Portfolio may enter into forward foreign currency
exchange contracts in order to manage its foreign currency exposure.
INVESTING IN EMERGING MARKETS. Investing in the securities of emerging
market issuers involves considerations and potential risks not typically
associated with investing in the securities of issuers in the United States and
other developed countries.
MARKET CHARACTERISTICS. The fixed income securities markets of emerging
countries generally have substantially less volume than the markets for similar
securities in the United States and may not be able to absorb, without price
disruptions, a significant increase in trading volume or trade size.
Additionally, market making activities may be less extensive in such markets,
which may contribute to increased volatility and reduced liquidity in those
markets. The less liquid the market, the more difficult it may be for the
Portfolio to accurately price its portfolio securities or to dispose of such
securities at the times determined to be appropriate. The risks associated with
reduced liquidity may be particularly acute to the extent that the Portfolio
needs cash to satisfy investor withdrawals, distribute income, or pay expenses.
Transaction costs in emerging markets may be higher than in the United
States and other developed securities markets. As legal systems in emerging
markets develop, foreign investors may be adversely affected by new or amended
laws and regulations or may not be able to obtain swift and equitable
enforcement of existing law.
ECONOMIC, POLITICAL AND SOCIAL FACTORS. Emerging markets may be subject
to a greater degree of economic, political and social instability that could
significantly disrupt the principal financial markets than are markets in the
United States and in other developed countries. Such instability may result from
among other things: (i) authoritarian governments or military involvement in
political and economic decision making, including changes or attempted changes
in government through extraconstitutional means; (ii) popular unrest associated
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with demands for improved economic, political and social conditions; (iii)
internal insurgencies; (iv) hostile relations with neighboring countries; and
(v) ethnic, religious and racial disaffection and conflict. Many emerging
markets have experienced in the past, and continue to experience, high rates of
inflation. In certain countries inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial assets in those countries.
The economies of many emerging markets are heavily dependent upon international
trade and are accordingly affected by protective trade barriers and the economic
conditions of their trading partners. In addition, the economies of some
emerging markets are vulnerable to weakness in world prices for their commodity
exports. The economies of emerging markets may differ unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position.
RESTRICTIONS ON INVESTMENT AND REPATRIATION. Certain emerging markets
limit, or require governmental approval prior to, investments by foreign
persons. Repatriation of investment income and capital from certain emerging
markets is subject to certain governmental consents. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect the operation of the Portfolio.
SOVEREIGN FIXED INCOME SECURITIES. The Portfolio may invest in fixed
income securities issued or guaranteed by a foreign sovereign government or its
agencies, authorities or political subdivisions. Investment in sovereign fixed
income securities involves special risks not present in corporate fixed income
securities. The issuer of the sovereign debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due, and the Portfolio may have limited recourse in
the event of a default. During periods of economic uncertainty, the market
prices of sovereign debt, and the Portfolio's net asset value, may be more
volatile than prices of U.S. debt obligations. In the past, certain foreign
countries have encountered difficulties in servicing their debt obligations,
withheld payments of principal and interest and declared moratoria on the
payment of principal and interest on their sovereign debts.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward international lenders and local political
constraints. Sovereign debtors may also be dependent on expected disbursements
from foreign governments, multilateral agencies and other entities to reduce
principal and interest arrearages on their debt. The failure of a sovereign
debtor to implement economic reforms, achieve specified levels of economic
performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.
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BRADY BONDS. Brady bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings. Brady
bonds have been issued since 1989 and do not have a long payment history. In
light of the history of defaults of countries issuing Brady bonds on their
commercial bank loans, investments in Brady bonds may be viewed as speculative.
Brady bonds may be fully or partially collateralized or uncollateralized, are
issued in various currencies (but primarily the dollar) and are actively traded
in over-the-counter secondary markets. Incomplete collateralization of interest
or principal payment obligations results in increased credit risk.
Dollar-denominated collateralized Brady bonds, which may be fixed-rate bonds or
floating-rate bonds, are generally collateralized by U.S. Treasury zero coupon
bonds having the same maturity as the Brady bonds.
OBLIGATIONS OF SUPRANATIONAL ENTITIES. The Portfolio may invest in
obligations of supranational entities designated or supported by governmental
entities to promote economic reconstruction or development and of international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"), the
European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. Each supranational entity's lending activities
are limited to a percentage of its total capital (including "callable capital"
contributed by its governmental members at the entity's call), reserves and net
income. There is no assurance that participating governments will be able or
willing to honor their commitments to make capital contributions to a
supranational entity.
CONVERTIBLE SECURITIES. Convertible securities in which the Portfolio
may invest consist of bonds, notes, debentures and preferred stocks. Convertible
debt securities and preferred stock acquired by the Portfolio will entitle the
Portfolio to exchange such instruments for common stock of the issuer at a
predetermined rate. Convertible securities are subject both to the credit and
interest rate risks associated with debt obligations and to the stock market
risk associated with equity securities.
ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES. Zero coupon
securities are securities that are sold at a discount to par value and on which
interest payments are not made during the life of the security. Upon maturity,
the holder is entitled to receive the par value of the security. Pay-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. The Portfolio accrues income with respect to zero
coupon and pay-in-kind securities prior to the receipt of cash payments.
Deferred payment securities are securities that remain zero coupon securities
until a predetermined date, at which time the stated coupon rate becomes
effective and interest becomes payable at regular intervals. Zero coupon, pay-
in-kind and deferred payment securities may be subject to greater fluctuation in
value and lesser liquidity in the event of adverse market conditions than
comparably rated securities paying cash interest at regular interest payment
periods.
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INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may invest up
to 10% of its total assets in shares of other investment companies and up to 5%
of its total assets in any one investment company as long as that investment
does not represent more than 3% of the total voting shares of the acquired
investment company. Investments in the securities of other investment companies
may involve duplication of advisory fees and other expenses.
MONEY MARKET INSTRUMENTS. Under normal market conditions, the Portfolio
will purchase money market instruments to invest temporary cash balances or to
maintain liquidity to meet redemptions. However, the Portfolio may also invest
in money market instruments without limitation as a temporary defensive measure
taken in the Advisor's judgment during, or in anticipation of, adverse market
conditions. These money market instruments include obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities,
any foreign government or any of its political subdivisions, commercial paper,
bank obligations, repurchase agreements and other fixed income securities of
U.S. and foreign issuers. If a repurchase agreement counterparty defaults on its
obligations, the Portfolio may, under some circumstances, be limited or delayed
in disposing of the repurchase agreement collateral to recover its investment.
RESTRICTED AND ILLIQUID SECURITIES. The Portfolio may acquire
securities that have restrictions on their resale (restricted securities) or
securities for which there is a limited trading market which the Advisor may
determine are illiquid. However, the Portfolio may not purchase an illiquid
security if, as a result, more than 15% of the Portfolio's net assets would be
invested in illiquid investments. 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. In addition, illiquid
securities may be more difficult to value due to the unavailability of reliable
broker quotes for these securities. The Portfolio may experience delays in
disposing of illiquid securities and this may have an adverse effect on the
ability of the Portfolio to satisfy withdrawals in an orderly manner. The
Portfolio may purchase restricted securities that are eligible for resale to
qualified institutional buyers pursuant to Rule 144A. Restricted securities
eligible for resale under Rule 144A 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.
WHEN-ISSUED AND FORWARD COMMITMENT TRANSACTIONS. The Portfolio may
purchase when-issued securities and enter into other forward commitments to
purchase or sell securities. The value of securities purchased on a when-issued
or forward commitment basis may decline between the purchase date and the
settlement date.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase derivative
securities to enhance return and enter into derivative contracts to hedge
against fluctuations in securities prices or currency exchange rates, to change
the duration of the Portfolio's fixed income holdings or as a substitute for the
purchase or sale of securities or currency.
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All of the Portfolio's transactions in derivative instruments involve a
risk of loss or depreciation due to unanticipated adverse changes in interest
rates, securities prices or currency exchange rates. The loss on derivative
contracts (other than purchased options) may substantially exceed the
Portfolio's initial investment in these contracts. In addition, the Portfolio
may lose the entire premium paid for purchased options that expire before they
can be profitably exercised by the Portfolio.
STRUCTURED SECURITIES. The Portfolio may invest in structured
securities, including currency linked securities. The interest rate or, in some
cases, the principal payable at the maturity of a structured security may change
positively or inversely in relation to one or more interest rates, financial
indices, currency rates or other financial indicators (reference prices). A
structured security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on a structured security is a
multiple of the change in the reference price. Thus, structured securities may
decline in value due to adverse market changes in currency exchange rates and
other reference prices.
DERIVATIVE CONTRACTS. The Portfolio may purchase and sell a variety of
derivative contracts, including futures contracts on securities, indices or
currency; options on futures contracts; options on securities, indices or
currency; forward contracts to purchase or sell securities or currency; and
interest rate and currency swaps. The Portfolio incurs liability to a
counterparty in connection with transactions in futures contracts, forward
contracts and swaps and in selling options. The Portfolio pays a premium for
purchased options. In addition, the Portfolio incurs transaction costs in
opening and closing positions in derivative contracts.
RISKS ASSOCIATED WITH DERIVATIVE SECURITIES AND CONTRACTS. The risks
associated with the Portfolio's transactions in derivative securities and
contracts may include some or all of the following: market risk, leverage and
volatility risk, correlation risk, credit risk, and liquidity and valuation
risk.
MARKET RISK. Investments in structured securities are subject to the
market risks described above. Entering into a derivative contract involves a
risk that the applicable market will move against the Portfolio's position and
that the Portfolio will incur a loss. For derivative contracts other than
purchased options, this loss may substantially exceed the amount of the initial
investment made or the premium received by the Portfolio.
LEVERAGE AND VOLATILITY RISK. Derivative instruments may sometimes
increase or leverage the Portfolio's exposure to a particular market risk.
Leverage enhances the price volatility of derivative instruments held by the
Portfolio. If the Portfolio enters into futures contracts, writes options or
engages in certain foreign currency exchange transactions, it is required to
maintain a segregated account consisting of cash or liquid assets, hold
offsetting portfolio securities or cover written options which may partially
offset the leverage inherent in these transactions. Segregation of a large
percentage of assets could impede portfolio management or an investor's ability
to meet redemption requests.
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CORRELATION RISK. The Portfolio's success in using derivative contracts
to hedge portfolio assets depends on the degree of price correlation between the
derivative contract and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading markets
for the derivative contract, the assets underlying the derivative contract and
the Portfolio's assets.
CREDIT RISK. Derivative securities and over-the-counter derivative
contracts involve a risk that the issuer or counterparty will fail to perform
its contractual obligations.
LIQUIDITY AND VALUATION RISK. Some derivative securities are not
readily marketable or may become illiquid under adverse market conditions. In
addition, during periods of extreme market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative contract, which may
make the contract temporarily illiquid and difficult to price. The Portfolio's
ability to terminate over-the-counter derivative contracts may depend on the
cooperation of the counterparties to such contracts. For thinly traded
derivative securities and contracts, the only source of price quotations may be
the selling dealer or counterparty.
PORTFOLIO SECURITIES LOANS. The Portfolio may lend portfolio securities
with a value up to one-third of its total assets. Each loan must be fully
collateralized by cash or other eligible assets. The Portfolio may pay
reasonable fees in connection with securities loans. The Advisor will evaluate
the creditworthiness of prospective institutional borrowers and monitor the
adequacy of the collateral to reduce the risk of default by borrowers.
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 Investment Company Act of 1940 (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.
SHORT-TERM TRADING. The Portfolio will sell a portfolio security
without regard to the length of time such security has been held if, in the
Advisor's view, the security meets the criteria for sale. The annual portfolio
turnover rate of the Portfolio is generally not expected to exceed 300%. A high
portfolio turnover rate involves higher transaction costs to the Portfolio in
the form of dealer spreads. This policy is subject to certain requirements so
that certain investors can qualify as regulated investment companies under the
Code.
INVESTMENT POLICIES AND RESTRICTIONS. Except as otherwise stated in
this Part A or 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,
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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. For purposes of this limitation, the staff of the
Securities and Exchange Commission (the "SEC") considers (a) all supranational
organizations as a group to be a single industry and (b) each foreign government
and its political subdivisions to be a single industry.
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.
The Board of Trustees provides broad supervision over the affairs of
the Portfolio. The Portfolio has retained the services of Morgan as investment
adviser and administrative services agent. The Portfolio has retained the
services of Funds Distributor, Inc. ("FDI") as co-administrator (the
"Co-Administrator").
The Portfolio 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.
The Portfolio has entered into an Amended and Restated Portfolio Fund
Services Agreement dated July 11, 1996 with Pierpont Group, Inc. ("Pierpont
Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio. The fees to be paid under the agreement
approximate the reasonable cost of Pierpont Group in providing these services to
the Portfolio and other registered investment companies subject to similar
agreements with Pierpont Group. Pierpont Group was organized in 1989 at the
request of the Trustees of The Pierpont Family of Funds for the purpose of
providing these services at cost to those funds. See Item 14 in Part B. The
principal offices of Pierpont Group are located at 461 Fifth Avenue, New York,
New York 10017.
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 $197 billion (of which the Advisor advises over $30
billion). Morgan provides investment advice and portfolio management services to
the Portfolio. Subject to the supervision of the Portfolio's Trustees, Morgan,
as Advisor, makes the Portfolio's day-to-day investment decisions,
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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 have been primarily
responsible for the day-to-day management and implementation of Morgan's
investment process for the Portfolio since its inception (business experience
for the past five years is indicated parenthetically): Gerard W. Lillis,
Managing Director (employed by Morgan since prior to 1992) and Mark E. Smith,
Vice President (employed by Morgan since prior to 1992).
As compensation for the services rendered and related expenses borne by
Morgan under its investment advisory agreement with the Portfolio, the Portfolio
has agreed to pay Morgan a fee which is computed daily and may be paid monthly
at the annual rate of 0.45% of the Portfolio's average daily net assets.
Under a separate agreement, Morgan also provides administrative and
related services to the Portfolio. See Administrative Services Agent below.
CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with the
Portfolio, FDI serves as the Co-Administrator for the Portfolio. FDI (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; (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
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 and certain other registered investment
companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to the Administrative Services
Agreement with the Portfolio, 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
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Boston Institutional Group, Inc. FDI's principal business address is 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the custodian, fund
accounting and transfer agent for the Portfolio. 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. These include, among other things, organization
expenses, legal fees, audit and accounting expenses, insurance costs, the
compensation and expenses of the Trustees, interest, taxes and extraordinary
expenses (such as for litigation), brokerage expenses and registration fees
under foreign securities laws.
Morgan has agreed that it will, at least through November 30, 1997,
maintain the Portfolio's total operating expenses at the annual rate of 0.658%
of the Portfolio's average daily net assets. This expense limitation does not
cover extraordinary expenses during the period.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
As of February 20, 1997, The JPM Institutional Global Strategic Income
Fund (the "Fund"), a series of The JPM Institutional Funds, owned 99.99% of the
outstanding beneficial interests in the Portfolio. So long as the Fund controls
the Portfolio, the Fund may take actions without the approval of any other
holder of beneficial interests in the Portfolio.
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) the right to
communicate with other investors in connection with requesting a meeting of
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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.
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 4:15 p.m. New York
time (the "Valuation Time"). See Item 19 in Part B.
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. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio.
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
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received in "good order" by the Portfolio. The net asset value of the Portfolio
is determined 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) if stock, have a value
which is readily ascertainable as evidenced by a listing on a stock exchange,
OTC 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 at 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 redeem 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
redemption will
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be paid by the Portfolio in federal funds normally on the next Portfolio
Business Day after the redemption is effected, but in any event within seven
days.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
redemption may be suspended or the payment of the proceeds therefrom postponed
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.
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 Fund B-14
Control Persons and Principal Holders
of Securities B-17
Investment Advisory and Other Services B-17
Brokerage Allocation and Other Practices B-22
Capital Stock and Other Securities B-24
Purchase, Redemption and Pricing of
Securities Being Offered B-25
Tax Status B-27
Underwriters B-28
Calculations of Performance Data B-28
Financial Statements B-28
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
The investment objective of The Global Strategic Income Portfolio (the
"Portfolio") is high total return from a portfolio of fixed income securities of
foreign and domestic issuers. The Portfolio attempts to achieve its investment
objective by investing primarily in mortgage-backed securities and direct
mortgage obligations; below investment grade debt obligations of U.S. and non-
U.S. issuers; investment grade U.S. dollar denominated debt obligations of U.S.
and non-U.S. issuers; investment grade non-dollar denominated debt obligations
of non-U.S. issuers; and obligations of emerging market issuers. These fixed
income markets are described in Part A and this Part B.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").
The following discussion supplements the information regarding the
investment objective of the Portfolio and the policies to be employed to achieve
this 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.
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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.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, the Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
Securities in which the Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not limited to,
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, and the U.S. Postal Service, each of which has the right to borrow
from the U.S. Treasury to meet its obligations. Securities in which the
Portfolio may invest that are not backed by the full faith and credit of the
United States include obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, both of whose obligations may be satisfied only by the
individual credits of each issuing agency. Securities which are backed by the
full faith and credit of the United States include obligations of the Government
National Mortgage Association, the Farmers Home Administration, and the
Export-Import Bank.
FOREIGN GOVERNMENT OBLIGATIONS. The Portfolio, subject to its applicable
investment policies, may also invest in short-term obligations of foreign
sovereign governments or of their agencies, instrumentalities, authorities or
political subdivisions. These securities may be denominated in the U.S. dollar
or in another currency. See "Foreign Investments".
BANK OBLIGATIONS. The Portfolio, unless otherwise noted in Part A or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) foreign branches of U.S. banks and U.S. savings and
loans associations or of foreign banks (Euros) and (ii) U.S. branches of foreign
banks (Yankees). The Portfolio will not invest in obligations for which the
Advisor, or any of its affiliated persons, is the ultimate obligor or accepting
bank. The Portfolio may also invest in obligations of international banking
institutions designated or supported by national governments to promote economic
reconstruction, development or trade between nations (e.g., the European
Investment Bank, the Inter-American Development Bank, or the World Bank).
COMMERCIAL PAPER. The Portfolio may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no additional fee,
in its capacity as
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investment advisor to the Portfolio and as fiduciary for other clients for whom
it exercises investment discretion. The monies loaned to the borrower come from
accounts managed by the Advisor or its affiliates, pursuant to arrangements with
such accounts. Interest and principal payments are credited to such accounts.
The Advisor, acting as a fiduciary on behalf of its clients, has the right to
increase or decrease the amount provided to the borrower under an obligation.
The borrower has the right to pay without penalty all or any part of the
principal amount then outstanding on an obligation together with interest to the
date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change. Repayment of a master demand
obligation to participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on demand which is
continuously monitored by the Advisor. Since master demand obligations typically
are not rated by credit rating agencies, the Portfolio may invest in such
unrated obligations only if at the time of an investment the obligation is
determined by the Advisor to have a credit quality which satisfies the
Portfolio's quality restrictions. See "Quality and Diversification
Requirements". Although there is no secondary market for master demand
obligations, such obligations are considered by the Portfolio to be liquid
because they are payable upon demand. The Portfolio does not have any specific
percentage limitation on investments in master demand obligations. It is
possible that the issuer of a master demand obligation could be a client of
Morgan to whom Morgan, in its capacity as a commercial bank, has made a loan.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase
agreements with brokers, dealers or banks that meet the credit guidelines
approved by the 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 thirteen months. The securities which are
subject to repurchase agreements, however, may have maturity dates in excess of
thirteen months from the effective date of the repurchase agreement. 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. 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.
The Portfolio may make investments in other debt securities with
remaining effective maturities of not more than 13 months, including without
limitation
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corporate and foreign bonds, asset-backed securities and other obligations
described in Part A or this Part B.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in Part A, the Portfolio may invest in bonds and other
debt securities of domestic and foreign issuers to the extent consistent with
its investment objectives and policies. A description of these investments
appears in Part A and below. See "Quality and Diversification Requirements". For
information on short-term investments in these securities, see "Money Market
Instruments".
MORTGAGE-BACKED SECURITIES. The Portfolio may invest in mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar security instruments creating a first lien on
owner occupied and non-owner occupied one-unit to four-unit residential
properties, multifamily (i.e., five or more) properties, agriculture properties,
commercial properties and mixed use properties. The investment characteristics
of adjustable and fixed rate mortgage-backed securities differ from those of
traditional fixed income securities. The major differences include the payment
of interest and principal on mortgage-backed securities on a more frequent
(usually monthly) schedule and the possibility that principal may be prepaid at
any time due to prepayments on the underlying mortgage loans or other assets.
These differences can result in significantly greater price and yield volatility
than is the case with traditional fixed income securities. As a result, a faster
than expected prepayment rate will reduce both the market value and the yield to
maturity from those which were anticipated. A prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity and
market value.
GOVERNMENT GUARANTEED MORTGAGE-BACKED SECURITIES. Government National
Mortgage Association mortgage-backed certificates ("Ginnie Maes") are supported
by the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the U.S.
Treasury. These securities include obligations of instrumentalities such as the
Federal Home Loan Mortgage Corporation ("Freddie Macs") and the Federal National
Mortgage Association ("Fannie Maes"). No assurance can be given that the U.S.
Government will provide financial support to these federal agencies,
authorities, instrumentalities and government sponsored enterprises in the
future.
There are several types of guaranteed mortgage-backed securities
currently available, including guaranteed mortgage pass-through certificates and
multiple class securities, which include guaranteed real estate mortgage
investment conduit certificates ("REMIC Certificates"), other collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities.
Mortgage pass-through securities are fixed or adjustable rate
mortgage-backed securities which provide for monthly payments that are a
"pass-through"
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of the monthly interest and principal payments (including any prepayments) made
by the individual borrowers on the pooled mortgage loans, net of any fees or
other amounts paid to any guarantor, administrator and/or servicer of the
underlying mortgage loans.
Multiple class securities include CMOs and REMIC Certificates issued by
U.S. Government agencies, instrumentalities (such as Fannie Mae) and sponsored
enterprises (such as Freddie Mac) or by trusts formed by private originators of,
or investors in, mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, insurance companies, investment banks and
special purpose subsidiaries of the foregoing. In general, CMOs are debt
obligations of a legal entity that are collateralized by, and multiple class
mortgage-backed securities represent direct ownership interests in, a pool of
mortgage loans or mortgaged-backed securities and payments on which are used to
make payments on the CMOs or multiple class mortgage-backed securities.
CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie
Mac are types of multiple class mortgage-backed securities. Investors may
purchase beneficial interests in REMICs, which are known as "regular" interests
or "residual" interests. The Portfolio does not intend to purchase residual
interests in REMICs. The REMIC Certificates represent beneficial ownership
interests in a REMIC trust, generally consisting of mortgage loans or Fannie
Mae, Freddie Mac or Ginnie Mae guaranteed mortgage-backed securities (the
"Mortgage Assets"). The obligations of Fannie Mae and Freddie Mac under their
respective guaranty of the REMIC Certificates are obligations solely of Fannie
Mae and Freddie Mac, respectively.
CMOs and REMIC Certificates are issued in multiple classes. Each class
of CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the assets underlying
the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or
REMIC Certificates to be retired substantially earlier than their final
scheduled distribution dates. Generally, interest is paid or accrues on all
classes of CMOs or REMIC Certificates on a monthly basis.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed
securities ("SMBS") are derivative multiclass mortgage securities, issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
private issuers. Although the market for such securities is increasingly liquid,
privately issued SMBS may not be readily marketable and will be considered
illiquid for purposes of the Portfolio's limitation on investments in illiquid
securities. The Advisor may determine that SMBS which are U.S. Government
securities are liquid for purposes of the Portfolio's limitation on investments
in illiquid securities in accordance with procedures adopted by the Board of
Trustees. The market value of the class consisting entirely of principal
payments generally is unusually volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
from Mortgage Assets are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped.
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ZERO COUPON, PAY-IN-KIND AND DEFERRED PAYMENT SECURITIES. While
interest payments are not made on such securities, holders of such securities
are deemed to have received "phantom income." Because the Portfolio will
distribute "phantom income" to investors, the Portfolio may have fewer assets
with which to purchase income producing securities.
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing the securities.
The asset-backed securities in which the Portfolio may invest are subject to the
Portfolio's overall credit requirements. However, asset-backed securities, in
general, are subject to certain risks. Most of these risks are related to
limited interests in applicable collateral. For example, credit card debt
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts on credit card debt
thereby reducing the balance due. Additionally, if the letter of credit is
exhausted, holders of asset-backed securities may also experience delays in
payments or losses if the full amounts due on underlying sales contracts are not
realized. Because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.
TAX EXEMPT OBLIGATIONS
As discussed in Part A, the Portfolio may, in certain circumstances,
invest in tax exempt obligations to the extent consistent with the Portfolio's
investment objective and policies. A description of the various types of tax
exempt obligations which may be purchased by the Portfolio appears in Part A and
below. See "Quality and Diversification Requirements".
MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the
states, territories and possessions of the United States and the District of
Columbia, by their political subdivisions and by duly constituted authorities
and corporations. For example, states, territories, possessions and
municipalities may issue municipal bonds to raise funds for various public
purposes such as airports, housing, hospitals, mass transportation, schools,
water and sewer works. They may also issue municipal bonds to refund outstanding
obligations and to meet general operating expenses. Public authorities issue
municipal bonds to obtain funding for privately operated facilities, such as
housing and pollution control facilities, for industrial facilities or for water
supply, gas, electricity or waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special
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excise tax or from other specific revenue sources. They are not generally
payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal notes are subdivided into three categories of
short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal notes are short-term obligations with a maturity at the time
of issuance ranging from six months to five years. The principal types of
municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term,
unsecured, negotiable promissory notes that are sold to meet seasonal working
capital or interim construction financing needs of a municipality or agency.
While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or institutions.
Municipal demand obligations are subdivided into two types: variable rate
demand notes and master demand obligations.
Variable rate demand notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to demand payment of the notes,
or to demand purchase of the notes at a purchase price equal to the unpaid
principal balance, plus accrued interest either directly by the issuer or by
drawing on a bank letter of credit or guaranty issued with respect to such note.
The issuer of the municipal obligation may have a corresponding right to prepay
at its discretion the outstanding principal of the note plus accrued interest
upon notice comparable to that required for the holder to demand payment. The
variable rate demand notes in which the Portfolio may invest are payable, or are
subject to purchase, on demand usually on notice of seven calendar days or less.
The terms of the notes provide that interest rates are adjustable at intervals
ranging from daily to six months, and the adjustments are based upon the prime
rate of a bank or other appropriate interest rate index specified in the
respective notes. Variable rate demand notes are valued at amortized cost; no
value is assigned to the right of the Portfolio to receive the par value of the
obligation upon demand or notice.
Master demand obligations are tax exempt municipal obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. The interest on such obligations is, in the
opinion of counsel for the borrower, exempt from federal income tax. Although
there is no secondary market for master demand obligations, such obligations are
considered by the Portfolio to be liquid because they are payable upon demand.
The Portfolio has no specific percentage limitations on investments in master
demand obligations.
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FOREIGN INVESTMENTS
The Portfolio makes substantial investments in foreign countries. The
Portfolio may invest in fixed income securities of foreign issuers denominated
in the U.S. dollar and other currencies. Foreign investments may be made
directly in securities of foreign issuers or in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Generally, ADRs and
EDRs are receipts issued by a bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation and that are designed for
use in the domestic, in the case of ADRs, or European, in the case of EDRs,
securities markets.
Since investments in foreign securities may involve foreign currencies,
the value of the Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Portfolio may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Portfolio's
currency exposure related to foreign investments. See "Additional Investment
Information" in Part A.
The Portfolio may also invest in countries with emerging economies or
securities markets. Political and economic structures in many of such countries
may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of such countries may have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Portfolio's investments in those countries and the
availability to the Portfolio of additional investments in those countries. The
small size and inexperience of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries may
make the Portfolio's investments in such countries illiquid and more volatile
than investments in more developed countries, and the Portfolio may be required
to establish special custodial or other arrangements before making certain
investments in those countries. There may be little financial or accounting
information available with respect to issuers located in certain of such
countries, and it may be difficult as a result to assess the value or prospects
of an investment in such issuers.
For a description of the risks associated with investing in foreign
securities, see "Additional Investment Information and Risk Factors" in Part A.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
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the settlement date is fixed. The value of such securities is subject to market
fluctuation and for fixed income securities 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 settlement 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 ("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 reverse repurchase
agreement. 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. If
interest rates rise during the term of a reverse repurchase agreement, the
Portfolio's entering into the reverse repurchase agreement may have a negative
impact on the Portfolio's net asset value. See "Investment Restrictions" below
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for the Portfolio's limitations on reverse repurchase agreements and bank
borrowings.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Portfolio may engage in mortgage
dollar roll transactions with respect to mortgage securities issued by the
Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction, the Portfolio sells a mortgage backed security and
simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future repurchase
as well as by the interest earned on the reinvestment of the sales proceeds. The
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in an
amount sufficient to pay for the future repurchase are segregated with the
Custodian. Mortgage dollar roll transactions are considered reverse repurchase
agreements for purposes of the Portfolio's investment restrictions.
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
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 no Portfolio will 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 placement
agent, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolio may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in Part A.
As to illiquid investments, the Portfolio is subject to a risk that
should the Portfolio decide to sell them when a ready buyer is not available at
a price the Portfolio deems representative of their value, the value of the
Portfolio's net assets could be adversely affected. Where an illiquid security
must be registered under the Securities Act of 1933, as amended (the "1933 Act")
before it may be sold, the Portfolio may be obligated to pay all or part of the
registration expenses, and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
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adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
INTEREST RATE SWAPS. In connection with such transactions, the
Portfolio will segregate cash or liquid securities to cover any amounts it could
owe under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily, as needed. During the term of the swap, changes in the
value of the swap are recognized as unrealized gains or losses by marking to
market to reflect the market value of the swap. When the swap is terminated, the
Portfolio will record a realized gain or loss equal to the difference, if any,
between the proceeds from (or cost of) the closing transaction and the
Portfolio's basis in the contract. The Portfolio is exposed to credit loss in
the event of nonperformance by the other party to the swap.
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. As for the other 25% of the Portfolio's assets not
subject to the limitation described above, there is no limitation on investment
of these assets under the 1940 Act, so that all of such assets may be invested
in securities of any one issuer. Investments not subject to the limitations
described above could involve an increased risk to the Portfolio should an
issuer, or a state or its related entities, be unable to make interest or
principal payments or should the market value of such securities decline.
The higher total return sought by the Portfolio is generally obtainable
from high yield high risk securities in the lower rating categories of the
established rating services. These securities are rated below Baa by Moody's
Investors Services, Inc. ("Moody's") or below BBB by Standard & Poor's Ratings
Group ("Standard & Poor's"). The Portfolio may invest in securities rated as low
as B by Moody's or Standard & Poor's, which may indicate that the obligations
are speculative to a high degree and in default. Lower rated securities are
generally referred to as junk bonds. See the Appendix for a description of the
characteristics of the various ratings categories. The Portfolio is not
obligated to dispose of securities whose issuers subsequently are in default or
which are downgraded below the minimum ratings noted above. The credit ratings
of Moody's and Standard & Poor's (the "Rating Agencies"), such as those ratings
described in this Part B, may not be changed by the Rating Agencies in a timely
fashion to reflect subsequent economic events. The credit ratings of securities
do not evaluate market risk. The Portfolio may also invest in unrated securities
which, in the opinion of the Advisor, offer comparable yields and risks to the
rated securities in which the Portfolio may invest.
Debt securities that are rated in the lower rating categories, or which
are unrated, involve greater volatility of price and risk of loss of principal
and income. In addition, lower ratings reflect a greater possibility of an
adverse change in financial condition affecting the ability of the issuer to
make
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payments of interest and principal. The market price and liquidity of lower
rated fixed income securities generally respond to short-term corporate and
market developments to a greater extent than the price and liquidity of higher
rated securities, because these developments are perceived to have a more direct
relationship to the ability of an issuer of lower rated securities to meet its
ongoing debt obligations. Although the Advisor seeks to minimize these risks
through diversification, investment analysis and attention to current
developments in interest rates and economic conditions, there can be no
assurance that the Advisor will be successful in limiting the Portfolio's
exposure to the risks associated with lower rated securities. Because the
Portfolio invests in securities in the lower rated categories, the achievement
of the Portfolio's investment objective is more dependent on the Advisor's
ability than would be the case if the Portfolio were investing in securities in
the higher rated categories.
Reduced volume and liquidity in the high yield bond market or the
reduced availability of market quotations may make it more difficult to dispose
of the Portfolio's investments in high yield securities and to value accurately
these assets. The reduced availability of reliable, objective data may increase
the Portfolio's reliance on management's judgment in valuing high yield bonds.
In addition, the Portfolio's investments in high yield securities may be
susceptible to adverse publicity and investor perceptions whether or not
justified by fundamental factors.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OVER-THE-COUNTER OPTIONS. All options purchased or
sold by the Portfolio will be traded on a securities exchange or will be
purchased or sold by securities dealers (OTC options) that meet creditworthiness
standards approved by the Board of Trustees. While exchange-traded options are
obligations of the Options Clearing Corporation, in the case of OTC options, the
Portfolio relies on the dealer from which it purchased the option to perform if
the option is exercised. Thus, when the Portfolio purchases an OTC option, it
relies on the dealer from which it purchased the option to make or take delivery
of the underlying securities. Failure by the dealer to do so would result in the
loss of the premium paid by the Portfolio as well as loss of the expected
benefit of the transaction.
Provided that the Portfolio has arrangements with certain qualified
dealers who agree that the Portfolio may repurchase any option it writes for a
maximum price to be calculated by a predetermined formula, the Portfolio may
treat the underlying securities used to cover the written OTC options as liquid.
In these cases, the OTC option itself would only be considered illiquid to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. In entering into
futures and options transactions the Portfolio may purchase or sell (write)
futures contracts and purchase put and call options, including put and call
options on futures contracts. In addition, the Portfolio may sell (write) put
and call options, including options on futures. Futures contracts obligate the
buyer to take and the seller to make delivery at a future date of a specified
quantity
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of a financial instrument or an amount of cash based on the value of a
securities index. Currently, futures contracts are available on various types of
fixed income securities, including but not limited to U.S. Treasury bonds, notes
and bills, Eurodollar certificates of deposit and on indexes of fixed income
securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by the Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the 1940
Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match the
Portfolio's current or anticipated investments exactly. The Portfolio may invest
in options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
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correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Portfolio's options
or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require the Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and Over-the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange).
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Portfolio or the Advisor may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The
Portfolio intends to comply with Section 4.5 of the regulations under the
Commodity Exchange Act, which limits the extent to which the Portfolio can
commit assets to initial margin deposits and option premiums. In addition, the
Portfolio will comply with guidelines established by the SEC with respect to
coverage of options and futures contracts by mutual funds, and if the guidelines
so require, will set aside appropriate liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures contract or option is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
RISK MANAGEMENT. The Portfolio may employ non-hedging risk management
techniques. Examples of such strategies include synthetically altering the
duration of a portfolio or the mix of securities in a portfolio. For example, if
the Advisor wishes to extend maturities in a fixed income portfolio in order to
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take advantage of an anticipated decline in interest rates, but does not wish to
purchase the underlying long-term securities, it might cause the Portfolio to
purchase futures contracts on long term debt securities. Similarly, if the
Advisor wishes to decrease fixed income securities or purchase equities, it
could cause the Portfolio to sell futures contracts on debt securities and
purchase futures contracts on a stock index. Such non-hedging risk management
techniques are not speculative, but because they involve leverage include, as do
all leveraged transactions, the possibility of losses as well as gains that are
greater than if these techniques involved the purchase and sale of the
securities themselves rather than their synthetic derivatives.
PORTFOLIO TURNOVER. The estimated annual portfolio turnover rate for
The Portfolio generally should not exceed 300%. A rate of 100% indicates that
the equivalent of all of the Portfolio's assets have been sold and reinvested in
a year. High portfolio turnover may result in the realization of substantial net
capital gains. To the extent net short term capital gains are realized, any
distributions resulting from such gains are considered ordinary income for
federal income tax purposes. See Item 20 below.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by 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 securities" (as defined in the 1940 Act) 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.
Unless Section 8(b)(1), and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof, are amended or modified, the Portfolio may not:
1. Purchase any security if, as a result, more than 25% of the value of
the Portfolio's total assets would be invested in securities of issuers
having their principal business activities in the same industry. This
limitation shall not apply to obligations issued or guaranteed by the
U.S.
Government, its agencies or instrumentalities.
2. Issue senior securities. For purposes of this restriction, borrowing
money in accordance with paragraph 3 below, making loans in accordance
with non-fundamental restriction no. (v), the issuance of shares of
beneficial interest in multiple classes or series, the purchase or sale
of options, futures contracts, forward commitments, swaps and
transactions in repurchase agreements are not deemed to be senior
securities.
3. 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 redemptions or to
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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 agreement entered into by the
Portfolio.1
4. Underwrite the securities of other issuers, except to the extent that ,
in connection with the disposition of portfolio securities, the
Portfolio may be deemed to be an underwriter under the 1933 Act.
5. Purchase or sell real estate except that the Portfolio may (i) acquire
or lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein, (iii) invest
in securities that are secured by real estate or interests therein,
(iv) make direct investments in mortgages, (v) purchase and sell
mortgage-related securities and (vi) hold and sell real estate acquired
by the Portfolio as a result of the ownership of securities including
mortgages.
6. Purchase or sell commodities or commodity contracts, unless acquired as
a result of the ownership of securities or instruments, except the
Portfolio may purchase and sell financial futures contracts, options on
financial futures contracts and warrants and may enter into swap and
forward commitment transactions.
7. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U. S. Government, its agencies, instrumentalities or
authorities or repurchase agreements collateralized by U.S. Government
securities), if:
a. such purchase would cause more than 5% of the Portfolio's total assets to
be invested in the securities of such issuer; or
b. Such purchase would cause the Portfolio to hold more than 10% of the
outstanding voting securities of such issuer.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Portfolio and may be changed
by the Trustees. These non-fundamental investment policies require that the
Portfolio may not:
(i) Acquire securities of other investment companies, except as permitted by the
1940 Act or any rule, order or interpretation thereunder, or in connection with
a merger, consolidation, reorganization, acquisition of assets or an offer of
exchange;
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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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(ii) 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 15% of the market value of the
Portfolio's total assets would be in investments that are illiquid;
(iii) Sell any security short, except to the extent permitted by the 1940
Act. Transactions in futures contracts and options shall not constitute selling
securities short;
(iv) Purchase securities on margin, but the Portfolio may obtain such short
term credits as may be necessary for the clearance of transactions; or
(v) Make loans, except that the Portfolio (1) may lend portfolio securities with
a value not exceeding one third of the Portfolio's total assets, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an issue of debt
obligations (including privately issued debt obligations and direct investments
in mortgages), bank loan participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
ITEM 14. MANAGEMENT OF THE FUND.
The Trustees and officers of the Portfolio, their business addresses,
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 since prior 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; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. 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 prior to 1992. His address is
Pine Tree Country Club Estates, 10286 St. Andrews Road, Boynton Beach, FL 33436,
and his date of birth is August 23, 1937.
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Michael P. Mallardi - Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group since prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10901, and his date of birth is March
17, 1934.
- ----------------------
* Mr. Healey is an "interested person" of the Portfolio as that term is
defined in the 1940 Act.
Each Trustee is currently paid an annual fee of $65,000 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.
Trustee compensation expenses accrued by the Master Portfolios(as
defined below), the JPM Institutional Funds and the JPM Pierpont Funds for the
calendar year ended December 31, 1996 is set forth below.
TOTAL TRUSTEE COMPENSATION ACCRUED
BY THE MASTER PORTFOLIOS(*), THE
JPM INSTITUTIONAL FUNDS AND THE JPM
NAME OF TRUSTEE PIERPONT FUNDS DURING 1996(***)
Frederick S. Addy, $65,000
Trustee
William G. Burns, $65,000
Trustee
Arthur C. Eschenlauer, $65,000
Trustee
Matthew Healey, $65,000
Trustee(**), Chairman and Chief
Executive Officer
Michael P. Mallardi, $65,000
Trustee
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(*) Includes the Portfolio and 18 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.
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The Trustees of the Portfolio are the same as the Trustees of each of
the other Master Portfolios, The JPM Pierpont Funds and 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, in addition to reviewing actions of the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio has entered into a Portfolio Fund Services Agreement with Pierpont
Group to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. Pierpont Group was organized in
July 1989 to provide services for The Pierpont Family of Funds, and the Trustees
are the sole shareholders of Pierpont Group. The Portfolio has agreed to pay
Pierpont Group a fee in an amount representing its reasonable costs in
performing these services to the Portfolio and other registered investment
companies subject to similar agreements with Pierpont Group. These costs are
periodically reviewed by the Trustees. The Portfolio 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's officers
conduct and supervise the business operations of the Portfolio.
The officers of the Portfolio, 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 and
Chief Executive Officer and Director of FDI, Premier Mutual Fund Services, Inc.
("Premier Mutual") and an officer of certain investment companies advised or
administered by the Dreyfus Corporation ("Dreyfus") or is 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. Supervisor of
Treasury Services and Administration of FDI and an officer of certain investment
companies advised or administered by Dreyfus or its affiliates. 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.
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RICHARD W. INGRAM; President and Treasurer. Senior 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. 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.
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. 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 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: FDI, 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. 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, 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 and
General 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. From February 1992 to April 1994, Mr. Pelletier
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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.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of FDI and Premier Mutual and
an officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. 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'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 willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of February 20, 1997, The JPM Institutional Global Strategic Income
Fund ("the Fund"), a series of The JPM Institutional Funds, owned 99.99% of the
outstanding beneficial interests in the Portfolio. So long as the Fund controls
the Portfolio, the Fund may take actions without the approval of any other
holder of beneficial interests in the Portfolio.
The Fund has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the Portfolio (other than a vote by the Portfolio
to continue the operation of the Portfolio upon the withdrawal of another
investor in the Portfolio), it will hold a meeting of its shareholders and will
cast its vote as instructed by those shareholders.
The officers and Trustees of the Portfolio own none of the outstanding
beneficial interests in the Portfolio.
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. Morgan, 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. Morgan is subject to regulation by the New
York State Banking Department and is a member bank of the Federal Reserve
System. Through
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offices in New York City and abroad, Morgan 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.
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 $197 billion (of which the Advisor advises over $30 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, through its predecessor firms, has been in
business for over a century 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 conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns for individual companies through the use of a
dividend discount model. These returns are projected for 2 to 5 years to enable
analysts to take a longer term view. These returns, or normalized earnings, are
used to establish relative values among stocks in each industrial sector. These
values may not be the same as the markets' current valuations of these
companies. This provides the basis for ranking the attractiveness of the
companies in an industry according to five distinct quintiles or rankings. This
ranking is one of the factors considered in determining the stocks purchased and
sold in each sector. 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 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 below.
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
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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.
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 the annual rate of 0.45% of the
Portfolio's average daily net assets.
The Investment Advisory Agreement provides that it will continue in
effect 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 its Trustees and (ii) by a vote of a
majority of the Portfolio's Trustees who are not parties to the Investment
Advisory 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,
or by a vote of the holders of a majority of the Portfolio's outstanding voting
securities, on 60 days' written notice to the Advisor and by the Advisor 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 shares, such as
the Portfolio. 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 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 would recommend to
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investors that they approve the Portfolio's entering into a 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 Agent" in Part
A above.
CO-ADMINISTRATOR. Under the Portfolio's Co-Administration Agreement
dated August 1, 1996, FDI serves as the Portfolio'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 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, subcontract for the performance of its obligations, provided,
however, that unless the Portfolio 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
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 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, effective August 1, 1996, 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 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 aggregate 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. 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. Pursuant to the Custodian
Contract, State Street is responsible for maintaining the books of account and
records of portfolio transactions and holding the portfolio securities and cash.
In addition, the Custodian has also entered into subcustodian agreements with
Bankers Trust Company for the purpose of holding TENR Notes and with Bank of New
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York and Chemical Bank, N.A. for the purpose of holding certain variable rate
demand notes. In the case of foreign assets held outside the United States, the
Custodian employs various sub-custodians, who were approved by the Trustees of
the Portfolio in accordance with the regulations of the SEC. The Custodian
maintains Portfolio transaction records, calculates book and tax allocations for
the Portfolio, and computes the value of the interest of each investor.
INDEPENDENT ACCOUNTANTS. The independent accountants of the Portfolio
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 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, insurance costs, the compensation and expenses of the Trustees,
registration fees under federal securities laws, and extraordinary expenses
applicable to the Portfolio. Such expenses also include brokerage expenses.
Morgan has agreed that it will, at least through November 30, 1997,
maintain the Portfolio's total operating expenses at the annual rate of 0.65% of
the Portfolio's average daily net assets. This expense limitation does not cover
extraordinary expenses during the period.
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, and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See Item 13 above.
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price 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.
Portfolio transactions for the Portfolio will be undertaken principally
to accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short term trading
consistent with its objective.
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.
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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; as well as
the firm's financial condition. The Trustees of the Portfolio review regularly
other 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 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
portfolio 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, 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's 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 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.
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If the Portfolio effects a closing purchase transaction with respect to
an option written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. The writing of options by the
Portfolio will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class which may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options which the Portfolio may write may be affected by options written by the
Advisor for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees if they choose to do so
and in such event the other investors in the Portfolio would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual meetings of investors but the Portfolio will hold special meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
its investment).
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 Portfolio), 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 of the Portfolio) will be sufficient. The Portfolio may also be
terminated (i) upon liquidation and distribution of its assets if approved by
the vote of two thirds of its investors (with the vote of each being in
proportion to the amount of its investment) or (ii) by the Trustees by written
notice to its investors.
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The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Portfolio's Declaration of Trust further provides that obligations
of the Portfolio are not binding upon the Trustees individually but only upon
the property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
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.
Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over-the-counter, are valued
using prices supplied daily by an independent pricing service or services that
(i) are based on the last sale price on a national securities exchange, or in
the absence of recorded sales, at the readily available closing bid price on
such exchange or at the quoted bid price in the OTC market, if such exchange or
market constitutes the broadest and most representative market for the security
and (ii) in other cases, take into account various factors affecting market
value, including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. If such prices are not
supplied by the Portfolio's independent pricing service, such securities are
priced in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by the
amortized cost method. Because of the large number of municipal bond issues
outstanding and the varying maturity dates, coupons and risk factors applicable
to each issuer's books, no readily available market quotations exist for most
municipal securities.
Trading in securities in most foreign markets is normally completed
before the close of trading on U.S. markets and may also take place on days on
which the U.S. markets are closed. If events materially affecting the value of
securities occur between the time when the market in which they are traded
closes and the time when the Portfolio's net asset value is calculated, such
securities will be
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valued at fair value in accordance with procedures established by and under the
general supervision of the Trustees.
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 Portfolio is in the process of seeking exemptive relief
from the SEC with respect to redemptions in kind. If the requested relief is
granted, the Portfolio would then be permitted to pay redemptions to investors
owning 5% or more of the outstanding beneficial interests in the Portfolio in
securities, rather than in cash, to the extent permitted by the SEC and
applicable law. 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.
The net asset value of the Portfolio will not be computed on the days
the following legal holidays are observed: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Portfolio would expect to close for purchases and
withdrawals at the same time. 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. The days on which net asset value is
determined are the Portfolio's business days.
Item 20. TAX STATUS.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York. However, each
investor in the Portfolio will be subject to U.S. Federal income tax in the
manner described below 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 Service 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.
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Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, a put is
acquired or a call option is written thereon. Other gains or losses on the sale
of securities will be short-term capital gains or losses. Gains and losses on
the sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by the
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by the Portfolio pursuant to the
exercise of a put option written by it, the Portfolio will subtract the premium
received from its cost basis in the securities purchased.
Forward currency contracts, options and futures contracts entered into
by the Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, the Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes -- i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
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 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. 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.
The exclusive placement agent for the Portfolio is FDI, which receives
no additional compensation for serving in this capacity. Investment companies,
insurance company separate accounts, common and commingled trust funds and
similar organizations and entities may continuously invest in the Portfolio.
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ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The Portfolio's audited statement of assets and liabilities at February
20, 1997 is attached hereto.
THE GLOBAL STRATEGIC INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 20, 1997
- -----------------------------------------------------------------------------
ASSETS
Cash $100,010
Deferred Organization Expenses 17,700
--------
Total Assets 117,710
--------
LIABILITIES
Organization Expenses Payable 17,700
--------
Total Liabilities 17,700
--------
NET ASSETS
Applicable to Investors' Beneficial Interests $100,010
========
The Accompanying Notes are an Integral Part of the Financial Statement.
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THE GLOBAL STRATEGIC INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENT
FEBRUARY 20, 1997
- -----------------------------------------------------------------------------
1. ORGANIZATION
The Global Strategic Income Portfolio (the "Portfolio") is a trust organized
under the laws of the State of New York on January 9, 1997 and has been inactive
since that date except for matters relating to its organization, registration as
an investment company under the Investment Company Act of 1940, as amended, and
the sales of beneficial interests in the Portfolio in the respective amounts of
$100,000 (the "initial interest") to The JPM Institutional Global Strategic
Income Fund (the "Fund") and $10 to Funds Distributor, Inc. ("FDI"), a wholly
owned indirect subsidiary of Boston Institutional Group, Inc.
The Portfolio has incurred $17,700 in organization expenses. Morgan Guaranty
Trust Company of New York ("Morgan") has agreed to pay the organization expenses
of the Portfolio. The Portfolio has agreed to reimburse Morgan for these costs
which are being deferred and will be amortized on a straight-line basis over a
period not to exceed five years beginning with the commencement of operations of
the Portfolio. As long as there is another investor in the Portfolio, the
Portfolio will receive upon a redemption by FDI Distribution Services, Inc. (the
purchaser of the Fund's initial shares) from the Fund a pro rata portion of the
unamortized organization expenses of the Portfolio. The Fund has agreed that if
it withdraws any of such interest prior to the fifth anniversary of the date the
Portfolio commenced operations, the Fund will reduce the amount of its
withdrawal from the Portfolio in an amount equal to the number resulting from
multiplying the Portfolio's total unamortized organizational expenses by a
fraction, the numerator of which is equal to the amount of initial interest
redeemed by it and the denominator of which is equal to the amount of such
interest held by it outstanding as of the date of such withdrawal, as long as
the administrative position of the staff of the Securities and Exchange
Commission requires such reimbursement.
2. VALUATION OF INVESTORS' BENEFICIAL INTERESTS
At 4:15 p.m. New York time on each business day of the Portfolio, the value of
an investor's beneficial interest in the Portfolio is equal to the product of i)
the aggregate net asset value of the Portfolio, effective for that day, and ii)
the percentage representing that investor's pro rata share of the aggregate
beneficial interests in the Portfolio, on that day.
3. SERVICE AGREEMENTS WITH AFFILIATES
The Portfolio has entered into an Investment Advisory Agreement with Morgan to
provide investment advice and portfolio management services to the Portfolio.
The Portfolio has also entered into an Administrative Services Agreement with
Morgan to provide administrative and related services to the Portfolio. The
Portfolio is a party to a Co-Administration Agreement with FDI pursuant to which
FDI provides co-administration services for the Portfolio. The officers of the
Portfolio, excluding its Chief Executive Officer, are employees of FDI. Pursuant
to a separate agreement, FDI also serves as exclusive placement agent for the
Portfolio's beneficial interests. The Portfolio has entered into a Fund Services
Agreement with Pierpont Group, Inc. to assist the Trustees in exercising their
overall responsibilities for the affairs of the Portfolio. The Trustees of the
Portfolio represent all the existing shareholders of Pierpont Group, Inc.
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1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
PRICE WATERHOUSE LLP [logo]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors
of The Global Strategic Income Portfolio
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of The Global
Strategic Income Portfolio (the "Portfolio) at February 20, 1997, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Portfolio's management; our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit of this financial statement in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York 10036
February 20, 1997
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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.
B - An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC - An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.
CC - An obligation rated CC is currently highly vulnerable to nonpayment.
C - The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments
on this obligation are being continued.
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Appendix A-1
<PAGE>
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.
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
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Appendix A-2
<PAGE>
investment characteristics and in fact have speculative characteristic
as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
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.
- 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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Appendix A-3
<PAGE>
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:
The audited financial statements included in Item 23 are as follows:
Statement of Assets and Liabilities at February 20, 1997
(B) EXHIBITS
1 Declaration of Trust of the Registrant.1
2 Restated By-Laws of the Registrant.1
5 Form of Investment Advisory Agreement between the Registrant and Morgan
Guaranty Trust Company of New York ("Morgan").1
8 Form of Custodian Contract between the Registrant and State Street Bank
and Trust Company ("State Street").1
9(a) Co-Administration Agreement between the Registrant and Funds Distributor,
Inc. dated August 1, 1996.1
9(b) Transfer Agency and Service Agreement between the Registrant and State
Street.1
9(c) Restated Administrative Services Agreement between the Registrant and
Morgan dated August 1, 1996.1
9(d) Amended and Restated Portfolio Fund Services Agreement between the
Registrant and Pierpont Group, Inc. dated July 11, 1996.1
13 Purchase Agreement with respect to initial capital.1
27 Financial Data Schedule.1
- -------------------
1 Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Title of Class: Beneficial Interests
Number of Record Holders: 2 (as of February 20, 1997)
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.
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.
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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 02109 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 or c/o State Street Cayman Trust Company, Ltd., Elizabethan
Square, Shedden Road, George Town, Grand Cayman, Cayman Islands, BWI (records
relating to its functions as co-administrator and exclusive placement agent).
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 Global Strategic Income Portfolio has duly caused its registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, Commonwealth of Massachusetts, on the 26th
day of February, 1997.
THE GLOBAL STRATEGIC INCOME PORTFOLIO
By: /s/ Richard W. Ingram
----------------------------------
Richard W. Ingram
President and Treasurer
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-99.B1 Declaration of Trust of the Registrant
EX-99.B2 Restated By-Laws of the Registrant
EX-99.B5 Form of Investment Advisory Agreement between the Registrant
and Morgan Guaranty Trust Company of New York
EX-99.B8 Form of Custodian Contract between the Registrant and State
Street Bank and Trust Company
EX-99.B9a Form of Co-Administration Agreement between the Registrant and
Funds Distributor, Inc.
EX-99.B9b Transfer Agency and Service Agreement between the Registrant
and State Street Bank and Trust Company
EX-99.B9c Restated Administrative Services Agreement between the
Registrant and Morgan Guaranty Trust Company of New York
EX-99.B9d Amended and Restated Portfolio Fund Services Agreement between
the Registrant and Pierpont Group, Inc.
EX-99.B13 Purchase Agreement with respect to initial capital.
EX-27 Financial Data Schedule
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THE GLOBAL STRATEGIC INCOME PORTFOLIO
--------------------------
DECLARATION OF TRUST
Dated as of January 9, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--Trustees 3
Section 2.1 Number and Qualification 3
Section 2.2 Term and Election 4
Section 2.3 Resignation, Removal and Retirement 4
Section 2.4 Vacancies 5
Section 2.5 Meetings 5
Section 2.6 Officers; Chairman of the Board 6
Section 2.7 By-Laws 6
ARTICLE III--Powers of Trustees 6
Section 3.1 General 6
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Sale and Increases of Interests 7
Section 3.5 Decreases and Redemptions of Interests 8
Section 3.6 Borrow Money 8
Section 3.7 Delegation; Committees 8
Section 3.8 Collection and Payment 8
Section 3.9 Expenses 8
Section 3.10 Miscellaneous Powers 9
Section 3.11 Further Powers 9
ARTICLE IV--Investment Management and Administration
and Placement Agent Arrangements 10
Section 4.1 Investment Management and Other
Arrangements 10
Section 4.2 Parties to Contract 10
ARTICLE V--Liability of Holders; Limitations of Liability
of Trustees, Officers, etc. 10
Section 5.1 Liability of Holders; Indemnification 10
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents,
Independent Contractors to Third
Parties 11
Section 5.3 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. 11
Section 5.4 Mandatory Indemnification 11
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PAGE
Section 5.5 No Bond Required of Trustees 12
Section 5.6 No Duty of Investigation; Notice in
Trust Instruments, etc. 12
Section 5.7 Reliance on Experts, etc. 13
ARTICLE VI--Interests 13
Section 6.1 Interests 13
Section 6.2 Non-Transferability 14
Section 6.3 Register of Interests 14
Section 6.4 Establishment and Designation of Series 14
ARTICLE VII--Increases, Decreases, And Redemptions of
Interests 14
ARTICLE VIII--Determination of Book Capital Account
Balances, and Distributions 15
Section 8.1 Book Capital Account Balances 15
Section 8.2 Allocations and Distributions to
Holders 15
Section 8.3 Power to Modify Foregoing Procedures 16
ARTICLE IX--Holders 16
Section 9.1 Rights of Holders 16
Section 9.2 Meetings of Holders 16
Section 9.3 Notice of Meetings 16
Section 9.4 Record Date for Meetings,
Distributions, etc. 17
Section 9.5 Proxies, etc. 17
Section 9.6 Reports 17
Section 9.7 Inspection of Records 18
Section 9.8 Holder Action by Written Consent 18
Section 9.9 Notices 18
ARTICLE X--Duration; Termination; Amendment;
Mergers; Etc. 18
Section 10.1 Duration 18
Section 10.2 Termination 18
Section 10.3 Dissolution 19
Section 10.4 Amendment Procedure 19
Section 10.5 Merger, Consolidation and Sale of
Assets 21
Section 10.6 Incorporation 21
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PAGE
ARTICLE XI--Miscellaneous 21
Section 11.1 Certificate of Designation; Agent for
Service of Process 21
Section 11.2 Governing Law 22
Section 11.3 Counterparts 22
Section 11.4 Reliance by Third Parties 22
Section 11.5 Provisions in Conflict With Law or
Regulations 22
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<PAGE>
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DECLARATION OF TRUST
OF
THE GLOBAL STRATEGIC INCOME PORTFOLIO
This DECLARATION OF TRUST of The Global Strategic Income
Portfolio is made as of the 9th day of January, 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 desire to form a trust fund under the
law of the State of New York for the investment and reinvestment of its assets;
and
WHEREAS, it is proposed that the trust assets be composed of
money and property contributed thereto by the holders of interests in the trust
entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and property contributed to the trust fund and will
manage and dispose of the same for the benefit of the holders of interests in
the Trust and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust")
shall be The Global Strategic Income Portfolio and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not individually,
and shall not refer to the officers, employees, agents or independent
contractors of the Trust or holders of interests in the Trust.
1.2. Definitions. As used in this Declaration, the following
terms shall have the following meanings:
The term "Interested Person" shall have the meaning given it
in the 1940 Act.
"Book Capital Account" shall mean, for any Holder at any time,
the Book Capital Account of the Holder for such day, determined in accordance
with Section 8.1 hereof.
<PAGE>
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, as well as any non-superseded provisions of
the Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
"Commission" shall mean the United States Securities and
Exchange Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on December 31 of each year or on such other day as is
permitted or required by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual, S
corporation, partnership or grantor trust beneficially owned by any individual,
S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the
Trust, including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined by
calculating, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances. Reference herein to a
specified percentage of, or fraction of, Interests, means Holders whose combined
Book Capital Account balances represent such specified percentage or fraction of
the combined Book Capital Account balances of all, or a specified group of,
Holders.
"Investment Manager and Administrator" shall mean any party
furnishing services to the Trust pursuant to any investment management or
administration contract described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at such
meeting, if Holders of more than 50% of all Interests are present or represented
by proxy, or (B) more than 50% of all Interests, whichever is less.
2
<PAGE>
"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.
"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.
"Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the United States Investment Company
Act of 1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three or more than 15. Any vacancy created by an increase in
the number of Trustees may be filled by the appointment of an individual having
the qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this
3
<PAGE>
Declaration. A Trustee shall be an individual at least 21 years of age who is
not under legal disability.
2.2. Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the event
of resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
Chairman, if any, the President or the Secretary of the Trust and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any Trustee may be removed by the affirmative
vote of Holders of two-thirds of the Interests or (provided the aggregate number
of Trustees, after such removal and after giving effect to any appointment made
to fill the vacancy created by such removal, shall not be less than the number
required by Section 2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Removal with cause includes, but is not limited to, the
removal of a Trustee due to physical or mental incapacity or failure to comply
with such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory retirement age,
if any, established pursuant to any written policy adopted from time to time by
at least two-thirds of the Trustees shall, automatically and without action by
such Trustee or the remaining Trustees, be deemed to have retired in accordance
with the terms of such policy, effective as of the date determined in accordance
with such policy. Any Trustee who has become incapacitated by illness or injury
as determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee
4
<PAGE>
such documents as the remaining Trustees shall require for the purpose set forth
in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
retirement, adjudicated incompetence or other incapacity to perform the duties
of the office, or removal, of a Trustee. No such vacancy shall operate to annul
this Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary, an Assistant Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice at a time and place fixed by the
By-Laws or by resolution of the Trustees. Notice of any other meeting shall be
mailed or otherwise given not less than 24 hours before the meeting but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Trustee attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. The Trustees may act with
or without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration, any
action of the Trustees may be taken at a meeting by vote of a majority of the
Trustees present (a quorum being present) or without a meeting by written
consent of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or otherwise
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.
5
<PAGE>
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
2.6. Officers; Chairman of the Board. The Trustees shall, from
time to time, elect a President, a Secretary and a Treasurer. The Trustees may
elect or appoint, from time to time, a Chairman of the Board who shall preside
at all meetings of the Trustees and carry out such other duties as the Trustees
may designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other officer may, but need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to
time, amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and such
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees may perform such acts as in their
sole discretion they deem proper for conducting the business of the Trust. The
enumeration of or failure to mention any specific power herein shall not be
construed as limiting such exclusive and absolute control. The powers of the
Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of
an investment company;
(b) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of United States and
foreign currencies and related instruments, including forward contracts, and
securities, including common and preferred stock, warrants, bonds, debentures,
time notes and all other evidences of indebtedness, including whole loans, loan
participations, direct mortgages and mortgage-related securities, negotiable or
non-negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper,
6
<PAGE>
repurchase agreements, reverse repurchase agreements, convertible
securities, forward contracts, options, futures contracts, and other securities,
including, without limitation, those issued, guaranteed or sponsored by any
state, territory or possession of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or by the
United States Government, any foreign government, or any agency, instrumentality
or political subdivision of the United States Government or any foreign
government, or any international instrumentality, or by any bank, savings
institution, corporation or other business entity organized under the laws of
the United States or under any foreign laws; and to exercise any and all rights,
powers and privileges of ownership or interest in respect of any and all such
investments of any kind and description, including, without limitation, the
right to consent and otherwise act with respect thereto, with power to designate
one or more Persons to exercise any of such rights, powers and privileges in
respect of any of such investments; and the Trustees shall be deemed to have the
foregoing powers with respect to any additional instruments in which the
Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have the
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name or
nominee name of any other Person on behalf of the Trust, on such terms as the
Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased Trustee
in the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest, or increase its Interest, for
such type of consideration, including cash or property, at such time or times
(including, without limitation, each business day), and on such terms as the
Trustees may deem best, and may in such manner
7
<PAGE>
acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses. Individuals,
S corporations, partnerships and grantor trusts that are beneficially owned by
any individual, S corporation or partnership may not purchase Interests. A
Holder which has redeemed its Interest may not be permitted to purchase an
Interest until the later of 60 calendar days after the date of such Redemption
or the first day of the Fiscal Year next succeeding the Fiscal Year during which
such Redemption occurred.
3.5 Decreases and Redemptions of Interests. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest, or decrease its
Interest, for either cash or property, at such time or times (including, without
limitation, each business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging, pledging
or otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust, to delegate from time to time to
such of their number or to officers, employees, agents or independent
contractors of the Trust the doing of such things and the execution of such
instruments in either the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust or the Trust Property; to foreclose any security
interest securing any obligation, by virtue of which any property is owed to the
Trust; and to enter into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the Trust Property to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
brokerage services, as they in good faith may deem reasonable, and reimbursement
for expenses reasonably incurred by themselves on behalf of the Trust.
8
<PAGE>
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem appropriate
for the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
the Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices, whether within or without the State of New York,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust which is made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
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ARTICLE IV
Investment Management and Administration
and Placement Agent Arrangements
4.1. Investment Management and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
management and administration contracts or placement agent agreements whereby
the other party to such contract or agreement shall undertake to furnish the
Trustees such investment management and administration, placement agent and/or
other services as the Trustees shall, from time to time, consider appropriate or
desirable and all upon such terms and conditions as the Trustees may in their
sole discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Manager and Administrator (subject to
such general or specific instructions as the Trustees may, from time to time,
adopt) to effect purchases, sales, loans or exchanges of Trust Property on
behalf of the Trustees or may authorize any officer, employee or Trustee to
effect such purchases, sales, loans or exchanges pursuant to recommendations of
any such Investment Manager and Administrator (all without any further action by
the Trustees). Any such purchase, sale, loan or exchange shall be deemed to have
been authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 hereof or in the By-Laws of the Trust may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any individual holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was reasonable and fair and not inconsistent with the provisions of this Article
IV or the By-Laws of the Trust. The same Person may be the other party to one or
more contracts entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any individual may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts mentioned in this
Section 4.2 or in the By-Laws of the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers etc.
5.1. Liability of Holders; Indemnification. Each Holder shall
be jointly and severally liable (with rights of
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contribution inter se in proportion to their respective Interests in the
Trust) for the liabilities and obligations of the Trust in the event that the
Trust fails to satisfy such liabilities and obligations; provided, however,
that, to the extent assets are available in the Trust, the Trust shall indemnify
and hold each Holder harmless from and against any claim or liability to which
such Holder may become subject by reason of being or having been a Holder to the
extent that such claim or liability imposes on the Holder an obligation or
liability which, when compared to the obligations and liabilities imposed on
other Holders, is greater than such Holder's Interest (proportionate share), and
shall reimburse such Holder for all legal and other expenses reasonably incurred
by such Holder in connection with any such claim or liability. The rights
accruing to a Holder under this Section 5.1 shall not exclude any other right to
which such Holder may be lawfully entitled, nor shall anything contained herein
restrict the right of the Trust to indemnify or reimburse a Holder in any
appropriate situation even though not specifically provided herein.
Notwithstanding the indemnification procedure described above, it is intended
that each Holder shall remain jointly and severally liable to the Trust's
creditors as a legal matter.
5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents Independent Contractors to Third Parties. No Trustee, officer,
employee, agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written contract) of
the Trust shall be subject to any personal liability whatsoever to any Person,
other than the Trust or the Holders, in connection with Trust Property or the
affairs of the Trust; and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature against a Trustee, officer,
employee, agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written contract) of
the Trust arising in connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust shall be liable to the Trust or the Holders for any
action or failure to act (including, without limitation, the failure to compel
in any way any former or acting Trustee to redress any breach of trust) except
for such Person's own bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract)
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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;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for such payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Person's office by the court or other body approving the
settlement or other disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that such Person did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any right
of indemnity or reimbursement granted in this Section 5.4 or in Section 5.2
hereof or to which such Person may be otherwise entitled except out of the Trust
Property. The Trustees may make advance payments in connection with
indemnification under this Section 5.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent contractor of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
such Trustee, officer, employee, agent or independent contractor or be liable
for the application of money or property paid, loaned or delivered to or on the
order of such Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust, and every other act or thing
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whatsoever executed in connection with the Trust shall be conclusively
taken to have been executed or done by the executors thereof only in their
capacity as Trustees, officers, employees, agents or independent contractors of
the Trust. Every written obligation, contract, instrument, certificate or other
interest or undertaking of the Trust made or sold by any Trustee, officer,
employee, agent or independent contractor of the Trust, in such capacity, shall
contain an appropriate recital to the effect that the Trustee, officer,
employee, agent or independent contractor of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
for the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any further
recital which they may deem appropriate, but the omission of such recital shall
not operate to impose personal liability on any Trustee, officer, employee,
agent or independent contractor of the Trust. Subject to the provisions of the
1940 Act, the Trust may maintain insurance for the protection of the Trust
Property, the Holders, and the Trustees, officers, employees, agents and
independent contractors of the Trust in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the performance
of such Person's duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust (whether or not the
Trust would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any Investment Manager and Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests except as provided in Section 6.2
hereof. 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.
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
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designated pursuant to Section 6.4 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 or 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. Non-Transferability. A Holder may not transfer, sell
or exchange its Interest except as part of a merger or similar plan of
reorganization of a Holder that qualifies under Section 368 of the Code as
permitted by the Trustees.
6.3. Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder. Such register shall be
conclusive as to the identity of the Holders. No Holder shall be entitled to
receive payment of any distribution, nor to have notice given to it as herein
provided, until it has given its address to such officer or agent of the Trust
as is keeping such register for entry thereon.
6.4. Establishment and Designation of Series. The
establishment and designation of any Series shall be effective upon the
execution 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 a similar instrument 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.
ARTICLE VII
Increases, Decreases and Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted by the
Trustees, each Holder shall have the right to vary its investment in the Trust
at any time without limitation by increasing (through a capital contribution) or
decreasing (through a capital withdrawal) or by a Redemption of its Interest. An
increase in the investment of a
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Holder in the Trust shall be reflected as an increase in the Book Capital
Account balance of that Holder and a decrease in the investment of a Holder in
the Trust or the Redemption of the Interest of a Holder shall be reflected as a
decrease in the Book Capital Account balance of that Holder. The Trust shall,
upon appropriate and adequate notice from any Holder increase, decrease or
redeem such Holder's Interest for an amount determined by the application of a
formula adopted for such purpose by resolution of the Trustees; provided that
(a) the amount received by the Holder upon any such decrease or Redemption shall
not exceed the decrease in the Holder's Book Capital Account balance effected by
such decrease or Redemption of its Interest, and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for
effecting any such decrease or Redemption, at such rates as the Trustees may
establish, and may, at any time and from time to time, suspend such right of
decrease or Redemption. The procedures for effecting decreases or Redemptions
shall be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of each Holder shall be determined on such days and at such time or
times as the Trustees may determine. The Trustees shall adopt resolutions
setting forth the method of determining the Book Capital Account balance of each
Holder. The power and duty to make calculations pursuant to such resolutions may
be delegated by the Trustees to the Investment Manager and Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled to
receive the balance of its Book Capital Account in cash or in kind. Except as
provided in Section 6.2, a holder may not transfer, sell or exchange its Book
Capital Account balance.
8.2. Allocations and Distributions to Holders. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall make
(i) the allocation of unrealized gains and losses, taxable income and tax loss,
and profit and loss, or any item or items thereof, to each Holder, (ii) the
payment of distributions, if any, to Holders, and (iii) upon liquidation, the
final distribution of items of taxable income and expense. Such procedures shall
be set forth in writing and be furnished to the Trust's accountants. The
Trustees may amend the procedures adopted pursuant to this Section 8.2 from time
to time. The Trustees may retain from the net profits such amount as they may
deem necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the conduct
of the affairs of the Trust or to retain for future requirements or extensions
of the business.
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8.3. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income of the Trust, the allocation of income of the Trust, the Book Capital
Account balance of each Holder, or the payment of distributions to the Holders
as they may deem necessary or desirable to enable the Trust to comply with any
provision of the 1940 Act or any order of exemption issued by the Commission or
with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property
and the right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
power or right to call for any partition or division of any Trust Property.
9.2. Meetings of Holders. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within or without the
State of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of one-third of the
Interests, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, this Declaration or the By-Laws of the Trust.
All or any one of more Holders may participate in a meeting of Holders by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
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attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before the meeting may be considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders for such
purpose.
9.5. Proxies, etc. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote is to be taken. A
proxy may be revoked by a Holder at any time before it has been exercised by
placing on file with the Secretary, or with such other officer or agent of the
Trust as the Secretary may direct, a later dated proxy or written revocation.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of the Trust or of one or more Trustees or of one or more officers
of the Trust. Only Holders on the record date shall be entitled to vote. Each
such Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Interest, but if more than one
of them is present at such meeting in person or by proxy, and such joint owners
or their proxies so present disagree as to any vote to be cast, such vote shall
not be received in respect of such Interest. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger.
9.6. Reports. The Trustees shall cause to be prepared and
furnished to each Holder, at least annually as of the end of each Fiscal Year, a
report of operations containing a balance sheet and a statement of income of the
Trust prepared in conformity with generally accepted accounting principles and
an opinion of an independent public accountant on such financial statements. The
Trustees shall, in addition, furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income for the period from
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the beginning of the then-current Fiscal Year to the end of such period.
9.7. Inspection of Records. The records of the Trust shall
be open to inspection by Holders during normal business hours for any purpose
not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action which may be
taken by Holders may be taken without a meeting if Holders of all Interests
entitled to vote consent to the action in writing and the written consents are
filed with the records of the meetings of Holders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Holders. Each such
written consent shall be executed by or on behalf of the Holder delivering such
consent and shall bear the date of such execution. No such written consent shall
be effective to take the action referred to therein unless, within one year of
the earliest dated consent, written consents executed by a sufficient number of
Holders to take such action are filed with the records of the meetings of
Holders.
9.9. Notices. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly served
or given if mailed, postage prepaid, addressed to a Holder at its last known
address as recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible termination or dissolution
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of lives now in being.
10.2. Termination.
(a) The Trust may be terminated (i) by the
affirmative vote of Holders of not less
than two-thirds of all Interests at any meeting of Holders or by an instrument
in writing without a meeting, executed by a majority of the Trustees and
consented to by Holders of not less than two-thirds of all Interests, or (ii) by
the Trustees by written notice to the Holders. Upon any such termination,
(i) the Trust shall carry on no business except for
the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under this
Declaration shall continue until
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the affairs of the Trust have been
wound up, including the power to fulfill or discharge the contracts of
the Trust, collect the assets of the Trust, sell, convey, assign,
exchange or otherwise dispose of all or any part of the Trust Property
to one or more Persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay the liabilities of the Trust,
and do all other acts appropriate to liquidate the business of the
Trust; provided that any sale, conveyance, assignment, exchange or
other disposition of all or substantially all the Trust Property shall
require approval of the principal terms of the transaction and the
nature and amount of the consideration by the vote of Holders holding
more than 50% of all Interests; and
(iii) after paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for their
protection, the Trustees shall distribute the remaining Trust Property,
in cash or in kind or partly each, among the Holders according to their
respective rights as set forth in the procedures established pursuant
to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution
to the Holders as herein provided, a majority of the Trustees shall execute
and file with the records of the Trust an instrument in writing setting forth
the fact of such termination and distribution. Upon termination of the Trust,
the Trustees shall thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all Holders shall thereupon
cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon
the Redemption of any Interest, the Trust shall be dissolved effective 120 days
after the event. However, the Holders (other than such bankrupt or redeeming
Holder) may, by a unanimous affirmative vote at any meeting of such Holders or
by an instrument in writing without a meeting executed by a majority of the
Trustees and consented to by all such Holders, agree to continue the business of
the Trust even if there has been such a dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of
Holders of more than 50% of all Interests at any meeting of Holders or by
an instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by the Holders of more than 50% of all Interests.
Notwithstanding any other provision hereof, this Declaration may be amended by
an instrument in writing executed by a majority of the Trustees, and
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without the vote or consent of Holders, for any one or more of the
following purposes: (i) to change the name of the Trust, (ii) to restate this
Declaration relative to the establishment and designation of Series provided for
in Section 6.4 and otherwise not affecting the relative rights and preferences
of the Trust's outstanding Interests, (iii) to supply any omission, or to cure,
correct or supplement any ambiguous, defective or inconsistent provision hereof,
(iv) to conform this Declaration to the requirements of applicable federal law
or regulations or the requirements of the applicable provisions of the Code, (v)
to change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (vi) to effect
such changes herein as the Trustees find to be necessary or appropriate (A) to
permit the filing of this Declaration under the law of such state or other
jurisdiction applicable to trusts or voluntary associations, (B) to permit the
Trust to elect to be treated as a "regulated investment company" under the
applicable provisions of the Code, (C) to permit the Trust to comply with fiscal
or other statutory or official requirements of any government authority, or (D)
to permit the transfer of Interests (or to permit the transfer of any other
beneficial interest in or share of the Trust, however denominated), and (vii) in
conjunction with any amendment contemplated by the foregoing clause (v) or the
foregoing clause (vi) to make any and all such further changes or modifications
to this Declaration as the Trustees find to be necessary or appropriate, any
finding of the Trustees referred to in the foregoing clause (vi) or the
foregoing clause (vii) to be conclusively evidenced by the execution of any such
amendment by a majority of the Trustees; provided, however, that unless effected
in compliance with the provisions of Section 10.4(b) hereof, no amendment
otherwise authorized by this sentence may be made which would reduce the amount
payable with respect to any Interest upon liquidation of the Trust and;
provided, further, that the Trustees shall not be liable for failing to make any
amendment permitted by this Section 10.4(a).
(b) No amendment may be made under Section 10.4(a)
hereof which would change any rights with respect to any Interest by reducing
the amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of Holders of two-thirds of all Interests.
(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
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terminated or amended in any respect by the affirmative vote of a majority
of the Trustees at any meeting of Trustees or by an instrument executed by a
majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Holders called for such
purpose by the affirmative vote of Holders of not less than two-thirds of all
Interests, or by an instrument in writing without a meeting, consented to by
Holders of not less than two-thirds of all Interests, and any such merger,
consolidation, sale, lease or exchange shall be deemed for all purposes to have
been accomplished under and pursuant to the statutes of the State of New York.
10.6. Incorporation. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to carry on
any business in which the Trust directly or indirectly has any interest, and to
sell, convey and transfer the Trust Property to any such corporation, trust,
partnership, association or other organization in exchange for the equity
interests thereof or otherwise, and to lend money to, subscribe for the equity
interests of, and enter into any contract with any such corporation, trust,
partnership, association or other organization, or any corporation, trust,
partnership, association or other organization in which the Trust holds or is
about to acquire equity interests. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service of
Process. If appropriate, the Trust shall file, with the Department of State of
the State of New York, a certificate, in the name of the Trust and executed by
an officer of the Trust, designating the Secretary of State of the State of New
York as an agent upon whom process in any action or proceeding against the Trust
may be served.
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11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed in accordance with the
law of the State of New York and reference shall be specifically made to the
trust law of the State of New York as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
11.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any one such original
counterpart.
11.4. Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Holders, (d) the fact that
the number of Trustees or Holders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officer elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are
severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, or with other applicable law and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be
held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any manner affect such provision
in any other jurisdiction or any other provision of this Declaration in any
jurisdiction.
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IN WITNESS WHEREOF, the undersigned have executed this
instrument as of the day and year first above written.
/s/ F.S. Addy
- -------------------------------
[Frederick S. Addy]
As Trustee and not individually
/s/ A.C. Eschenlauer
- -------------------------------
[Arthur C. Eschenlauer]
As Trustee and not individually
/s/ William G. Burns
- -------------------------------
As Trustee and not individually
/s/ Michael Mallardi
- -------------------------------
[Michael P. Mallardi]
As Trustee and not individually
/s/ Matthew Healey
- -------------------------------
As Trustee and not individually
23
JPM345A
AMENDED AND RESTATED BY-LAWS
OF
EACH MASTER TRUST LISTED ON SCHEDULE I
AND
EACH FEEDER TRUST LISTED ON SCHEDULE II
AND
EACH STAND ALONE TRUST LISTED ON SCHEDULE III
ARTICLE I
DEFINITIONS
Each Trust listed on Schedule I is referred to in these By-Laws as a
"Master Trust". Each Trust listed on Schedule II is referred to in these By-Laws
as a "Feeder Trust". Each Trust listed on Schedule III is referred to in these
By-Laws as a "Stand Alone Trust".
In the case of each Trust, unless otherwise specified, capitalized
terms have the respective meanings given them in the Declaration of Trust of
such Trust dated as of the date set forth in Schedule I, II or III, as amended
from time to time. In the case of each Feeder Trust and each Stand Alone Trust,
the term "Holder" has the meaning given the term "Shareholder" in the respective
Declarations of Trust.
ARTICLE II
OFFICES
Section 1. Principal Office. In the case of each Master Trust, the
principal office of the Trust shall be in such place as the Trustees may
determine from time to time, provided that the principal office shall be outside
the United States of America if the Trustees determine that the Trust is
intended to be operated so that it is not engaged in United States trade or
business for United States federal income tax purposes. In the case of each
Feeder Trust and each Stand Alone Trust, until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within the state of its organization and the United
States of America as the Trustees may from time to time determine.
ARTICLE III
HOLDERS
Section 1. 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 the case of each Master Trust or 10% of the voting securities
entitled to vote thereat in the case of each Feeder Trust and each Stand Alone
Trust, 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
organization of the Trust and within, or, if applicable, in the case of a Master
Trust only without, the United States of America on such day
<PAGE>
and at such time as
the Trustees shall designate. Holders of one third of the Interests in the case
of each Master Trust or one third of the voting securities entitled to vote
thereat in the case of each Feeder Trust and each Stand Alone Trust, 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, the Declaration or these By-Laws. If a quorum is present at a meeting, an
affirmative vote of the Holders present in person or by proxy, holding more than
50% of the total Interests in the case of each Master Trust, or 50% of the
voting securities entitled to vote thereat in the case of each Feeder Trust and
each Stand Alone Trust, present, either in person or by proxy, at such meeting
constitutes the action of the Holders, unless a greater number of affirmative
votes is required by the 1940 Act, other applicable law, the Declaration or
these By-Laws.
All or any one or 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.
In the case of The Series Portfolio or any Feeder Trust or any Stand
Alone Trust, whenever a matter is required to be voted by Holders of the Trust
in the aggregate under Section 9.1 and Section 9.2 of the Declaration of The
Series Portfolio or Section 6.8 and Section 6.9 and Section 6.9(g) of the
Declaration of the Feeder Trust and the Stand Alone Trust, the Trust may either
hold a meeting of Holders of all series, as defined in Section 1.2 of the
Declaration of The Series Portfolio or Section 6.9 of the Declaration of the
Feeder Trust and the Stand Alone Trust, to vote on such matter, or hold separate
meetings of Holders of each of the individual series to vote on such matter,
provided that (i) such separate meetings shall be held within one year of each
other, (ii) a quorum consisting of the Holders of one third of the voting
securities of the individual series entitled to vote shall be present at each
such separate meeting except as may otherwise be required by the 1940 Act, other
applicable law, the Declaration or these By-Laws and (iii) a quorum consisting
of the Holders of one third of all voting securities of the Trust entitled to
vote, except as may otherwise be required by the 1940 Act, other applicable law,
the Declaration or these By-Laws, shall be present in the aggregate at such
separate meetings, and the votes of Holders at all such separate meetings shall
be aggregated in order to determine if sufficient votes have been cast for such
matter to be voted.
Section 2. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purpose of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before the meeting may be considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by
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<PAGE>
Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, notice of
each such separate meeting shall be provided in the manner described above in
this Section 2.
Section 3. Record Date for Meetings. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, the Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Holders as a record date for the determination of the Persons to be
treated as Holders for such purpose.
In the case of The Series Portfolio and each Feeder Trust and each
Stand Alone Trust, where separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by Holders of the
Trust in the aggregate, as provided in Article III, Section 1 above, the record
date of each such separate meeting shall be determined in the manner described
above in this Section 3.
Section 4. Voting, Proxies, Inspectors of Election. 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. No proxy shall be valid after one year from the date
of its execution, unless a longer period is expressly stated in the proxy.
In the case of each Master Trust, only Holders on the record date shall
be entitled to vote and each such Holder shall be entitled to a vote
proportionate to its Interest. In the case of each Feeder Trust, (i) only
Holders on the record date shall be entitled to vote, and (ii) each whole Share
shall be entitled to vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust shall not be voted. In the
case of each Stand Alone Trust, unless the Trustees determine that each Share
will entitle Holders to one vote per Share, on any matter submitted to a vote of
Holders of Shares of any series or class thereof, if any, each dollar of net
asset value (number of Shares owned times net asset value per Share of such
series or class, as applicable) shall be entitled to one vote on any matter on
which such shares are entitled to vote and each fractional dollar amount shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. In the case of each Feeder Trust and
each Stand Alone Trust, (i) Shares shall be voted by individual series or
classes thereof, if any, on any matter submitted to a vote of the Holders of the
Trust except as provided in Section 6.9(g) of the Declaration, and (ii) at any
meeting of Holders of the Trust or of any series or class thereof, if any, a
Shareholder Servicing Agent may vote any Shares as to which such Shareholder
Servicing Agent is the agent of record.
The Chairman of the meeting may, and upon the request of the Holders of
10% of the Interests or Shares, as the case may be, entitled to vote at such
election shall, appoint one or three inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after
3
<PAGE>
the election certify the result of the vote taken. No
candidate for Trustee shall be appointed such inspector. If there are three
inspectors of election, the decision, act or certification of a majority is
effective in all respects as the decision, act or certificate of all.
At every meeting of the Holders, all proxies shall be required and
taken in charge of and all ballots shall be required and canvassed by the
Secretary of the meeting, who shall decide all questions touching the
qualification of voters, the validity of the proxies, the acceptance or
rejection of votes and any other questions related to the conduct of the vote
with fairness to all Holders, unless inspectors of election shall have been
appointed, in which event the inspectors of election shall decide all such
questions. On request of the Chairman of the meeting, or of any Holder or his
proxy, the Secretary shall make a report in writing of any question determined
and shall execute a certificate of facts found, unless inspectors of election
shall have been appointed, in which event the inspectors of election shall do
so.
When an Interest is held or Shares are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest or Shares, 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 or Shares. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger.
Section 5. Holder Action by Written Consent. In the case of each Master
Trust, any action which may be taken by Holders may be taken without a meeting
if Holders of all Interests entitled to vote consent to the action in writing
and the written consents are filed with the records of the meetings of Holders.
In the case of each Feeder Trust and each Stand Alone Trust, any action which
may be taken by Holders may be taken without a meeting if Holders holding a
majority of Shares entitled to vote on the matter (or such larger proportion
thereof as shall be required by law, the Declaration or these By-Laws for
approval of such matter) 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.
Section 6. Conduct of Meetings. The meetings of the Holders shall be
presided over by the Chairman, or if he is not present, by a Chairman to be
elected at the meeting. The Secretary of the Trust, if present, shall act as
secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act; if neither the Secretary nor any Assistant Secretary is present,
then the meeting shall elect its secretary
4
<PAGE>
ARTICLE IV
TRUSTEES
Section 1. Place of Meeting, etc. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust, inside or outside the
state of organization of the Trust or the United States of America, at any
office of the Trust or at any other place as they may from time to time
determine, or in the case of meetings, as they may from time to time determine
or as shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 2. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman or any two Trustees. The President, the
Secretary or an Assistant Secretary may call meetings only upon the written
direction of the Chairman or two Trustees. The Trustees shall hold an annual
meeting for the election of officers and transaction of other business which may
come before such meeting. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed 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. Notice shall be given of any proposed action to be taken by
written consent. Notice of a meeting or proposed action to be taken by written
consent may be given by telegram (which term shall include a cablegram), by
telecopier or delivered personally (which term shall include by telephone), as
well as by mail. 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.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Trustees need be stated in the notice or waiver of notice of such meeting.
Section 3. Quorum. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in the Declaration, the 1940
Act or other applicable law, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present).
In the absence of a quorum, a majority of the Trustees present may adjourn the
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
With respect to actions 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 and shall be entitled to vote to the extent
permitted by the 1940 Act.
Section 4. Committees. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. Unless provided otherwise in the Declaration or by the
Trustees, a majority of all the members of any such committee may determine its
actions and fix the time and place of its meetings. With respect to actions of
any committee, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes and
shall be entitled to vote to the extent permitted by the 1940 Act. The Trustees
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee. Each committee
5
<PAGE>
shall keep regular minutes of its meetings and cause them to be filed with the
minutes of the proceedings of the Trustees.
Section 5. Telephone Meetings. 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 participating
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting. Any conference telephone meeting shall be deemed to
have been held at a place designated by the Trustees at the meeting.
Section 6. Action without a Meeting. Any action required or permitted
to be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed either by all
the Trustees or all members of such committee then in office or by an 80%
majority of the Trustees or an 80% majority of members of such committee,
provided that no action by 80% majority consent shall be effective unless and
until (i) each Trustee or committee member signing such consent shall have been
advised in writing of the following information: the identity of any Trustee or
committee member not signing such consent and the reasons for his not signing;
and (ii) after receiving such information signing Trustees or committee members
who represent an 80% majority then in office indicate in writing that the
consent shall become effective by 80% majority, rather than unanimous, consent.
All such effective written consents shall be filed with the minutes of the
proceedings of the Trustees and treated as a vote for all purposes.
Section 7. Compensation. The Trustees shall be entitled to receive
such compensation from the Trust for their services as may from time to time
be voted by the Trustees.
Section 8. Chairman. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to serve until his successor
shall have been duly elected and qualified; the Chairman may serve on committees
of the Trustees. The Chairman shall not be an officer of the Trust solely by
virtue of his serving as Chairman. The Chairman shall preside at all meetings of
the Trustees at which he is present, shall serve as the liaison between the
Trustees and the officers of the Trust and between the Trustees and their staff
and shall have such other duties as from time to time may be assigned to him by
the Trustees.
Section 9. Trustees' Staff; Counsel for the Trust and Trustees, etc.
The Trustees may employ or contract with one or more Persons to serve as their
staff and to provide such services related thereto as may be determined from
time to time. The Trustees may employ attorneys as counsel for the Trust and/or
the Trustees and may engage such other experts or consultants as may be
determined from time to time.
ARTICLE V
OFFICERS
Section 1. General Provisions. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
6
<PAGE>
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these ByLaws, each of the principal
executive officer described in Section 4 below, the Treasurer and the Secretary
shall hold office until a successor shall have been duly elected and qualified,
and any other officers shall hold office at the pleasure of the Trustees. Any
two or more offices may be held by the same Person, provided that at least two
different individuals shall serve as officers. Any officer may be, but does not
need be, a Trustee.
Section 3. Removal. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
Section 4. Powers and Duties of the Chief Executive Officer; President.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Holders in proper books provided for that
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise
7
<PAGE>
any of the powers, of the Treasurer. Each Assistant Treasurer shall perform
such other duties as from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
Section 11. Bond and Surety. As provided in the Declaration, any
officer may be required by the Trustees to be bonded for the faithful
performance of his duties in the amount and with such sureties as the Trustees
may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, provided that the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ one or more banks or trust companies having a capital, surplus and
undivided profits of at least $50,000,000 as custodian with authority as the
Trust's agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Declaration, these By-Laws and
the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or elsewhere
as the Trustees may direct; (iii) to disburse such funds upon orders or
vouchers; (iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(v) if authorized by the Trustees, to compute the net income of
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<PAGE>
the
Trust and the net asset value of the Trust or, in the case of each
Feeder Trust and each Stand Alone Trust, Shares; all upon such basis of
compensation as may be agreed upon between the Trustees and the
custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
Section 2. Successor Custodian. The Trust shall upon the resignation
or inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian,
the question whether the Trust shall be liquidated or shall function
without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Master Trust, insofar as the conditional advancing
of indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions:
(i) the advances must be limited to amounts used, or to be used, for
the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may
be made only upon receipt of a written promise by, or on behalf of, the
recipient to repay the amount of the advance which exceeds the amount
to which it is ultimately determined that he is entitled to receive
from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayment may be
obtained by the Trust without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient
of the advance, or (b) a majority of a quorum of the Trust's
disinterested, nonparty Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be
found entitled to indemnification.
9
<PAGE>
ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal
these By-Laws or adopt new By-Laws at any time to the extent such power is not
reserved to the Holders by the 1940 Act, other applicable law or the
Declaration. Action by the Trustees with respect to these By-Laws shall be taken
by an affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
One or more additional trusts may be added to Schedule I or Schedule II
by resolution of the trustees of such trust(s), provided that the trustees of
such trust(s) are identical to the Trustees of the Master Trusts, the Feeder
Trusts and the Stand Alone Trusts immediately prior to such addition.
In the case of each Master Trust, the Declaration refers to the
Trustees as Trustees, but not as individuals or personally; and no Trustee,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust. In
the case of each Feeder Trust and each Stand Alone Trust, the Declaration refers
to the Trustees not individually, but as Trustees under the Declaration, and no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Holders, in connection with Trust Property or the affairs of the Trust, save
only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust.
JPM345A
10
<PAGE>
SCHEDULE I
MASTER TRUSTS
State of Date of Date
Organiza- Declara- By-Laws
Trust tion tion Adopted
The Treasury Money Market New York 11/4/92 10/10/96
Portfolio
The Money Market Portfolio New York 1/29/93 10/10/96
The Tax Exempt Money Market New York 1/29/93 10/10/96
Portfolio
The Short Term Bond Portfolio New York 1/29/93 10/10/96
The U.S. Fixed Income Portfolio New York 1/29/93 10/10/96
The Tax Exempt Bond Portfolio New York 1/29/93 10/10/96
The Selected U.S. Equity Portfolio New York 1/29/93 10/10/96
The U.S. Small Company Portfolio New York 1/29/93 10/10/96
The Non-U.S. Equity Portfolio New York 1/29/93 10/10/96
The Diversified Portfolio New York 1/29/93 10/10/96
The Non-U.S. Fixed Income New York 6/13/93 10/10/96
Portfolio
The Emerging Markets Equity New York 6/13/93 10/10/96
Portfolio
The New York Total Return Bond New York 6/13/93 10/10/96
Portfolio
The Series Portfolio New York 6/14/94 10/10/96
The Global Strategic Income
Portfolio New York 1/9/97 2/13/97
11
<PAGE>
SCHEDULE II
FEEDER TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
The JPM Pierpont Funds Massachusetts 11/4/92 10/10/96
The JPM Institutional
Funds Massachusetts 11/4/92 10/10/96
12
<PAGE>
SCHEDULE III
STAND ALONE TRUSTS
State of Date of Date
Organization Declara- By-Laws
Trust tion Adopted
JPM Series Trust Massachusetts 8/15/96 10/10/96
13
THE GLOBAL STRATEGIC INCOME PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 10th day of February, 1997, between The Global
Strategic Income Portfolio, a trust organized under the law of the State of New
York (the "Portfolio") and Morgan Guaranty Trust Company of New York, a New York
trust company authorized to conduct a general banking business (the "Advisor"),
WHEREAS, the Portfolio is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Portfolio desires to retain the Advisor to render
investment advisory services to the Portfolio, 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. The Portfolio hereby appoints the Advisor to act as
investment adviser to the Portfolio 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 the
Portfolio, the Advisor shall manage the investment operations of the 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 the Registration Statement (as defined in paragraph 3(d)
of this Agreement) and subject to the following understandings:
(a) the Advisor shall furnish a continuous investment program
for the 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 the 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 the
Declaration of Trust, By-Laws and Registration Statement of the
Portfolio and with the instructions and directions of the Trustees of
the Portfolio and will conform to and comply with the
<PAGE>
requirements of
the 1940 Act and all other applicable federal and state laws and
regulations;
(d) the Advisor shall determine the securities to be
purchased, sold or lent by the Portfolio and as agent for the Portfolio
will effect portfolio transactions pursuant to its determinations
either directly with the issuer or with any broker and/or dealer in
such securities; 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 or not 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 the Portfolio as well as other
customers of the Advisor, 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 the Portfolio's securities transactions and shall render to the
Portfolio's Trustees such periodic and special reports as the Trustees
may reasonably request; and
(f) the investment management services of the Advisor to the
Portfolio under this Agreement are not to be deemed exclusive, and the
Advisor shall be free to render similar services to others.
3. The Portfolio 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) Declaration of Trust of the Portfolio (such Declaration of
Trust, as presently in effect and as amended from time to time, is
herein called the "Declaration of Trust");
(b) By-Laws of the Portfolio (such By-Laws, as presently in effect and as
amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees of the Portfolio authorizing the
appointment of the Advisor and approving the form of this Agreement;
(d) The Portfolio's Notification of Registration on Form N-8A
and Registration Statement on Form N-1A (the "Registration Statement")
each under the 1940 Act as filed with the Securities and Exchange
Commission (the "Commission").
4. The Advisor shall keep the 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 the Portfolio are the property of the
Portfolio and it will promptly surrender any of such records to the Portfolio
upon the Portfolio's request. The Advisor further agrees to preserve for the
periods prescribed by Rule 31a-2 of the Commission under the
2
<PAGE>
1940 Act any such
records as are required to be maintained by the Advisor with respect to the
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 the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Portfolio will pay to the Advisor as full compensation
therefor a fee at an annual rate equal to .45% of the Portfolio's average daily
net assets. This fee will be computed daily and payable as agreed by the
Portfolio and the Advisor, but no more frequently than monthly.
7. The Advisor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Portfolio in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
8. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by vote of a majority
of all the Trustees of the Portfolio or by vote of a majority of the outstanding
voting securities of the 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 the Portfolio. 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 the Portfolio from time to time, have no
authority to act for or represent the Portfolio in any way or otherwise be
deemed an agent of the Portfolio.
10. This Agreement may be amended by mutual consent, but the
consent of the Portfolio must be approved (a) by vote of a majority of those
Trustees of the Portfolio 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 the
Portfolio 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 the Portfolio. Notices of any kind to be given to
the Portfolio by the Advisor shall be in writing and shall be duly given if
mailed or delivered to the Portfolio at 60 State Street, 13th Floor, Boston,
Massachusetts 02109, Attention: Treasurer, or at such other address or to such
other individual as shall be specified by the Portfolio to the Advisor.
3
<PAGE>
12. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually and the Advisor
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Portfolio shall be personally liable upon, or
shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Portfolio, that
the shareholders, trustees, officers, employees, representatives and agents of
the Portfolio shall not be personally liable hereunder, and that it shall look
solely to the property of the Portfolio for the satisfaction of any claim
hereunder.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the 10th day
of February, 1997.
THE GLOBAL STRATEGIC INCOME
PORTFOLIO
By:
Elizabeth Keeley
Vice President and Assistant Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
Stephen H. Hopkins
Vice President
GSIIAA.DOC
4
CUSTODIAN CONTRACT
Between
THE GLOBAL STRATEGIC INCOME PORTFOLIO
and
STATE STREET BANK AND TRUST COMPANY
I:\DSFNDLGL\GSI\PORT\GSICUS.WPF
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be
Held By It...................................................... 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States.......... 1
2.1 Holding Securities..................................... 1
2.2 Delivery of Securities................................. 2
2.3 Registration of Securities............................. 4
2.4 Bank Accounts.......................................... 4
2.5 Availability of Federal Funds.......................... 4
2.6 Collection of Income................................... 4
2.7 Payment of Fund Monies................................. 5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased................................... 6
2.9 Appointment of Agents.................................. 6
2.10 Deposit of Fund Assets in U.S. Securities Systems...... 6
2.11 Fund Assets Held in the Direct Paper System............ 7
2.12 Segregated Account..................................... 8
2.13 Ownership Certificates for Tax Purposes................ 9
2.14 Proxies................................................ 9
2.15 Communications Relating to Portfolio Securities........ 9
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States...................... 9
3.1 Appointment of Foreign Sub-Custodians.................. 9
3.2 Assets to be Held...................................... 9
3.3 Foreign Securities Systems............................. 10
3.4 Holding Securities..................................... 10
3.5 Agreements with Foreign Banking Institutions........... 10
3.6 Access of Independent Accountants of the Fund.......... 11
3.7 Reports by Custodian................................... 11
3.8 Transactions in Foreign Custody Account................ 11
3.9 Liability of Foreign Sub-Custodians.................... 11
3.10 Liability of Custodian................................. 12
3.11 Reimbursement for Advances............................. 12
3.12 Monitoring Responsibilities............................ 12
3.13 Branches of U.S. Banks................................. 12
3.14 Tax Law................................................ 13
<PAGE>
4. Payments for Sales or Repurchases or Withdrawals of Interests... 13
5. Proper Instructions............................................. 13
6. Actions Permitted Without Express Authority..................... 14
7. Evidence of Authority........................................... 14
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income................... 14
9. Records......................................................... 15
10. Opinion of Fund's Independent Accountants....................... 15
11. Reports to Fund by Independent Public Accountants............... 15
12. Compensation of Custodian....................................... 16
13. Responsibility of Custodian..................................... 16
14. Effective Period, Termination and Amendment..................... 17
15. Successor Custodian............................................. 18
16. Interpretive and Additional Provisions.......................... 18
17. Additional Portfolios........................................... 19
18. Massachusetts Law to Apply...................................... 19
19. Prior Contracts................................................. 19
20. Reproduction of Documents....................................... 19
21. Shareholder Communications Election............................. 19
22. Limitation of Liability......................................... 20
<PAGE>
CUSTODIAN CONTRACT
This Contract between The Global Strategic Income Portfolio, a trust
fund organized and existing under the laws of the State of New York, having its
principal place of business at 60 State Street, Suite 1300, Boston,
Massachusetts 02109 hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts 02110, hereinafter called
the "Custodian",
WITNESSETH:
WHEREAS, the Fund's assets are composed of money and property
contributed thereto by the holders of interests in the Fund ("Interest(s)")
entitled to ownership rights in the Fund ("Investors"); and
WHEREAS, the Fund desires to retain the Custodian to render custody and
fund accounting services to the Fund;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of the Fund's Declaration of Trust. The Fund agrees to deliver to the Custodian
all securities and cash of the Fund, all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Fund from time to time, and the cash consideration received by it
for such new Interests as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Fund held or received by the
Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the Fund from time to time employ one or
more sub-custodians, located in the United States but only in accordance with an
applicable vote by the Board of Trustees of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities the foreign banking institutions
and foreign securities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in
the United States including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to
<PAGE>
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury (each, a "U.S. Securities System") and (b) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration
is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
2
<PAGE>
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash, obligations issued by the
United States government, its agencies or instrumentalities or
other equivalent collateral or by a letter of credit, except
that in connection with any loans for which collateral is to
be credited to the Custodian's account in a U.S. Securities
System, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Fund prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with the Fund's transactions;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with the Fund's transactions;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to Investors in connection with distributions in
kind, as may be described from time to time in the Fund's
currently effective registration statement on Form N-1A under
the Investment Company Act of 1940, as amended (the "1940
Act") (the "Registration Statement"), in satisfaction of
requests by Investors for repurchase or redemption; and
3
<PAGE>
15) For any other proper corporate purpose, BUT ONLY upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board of Trustees or of
the Executive Committee of the Fund signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Fund to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
UNLESS the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the 1940 Act. Funds held by the Custodian for the Fund may be deposited
by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; PROVIDED, however, that every
such bank or trust company shall be qualified to act as a custodian
under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Trustees of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to the Fund as
of specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Interests
which are deposited into the Fund's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
the Fund shall be entitled either by law or pursuant to custom in the
4
<PAGE>
securities business and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned
pursuant to the provisions of Section 2.2(10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to act
as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the
case of a purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in Section 2.10
hereof, (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of securities owned by
the Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the Fund or
(e) for transfer to a time deposit account of the Fund in any
bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Article 5;
2) In connection with conversion , exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Interests issued by the
Fund as set forth in Article 4 hereof;
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4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of income to Investors pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as
if the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Exchange Act, which acts as a securities depository,
or in the U.S. Securities System in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a U.S.
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
U.S. Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
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2) The records of the Custodian with respect to securities of the
Fund which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund. Copies
of all advices from the U.S. Securities System of transfers of
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian and be
provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Fund;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safe-
guarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund the
certificates required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the Fund's benefit
for any loss or damage to the Fund resulting from use of the
U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the U.S. Securities System; at
the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss
or damage if and to the extent that the Fund has not been made
whole for any such loss or damage; provided, that the
Custodian shall, notwithstanding such subrogation, reimburse
the Fund for its reasonable expenses in connection with such
claims.
2.11 FUND ASSETS HELD IN THE DIRECT PAPER SYSTEM. The Custodian may deposit
and/or maintain securities owned by the Fund in the Direct Paper System
subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund;
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2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transaction in the U.S. Securities System for the account of
the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any Futures
Commission Merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
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purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it and
in connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers
of the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires to
take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at least
three business days prior to the date on which the Custodian is to take
such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for its securities
and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with
a certified resolution of the Fund's Board of Trustees, the Custodian
and the Fund may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining
custody of the Fund's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the 1940 Act, and (b) cash and cash equivalents in such
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<PAGE>
amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
Notwithstanding any provisions to the contrary set forth in this
Contract, the Custodian may hold securities and other non-cash property
for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to
the Custodian for the benefit of its customers provided, however, that
(i) the records of the Custodian with respect to securities and other
non-cash property of the Fund which are maintained in such account
shall identify by book-entry those securities and other non-cash
property belonging to the Fund and (ii) the Custodian shall require
that securities and other non-cash property so held by the foreign
sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Fund shall be
maintained in a clearing agency which acts as a securities depository
or in a book-entry system for the central handling of securities
located outside the United States (each, a "Foreign Securities System")
only through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms hereof
(Foreign Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 HOLDING SECURITIES. The Custodian may hold securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (i) the records of the Custodian with respect to
securities and other non-cash property of the Fund which are maintained
in such account shall identify by book-entry those securities and other
non-cash property belonging to the Fund and (ii) the Custodian shall
require that securities and other non-cash property so held by the
foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of the
Fund will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration; (b) beneficial ownership for the assets of the Fund
will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to the Fund; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given access to
the books and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (e) assets of
the Fund held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
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3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian
on behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of such
securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply MUTATIS MUTANDIS to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against
a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of the Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of
the Fund's assets to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S.
accounting principles).
3.13 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund's assets is maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
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1940 Act meeting the qualification set forth in Section 26(a) of said
Act. The appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW.
(a) UNITED STATES TAXES. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of the United
States of America or any state or political subdivision thereof. The
Custodian will be responsible for informing the Fund of the income
received by the Fund which is United States source income and which is
not United States source income.
(b) CLAIMING FOR EXEMPTION OR REFUND UNDER THE TAX LAWS OF NON-UNITED
STATES JURISDICTIONS. The sole responsibility of the Custodian with
regard to the tax laws of non-United States jurisdictions shall be to
identify the income of the Fund which has been subject to withholding
and other tax assessments or other governmental charges by such
jurisdictions and the amount thereof and to use reasonable efforts to
assist the Fund or Investors with respect to any claim for exemption or
refund of such charges that can be made on behalf of the Fund or
Investors.
4. PAYMENTS FOR SALES OR REPURCHASES OR WITHDRAWALS OF INTERESTS
The Custodian shall receive from the Fund's placement agent or from the
Transfer Agent and deposit into the account of the Fund such payments
as are received for Interests issued or sold from time to time by the
Fund. The Custodian will provide notification to the Fund and the
Transfer Agent of any receipt by it of payments for Interests.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall,
upon receipt of instructions from the Fund or the Transfer Agent, make
funds available for payment to Investors who have delivered to the Fund
a request for withdrawal or repurchase of their Interests. In
connection with the withdrawal of an Interest, the Custodian is
authorized upon receipt of instructions from the Fund or the Transfer
Agent to wire funds to or through a commercial bank designated by the
redeeming Investor.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing
signed or initialled by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be
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considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
1 ) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall keep the books of account of the Fund and shall
perform the following duties as described in the Registration Statement and in
accordance with the procedures as may be agreed upon by the Fund and the
Custodian from time to time:
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(a) record general ledger entries;
(b) calculate daily net income;
(c) reconcile activity to the trial balance;
(d) calculate book capital account balances;
(e) calculate and provide to the Fund the daily
net asset value of the Fund and the SEC
yield of the Fund and the allocation of its
various components to Investors;
(f) prepare capital allocation reports in
accordance with Regulation 1.704-3(e)(3)
(special aggregation rule for securities
partnerships) under the U.S. Internal
Revenue Code, based upon tax adjustments
supplied by the Fund; and
(g) prepare account balances.
The Custodian shall advise the Fund daily of the total amounts
of such net income, including the categorization of such net
income by source. The calculation of the Fund's net income and
its components shall include, but may not be limited to,
accounting for purchases and sales of portfolio securities,
calculation of realized and unrealized gains and losses,
accruals of income on portfolio investments, expense accruals
and calculations of market value of portfolio securities.
9. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular attention to Section
31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund at such times as the Fund may
reasonably require with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
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securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation from the
Fund for its services and expenses as Custodian, as agreed upon from time to
time between the Fund and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any Futures Commission Merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by: (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts; (ii) errors by the Fund or the Fund's investment
advisor in their instructions to the Custodian provided such instructions have
been in accordance with this Contract; (iii) the insolvency of or acts or
omissions by a Securities System; (iv) any delay or failure of any broker, agent
or intermediary, central bank or other commercially prevalent payment or
clearing system to deliver to the Custodian's sub-custodian or agent securities
purchased or in the remittance or payment made in connection with securities
sold; (v) any delay or failure of any company, corporation, or other body in
charge of registering or transferring securities in the name of the Custodian,
the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including nonreceipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities
16
<PAGE>
System; and (vii) any provision of any present or future law or regulation or
order of the United States of America, or any state thereof, or any other
country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the initial use of
a particular Securities System by the Fund, as required by Rule 17f-4 under the
1940 Act and that the Custodian shall not act under Section 2.11 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees has approved the initial use of the Direct
Paper System by the Fund; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
17
<PAGE>
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund shall be appointed by the Board
of Trustees of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of the Fund then held by it hereunder and
shall transfer to an account of the successor custodian all of the securities of
the Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$50,000,000, all securities, funds and other properties held by the Custodian on
behalf of the Fund and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract and to transfer to an
account of such successor custodian all of the securities of the Fund held in
any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
18
<PAGE>
17. ADDITIONAL PORTFOLIOS
In the event that the Fund establishes one or more series or subtrusts
with respect to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such services, the Custodian
shall provide such services under the terms hereof.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
20. REPRODUCTION OF DOCUMENTS
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process. The parties hereto each agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
21. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
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<PAGE>
NO [X] The Custodian is not authorized to release the Fund's
name, address, and share positions.
22. LIMITATION OF LIABILITY
The references herein to the Trustees of the Fund are to the Trustees
of the Fund as trustees and not individually or personally. The obligations of
the Fund entered into on behalf of the Fund by any of the Trustees are not made
individually but in their capacity as trustees and are not binding on any of the
Trustees personally. All persons dealing with the Fund must look solely to the
assets of the Fund for the enforcement of any claims against the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of , 199 .
ATTEST THE GLOBAL STRATEGIC INCOME PORTFOLIO
___________________________________ By _______________________________
Name:
Title:
ATTEST STATE STREET BANK AND TRUST COMPANY
___________________________________ By _______________________________
Name:
Title:
20
<PAGE>
Schedule A
17f-5 Approval
The Board of Trustees of The Global Strategic Income Portfolio has approved
certain foreign banking institutions and foreign securities depositories within
State Street's Global Custody Network for use as subcustodians for the Fund's
securities, cash and cash equivalents held outside of the United States. Board
approval is as indicated by the Fund's Authorized Officer:
Fund
Officer
Initials Country Subcustodian Central Depository
/s/ EK State Street's entire Global Custody Network listed below
________ Argentina Citibank, N.A. Caja de Valores S.A.
________ Australia Westpac Banking Austraclear Limited;
Corporation
Reserve Bank Information
and Transfer System (RITS)
________ Austria GiroCredit Bank Oesterreichische
Aktiengesellschaft Kontrollbank AG
der Sparkassen (Wertpapiersammelbank
Division)
________ Bangladesh Standard Chartered Bank None
________ Belgium Generale Bank Caisse Interprofessionnelle
de Depots et de Virements
de Titres S.A. (CIK);
Banque Nationale de
Belgique
________ Botswana Barclays Bank of Botswana None
Limited
________ Brazil Citibank, N. A. Bolsa de Valores de Sao
Paulo (Bovespa);
Banco Central do Brasil,
Systema Especial de
Liquidacao e Custodia
(SELIC)
________ Canada Canada Trustco Mortgage The Canadian Depository
Company for Securities Limited
(CDS)
________ Chile Citibank, N.A. None
[logo] State Street [registered trademark]
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
________ People's The Hongkong and Shanghai Securities Central
Republic Shanghai Banking Clearing and Registration
of China Corporation Limited, Corporation (SSCCRC);
Shanghai and
Shenzhen branches Shenzhen Securities Central
Clearing Co., Ltd. (SSCC)
________ Colombia Cititrust Colombia S.A. None
Sociedad
Fiduciaria
________ Cyprus Barclays Bank PLC None
Cyprus Offshore Banking
Unit
________ Czech Ceskoslovenska Obchodni Stredisko cennych
Republic Banka A.S. papiru(SCP);
Czech National Bank (CNB)
________ Denmark Den Danske Bank Vaerdipapircentralen - The
Danish Securities Center
(VP)
________ Ecuador Citibank, N.A. None
________ Egypt National Bank of Egypt None
________ Finland Merita Bank Limited The Central Share Register
of Finland
________ France Banque Paribas Societe
Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres
(SICOVAM);
Banque de France,
Saturne System
________ Germany Dresdner Bank AG The Deutscher Kassenverein
AG
________ Ghana Barclays Bank of Ghana None
Limited
________ Greece National Bank of Greece The Central Securities
S.A. Depository (Apothetirion
Titlon A.E.)
[logo] State Street [registered trademark]
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
________ Hong Kong Standard Chartered Bank The Central Clearing and
Settlement System (CCASS)
________ Hungary Citibank Budapest Rt. The Central Depository and
Clearing House (Budapest)
Ltd. (KELER Ltd.)
________ India Deutsche Bank AG None
The Hongkong and None
Shanghai Banking
Corporation Limited
________ Indonesia Standard Chartered Bank None
________ Ireland Bank of Ireland None;
The Central Bank of
Ireland, The Gilt
Settlement Office (GSO)
________ Israel Bank Hapoalim B.M. The Clearing House of the
Tel Aviv Stock Exchange
________ Italy Morgan Guaranty Trust Monte Titoli S.p.A.;
Company
(Present Subcustodian) Banca d'Italia
________ Banque Paribas Monte Titoli S.p.A.;
(Future Subcustodian)
Banca d'Italia
________ Ivory Societe Generale de None
Coast Banques en Cote d'Ivoire
________ Japan The Daiwa Bank, Limited Japan Securities Depository
Center (JASDEC);
Bank of Japan Net System
________ The Fuji Bank, Limited Japan Securities Depository
Center (JASDEC);
Bank of Japan Net System
________ The Sumitomo Trust & Japan Securities Depository
Banking Co., Ltd. Center (JASDEC);
Bank of Japan Net System
[logo] State Street [registered trademark]
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
________ Jordan The British Bank of the None
Middle East
________ Kenya Barclays Bank of Kenya None
Limited
________ Republic SEOULBANK Korea Securities Depository
of Korea (KSD)
________ Malaysia Standard Chartered Bank Malaysian Central
Malaysia Berhad Depository Sdn.
Bhd. (MCD)
________ Mauritius The Hongkong and None
Shanghai Banking
Corporation Limited
________ Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito
de Valores);
Banco de Mexico
________ Morocco Banque Commerciale du None
Maroc
________ Netherlands MeesPierson N.V. Nederlands Centraal
Instituut voor
Giraal Effectenverkeer B.V.
(NECIGEF;)
________ New Zealand ANZ Banking Group New Zealand Central
(New Zealand) Limited Securities Depository
Limited (NZCSD)
________ Norway Christiania Bank og Verdipapirsentralen - The
Kreditkasse Norwegian Registry of
Securities (VPS)
________ Pakistan Deutsche Bank AG None
________ Peru Citibank, N.A. Caja de Valores (CAVAL)
________ Philippines Standard Chartered Bank None
________ Poland Citibank Poland S.A. The National Depository of
Securities (Krajowy Depozyt
Papierow Wartosciowych);
National Bank of Poland
[logo] State Street [registered trademark]
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
________ Portugal Banco Comercial Central de Valores
Portugues Mobiliarios (Central)
________ Russia Credit Suisse, Zurich None
via Credit Suisse
(Moscow) Limited
________ Singapore The Development Bank The Central Depository
of Singapore Ltd. (Pte) Limited (CDP)
________ Slovak Ceskoslovenska Obchodna Stredisko Cennych Papierov
Republic Banka A.S. (SCP);
National Bank of Slovakia
________ South Standard Bank of South The Central Depository
Africa Africa Limited Limited
________ Spain Banco Santander, S. A. Servicio de Compensacion y
Liquidacion de Valores,
S.A. (SCLV);
Banco de Espana,
Anotaciones en Cuenta
________ Sri Lanka The Hongkong and Central Depository System
Shanghai Banking (Pvt) Limited
Corporation Limited
________ Swaziland Barclays Bank of None
Swaziland Limited
________ Sweden Skandinaviska Enskilda Vardepapperscentralen VPC
Banken AB - The Swedish Central
Securities Depository
________ Switzerland Union Bank of Schweizerische Effekten -
Switzerland Giro AG (SEGA)
________ Taiwan - Central Trust of China The Taiwan Securities
R.O.C. Central Depository
or Advisor/State Street Company, Ltd. (TSCD)
designated meeting the
requirements of Rule 17f-5
(Client Designated
Subcustodian)
________ Thailand Standard Chartered Bank Thailand Securities
Depository Company Limited
(TSD)
[logo] State Street [registered trademark]
<PAGE>
Fund
Officer
Initials Country Subcustodian Central Depository
________ Turkey Citibank, N.A. Takas ve Saklama Bankasi
A.S.(TAKASBANK);
Central Bank of Turkey
________ United State Street Bank None;
Kingdom and Trust Company
The Bank of England,
The Central Gilts Office
CGO);
The Central Moneymarkets
Office (CMO)
________ Uruguay Citibank, N.A. None
________ Venezuela Citibank, N.A. None
________ Zambia Barclays Bank of Zambia Lusaka Central Depository
Limited (LCD)
________ Zimbabwe Barclays Bank of None
Zimbabwe Limited
________ Euroclear (The Euroclear System)/State Street London Limited[)]
________ Cedel (Cedel Bank, societe anonyme)/State Street London Limited[)]
Certified by:
/s/ Elizabeth Keeley February 13, 1997
Fund's Authorized Officer Date
Elizabeth Keeley
Vice President and
Assistant Secretary
[logo] State Street [registered trademark]
PORTFOLIOS LISTED IN EXHIBIT I
CO-ADMINISTRATION AGREEMENT
CO-ADMINISTRATION AGREEMENT, dated as of August 1, 1996 by and between
each of the Portfolios listed on Exhibit I, each a New York trust (a
"Portfolio"), and Funds Distributor, Inc., a Massachusetts corporation (the
"Co-Administrator").
W I T N E S S E T H:
WHEREAS, each Portfolio is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act");
WHEREAS, each Portfolio wishes to engage the Co-Administrator to
provide certain administrative and management services, and the Co-Administrator
is willing to provide such administrative and management services to the
Portfolio, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF CO-ADMINISTRATOR FOR EACH PORTFOLIO. Subject to the
general direction and control of the Board of Trustees of the Portfolio, the
Co-Administrator shall perform the following administrative and management
services: (a) providing or obtaining office space, equipment and clerical
personnel necessary for maintaining the organization of the Portfolio and for
performing the administrative and management functions herein set forth; (b)
arranging for Directors, officers and employees of the Co-Administrator or its
agents, reasonably acceptable to the Trustees, to serve as Trustees, officers or
agents of the Portfolio and perform the duties incident to their office if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law; (c) filing documents with regulatory
authorities or mailing documents to investors in or Trustees of the Portfolio to
the extent requested by the Portfolio; (d) maintaining books and records of the
Portfolio related to the foregoing. In the performance of its duties under this
Agreement, the Co-Administrator will comply with the provisions of the
Declaration of Trust and By-Laws of the Portfolio and the Portfolio's stated
investment objective, policies and restrictions, and will use its best efforts
to safeguard and promote the welfare of the Portfolio, and to comply with other
policies which the Board of Trustees may from time to time determine.
Notwithstanding the foregoing, the Co- Administrator shall not be deemed to have
assumed any duties not specified in this Agreement, including, without
limitation, any responsibility for the management of the Portfolio's assets or
the rendering of investment advice and supervision with respect thereto, nor
shall the Co- Administrator be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent, custodian
or other administrative service provider of the Portfolio. The Co-Administrator
undertakes to comply with all applicable requirements
1
<PAGE>
of the U.S. federal securities laws and any other laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by it hereunder. Where the Portfolio's address is outside the United
States as indicated on Exhibit 1, the Co- Administrator further undertakes to
perform its duties, or cause its duties to be performed, outside of the United
States, as requested by the Trustees.
2. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Co-Administrator hereby agrees that all records which it
maintains for a Portfolio are the property of the Portfolio and further agrees
to surrender promptly to the Portfolio any such records upon the Portfolio's
request.
3. ALLOCATION OF CHARGES AND EXPENSES. The Co-Administrator shall pay
the entire salaries and wages of all of the Portfolio's Trustees, officers and
agents who devote part or all of their time to the affairs of the
Co-Administrator or its affiliates, and the wages and salaries of such persons
shall not be deemed to be expenses incurred by the Portfolio for purposes of
this Section 3. Except as provided in the foregoing sentence, the
Co-Administrator shall not pay other expenses relating to the Portfolio
including, without limitation, compensation of Trustees not affiliated with the
Co-Administrator; governmental fees; interest charges; taxes; membership dues in
the Investment Company Institute allocable to the Portfolio; fees and expenses
of the Portfolio's independent auditors, of legal counsel and of any transfer
agent or registrar of the Portfolio; expenses of preparing, printing and mailing
reports, notices, proxy statements and reports to investors and government
officers and commissions; expenses of preparing and mailing agendas and
supporting documents for meetings of Trustees and committees of Trustees;
expenses connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the Portfolio's custodian
for all services to the Portfolio, including safekeeping of funds and securities
and maintaining required books and accounts; expenses of calculating the net
asset value of the Portfolio; expenses of meetings of investors in the
Portfolio; and expenses relating to the issuance, registration and qualification
of interests in the Portfolio.
4. COMPENSATION OF CO-ADMINISTRATOR. For the services to be rendered
and the facilities to be provided by the Co-Administrator hereunder, the
Co-Administrator will receive a fee from each Portfolio as agreed by the
Co-Administrator and the Portfolio from time to time as set forth on Schedule A
attached hereto. This fee will be payable as agreed by the Portfolio and the
Co-Administrator, but not more frequently than monthly.
5. LIMITATION OF LIABILITY OF THE CO-ADMINISTRATOR. The
Co-Administrator shall not be liable for any error of judgment or mistake of law
or for any act or omission in the administration or management of any Portfolio
or the performance of its duties hereunder, except for wilful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 5, the term "Co-Administrator" shall include Funds Distributor, Inc.
and/or any of its affiliates and the Directors, officers and employees of Funds
Distributor, Inc. and/or of its affiliates.
6. ACTIVITIES OF THE CO-ADMINISTRATOR. The services of the Co-Administrator
to the Portfolios are not to be deemed to be exclusive, the Co-Administrator
being free to render administrative and/or other services to other parties. It
is understood that Trustees, officers, and
2
<PAGE>
investors of a Portfolio are or may become interested in the Co-Administrator
and/or any of its affiliates as Directors, officers, employees, or otherwise,
and that Directors, officers and employees of the Co-Administrator and/or any of
its affiliates are or may become similarly interested in the Portfolio and that
the Co-Administrator and/or any of its affiliates may be or become interested in
the Portfolio as an investor or otherwise.
7. TERMINATION. This Agreement may be terminated at any time with respect
to a Portfolio, without the payment of any penalty, by the Board of Trustees of
the Portfolio or by the Co-Administrator, in each case on not more than 60 days'
nor less than 30 days' written notice to the other party.
8. SUBCONTRACTING BY THE CO-ADMINISTRATOR. The Co-Administrator may
subcontract for the performance of its obligations hereunder with any one or
more persons; PROVIDED, HOWEVER, that the Co-Administrator may subcontract
hereunder only with the prior consent of the Trustees of the Portfolio; and
PROVIDED, FURTHER, that, unless the Portfolio otherwise expressly agrees in
writing, the Co-Administrator shall be as fully responsible to the Portfolio for
the acts and omissions of any subcontractor as it would be for its own acts or
omissions.
9. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. AMENDMENTS. This Agreement may be amended only by mutual written
consent.
11. CONFIDENTIALITY. The Co-Administrator agrees on behalf of itself
and its employees to treat confidentially and as proprietary information of each
Portfolio all records and other information not otherwise publicly available
relative to the Portfolio and its prior, present or potential investors and not
to use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Portfolio, which approval shall not be
unreasonably withheld and may not be withheld where the Co-Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Portfolio.
12. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. Should any part of this Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
13. NOTICE. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Co-Administrator at 60 State
Street, 13th Floor, Boston, Massachusetts 02109, Attention: President with a
copy to General Counsel; or (2) to the Portfolio at the Portfolio's address
listed on Exhibit I, Attention: Treasurer, or at such other address as either
3
<PAGE>
party may from time to time specify to the other party pursuant to this section,
with a copy to Morgan Guaranty Trust Company of New York, 522 Fifth Avenue, New
York, New York 10036, Attention: Funds Management.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of each Portfolio has executed this Agreement not
individually, but as an officer of the Portfolio under the Portfolio's
Declaration of Trust, dated as set forth on Exhibit I, and the obligations of
this Agreement are not binding upon any of the Trustees or investors of the
Portfolio individually, but bind only the trust estate.
EACH PORTFOLIO LISTED ON EXHIBIT I
By /s/ John E. Pelletier
John E. Pelletier, Vice President
and Secretary
Attest: /s/ L. McCabe
Lenore J. McCabe
FUNDS DISTRIBUTOR, INC.
By /s/ Marie E. Connolly
Marie E. Connolly, President and
Chief Executive Officer
MASADMI[N]2
4
<PAGE>
ADDENDUM
ADDENDUM, dated February 13, 1997, to the Co-Administration Agreement
made as of the 1st day of August, 1996 (the "Agreement") between each of trusts
set forth on Exhibit I hereto and Funds, Distributor, Inc.
Effective February 13, 1997, The Global Strategic Income Portfolio (the
"Trust") shall be added to Exhibit I to the Agreement so that such Exhibit I
shall include the Trust.
THE GLOBAL STRATEGIC INCOME PORTFOLIO
By ___________________________________
John E. Pelletier, Vice President
and Assistant Secretary
FUNDS DISTRIBUTOR, INC.
By ___________________________________
Marie E. Connolly, President and
Chief Executive Officer
MASADMI2
<PAGE>
SCHEDULE A
The Co-Administrator's annual fee charged to and payable by each
Covered Entity as defined below is its share of an annual complex-wide charge.
The annual complex-wide charge is:
(a) $425,000 for all Covered Entities, PROVIDED that such charge shall be
increased by $5,000 for each Covered Entity in excess of 100, plus
(b) out-of-pocket charges for any services subcontracted pursuant to
co-administration agreements with Covered Entities.
The portion of this charge payable by each Covered Entity is (i) in the case of
any charges described in paragraph (b) directly attributable to a particular
Covered Entity, the amount attributable to such Covered Entity, plus (ii) in the
case of all other amounts, the amount determined by the proportionate share that
such Covered Entity's net assets bear to the total net assets of the Covered
Entities.
A Covered Entity is any series of The Pierpont Funds, The JPM Institutional
Funds, The JPM Advisor Funds, the Portfolios in which they invest, and each
other current or future mutual fund (or series thereof) for which both (1) a tax
return is filed with the Internal Revenue Service under United States tax law
and (2) Morgan Guaranty Trust Company of New York provides investment advice
and/or administrative services and the Co-Administrator provides administration
services.
Approved: July 11, 1996
Effective August 1, 1996
MASADMI2
<PAGE>
<TABLE>
<CAPTION>
Restated Exhibit I as of February 13, 1997 EXHIBIT I
DATE OF DECLARATION
PORTFOLIO OF TRUST ADDRESS EFFECTIVE DATE
<S> <C> <C> <C>
The Treasury Money Market Portfolio......... 11/4/92 60 State Street, Boston, MA 02109 8/1/96
The Money Market Portfolio.................. 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Tax Exempt Money Market Portfolio....... 1/29/93 60 State Street, Boston, MA 02109 8/1/96
The Short Term Bond Portfolio............... 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The U.S. Fixed Income Portfolio............. 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Tax Exempt Bond Portfolio............... 1/29/93 60 State Street, Boston, MA 02109 8/1/96
The Selected U.S. Equity Portfolio.......... 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The U.S. Small Company Portfolio............ 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Non-U.S. Equity Portfolio............... 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Diversified Portfolio................... 1/29/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Non-U.S. Fixed Income Portfolio......... 6/16/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Emerging Markets Equity Portfolio....... 6/16/93 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The New York Total Return Bond Portfolio.... 6/16/93 60 State Street, Boston, MA 02109 8/1/96
The Series Portfolio*....................... 6/24/94 P.O. Box 2508 GT 8/1/96
Grand Cayman, Cayman Islands, BWI
The Global Strategic Income Portfolio*...... 1/9/97 60 State Street, Boston, MA 02109 2/13/97
</TABLE>
*In the case of these Portfolios, references to the "Portfolio" refer to its
individual series as the context requires.
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE PORTFOLIOS NAMED HEREIN
and
STATE STREET BANK AND TRUST COMPANY
JPM259A1
<PAGE>
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank 1
Article 2 Fees and Expenses 3
Article 3 Representations and Warranties of the Bank 4
Article 4 Representations and Warranties of
the Portfolio(s) 5
Article 5 Data Access and Proprietary Information 5
Article 6 Indemnification 8
Article 7 Standard of Care 11
Article 8 Covenants of the Portfolios and the Bank 11
Article 9 Termination of Agreement 13
Article 10 Additional Parties to Agreement 14
Article 11 Assignment 14
Article 12 Amendment 15
Article 13 Massachusetts Law to Apply 15
Article 14 Merger of Agreement 15
Article 15 Limitations of Liability of the Trustees
and the Investors 15
Article 16 Counterparts 16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 23rd day of December, 1992, by and between
each of the New York trusts executing this Agreement on the signature pages
hereto or becoming a party to this Agreement subsequent to the date hereof as
provided in Article 10 (each a "Portfolio"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, each Portfolio's assets are composed of money and property
contributed thereto by the holders of interests in the Portfolio ("Interest(s)")
entitled to ownership rights in the Portfolio ("Investors");
WHEREAS, each Portfolio desires to appoint the Bank as its transfer
agent and agent in connection with certain other activities, and the Bank
desires to accept such appointment;
WHEREAS, additional Portfolios may become subject to this Agreement in
accordance with Article 10; and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, each Portfolio hereby employs and appoints the Bank to act as, and
the Bank agrees to act, as its transfer agent for the authorized Interests.
<PAGE>
1.02 The Bank agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Portfolios and the Bank, the Bank shall:
(i) Receive orders for the purchase of
Interests and promptly deliver payment and
appropriate documentation thereof to the custodian of
the applicable Portfolio authorized pursuant to the
Declaration of Trust of the Portfolio (the
"Custodian");
(ii) Pursuant to purchase orders, hold each
Interest in the appropriate Investor account;
(iii) Receive requests for purchases and
withdrawals and directions associated therewith and
deliver the appropriate documentation thereof to the
Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with
respect to any withdrawal, pay over or cause to be
paid over in the appropriate manner such monies as
instructed by the withdrawing Investor; and
(v) Maintain records of account for and
advise the Portfolios and their respective Investors
as to the foregoing; and
(vi) Record the Interest of each Investor
and maintain pursuant to SEC Rule 17Ad-lO(e) a record
of the
-2-
<PAGE>
total number and value of Interests which have been
established, based upon data provided to it by the
applicable Portfolio.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall perform the
customary services of a transfer agent, including but not limited to:
maintaining all Investor accounts and withholding taxes, as applicable, on
non-resident alien Investors.
(c) Procedures as to who shall provide certain of these
services in Article 1 may be established from time to time by agreement between
the Portfolios and the Bank per the attached service responsibility schedule.
The Bank may at times perform only a portion of these services and the
Portfolios or their agents may perform these services on the Portfolios' behalf.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement,
each Portfolio agrees to pay the Bank an annual fee as agreed to from time to
time by the Bank and the Portfolios. Such fees and out-of-pocket expenses and
advances identified under Section 2.02 below may be changed from time to time
subject to mutual written agreement between the Portfolios and the Bank.
2.02 In addition to the fee paid under Section 2.01 above,
each Portfolio agrees to reimburse the Bank for out-of-pocket expenses,
including but not limited to confirmation production, postage, forms, telephone,
microfilm, microfiche,
-3-
<PAGE>
tabulating information statements and/or proxies, records storage or advances
incurred by the Bank. In addition, any other expenses incurred by the Bank at
the request or with the consent of a Portfolio, will be reimbursed by such
Portfolio.
2.03 Each Portfolio agrees to pay all fees and reimbursable
expenses promptly following the receipt of the respective billing notice.
Procedures applicable to advance payment by the Portfolios to the Bank of
postage for mailing information statements and/or proxies, reports and other
mailings to Investor accounts may be established from time to time by agreement
between the Portfolios and the Bank.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to each Portfolio that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
-4-
<PAGE>
Article 4 Representations and Warranties of the Portfolio(s)
Each Portfolio represents and warrants to the Bank that:
4.01 It is a common law trust duly organized and existing
under the laws of the State of New York.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open - end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
Article 5 Data Access and Proprietary Information
5.01 Each Portfolio acknowledges that the data bases, computer
programs, screen format, report formats, interactive design techniques, and
documentation manuals (collectively, "Proprietary Information") furnished to the
Portfolio by the Bank as part of the Portfolio's ability to access certain
Portfolio-related data ("Customer Data") maintained by the Bank on data bases
under the control and ownership of the Bank or other third party ("Data Access
Services") constitute copyrighted, trade secret, or other proprietary
information of substantial value to the Bank or other third party. In no event
shall Proprietary Information be deemed Customer Data. Each Portfolio agrees to
treat all Proprietary Information as proprietary to the Bank and further
-5-
<PAGE>
agrees that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, each Portfolio agrees for itself and its employees and agents:
(a) to access Customer Data solely from
locations as may be designated in writing by the Bank
and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating
in any way the Proprietary Information;
(c) to refrain from obtaining unauthorized
access to any portion of the Proprietary Information,
and if such access is inadvertently obtained, to
inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's
instructions;
(d) to refrain from causing or allowing
third-party data required hereunder from being
retransmitted to any other computer facility or other
location, except with the prior written consent of
the Bank;
(e) that the Portfolio shall have access
only to those authorized transactions agreed upon
by the parties;
(f) to honor all reasonable written
requests made by the Bank to protect at the Bank's
expense the rights of the Bank in Proprietary
Information at
-6-
<PAGE>
common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its
employees of their obligations pursuant to this Article 5. The obligations of
this Article shall survive any earlier termination of this Agreement.
5.02 If a Portfolio notifies the Bank that any of the Data
Access Services do not operate in material compliance with the most recently
issued user documentation for such services, the Bank shall use its best efforts
to promptly correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible for the
contents of such data and each Portfolio agrees to make no claim against the
Bank arising out of the contents of such third-party data, including, but not
limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Portfolios include
the ability to originate electronic instructions to the Bank in order to (i)
effect the transfer or movement of cash or (ii) transmit Investor information or
other information (such transactions are known as "Customer Originated
Electronic Financial Instructions" or "COEFI"), then in such event the Bank
shall be
-7-
<PAGE>
entitled to rely on the validity and authenticity of such instruction without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and each Portfolio
shall indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to any claim, demand, action or suit in
connection with:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Portfolio's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Portfolio hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Portfolio or any other person or firm
on behalf of the Portfolio.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Portfolio.
-8-
<PAGE>
(e) The offer or sale of Interests in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Interests be registered in such state
or in violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer of Interests in such
state.
6.02 The Bank shall indemnify and hold each Portfolio harmless
from and against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liability arising out of or attributable to any
action or failure or omission to act by the Bank as a result of the Bank's lack
of good faith, negligence or willful misconduct.
6.03 At any time the Bank may apply to any officer of a
Portfolio for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the applicable Portfolio for any action taken
or omitted by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of a
Portfolio, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar
-9-
<PAGE>
means authorized by the Portfolio, and shall not be held to have notice of any
change of authority of any person, until receipt of written notice thereof from
the Portfolio. The Bank, its agents and subcontractors shall also be protected
and indemnified in recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signatures of the officers of a
Portfolio, and the proper countersignature of any former transfer agent or
former registrar, or of a co-transfer agent or co-registrar.
6.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes, provided that the Bank shall use its best efforts to
minimize the likelihood of all damage, loss of data, delays and errors resulting
from uncontrollable events, and if such damage, loss of data, delays or errors
occur, the Bank shall use its best efforts to mitigate the effects of such
occurrence.
6.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.
-10-
<PAGE>
6.06 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees.
Article 8 Covenants of the Portfolios and the Bank
8.01 Each of the Portfolios shall promptly furnish to the Bank
the following:
(a) A certified copy of the resolution of the Trustees of the
Portfolio authorizing the appointment of the Bank and the execution and delivery
of this Agreement.
-11-
<PAGE>
(b) A copy of the Declaration of Trust and By-Laws of the
Portfolio and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Portfolios for safe-
keeping of stock certificates, check forms and facsimile signature imprinting
devices, if any, and for the preparation or use, and for keeping account of,
such certificates, forms and devices. The forms and documents used for a
Portfolio or its Investors shall be acceptable to the Portfolio.
8.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable and as
may be reasonably acceptable to the Portfolios. To the extent required by
Section 31 of the 1940 Act and the Rules thereunder, the Bank agrees that all
such records prepared or maintained by the Bank relating to the services to be
performed by the Bank hereunder are the property of the Portfolios and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to each Portfolio on and in accordance
with its request.
8.04 The Bank and the Portfolios agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law. Notice shall be
given to the other party a reasonable time in advance of any such
-12-
<PAGE>
disclosure. In addition, in the case of any request or demand for the inspection
of the Investor records of a Portfolio, the Bank will notify the Portfolio
promptly of receipt of such request or demand and request instructions from an
authorized officer of the Portfolio as to such inspection. The Portfolio will
within two business days furnish instructions to the Bank. Pending receipt of
such instructions, the Bank will not disclose such Investor records and upon
receipt the Bank will abide by such instructions. Notwithstanding any other
provision of this Agreement, in the event that (a) the Portfolio instructs the
Bank not to disclose such Investor records and the Bank has furnished the
Portfolio with an opinion of counsel that the Bank may be held liable for the
failure to disclose such Investor records, the Portfolio will indemnify the Bank
for any such liability, or (b) the Bank discloses such Investor records without
proper instructions from the Portfolio, the Bank shall indemnify and hold the
Portfolio harmless from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributable to such disclosure. The provision of Section 6.06 shall govern such
indemnification.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should a Portfolio exercise its right to terminate,
all out-of-pocket expenses associated with the movement of records and material
will be borne by the Portfolio. Additionally, the
-13-
<PAGE>
Bank reserves the right to charge for any other reasonable expenses associated
with such termination.
Article 10 Additional Parties to Agreement
10.01 In the event that the Board of Trustees of the
Portfolio(s) organizes one or more separate New York trusts in addition to the
Portfolio executing this Agreement on the date hereof with respect to which it
desires to have the Bank render services as transfer agent under the terms
hereof, the Bank shall be so notified in writing by the officers of such trust,
and if the Bank agrees in writing to provide such services, such trust shall
become a party to this Agreement and shall be referred to as a Portfolio
hereunder.
Article 11 Assignment
11.01 Except as provided in Section 11.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of any
Portfolio, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
-14-
<PAGE>
registered as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to
the Portfolio for the acts and omissions of any subcontractor as it is for its
own acts and omissions.
Article 12 Amendment
12.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Trustees of the Portfolio(s).
Article 13 Massachusetts Law to Apply
13.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
Article 14 Merger of Agreement
14.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
Article 15 Limitations of Liability of the Trustees and the Investors
15.01 A copy of the Declaration of Trust of each Portfolio is
on file at the principal business address of the Portfolio, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the
Portfolio(s) as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Investors individually
but are binding only upon the assets and property of the Portfolio(s).
-15-
<PAGE>
Article 16 Counterparts
16.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
THE TREASURY MONEY MARKET PORTFOLIO
BY: /s/ James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
-16-
<PAGE>
STATE STREET BANK AND TRUST COMPANY
SERVICE RESPONSIBILITIES*
Responsibility
Service Performed Bank Portfolio
1. Receives orders for the purchase of Interests. X
2. Hold Interests in Investor Accounts. X
3. Receive requests for withdrawals. X
4. Effect transactions 1-3 above directly
with broker-dealers. N/A
5. Pay over monies to withdrawing investors. X
6. Effect transfers of Interests. N/A
7. Prepare and transmit distributions. N/A
8. Issue Replacement Certificates. N/A
9. Reporting of abandoned property. N/A
10. Maintain records of account. X
11. Maintain and keep a current and accurate
control book for each issue of securities. X
12. Mail information statements and/or proxies. X
13. Mail Investor reports. X
14. Mail offering documents to prospective Investors. X
15. Withhold taxes on non-resident alien accounts. X
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation
statements for Investors. X
-17-
<PAGE>
Responsibility
Service Performed Bank Portfolio
18. Provide Investor account information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
THE TREASURY MONEY MARKET PORTFOLIO
BY: /s/ James B. Craver
James B. Craver
Secretary and Treasurer
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
Executive Vice President
-18-
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
February 1, 1993
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 0[2]171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees of The Treasury Money Market
Portfolio has organized the following ten additional New York trusts:
The Money Market Portfolio The Selected U.S. Equity Portfolio
The Tax Exempt Money Market Portfolio The U.S. Stock Portfolio
The Short Term Bond Portfolio The U.S. Small Company Portfolio
The U.S. Fixed Income Portfolio The Non-U.S. Equity Portfolio
The Tax Exempt Bond Portfolio The Diversified Portfolio
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 between The Treasury Money
Market Portfolio and State Street Bank and Trust Company, each of the ten
Portfolios hereby requests that you act as Transfer Agent of the Portfolio under
the terms of the agreement.
Please indicate your acceptance of the foregoing by executing two copies of this
letter agreement, returning one to the Portfolios and retaining one copy for
your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE SHORT TERM BOND PORTFOLIO
THE U.S. FIXED INCOME PORTFOLIO
THE TAX EXEMPT BOND PORTFOLIO
THE SELECTED U.S. EQUITY PORTFOLIO
THE U.S. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
By /s/ Cheri J. Baumann
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
February 1, 1993
Page 2
Agreed to this 2nd day of February,
1993
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
September 27, 1993
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 0[2]171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees of The Treasury Money Market
Portfolio has organized the following two additional New York trusts:
The Emerging Markets Equity Portfolio The Non-U.S. Fixed Income Portfolio
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 between The Treasury Money
Market Portfolio and State Street Bank and Trust Company as amended, each of the
two Portfolios hereby requests that you act as Transfer Agent of the Portfolio
under the terms of the agreement.
Please indicate your acceptance of the foregoing by executing two copies of this
letter agreement, returning one to the Portfolios and retaining one copy for
your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE SHORT TERM BOND PORTFOLIO
THE U.S. FIXED INCOME PORTFOLIO
THE TAX EXEMPT BOND PORTFOLIO
THE SELECTED U.S. EQUITY PORTFOLIO
THE U.S. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
By /s/ Cheri J. Baumann
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
September 27, 1993
Page 2
Agreed to this 27th day of September,
1993
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
The New York Total Return Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
March 10, 1994
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees [of] has organized the
following additional New York trust: The New York Total Return Bond Portfolio
(the "Trust").
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 as amended between the
other Portfolios referenced above and State Street Bank and Trust Company, the
Trust hereby requests that you act as its Transfer Agent under the terms of the
agreement.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two the Portfolios and the Trust and
retaining two for your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE SHORT TERM BOND PORTFOLIO
THE U.S. FIXED INCOME PORTFOLIO
THE TAX EXEMPT BOND PORTFOLIO
THE SELECTED U.S. EQUITY PORTFOLIO
THE U.S. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
By /s/ Laura R. Young
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
March 10, 1994
Page 2
Agreed to this 10th day of March,
1994
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
The Treasury Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Tax Exempt Bond Portfolio
The New York Total Return Bond Portfolio
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
The Money Market Portfolio
The U.S. Fixed Income Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Short Term Bond Portfolio
The U.S. Stock Portfolio
The Diversified Portfolio
The Emerging Markets Equity Portfolio
The Non-U.S. Fixed Income Portfolio
The Series Portfolio
P.O. Box 268, George Town
Grand Cayman, Cayman Islands, BWI
(809) 945-1824
July 8, 1994
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
This is to advise you that the Board of Trustees has organized the following
additional New York trust: The Series Portfolio (the "Trust") (the Trust is
comprised initially of three separate and distinct investment portfolios--The
Asia Growth Portfolio, The European Equity Portfolio and The Japan Equity
Portfolio (each a "Series")).
In accordance with Article 10 (Additional Parties to Agreement) of the Transfer
Agency and Service Agreement dated December 23, 1992 as amended between the
other Portfolios referenced above and State Street Bank and Trust Company, the
Trust hereby requests that you act as Transfer Agent for each Series under the
terms of the agreement.
Please indicate your acceptance of the foregoing by executing the four originals
of this letter agreement, returning two the Portfolios and the Trust and
retaining two for your records.
Very truly yours,
THE TREASURY MONEY MARKET PORTFOLIO
THE MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE SHORT TERM BOND PORTFOLIO
THE U.S. FIXED INCOME PORTFOLIO
THE TAX EXEMPT BOND PORTFOLIO
THE SELECTED U.S. EQUITY PORTFOLIO
THE U.S. STOCK PORTFOLIO
THE U.S. SMALL COMPANY PORTFOLIO
THE NON-U.S. EQUITY PORTFOLIO
THE DIVERSIFIED PORTFOLIO
THE EMERGING MARKETS EQUITY PORTFOLIO
THE NON-U.S. FIXED INCOME PORTFOLIO
THE NEW YORK TOTAL RETURN BOND PORTFOLIO
THE SERIES PORTFOLIO
By /s/ Laura R. Young
Assistant Treasurer
<PAGE>
State Street Bank and Trust Company
July 8, 1994
Page 2
Agreed to this 8th day of July,
1994
STATE STREET BANK AND TRUST COMPANY
By /s/ Ronald E. Logue
Executive Vice President
<PAGE>
THE SERIES PORTFOLIO
P.O. Box 2508 GT
Elizabethan Square, 2nd Floor
Shedden Road, George Town
Grand Cayman, Cayman Islands, BWI
(809) 949-6644
December 18, 1996
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Custodian Contract and Transfer Agency and Service Agreement
- -----------------------------------------------------------------
This is to advise you that the Board of Trustees of The Series Portfolio (the
"Trust") has established and organized two additional subtrusts (series): The
Disciplined Equity Portfolio and The International Opportunities Portfolio
(collectively, the "Portfolios"). State Street Bank and Trust Company ("State
Street") currently provides (i) custody and portfolio and fund accounting
services for the Trust's three other subtrusts pursuant to a Custodian Contract
dated July 8, 1994, as amended, between the Trust and State Street (the
"Custodian Contract") and (ii) transfer agency services for the Trust's three
other subtrusts pursuant to a Transfer Agency and Service Agreement dated
December 23, 1992, as amended, with State Street to which the Trust is also a
party (the "Transfer Agency Agreement").
In accordance with Article 17 (Additional Portfolios) of the Custodian Contract
and Article 10 (Additional Parties to Agreement) of the Transfer Agency
Agreement, the Trust hereby requests that State Street act as custodian and
transfer agent for each of the Portfolios under the terms of the Custodian
Contract and Transfer Agency Agreement, respectively.
Please indicate your acceptance of the foregoing by executing the eight
originals of this letter agreement, returning four the Trust and retaining four
for your records.
Very truly yours,
THE SERIES PORTFOLIO
By /s/ Lenore J. McCabe
Lenore J. McCabe
Assistant Secretary and Assistant Treasurer
Agreed to this 18th day of December,
1996
STATE STREET BANK AND TRUST COMPANY
By _________________________
Ronald E. Logue
Executive Vice President
JPM259A1
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
60 State Street, Suite 1300
Boston, Massachusetts 02109
(617) 557-0700
February 20, 1997
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Ladies and Gentlemen:
Re: Transfer Agency and Service Agreement
- ------------------------------------------
This is to advise you that a new investment company, The Global Strategic
Income Portfolio (the "Portfolio") has been established and organized. State
Street Bank and Trust Company ("State Street") currently provides transfer
agency services for other investment companies with a related Board of Trustees
pursuant to a Transfer Agency and Service Agreement dated December 23, 1992, as
amended, with State Street to which the Portfolio desires to become a party (the
"Transfer Agency Agreement").
In accordance with Article 10 (Additional Parties to Agreement) of the
Transfer Agency Agreement, the Portfolio hereby requests that State Street act
as transfer agent for the Portfolio under the terms of the Transfer Agency
Agreement.
Please indicate your acceptance of the foregoing by executing the eight
originals of this letter agreement, returning four the Portfolio and retaining
four for your records.
Very truly yours,
THE GLOBAL STRATEGIC INCOME PORTFOLIO
By -------------------------
Elizabeth A. Keeley
Vice President and
Assistant Secretary
Agreed to this 20th day of February,
1997
STATE STREET BANK AND TRUST COMPANY
By -------------------------
Ronald E. Logue
Executive Vice President
JPM259A1
PORTFOLIOS LISTED ON EXHIBIT I
RESTATED ADMINISTRATIVE SERVICES AGREEMENT
RESTATED ADMINISTRATIVE SERVICES AGREEMENT, dated as of August 1, 1996,
by and between each of the Portfolios listed on Exhibit I, each a New York trust
(a "Portfolio"), and Morgan Guaranty Trust Company of New York, a New York trust
company ("Morgan").
W I T N E S S E T H:
WHEREAS, each Portfolio is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act");
WHEREAS, each Portfolio wishes to engage Morgan to provide certain
administrative services for the Portfolio, and Morgan is willing to provide such
services for the Portfolio, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DUTIES OF MORGAN. Subject to the general direction and control of
the Board of Trustees of the Portfolio, Morgan shall perform such administrative
and related services as may from time to time be reasonably requested by the
Portfolio, which shall include without limitation: a) arranging for the
preparation and filing of the Portfolio's tax returns and preparing financial
statements and other financial reports for review by the Portfolio's independent
auditors; b) coordinating the Portfolio's annual audit; c) developing the
Portfolio's budget and establishing its rate of expense accrual; d) overseeing
the Portfolio's custodian (the "Custodian") and transfer agent and other service
providers, including monitoring the daily income accrual and collection, expense
accrual and disbursement, and computation of the Portfolio's net asset value;
verifying the calculation of performance data for the Portfolio; monitoring the
trade reporting for portfolio securities transactions; monitoring the pricing of
portfolio securities and compliance with amortized cost procedures, if
applicable; monitoring the computation of the Portfolio's income and capital
gains (losses) and confirming that they have been properly allocated to the
holders of record; and monitoring services provided by the Custodian under
Article 8 of its Custodian Contract; e) taking responsibility for compliance
with all applicable federal securities and other regulatory requirements; f)
taking responsibility for monitoring the tax status of the Portfolio so that its
investors can qualify as regulated investment companies under the Internal
Revenue Code of 1986; g) arranging for preparation of agendas and
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<PAGE>
supporting documents for and minutes of meetings of Trustees, committees of
Trustees, and investors; h) maintaining books and records relating to such
services; and i) providing such other related services as the Portfolio may
reasonably request, to the extent permitted by applicable law. Morgan shall
provide all personnel and facilities necessary in order for it to provide the
services contemplated by this paragraph.
Morgan assumes no responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and conditions provided
herein. In the performance of its duties under this Agreement, Morgan will
comply with the provisions of the Declaration of Trust and By-Laws of the
Portfolio and the Portfolio's stated investment objective, policies and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Portfolio, and to comply with other policies which the Board of Trustees
may from time to time determine.
2. BOOKS AND RECORDS. Morgan shall with respect to each Portfolio
create and maintain all records relating to its activities and obligations under
this Agreement in such manner as will meet the obligations of the Portfolio
under the 1940 Act, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be the property of the
Portfolio and shall at all times during the regular business hours of Morgan be
open for inspection by duly authorized officers, employees or agents of the
Securities and Exchange Commission. In compliance with the requirements of Rule
31a-3 under the 1940 Act, Morgan hereby agrees that all records which it
maintains for the Portfolio are the property of the Portfolio and further agrees
to surrender promptly to the Portfolio any such records upon the Portfolio's
request.
3. LIAISON WITH AND OPINION OF THE PORTFOLIO'S INDEPENDENT PUBLIC
ACCOUNTANTS.
3.1. Morgan shall act as liaison with the Portfolio's independent
public accountants and shall provide, upon request, account analyses, fiscal
year summaries and other audit-related schedules. Morgan shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their opinion, as such may be required by the Portfolio from
time to time.
3.2. Morgan shall take all reasonable action, as the Portfolio may from
time to time request, to obtain from year to year favorable opinions from the
Portfolio's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Portfolio's registration
statement on Form N-1A, reports on Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any other requirements of
such Commission.
4. ALLOCATION OF CHARGES AND EXPENSES. Morgan shall bear all of the
expenses incurred in connection with carrying out its duties hereunder. The
Portfolio shall pay the usual, customary or extraordinary expenses incurred by
the Portfolio, including without limitation
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<PAGE>
compensation of Trustees; federal and state governmental fees; interest charges;
taxes; membership dues in the Investment Company Institute allocable to the
Portfolio; fees and expenses of any provider other than Morgan of services to
the Portfolio under a co- administration agreement (the "Co-Administrator"),
Morgan pursuant to the Investment Advisory Agreement and this Agreement,
Pierpont Group, Inc. pursuant to the Portfolio Fund Services Agreement, the
Custodian for all services to the Portfolio (including safekeeping of funds and
securities and maintaining required books and accounts), independent auditors,
legal counsel and of any transfer agent, registrar or dividend disbursing agent
of the Portfolio; brokerage expenses; expenses of preparing, printing and
mailing reports, notices, proxy statements and reports to investors and
governmental offices and commissions; expenses of preparing, printing and
mailing agendas and supporting documents for meetings of Trustees and committees
of Trustees; insurance premiums; expenses of calculating the net asset value of
interests in the Portfolio; expenses of meetings of investors in the Portfolio;
expenses relating to the issuance of interests in the Portfolio; and litigation
and indemnification expenses.
5. COMPENSATION OF MORGAN. For the services to be rendered and the
expenses to be borne by Morgan hereunder, the Portfolio shall pay Morgan a fee
at an annual rate as set forth on Schedule A attached hereto. This fee will be
computed daily and payable as agreed by the Portfolio and Morgan, but no more
frequently than monthly.
6. LIMITATION OF LIABILITY OF MORGAN. Morgan shall not be liable for
any error of judgment or mistake of law or for any act or omission in the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder.
7. ACTIVITIES OF MORGAN. The services of Morgan to the Portfolio are not to
be deemed to be exclusive, Morgan being free to engage in any other business or
to render services of any kind to any other corporation, firm, individual or
association.
8. TERMINATION. This Agreement may be terminated at any time, without
the payment of any penalty, by the Board of Trustees of the Portfolio or by
Morgan, in each case on not more than 60 days' nor less than 30 days' written
notice to the other party.
9. SUBCONTRACTING BY MORGAN. Morgan may subcontract for the performance
of its obligations hereunder with any one or more persons; PROVIDED, HOWEVER,
that, unless the Portfolio otherwise expressly agrees in writing, Morgan shall
be as fully responsible to the Portfolio for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
10. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
11. AMENDMENTS. This Agreement may be amended only by mutual written
consent.
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<PAGE>
12. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements,
terminations, extensions or other understandings relating to Morgan's provision
of financial, fund accounting oversight or administrative services for the
Portfolio. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. Should any part of this Agreement
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding and shall inure to the benefit of the parties hereto and their
respective successors, to the extent permitted by law.
13. NOTICE. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid (1) to Morgan at Morgan Guaranty Trust Company
of New York, 522 Fifth Avenue, New York, New York 10036, Attention: Funds
Management, or (2) to the Portfolio at its principal place of business as
provided to Morgan, Attention: Treasurer.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. ADDITIONAL PORTFOLIOS. This agreement may be made applicable to any
additional Portfolio from time to time by agreement of Morgan and each such
Portfolio and the adding of such Portfolio to Exhibit I.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of each Portfolio has executed this Agreement not
individually, but as an officer of the Portfolio under the Portfolio's
Declaration of Trust, dated as set forth on Exhibit I, and the obligations of
this Agreement are not binding upon any of the Trustees or investors of the
Portfolio individually, but bind only the trust estate.
EACH PORTFOLIO LISTED ON EXHIBIT I
By /s/ John E. Pelletier
John E. Pelletier, Vice President
and Secretary
Attest: /s/ L. McCabe
Lenore J. McCabe
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Stephen H. Hopkins
Stephen H. Hopkins, Vice President
RMMFFAS5
4
<PAGE>
ADDENDUM
ADDENDUM, dated February 13, 1997, to the Restated Administrative
Services Agreement made as of the 1st day of August 1996 (the "Agreement")
between each of trusts set forth on Exhibit I hereto and Morgan Guaranty Trust
Company of New York.
Effective February 13, 1997, The Global Strategic Income Portfolio (the
"Trust") shall be added to Exhibit I to the Agreement so that such Exhibit I
shall include the Trust.
THE GLOBAL STRATEGIC INCOME PORTFOLIO
By ___________________________________
Elizabeth A. Keeley
Vice President and Assistant Secretary
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By ___________________________________
Stephen H. Hopkins
Vice President
RMMFFAS5
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES FEES
PORTFOLIOS LISTED ON EXHIBIT I
The annual administrative services fee charged to and payable by each
Portfolio listed on Exhibit I, as amended from time to time (the "Master
Portfolios"), is equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios and in accordance with the following annual schedule:
0.09% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets; and 0.04% of the Master
Portfolios' aggregate average daily net assets in excess of $7
billion less the complex-wide charge of the Co-Administrator
The portion of this charge payable by each Master Portfolio is
determined by the proportionate share that its net assets bear to the total of
the net assets of the Master Portfolios, The JPM Pierpont Funds, The JPM
Institutional Funds, JPM Series Trust and other investors in the Master
Portfolios for which Morgan provides similar services.
Approved: January 9, 1997
Effective January 9, 1997
RMMFFAS5
<PAGE>
Exhibit I
Date of Effective
Portfolio Declaration of Trust Date
The Treasury Money Market Portfolio 11/4/92 8/1/96
The Money Market Portfolio 1/29/93 8/1/96
The Tax Exempt Money Market Portfolio 1/29/93 8/1/96
The Short Term Bond Portfolio 1/29/93 8/1/96
The U.S. Fixed Income Portfolio 1/29/93 8/1/96
The Tax Exempt Bond Portfolio 1/29/93 8/1/96
The Selected U.S. Equity Portfolio 1/29/93 8/1/96
The U.S. Small Company Portfolio 1/29/93 8/1/96
The Non-U.S. Equity Portfolio 1/29/93 8/1/96
The Diversified Portfolio 1/29/93 8/1/96
The Non-U.S. Fixed Income Portfolio 6/16/93 8/1/96
The Emerging Markets Equity Portfolio 6/16/93 8/1/96
The New York Total Return Bond Portfolio 6/16/93 8/1/96
The Series Portfolio* 6/24/94
The Asia Growth Portfolio 8/1/96
The Japan Equity Portfolio 8/1/96
The European Equity Portfolio 8/1/96
The Disciplined Equity Portfolio 12/27/96
The International Opportunities Portfolio 12/27/96
The Latin American Equity Portfolio 1/9/97
The Emerging Markets Debt Portfolio 1/9/97
The Small Company Growth Portfolio 1/9/97
The Global Strategic Income Portfolio* 1/9/97 2/13/97
JPM Series Trust* 8/15/96
Tax Aware Equity Fund 11/4/96
Tax Aware Disciplined Equity Fund 11/4/96
California Bond Fund 11/4/96
*In the cases of The Series Portfolio, The Global Strategic Income Portfolio
and JPM Series Trust, references to "Portfolio" or "Fund" refer to their
respective individual series as the context requires.
AMENDED AND RESTATED
PORTFOLIO FUND SERVICES AGREEMENT
FUND SERVICES AGREEMENT made as of the 15th day of January, 1994, as
amended and restated as of July 11, 1996, between each of the trusts set forth
on Schedule I (individually, a "Trust"), and PIERPONT GROUP, INC., a New York
corporation (the "Group").
WITNESSETH:
WHEREAS, each Trust is an open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Trust has retained organizations to be its custodian,
transfer agent, exclusive placement agent and services agent, and an
administrator to administer and manage all aspects of the Trust's day-to-day
operations (except for providing a Chief Executive Officer pursuant to this
Agreement and for those services provided pursuant to the Trust's Investment
Advisory Agreement and Administrative Services Agreement, each with Morgan
Guaranty Trust Company of New York ("Morgan")); and
WHEREAS, the Trust and its Trustees wish to engage the Group to assist
the Trustees in carrying out their duties as Trustees in supervising the Trust's
affairs;
NOW, THEREFORE, the Trust and the Group hereby agree as follows:
1. Beginning on the date hereof, the Group shall provide facilities and
personnel to assist the Trustees in carrying out their duties as Trustees in
supervising the affairs of the Trust, including without limitation:
a) Organization of the times and participation in the preparation
of agendas for Trustees' meetings;
b)Providing personnel acceptable to the Trustees to act in the
capacity of Chief Executive Officer when so requested by the Trustees; and
c) Oversight and review of the performance of services to the
Trust by others, including review of registration statements, annual and semi-
annual reports to shareholders, proxies, compliance procedures with applicable
legal, regulatory, and financial requirements,
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current market and legal developments in the investment management industry,
materials presented to the Trustees for approval, and any other matters as
directed by the Trustees.
2. In return for the services provided hereunder, the Trust will pay
the Group a fee in an amount representing the reasonable costs of the Group in
providing services hereunder, payable in a manner corresponding as closely as
practicable to the Trust's receipt of such services, all as determined from time
to time by the Trustees.
3. The Group shall not be liable for any error of judgment or for any
loss suffered by the Trust in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or for reckless
disregard by it of its obligations and duties under this Agreement.
4. This Agreement shall continue in effect for a period of two years
from July 11, 1996, and may be renewed by the Trustees; PROVIDED, HOWEVER, that
this Agreement may be terminated by the Trust at any time without the payment of
any penalty by the Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Trust, upon not less than six (6)
months' written notice to the Group, or by the Group at any time, without the
payment of any penalty, upon not less than six (6) months' written notice to the
Trust. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
5. The Group's activities will be limited to performing the services
hereunder for the Trust and any other registered investment company which has
the same Trustees as the Trust. No employee of the Group shall engage in any
other business or devote his time and attention in part to the management or
other aspects of any business whether of a similar or dissimilar nature except
with the consent of the Trustees of the Trust.
6. The Trustees have authorized the execution of this Agreement not
individually, but as Trustees under the Trust's Declaration of Trust, and the
Group agrees that the obligation of this Agreement are not binding upon any of
the Trustees or shareholders individually, but bind only the trust estate.
7. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid (1) to the Group at 461 Fifth Avenue, New York, NY 10017,
Attention: President or (2) to the Trust at the address set forth on the cover
of its Registration Statement as then in effect or at such other address as
either party shall designate by notice to the other party.
8. One or more additional trusts may become party to this Agreement by
execution of an addendum which states that such trust shall be added to Schedule
I, specifies the effective date with respect to such trust and is signed by such
trust and Group.
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<PAGE>
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Fund Services Agreement to be executed by their officers designated
below as of July 11, 1996.
THE TREASURY MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE TAX EXEMPT MONEY MARKET PORTFOLIO
THE NEW YORK TOTAL RETURN BOND
PORTFOLIO
By /s/ Matthew Healey
Matthew Healey, Chairman and
Chief Executive Officer
EACH OTHER PORTFOLIO LISTED SCHEDULE I
By /s/ John E. Pelletier
John E. Pelletier, Vice President
and Secretary
Attest: /s/ L. McCabe
Lenore J. McCabe
PIERPONT GROUP, INC.
By /s/ Nina O. Shenker
Nina O. Shenker, President
PORTARFS.WP5
3
<PAGE>
ADDENDUM
ADDENDUM, dated February 13, 1997, to the Amended and Restated
Portfolio Fund Services Agreement made as of the 15th day of January 1994 as
amended and restated as of July 11, 1996 (the "Agreement") between each of
trusts set forth on Schedule I hereto and Pierpont Group, Inc.
Effective February 13, 1997, The Global Strategic Income Portfolio (the
"Trust") shall be added to Schedule I to the Agreement so that such Schedule I
shall include the Trust.
THE GLOBAL STRATEGIC INCOME PORTFOLIO
By ___________________________________
Elizabeth A. Keeley
Vice President and Assistant Secretary
PIERPONT GROUP, INC.
By ___________________________________
Nina O. Shenker
President
PORTARFS.WP5
<PAGE>
SCHEDULE I
STATE OF EFFECTIVE
PORTFOLIO ORGANIZATION DATE
The Treasury Money Market Portfolio New York 1/15/94
The Money Market Portfolio New York 1/15/94
The Tax Exempt Money Market Portfolio New York 1/15/94
The Short Term Bond Portfolio New York 1/15/94
The U.S. Fixed Income Portfolio New York 1/15/94
The Tax Exempt Bond Portfolio New York 1/15/94
The Selected U.S. Equity Portfolio New York 1/15/94
The U.S. Stock Portfolio New York 1/15/94
The U.S. Small Company Portfolio New York 1/15/94
The Non-U.S. Equity Portfolio New York 1/15/94
The Emerging Markets Equity Portfolio New York 1/15/94
The Diversified Portfolio New York 1/15/94
The New York Total Return Bond Portfolio New York 4/10/94
The Non-U.S. Fixed Income Portfolio New York 9/24/94
The Series Portfolio New York 3/21/95
The Global Strategic Income Portfolio New York 2/13/97
PORTARFS.WP5
PURCHASE AGREEMENT
With respect to its purchase of the initial interest in The Global Strategic
Income Portfolio (the "Portfolio"), a New York Trust, The JPM Institutional
Global Strategic Income Fund (the "Fund"), a series of The JPM Institutional
Funds, a Massachusetts business trust (the "Trust"), hereby represents and
warrants to the Portfolio as follows:
1. That this purchase agreement (the "Agreement") shall be entered into
for the benefit of the Portfolio, such benefit to be evidenced by the
Portfolio's acceptance of the terms of this Agreement by signature inscribed at
the end hereof,
2. That the Fund hereby purchases the initial beneficial interest in
the Portfolio by cash deposit of $100,000, determined at the net asset value of
the initial interest.
3. That the interest is being acquired for investment purposes
and not with a view to the transfer thereof.
4. As long as there is another investor in the Portfolio, the Portfolio
will receive upon a redemption by FDI Distribution Services, Inc. (the purchaser
of the Fund's initial shares) from the Fund a pro rata portion of the
unamortized organization expenses of the Portfolio. The Fund agrees that if it
withdraws any of the initial interest prior to the fifth anniversary of the
commencement of investment operations of the Portfolio, the Fund will reduce the
amount of its withdrawal from the Portfolio in an amount equal to the number
resulting from multiplying the Portfolio's total unamortized organizational
expenses by a fraction, the numerator of which is equal to the amount of initial
interest redeemed by the Fund and the denominator of which is equal to the
amount of such interest held by it outstanding as of the date of such
withdrawal, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
5. That the Trust is authorized and otherwise duly qualified to
purchase and hold the initial interest and to enter into this Agreement.
THE JPM INSTITUTIONAL FUNDS
ATTEST:
By: /s/ Richard W. Ingram
Richard W. Ingram
President and Treasurer
Date: February 20, 1997
ACCEPTED BY:
THE GLOBAL STRATEGIC INCOME
PORTFOLIO
ATTEST:
By: /s/ Joseph F. Tower
Joseph F. Tower
Vice President and
Assistant Treasurer
Date: February 20, 1997
JPM515C
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED STATEMENT OF ASSETS AND LIABILITIES DATED FEBRUARY 20, 1997 FOR THE
GLOBAL STRATEGIC INCOME PORTFOLIO AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT
</LEGEND>
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<NAME> THE GLOBAL STRATEGIC INCOME PORTFOLIO
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<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> FEB-20-1997
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