DEUT027B
As filed with the Securities and Exchange Commission on September 23, 1997
FILE NO. 811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
DEUTSCHE PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
P.O. BOX 501
CARDINAL AVENUE
GRAND CAYMAN, CAYMAN ISLANDS, BWI
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 416-216-4293
Brian Lee, 31 West 52nd Street, New York, New York 10019
(Name and Address of Agent for Service)
Copy to: John T. Bostelman, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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EXPLANATORY NOTE
This registration statement on Form N-1A (the "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 (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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DEUT027B
PART A - Top 50 World Portfolio (US Dollar), Top 50 Europe Portfolio
(US Dollar), Top 50 Asia Portfolio (US Dollar), Top 50 US Portfolio (US Dollar),
Provesta Portfolio (US Dollar), Investa Portfolio (US Dollar) and Japanese
Equity Portfolio (US Dollar) and Global Bond Portfolio (US Dollar) and European
Bond Portfolio (US Dollar)
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.
Deutsche Portfolios (the "Trust") is a non-diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on June 20, 1997.
Beneficial interests in the Trust are divided into separate series, each
having distinct investment objectives and policies. The Top 50 World Portfolio
(US Dollar), Top 50 Europe Portfolio (US Dollar), Top 50 Asia Portfolio (US
Dollar) and Top 50 US Portfolio (US Dollar) (collectively, the "Top 50
Portfolios"); Provesta Portfolio (US Dollar), Investa Portfolio (US Dollar) and
Japanese Equity Portfolio (US Dollar) (collectively, with the Top 50 Portfolios,
the "Equity Portfolios"); and Global Bond Portfolio (US Dollar) and European
Bond Portfolio (US Dollar) (collectively, the "Bond Portfolios") (collectively,
with the Equity Portfolios, the "Portfolios") are described herein. Beneficial
interests in the Portfolios 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
Portfolios 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.
Each Portfolio is managed by Deutsche Fund Management, Inc. ("DFM" or
the "Manager"), a registered investment adviser and an indirect subsidiary of
Deutsche Bank AG, a major global financial institution.
The investment objective(s) of each Portfolio follow:
Provesta Portfolio (US Dollar) ("Provesta Portfolio"). This Portfolio
seeks primarily to achieve high capital appreciation, and as a secondary
objective, reasonable dividend income. It pursues its investment objectives by
investing primarily in the equity securities of issuers located in European
countries, including those which are member states of the European Union, those
which are party to the Convention on the European Economic Area ("CEEA"),
Switzerland, Slovakia, Czech Republic and Hungary.
The Provesta Portfolio seeks investment in companies which the Adviser
(as defined herein) believes may grow at a higher rate than the average of other
European companies. These anticipated higher growth rates may cause the
performance of the Portfolio to be more volatile than that of other equity
portfolios. See "Risk Factors".
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Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in European equity securities issued by companies with market
capitalizations of between $115 million and $19 billion.
Investa Portfolio (US Dollar) ("Investa Portfolio"). This Portfolio also
seeks primarily to achieve high capital appreciation, and as a secondary
objective, reasonable dividend income. It pursues its investment objectives by
investing primarily in the equity securities of German companies.
Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in equity securities issued by German issuers. In pursuing the
Portfolio's objectives, the Adviser will emphasize German companies that have
some or all of the following attributes: high market capitalization, large
number of publicly held shares, high trading volume, high liquidity, financial
stability, or a widely known name or product/service.
Japanese Equity Portfolio (US Dollar) ("Japanese Equity Portfolio").
This Portfolio seeks to achieve high capital appreciation. It pursues its
investment objective by investing primarily in the equity securities of Japanese
issuers. Under normal circumstances, at least 65% of the Portfolio's total
assets are invested in equity securities issued by Japanese companies, which may
include, for the purpose of meeting such 65% minimum, up to 5% of the total
assets in securities that grant the right to acquire Japanese securities.
Top 50 World Portfolio (US Dollar) ("Top 50 World Portfolio"). This
Portfolio also seeks primarily to achieve high capital appreciation, and as a
secondary objective, reasonable dividend income. It pursues its investment
objectives by investing at least 65% of its total assets in equity securities.
In selecting securities for the Portfolio, emphasis will be placed on
international diversification. While there are no specific percentage
limitations on investments in any single country, the Portfolio generally
expects to maintain a significant investment in at least three regions around
the world-- e.g., Europe, North America, Asia, etc.
The Portfolio invests in companies with a strong market position, which
are globally competitive, have outstanding growth potential and offer
above-average opportunities to take advantage of one or more of the following
global future trends ("megatrends"):
1. Strong population growth in emerging markets
2. Aging population in industrialized nations,
leading to growing demands for the products
and services of healthcare and related
industries
3. Transition to an information and communications society
4. Growing demand for brand names
5. Growing oil/energy consumption worldwide
Top 50 Europe Portfolio (US Dollar) ("Top 50 Europe Portfolio"). This
Portfolio also seeks to achieve high capital appreciation, and as a secondary
objective, reasonable dividend income. It pursues its investment objectives by
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investing at least 65% of its total assets in the equity securities of issuers
located in European countries, including those which are member states of the
European Union, those which are party to the CEEA, Switzerland, Slovakia, Czech
Republic, and Hungary.
The Portfolio invests primarily in European companies with above-average
potential for capital gain. The Adviser places strong emphasis on companies that
have clear strategic goals, that concentrate on their core businesses, and whose
management gives appropriate consideration to return on investment.
Top 50 Asia Portfolio (US Dollar) ("Top 50 Asia Portfolio"). This
Portfolio also seeks to achieve high capital appreciation, and as a secondary
objective, reasonable dividend income. It pursues its investment objectives by
investing at least 65% of its total assets in the equity securities of issuers
with a domicile or business focus in Asian countries, including China, Hong
Kong, India, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore,
Taiwan, Thailand. A company has its business focus in Asia when the majority of
its profits or sales are made there.
In selecting securities for the Portfolio, the Adviser will seek
companies with some or all of the following attributes: strong prospects for
medium-term growth, solid market position, with favorable financial performance
and indicators, and high quality management whose aim is toward longer-term
earnings, with a strategic view of their companies and markets.
Top 50 US Portfolio (US Dollar) ("Top 50 US Portfolio"). This Portfolio
also seeks to achieve high capital appreciation, and as a secondary objective,
reasonable dividend income. It pursues its investment objectives by investing at
least 65% of its total assets in the equity securities of issuers domiciled or
headquartered in the United States. These companies may also conduct a
substantial part of their business outside the United States.
The Portfolio will invest primarily in companies that dominate their
markets and maintain a leadership position through the combination of management
talent, product or service differentiation, economies of scale and financial
strength. These companies, in the opinion of the Adviser, are aggressive and
tenacious companies, generally referred to as "Bulldogs," that are leading-edge
U.S. corporations and have a "no holds barred" attitude geared toward market
share dominance.
The investment style of the Portfolio will also place great emphasis on
the market valuation of a company's earnings (i.e., P/E ratio), as well as the
predictability and durability of its earnings growth. The analysis of industry
trends will also play an important part in the portfolio management process.
Although the assets of the Portfolio are invested primarily in common
stocks, other securities with equity characteristics may be purchased, including
securities convertible into common stock, and warrants. The Portfolio may
participate in initial public offerings from time to time and may only invest in
publicly traded securities.
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Top 50 Portfolios. The number of issuers of equity securities held in
each Top 50 Portfolio is generally fifty. Each of these Portfolios generally
invests only in those companies that the portfolio managers consider to be of
outstanding quality in their particular field. In selecting the fifty issuers,
the Adviser will emphasize some or all of the following attributes:
o strong market position within its respective market
o profitability, predictability and duration of
earnings growth, reflected in sound balance sheet ratios and
financial statements
o high quality of management with an orientation toward strong,
long-term earnings
o long-range strategic plans in place
o generally publicly held with broad distribution
of financial information related to the company's operations
Companies selected for each Top 50 Portfolio will be monitored on a
consistent basis to detect risk in the form of possible changes in their
earnings outlook and/or financial condition. The Adviser will monitor the annual
and interim financial statements of a broad universe of companies, conduct
sector and industry analysis and maintain company contact, including company
visits and attendance at company meetings and analyst presentations. In
addition, the Adviser will assess macroeconomic and stock market conditions in
the various countries in which the companies held in each of these Portfolios
are domiciled or have their primary stock market listings.
The Adviser will consider the geographic market focus of each Top 50
Portfolio in considering companies proposed for investment, which may cause
modest differences in style or investment approach among each of the Top 50
Portfolios.
Global Bond Portfolio (US Dollar) ("Global Bond Portfolio"). This
Portfolio seeks to achieve steady, high income. It pursues its investment
objective by investing primarily in the fixed income securities (including
convertible bonds and bonds with warrants) of issuers worldwide.
Under normal circumstances, at least 65% of the Portfolio's total assets
are invested in bonds and the Portfolio will include securities of issuers
organized in at least three different countries.
European Bond Portfolio (US Dollar) ("European Bond Portfolio"). This
Portfolio also seeks to achieve steady, high income. It pursues its investment
objective by investing primarily in the fixed income securities of European
issuers. Under normal circumstances, at least 65% of the Portfolio's total
assets are invested in fixed income securities and the Portfolio will include
securities issued by European issuers.
Each of the Global Bond Portfolio's and the European Bond Portfolio's
investment in equity securities will not exceed 25% of its net assets. For
purposes of the foregoing investment policies, the term "bonds" includes all
fixed income securities.
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Because each Portfolio is classified as "non-diversified" under the
1940 Act, the performance of each Portfolio may be subject to greater
fluctuation than that of a diversified investment company. See "Fundamental
Investment Restrictions" below.
The investment objective of each Portfolio is a fundamental policy and
may be changed only with the approval of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio.
However, the investment policies as described below are not fundamental policies
and may be changed without such approval.
Additional information about the investment policies of each Portfolio
appears in Part B. There can be no assurance that the investment objective(s)
any of the Portfolios will be achieved.
All Portfolios
LISTED SECURITIES. Each Portfolio will invest primarily in listed securities
("Listed Securities"). For purposes of this Registration Statement, Listed
Securities are defined as securities meeting at least one of the following
requirements: (a) they are listed on a stock exchange in a member state of the
European Union ("Member State") or in another state which is a party to the
CEEA, or are included on another regulated market in a Member State or in
another state party to the CEEA which market is recognized, open to the public
and operates regularly; (b) they are admitted to the official listing on one of
the stock exchanges listed in Appendix A or included on one of the regulated
markets listed in Appendix A; or (c) application is to be made for admission to
official listing on one of the aforementioned stock exchanges or inclusion in
one of the aforementioned regulated markets and such admission or inclusion is
to take place within 12 months of their issue.
UNLISTED SECURITIES AND NOTES. Up to a total of 10% of the net
assets of each Portfolio may be invested in:
(a) securities that are consistent with the Portfolio's
investment objective(s) and policies, which are not admitted
to official listing on one of the stock exchanges or
included on one of the regulated markets,
described above;
(b) interests in loans which are portions of an overall loan granted by a
third party and for which a note has been issued ("Notes"), provided
these Notes can be assigned at least twice after purchase by the
Portfolio, and the Note was issued by:
o the Federal Republic of Germany (the "FRG"), a special purpose
fund of the FRG, a state of the FRG, the European Union or a
member state of the Organisation for Economic Cooperation and
Development (an "OECD Member"),
o another German domestic authority, or a regional government or
local authority of another Member State or another state party to
the CEEA for which a zero weighting was notified according to
Article 7 of
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the Council Directive 89/647/YACK of 18 December 1989
on a solvency ratio for credit institutions (Official Journal
EC No. L386, p. 14),
o other corporate bodies or institutions organized under public law
and registered domestically in Germany or in another Member State
or another state party to the CEEA,
o other debtors, if guaranteed as to the payment of
interest and repayment of principal by one of the
aforementioned bodies, or
o companies which have issued securities which are admitted to the
official listing on a German or other foreign stock exchange.
Investments in Notes are subject to the Japanese Equity Portfolio's
overall 30% limitation on fixed income securities and each other Equity
Portfolio's overall 20% limitation on fixed income securities. See "Equity
Portfolios--Fixed Income Securities" below.
The current Member States and the states party to the CEEA and OECD
Members are listed in Appendix A.
Equity Portfolios
FIXED INCOME SECURITIES. Each Equity Portfolio is permitted to invest in
fixed income securities, although it intends to remain invested in equity
securities to the extent practical in light of its objective. Investment in
fixed income securities (excluding bank deposits and money market instruments)
by each Equity Portfolio (excluding the Japanese Equity Portfolio) will not
exceed 20% of such Portfolio's net assets. The Japanese Equity Portfolio's
investment in fixed income securities (excluding bank deposits and money market
instruments) will not exceed 30% of its net assets. For purposes of each Equity
Portfolio's investments, convertible bonds and bonds with warrants would be
considered equities, not fixed income securities. For the quality criteria of
the fixed income securities, see "Quality of Fixed Income Securities" below.
All Portfolios
QUALITY OF FIXED INCOME SECURITIES. The fixed income securities in which
each Portfolio may invest will be rated on the date of investment, within the
four highest ratings of Moody's Investors Service, Inc. ("Moody's"), currently
Aaa, Aa, A and Baa, or of Standard & Poor's Rating Services ("S&P"), currently
AAA, AA, A and BBB or, if unrated, will be, in the opinion of the Adviser, of
comparable quality to such rated securities discussed above. See Appendix B to
the Part B for a description of these ratings.
BANK DEPOSITS AND MONEY MARKET INSTRUMENTS. Each Portfolio may
temporarily invest in bank deposits and money market instruments maturing in
less than 12 months. These instruments include credit balances and bank
certificates of deposit, discounted treasury notes and bills issued by the FRG,
the states of the FRG, the European Union, OECD Members or quasi-governmental
entities for any of the foregoing.
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Under normal circumstances each Portfolio will purchase bank deposits
and money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions. However, each Portfolio may temporarily invest in
bank deposits and money market instruments up to 49% of its net assets, as a
measure taken in the Adviser's judgment during, or in anticipation of, adverse
market conditions. For each Portfolio, except the Top 50 US Portfolio,
certificates of deposit from the same credit institution may not account for
more than 10% of the Portfolio's total assets. See "Investment Objectives and
Policies" in Part B.
OPTIONS TRANSACTIONS ON SECURITIES. Options transactions may be carried
out for each Portfolio if the securities options are admitted to official
listing on a recognized futures or securities exchange and the securities
underlying the options are within the applicable investment objective and
policies of the Portfolio. Each of these instruments is a derivative instrument
as its value derives from the underlying asset. Each Portfolio may use options
for hedging and risk management purposes and may purchase call options and sell
put options for speculation. See "Risk Factors".
By purchasing a put option, a Portfolio obtains the right (but not the
obligation) to sell the instrument underlying the option at a fixed strike
price. In return for this right, the Portfolio pays the current market price for
the option (known as the option premium). The purchaser of a call option obtains
the right to purchase, rather than sell, the instrument underlying the option at
the option's strike price.
Put options on securities may be purchased only if the securities
underlying the option transaction are held by a Portfolio at the time of the
purchase of the put option.
When a Portfolio writes a put option, it takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the Portfolio assumes the obligation to pay the strike price for the instrument
underlying the option if the other party to the option chooses to exercise it.
Writing a call option obligates a Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option.
Call options on securities may be sold only if the securities underlying
the option transaction are held by a Portfolio at the time of the sale. These
securities may not be sold during the maturity of the call option and may not be
the subject of a securities loan.
There is no limitation on the value of the options that may be purchased
or written by a Portfolio. However, the strike prices of the securities options,
together with the strike prices of the securities that underlie other securities
options already purchased or granted for the account of each Portfolio, may not
exceed 20% of net assets of the Portfolio. See "Risk Factors." With respect to
the Provesta Portfolio and the Investa Portfolio, the strike prices of options
on fixed income securities held by each Portfolio may not exceed 4% of the net
assets of the Portfolio (i.e., 20% of the 20% investment limitation on fixed
income securities). See "Equity Portfolios - Fixed Income Securities" above.
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Options on securities may only be purchased or granted to a third party to the
extent that the strike prices of such options, together with the strike prices
of options on securities of the same issuer already purchased by or granted for
the account of a Portfolio, do not exceed 10% of the net assets of the
Portfolio. Options on securities may only be written (sold) to the extent that
the strike prices of such options, together with the strike prices of options on
securities of the same issuer already written for the account of a Portfolio, do
not exceed 2% of the net assets of the Portfolio. When an option transaction is
offset by a back-to-back transaction (e.g., where a Portfolio writes a put
option on a security and purchases a put option on the same security having the
same expiration date), these two transactions will not be counted for purposes
of the limits set forth in this paragraph.
FUTURES CONTRACTS, OPTIONS ON FUTURES AND SECURITIES INDICES AND
WARRANTS. Each Portfolio may purchase and sell stock index futures contracts and
interest rate futures contracts and may purchase options on interest rate
futures contracts, options on securities indices and warrants on futures
contracts and stock indices. A Portfolio will engage in transactions in such
instruments only if they are admitted to official listing on a recognized
futures or securities exchange and meet certain other requirements stated below.
A Portfolio may use these techniques for hedging or risk management purposes or,
subject to certain limitations, for the purposes of obtaining desired exposure
to certain securities or markets.
For the purpose of hedging a Portfolio's assets, the Portfolio may sell
(but not purchase) stock index or interest rate futures contracts and may
purchase put or call options on futures contracts, options on securities indices
and any of the warrants described above. Any such transaction will be considered
a hedging transaction, and not subject to the limitations on non-hedging
transactions stated below, to the extent that (1) in the case of stock index
futures, options on securities indices and warrants thereon, the contract value
does not exceed the market value of the shares held by the Portfolio for which
the hedge is intended and such shares are admitted to official listing on a
stock exchange in the country in which the relevant futures or securities
exchange is based or (2) in the case of interest rate futures and options on
securities indices and warrants thereon, the contract value does not exceed the
interest rate exposure associated with the assets held in the applicable
currency by the Portfolio. In carrying out a particular hedging strategy, a
Portfolio may sell futures contracts and purchase options or warrants based on
securities, financial instruments or indices that have issuers, maturities or
other characteristics that do not precisely match those of the Portfolio's
assets for which such hedge is intended, thereby creating a risk that the
futures, options or warrants position will not mirror the performance of such
assets. A Portfolio may also enter into transactions in futures contracts,
options on futures, options on indices and warrants for non-hedging purposes, as
described below.
Each Portfolio, except the Top 50 US Portfolio, may purchase or sell
stock index or interest rate futures contracts, put or call options on futures,
options on securities indices and warrants other than for hedging purposes.
Transactions for non-hedging purposes may be entered into only to the extent
that (1) the underlying contract values, together with the contract values of
any instrument then held by the Portfolio for non-hedging purposes, do not
exceed in the
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aggregate 20% of the net assets of the Portfolio and (2) such instruments relate
to categories of assets which the Portfolio is permitted to hold. In addition,
with respect to the Provesta Portfolio and the Investa Portfolio, the contract
values of all interest rate futures contracts and options and warrants on
interest rate futures contracts held for non-hedging purposes may not exceed 4%
of the net assets of the Portfolio (i.e., 20% of the 20% limitation on fixed
income securities). See "Equity Portfolios - Fixed Income Securities" above.
CURRENCY FORWARD CONTRACTS, OPTION RIGHTS AND WARRANTS ON CURRENCIES AND
CURRENCY FUTURES CONTRACTS. (Each Portfolio, except the Top 50 US Portfolio)
Each Portfolio, except Top 50 US Portfolio, may enter into foreign currency
transactions to hedge currency risks associated with the assets of each
Portfolio denominated or principally traded in foreign currencies. The Provesta
Portfolio and the Investa Portfolio, however, do not presently intend to engage
in such hedging activity but reserve the ability to do so under circumstances in
which the Adviser believes that one or more currencies in which such Portfolio's
assets are denominated may suffer a substantial decline against the U.S. dollar.
Each Portfolio other than the Provesta Portfolio, Investa Portfolio and Top 50
US Portfolio may also enter into foreign currency transactions to hedge against
currencies other than the U.S. dollar.
A Portfolio may purchase or sell foreign currency contracts for forward
delivery, purchase option rights for the purchase or sale of currencies or
currency futures contracts or warrants which entitle the holder to the right to
purchase or sell currencies or currency futures contracts or to receive payment
of a difference, which is measured by the performance of currencies or currency
futures contracts, provided that these option rights and warrants are admitted
to official listing on an exchange.
SECURITIES LOANS. Subject to applicable investment restrictions, each
Portfolio is permitted to lend its securities. These loans may not exceed 33
1/3% of a Portfolio's total assets. The Portfolios may pay reasonable
administrative and custodial fees in connection with the loan of securities. The
following conditions will be met whenever portfolio securities of a Portfolio
are loaned: (1) the Portfolio must receive at least 100% collateral from the
borrower; (2) the borrower must increase such collateral whenever the market
value of the securities loaned rises above the level of the collateral; (3) the
Portfolio must be able to terminate the loan at any time; (4) the Portfolio must
receive reasonable interest on the loan, as well as payments in respect of any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (5) the Portfolio may pay only reasonable custodian
and finder's fees in connection with the loan; and (6) while voting rights on
the loaned securities may pass to the borrower, the Portfolio must terminate the
loan and regain the right to vote the securities if a material event conferring
voting rights and adversely affecting the investment occurs. In addition, a
Portfolio will consider all facts and circumstances, including the
creditworthiness of the borrowing financial institution. No Portfolio will lend
its securities to any officer, Trustee, Director, employee or other affiliate of
the Deutsche Funds, Inc., a registered investment company the funds of which
invest substantially all their assets in the Portfolio (the "Corporation") or
the Trust, the Manager, the Adviser or the Distributor, unless otherwise
permitted by applicable law.
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Each Portfolio may lend its securities on a demand basis provided the
market value of the assets transferred in securities loans together with the
market value of the securities already transferred as a securities loan for the
Portfolio's account to the same borrower does not exceed 10% of the total assets
of the Portfolio.
BORROWING. Each Portfolio may borrow money from banks for temporary or
short-term purposes and then only in amounts not to exceed 10% of the
Portfolio's, except the Top 50 US Portfolio's, total assets at the time of such
borrowing. The Top 50 US Portfolio may take up short-term loans up to a limit of
1/3 of the Portfolio's total assets.
WARRANTS. Each Portfolio may purchase warrants in value of up to 10% of
the Portfolio's net assets. The warrants in which the Portfolios invest are a
type of security that entitles the holder to buy a fixed amount of securities of
such issuer at a specified price at a fixed date or for a fixed period of time
(which may be in perpetuity) or to demand settlement in cash based on the price
performance of the underlying security. If the market price of the underlying
security is below the exercise price set forth in the warrant on the expiration
date, the warrant will expire worthless.
Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.
CONVERTIBLE SECURITIES. The convertible securities in which the
Portfolios may invest include any debt securities or preferred stock which may
be converted into common stock or which carry the right to purchase common
stock. Convertible securities entitle the holder to exchange the securities for
a specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time.
SHORT-TERM TRADING. Each Portfolio intends to manage its portfolio
actively in pursuit of its investment objective. A Portfolio may take advantage
of short-term trading opportunities that are consistent with its objective. To
the extent a Portfolio engages in short-term trading, it may realize short-term
capital gains or losses and incur increased transaction costs. See "Taxes"
below.
INVESTMENT RESTRICTIONS. The investment objective of each Portfolio,
together with the fundamental investment restrictions described below and in
Part B, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of a Portfolio. Any other investment policies of the
Portfolios described herein or in Part B are not fundamental and may be changed
without investor approval.
Fundamental Investment Restrictions.
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Each Portfolio is classified as "non-diversified" under the 1940 Act,
which means that it is not limited by the 1940 Act with respect to the portion
of its assets which may be invested in securities of a single company (although
certain diversification requirements are in effect imposed by the Internal
Revenue Code of 1986, as amended (the "Code")). The possible assumption of large
positions in the securities of a small number of companies may cause the
performance of a Portfolio to fluctuate to a greater extent than that of a
diversified investment company as a result of changes in the financial condition
or in the market's assessment of the companies.
At least 65% of the Provesta Portfolio's total assets are invested in
European equity securities issued by companies with market capitalizations of
between $115 million and $19 billion. At least 65% of the Investa Portfolio's
total assets are invested in equity securities issued by German companies. At
least 65% of the Japanese Equity Portfolio's total assets are invested in equity
securities issued by Japanese companies, which may include, for the purposes of
meeting such 65% minimum, up to 5% of the total assets in securities that grant
the right to acquire Japanese securities. At least 65% of the Global Bond
Portfolio's total assets are invested in bonds and such Portfolio will include
securities of issuers organized in at least three different countries. At least
65% of the European Bond Portfolio's total assets are invested in bonds issued
by European issuers.
Top 50 World Portfolio will invest at least 65% of its total assets in
equity securities. Top 50 Europe Portfolio will invest at least 65% of its total
assets in the equity securities of issuers located in European countries. Top 50
Asia Portfolio will invest at least 65% of its total assets in the equity
securities of issuers with a domicile or business focus in Asian countries. Top
50 US Portfolio will invest at least 65% of its total assets in the equity
securities of issuers located in the United States.
No Portfolio may purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would equal or exceed 25% of the value of the
Portfolio's total assets, provided that the foregoing limitation shall not apply
to investments in securities issued by the U.S. Government or its agencies or
instrumentalities.
Non-Fundamental Investment Restrictions.
Each Portfolio generally will not borrow money. Each Portfolio may not
issue senior securities except as permitted by the 1940 Act or any rule, order
or interpretation thereunder. Each Portfolio, except the Top 50 US Portfolio,
may not invest more than 10% of its net assets in the securities of any one
issuer or invest more than 40% of its net assets in the aggregate in the
securities of those issuers in which the Portfolio has invested in excess of 5%
but not more than 10% of its net assets.
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see "Investment
Restrictions" in Part B.
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RISK FACTORS.
Equity Investments. Because the assets of each Equity Portfolio are invested
primarily in equity securities, the Equity Portfolios are subject to market risk
and the risks associated with the individual companies in which the Portfolios
invest, meaning that stock prices in general may decline over short or extended
periods of time. As with any equity-based investment company, the investor
should be aware that unfavorable economic conditions can adversely affect
corporate earnings and cause declines in stock prices.
With respect to the Provesta Portfolio, investing in equity securities
of mid-sized companies involves risks not typically associated with investing in
comparable securities of large companies. Assets of the Portfolio are invested
in companies which may have narrow product lines and limited financial and
managerial resources. Since the market for the equity securities of mid-sized
companies is often characterized by less information and liquidity than that for
the equity securities of large companies, the Portfolio's investments can
experience unexpected sharp declines in their market prices. Therefore,
investments in the Portfolio may be subject to greater declines in value than
shares of equity funds investing in the equity securities of large companies.
Fixed Income Securities. The value of fixed income securities generally goes
down when interest rates go up, and vice versa. Furthermore, the value of fixed
income securities may vary based on anticipated or potential changes in interest
rates. Changes in interest rates will generally cause bigger changes in the
prices of longer-term securities than in the prices of shorter-term securities.
Prices of fixed income securities fluctuate based on changes in the
actual and perceived creditworthiness of issuers. The prices of lower rated
securities often fluctuate more than those of higher rated securities. It is
possible that some issuers will be unable to make required payments on fixed
income securities.
Foreign Investments. Each Portfolio, except Top 50 US Portfolio, invests in
foreign securities. Investment in securities of foreign issuers involves
somewhat different investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. domestic companies. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes (such as
capital gain taxes) which may decrease the net return on foreign investments as
compared to dividends and interest paid to a Portfolio by U.S. domestic
companies.
Investors should realize that the value of a Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) currency exchange control or tax regulations in those foreign
countries. In addition, changes in government administrations or economic or
monetary policies in the United States or abroad could result in appreciation or
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depreciation of portfolio securities and could favorably or unfavorably affect a
Portfolio's operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross domestic product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolios must be made in
compliance with foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic securities exchanges. Accordingly, the Portfolios'
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. Moreover, the
settlement periods for foreign securities, which are often longer than those for
securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, purchasers normally pay fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less government supervision
and regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
Since each Portfolio's investments in foreign securities 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. Because the Provesta
Portfolio and Investa Portfolio do not presently intend to engage in currency
transactions to hedge currency risks, these Portfolios may be more vulnerable to
the aforementioned currency risks. See "Foreign Currency Exchange Transactions"
in Part B.
Emerging Markets (Provesta Portfolio, Global Bond Portfolio, Top 50 World
Portfolio, Top 50 Europe Portfolio and Top 50 Asia Portfolio Only). Investments
in securities of issuers in emerging markets countries may involve a high degree
of risk and many may be considered speculative. Investments in developing and
emerging markets may be subject to potentially greater risks than those of other
foreign issuers. These risks include: (i) the small current size of the markets
for such securities and the low volume of trading, which result in less
liquidity and in greater price volatility; (ii) certain national policies which
may restrict the Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests;
(iii) foreign taxation; (iv) the absence, until recently, of a capital market
structure or market oriented economy as well as issuers without a long period of
successful operations; (v) the possibility that recent favorable economic
developments may be slowed or reversed by unanticipated political or social
events in such countries or their neighboring countries; and (vi) greater risks
of expropriation, confiscatory taxation, nationalization, and less social,
political and economic stability.
Futures, Options and Warrants. Each Portfolio's successful use of
futures,
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options and warrants depends on the ability of the Adviser to predict the
direction of the market or, in the case of hedging transactions, the correlation
between market movements and movements in the value of the Portfolio's assets,
and is subject to various additional risks. The investment techniques and skills
required to use futures, options and warrants successfully are different from
those required to select equity securities for investment. The correlation
between movements in the price of the futures contract, option or warrant and
the price of the securities or financial instruments being hedged is imperfect
and the risk from imperfect correlation increases, with respect to stock index
futures, options and warrants, as the composition of a Portfolio's portfolio
diverges from the composition of the index underlying such stock index futures,
options or warrants. If a Portfolio has hedged portfolio securities by
purchasing put options or selling futures contracts, the Portfolio could suffer
a loss which is only partially offset or not offset at all by an increase in the
value of the Portfolio's securities. As noted, a Portfolio may also enter into
transactions in future contracts, options and warrants for other than hedging
purposes (subject to applicable law), including speculative transactions, which
involve greater risk. In particular, in entering into such transactions, a
Portfolio may experience losses which are not offset by gains on other portfolio
positions, thereby reducing its gross income. In addition, the markets for such
instruments may be volatile from time to time, which could increase the risk
incurred by a Portfolio in entering into such transactions. The ability of a
Portfolio to close out a futures, options or warrants position depends on a
liquid secondary market.
The use of futures contracts potentially exposes the Portfolios to the
effects of "leveraging," which occurs when futures are used so a Portfolio's
exposure to the market is greater than it would have been if the Portfolio had
invested directly in the underlying instruments. Leveraging increases a
Portfolio's potential for both gain and loss. As noted above, the Portfolios
intend to adhere to certain policies relating to the use of futures contracts,
which should have the effect of limiting the amount of leverage by the
Portfolios. See "Futures and Option Contracts" in Part B.
LOCAL SECURITIES MARKETS
The German Securities Markets. Equity securities trade on the country's eight
regional stock exchanges of which Frankfurt accounted for approximately 79.5% of
the total volume in 1996.
Share prices of companies traded on German stock exchanges declined in
1991 and 1992 as the German economy entered a recessionary period following
unification of eastern and western Germany in 1990. The DM total return of the
CDAX German Composite Index of stocks was -6.39% in 1992, 44.56% in 1993, -5.83%
in 1994, 4.75% in 1995, 22.14% in 1996 and 29.96% for the first half of 1997.
Trading volume tends to concentrate on the relatively few companies
having both large market capitalization and a broad distribution of their stock
with few or no large holders. The five companies having the largest annual
trading volume of their stock in 1996 represented 46.8% of total trading volume
on the German stock exchanges: Daimler-Benz AG with DM 261.9 billion, Siemens AG
with
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DM 256.1 billion, Deutsche Bank AG with DM 216.8 billion, Bayer AG with DM 186.4
billion and Volkswagen AG with DM 162.2 billion.Siemens Aktiengesellschaft with
DM 178.1 billion, Daimler Benz AG with DM 176.3 billion, Deutsche Bank AG with
DM 150.9 billion, Bayer AG with DM 135.3 billion and Volkswagen
Aktiengesellschaft with DM 110.2 billion.
Japanese Equity Securities Markets. Listed securities in Japan trade on three
Main Japanese Exchanges (including the Tokyo Stock Exchange) and five regional
stock exchanges, although the Tokyo Stock Exchange ("TSE") has generally
represented over 75% of annual trade of volume. In 1996, three industrial groups
(banks, electric appliances and transportation equipment) accounted for
approximately 40% of the total market value of TSE stocks. Share prices of
companies traded on Japanese stock exchanges reached historical peaks in 1989
and 1990. Afterwards stock prices decreased significantly, reaching their lowest
levels in 1992. For example, the Nikkei index of 225 stocks fell from 38916 at
year-end 1989 to a low in 1992 of 14309, a drop of 63%. The index was 19361 at
the end of 1996, and 20331 at June 30, 1997. The decline in stock prices after
1989 has raised the cost of capital for industry and has reduced the value of
stock holdings by banks and corporations. These effects have, in turn,
contributed to the recent weakness in Japan's economy and could continue to have
an adverse impact in the future.
ITEM 5. MANAGEMENT OF THE TRUST.
Deutsche Fund Management, Inc. is the investment manager of the Portfolios. DFM
has retained the services of DWS International Portfolio Management GmbH ("DWS
Adviser") as the investment adviser of each Portfolio, except the Top 50 US
Portfolio. DFM has retained the services of Deutsche Morgan Grenfell Investment
Management Inc. (DMGIM) as investment adviser of the Top 50 US Portfolio ("DMGIM
Adviser") as the investment adviser of Top 50 US Portfolio (collectively with
the DWS Adviser, the "Advisers" and severally as the context may require, the
"Adviser"). DFM and the Advisers are indirect subsidiaries of Deutsche Bank AG.
Federated Services Company is the operations agent of the Portfolios (the
"Operations Agent"). IBT Fund Services (Canada) Inc. ("IBT (Canada)") is the
fund accounting agent of the Portfolios ("Fund Accounting Agent"). IBT Trust
Company (Cayman) Ltd. ("IBT (Cayman)") is the administrative agent of the
Portfolios ("Administrative Agent"). Investors Bank & Trust Company ("IBT") is
the custodian of the Portfolios ("Custodian"). The Board of Trustees of the
Trust provide broad supervision over the affairs of the Portfolios. A majority
of the Trust's Trustees are not affiliated with the Manager or the Advisers. For
further information about the Trustees of the Trust, see Item 14 in Part B.
Manager. The Trust has retained the services of DFM as investment manager to
each Portfolio. DFM, with principal offices at 31 West 52nd Street, New York,
New York 10019, is a Delaware corporation and registered investment adviser
under the Advisers Act of 1940.
DFM is a wholly-owned subsidiary of Deutsche Fonds Holding GmbH ("DFH"),
a company with limited liability organized under the laws of Germany and a
consolidated subsidiary of Deutsche Bank AG, a major global banking institution.
With total assets the equivalent of $570 billion and 75,000 employees as of
year-
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end 1996, Deutsche Bank AG is Europe's largest universal bank. It is engaged in
a wide range of financial services, including retail and commercial banking,
investment banking and insurance. Deutsche Bank AG's creditworthiness ranks it
among the most highly rated financial institutions in the world. For example,
Deutsche Bank AG has been rated AAA by Standard & Poor's Corporation, New York.
Deutsche Bank AG and its affiliates may have commercial lending relationships
with companies whose securities may be held by a Portfolio.
DFH subsidiaries include German-based DWS Deutsche Gesellschaft fuer
Wertpapiersparen mbH ("DWS") and others based in Luxembourg, Austria,
Switzerland, Singapore, France and Italy. Together, DFH subsidiaries serve as
manager and/or investment adviser to more than 150 mutual funds outside the
United States, having aggregate assets under management of more than the
equivalent of $68 billion as of August 1997. DFH and its subsidiaries employ
approximately 500 professionals and is the largest mutual fund operator in
Europe based on assets under management.
The primary subsidiary of DFH is DWS. Founded in 1956, it is the largest
mutual fund company in Germany, holding a 25% share of the German mutual fund
market based on assets under management as of August 1997. DFH and its
subsidiaries are known in the financial market as "DWS Group, Investmentgroup of
Deutsche Bank."
DFH subsidiaries have received widespread industry recognition in
Europe. For example, Micropal, Europe's leading fund rating organization, has
accorded DWS the following awards: 1994: best fund manager for 1, 3 and 5 year
periods; 1995: best fund manager for 1, 3 and 5 year periods; 1996: best fund
manager for 3 and 5 year periods. These awards were given to fund managers
having 10 or more funds registered for sale in Germany, based on the manager
with the highest number of funds ranked first within various categories of
investment objective defined by Micropal. Fund rankings are based on
above-average performance in Deutsche Mark ("DM") terms and below-average
volatility.
Subject to the overall supervision of the Trust's Trustees, DFM is
responsible for the day-to-day investment decisions, the execution of portfolio
transactions and the general management of each Portfolio's investments and
provides certain supervisory services. Under its investment management agreement
with the Trust (the "Management Agreement"), DFM is permitted, subject to the
approval of the Board of Trustees of the Trust, to delegate to a third party
responsibility for management of the investment operations of each Portfolio.
DFM has delegated this responsibility to the relevant Advisers. DFM retains
overall responsibility, however, for supervision of the investment management
program for each Portfolio. See "Manager" in Part B.
As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Trust with respect to Top 50 US
Portfolio, Provesta Portfolio, Investa Portfolio and Japanese Equity Portfolio,
DFM receives a fee from each Portfolio, which is computed daily and paid
monthly, equal to 0.85% of the average daily net assets of each Portfolio on an
annualized basis for the Portfolio's then-current fiscal year. DFM receives a
fee from Top 50 World Portfolio, Top 50 Europe Portfolio and Top 50 Asia
Portfolio, which is computed daily and paid monthly, equal to 1.00% of the
average daily net assets
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of each Portfolio on an annualized basis for the Portfolio's then-current fiscal
year. As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Trust with respect to each Bond
Portfolio, DFM receives a fee from each Bond Portfolio, which is computed daily
and paid monthly, equal to 0.75% of the average daily net assets of each Bond
Portfolio on an annualized basis for the Portfolio's then-current fiscal year.
Adviser. Pursuant to an investment advisory agreement ("Advisory Agreement")
between DFM and the relevant Adviser, the Adviser provides investment advice and
portfolio management services to each Portfolio. Subject to the overall
supervision of DFM, the Adviser conducts the day-to-day investment decisions of
each Portfolio, arranges for the execution of portfolio transactions and
furnishes a continuous investment program for each Portfolio.
Each Adviser is an SEC-registered investment adviser and an indirect subsidiary
of Deutsche Bank AG. The offices of the DWS Adviser are located at Grueneburgweg
113-115, 60323 Frankfurt am Main, Germany. The offices of the DMGIM Adviser are
located at 31 West 52nd Street, New York, New York 10019.
For these services, the relevant Adviser receives from DFM a fee, which
is computed daily and may be paid monthly, equal to 0.75% of the average daily
net assets of Top 50 World Portfolio, Top 50 Europe Portfolio and Top 50 Asia
Portfolio and equal to 0.60% of the average daily net assets of Provesta
Portfolio, Investa Portfolio, Japanese Equity Portfolio and Top 50 US Portfolio
and equal to 0.50% of Global Bond Portfolio and European Bond Portfolio on an
annualized basis for the Portfolio's then-current fiscal year.
Portfolio Management
Elisabeth Weisenhorn is the senior portfolio manager for the Investa Portfolio
and the Provesta Portfolio. Ms. Weisenhorn also serves as portfolio manager for
Investa and Provesta, German registered mutual funds with the same investment
objective, policies and restrictions as the respective Portfolio. She has held
this position since 1991. Ms. Weisenhorn has 12 years of experience as an
investment manager and joined the DWS Group in 1985. She is Senior Investment
Officer, head of the German equity team, supervising funds holding assets under
management of DM 8 billion ($4.7 billion) as of March 31, 1997. Ms. Weisenhorn
is based at DWS Group's office in Frankfurt, Germany.
Hannah Cunliffe is the portfolio manager for the Japan Equity Portfolio. Ms.
Cunliffe also serves as portfolio manager of the DWS-Japan Fonds, a German
registered mutual fund with the same investment objective, policies and
restrictions as the Japanese Equity Portfolio. She has held this position since
February, 1994. Prior to this, she was the Asian equity market analyst for
Deutsche Bank Research. Ms. Cunliffe joined the Deutsche Bank Group in 1989.
Heinz-Wilhelm Fesser is the senior portfolio manager for the Global Bond
Portfolio and European Bond Portfolio. Mr. Fesser joined the DWS Group in 1987,
where he has been engaged in the management of global fixed income funds. He is
Senior Investment Officer, head of the global fixed-income team, supervising
funds holding assets under management of DM 19.5 billion ($11.5 billion) as of
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March 31, 1997.
Klaus Kaldemorgen is the senior portfolio manager for the Top 50 Asia Portfolio
and Deutsche Top 50 World Portfolio. Mr. Kaldemorgen also serves as senior
portfolio manager for the Top 50 Asien and Top 50 Welt, German registered mutual
funds with the same investment objective, policies and restrictions as the
respective Portfolios. He has held this position since the inception of these
funds in April, 1996, and January 1997, respectively. Mr. Kaldemorgen has 15
years experience as an investment manager, joining the DWS Group in 1982. Mr.
Kaldemorgen is Senior Investment Officer, head of the global equity team, DWS
Group, Investmentgroup of Deutsche Bank, supervising funds holding assets under
management of DM 10.8 billion ($6.3 billion) as of March 31, 1997.
Klaus Martini and Elisabeth Weisenhorn are the co-senior portfolio managers for
the Top 50 Europe Portfolio. Mr. Martini joined the DWS Group in 1984, where he
has managed European stock funds since 1988. Mr. Martini also serves as senior
portfolio manager for Europa. He has held this position since the fund's
inception in November, 1995. He is Senior Investment Officer, head of the
European equity team, supervising funds holding assets under management of DM
4.8 billion ($2.8 billion) as of March 31, 1997. Mr. Martini is based at DWS
Group's office in Frankfurt, Germany.
James E. Moltz, the chief investment officer of Deutsche Morgan
Grenfell Inc., is the senior portfolio manager of the Top 50 US
Portfolio. Mr. Moltz is also the chief investment strategist of
Deutsche Morgan Grenfell Inc., and previously served as chief
investment strategist for 20 years with an acquired firm, C.J.
Lawrence Inc. He was also chairman and president of C.J. Lawrence
Inc. from 1973 to 1994. Mr. Moltz is a former Director of both the
New York Stock Exchange and the Securities Industry Association.
He is a member of the New York Society of Security Analysts and a
Chartered Financial Analyst.
Operations Agent. Under an operations agency agreement with the Trust, Federated
Services Company serves as Operations Agent to the Portfolio. In connection with
its responsibilities as Operations Agent, Federated Services Company, among
other things, (i) prepares governing documents, registration statements and
regulatory filings; (ii) performs internal audit examinations (iii) prepares
expense projections; (iv) prepares materials for the Trustees of the Trust, (v)
coordinates the activities of all service providers; (vi) conducts compliance
training for the Adviser; (vii) prepares investor meeting materials and (viii)
monitors and supervises collection of tax reclaims.
As Operations Agent of the Portfolios, Federated Services Company
receives a fee from each Portfolio, which is computed daily and paid monthly, at
the annual rate of 0.035% of the average daily net assets of each Portfolio for
the Portfolio's then-current fiscal year. The Operations Agent of the Portfolios
will receive a minimum fee of $60,000 per Portfolio annually and a minimum
aggregate fee for each Portfolio, corresponding Fund and any other fund
investing in the Portfolio, taken together, of $75,000 for the first year of the
Portfolio's operation and $125,000 for the second year, in each case payable to
the Operations Agent, the Administrator and Transfer Agent combined.
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Administrative Agent. Under an administration agreement with the Trust, IBT
(Cayman) provides certain services to the Portfolios, including (i) filing and
maintaining the governing documents, registration statements and other
regulatory filings; (ii) maintaining a telephone line; (iii) approving annual
expense budgets; (iv) authorizing expenses; (v) distributing materials to the
Trustees of the Trust; (vi) authorizing dividend distributions; (vii)
maintaining books and records; (viii) filing tax returns; and (ix) maintaining
the investor register.
As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee
from each Portfolio, which may be paid monthly, at the annual rate of $5,000.
Custodian and Fund Accountant. IBT, 200 Clarendon Street, Boston, MA 02116 acts
as the custodian of each Portfolio's assets. Securities held for a Portfolio may
be held by a sub-custodian bank approved by the Trustees or Custodian of the
Trust. IBT (Canada) provides fund accounting services to the Portfolios,
including (i) calculation of the daily net asset value for the Portfolios; (ii)
monitoring compliance with investment portfolio restrictions, including all
applicable federal securities and other regulatory requirements; and (iii)
monitoring each Portfolio's compliance with the requirements applicable to a
regulated investment company under the Code.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Trust is organized under the laws of the State of New York. Under
the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in separate series of the Trust. Each investor is entitled to a vote
in proportion to the amount of its investment in each Portfolio. The Trust's
Declaration of Trust provides that each investor in a Portfolio (e.g., other
investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolios 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.
The Trust reserves the right to create and issue a number of series, in which
case investments in each series would participate equally in earnings and assets
of the particular series. Currently the Trust has ten series.
Investments in the Portfolios have no pre-emptive or conversion rights and are
fully paid and non-assessable, except as set forth below. The Trust is not
required and has no current intention to hold annual meetings of investors, but
the Trust 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 aggregate value of the Trust's outstanding interests) the
right to communicate with other investors in connection with requesting a
meeting of investors for the purpose of removing one or more Trustees. Investors
also have the right to remove one or more Trustees without a meeting by a
declaration in writing by a
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specified number of investors. Upon liquidation of a Portfolio its 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 each Portfolio is determined each day on which the New
York Stock Exchange Inc. ("NYSE") is open for trading ("Portfolio Business
Day"). This determination is made as of the close of regular trading on the NYSE
which is currently 4:00 p.m., New York time, or in the event that the NYSE
closes early, at the time of such early closing (the "Valuation Time").
Each investor in the Portfolios may add to or reduce its investment in the
Portfolio on each day the New York Stock Exchange is open for regular trading.
At 4:00 p.m., New York time on each such business day, the value of each
investor's beneficial interest in a Portfolio is 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 withdrawals, which are to be effected on that
day, are then effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio is then recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of 4:00 p.m., New York time on such day plus or minus, as
the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., New York time, on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined is
then applied to determine the value of the investor's interest in the Portfolio
as of 4:00 p.m., New York time on the following business day of the Portfolio.
The end of each Portfolio's fiscal year is August 31.
Under the anticipated method of operation of the Portfolios, the Portfolios will
not be subject to any income tax. However, each investor in the Portfolios will
be taxable on its share (as determined in accordance with the governing
instruments of each Portfolio) of a Portfolio's ordinary income and capital gain
in determining its income tax liability. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
It is intended that each Portfolio's assets, income and distributions will be
managed in such a way that an investor in a Portfolio will be able to satisfy
the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in a Portfolio.
Investor inquiries may be directed to: 416-216-4293
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolios 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 Portfolios may only be made by
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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 Portfolios may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by a Portfolio. The net asset value of a Portfolio is
determined each Portfolio Business Day.
There is no minimum initial or subsequent investment in a Portfolios. However,
because each 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).
Each Portfolio reserves the right to cease accepting investments at any time or
to reject any investment order.
Portfolio Brokerage. The estimated annual portfolio turnover rate for the
Provesta Portfolio, Investa Portfolio, Japanese Equity Portfolio, Global Bond
Portfolio, European Bond Portfolio, Top 50 World Portfolio, Top 50 Europe
Portfolio, Top 50 Asia Portfolio and Top 50 US Portfolio is generally not
expected to exceed 180%, 80%, 150%, 350%, 350%, 80%, 80%, 100% and 80%,
respectively. A 100% annual turnover rate would occur, for example, if all
portfolio securities (excluding short-term obligations) were replaced once in a
period of one year, or if 10% of the portfolio securities were replaced ten
times in one year.
In effecting securities transactions, the Adviser seeks to obtain the best price
and execution of orders. In selecting a broker, the Adviser considers a number
of factors including: the broker's ability to execute orders without disturbing
the market price; the broker's reliability for prompt, accurate confirmations
and on-time delivery of securities; the broker's financial condition and
responsibility; the research and other investment information provided to the
Adviser by the broker; and the commissions charged. Accordingly, the commissions
charged by any such broker may be greater than the amount another firm might
charge if the Adviser determines in good faith that the amount of such
commissions is reasonable in relation to the value of the brokerage services and
research information provided by such broker.
The Adviser may direct a portion of a Portfolio's securities transactions to
certain unaffiliated brokers which in turn use a portion of the commissions they
receive from a Portfolio to pay other unaffiliated service providers on behalf
of that Portfolio for services provided for which the Portfolio would otherwise
be obligated to pay. Such commissions paid by a Portfolio are at the same rate
paid to other brokers for effecting similar transactions in listed equity
securities.
Deutsche Bank AG or one of its subsidiaries or affiliates may act
as one of the
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agents of the Portfolios in the purchase and sale of portfolio securities when,
in the judgment of the Adviser, that firm will be able to obtain a price and
execution at least as favorable as other qualified brokers. As one of the
principal brokers for the Portfolios, Deutsche Bank AG receives brokerage
commissions from each Portfolio.
On those occasions when the Adviser deems the purchase or sale of a security to
be in the best interests of a Portfolio as well as other customers, the Adviser,
to the extent permitted by applicable laws and regulations, may, but is not
obligated to, aggregate the securities to be sold or purchased for a Portfolio
with those to be sold or purchased for other customers in order to obtain best
execution, including lower brokerage commissions, if appropriate. In such event,
allocation of the securities so purchased or sold as well as any expenses
incurred in the transaction are made by the Adviser in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect a Portfolio.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolios may reduce all or any portion of its investment at
the net asset value next determined after a request in "good order" is furnished
by the investor to the Portfolio. The proceeds of a reduction will be paid by
the Portfolios in federal funds normally on the next Portfolio Business Day
after the reduction is effected, but in any event within seven days. Investments
in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any reduction may
be suspended or the payment of the proceeds therefrom postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on the New York Stock Exchange 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.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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<PAGE>
APPENDIX A
Member States of the European Union
Belgium Denmark Germany
Finland France Greece
Great Britain Ireland Italy
Luxembourg Netherlands Austria
Portugal Sweden Spain
Organisation for Economic Cooperation and Development Members
Australia Austria Belgium
Canada Czech Republic Denmark
Finland France Great Britain
Greece Germany Hungary
Iceland Ireland Italy
Japan Liechtenstein Luxembourg
Mexico Netherlands New Zealand
Norway Poland Portugal
South Korea Spain Sweden
Switzerland Turkey United States
States Party to the Convention on the European Economic Area
Austria Belgium Denmark
Finland France Greece
Great Britain Germany Iceland
Ireland Italy Liechtenstein
Luxembourg Netherlands Norway
Portugal Spain Sweden
Switzerland
Exchanges in European countries which are not Member States of the European
Union and not states party to the Convention on the European Economic Area.
Switzerland Slovakia* Czech Republic* Hungary* ***
Zurich Bratislavia Prague Budapest
Geneva
Basel
Exchanges in Non-European countries**
Argentina* Canada* Singapore*
Buenos Aires Toronto Singapore Stock Exchange
Vancouver
Australia* Montreal South Africa*
ASX (Sydney, Johannesburg
Hobart, Melbourne, Thailand*
Perth) Bangkok
Brazil* South Korea*
Sao Paulo Seoul USA
Rio de Janiero American Stock Exchange (AMEX)
Boston*
Chile* Malaysia* Chicago*
Santiago Kuala Lumpur Cincinnati*
Los Angeles Pacific Stock Exchange*
Hong Kong* Mexico* New York
Hongkong Stock Mexico City New York Stock Exchange (NYSE)
Exchange Philadelphia*
San Francisco Pacific Stock Exchange*
Indonesia* New Zealand*
Jakarta Stock Exchange Wellington
Christchurch/Invercargill
Japan Auckland
Tokyo
Osaka Peru*
Nagoya Lima
Kyoto
Fukuoto Philippines*
Niigata Manilla
Sapporo
Hiroshima
<PAGE>
Regulated Markets in countries which are not members on the European Union and
not contracting states of the treaty on the European Economic Area
Japan* **
Over-the-Counter Market
Canada* **
Over-the-Counter Market
South Korea* **
Over-the Counter Market
Switzerland
Free Trading Zurich
Free Trading Geneva
Exchange Bern
Over the Counter Market of the members of the International
Securities Market Association (ISMA), Zurich
United States**
NASDAQ-System
Over-the-Counter Market (organized markets by the
National Association of Securities Dealers, Inc.)
* Not applicable to the European Bond Portfolio
** Not applicable to the Provesta Portfolio
*** Not applicable to Top 50 Europe Portfolio, Top 50 Asia
Portfolio and Top 50 World Portfolio
<PAGE>
DEUT056
PART A - US MONEY MARKET PORTFOLIO (US DOLLAR)
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.
Deutsche Portfolios (the "Trust") is a non-diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York on June 20, 1997.
Beneficial interests in the Trust are divided into separate series, each
having distinct investment objectives and policies. US Money Market Portfolio
(US Dollar)(the "Portfolio") is described herein. 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 managed by Deutsche Fund Management, Inc. ("DFM" or the
"Manager"), a registered investment adviser and an indirect subsidiary of
Deutsche Bank AG, a major global financial institution.
Investment Objective and Policies
The investment objective of the Portfolio is to achieve as high a level
of current income as is consistent with the preservation of capital and the
maintenance of liquidity. The policies employed by the Portfolio in its efforts
to achieve this objective are described below. Additional information about the
investment policies of the Portfolio appears in Part B under "Investment
Objectives and Policies."
Investments for the Portfolio mature or are deemed to mature within 397
days (or 792 days in the case of U.S. Government securities) from the date of
purchase and the average maturity of the investments held by the Portfolio (on a
dollar-weighted basis) is 90 days or less. Currently, the Portfolio's investment
policy is to invest only in money market instruments, including securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
and bank obligations (such as certificates of deposit, fixed time deposits and
bankers' acceptances), commercial paper, repurchase agreements, when-issued and
delayed delivery securities, bonds issued by U.S. corporations and obligations
of certain supranational organizations and foreign governments and their
agencies and instrumentalities. (See Appendix A for more information.) The
Portfolio may also enter into reverse repurchase agreements. The Portfolio
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will not invest more than 5% of its total assets in securities of a single
issuer other than U.S. Government securities. All of the assets of the Portfolio
are invested in securities which are rated within the highest rating category
for short-term debt obligations by at least two (unless only rated by one)
nationally recognized statistical rating organizations (e.g., Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")) or, if
unrated, are of comparable quality as determined by or under the direction of
the Trust's Board of Trustees.
Although the assets of the Portfolio are invested in high quality,
short-term securities, the Portfolio is subject to interest rate risk and credit
risk which cause fluctuations in the amount of income accrued on the Portfolio's
investments. Interest rate risk refers to the price fluctuation of a debt
security in response to changes in interest rates. In general, short-term
securities have relatively small fluctuations in price in response to general
changes in interest rates. Credit risk refers to the likelihood that an issuer
will default on interest and principal payments. High quality securities of
short maturities generally have relatively minimal credit risk.
Subject to the restriction on the Portfolio's investments in securities
that are not readily marketable (see "Non-Fundamental Investment Restrictions"),
the Portfolio may purchase restricted securities, including securities eligible
for resale under Rule 144A under the 1933 Act and commercial paper issued in
reliance upon the exemption from registration in Section 4(2) of the 1933 Act.
Restricted securities are securities subject to contractual or legal
restrictions on resale, such as those arising from an issuer's reliance upon
certain exemptions from registration under the 1933 Act.
Loans of Portfolio Securities. Loans of portfolio securities up to 30% of the
total value of the Portfolio are permitted and may be entered into for not more
than one year. These loans must be secured continuously by cash or equivalent
collateral or by an irrevocable 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 income. By lending securities, the Portfolio's income can be
increased by its continuing to receive income on the loaned securities as well
as by the opportunity to receive interest on the collateral. Any appreciation or
depreciation in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its investors.
Reverse Repurchase Agreements. Reverse repurchase agreements may be entered into
only with a "primary dealer" (as designated by the Federal Reserve Bank of New
York) in U.S. Government securities. This is an agreement in which the Portfolio
agrees to repurchase securities sold by it at a mutually agreed upon time and
price. As such, it is viewed as the borrowing of money for the Portfolio.
Proceeds of borrowings under reverse repurchase agreements are invested for the
Portfolio. This is the speculative factor known as "leverage". If interest rates
rise during the term of a reverse repurchase agreement utilized for leverage,
the value of the securities to be repurchased for the Portfolio as well as the
value of securities purchased with the proceeds will decline. Proceeds of a
reverse repurchase transaction are not invested for a period which exceeds the
duration of the reverse repurchase agreement. A reverse repurchase agreement
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is not entered into for the Portfolio if, as a result, more than one-third of
the market value of the Portfolio's total assets, less liabilities other than
the obligations created by reverse repurchase agreements, is engaged in reverse
repurchase agreements. In the event that such agreements exceed, in the
aggregate, one-third of such market value, the amount of the Portfolio's
obligations created by reverse repurchase agreements is reduced within three
days thereafter (not including Sundays and holidays) or such longer period as
the Securities and Exchange Commission may prescribe, to an extent that such
obligations do not exceed, in the aggregate, one-third of the market value of
the Portfolio's assets, as defined above. A segregated account with the
Custodian is established and maintained for the Portfolio with liquid assets in
an amount at least equal to the Portfolio's purchase obligations under its
reverse repurchase agreements. Such a segregated account consists of liquid,
high grade debt securities marked to the market daily, with additional liquid
assets added when necessary to insure that at all times the value of such
account is equal to the purchase obligations.
Floating and Variable Rate Instruments. Certain of the obligations that the
Portfolio may purchase have a floating or variable rate of interest. Such
obligations bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the Prime Rate, and at specified
intervals. Certain of such obligations may carry a demand feature that would
permit the holder to tender them back to the issuer at par value prior to
maturity. The Portfolio will limit its purchase of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
The Adviser will monitor on an ongoing basis the ability of an issuer of a
demand instrument to pay principal and interest on demand. The Portfolio's right
to obtain payment at par on a demand instrument could be affected by events
occurring between the date the Portfolio elects to demand payment and the date
payment is due that may affect the ability of the issuer of the instrument to
make payment when due, except when such demand instruments permit same day
settlement. To facilitate settlement, these same day demand instruments may be
held in book-entry form at a bank other than the Custodian, subject to a
subcustodian agreement approved by the Trust between that bank and the
Custodian.
To the extent that floating and variable rate instruments without demand
features are not readily marketable, they will be subject to the investment
restriction on the Portfolio's investment in securities that are not readily
marketable.
Investment Restrictions
The investment objective of the Portfolio, together with the fundamental
investment restrictions described below and in Part B, except as noted, are
deemed fundamental policies, i.e., they may be changed only with the approval of
the holders of a majority of the outstanding voting securities of the Portfolio.
Any other investment policies of the Portfolio described herein or in Part B are
not fundamental and may be changed without investor approval.
The Portfolio will comply with Rule 2a-7 under the 1940 Act, including
the diversification, quality and maturity limitations imposed by the Rule. A
more
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<PAGE>
detailed description of Rule 2a-7 is set forth in Part B under "Investment
Objective and Policies."
Fundamental Investment Restrictions. The Portfolio is classified as
"diversified" under the 1940 Act, which means that at least 75% of its total
assets is represented by cash; securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and other securities limited in
respect of any one company to an amount no greater than 5% of the Portfolio's
total assets (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities). As a matter of operating policy, the
foregoing fundamental policy would give the Portfolio the ability to invest,
with respect to 25% of its assets, more than 5% of its assets in any one issuer
only in the event that Rule 2a-7 is amended in the future.
The Portfolio may not purchase securities or other obligations of
issuers conducting their principal business activity in the same industry if its
investments in such industry would equal or exceed 25% of the value of the
Portfolio's total assets, except this limitation shall not apply to investments
in securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or certificates of deposit, bankers' acceptances or time
deposits.
Non-Fundamental Investment Restrictions. The Portfolio will not purchase more
than 10% of the principal amount of all outstanding debt obligations of any one
issuer (other than securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities). In addition not more than 10% of the net assets
of the Portfolio may be invested in securities that are subject to legal or
contractual restrictions on resale or in securities which are not readily
marketable, provided that there is no limitation with respect to or arising out
of investment in (a) securities that have legal or contractual restrictions on
resale but have a readily available market or (b) securities that are not
registered under the 1933 Act but which can be sold to qualified institutional
buyers in accordance with Rule 144A under the 1933 Act.
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see "Investment
Restrictions" in Part B.
ITEM 5. MANAGEMENT OF THE TRUST.
Deutsche Fund Management, Inc. is the investment manager of the
Portfolio. DFM has retained the services of Deutsche Morgan Grenfell Investment
Management Inc. (DMGIM) as investment adviser of the Portfolio (the "Adviser").
DFM and the Adviser are indirect subsidiaries of Deutsche Bank AG. Federated
Services Company is the operations agent of the Portfolio (the "Operations
Agent"). IBT Fund Services (Canada) Inc. ("IBT (Canada)") is the fund accounting
agent of the Portfolio ("Fund Accounting Agent"). IBT Trust Company (Cayman)
Ltd. ("IBT (Cayman)") is the administrative agent of the Portfolio
("Administrative Agent"). Investors Bank & Trust Company ("IBT") is the
custodian of the Portfolio ("Custodian"). The Board of Trustees of the Trust
provide broad supervision over the affairs of the Portfolio. A majority of the
Trust's Trustees are not
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affiliated with the Manager or the Adviser. For further information about the
Trustees of the Trust, see Item 14 in Part B.
Manager. The Trust has retained the services of DFM as investment manager to the
Portfolio. DFM, with principal offices at 31 West 52nd Street, New York, New
York 10019, is a Delaware corporation and registered investment adviser under
the Advisers Act of 1940.
DFM is a wholly-owned subsidiary of Deutsche Fonds Holding GmbH ("DFH"),
a company with limited liability organized under the laws of Germany and a
consolidated subsidiary of Deutsche Bank AG, a major global banking institution.
With total assets the equivalent of $570 billion and 75,000 employees as of the
year-ended 1996, Deutsche Bank AG is Europe's largest universal bank. It is
engaged in a wide range of financial services, including retail and commercial
banking, investment banking and insurance. Deutsche Bank AG's creditworthiness
ranks it among the most highly rated financial institutions in the world. For
example, Deutsche Bank AG has been rated AAA by S&P. Deutsche Bank AG and its
affiliates may have commercial lending relationships with companies whose
securities may be held by the Portfolio.
Subject to the overall supervision of the Trust's Trustees, DFM is
responsible for the day-to-day investment decisions, the execution of portfolio
transactions and the general management of the Portfolio's investments and
provides certain supervisory services. Under its investment management agreement
with the Trust (the "Management Agreement"), DFM is permitted, subject to the
approval of the Board of Trustees of the Trust, to delegate to a third party
responsibility for management of the investment operations of the Portfolio. DFM
has delegated this responsibility to the Adviser. DFM retains overall
responsibility, however, for supervision of the investment management program
for the Portfolio. See "Manager" in Part B.
As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Trust with respect to the Portfolio,
DFM receives a fee from the Portfolio, which is computed daily and may be paid
monthly, equal to 0.15% of the average daily net assets of the Portfolio on an
annualized basis for the Portfolio's then-current fiscal year.
Adviser. Pursuant to an investment advisory agreement ("Advisory Agreement")
between DFM and DMGIM, DMGIM provides investment advice and portfolio management
services to the Portfolio. Subject to the overall supervision of DFM, the
Adviser conducts the day-to-day investment decisions of the Portfolio, arranges
for the execution of portfolio transactions and furnishes a continuous
investment program for the Portfolio.
The Adviser is an SEC-registered investment adviser and an indirect
subsidiary of Deutsche Bank AG. The offices of the Adviser are located at 31
West 52nd Street, New York, New York 10019. The Adviser is a wholly owned
indirect subsidiary of Deutsche Bank AG, a major German banking institution.
For these services, the Adviser receives from DFM a fee, which is
computed daily and may be paid monthly, equal to 0.1125% of the average daily
net assets
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of the Portfolio on an annualized basis for the Portfolio's then-current fiscal
year.
Operations Agent. Under an operations agency agreement with the Trust, Federated
Services Company serves as Operations Agent to the Portfolio. In connection with
its responsibilities as Operations Agent, Federated Services Company, among
other things (i) prepares governing documents, registration statements and
regulatory filings; (ii) performs internal audit examinations; (iii) prepares
expense projections; (iv) prepares materials for the Trustees of the Trust, (v)
coordinates the activities of all service providers; (vi) conducts compliance
training for the Adviser; (vii) prepares investor meeting materials and (viii)
monitors and supervises collection of tax reclaims.
As Operations Agent of the Portfolio, Federated Services Company
receives a fee from the Portfolio, which is computed daily and paid monthly, at
an annual rate, for at least the Portfolio's first year of operations, equal to
0.015% of the average daily net assets of the Portfolio. If, after the
Portfolio's first year of operations, the average net assets of the Portfolio
(excluding assets attributable to the Class Y Fund, an investor in the Fund)
have not reached $325 million, the Operations Agent's fee would be increased to
an annual rate of 0.035% of the average daily net assets of the Portfolio.
Administrative Agent. Under an administration agreement with the Trust, IBT
(Cayman) provides certain services to the Portfolio, including (i) filing and
maintaining the governing documents, registration statements and other
regulatory filings; (ii) maintaining a telephone line; (iii) approving annual
expense budgets; (iv) authorizing expenses; (v) distributing materials to the
Trustees of the Trust; (vi) authorizing dividend distributions; (vii)
maintaining books and records; (viii) filing tax returns; and (ix) maintaining
the investor register.
As Administrative Agent of the Portfolio, IBT (Cayman) receives a fee
from the Portfolio, which may be paid monthly, at the annual rate $5,000.
Custodian and Fund Accountant. IBT, 200 Clarendon Street, Boston, MA 02116 acts
as the custodian of the Portfolio's assets. Securities held for a Portfolio may
be held by a sub-custodian bank approved by the Trustees or Custodian of the
Trust. IBT (Canada) provides fund accounting services to the Portfolio,
including (i) calculation of the daily net asset value for the Portfolio; (ii)
monitoring compliance with investment portfolio restrictions, including all
applicable federal securities and other regulatory requirements; and (iii)
monitoring the Portfolio's compliance with the requirements applicable to a
regulated investment company under the Code.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Trust is organized under the laws of the State of New York. Under
the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in separate series of the Trust. Each investor is entitled to a vote
in proportion to the amount of its investment in the Portfolio. The Trust's
Declaration of Trust provides that each investor in the Portfolio (e.g., other
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investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
The Trust reserves the right to create and issue a number of series, in
which case investments in each series would participate equally in earnings and
assets of the particular series. Currently the Trust has ten series.
Investments in the Portfolio have no pre-emptive or conversion rights
and are fully paid and non-assessable, except as set forth below. The Trust is
not required and has no current intention to hold annual meetings of investors,
but the Trust 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 aggregate value of the Trust's outstanding interests) the
right to communicate with other investors in connection with requesting a
meeting of investors for the purpose of removing one or more Trustees. Investors
also have the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of investors. Upon liquidation of
the Portfolio investors in the Portfolio 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 once daily at 3:00
p.m. (Eastern time) on Monday through Friday, except on the holidays listed
under "Net Asset Value" in Part B. The Portfolio's assets are valued by using
the amortized cost method of valuation. This method involves valuing a security
at its cost at the time of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The market
value of the securities held by the Portfolio fluctuates on the basis of the
creditworthiness of the issuers of such securities and on the levels of interest
rates generally. While the amortized cost method provides certainty in
valuation, it may result in periods when the value so determined is higher or
lower than the price the Portfolio would receive if the security were sold. (See
"Net Asset Value" in Part B.)
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each day the New York Stock Exchange is open for regular
trading and the Federal Reserve Bank is open for business. At 3:00 p.m. (Eastern
time) on each such business day, the value of each investor's beneficial
interest in the Portfolio is determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that day that represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio is then recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 3:00 p.m. (Eastern time) on such day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's
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investment in the Portfolio effected on such day, and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of 3:00 p.m. (Eastern
time) on such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined is then applied to
determine the value of the investor's interest in the Portfolio as of 3:00 p.m.
(Eastern time) on the following business day of the Portfolio.
The end of the Portfolio's fiscal year is August 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: 416-216-4293.
ITEM 7. PURCHASE 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. Investments in the Portfolio may only
be made by other investment companies, insurance company separate accounts,
common or commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio. The net asset value of the Portfolio
is determined once daily at 3:00 p.m. (Eastern time) on Monday through Friday,
except on the holidays listed under "Net Asset Value" in Part B.
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 reserves the right to cease accepting investments at any
time or to reject any investment order.
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Portfolio Transactions. Although the Portfolio generally holds investments until
maturity and does not seek profits through short-term trading, it may dispose of
any portfolio security prior to its maturity if it believes such disposition
advisable. Money market securities are generally traded on a net basis and do
not normally involve brokerage commissions or transfer taxes. See "Portfolio
Transactions" in Part B.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio in federal funds normally on the next
Portfolio business day after the reduction is effected, but in any event within
seven days.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
reduction may be suspended or the payment of the proceeds therefrom postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on the New York Stock Exchange 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.
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 Trust . . . . . . . . . . . . .B-20
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . .B-21
Investment Advisory and Other Services . . . . . . .B-22
Brokerage Allocation and Other Practices . . . . . .B-25
Capital Stock and Other Securities . . . . . . . . .B-27
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . .B-28
Tax Status . . . . . . . . . . . . . . . . . . . . .B-29
Underwriters . . . . . . . . . . . . . . . . . . . .B-31
Calculations of Performance Data . . . . . . . . . .B-31
Financial Statements . . . . . . . . . . . . . . . .B-31
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
Part A contains additional information about the investment objectives and
policies of the Top 50 World Portfolio (US Dollar) ("Top 50 World Portfolio"),
Top 50 Europe Portfolio (US Dollar) ("Top 50 Europe Portfolio"), Top 50 Asia
Portfolio (US Dollar) ("Top 50 Asia Portfolio"), Top 50 US Portfolio (US Dollar)
("Top 50 US Portfolio"), Provesta Portfolio (US Dollar)("Provesta Portfolio"),
Investa Portfolio (US Dollar)("Investa Portfolio"), Japanese Equity Portfolio
(US Dollar)("Japanese Equity Portfolio"), Global Bond Portfolio (US
Dollar)("Global Bond Portfolio") and European Bond Portfolio (US
Dollar)("European Bond Portfolio") (collectively, the "Portfolios"). This Part B
should only be read in conjunction with Part A. This section contains
supplemental information concerning the types of securities and other
instruments in which each Portfolio may invest, the investment policies and
portfolio strategies that each Portfolio may utilize and certain risks attendant
to those investments, policies and strategies.
Equity Investments
As discussed in Part A, each Portfolio may invest in the equity
securities of domestic and foreign issuers to the extent consistent with its
investment objectives and policies. Equity investments may or may not pay
dividends and may or may not carry voting rights. Common stock occupies the most
junior position in a company's capital structure. Preferred stock generally
carries preferential
B-1
<PAGE>
rights to dividends and amounts payable upon liquidation of the issuer, but may
have no voting rights. Convertible securities entitle the holder to exchange the
securities for a specified number of shares of common stock, usually of the same
company, at specified prices within a certain period of time and to receive
interest or dividends until the holder elects to convert. The provisions of any
convertible security determine its ranking in a company's capital structure. In
the case of subordinated convertible securities, the holder's claims on assets
and earnings are subordinated to the claims of other creditors, and are senior
to the claims of common shareholders.
Investment Companies
Up to 5% of the total assets of each Portfolio except the Top 50 US
Portfolio may be invested in shares of investment companies, provided these
shares are offered to the public without limitation on the number of shares, the
investors have the right to redeem their interest, and have investment policies
consistent with those of the Portfolio. The Top 50 US Portfolio may invest up to
5% of its total assets in the securities of any one investment company and
invest in the aggregate up to 10% of its total assets in the securities of
investment companies as a group. However, the Top 50 US Portfolio intends that
less than 5% of the Portfolio's total assets will be invested in investment
company securities during its first year of operations. Each Portfolio may not
own more than 3% of the total outstanding voting stock of any other investment
company. As a shareholder of another investment company, a Portfolio would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees.
Subject to the foregoing limitations, shares of another securities
investment fund managed by the Manager or the Adviser or by another investment
adviser affiliated with the Manager or the Adviser through a substantial direct
or indirect interest may be purchased, subject to certain limitations, if the
other investment fund according to its investment policies is specialized in a
specific geographic area or economic sector. A Portfolio would not, however, pay
a sales charge when investing in an investment company managed by the Manager,
the Adviser or their affiliates. In addition, no management or advisory fees
would be paid by a Portfolio with respect to its assets which are invested in
investment companies managed by the Manager, the Adviser or their affiliates.
Participation Certificates
Certain companies have issued participation certificates, which entitle
the holder to participate only in dividend distributions, generally at rates
above those declared on the issuers' common stock, but not to vote, nor usually
to any claim for assets in liquidation. Participation certificates trade like
common stock on their respective stock exchanges. Such securities may have
higher yields; however, they may be less liquid than common stock. The Adviser
believes that certain participation certificates have potential for long-term
appreciation, depending on their price relative to that of the issuer's equity
securities, if publicly traded, and other criteria.
Short-Term Instruments
B-2
<PAGE>
Although it is intended that the assets of each Portfolio stay invested
in the securities described above and in Part A to the extent practical in light
of each Portfolio's investment objective and long-term investment perspective,
assets of each Portfolio may be invested in bank deposits and money market
instruments maturing in less than 12 months to meet anticipated expenses or for
day-to-day operating purposes and when, in the Adviser's opinion, it is
advisable to adopt a temporary defensive position because of unusual and adverse
conditions affecting the equity or fixed income markets. In addition, when a
Portfolio experiences large cash inflows through additional investments by its
investors or the sale of portfolio securities, and desirable securities that are
consistent with its investment objective are unavailable in sufficient
quantities, assets may be held in short-term investments for a limited time
pending availability of such securities. Bank deposits and money market
instruments include credit balances and bank certificates of deposit, discounted
treasury notes and bills issued by the Federal Republic of Germany ("FRG"), the
states of the FRG, the European Union, other member states of the OECD or
quasi-government entities of any of the foregoing.
Zero Coupon Obligations
Each Portfolio may also invest in zero coupon obligations, such as zero
coupon bonds. Zero coupon obligations pay no current interest, and as a result
their prices tend to be more volatile than those of securities that offer
regular payments of interest. In order to pay cash distributions representing
income on zero coupon obligations, a Portfolio may have to sell other securities
on unfavorable terms, and these sales may generate taxable gains for
shareholders in the corresponding Fund.
Options
Each Portfolio may write call and put options and purchase call and put
options on securities. A Portfolio will write options on securities for the
purpose of increasing its return on such securities and/or to protect the values
of its portfolio.
The buyer of a typical put option can expect to realize a gain if the
price of the underlying instrument falls substantially. However, if the price of
the instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs). A call buyer
typically attempts to participate in potential price increases of the instrument
underlying the option with risk limited to the cost of the option if security
prices fall. At the same time, the buyer can expect to suffer a loss if security
prices do not rise sufficiently to offset the cost of the option (limited to the
amount of the premium paid, plus related transaction costs). A Portfolio may
seek to terminate its position in a put option it writes before exercise by
purchasing an offsetting option in the market at its current price. If the
market is not liquid for a put option the Portfolio has written, however, the
Portfolio must continue to be prepared to pay the strike price while the option
is outstanding, regardless of price changes, and must continue to post margin as
discussed below.
B-3
<PAGE>
If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline. The
characteristics of writing call options are similar to those of writing put
options, except that writing calls generally is a profitable strategy if prices
remain the same or fall. Through receipt of the option premium a call writer
offsets part of the effect of a price decline. At the same time, because a call
writer must be prepared to deliver the underlying instrument in return for the
strike price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.
Transaction in options, futures contracts, options on futures contracts
and forward contracts entered into for non-hedging purposes involve greater risk
and could result in losses which are not offset by gains on other portfolio
assets.
All options purchased or sold by a Portfolio will be traded on a
securities exchange or, in the case of Top 50 US Portfolio, will be purchased or
sold by securities dealers (in the case of over-the-counter, or "OTC," options)
that meet creditworthiness standards approved by the Trust's Board of Trustees.
In the case of OTC options, the Top 50 US 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.
The staff of the Securities and Exchange Commission ("SEC") has taken
the position that, in general, purchased OTC options and the underlying
securities used to cover written OTC options are illiquid securities. However,
the Top 50 US Portfolio may treat as liquid the underlying securities used to
cover written OTC options, provided it has arrangements with certain qualified
dealers who agree that such Portfolio may repurchase any option it writes for a
maximum price to be calculated by a predetermined formula. In these cases, the
OTC option itself would only be considered illiquid to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of the
option.
Foreign Currency Exchange Transactions
Each Portfolio (except the Top 50 US Portfolio) may enter into foreign
currency exchange transactions in an attempt to protect against changes in
foreign currency exchange rates between the trade and settlement dates of
specific securities transactions or anticipated securities transactions. Each
Portfolio may also enter into foreign currency transactions to hedge against a
change in foreign currency exchange rates that would affect the value of
existing investments denominated or principally traded in a foreign currency.
Each Portfolio other than the Provesta Portfolio and the Investa Portfolio may
also,
B-4
<PAGE>
in circumstances where the Adviser considers it appropriate, enter into foreign
currency exchange transactions for the purpose of hedging the value of such
Portfolios against currencies other than the U.S. dollar. To conduct the hedging
discussed above, a Portfolio would generally enter into a forward contract to
sell the foreign currency in which the investment is denominated in exchange for
U.S. dollars or other currency in which the Adviser desires to protect the value
of the Portfolio.
Although these transactions are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
limit any potential gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the date
the forward contract is entered into and the date it matures. The projection of
currency market movements is difficult, and the successful execution of a
hedging strategy is highly uncertain.
Futures Contracts and Options on Futures Contracts
Each Portfolio may purchase or sell futures contracts and purchase put
and call options, including put and call options on futures contracts. In
addition, each Portfolio may purchase put and call options on futures. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index.
Futures contracts and options on futures contracts may be entered into
on foreign exchanges. Investors should recognize that transactions involving
foreign securities or foreign currencies, and transactions entered into in
foreign countries may involve considerations and risks not typically associated
with investing in U.S. markets.
Futures Contracts. When a Portfolio purchases a futures contract, it
agrees to purchase a specified quantity of an underlying instrument at a
specified future date and price or to make or receive a cash payment based on
the value of a securities index or a financial instrument. When a Portfolio
sells a futures contract, it agrees to sell a specified quantity of the
underlying instrument at a specified future date and price or to receive or make
a cash payment based on the value of a securities index or a financial
instrument. When a Portfolio purchases or sells a futures contract, the value of
the futures contract tends to increase and decrease in tandem with the value of
its underlying instrument or index. The price at which the purchase and sale
will take place is fixed when a Portfolio enters into the contract. Futures can
be held until their delivery dates or the positions can be (and normally are)
closed out, by entering into an opposing contract, before then.
When a Portfolio purchases or sells a futures contract, it
is required to make an initial margin deposit. Although the amount
may vary, initial margin can be as low as 1% or less of the
notional amount of the contract. Additional
B-5
<PAGE>
margin may be required as the contract fluctuates in value. Since the amount of
margin is relatively small compared to the value of the securities covered by a
futures contract, the potential for gain or loss on a futures contract is much
greater than the amount of the Portfolio's initial margin deposit.
Options on Futures. Put and call options on futures contracts may be
purchased by each Portfolio in order to protect against declines in values of
portfolio securities or against increases in the cost of securities to be
acquired. Unlike a futures contract, which requires parties to buy or sell the
underlying financial instrument or make a cash settlement payment based on
changes in the price of the financial instrument 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 a Portfolio are paid by that Portfolio into a segregated
account as required by the 1940 Act and the SEC's interpretations thereunder.
Purchase of options on futures contracts may present less risk in
hedging a Portfolio than the purchase or sale of the underlying futures
contracts since the potential loss is limited to the amount of the premium plus
related transaction costs.
Combined Positions. Each 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, a 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.
Options on Securities Indices. Each Portfolio is also permitted to
purchase call and put options on any securities index based on securities in
which the Portfolio may invest. Options on securities indices are similar to
options on securities, except that the exercise of securities index options is
settled by cash payment and does not involve the actual purchase or sale of
securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. A Portfolio, in purchasing index
options for hedging purposes, is subject to the risk that the value of its
B-6
<PAGE>
portfolio securities may not change as much as that of an index because the
Portfolio's investments generally will not match the composition of an index.
Warrants. Each Portfolio may purchase warrants which, like options on
futures contracts and options on securities indices, entitle the holder to
purchase or sell a futures contract or to a cash payment reflecting the price
fluctuation in an index of securities. A Portfolio may also purchase warrants
that entitle the holder to a cash payment reflecting the fluctuation in the
value of certain financial futures contracts. Warrants on futures contracts and
warrants on securities indices differ from the equivalent options in that: (1)
they are securities issued by a financial institution/special purpose issuer
rather than contracts entered into with a futures exchange and (2) they are
traded on a securities exchange rather than on a futures exchange. The use of
warrants will generally entail the same risks that are associated with a
Portfolio's positions in options on futures and options on securities indices.
Other Limitations. The Commodity Exchange Act prohibits U.S. persons,
such as a Portfolio, from buying or selling certain foreign futures contracts or
options on such contracts. Accordingly, each Portfolio will not engage in
foreign futures or options transactions unless the contracts in question may
lawfully be purchased and sold by U.S. persons in accordance with applicable
Commodity Futures Trading Commission ("CFTC") regulations or CFTC staff
advisories, interpretations and no action letters. In addition, in order to
assure that a Portfolio will not be considered a "commodity pool" for purposes
of CFTC rules, the Portfolio will enter into transactions in futures contracts
or options on futures contracts only if (1) such transactions constitute bona
fide hedging transactions, as defined under CFTC rules or (2) no more than 5% of
the Portfolio's net assets are committed as initial margin or premiums to
positions that do not constitute bona fide hedging transactions.
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 a
Portfolio's current or anticipated investments exactly. Each 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 a 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 a
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
B-7
<PAGE>
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
Liquidity of Options and Futures Contracts. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, a
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and Over-the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange.)
Position Limits. Futures exchanges can limit the number of futures and options
on futures contracts that can be held or controlled by an entity. If an adequate
exemption cannot be obtained, a Portfolio or its Adviser may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.
Asset Coverage for Futures Contracts and Options Positions. Each Portfolio
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Portfolio can commit assets to
initial margin deposits and option premiums. In addition, each 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 a Portfolio's assets could impede portfolio management
or a Portfolio's ability to meet redemption requests or other current
obligations.
Risk Management
Each 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 Adviser
wishes to extend maturities in a fixed income portfolio in order to 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
Adviser wishes to decrease fixed income securities or purchase equities, it
could cause a Portfolio
B-8
<PAGE>
to sell futures contracts on debt securities and purchase futures contracts on a
stock index. Because these risk management techniques involve leverage, they
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.
THE GERMAN SECURITIES MARKETS
Equity Markets. Equity securities trade on the country's eight regional
stock exchanges (Frankfurt, Dusseldorf, Munich, Hamburg, Berlin, Stuttgart,
Hanover and Bremen), of which Frankfurt accounted for approximately 77% of the
total volume in 1996. While trading in listed securities is not legally or
otherwise confined to the exchanges, they are believed to handle the largest
part of trading volume in equity transactions.
<TABLE>
<CAPTION>
Market Capitalization and Trading Volume
of Equity Securities on German Stock Exchanges(1)
(in billions)
Market Trading Volume for
Capitalization as the year ended
of December 31(2) December 31(2)
----------------- --------------
<S> <C> <C> <C> <C>
1992....... $359.77 DM561.89 $876.8 DM1,415.2
1993....... 483.59 800.10 1,150.3 1,985.8
1994....... 499.25 773.88 1,302.9 2,017.9
1995...... 544.89 781.10 1,146.8 1,643.9
1996........ 635.95 988.77 1,487.6 2,312.9
</TABLE>
- ---------------
(1) Excluding stocks of foreign-domiciled companies and investment companies.
(2) US Dollar equivalents calculated at year-end exchange rates.
The figures for 1992 through 1994 include warrants.
Sources: Deutsche Borse AG and the Deutsche Bundesbank.
German stock exchanges offer three different market segments within
which stocks are traded:
(i) The official market (Amtlicher Handel) comprises trading in
shares which have been formally admitted to official listing by the
admissions committee of the stock exchange concerned, based upon
disclosure in the listing application or "prospectus".
(ii) The regulated, unlisted market (Geregelter Market) comprises
trading in shares not admitted to official listing. Companies admitted
to this market segment are exempt from publishing a full listing
prospectus, but are required to submit an offering memorandum. Admission
is granted by a special committee which is also responsible for the
supervision of the establishment of prices.
B-9
<PAGE>
(iii) The unofficial, unregulated telephone, or over-the-counter,
market (Freiverkehr) comprises trading in securities that have not
followed any special listing procedure. It includes trading in
securities by telephone or on the stock exchange premises, between banks
or through floor brokers prior to or after official trading hours.
For an official listing, the German stock exchanges and pertinent
legislation require public disclosure of all information about an issuer
considered material to an evaluation of the securities to be listed.
Applications must further provide the latest annual financial statements of the
issuer with explanatory notes, including disclosure of any liabilities not shown
therein. They must also furnish details of the issuer to be listed. Generally,
DM 0.5 million par value (i.e., 10,000 shares of DM 50 par value) is considered
to be the minimum amount suitable for full listing. Applications for admission
to regulated unlisted trading must contain essentially similar information as
that required for full listing, but in a condensed form that may be submitted as
a memorandum. However, the document, in lieu of being published, may be
deposited with paying agents so long as reference is made in one of the official
stock exchange publications.
Markets in listed securities are generally of the auction type, but a
substantial amount of listed securities also changes hands in inter-bank dealer
markets both on and off the stock exchanges. Prices for active stocks, including
those of larger companies, are quoted continuously during stock exchange hours.
Less active listed and stocks admitted to trading in the regulated unlisted
market are quoted only once a day.
Options on both domestic and foreign stocks have been traded since 1970
although trading activity is relatively low. There is also active trading in
share warrants, generally issued in conjunction with bonds.
As set forth below under "Role of Banks in German Capital Markets",
German banks, brokers and selected domestic investment trusts are regular
members of the stock exchanges. Banks may deal on a net basis for their own
account, as well as for accounts of domestic and foreign institutional customers
during or after regular stock exchange hours.
Stock Indices. Two principal stock indices in Germany are the DAX Index
(Deutscher Aktienindex; i.e., German Stock Index) and the CDAX German Composite
Index (Composite Deutscher Aktienindex). The DAX Index is composed of the 30
most actively traded German blue-chip stocks. It represents over 69% of the
total equity capital of German exchange-listed companies. Trading in these
shares accounts for approximately 75% of the stock volume traded on the German
exchanges. The CDAX German Composite Index comprises all German stocks listed in
the official market at the Frankfurt Stock Exchange.
Set forth in the table below is information concerning the total return
of the DAX Index and CDAX Index for each of the periods indicated.
B-10
<PAGE>
<TABLE>
<CAPTION>
Annual Total Return(1)
First
half
1992 1993 1994 1995 1996 1997(2)
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
DAX.................. (2.09)% 46.71% (7.06)% 6.99% 28.17% 31.05%
CDAX................. (6.39)% 44.56% (5.83)% 4.75% 22.14% 29.96%
Dollar-adjusted DAX.... (8.33)% 36.85% 4.12% 15.60% 18.17% 16.83%
Dollar-adjusted CDAX....... (12.36)% 34.85% 5.50% 13.17% 12.61% 15.85%
</TABLE>
- ----------------
(1) Based on U.S. dollar returns.
(2) Return as of June 30, 1997 (not annualized).
Trading volume tends to concentrate on the relatively few companies
having both large market capitalization and a broad distribution of their stock
with few or no large holders. The five companies having the largest annual
trading volume of their stock in 1996 represented 46.8% of total trading volume
on the German stock exchanges: Saimler-Benz Ag with DM 261.9 billion, Siemens AG
with DM 256.1 billion, Deutsche Bank AG with DM 216.8 billion, Bayer AG with DM
186.4 billion and Volkswagen AG with DM 162.2 billion.
The actual float available for public trading is significantly smaller
than the aggregate market value cited above because of the large extent of
long-term holdings by non-financial corporations, family groups and banks.
However, the number of publicly traded shares has been increasing in recent
years due to a reduction in such holdings on the part of certain insurance
companies and public authorities. In addition, the continuing public offerings
of equity securities previously controlled by the federal government have
contributed to the growing size of the float.
Domestic institutional ownership of German equities, while large
relative to that by individuals, is less than that in certain other industrial
countries. The German Government is encouraging the expansion of private
participation in the equity markets, and has contributed to this process both
directly, through public sale of government-owned enterprises, as well as
indirectly through fiscal measures.
Set forth in the table below is information concerning the industry
composition of the DAX Index and CDAX Index.
B-11
<PAGE>
<TABLE>
<CAPTION>
Industry Composition of DAX(1) and CDAX(2) Index -- as of December 31, 1996
DAX CDAX
<S> <C> <C>
Banks and Insurance........................................ 28.0% 28.0%
Chemical Concerns/Pharmaceutical........................... 20.9% 20.1%
Auto Industry and Supply................................... 13.7% 10.2%
Utilities and Energy....................................... -- --
Electronics Industry....................................... 5.3% 5.7%
Mechanical Engineering..................................... 2.0% 2.7%
Steel and Raw Materials.................................... 3.5% 4.1%
Consumer Goods............................................. 4.5% 6.0%
Other...................................................... 4.5% 6.0%
---- ----
Total................................. 100.0% 100.0%
====== ======
</TABLE>
- -----------------
(1) The DAX Index is comprised of 30 stocks representing approximately 69%
of the market capitalization of the German stock exchange.
(2) The CDAX Index is comprised of 374 stocks (subject to adjustments).
Primary Markets. The amount of funds raised in equity financings in 1996
increased by DM 17,862 to DM 24,807 while the number of financings decreased by
6 to 14. The total value of primary offerings for each of the previous five
years of listed equity issues is shown in the table below.
<TABLE>
<CAPTION>
Primary Offerings of Listed Equity Securities by
Domestic Issuers
(millions of DM)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Value....................... 804 833 1,246 6,495 24,807
</TABLE>
- --------------
Source: Deutsche Borse AG.
Role of Banks in German Capital Markets. As is the case in other
continental European developed countries, German commercial and banking laws
permit commercial banks to act, either directly or indirectly, as investment
bankers/underwriters, managers of mutual and other investment funds and
investment advisers, as well as securities broker/dealers. Many German banks,
including Deutsche Bank AG ("Deutsche Bank"), are members of stock exchanges in
their respective countries. Moreover, they may, directly or indirectly, also
provide other financial services such as life insurance, mortgage lending and
installment financing. Lastly, they may, and frequently do, maintain long-term
equity participations in industrial, commercial or financial enterprises,
including enterprises whose voting and other equity securities may be publicly
B-12
<PAGE>
traded and/or listed on national securities exchanges. Recent legislation
requires notification of the newly established Securities Trading Supervisory
Office and publication if certain thresholds of participating in the voting
capital of a stock exchange listed corporation are passed.
Deutsche Bank, the parent of the Manager and the Investment Adviser,
holds significant participation in five listed German companies. The term
"significant" denotes direct ownership of over 25% of the voting equity which,
under German law, provides the holder with veto power in policy decisions, such
as a change of business objectives or major acquisitions. Deutsche Bank owns
equity interests ranging from 25% to 50% in holding companies that own
participations of 25% or more in an additional four listed German companies,
most of which are publicly owned. In addition, Deutsche Bank may maintain
trading positions in the securities of these and other (domestic and foreign)
companies, and may make trading markets in some of them, subject to limitations
imposed by applicable law, including the limitations of the German Stock
Exchange Law (Borsengesetz) of 1896, as amended. Deutsche Bank directors or
officers may, by virtue of such ownership or otherwise, be elected to the
Supervisory Boards of these and other companies. Deutsche Bank and its
affiliates may also have commercial lending relationships with companies whose
securities the Portfolio may acquire.
In their capacity as underwriters, German banks originate and manage new
issues of domestic and international fixed income and equity securities both in
their respective domestic primary market and in the Euromarket. Deutsche Bank
frequently acts as lead manager for domestic underwritten offerings of both debt
and equity securities. Under an SEC securities in offerings in which Deutsche
Bank or one of its affiliates is the principal underwriter. Directly and through
its various wholly-owned affiliates abroad, Deutsche Bank is a major factor in
the Eurobond market. Although the Portfolio will not purchase securities from or
sell securities to Deutsche Bank, the trading activities of Deutsche Bank as
well as the investment positions and underwriting activities in such securities
could have either an adverse or beneficial effect on the price of those
securities already held in the Portfolio or contemplated for purchase and,
depending on the size of Deutsche Bank's position, may or may not affect the
availability of the securities for investment of the Portfolio.
JAPANESE EQUITY SECURITIES MARKETS
Listed securities in Japan trade on three Main Japanese Exchanges (the
Nagoya Stock Exchange, the Osaka Securities Exchange and the Tokyo Stock
Exchange (the "TSE")) and five regional stock exchanges (the Fukuoka Stock
Exchange, the Hiroshima Stock Exchange, the Kyoto Stock Exchange, the Niigata
Stock Exchange and the Sapporo Stock Exchange). The TSE is the largest and most
prestigious of the exchanges and is widely regarded as the central marketplace
for all of Japan.
There are two widely followed price indices in Japan for listed
securities. The Nikkei Stock Average ("NSA") is the arithmetic average of 225
selected stocks computed by a private corporation. The Tokyo Stock Price Index
("TOPIX"), published by the TSE, is the composite index of all common stock
listed on the First Section of the TSE. TOPIX reflects the change in the
aggregate market
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<PAGE>
value of the common stocks as compared to the aggregate market value of those
stocks as of the close on January 4, 1968.
The following table sets forth the year-end NSA and TOPIX for 1987
through 1996 and yen and dollar-adjusted total return information for those
years.
<TABLE>
<CAPTION>
NSA TOPIX
----------------------------------------- ------------------------------------
Total Return(1) Total Return(1)
--------------------------- -----------------------
Dollar Dollar
Index* (Y) Adjusted Index* (Y) Adjusted
----------- --------- ----------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
1987 21,564.00 15.31% 50.54% 1,725.83 10.89% 44.77%
1988 30,159.00 39.86% 35.61% 2,357.03 36.57% 32.42%
1989 38,915.87 29.04% 12.21% 2,881.37 22.25% 6.31%
1990 23,848.71 -38.72% -35.08% 1,733.83 -39.83% -36.26%
1991 22,983.77 -3.63% 4.75% 1,714.68 -1.10% 7.49%
1992 16,924.95 -26.36% -26.33% 1,307.66 -23.74% -23.71%
1993 17,417.24 2.91% 15.02% 1,439.31 10.07% 23.03%
1994 19,723.06 13.24% 27.00% 1,559.09 8.32% 21.48%
1995 19,868.15 0.74% -2.85% 1,577.70 1.19% -2.41%
1996 19,361.35 -2.55% -13.06% 1,470.94 -6.77% -16.83%
</TABLE>
(1) Total return is the percent change in the index from
the start of the year to the end.
Sources: Tokyo Stock Exchange, Annual Securities Statistics
(1996); Monthly Statistics Report (Dec. 1987, 1988,
1989, 1990, 1991, 1992, 1993, 1994, 1995).
The Japanese stock and real estate markets of the late 1980s have been
dubbed "bubble" markets because they were characterized by dramatic increases in
the volume of trading and transactions as well as in prices of stock and land.
Such increases were driven by investors' expectations that stock and land prices
would rise even further for the foreseeable future, thereby justifying (in their
minds) their over-priced investments in Japanese stock and real estate. Many of
such investments were financed with secured loans from Japan's banks and
so-called "non-bank banks" (i.e., companies that are not licensed by the
Minister of Finance to engage in the business of commercial banking but that are
primarily engaged in the business of commercial lending).
The collapse of the "bubble" stock market in 1990 had a material adverse
impact on the financial situation of various participants therein. Such collapse
also led to various problems involving irregular practices in the securities
business, such as compensation to favored customers by securities companies for
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<PAGE>
trading and other losses. The decline in stock prices has raised the cost of
capital for industry and has reduced the value of stock holdings by banks and
corporations. These effects have, in turn, contributed to the recent weakness in
Japan's economy and could continue to have an adverse impact in the future.
The following table sets forth the aggregate trading volume and the
value of Japanese stocks on the eight Japanese stock exchanges for the years
1989 through 1996. Trading on the TSE represented over 76% of trading volume in
each year.
Volume Value
Year (millions of shares) ((Y) bils.)
1989 256,296 (Y)386,395
1990 145,837 231,837
1991 107,844 134,160
1992 82,563 80,456
1993 101,172 106,123
1994 105,936 114,622
1995 120,148 115,840
1996 126,496 136,170
Source: Tokyo Stock Exchange, Fact Book 1997.
The Main Japanese Exchanges divide listed companies into First and
Second Sections. Generally, larger, established companies are assigned to the
First Section. Such companies meet more stringent listing criteria relating to
the size and business condition of the issuing company, the liquidity of its
securities and other factors pertinent to investor protection. At the end of
1996, 1,293 Japanese companies were listed on the First Section of the TSE.
Newly listed and smaller companies are assigned to the Second Section. At the
end of 1996, 473 Japanese companies were listed on the Second Section of the
TSE. In an effort to increase the number of companies listed on the Second
Section, the Second Section listing requirements prescribed by each of the Main
Japanese Exchanges were lowered in 1996.
The 20 leading Japanese companies on the TSE, by market value,
represented 25.6% of the total market value of the TSE at year-end 1996. In
1996, three industrial groups accounted for approximately 40% of the total
market value of the TSE: banks, 19.3%; electric appliances, 12.4%; and
transportation equipment, 9.4%. The following table sets forth the number of
companies listed on the TSE and market value by industrial group for year-end
1996.
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<PAGE>
<TABLE>
<CAPTION>
Number of Market Values
Companies ((Y) bils.)
<S> <C> <C>
Fishery, Agriculture & Forestry................. 7 497
Mining.......................................... 9 670
Construction.................................... 145 12,981
Foods........................................... 91 9,837
Textiles & Apparels............................. 64 5,198
Pulp & Paper.................................... 22 2,272
Chemicals....................................... 131 15,983
Pharmaceutical.................................. 39 10,516
Oil & Coal Products............................ 13 3,484
Rubber Products................................. 15 2,680
Glass & Ceramics Products....................... 40 4,693
Iron & Steel.................................... 51 9,038
Nonferrous Metals............................... 34 4,837
Metal Products.................................. 45 2,906
Machinery....................................... 149 12,196
Electric Appliances............................. 181 43,190
Transportation Equipment........................ 85 32,599
Precision Instruments........................... 26 2,462
Other Products.................................. 48 7,725
Electric Power & Gas............................ 17 14,282
Land Transportation............................. 37 12,376
Marine Transportation........................... 22 1,506
Air Transportation.............................. 5 2,460
Warehousing & Harbor Transportation
Services........................................ 24 1,028
Communication................................... 4 8,086
Wholesale Trade................................. 120 12,565
Retail Trade.................................... 88 15,571
Banks........................................... 100 67,109
Securities...................................... 25 8,255
Insurance....................................... 14 4,885
Other Financing Businesses...................... 20 4,043
Real Estate..................................... 26 4,126
Services........................................ 68 7,505
------ -------
Total........................................... 1,765 347,578
===== =======
Manufacturing................................... 1,034 169,525
Non-Manufacturing............................... 732 177,952
--- -------
Total........................................... 1,765 347,578
===== =======
Source: Tokyo Stock Exchange, Fact Book 1997.
</TABLE>
B-16
<PAGE>
The amount of funds raised in equity financings by all the companies
listed on the TSE in 1996 increased by 946 billion yen to 1,534 billion yen
while the number of financings increased by 96 to 253. The following table sets
forth the number of equity financings by companies listed on the TSE and the
amount raised for each of 1992 through 1996.
<TABLE>
<CAPTION>
Rights Offerings Public Offerings Private Placements Exercise of Warrants Total
Amount Amount Amount Amount Amount
No. of Raised No. of Raised No. of Raised No. of Raised Raised
Financings ((Y)bils.) Financings ((Y)bils.) Financings ((Y)bils.) Financings ((Y)bils.) ((Y)bils.)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 20 111 3 4 22 102 127 203 419
1993 9 48 4 7 14 150 184 617 822
1994 2 10 18 237 8 239 180 451 935
1995 12 96 8 33 19 160 118 299 588
1996 9 337 36 305 20 218 187 673 1,533
</TABLE>
Source: Tokyo Stock Exchange, Fact Book 1997.
INVESTMENT RESTRICTIONS
The investment restrictions of each Portfolio are identical, unless
otherwise specified. 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 a Portfolio. The percentage limitations contained in the
restrictions below apply at the time of the purchase of securities except as
otherwise noted.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof are amended or modified, each of the Portfolios
may not:
1. Purchase any security if, as a result, 25% or more of its total assets would
be invested in securities of issuers in any single industry. This limitation
shall not apply to securities issued or guaranteed as to principal or interest
by the U.S. Government or instrumentalities.
2. Issue senior securities. For purposes of this restriction, borrowing money in
accordance with paragraph 3 below, making loans in accordance with paragraph 7
below, the issuance of shares 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) (i) from banks for temporary or
short-term purposes or for the clearance of transactions, (ii) in connection
with the redemption of Portfolio shares or to finance failed settlements of
portfolio trades without immediately liquidating portfolio securities or other
assets, (iii) in order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio securities or assets
and
B-17
<PAGE>
(iv) pursuant to reverse repurchase agreements entered into by the Portfolio.
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 Securities Act of 1933, as amended (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) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Portfolio as a result of the ownership of securities.
6. Purchase or sell commodities or commodity contracts, 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. 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
securities (including privately issued debt securities), 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.
Non-Fundamental Investment Restrictions. The investment restrictions described
below are not fundamental policies of the Portfolios and may be changed by their
respective Directors or Trustees. These non-fundamental investment policies
require that, each 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, provided that Provesta Portfolio and Investa Portfolio shall each be
limited to 5% in the amount of its total assets that may be invested in the
aggregate in securities of investment companies as a group. Currently the 1940
Act prohibits a Portfolio from acquiring securities of other investment
companies if as a result (i) more than 5% of the value of a Portfolio's total
assets will be invested in the securities of any one investment company, (ii)
more than 10% of the value of its total assets will be invested in the aggregate
in securities of investment companies as a group, or (iii) more than 3% of the
outstanding voting stock of any one investment company will be owned by a
Portfolio;
(ii) Acquire any illiquid investments, such as repurchase agreements with more
than seven days to maturity, if as a result thereof, more than 15% of the market
value of the Portfolio's net assets would be in investments that are illiquid;
(iii) invest more than 10% of its net assets in unlisted securities
and Notes (as defined in Part A);
B-18
<PAGE>
(iv) 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; or
(v) Purchase securities on margin, but the Portfolio may obtain
such short term credits as may be necessary for the clearance of transactions.
In addition to the investment policies discussed herein and in Part A,
each Portfolio, except Top 50 US, has adopted additional non-fundamental
investment policies. These non-fundamental investment policies require that each
such Portfolio may not:
(i) invest more than 10% of its net assets in the securities of any one issuer
or invest more than 40% of its net assets in the aggregate in the securities of
those issuers in which the Portfolio has invested in excess of 5% but not more
than 10% of its net assets. For purposes of this restriction, mortgage bonds and
municipal bonds as well as bonds and Notes issued by the FRG, the states of the
FRG, a member state of the European Union ("EU"), a state party to the
Convention on the European Economic Area ("CEEA"), a member state of the
Organization for Economic Cooperation and Development ("OECD") or the EU shall
be valued at half of their value. Bonds of credit institutions situated in a
member state of the EU or state party to the CEEA shall be valued at half their
value provided that the credit institutions are by law subject to a special
public supervision to protect the holders of such bonds and provided the funds
raised through the issue of such bonds are invested in accordance with the legal
provisions in assets, which provide sufficient coverage for the ensuing
liabilities throughout the entire life of the bonds and which in case of
deficiency of the issuer are earmarked for prior redemption of principal and
payment of interest. Securities and Notes issued by companies in the same
affiliated group shall be considered securities of the same issuer (borrower);
(ii) purchase bonds of the same issuer to the extent that their total value
exceeds 10% of the total value of the bonds outstanding of the same issuer. This
restriction does not apply to bonds issued by a national government, a local
authority of a member state of the EU, a state party to the CEEA or by the EU,
or if one of these bodies guarantees the payment of interest or the repayment of
principal. For purchases, the above limit need not be complied with if the total
value of the outstanding bonds of the same issuer cannot be determined;
(iii) purchase non-voting shares of the same issuer to the extent that the total
value exceeds 10% of the total value of non-voting shares of the issuer; and
(iv) borrow money, except in amounts not to exceed 10% of the Portfolio's total
assets (including the amount borrowed).
The European Bond Portfolio is subject to an additional non-fundamental
investment restriction: no more than 10% of the value of its total assets will
be invested in equity securities (including warrants).
All Portfolios. There will be no violation of any investment
restriction if that restriction is complied with at the time the relevant action
is taken
B-19
<PAGE>
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, the Adviser may classify issuers by industry based on
classifications used by Micropal, a leading company offering a comprehensive and
accurate performance measurement service specializing in collective investment
vehicles. Micropal monitors all the world's major fund markets and has a range
of clients from financial institutions to individual investors. In the absence
of such classification or if the Adviser determines in good faith based on its
own information that the economic characteristics affecting a particular issuer
make it more appropriately considered to be engaged in a different industry, the
Adviser may classify an issuer accordingly. For instance, personal credit
finance companies and business credit finance companies are deemed to be
separate industries and wholly owned finance companies are considered to be in
the industry of their parents if their activities are primarily related to
financing the activities of their parents.
ITEM 14. MANAGEMENT OF THE TRUST.
The Trustees of the Trust, and principal occupations during the past five years
(although their titles may have varied during the period) and business addresses
are:
TRUSTEES OF THE TRUST
Edward C. Schmults - Member of the Board of Directors of Green Point Financial
Corp. Chairman of the Board of Trustees of The Edna McConnell Clark
Foundation. Director of The Germany Fund, Inc. and The Central European
Equity Fund, Inc. Senior Vice President-External Affairs and General Counsel
of GTE Corporation (prior to 1994). Mr. Schmults' address is Rural Route One,
Box 788, Cuttingsville, Vermont 05738.
Robert H. Wadsworth - President of The Wadsworth Group, First Fund
Distributors, Inc. and Guinness Flight Investment Funds, Inc. Director of The
Germany Fund, Inc., The New Germany Fund, Inc. and The Central European Equity
Fund, Inc. Vice President of Professionally Managed Portfolios and Advisors
Series Trust. Mr. Wadsworth's address is Investment Company Administration
Corp., 479 West 22nd Street, New York, NY 10011.
Werner Walbroel - President and Chief Executive of the German American Chamber
of Commerce, Inc. Member of the United States German Youth Exchange Council.
Director of TUV Rheinland of North America, Inc. President and Director of
German American Partnership Program. Director of The Germany Fund, Inc., DB
New World Fund, Limited and LDC, and The Central European Equity Fund, Inc.
Mr. Walbroel's address is German American Chamber of Commerce, Inc., 40 West
57th Street, New York, NY 10019.
G. Richard Stamberger* **- Managing Director of Deutsche Morgan Grenfell Inc.
President, Deutsche Morgan Grenfell Investment Management Inc. Director of
The Germany Fund, Inc., The New Germany Fund, Inc. and The Central European
Equity Fund, Inc. Managing Director of C.J. Lawrence, Inc. (prior to 1993).
B-20
<PAGE>
Mr. Stamberger's address is Deutsche Morgan Grenfeel Investment Management
Inc, 31 West 52nd Street, New York, NY 10019.
Christian Strenger* ** - Managing Director of DWS Deutsche Gesellschaft fuer
Wertpapiersparen mbH (since 1991). Director of The Germany Fund, Inc., The
New Germany Fund, Inc. and The Central European Equity Fund, Inc. Managing
Director of Deutsche Bank Securities Corp. (prior to 1991). Mr. Strenger's
address is DWS Deutsche Gesellschaft fuer Wertpapiersparen mbH, Gruneburgweg
113-115, 60323 Frankfurt am Main, Germany.
* is an "interested person" of the Trust as that term is defined in the
1940 Act.
** Mr. Strenger and Mr. Stamberger own less than 1% of the shares of
Deutsche Bank AG, of which the Manager and the Adviser are indirect
subsidiaries.
The Trust does not have officers, but instead acts exclusively through its
Trustees and agents of the Trust authorized by the Trustees.
The non-interested Trustees of the Trust receive a base annual fee of $5,000 and
$500 per meeting attended plus expenses which is paid jointly by all series of
the Trust and allocated among the series based upon their respective net assets.
The aggregate compensation to each Trustee from the Trust is less than $60,000.
The Trust does not require employees other than its officers, and none of its
officers devote full time to the affairs of the Trust or receive any
compensation from a Portfolio.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of September 21, 1997, the following funds owned approximately 100% of the
outstanding beneficial interests in each of the Portfolios:
Owner of Beneficial Interest Portfolio
---------------------------- ---------
Deutsche European Mid-Cap Fund Provesta Portfolio
Deutsche German Equity Fund Investa Portfolio
Deutsche Japanese Equity Fund Japanese Equity Portfolio
Deutsche Global Bond Fund Global Bond Portfolio
Deutsche European Bond Fund European Bond Portfolio
Deutsche Top 50 World Top 50 World Portfolio
Deutsche Top 50 Europe Top 50 Europe Portfolio
Deutsche Top 50 Asia Top 50 Asia Portfolio
Deutsche Top 50 US Top 50 US Portfolio
So long as each Fund controls its corresponding Portfolio, the Fund may take
actions without the approval of any other holder of beneficial interest in the
Portfolio.
Each Fund has informed its corresponding Portfolio that whenever the Corporation
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
B-21
<PAGE>
of its investors and will cast its vote as instructed by those investors.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
Investment Manager. The investment manager to each Portfolio is DFM, an indirect
subsidiary of Deutsche Bank AG, a major global banking institution headquartered
in Germany. DFM, with principal offices at 31 West 52nd Street, New York, New
York 10019, is a Delaware corporation and registered investment adviser under
the Investment Advisers Act of 1940.
Pursuant to an investment management agreement with the Trust with respect to
each Portfolio (the "Management Agreement"), DFM acts as investment manager to
each Portfolio and, subject to the supervision of the Board of Trustees of the
Trust, is responsible for, but may and has delegated as described below, under
"Adviser," the management of the investment operations of each Portfolio's
investments in accordance with its investment objective, policies and
restrictions. DFM also provides each Portfolio with overall supervisory services
over the other service providers and certain other services. The investment
management services DFM provides to each Portfolio are not exclusive under the
terms of the Management Agreement. DFM is free to render similar investment
management services to others.
The Management Agreement is dated July 28, 1997 and will remain in effect until
July 28, 1999 and from year to year thereafter, but only so long as the
agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the related Portfolio, or by the Trust's Trustees, and (ii) by a
vote of a majority of the Trustees of the Trust who are not parties to such
Management Agreement or "interested persons" (as defined in the 1940 Act) of the
Trust, cast in person at a meeting called for the purpose of voting on such
approval. The Management Agreement was initially approved at a meeting held on
July 28, 1997. A Management Agreement will terminate automatically if assigned
and is terminable at any time without penalty by a vote of a majority of the
Trust's Trustees, or by a vote of the holders of a majority of the related
Portfolio's outstanding voting securities, on 60 days' written notice to the
Manager and by the Manager on 90 days' written notice to the Trust. The
Management Agreement provides that neither DFM nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss or expense in
connection with the matters in which the agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its obligations and duties under the agreement. As
compensation for the services rendered and related expenses borne by DFM under
the Management Agreement with the Trust with respect to each Portfolio, DFM
receives a fee from each of Top 50 World, Top 50 Europe and Top 50 Asia
Portfolio, each Equity Portfolio (except the foregoing three Top 50 Portfolios)
and each Bond Portfolio, which is computed daily and may be paid monthly, equal
to 1.00%, 0.85% and 0.75%, respectively, of the average daily net assets of each
such Portfolio on an annualized basis for the Portfolio's then-current fiscal
year.
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<PAGE>
Investment Adviser. DFM has entered into an investment advisory agreement (the
"Advisory Agreement") on behalf of the Trust with respect to each Portfolio
except Top 50 US Portfolio with DWS International Portfolio Management GmbH and
with respect to Top 50 US Portfolio with Deutsche Morgan Grenfell Investment
Management Inc. ("DMGIM"). It is the Adviser's responsibility, under the overall
supervision of DFM, to conduct the day-to-day investment decisions of its
respective Portfolio(s), arrange for the execution of portfolio transactions and
generally manage each Portfolio's investments in accordance with its investment
objective, policies and restrictions.
The DWS Adviser and DMGIM Adviser are each an indirect subsidiary of Deutsche
Bank AG. For these services, the respective Adviser receives from DFM a fee,
which is computed daily and may be paid monthly, equal to 0.75%, 0.60% and 0.50%
of the average daily net assets of each of Top 50 World, Top 50 Europe and Top
50 Asia Portfolio, each Equity Portfolio (except the foregoing Top 50
Portfolios) and each Bond Portfolio, respectively, on an annualized basis for
the Portfolio's then-current fiscal year.
The Advisory Agreement is dated July 28, 1997 and will remain in effect until
July 28, 1999 and from year to year thereafter, but only so long as the
agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the related Portfolio, or by the Trust's Trustees, and (ii) by a
vote of a majority of the Trustees of the Trust who are not parties to such
Advisory Agreement or "interested persons" (as defined in the 1940 Act) of the
Trust, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement was initially approved at a meeting held on
July 28, 1997. The Advisory Agreement will terminate with respect to a Portfolio
automatically if assigned or if the Management Agreement is terminated with
respect to that Portfolio and is terminable at any time without penalty by a
vote of a majority of the Trust's Trustees, or by a vote of the holders of a
majority of the related Portfolio's outstanding voting securities, on 60 days'
written notice to the relevant Adviser and by each Adviser on 90 days' written
notice to the Manager and the Trust. The Advisory Agreement provides that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss or expense in connection with the matters in
which the agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its obligations
and duties under the agreement.
Operations Agent. Under an operations agency agreement with the Trust
("Operations Agent Agreement"), Federated Services Company serves as operations
agent to the Portfolios ("Operations Agent"). In connection with its
responsibilities as Operations Agent of the Portfolios, Federated Services
Company, among other things, (i) prepares governing documents, registration
statements and regulatory filings; (ii) performs internal audit examinations
(iii) prepares expense projections; (iv) prepares materials for the Trustees of
the Trust, (v) coordinates the activities of all service providers; (vi)
conducts compliance training for the Adviser; (vii) prepares investor meeting
B-23
<PAGE>
materials and (viii) monitors and supervises collection of tax reclaims.
The Operations Agency Agreement between the Trust and Federated Services
Company (dated July 28, 1997) with respect to each Portfolio has an initial term
of three years. Thereafter, the Operations Agency Agreement will remain in
effect until terminated by either party thereto. The agreement is terminable by
the Trust at any time after the initial term without penalty by a vote of a
majority of the Trustees of the Trust, or by a vote of the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. The Operations Agency Agreement is terminable by the Trustees of the
Trust or investors of the Portfolio on 60 days' written notice to Federated
Services Company. The agreement is terminable by Federated Services Company on
90 days' written notice to the Trust. The Operations Agent Agreement provides
that neither Federated Services Company nor its personnel shall be liable for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in its services, except for wilful
misfeasance, bad faith or gross negligence or reckless disregard of its
obligations and duties under the Agreement.
As Operations Agent of the Portfolios, Federated Services Company receives a fee
from each Portfolio, which is computed daily and paid monthly, at the annual
rate of 0.035% of the average daily net assets of each Portfolio for the
Portfolio's then-current fiscal year. The Operations Agent of the Portfolios
will receive a minimum fee of $60,000 per Portfolio annually and a minimum
aggregate fee for each Portfolio and any fund investing in the Portfolio, taken
together, of $75,000 for the first year of the Portfolio's operation and
$125,000 for the second year, in each case payable to the Operations Agent.
Administrative Agent. Under an administration agreement with the Trust
("Administration Agreement"), IBT Trust Company (Cayman) Ltd. ("IBT (Cayman)")
serves as administrative agent to the Portfolios ("Administrative Agent"). In
connection with its responsibilities as Administrative Agent of the Portfolios,
IBT (Cayman) (i) files and maintains governing documents, registration
statements and regulatory filings; (ii) maintains a telephone line; (iii)
approves annual expense budget; (iv) authorizes expenses; (v) distributes
materials to the Trustees of the Trust; (vi) authorizes dividend distributions;
(vii) maintains books and records; (viii) files tax returns and (ix) maintains
an investor register.
The Administration Agreement between the Trust and IBT (Cayman) (dated July 28,
1997) with respect to each Portfolio has an initial term of three years.
Thereafter, the Administration Agreement will remain in effect until terminated
by either party thereto. The agreement is terminable by the Trust at any time
after the initial term without penalty by a vote of a majority of the Trustees
of the Trust, or by a vote of the holders of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Trust. The Administration
Agreement is terminable by the Trustees of the Trust or investors of the
Portfolio on 60 days' written notice to IBT (Cayman). The agreement is
terminable by IBT (Cayman) on 90 days' written notice to the Portfolio. The
Administration Agreement provides that neither IBT (Cayman)
B-24
<PAGE>
nor its personnel shall be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in its
services, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard of its obligations and duties under the Agreement.
As Administrative Agent of the Portfolios, IBT (Cayman) receives a fee from each
Portfolio, which may be paid monthly, at the annual rate of $5,000.
Custodian and Fund Accountant. Investors Bank & Trust Company, 200 Clarendon
Street, Boston, MA 02116 acts as the custodian of each Portfolio's assets.
Pursuant to the Custodian Contract with the Trust, IBT is responsible for
maintaining the books and records of portfolio transactions and holding
portfolio securities and cash. In the case of foreign assets held outside the
United States, IBT employs various subcustodians who were approved in accordance
with the regulations of the SEC. The Custodian maintains portfolio transaction
records. IBT Fund Services (Canada) Inc., One First Canadian Place, King Street
West, Suite 2800, P.O. Box 231, Toronto, Ontario M5X1C8, provides fund
accounting services to the Portfolios including (i) calculation of the daily net
asset value for the Portfolios; (ii) monitoring compliance with investment
portfolio restrictions, including all applicable federal and state securities
and other regulatory requirements; and (iii) monitoring each Portfolio's
compliance with the requirements applicable to a regulated investment company
under the Code.
Independent Accountants. The independent accountants of the Trust are Price
Waterhouse, Kaya W.F.G. (Jombi) Mensing 18, P.O. Box 46, Curacao, Netherlands
Antilles.. The independent accountants conduct annual audits of financial
statements, assist in the preparation and/or review of federal and state income
tax returns and provide consulting as to matters of accounting and federal and
state income taxation for each Portfolio.
Expenses. In addition to the fees payable under the various agreements discussed
above, each Portfolio is responsible for usual and customary expenses associated
with its operations. Such expenses may include organization expenses, legal
fees, audit fees and expenses, insurance costs, the compensation and expenses of
the Trustees, registration fees under applicable securities laws, fund
accounting fees, custodian fees and extraordinary expenses. For each Portfolio,
such expenses also include brokerage expenses.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Trust trades securities for a Portfolio if it believes that a transaction
net of costs (including custodian charges) will help achieve the Portfolio's
investment objective. Changes in a Portfolio's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. Specific decisions to
purchase or sell securities for a Portfolio are made by its portfolio manager
who is an employee of the Adviser. The portfolio manager may serve other clients
of the Adviser in a similar capacity.
B-25
<PAGE>
The primary consideration in placing portfolio securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolios and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser on the tender of a
Portfolio's securities in so-called tender or exchange offers.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser seeks for each Portfolio in its best judgment, prompt
execution in an effective manner at the most favorable price. Subject to this
requirement of seeking the most favorable price, securities may be bought from
or sold to broker-dealers who have furnished statistical, research and other
information or services to the Adviser or the Portfolio, subject to any
applicable laws, rules and regulations.
The investment advisory fee that each Portfolio pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain such services
independently.
In certain instances there may be securities that are suitable as an investment
for a Portfolio as well as for one or more of the Adviser's other clients.
Investment decisions for the Portfolios and for the Adviser's other clients are
made with a view to achieving their respective investment objectives. It may
develop that a particular security is bought or sold for only one client even
though it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the same security. Some simultaneous transactions are
inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect the
price of or the size of the position obtainable in a security for a Portfolio.
When purchases or sales of the same security for a Portfolio and for other
portfolios managed by the Adviser occur contemporaneously, the purchase or sale
orders may be aggregated in order to obtain any price advantages available to
large volume purchases or sales.
B-26
<PAGE>
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in separate series, such as the Portfolios. No series of the Trust has
any preference over any other series. Investors in the Portfolios are entitled
to participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon liquidation or dissolution of the Portfolios,
investors are entitled to share pro rata in the net assets of the Portfolios
available for distribution to investors. Investments in the Portfolios have no
preference, preemptive, conversion or similar rights and are fully paid and
nonassessable, except as set forth below. Investments in the Portfolios 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 in the Portfolios is entitled to a vote in proportion to the
amount of its investment. The Portfolios and other series of the Trust will all
vote together in certain circumstances (e.g., election of the Trust's Trustees
and auditors, as required by the 1940 Act and the rules thereunder). One or more
series of the Trust could control the outcome of these votes. Investors do not
have cumulative voting rights, and investors holding more than 50% of the
aggregate beneficial interests in the Trust, or in a series as the case may be,
may control the outcome of votes and in such event the other investors in the
Portfolios, or in the series, would not be able to elect any Trustee. The Trust
is not required and has no current intention to hold annual meetings of
investors but the Portfolios will hold special meetings of investors when in the
judgment of the Trust's Trustees it is necessary or desirable to submit matters
for an investor vote. No material amendment may be made to the Trust'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 Trust, with respect to each 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 the Portfolios' investors (with the vote of each being
in proportion to its percentage of the beneficial interests in a Portfolio),
except that if the Trustees of the Trust 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 each Portfolio) will
be sufficient. A Portfolio may also be terminated (i) upon liquidation and
distribution of its assets if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to the amount of its
investment) or (ii) by the Trustees of the Trust by written notice to its
investors.
The Trust is organized as a trust under the laws of the State of New York.
Investors in the Portfolios or any other series of the Trust will be held
personally liable for its obligations and liabilities, subject, however, to
indemnification by the Trust 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. The Declaration of Trust also provides that
the Trust shall maintain appropriate insurance (for example,
B-27
<PAGE>
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, 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 Trust itself was unable to meet its
obligations with respect to any series thereof.
The Declaration of Trust further provides that obligations of the Portfolios or
any other series of the Trust are not binding upon the Trustees individually but
only upon the property of the Portfolios or other series of the Trust, as the
case may be, and that the Trustees will not be liable for any action or failure
to act, but nothing in the Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
The Trust reserves the right to create and issue a number of series, in which
case investments in each series would participate equally in the earnings and
assets of the particular series. Investors in each series would be entitled to
vote separately to approve advisory agreements or changes in investment policy,
but investors of all series may vote together in the election or selection of
Trustees, principal underwriters and accountants. Upon liquidation or
dissolution of any series of the Trust, the investors in that series would be
entitled to share pro rata in the net assets of that series available for
distribution to investors.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
Beneficial interests in each Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act.
Each Portfolio determines its net asset value once daily on Monday through
Friday as described under "Capital Stock and Other Securities" in Part A. The
net asset value will not be computed on the day the following legal holidays are
observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Martin Luther King, Jr. Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, each Portfolio would expect to close for
purchases and redemptions at the same time. The days on which net asset value is
determined are the Portfolios' business days.
The fixed income portion of the Portfolios and 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 over-the-counter 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
B-28
<PAGE>
from dealers and general market conditions. If such prices are not supplied by a
Portfolio's independent pricing service, such securities are priced in
accordance with procedures adopted by the Trustees of the Trust. All portfolio
securities with a remaining maturity of less than 60 days are valued by the
amortized cost method.
The value of investments listed on a U.S. securities exchange, other than
options on stock indexes, is based on the last sale prices on the New York Stock
Exchange at 4:00 p.m. or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange. Securities
listed on a foreign exchange considered by the Adviser to be a primary market
for the securities are valued at the last quoted sale price available before the
time when net assets are valued. Unlisted securities, and securities for which
the Adviser determines the listing exchange is not a primary market, are valued
at the average of the quoted bid and asked prices in the over-the-counter
market. The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative market
for such security. For purposes of calculating net asset value, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the prevailing market rates available at the time of valuation.
Options on stock indexes traded on U.S. national securities exchanges are valued
at the close of options trading on such exchanges which is currently 4:10 p.m.,
New York time. Stock index futures and related options, which are traded on U.S.
futures exchanges, are valued at their last sales price as of the close of such
futures exchanges which is currently 4:15 p.m., New York time. Options, futures
contracts and warrants traded on a foreign stock exchange or on a foreign
futures exchange are valued at the last price available before the time when the
net assets are valued. Securities or other assets for which market quotations
are not readily available (including certain restricted and illiquid securities)
are valued at fair value in accordance with procedures established by and under
the general supervision and responsibility of the Trustees of the Trust. Such
procedures include the use of independent pricing services that use prices based
upon yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of securities occur between the time when the
exchange on which they are traded closes and the time when a Portfolio's net
asset value is calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
ITEM 20. TAX STATUS.
The Trust is organized as a New York trust. Under the anticipated method of
operation of the Trust, the Portfolios will not subject to any income tax.
However, each investor in the Portfolios will be taxable on its share (as
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<PAGE>
determined in accordance with the governing instruments of the Trust) of a
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.
The Trust's taxable year-end is December 31. Although, as describe above, each
Portfolio will not be subject to federal income tax, the Trust will file
appropriate income tax returns with respect to each Portfolio.
It is intended that the assets, income and distributions of the Portfolios will
be managed in such a way that an investor in each Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in that Portfolio.
Gains or losses attributable to disposition of foreign currency or to foreign
currency contracts, or to fluctuations in exchange rates between the time a
Portfolio accrues income or receivables or expenses or other liabilities
denominated in a foreign currency and the time a Portfolio actually collects
such income or pays such liabilities, are generally treated as ordinary income
or ordinary loss. Similarly, gains or losses on the disposition of debt
securities held by a Portfolio, if any, denominated in foreign currency, to the
extent attributable to fluctuations in exchange rates between the acquisition
and disposition dates are also treated as ordinary income or loss. These gains
and losses increase or decrease the amount of a Portfolio's net investment
income available for distribution rather than its net capital gains.
Forward currency contracts, options and futures contracts entered into by a
Portfolio may create "straddles" for U.S. federal income tax purposes and this
may affect the character and timing of gains or losses realized by a 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% gross income test
described above, and therefore, a Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Foreign Taxes. The Portfolios may be subject to foreign withholding and other
taxes with respect to income received from sources within certain foreign
countries.
A Portfolio's gains and losses from the sale of securities will generally be
treated as derived from U.S. sources, however, and certain foreign currency
gains and losses likewise will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
"passive income," such as the portion of dividends received from a Portfolio
that qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals.
Foreign Investors. Allocations of U.S. source dividend income to an investor
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<PAGE>
who, as to the United States, is a foreign trust or estate, foreign corporation
or foreign partnership (a "foreign investor") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless the dividends
are effectively connected with a U.S. trade or business of the investor, in
which case the dividends will be subject to tax on a net income basis at the
graduated rates applicable to U.S. individuals or domestic corporations.
Allocations of Portfolio interest or short term or net long term capital gains
to foreign investors will not be subject to U.S. tax unless the allocations are
effectively connected with the investor's trade or business in the United States
or, in the case of an investor who is a non-resident alien individual, the
investor was present in the United States for more than 182 days during the
taxable year and certain other conditions are met.
The foregoing discussion is based on U.S. federal tax laws in effect on the date
hereof. These laws are subject to change by legislative or administrative
action, possibly with retroactive effect.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Trust is Edgewood Services, Inc. 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 each
Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
Each Portfolio's statement of assets and liabilities dated September 17, 1997
included herein has been included in reliance upon the report of Price
Waterhouse, Grand Cayman, independent accountants, as experts in accounting and
auditing.
B-31
<PAGE>
<PAGE>
DEUTSCHE PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
SEPTEMBER 17, 1997
<TABLE>
<CAPTION>
Top 50 Top 50 Top 50 Top 50 Japanese Global European
World Europe Asia US Provesta Investa Equity Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
(US (US (US (US (US (US (US (US (US
Dollar) Dollar) Dollar) Dollar) Dollar) Dollar) Dollar) Dollar) Dollar)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash........................ $11,114 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112
Deferred organization
expenses (Note 1) 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957
------------------------------------------------------------------------------------------
Total Assets............. 64,071 64,069 64,069 64,069 64,069 64,069 64,069 64,069 64,069
------------------------------------------------------------------------------------------
LIABILITIES
Organization expenses
payablE................... 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957
------------------------------------------------------------------------------------------
Total Liabilities........ 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957 52,957
------------------------------------------------------------------------------------------
Net Assets............... $11,114 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112 $11,112
==========================================================================================
</TABLE>
See Notes to Financial Statement.
<PAGE>
DEUTSCHE PORTFOLIOS
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 17, 1997
1 - GENERAL
Deutsche Portfolios ("Portfolio Trust") was organized on June 20, 1997, as a
business trust under the laws of the State of New York and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Portfolio Trust currently consists of ten
separate investment series (each a "Portfolio" and collectively the
"Portfolios"), each of which is, in effect, a separate mutual fund. The
accompanying financial statement and notes relate to nine of these Portfolios
which are Top 50 World Portfolio (US Dollar), Top 50 Europe Portfolio (US
Dollar), Top 50 Asia Portfolio (US Dollar), Top 50 US Portfolio (US Dollar),
Provesta Portfolio (US Dollar), Investa Portfolio (US Dollar) and Japanese
Equity Portfolio (US Dollar) (collectively, the "Equity Portfolios"), and Global
Bond Portfolio (US Dollar) and European Bond Portfolio (US Dollar)
(collectively, the "Bond Portfolios").
Deutsche Fund Management, Inc. ("DFM"), an indirect subsidiary of Deutsche
Bank AG, intends to serve as investment manager (the "Manager") to the Portfolio
Trust. Investors Bank & Trust Company intends to serve as the custodian to the
Portfolio Trust. IBT Fund Services (Canada) Inc. intends to serve as the fund
accounting agent to the Portfolio Trust.
The Declaration of Trust of the Portfolios permits its Trustees to issue
interests in the Portfolio Trust. The Portfolios have had no operations through
September 17, 1997, other than those relating to organizational matters,
including the issuance of the following initial interests ("Initial Interests")
to Deutsche Funds, Inc. (the "Deutsche Funds") and Edgewood Services Inc.,
("Edgewood"), distributor of the Deutsche Funds:
<TABLE>
<CAPTION>
INITIAL INTEREST
PORTFOLIO INITIAL INTEREST TO DEUTSCHE FUND AMOUNT TO EDGEWOOD AMOUNT
- --------- --------------------------------- ------ ----------- ------
<S> <C> <C> <C> <C>
Top 50 World
Portfolio (US Dollar) Deutsche Top 50 World $11,112 Edgewood $2
Top 50 Europe
Portfolio (US Dollar) Deutsche Top 50 Europe $11,111 Edgewood $1
Top 50 Asia
Portfolio (US Dollar) Deutsche Top 50 Asia $11,111 Edgewood $1
Top 50 US
Portfolio (US Dollar) Deutsche Top 50 US $11,111 Edgewood $1
Provesta
Portfolio (US Dollar) Deutsche European Mid-Cap Fund $11,111 Edgewood $1
Investa
Portfolio (US Dollar) Deutsche German Equity Fund $11,111 Edgewood $1
Japanese Equity
Portfolio (US Dollar) Deutsche Japanese Equity Fund $11,111 Edgewood $1
Global Bond
Portfolio (US Dollar) Deutsche Global Bond Fund $11,111 Edgewood $1
European Bond
Portfolio (US Dollar) Deutsche European Bond Fund $11,111 Edgewood $1
</TABLE>
The investment objective of the Equity Portfolios is primarily to achieve high
capital appreciation, and as a secondary objective, reasonable dividend income.
The investment objective of the Bond Portfolios is to achieve steady, high
income.
Organization expenses incurred in connection with the organization and initial
registration of the Portfolio Trust will be paid initially by DFM and reimbursed
by the Portfolios. Such organization expenses have been deferred and will be
amortized ratably over a period of sixty months from the commencement of
operations of the Portfolios. Any amount received by the Portfolio from its
corresponding Fund as a result of a redemption by Edgewood of any of its Initial
Interest in the Portfolio will be applied so as to reduce the amount of
unamortized organization expenses. The amount paid by the Portfolio Trust on any
withdrawal by the Deutsche Funds of all or part of its Initial Interest in the
Portfolios will be reduced by a portion of any unamortized organization expenses
of the Portfolios, determined by the proportion of the amount of the Initial
Interest withdrawn to the aggregate amount of the Initial Interests in the
Portfolios then outstanding after taking into account any prior withdrawals of
any portion of the Initial Interests in the Portfolios.
<PAGE>
2 - COMMITMENTS AND RELATED AGREEMENTS
The Portfolio Trust intends to retain the services of DFM as Manager. DFM
retains overall responsibility for supervision of the investment management
program for each Portfolio but has delegated the day-to-day management of the
investment operations of each Portfolio to an Adviser. As compensation for the
services rendered by DFM under the investment management agreement ("Management
Agreement") with the Portfolio Trust with respect to each Portfolio, DFM
receives a fee from each Portfolio, which is computed daily and paid monthly,
equal to the following percentages of each Portfolio's average daily net assets
on an annualized basis for the Portfolio's then-current fiscal year:
Top 50 World Portfolio (US Dollar) 1.00%
Top 50 Europe Portfolio (US Dollar) 1.00%
Top 50 Asia Portfolio (US Dollar) 1.00%
Top 50 US Portfolio (US Dollar) 0.85%
Provesta Portfolio (US Dollar) 0.85%
Investa Portfolio (US Dollar) 0.85%
Japanese Equity Portfolio (US Dollar) 0.85%
Global Bond Portfolio (US Dollar) 0.75%
European Bond Portfolio (US Dollar) 0.75%
DFM has retained the services of DWS International Portfolio Management GmbH
("DWS") as investment adviser of the Portfolios other than the Top 50 US
Portfolio (US Dollar). Deutsche Morgan Grenfell Investment Management, Inc.
("DMGIM") is the investment adviser of the Top 50 US Portfolio (US Dollar). The
advisers are indirect subsidiaries of Deutsche Bank AG. As compensation for
their services DWS and DMGIM receive a fee paid from DFM which is based on the
average daily net assets of the applicable Portfolio.
The Portfolio Trust intends to retain Federated Services Company as Operations
Agent to the Portfolios. As Operations Agent of the Portfolios, Federated
Services Company will receive a fee from each Portfolio, which is computed daily
and paid monthly, at the annual rate of 0.035% of the average daily net assets
of each Portfolio for the Portfolio's then-current fiscal year, subject to a
minimum fee of $60,000 per Portfolio annually. Additionally, Federated Services
Company will receive, in its capacity as Administrator and Transfer Agent of the
Deutsche Funds and as Operating Agent of the Portfolios, a minimum aggregate fee
from each Portfolio, its corresponding Fund and any other fund investing in each
Portfolio, taken together, of $75,000 for the first year of each Portfolio's
operations and $125,000 for the second year. Federated Services Company is
affiliated with Edgewood.
The Portfolio Trust intends to enter into an administrative agreement with IBT
Trust Company (Cayman) Ltd. ("IBT (Cayman)"). As Administrative Agent of the
Portfolios, IBT (Cayman) will receive a fee from each Portfolio, which is
computed daily and paid monthly, at the annual rate of $5000 per each Portfolio.
<PAGE>
Report of Independent Accountants
To the Initial Interest Holders and Board
of Trustees of Deutsche Portfolios
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Top 50 World
Portfolio (US Dollar), Top 50 Europe Portfolio (US Dollar), Top 50 Asia
Portfolio (US Dollar), Top 50 US Portfolio (US Dollar), Provesta Portfolio (US
Dollar), Investa Portfolio (US Dollar), Japanese Equity Portfolio (US Dollar),
Global Bond Portfolio (US Dollar) and European Bond Portfolio (US Dollar) (nine
of ten separate portfolios constituting Deutsche Portfolios, hereafter referred
to as the "Portfolios") at September 17, 1997, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Portfolios' 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 the opinion expressed above.
/s/ Price Waterhouse
Price Waterhouse
Curacao, Netherlands Antilles
September 19, 1997
<PAGE>
APPENDIX B - 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.
MOODY'S
Corporate and Municipal Bonds
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.PART C
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS. Page
General Information and History . . . . . . . . . . .B-1
Investment Objective and Policies . . . . . . . . . .B-1
Management of the Portfolio . . . . . . . . . . . . .B-5
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . .B-6
Investment Advisory and Other Services . . . . . . .B-6
Brokerage Allocation and Other Practices . . . . . .B-10
Capital Stock and Other Securities . . . . . . . . .B-11
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . .B-12
Tax Status . . . . . . . . . . . . . . . . . . . . .B-13
Underwriters . . . . . . . . . . . . . . . . . . . .B-14
Calculations of Performance Data . . . . . . . . . .B-14
Financial Statements . . . . . . . . . . . . . . . .B-14
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
Part A contains additional information about the investment objective
and policies of the US Money Market Portfolio (US Dollar)(the "Portfolio"). This
Part B should only be read in conjunction with Part A. This section contains
supplemental information concerning the types of securities and other
instruments in which the Portfolio may invest, the investment policies and
portfolio strategies that the Portfolio may utilize and certain risks attendant
to those investments, policies and strategies.
INVESTMENT OBJECTIVE AND POLICIES
Loans of Portfolio Securities. Securities of the Portfolio may be loaned
if such loans are secured continuously by cash or equivalent collateral or by an
irrevocable 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 income.
While such securities are on loan, the borrower pays the Portfolio any income
accruing thereon, and cash collateral may be invested for the Portfolio, thereby
earning additional income. All or any portion of interest earned on invested
collateral may be paid to the borrower. Loans are subject to termination by the
Portfolio in the normal settlement time, currently three business days after
notice, or by the borrower on one day's notice. Borrowed securities are returned
when the loan is terminated. Any appreciation or depreciation in the market
price of the borrowed securities which occurs during the term of the loan inures
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to the Portfolio and its investors. Reasonable finders' and custodial fees may
be paid in connection with a loan. In addition, all facts and circumstances,
including the creditworthiness of the borrowing financial institution, are
considered before a loan is made and no loan is made in excess of one year.
There is the risk that a borrowed security may not be returned to the Portfolio.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trust with
respect to the Portfolio. Except where otherwise noted, these investment
restrictions are "fundamental" policies which, under the 1940 Act, may not be
changed without the vote of a "majority of the outstanding voting securities"
(as defined in the 1940 Act) of the Portfolio. The percentage limitations
contained in the restrictions below apply at the time of the purchase of
securities except as otherwise noted.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any Securities and
Exchange Commission ("SEC") or SEC staff interpretations thereof are amended or
modified, the Portfolio may not:
(1) enter into repurchase agreements with more than seven days to
maturity if, as a result thereof, more than 10% of the market value of its net
assets would be invested in such repurchase agreements together with any other
investment for which market quotations are not readily available;
(2) enter into reverse repurchase agreements which, including any
borrowings under Investment Restriction No. 3, exceed, in the aggregate,
one-third of the market value of its total assets, less liabilities other than
obligations created by reverse repurchase agreements. In the event that such
agreements exceed, in the aggregate, one-third of such market value, it will,
within three days thereafter (not including Sundays and holidays) or such longer
period as the SEC may prescribe, reduce the amount of the obligations created by
reverse repurchase agreements to an extent that such obligations will not
exceed, in the aggregate, one-third of the market value of its assets;
(3) borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts not to exceed 10% of the value of its total
assets, taken at cost, at the time of such borrowing; mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not to exceed 10% of the value of its net assets at the time of such
borrowing. The Portfolio will not purchase securities while borrowings exceed 5%
of its total assets. This borrowing provision is included to facilitate the
orderly sale of portfolio securities, for example, in the event of abnormally
heavy redemption requests, and is not for investment purposes and does not apply
to reverse repurchase agreements;
(4) enter into when-issued commitments exceeding in the aggregate 15% of
the market value of its total assets, less liabilities other than obligations
created by when-issued commitments;
(5) purchase the securities or other obligations of issuers conducting
their principal business activity in the same industry if, immediately after
such
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purchase, the value of such investments in such industry would equal or
exceed 25% of the value of its total assets. For purposes of industry
concentration, there is no percentage limitation with respect to investments in
U.S. Government securities and negotiable certificates of deposit, fixed time
deposits and bankers' acceptances of U.S. branches of U.S. banks and U.S.
branches of non-U.S. banks that are subject to the same regulation as U.S.
banks;
(6) purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in securities or other obligations or any one such issuer.
This limitation does not apply to issues of the U.S. Government, its agencies or
instrumentalities;
(7) make loans, except through the purchase or holding of debt
obligations, repurchase agreements or loans of portfolio securities in
accordance with its investment objective and policies (see "Investment Objective
and Policies");
(8) purchase or sell puts, calls, straddles, spreads, or any
combinations thereof; real estate; commodities; commodity contracts or interests
in oil, gas or mineral exploration or development programs. However, bonds or
commercial paper issued by companies which invest in real estate or interests
therein including real estate investment trusts may be purchased;
(9) purchase securities on margin, make short sales of securities or
maintain a short position, provided that this restriction is not deemed to be
applicable to the purchase or sale of when-issued securities or of securities
for delivery at a future date;
(10) invest in fixed time deposits with a duration of over seven
calendar days, or in fixed time deposits with a duration of from two business
days to seven calendar days if more than 10% of its total assets would be
invested in such deposits;
(11) acquire securities of other investment companies;
(12) act as an underwriter of securities; or
(13) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder.
Non-fundamental Restrictions. In order to comply with certain federal
statutes and policies the Portfolio as a matter of operating policy may not: (i)
borrow money at any time at which the amount of its borrowings exceed 5% of its
total assets (taken at market value), (ii) purchase securities issued by any
investment company if such purchase at the time thereof would cause more than 5%
of its total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuer, would cause more than 10% of its
total assets (taken at the greater of cost or market value) to be invested in
the securities of such issuer and all other investment companies or would cause
more than 3% of
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the outstanding voting securities of any such issuer to be held for it, or (iii)
invest more than 10% of its net assets in securities (valued at the greater of
cost or market value) that are subject to legal or contractual restrictions on
resale or in securities which are not readily marketable, including repurchase
agreements and fixed time deposits having maturities of more than 7 days,
provided that there is no limitation with respect to or arising out of
investment in (a) securities that have legal or contractual restrictions on
resale but have a readily available market or (b) securities that are not
registered under the 1933 Act but which can be sold to qualified institutional
buyers in accordance with Rule 144A under the 1933 Act. These policies are not
fundamental and may be changed without investor approval in response to changes
in the various federal requirements.
Percentage and Rating Restrictions. Except with respect to Fundamental
Investment Restriction No. 2 above and the limitation on the Portfolio's
obligations created by reverse repurchase agreements, described in Part A under
"Investment Objectives and Policies - Reverse Repurchase Agreements," a
percentage or rating restriction on investment or utilization of assets set
forth above or referred to in Part A is adhered to at the time an investment is
made or assets are so utilized, a later change in percentage resulting from
changes in the value of the portfolio securities or a later change in the rating
of a portfolio security is not considered a violation of policy.
The Portfolio will comply with Rule 2a-7 under the 1940 Act, including
the diversification, quality and maturity limitations imposed by the Rule.
Currently, pursuant to Rule 2a-7, the Portfolio may invest only in U.S.
dollar-denominated "eligible securities" (as that term is defined in the Rule)
that have been determined by the Adviser to present minimal credit risks
pursuant to procedures approved by the Trustees. Generally, an eligible security
is a security that (i) has a remaining maturity of 397 days or less and (ii) is
rated, or is issued by an issuer with short-term debt outstanding that is rated
in one of the two highest rating categories by two nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO has issued a
rating, by that NRSRO. A security that originally had a maturity of greater than
397 days is an eligible security if its remaining maturity at the time of
purchase is 397 calendar days or less and the issuer has outstanding short-term
debt that would be an eligible security. Unrated securities may also be eligible
securities if the Adviser determines that they are of comparable quality to a
rated eligible security pursuant to guidelines approved by the Trustees. A
description to the ratings of some NRSROs appears in the Appendix attached
hereto.
Under Rule 2a-7 the Portfolio may not invest more than five percent of
its assets in the securities of any one issuer other than the United States
Government, its agencies and instrumentalities. In addition, the Portfolio may
not invest in a security that has received, or is deemed comparable in quality
to a security that has received, the second highest rating by the requisite
number of NRSROs (a "second tier security") if immediately after the acquisition
thereof the Portfolio would have invested more than (A) the greater of one
percent of its total assets or one million dollars in securities issued by that
issuer which are second tier securities, or (B) five percent of its total assets
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in second tier securities.
ITEM 14. MANAGEMENT OF THE TRUST.
The Trustees of the Trust, and principal occupations during the past
five years (although their titles may have varied during the period) and
business addresses are:
TRUSTEES OF THE TRUST
Edward C. Schmults - Member of the Board of Directors of Green Point Financial
Corp. Chairman of the Board of Trustees of The Edna McConnell Clark
Foundation. Director of The Germany Fund, Inc. and The Central European
Equity Fund, Inc. Senior Vice President-External Affairs and General Counsel
of GTE Corporation (prior to 1994). Mr. Schmults' address is Rural Route One,
Box 788, Cuttingsville, Vermont 05738.
Robert H. Wadsworth - President of The Wadsworth Group, First Fund
Distributors, Inc. and Guinness Flight Investment Funds, Inc. Director of The
Germany Fund, Inc., The New Germany Fund, Inc. and The Central European Equity
Fund, Inc. Vice President of Professionally Managed Portfolios and Advisors
Series Trust. Mr. Wadsworth's address is Investment Company Administration
Corp., 479 West 22nd Street, New York, NY 10011.
Werner Walbroel - President and Chief Executive of the German American Chamber
of Commerce, Inc. Member of the United States German Youth Exchange Council.
Director of TUV Rheinland of North America, Inc. President and Director of
German American Partnership Program. Director of The Germany Fund, Inc., DB
New World Fund, Limited and LDC, and The Central European Equity Fund, Inc.
Mr. Walbroel's address is German American Chamber of Commerce, Inc., 40 West
57th Street, New York, NY 10019.
G. Richard Stamberger* **- Managing Director of Deutsche Morgan
Grenfell Inc. President, Deutsche Morgan Grenfell Investment Management Inc.
Director of The Germany Fund, Inc., The New Germany Fund, Inc., and The Central
European Equity Fund, Inc. Managing Director of C.J. Lawrence, Inc. (prior to
1993). Mr. Stamberger's address is Deutsche Morgan Grenfell Investment
Management Inc, 31 West 52nd Street, New York, NY 10019.
Christian Strenger* ** - Managing Director of DWS Deutsche Gesellschaft fuer
Wertpapiersparen mbH (since 1991). Director of The Germany Fund, Inc., The
New Germany Fund, Inc. and The Central European Equity Fund, Inc. Managing
Director of Deutsche Bank Securities Corp. (prior to 1991). Mr. Strenger's
address is DWS Deutsche Gesellschaft fuer Wertpapiersparen mbH, Gruneburgweg
113-115, 60323 Frankfurt am Main, Germany.
* is an "interested person" of the Trust as that term is defined in the
1940 Act.
** Mr. Strenger and Mr. Stamberger own less than 1% of the shares of
Deutsche Bank AG, of which the Manager and the Adviser are indirect
subsidiaries.
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The Trust does not have officers, but instead acts exclusively through
its Trustees and agents of the Trust authorized by the Trustees.
The non-interested Trustees of the Trust receive a base annual fee of
$5,000 and $500 per meeting attended plus expenses which is paid jointly by all
series of the Trust and allocated among the series based upon their respective
net assets. The aggregate compensation to each Trustee from the Trust is less
than $60,000.
The Trust does not require employees other than its officers, and none
of its officers devote full time to the affairs of the Trust or receive any
compensation from the Portfolio.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of September 21, the Deutsche US Money Market Fund and the Deutsche
Institutional US Money Market Fund (the "Funds") each owned approximately 50% of
the outstanding beneficial interests in the Portfolio. So long as a Fund
controls the Portfolio, the Fund may take actions without the approval of any
other holder of beneficial interest in the Portfolio.
Each 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 investors and will
cast its vote as instructed by those investors.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
Manager. The investment manager to the Portfolio is DFM, an indirect subsidiary
of Deutsche Bank AG, a major global banking institution headquartered in
Germany. DFM, with principal offices at 31 West 52nd Street, New York, New York
10019, is a Delaware corporation and registered investment adviser under the
Investment Advisers Act of 1940.
Pursuant to an investment management agreement with the Trust with
respect to the Portfolio ("Management Agreement"), DFM acts as investment
manager to the Portfolio and, subject to the supervision of the Board of
Trustees of the Trust, is responsible for, but may and has delegated as
described below, under "Adviser," the management of the investment operations of
the Portfolio's investments in accordance with its investment objective,
policies and restrictions. DFM also provides the Portfolio with overall
supervisory services over the other service providers and certain other
services. The investment management services DFM provides to the Portfolio are
not exclusive under the terms of the Management Agreement. DFM is free to render
similar investment management services to others.
The Management Agreement is dated July 28, 1997 and will remain in
effect until July 28, 1999 and from year to year thereafter, but only so long as
the agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined
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in the 1940 Act) of the Portfolio, or by the Trust's Trustees, and (ii) by a
vote of a majority of the Trustees of the Trust who are not parties to such
Management Agreement or "interested persons" (as defined in the 1940 Act) of the
Trust, cast in person at a meeting called for the purpose of voting on such
approval. The Management Agreement was initially approved at a meeting held on
July 28, 1997. The Management Agreement will terminate automatically if assigned
and is terminable at any time without penalty by a vote of a majority of the
Trust's 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 Manager and by
the Manager on 90 days' written notice to the Trust. The Management Agreement
provides that neither DFM nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss or expense in connection with the
matters in which the agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the performance of its
obligations and duties under the agreement.
As compensation for the services rendered and related expenses borne by
DFM under the Management Agreement with the Trust with respect to the Portfolio,
DFM receives a fee from the Portfolio, which is computed daily and may be paid
monthly, equal to 0.15% of the average daily net assets of the Portfolio on an
annualized basis for the Portfolio's then-current fiscal year.
Adviser. DFM has entered into an investment advisory agreement (the "Advisory
Agreement") dated July 28, 1997 with DMGIM on behalf of the Trust with respect
to the Portfolio and certain other portfolios of the Trust. It is the Adviser's
responsibility, under the overall supervision of DFM, to conduct the day-to-day
investment decisions of the Portfolio, arrange for the execution of portfolio
transactions and generally manage the Portfolio's investments in accordance with
its investment objective, policies and restrictions.
The Adviser is an indirect subsidiary of Deutsche Bank AG. For these
services, the Adviser receives from DFM a fee, which is computed daily and may
be paid monthly, equal to 0.1125% of the average daily net assets of the
Portfolio on an annualized basis for the Portfolio's then-current fiscal year.
The Advisory Agreement is dated July 28, 1997 and will remain in effect
until July 28, 1999 and from year to year thereafter, but only so long as the
agreement is specifically approved at least annually (i) by a vote of the
holders of a "majority of the outstanding voting securities" (as defined in the
1940 Act) of the Portfolio, or by the Trust's Trustees, and (ii) by a vote of a
majority of the Trustees of the Trust who are not parties to such Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of the Trust,
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement was initially approved at a meeting held on July 28,
1997. The Advisory Agreement will terminate automatically if assigned or if the
Management Agreement is terminated and is terminable at any time without penalty
by a vote of a majority of the Trust's 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 Adviser and by the Adviser on 90 days' written notice to the
Manager and the Trust. The Advisory Agreement provides that neither the Adviser
nor its personnel shall be liable for any
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error of judgment or mistake of law or for any loss or expense in connection
with the matters in which the agreement relates, except a loss resulting from
wilful misfeasance, bad faith or gross negligence on its part in the performance
of its obligations and duties under the agreement.
Operations Agent. Under an operations agency agreement with the Trust
("Operations Agency Agreement"), Federated Services Company serves as operations
agent to the Portfolio ("Operations Agent"). In connection with its
responsibilities as Operations Agent of the Portfolio, Federated Services
Company, among other things, (i) prepares governing documents, registration
statements and regulatory filings; (ii) performs internal audit examinations
(iii) prepares expense projections; (iv) prepares materials for the Trustees of
the Trust, (v) coordinates the activities of all service providers; (vi)
conducts compliance training for the Adviser; and (vii) prepares investor
meeting materials.
The Operations Agency Agreement between the Trust and Federated Services
Company (dated July 28, 1997) with respect to the Portfolio has an initial term
of three years. Thereafter, the Operations Agency Agreement will remain in
effect until terminated by either party thereto. The agreement is terminable by
the Trust at any time after the initial term without penalty by a vote of a
majority of the Trustees of the Trust, or by a vote of the holders of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. The Operations Agency Agreement is terminable by the Trustees of the
Trust or investors of the Portfolio on 60 days' written notice to Federated
Services Company. The agreement is terminable with respect to the Portfolio by
Federated Services Company on 90 days' written notice to the Trust. The
Operations Agent Agreement provides that neither Federated Services Company nor
its personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in its
services, except for wilful misfeasance, bad faith or gross negligence or
reckless disregard of its obligations and duties under the Agreement.
As Operations Agent of the Portfolio, Federated Services Company
receives a fee from the Portfolio, which is computed daily and paid monthly, at
an annual rate, for at least the Portfolio's first year of operations, equal to
0.015% of the average daily net assets of the Portfolio. If, after the
Portfolio's first year of operations, the average net assets of the Portfolio
(excluding net assets attributable to the Class Y Fund, an investor in the
Portfolio) have not reached $325 million, the Operations Agent's fee would be
increased to an annual rate of 0.035% of the average daily net assets of the
Portfolio.
Administrative Agent. Under an administration agreement with the Trust
("Administration Agreement"), IBT Trust Company (Cayman) Ltd. ("IBT (Cayman)")
serves as administrative agent to the Portfolio ("Administrative Agent"). In
connection with its responsibilities as Administrative Agent of the Portfolio,
IBT (Cayman) (i) files and maintains governing documents, registration
statements and regulatory filings; (ii) maintains a telephone line; (iii)
approves annual expense budget; (iv) authorizes expenses; (v) distributes
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materials to the Trustees of the Trust; (vi) authorizes dividend distributions;
(vii) maintains books and records; (viii) files tax returns and (ix) maintains
an investor register.
The Administration Agreement between the Trust and IBT (Cayman) (dated
July 28, 1997) with respect to the Portfolio has an initial term of three years.
Thereafter, the Administration Agreement will remain in effect until terminated
by either party thereto. The agreement is terminable by the Trust at any time
after the initial term without penalty by a vote of a majority of the Trustees
of the Trust, or by a vote of the holders of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Trust (see "Additional
Information"). The Administration Agreement is terminable by the Trustees of the
Trust or investors of the Portfolio on 60 days' written notice to IBT (Cayman).
The agreement is terminable by IBT (Cayman) on 90 days' written notice to the
Portfolio. The Administration Agreement provides that neither IBT (Cayman) nor
its personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in its
services, except for wilful misfeasance, bad faith or negligence or reckless
disregard of its obligations and duties under the Agreement.
As Administrative Agent of the Portfolio, IBT (Cayman) receives a fee
from the Portfolio, which may be paid monthly, at the annual rate of $5,000.
Custodian and Fund Accountant. Investors Bank & Trust Company, 200 Clarendon
Street, Boston, MA 02116 acts as the custodian of the Portfolio's assets.
Pursuant to the Custodian Contract with the Trust, IBT is responsible for
maintaining the books and records of portfolio transactions and holding
portfolio securities and cash. In the case of foreign assets held outside the
United States, IBT employs various subcustodians who were approved in accordance
with the regulations of the SEC. The Custodian maintains portfolio transaction
records. IBT Fund Services (Canada) Inc., One First Canadian Place, King Street
West, Suite 2800, P.O. Box 231, Toronto, Ontario M5X1C8, provides fund
accounting services to the Portfolio including (i) calculation of the daily net
asset value for the Portfolio; (ii) monitoring compliance with investment
portfolio restrictions, including all applicable federal and state securities
and other regulatory requirements; and (iii) monitoring the Portfolio's
compliance with the requirements applicable to a regulated investment company
under the Code.
Independent Accountants. The independent accountants of the Trust are Price
Waterhouse, Kaya W.F.G. (Jombi) Mensing 18, P.O. Box 46, Curacao, Netherlands
Antilles. The independent accountants conduct annual audits of financial
statements, assist in the preparation and/or review of federal and state income
tax returns and provide consulting as to matters of accounting and federal and
state income taxation for the Portfolio.
Expenses. In addition to the fees payable under the various agreements discussed
above, the Portfolio is responsible for usual and customary expenses associated
with its operations. Such expenses may include organization expenses, legal
fees, audit fees and expenses, insurance costs, the
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compensation and expenses of the Trustees, registration fees under applicable
securities laws, fund accounting fees, custodian fees and extraordinary
expenses. For the Portfolio, such expenses also include brokerage expenses.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Adviser for the Portfolio places orders for all purchases and sales
of portfolio securities, enters into repurchase and reverse repurchase
agreements and executes loans of portfolio securities. Fixed-income securities
are generally traded at a net price with dealers acting as principal for their
own account without a stated commission. The price of the security usually
includes a profit to the dealer. 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 money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid. From time to time
certificates of deposit may be purchased through intermediaries who may charge a
commission for their services.
The Adviser does not seek profits through short-term trading. However,
it may on behalf of the Portfolio dispose of any portfolio security prior to its
maturity if it believes such disposition is advisable even if this action
realizes profits.
Since brokerage commissions are not normally paid on investments which
are made for the Portfolio, turnover resulting from such investments should not
adversely affect the net asset value of the Portfolio. In connection with
portfolio transactions for the Portfolio, the Adviser intends to seek best price
and execution on a competitive basis for both purchases and sales of securities.
On those occasions when the Adviser deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other
customers, the Adviser to the extent permitted by applicable laws and
regulations, may, but is not obligated to, aggregate the securities to be sold
or purchased 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 are made by the Adviser in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
its customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
Deutsche Bank AG or one of its subsidiaries or affiliates may act as one
of the agents of the Portfolio in the purchase and sale of portfolio securities
when, in the judgment of the Adviser, that firm will be able to obtain a price
and execution at least as favorable as other qualified brokers. As one of the
principal brokers for the Portfolio, Deutsche Bank AG may receive brokerage
commissions from the Portfolio.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
B-10
<PAGE>
Under the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in separate series, such as the Portfolio. No series of the Trust has
any preference over any other series. Investors in the Portfolio 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 net assets of the Portfolio available for
distribution to 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 in the Portfolio is entitled to a vote in proportion to
the amount of its investment. The Portfolio and other series of the Trust will
all vote together in certain circumstances (e.g., election of the Trust's
Trustees and auditors, as required by the 1940 Act and the rules thereunder).
One or more series of the Trust could control the outcome of these votes.
Investors do not have cumulative voting rights, and investors holding more than
50% of the aggregate beneficial interests in the Trust, or in a series as the
case may be, may control the outcome of votes and in such event the other
investors in the Portfolio, or in the series, would not be able to elect any
Trustee. The Trust 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 Trust's Trustees it is necessary or desirable to
submit matters for an investor vote. No material amendment may be made to the
Trust'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 Trust, with respect to 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 the Portfolio's investors (with the vote of each being
in proportion to its percentage of the beneficial interests in a Portfolio),
except that if the Trustees of the Trust 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. A Portfolio may also be terminated (i) upon liquidation and
distribution of its assets if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to the amount of its
investment) or (ii) by the Trustees of the Trust by written notice to its
investors.
The Trust is organized as a trust under the laws of the State of New
York. Investors in the Portfolio or any other series of the Trust will be held
personally liable for its obligations and liabilities, subject, however, to
indemnification by the Trust 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. The Declaration of Trust also provides that
the Trust shall maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Trust, its
investors, Trustees, officers, employees and agents covering
B-11
<PAGE>
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 Trust itself was unable to meet
its obligations with respect to any series thereof.
The Declaration of Trust further provides that obligations of the
Portfolio or any other series of the Trust are not binding upon the Trustees
individually but only upon the property of the Portfolio or other series of the
Trust, as the case may be, and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
The Trust reserves the right to create and issue a number of series, in
which case investments in each series would participate equally in the earnings
and assets of the particular series. Investors in each series would be entitled
to vote separately to approve advisory agreements or changes in investment
policy, but investors of all series may vote together in the election or
selection of Trustees, principal underwriters and accountants. Upon liquidation
or dissolution of any series of the Trust, the investors in that series would be
entitled to share pro rata in the net assets of that series available for
distribution to investors.
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.
The Portfolio determines its net asset value once daily on Monday
through Friday as described under "Capital Stock and Other Securities" in Part
A. The net asset value will not be computed on the day the following legal
holidays are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Martin Luther King, Jr. 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 redemptions at the same time. The days on which net
asset value is determined are the Portfolio's business days.
The securities held by the Portfolio are valued at their amortized cost.
Pursuant to a rule of the SEC, an investment company may use the amortized cost
method of valuation subject to certain conditions and the determination that
such method is in the best interests of the Portfolio's other investors. The use
of amortized cost valuations is subject to the following conditions: (i) as a
particular responsibility within the overall duty of care owed to the
Portfolio's investors, the Trustees of the Trust have established procedures
reasonably designed, taking into account current market conditions and the
investment objective of its investors, to stabilize the net asset value as
computed; (ii) the procedures include periodic review by the Trustees of the
Trust, as they deem appropriate and at such intervals as are reasonable in
B-12
<PAGE>
light of current market conditions, of the relationship between the value of the
Portfolio's net assets using amortized cost and the value of the Portfolio's net
assets based upon available indications of market value with respect to such
portfolio securities; (iii) the Trustees of the Trust will consider what steps,
if any, should be taken if a difference of more than 1/2 of 1% occurs between
the two methods of valuation; and (iv) the Trustees of the Trust will take such
steps as they consider appropriate, such as shortening the average portfolio
maturity, realizing gains or losses, establishing the value of the Portfolio's
net assets by using available market quotations, or reducing the value of
interests in the Portfolio, to minimize any material dilution or other unfair
results which might arise from differences between the two methods of valuation.
Such conditions also generally require that: (i) investments for the
Portfolio be limited to instruments which the Trustees of the Trust determine
present minimal credit risks and which are of high quality as determined by any
nationally recognized statistical rating organization that is not an affiliated
person of the issuer of, or any issuer, guarantor or provider of credit support
for, the instrument, or, in the case of any instrument that is not so rated, is
of comparable quality as determined by the Investment Adviser under the general
supervision of the Trustees of the Trust; (ii) a dollar-weighted average
portfolio maturity of not more than 90 days be maintained and no instrument is
purchased with a remaining maturity of more than 397 days (792 in the case of
U.S. Government securities); (iii) the Portfolio's available cash will be
invested in such a manner as to reduce such maturity to 90 days or less as soon
as is reasonably practicable, if the disposition of a portfolio security results
in a dollar-weighted average portfolio maturity of more than 90 days; and (iv)
no more than 5% of the Portfolio's total assets may be invested in the
securities of any one issuer (other than U.S.
Government securities).
ITEM 20. TAX STATUS.
The Trust is organized as a New York trust. Under the anticipated method
of operation of the Trust, the Portfolio will not 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 Trust) of a
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.
The Trust's taxable year-end is December 31. Although, as describe
above, the Portfolio will not be subject to federal income tax, the Trust will
file appropriate income tax returns with respect to the Portfolio.
It is intended that the assets, income and distributions of the
Portfolio 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 that Portfolio.
B-13
<PAGE>
The foregoing discussion is based on U.S. federal tax laws in effect on
the date hereof. These laws are subject to change by legislative or
administrative action, possibly with retroactive effect.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Trust is Edgewood Services, Inc.
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.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The Portfolio's statement of assets and liabilities dated September 19,
1997 included herein has been included in reliance upon the report of Price
Waterhouse, Antilles, independent accountants, as experts in accounting and
auditing.
<PAGE>
DEUTSCHE PORTFOLIOS
STATEMENT OF ASSETS & LIABILITIES
SEPTEMBER 19, 1997
US
Money Market
Portfolio (US Dollar)
ASSETS:
Cash................................. $ 210
Deferred organization
expenses (Note 1).................. 52,957
-------
Total Assets...................... 53,957
-------
LIABILITIES
Organization expenses payable........ 52,957
-------
Total Liabilities................. 52,957
-------
Net Assets........................ $ 210
=======
See Notes to Financial Statement.
<PAGE>
DEUTSCHE PORTFOLIOS
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 19, 1997
1 - GENERAL
Deutsche Portfolios ("Portfolio Trust") was organized on June 20, 1997, as a
business trust under the laws of the State of New York and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Portfolio Trust currently consists of ten
separate investment series (the "Portfolios"), each of which is, in effect, a
separate mutual fund. The accompanying financial statement and notes relate to
the US Money Market Portfolio (US Dollar) (the "Portfolio").
Deutsche Fund Management, Inc. ("DFM"), an indirect subsidiary of Deutsche
Bank AG, intends to serve as investment manager (the "Manager") to the Portfolio
Trust. Investors Bank & Trust Company intends to serve as the custodian to the
Portfolio Trust. IBT Fund Services (Canada) Inc. intends to serve as the fund
accounting agent to the Portfolio Trust.
The Declaration of Trust of the Portfolios permits its Trustees to issue
interests in the Portfolio Trust. The Portfolio has had no operations through
September 19, 1997, other than those relating to organizational matters,
including the issuance of the following initial interests ("Initial Interests")
to the Deutsche US Money Market Fund and the Deutsche Institutional US Money
Market Fund, two of the eleven funds constituting Deutsche Funds, Inc. (each a
"Fund" and collectively the "Funds"), and Edgewood Services Inc. ("Edgewood"),
distributor of the Funds:
<TABLE>
<CAPTION>
INITIAL INTEREST
PORTFOLIO INITIAL INTEREST TO DEUTSCHE FUND AMOUNT TO EDGEWOOD AMOUNT
- --------- --------------------------------- ------ ----------- ------
<S> <C> <C> <C>
US Money Market Deutsche US
Portfolio (US Dollar) Money Market Fund $100 Edgewood $10
US Money Market Deutsche Institutional
Portfolio (US Dollar) US Money Market Fund $100
</TABLE>
The investment objective of the Portfolio is primarily to achieve as high a
level of current income as is consistent with the preservation of capital and
the maintenance of liquidity.
Organization expenses incurred in connection with the organization and initial
registration of the Portfolio Trust will be paid initially by DFM and reimbursed
by the Portfolios. Such organization expenses have been deferred and will be
amortized ratably over a period of sixty months from the commencement of
operations of the Portfolios. Any amount received by the Portfolio from its
corresponding Fund as a result of a redemption by Edgewood of any of its Initial
Interests in the Portfolio will be applied so as to reduce the amount of
unamortized organization expenses. The amount paid by the Portfolio Trust on any
withdrawal by the Funds of all or part of its Initial Interests in the Portfolio
will be reduced by a portion of any unamortized organization expenses of the
Portfolio, determined by the proportion of the amount of the Initial Interest
withdrawn to the aggregate amount of the Initial Interests in the Portfolio then
outstanding after taking into account any prior withdrawals of any portion of
the Initial Interests in the Portfolio.
<PAGE>
2 - COMMITMENTS AND RELATED AGREEMENTS
The Portfolio Trust intends to retain the services of DFM as Manager. DFM
retains overall responsibility for supervision of the investment management
program for the Portfolio but has delegated the day-to-day management of the
investment operations of the Portfolio to an Adviser. As compensation for the
services rendered by DFM under the investment management agreement ("Management
Agreement") with the Portfolio Trust with respect to the Portfolio, DFM receives
a fee from the Portfolio, which is computed daily and paid monthly, equal to
0.15% of the average daily net assets of the Portfolio on an annualized basis
for the Portfolio's then-current fiscal year. DFM has retained the services of
Deutsche Morgan Grenfell Investment Management, Inc. ("DMGIM") as the investment
adviser. The adviser is an indirect subsidiary of Deutsche Bank AG. As
compensation for its services DMGIM receives a fee paid from DFM which is based
on the average daily net assets of the Portfolio.
The Portfolio Trust intends to retain Federated Services Company as Operations
Agent to the Portfolios. As Operations Agent of the Portfolios, Federated
Services Company will receive a fee from the Portfolio, which is computed daily
and paid monthly, at the annual rate of 0.015% of the average daily net assets
of the Portfolio. If after the first year of operations, the average net assets
of the Portfolio have not reached $325 million, the Operations Agent's fee would
be increased to an annual rate of 0.035% of the average daily net assets of the
Portfolio. Federated Services Company is affiliated with Edgewood.
The Portfolio Trust intends to enter into an administrative agreement with IBT
Trust Company (Cayman) Ltd. ("IBT (Cayman)"). As Administrative Agent of the
Portfolios, IBT (Cayman) will receive a fee from the Portfolio, which is
computed daily and paid monthly, at the annual rate of 0.025% of the average
daily net assets of the Portfolio.
<PAGE>
Report of Independent Accountants
To the Initial Interest Holders and Board
of Trustees of Deutsche Portfolios
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of US Money Market
Portfolio (US Dollar) (one of ten separate portfolios constituting Deutsche
Portfolios, hereafter referred to as the "Portfolios") at September 19, 1997, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Portfolios' 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 the opinion expressed
above.
/s/ Price Waterhouse
Price Waterhouse
Curacao, Netherlands Antilles
September 22, 1997
<PAGE>
APPENDIX B
BOND, NOTE AND COMMERCIAL PAPER RATINGS
Bond Ratings
Moody's Investors Service, Inc. ("Moody's")
Aaa - Bonds rated Aaa are judged to be of the "best quality". Aa1 is the
rating directly below Aaa, and then continues to Aa2, Aa3 to show relative
strength within the rating category.
Standard & Poor's Corporation ("S&P")
AAA - The AAA rating is the highest rating assigned to debt obligations
and indicates an extremely strong capacity to pay principal and interest.
Note and Variable Rate Investment Ratings
Moody's - MIG-1. Notes rated MIG-1 are judged to be of the best quality,
enjoying strong protection from established cash flow of funds for their
services or from established and broad-based access to the market for
refinancing or both.
S&P - SP-1. SP-1 denotes a very strong or strong capacity to pay
principal and interest. Issues determined to possess overwhelming safety
characteristics are given a plus (+) designation (SP-1+).
B-14
<PAGE>
Corporate Commercial Paper Ratings
Moody's - Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Prime-1 indicates highest quality repayment
capacity of rated issue.
S&P - Commercial Paper ratings are a current assessment of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. Issues rated A-1 have the greatest capacity for timely payment.
Issues rated "A-1+" are those with an "overwhelming degree of credit
protection."
Other Considerations
Among the factors considered by Moody's in assigning bond, note and
commercial paper ratings are the following: (i) evaluation of the management of
the issuer; (ii) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(iii) evaluation of the issuer's products in relation to competition and
customer acceptance; (iv) liquidity; (v) amount and quality of long-term debt;
(vi) trend of earnings over a period of 10 years; (vii) financial strength of a
parent company and the relationships which exist with the issuer; and (viii)
recognition by management of obligations which may be present or may arise as a
result of public interest questions and preparations to meet such obligations.
Among the factors considered by S&P in assigning bond, note and
commercial paper ratings are the following: (i) trend of earnings and cash flow
with allowances made for unusual circumstances, (ii) stability of the issuer's
industry, (iii) the issuer's relative strength and position within the industry
and (iv) the reliability and quality of management.
B-15
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The financial statements included in Part B, Item 23 of this
Registration Statement are as follows:
Statement of Assets and Liabilities of Top 50 World Portfolio (US
Dollar), Top 50 Europe Portfolio (US Dollar), Top 50 Asia Portfolio
(US Dollar), Top 50 US Portfolio (US Dollar), Provesta Portfolio
(US Dollar), Investa Portfolio (US Dollar), Japanese Equity
Portfolio (US Dollar), Global Bond Portfolio (US Dollar) and
European Bond Portfolio (US Dollar)at September 17, 1997
Report of Independent Accountants
Statement of Assets and Liabilities of US Money Market Portfolio
(US Dollar) at September 19, 1997
Report of Independent Accountants
(b) Exhibits
1 Amended and Restated Declaration of Trust.
2 By-Laws of the Registrant.
5(a) Management Agreement between Registrant and Deutsche Fund
Management, Inc. ("DFM").
5(b) Investment Advisory Agreement between DFM, DWS
International Portfolio Management GmbH and Deutsche
Morgan Grenfell Investment Management Inc.
8(a) Custodian Contract between the Registrant and Investors
Bank & Trust Company.
8(b) Fund Accounting Agreement between the Registrant and IBT
Fund Services (Canada) Inc.
9(a) Administration Agreement between the Registrant and IBT
Trust Company (Cayman), Ltd.
9(b) Operations Agency Agreement between the Registrant and
Federated Services Company.
9(c) Exclusive Placement Agency Agreement between the
Registrant and Edgewood Services, Inc.
13 Investment representation letters of initial investors.
27 Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Item 25. Persons Controlled by or under Common Control with
Registrant
Immediately prior to the intial public offering of the shares of
the Registrant, Edgewood Services, Inc., a New York corporation
will own all of the outstanding shares of Deutsche Top 50 World,
Deutsche Top 50 Europe, Deutsche Top 50 Asia, Deutsche Top
50 U.S., Deutsche European Mid-Cap Fund, Deutsche German
Equity Fund, Deutsche Japanese Equity Fund, Deutsche Global
Bond Fund, Deutsche European Bond Fund, Deutsche U.S.
Money Market Fund and Deutsche Institutional U.S. Money
Market Fund. Edgewood Services, Inc. may, therefore, be
deemed to control the Registrant. The following entities may
therefore be deemed to be under common control with the
Registrant:
Advanced Information Services, a Delaware business trust
Federated Bank and Trust, a New Jersey bank
Federated Administrative Services, a Delaware business trust
Federated Shareholder Services Company, a Delaware business
trust
Retirement Plan Services Company of America, a Delaware
business trust
Federated Administrative Services, Inc., a Pennsylvania
corporation
FS Holdings Inc., a Delaware corporation
Federated Services Company, a Pennsylvania corporation
FII Holdings Inc., a Delaware corporation
Federated Shareholder Services, a Delaware business trust
FFSI Insurance Agency Inc., a Massachusetts corporation
Federated Investors Insurance Inc., a Pennsylvania corporation
Federated International Management Limited, an Irish limited
liability company
Federated Global Research Corp., a Delaware corporation
Federated Investment Counseling, a Delaware business trust
Federated Research, a Delaware business trust
Federated Management, a Delaware business trust
Federated Research Corp., a Maryland corporation
Federated Advisers, a Delaware business trust
Federated Investors Building Corp., a Pennsylvania corporation
Federated Financial Services, Inc., a Pennsylvania corporation
Federated Securities Corp., a Pennsylvania corporation
Exchange Fund Research Corp, a Pennsylvania corporation
Federated Investors Management Company, a Pennsylvania
corporation
Federated Investors, Inc., a Pennsylvania corporation
Each listed entity is wholly owned by Federated Investors, a Delaware
business trust. Each listed entity is included in the consolidated financial
statements of Federated Investors.
A-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests (as of September 23, 1997)
Provesta Portfolio (US Dollar) 2
Investa Portfolio (US Dollar) 2
Japanese Equity Portfolio (US Dollar) 2
Global Bond Portfolio (US Dollar) 2
European Bond Portfolio (US Dollar) 2
Top 50 World Portfolio (US Dollar) 2
Top 50 Europe Portfolio (US Dollar) 2
Top 50 Asia Portfolio (US Dollar) 2
Top 50 US Portfolio (US Dollar) 2
US Money Market Portfolio (US Dollar) 3
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant 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 ADVISER.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser.
Deutsche Fund Management, Inc. ("DFM"), DWS International Portfolio Management
GmbH ("DWS-IPM") and Deutsche Morgan Grenfell Investment Management Inc.
("DMGIM") are each indirect subsidiaries of Deutsche Bank AG.
Deutsche Fonds Holding GmbH ("DFH"), a holding company organized under German
law, 93% owned by Deutsche Bank AG; sole shareholder of DFM (since 1/97); sole
shareholder of DWS-IPM (since 5/97).
Deutsche Bank AG, a publicly-held global financial institution, trading on the
Frankfurt Stock Exchange); sole shareholder of DFH (since 9/94).
Deutsche Bank North America Holding Corp. ("DBNAH"), a holding company organized
under US law, 100% owned by Deutsche Bank AG; sole shareholder of Deutsche Bank
U.S. Financial Markets Holding Corporation.
Deutsche Bank U.S. Financial Markets Holding Corporation, a holding company
organized under US law, 100% owned by DBNAH; sole shareholder of DMGIM.
Brian A. Lee, President and Managing Director of DFM (since 1/97); President and
Chief Operating Officer of Deutsche Bank Trust Company ("DBTC")(prior to 1997).
Christian Strenger, Chairman of the Board of Directors of DFM (since 1/97);
Managing Director/Spokesman of DFH (since 9/94); Managing Director/Spokesman of
DWS-IPM (since 5/97); Managing Director/Spokesman of DWS Deutsche Gesellschaft
fuer Wertpapiersparen mbH ("DWS-DGW)(since 8/91).
Udo Behrenwaldt, Director of DFM (since (5/97); Managing Director of DFH (since
9/94); Manager Director of DWS-IPM (since 5/97); Executive Director of DB
Investment Management, S.A. (since 7/87); Managing Director of DWS-DGW (since
11/75).
Holger Naumann, Director of DFM (since 1/97); Head of Participations at DWS-DGW
(since 12/95); Group Strategy Department at Deutsche Bank AG (prior to 12/95).
Bernd-Albrecht von Maltzan, Director of DFM (since 5/97); Divisional Board
Member of Deutsche Bank AG (since 7/96); Managing Director of Deutsche Morgan
Grenfell in Frankfurt and London (prior to 7/96).
Michael C. Lowengrub, Treasurer of DFM (since 1/97); Treasurer of DBTC (since
4/95); Director and Comptroller - Private Banking at Deutsche Bank AG-New York
Branch (since 10/92).
Thomas A. Curtis, Secretary of DFM (since 1/97); Secretary of CB Management
Corp. (since 2/96); Director and Counsel of Deutsche Bank AG-New York Branch
(since 7/95).
Axel-Guenther Benkner, Managing Director of DWS-IPM (since 5/97); Managing
Director of DFH (since 9/94); Managing Director of Deutsche
Vermoegensbildungsgesellschaft mbH (since 12/90); Managing Director of DWS-DGW
(since 2/91).
Heinz-Wilheim Fesser, Senior Portfolio Manager of DWS-IPM (since 5/97); Fixed
Income-Global at DWS-DGW (since 12/??).
Klaus Kaldmorgen, Senior Portfolio Manager of DWS-IPM (since 5/97);
Equities-Global at DWS-DGW (since 12/??).
C-3
<PAGE>
Klaus Martini, Senior Portfolio Manager of DWS-IPM (since 6/97); Head of
Equities - Europe at DWS-DGW (since 7/84).
Elisabeth Weisenhorn, Senior Portfolio Manager of DWS-IPM (since 6/97); Head of
Equities - Germany at DWS-DGW (since 11/85).
Reinhold Volk, Chief Financial Officer of DWS-IPM (since 6/97); Head of
Controlling at DWS-DGW (sincec 10/86).
Mathias Geuckler, Chief Compliance Officer of DWS-IPM (since 6/97), Chief
Compliance Officer of DWS-DGW (since 11/92).
Gerhard Seifried, Chief Operations Officer of DWS-IPM (since 6/97); Head of Fund
Administration at DWS-DGW (since 10/85).
Guy Richard Stamberger, President, Chief Executive Officer and Director of DMGIM
(since 10/94); Director of DBTC (since 4/95); Managing Director of Deutsche Bank
Securities Corporation (prior to 10/94).
David Alan Zornitsky, Secretary and Treasurer of DMGIM (since 10/94); Assistant
Vice President at Deutsche Bank Securities Corporation (prior to 10/94).
C-4
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder are maintained at the offices of:
Deutsche Portfolios
P.O. Box 501
Cardinal Avenue
Grand Cayman, Cayman Islands, BWI
Deutsche Fund Management, Inc.
31 West 52nd Street
New York, NY 10019
(investment manager)
DWS International Portfolio Management GmbH
Gruenburgweg 113-115, 60323
Frankfurt am Main, Germany
(investment adviser for each Portfolio, except US Money Market
Portfolio
(US Dollar)and Top 50 US Portfolio (US DOllar))
Deutsche Morgan Grenfell Investment Management Inc.
31 West 52nd Street
New York, NY 10019
(investment adviser for US Money Market Portfolio (US Dollar) and
and Top 50 US Portfolio (US Dollar))
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222
(operations agent)
IBT Fund Services (Canada) Inc.
One First Place
King Street West, Suite 2800
P.O. Box 231
Toronto, Ontario M5X1C8
(fund accounting agent)
IBT Trust Company (Cayman) Ltd.
P.O. Box 501
Cardinal Avenue
Grand Cayman, Cayman Islands, BWI
(administrative agent)
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
A-5
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ITEM 32. UNDERTAKINGS.
Not applicable.
A-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
Deutsche Portfolios has duly caused this registration statement on Form N-1A to
be signed on its behalf by the undersigned, thereto duly authorized, in
Frankfurt, Germany on the 23rd day of September, 1997.
DEUTSCHE PORTFOLIOS
By: /s/ Christian Strenger
Christian Strenger
Trustee
A-7
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
1 Amended and Restated Declaration of Trust.
2 By-Laws of the Registrant.
5(a) Management Agreement between Registrant and Deutsche Fund
Management, Inc.
5(b) Investment Advisory Agreement between Deutsche Fund
Management, Inc. ("DFM"), DWS International Portfolio
Management GmbH and Deutsche Morgan Grenfell Investment
Management Inc.
8(a) Custodian Contract between the Registrant and Investors
Bank & Trust Company.
8(b) Fund Accounting Agreement between the Registrant and IBT
Fund Services (Canada) Inc.
9(a) Administration Agreement between the Registrant and IBT
Trust Company (Cayman), Ltd.
9(b) Operations Agency Agreement between the Registrant and
Federated Services Company.
9(c) Exclusive Placement Agency Agreement between the
and Edgewood Services, Inc.
13 Investment representation letters of initial investors.
27 Financial Data Schedule.
DEUTSCHE PORTFOLIOS
AMENDED AND RESTATED DECLARATION OF TRUST
Dated as of July 28, 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 . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Chairman of the Board; Officers and Agents . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . 6
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . . . . . . . 6
------------------
Section 3.1 General . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Investments . . . . . . . . . . . . . . .. . . 6
Section 3.3 Legal Title . . . . . . . . . . . . . . .. . . 7
Section 3.4 Sale and Increases of Interests . . . . .. . . 7
Section 3.5 Decreases and Redemptions of Interests . . . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . 7
Section 3.7 Delegation; Committees . . . . . . . . . . . . . 8
Section 3.8 Collection and Payment . . . . . . . . . . . . . 8
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . . . 8
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . . . 9
Section 3.11 Further Powers . . . . . . . . . . . . . . . . . 9
ARTICLE IV--Investment Advisory, Administration and Placement
Agent Arrangements; Custodian . . . . . . . . . . . . . . . 9
Section 4.1 Investment Advisory and Other Arrangements . . 9
Section 4.2 Parties to Contract . . . . . . . . . . . . .. 10
Section 4.3 Custodian . . . . . . . . . . . . . . . . . . . 10
Section 4.4 1940 Act Governance . . . . . . . . . . . . . . 10
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . . . . . . . . . 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
Section 5.5 No Bond Required of Trustees . . . . . . . . . . 12
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PAGE
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . 12
Section 5.7 Reliance on Experts, etc. . . . . . . . . . . 13
Section 5.8 No Repeal or Modification . . . . . . . . . .. 13
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------
Section 6.1 Interests . . . . . . . . . . . . . . . . . . . 13
Section 6.2 Establishment and Designation of Series . . . . 14
Section 6.3 Non-Transferability . . . . . . . . . . . . . . 15
Section 6.4 Register of Interests . . . . . . . . . . . . . 15
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . . . 16
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . . . . . . . 16
Section 8.1 Book Capital Account Balances . . . . . . . . . 16
Section 8.2 Allocations and Distributions to Holders . . . . 16
Section 8.3 Power to Modify Foregoing Procedures . . . . . . 17
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------
Section 9.1 Rights of Holders . . . . . . . . . . . . . . . 17
Section 9.2 Meetings of Holders . . . . . . . . . . . . . . 17
Section 9.3 Notice of Meetings . . . . . . . . . . . . . . 18
Section 9.4 Record Date for Meetings, Distributions, etc. . 18
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . 18
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . . 18
Section 9.7 Holder Action by Written Consent . . . . . . . . 18
Section 9.8 Notices . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X--Duration; Termination; Dissolution; Amendment; Mergers; Etc. . 19
Section 10.1 Duration . . . . . . . . . . . . . . . . . . . . 20
Section 10.2 Dissolution . . . . . . . . . . . . . . . . . . 19
Section 10.3 Termination . . . . . . . . . . . . . . . . . . 20
Section 10.4 Amendment Procedure . . . . . . . . . . . . . . 21
Section 10.5 Merger, Consolidation and Sale of Assets . . . . 21
Section 10.6 Incorporation . . . . . . . . . . . . . . . . . 22
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------
Section 11.1 Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . 22
Section 11.2 Governing Law . . . . . . . . . . . . . . . . . 22
Section 11.3 Counterparts . . . . . . . . . . . . . . . . . . 23
Section 11.4 Reliance by Third Parties . . . . . . . . . . . 23
Section 11.5 Provisions in Conflict with Law or Regulations . 23
ii
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DEUT003D
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
DEUTSCHE PORTFOLIOS
WHEREAS, Trustees have previously established a master trust fund
or "Trust" (as defined in Section 1.2 hereof) through a Declaration of Trust,
dated June 20, 1997, pursuant to the laws of the State of New York consisting of
one or more subtrusts or "Series" (as defined in Section 1.2 hereof) for the
investment and reinvestment of assets contributed thereto;
WHEREAS, no "Interests" (as defined in Section 1.2 hereof) having
ever been issued pursuant to such Declaration of Trust, the Trustees hereby
amend and restate such Declaration of Trust; and
WHEREAS, it is proposed that the trust assets be composed of
money and other property contributed to or acquired by the Series, such assets
to be held and managed in trust for the benefit of the holders of beneficial
interests in such Series;
NOW, THEREFORE, the Trustees hereby declare that they will hold
in trust all money and other property contributed to the Trust and will manage
and dispose of the same for the benefit of such holders of beneficial interests
and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the Trust shall be Deutsche Portfolios and
so far as may be practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name (and the
term "Trust" wherever hereinafter used) shall refer to the Trustees as Trustees,
and not individually, and shall not refer to the officers, employees, "Agents"
(as defined in Section 1.2 hereof) or independent contractors of the Trust or
its holders of beneficial interests.
1.2. Definitions. As used in this Declaration, the following terms
shall have the following meanings:
"Administrator" shall mean any party furnishing services to one
or more Series pursuant to any administration contract described in Section 4.1
hereof.
"Agent" shall mean any person authorized by the Trustees in
accordance with Section 2.6 to act on their behalf.
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"Book Capital Account" shall mean, for any Holder (as hereinafter
defined) at any time, the account of the Holder at such time with respect to the
Holder's beneficial interest in the Trust Property (as hereinafter defined) of
any Series, determined and maintained in accordance with Section 6.4 and Article
VIII hereof. The Trust shall maintain separate records of Book Capital Accounts
for each such Series.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended from time to time and the Treasury Regulations promulgated
thereunder (or any corresponding provision or provisions of succeeding law).
"Commission" shall mean the United States Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration", "hereof",
"herein" and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"Fiscal Year" shall mean an annual period(s) of the Series
determined by the Trustees which ends on a date specified by the Trustees or on
such other day as is permitted or required by the Code.
"Holder" shall mean the record holder of any Interest.
"Institutional Investor(s)" shall mean any regulated investment
company, segregated asset account, foreign investment company, common trust
fund, group trust or other investment arrangement, whether organized within or
without the United States of America, other than an individual, S corporation or
a partnership or grantor trust beneficially owned by one or more individuals.
"Interested Person" shall have the meaning given it in the 1940 Act (as
hereinafter defined).
"Interest" shall mean the beneficial interest of a Holder in the
Trust Property of any Series, including all rights, powers and privileges
accorded to Holders by this Declaration, which interest may be expressed as a
percentage, determined by calculating for a particular Series, at such times and
on such basis as the Trustees shall from time to time determine, the ratio of
each Holder's Book Capital Account balance to the total of all Holders' Book
Capital Account balances. Reference herein to a specified percentage of, or
fraction of, Interests, means Holders whose combined Book Capital Account
balances represent such specified percentage or fraction of the combined Book
Capital Account balances of all, or a specified group of, Holders.
"Investment Adviser" shall mean any party furnishing services to
one or more Series of the Trust pursuant to any investment advisory contract
described in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders of one or more Series as the context may require, of (A) 67% or more of
the Interests present or represented at such meeting, if Holders of more than
50% of all Interests in such one or more Series are present or represented by
proxy,
2
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or (B) more than 50% of all Interests in such one or more Series, whichever is
less.
"1940 Act" shall mean the United States Investment Company Act of
1940, as amended from time to time, and the rules and regulations thereunder.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Redemption" shall mean the complete withdrawal of an Interest of
a Holder the result of which is to reduce the Book Capital Account balance of
that Holder to zero, and the term "redeem" shall mean to effect a Redemption.
"Series" shall mean the subtrusts of the Trust as the same are
established and designated pursuant to Article VI hereof, each of which shall be
a separate subtrust.
"Trust" shall mean the master trust fund established hereby and
shall include each Series hereof.
"Trust Property" shall mean as of any particular time any and all
assets or other property, real or personal, tangible or intangible, which at
such time is owned or held by or for the account of any Series or for the
account of the Trustees, each component of which shall be allocated and belong
to a specific Series to the exclusion of all other Series.
"Trustees" shall mean each signatory to this Declaration, so long
as such signatory shall continue in office in accordance with the terms hereof,
and all other individuals who at the time in question have been duly elected or
appointed and have qualified as Trustees in accordance with the provisions
hereof and are then in office, and reference in this Declaration to a Trustee or
Trustees shall refer to such individual or individuals in their capacity as
Trustees hereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than one. 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
3
<PAGE>
the Trustees by this Declaration. A Trustee shall be an individual at least 21
years of age who is not under legal disability.
2.2. Term and Election. Each Trustee named herein, or elected or
appointed prior to the first meeting of Holders, shall (except in the event of
resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee may resign
his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
Chairman, if any, an officer or Agent of the Trust and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed with or without cause by the affirmative
vote of Holders of two-thirds of the Interests or (provided the aggregate number
of Trustees, after such removal and after giving effect to any appointment made
to fill the vacancy created by such removal, shall not be less than the number
required by Section 2.1 hereof) by the action of two-thirds of the remaining
Trustees. Any Trustee who has attained a mandatory retirement age, if any,
established pursuant to any written policy adopted from time to time by a
majority of the Trustees shall, automatically and without action by such Trustee
or the remaining Trustees, be deemed to have retired in accordance with the
terms of such policy, effective as of the date determined in accordance with
such policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, retirement or
removal of a Trustee. No such vacancy shall operate to annul this Declaration or
to revoke any existing agency created pursuant to the terms of this Declaration.
In the case of a vacancy, Holders of at least a majority of the Interests
entitled to vote, acting at any meeting of Holders held in accordance with
Section 9.2 hereof, or, to the extent permitted by the 1940 Act, a majority vote
of the Trustees continuing in office acting by written instrument or
instruments, may fill such vacancy, and any Trustee so elected by the Trustees
or the Holders shall hold office as provided in this Declaration. The Trustees
may appoint a new Trustee as provided above in anticipation of a vacancy
expected to occur because of the retirement, resignation or removal of a
Trustee, or an
4
<PAGE>
increase in number of Trustees, provided that such appointment shall become
effective only when or after the expected vacancy occurs. Subject to the
foregoing sentence, as soon as any Trustee has accepted such appointment in
writing, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. The power of appointment is subject to Section
16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman, if any, or any two Trustees or any
officer or Agent authorized to call such meetings. Regular meetings of the
Trustees may be held without call or notice at a time and place fixed by the
By-Laws or by resolution of the Trustees. Notice of any other meeting shall be
mailed or otherwise given not less than 24 hours before the meeting but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Trustee attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. The Trustees may act with
or without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration, any
action of the Trustees may be taken at a meeting by vote of a majority of the
Trustees present (a quorum being present) or without a meeting by written
consent of a majority (or such larger percentage as may be specified by the
By-Laws) of the Trustees.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority (or such larger percentage as may be
specified by the By-Laws) of the members.
Any notice, waiver or written consent hereunder may be provided
and delivered to the Trust or a Trustee by facsimile or other similar electronic
mechanism.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
2.6. Chairman of the Board; Officers and Agents. The Trustees may
elect or appoint, from time to time, a Chairman of the Board who shall preside
at all meetings of the Trustees and carry out such other duties as the Trustees
may designate. The Trustees may elect or appoint a President, a Secretary, a
Treasurer and such other officers, Agents or independent contractors with such
5
<PAGE>
powers as the Trustees may deem to be advisable and may authorize such officers,
Agents or independent contractors to appoint such subordinate officers, Agents
or independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each officer may, but need not, be
a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time, amend or
repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust and each
Series to the same extent as if the Trustees were the sole owners of the Trust
Property and such business in their own right, but with such powers of
delegation as may be permitted by this Declaration. The Trustees may perform
such acts as in their sole discretion they deem proper for conducting the
business of the Trust and any Series. The enumeration of or failure to mention
any specific power herein shall not be construed as limiting such exclusive and
absolute control. The powers of the Trustees may be exercised without order of
or resort to any court.
The Trustees shall have full power and authority to do any and all acts
and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust.
3.2. Investments. The Trustees shall have the power with respect to the
Trust and each Series to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution, corporation
or other business entity organized under the laws of the United States or any
state or under any foreign laws; and to exercise any and all rights, powers and
privileges
6
<PAGE>
of ownership or interest in respect of any and all such investments of any kind
and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more Persons
to exercise any of such rights, powers and privileges in respect of any of such
investments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional instruments in which the Trustees may determine to
invest;
(c) definitively interpret the investment objectives, policies and
limitations of any Series.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have the
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series, or in
the name or nominee name of any other Person on behalf of the Trust or any
Series, on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased Trustee
in the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest in a Series, or increase such
Interest, for such type of consideration, including cash or property, at such
time or times (including, without limitation, each business day), and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. Individuals, S corporations or
partnerships or grantor trusts that are beneficially owned by one or more
individuals may not purchase Interests. The Trustees, in their discretion, may
refuse to sell an Interest in a Series to any person without any cause or reason
therefor. A Holder which has redeemed its Interest in a Series in its entirety
may not be permitted to purchase an Interest in such Series until the later of
60 calendar days after the date of such Redemption or the first day of the
Fiscal Year next succeeding the Fiscal Year during which such Redemption
occurred.
3.5 Decreases and Redemptions of Interests. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest in a Series, or
decrease such Interest, for either cash or property, at such time or times
(including, without limitation, each business day), and on such terms as the
Trustees may deem best.
7
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3.6. Borrow Money. The Trustees shall have power on behalf of any
Series to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets belonging to
such Series, as appropriate, including the lending of portfolio securities, and
to endorse, guarantee, or undertake the performance of any obligation, contract
or engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust and any Series, to delegate from
time to time to such of their number or to officers, employees, Agents or
independent contractors of the Trust or any Series the doing of such things and
the execution of such instruments in either the name of the Trust or any Series
or the names of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property on behalf of any Series; to prosecute, defend,
compromise or abandon any claims relating to the Trust or the Trust Property on
behalf of any Series; to foreclose any security interest securing any
obligation, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay any
expenses from the Trust Property which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of this Declaration,
and to pay reasonable compensation from the Trust Property to themselves as
Trustees. Permitted expenses of the Trust include, but are not limited to,
interest charges, taxes, brokerage fees and commissions; expenses of sales,
increases, decreases or redemptions of Interests; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, placement agents,
custodians transfer agents and fund accountants; fees of pricing, interest,
dividend, credit and other reporting services; costs of membership in trade
associations; telecommunications expenses; costs of forming the Trust and its
Series and maintaining its and their existence; costs of preparing and printing
the registration statements and Holder reports of the Trust and each Series and
delivering them to Holders; expenses of meetings of Holders; costs of
maintaining books and accounts; costs of reproduction, stationery and supplies;
fees and expenses of the Trustees; compensation of the Trust's officers, if any,
and employees and costs of other personnel performing services for the Trust or
any Series; costs of Trustee meetings; Commission registration fees and related
expenses; state or foreign securities laws registration fees and related
expenses; and for such non-recurring items as may arise, including litigation to
which the Trust or a Series (or a Trustee, officer or Agent of the Trust acting
as such) is a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of an expense allocable to more than
one Series, on the assets of each such Series, prior to any rights or interests
of the Holders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities. The Trustees shall fix the compensation
of all officers, employees and Trustees. The Trustees may pay themselves such
compensation for special services, including legal and brokerage services, as
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they in good faith may deem reasonable, and reimbursement for expenses
reasonably incurred by themselves on behalf of the Trust or any Series.
3.10. Miscellaneous Powers. The Trustees shall have power to: (a)
employ or contract with such Persons as the Trustees may deem appropriate for
the transaction of the business of the Trust or any Series and terminate such
employees or contractual relationships as they consider appropriate; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) purchase, and pay for out of Trust Property insurance policies insuring the
Investment Adviser, Administrator, placement agent, Holders, Trustees, officers,
employees, Agents or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
the Trustees, officers, employees or Agents of the Trust or any Series; (e)
prosecute, defend and settle lawsuits in the name of the Trust or any Series and
pay settlements and judgments out of the Trust Property; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, Agents or independent contractors of the Trust,
to such extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the Fiscal Year of
the Trust or any Series and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust or any Series, but the absence of such a seal
shall not impair the validity of any instrument executed on behalf of the Trust
or such Series.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust or any Series and carry on its operations in any and
all of its branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the District
of Columbia, and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other things and execute
all such instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust or any Series although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust or any Series which is made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees. The Trustees
shall not be required to obtain any court order in order to deal with Trust
Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The Trustees may
in their discretion, from time to time, enter into investment advisory
contracts, administration contracts, placement agent agreements or other service
agreements whereby the other party to such contract or agreement shall undertake
to furnish with respect to one or more particular Series such investment
advisory, administration, placement agent and/or other services as the Trustees
shall, from
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time to time, consider appropriate or desirable and all upon such terms and
conditions as the Trustees may in their sole discretion determine. The other
party to any such investment advisory contract or administration contract is
referred to as an "Investment Adviser" or "Administrator," respectively.
Notwithstanding any provision of this Declaration, the Trustees may authorize
any Investment Adviser (subject to such general or specific instructions as the
Trustees may, from time to time, adopt) to employ one or more subadvisers and to
effect purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, Agent, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (all without any further action by the Trustees).
4.2. Parties to Contract. Any contract of the character described
in Section 4.1 or Section 4.3 hereof or in the By-Laws of the Trust may be
entered into with any corporation, firm, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
Trustee, shareholder or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship, nor shall any individual holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust or any Series under or by reason of any such contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 or Section
4.3 hereof or the By-Laws, and any individual may be financially interested or
otherwise affiliated with Persons who are parties to any or all of the contracts
mentioned in this Section 4.2 or in the By-Laws.
4.3 Custodian. The Trustees shall at all times place and maintain
the securities and similar investments of the Trust on behalf of each Series in
custody meeting the requirements of Section 17(f) of the 1940 Act and the rules
thereunder. The Trustees, on behalf of the Trust or any Series, may enter into
an agreement with a custodian on terms and conditions acceptable to the
Trustees, providing for the custodian, among other things, (a) to hold the
securities owned by the Trust on behalf of any Series and deliver the same upon
written order or oral order confirmed in writing, (b) to receive and receipt for
any moneys due to the Trust on behalf of any Series and deposit the same in its
own banking department or elsewhere, (c) to disburse such funds upon orders or
vouchers, and (d) to employ one or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in Section 4.1
hereof shall be consistent with and subject to the applicable requirements of
Section 15 of the 1940 Act and the rules and orders thereunder with respect to
its continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal. No amendment to a contract referred to in
Section 4.1 hereof shall be effective unless assented to in a manner consistent
with the requirements of Section 15 of the 1940 Act, and the rules and orders
thereunder.
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ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, Agents, etc.
5.1. Liability of Holders; Indemnification. Each Holder of an
Interest in a Series shall be jointly and severally liable with every other
Holder of an Interest in that Series (with rights of contribution inter se in
proportion to their respective Interests in the Series) for the liabilities and
obligations of that Series (and of no other Series) in the event that the Trust
fails to satisfy such liabilities and obligations from the assets of that
Series; provided, however, that, to the extent assets of that Series are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of being or having been a Holder of an Interest in that Series to the
extent that such claim or liability imposes on the Holder an obligation or
liability which, when compared to the obligations and liabilities imposed on
other Holders of Interests in that Series, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all legal
and other expenses reasonably incurred by such Holder in connection with any
such claim or liability. The rights accruing to a Holder under this Section 5.1
shall not exclude any other right to which such Holder may be lawfully entitled,
nor shall anything contained herein restrict the right of the Trust to indemnify
or reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described above,
it is intended that each Holder of an Interest in a Series shall remain jointly
and severally liable to the creditors of that Series as a legal matter. The
liabilities of a particular Series and the right to indemnification granted
hereunder to Holders of Interests in such Series shall not be enforceable
against any other Series or Holders of Interests in any other Series.
5.2. Limitations of Liability of Trustees, Officers, Employees,
Agents, Independent Contractors to Third Parties. No Trustee, officer, employee,
Agent or independent contractor (except in the case of an Agent or independent
contractor to the extent expressly provided by written contract) of the Trust or
any Series shall be subject to any personal liability whatsoever to any Person,
other than the Trust or the Holders, in connection with Trust Property or the
affairs of the Trust; and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature against a Trustee, officer,
employee, Agent or independent contractor (except in the case of an Agent or
independent contractor to the extent expressly provided by written contract) of
the Trust arising in connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers, Agents or
Employees to Trust, Holders, etc. No Trustee, officer, Agent or employee of the
Trust shall be liable to the Trust or the Holders for any action or failure to
act (including, without limitation, the failure to compel in any way any former
or acting Trustee to redress any breach of trust) except for such Person's own
bad faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to the
fullest extent permitted by law (including the 1940 Act), each Trustee, officer,
employee or Agent of the Trust (including any Person who serves at the Trust's
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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's being or having been such a Trustee,
officer, employee, Agent or independent contractor, except with respect to any
matter as to which such Person shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties, such liabilities and expenses being liabilities only of the
Series out of which such claim for indemnification arises; provided, however,
that as to any matter disposed of by a compromise payment by such Person,
pursuant to a consent decree or otherwise, no indemnification either for such
payment or for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts (as
opposed to a full trial-type inquiry), by written opinion from independent legal
counsel approved by the Trustees; or (iii) by a majority of the Trustees who are
neither Interested Persons of the Trust nor parties to the matter, based upon a
review of readily available facts (as opposed to a full trial-type inquiry). The
rights accruing to any Person under these provisions shall not exclude any other
right to which such Person may be lawfully entitled; provided that no Person may
satisfy any right of indemnity or reimbursement granted in this Section 5.4 or
in Section 5.2 hereof or to which such Person may be otherwise entitled except
out of the Trust Property. The rights of indemnification provided herein may be
insured against by policies maintained by the Trust. The Trust may make advance
payments in connection with indemnification under this Section 5.4, provided
that the indemnified Person shall have given a written undertaking to reimburse
the Trust in the event it is subsequently determined that such Person is not
entitled to such indemnification, and provided further that either (i) such
Person shall have provided appropriate security for such undertaking, or (ii)
the Trust is insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Person will not be disqualified from indemnification under
this Section 5.4.
5.5. No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender or other Person dealing with any Trustee, officer,
employee, Agent or independent contractor of the Trust or any Series shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by such Trustee, officer, employee, Agent or independent contractor
or be liable for the application of money or property paid, loaned or delivered
to or on the order of such Trustee, officer, employee, Agent or independent
contractor. Every obligation, contract, instrument, certificate or other
interest or undertaking
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of the Trust or any Series, and every other act or thing whatsoever executed in
connection with the Trust or any Series shall be conclusively taken to have been
executed or done by the executors thereof only in their capacity as Trustees,
officers, employees, Agents or independent contractors of the Trust or any
Series. Every written obligation, contract, instrument, certificate or other
interest or undertaking of the Trust or any Series made or sold by any Trustee,
officer, Agent or employee of the Trust or any Series, in such capacity, shall
contain an appropriate recital to the effect that the Trustee, officer, Agent or
employee of the Trust or any Series shall not personally be bound by or liable
thereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any Trustee, officer, Agent or employee
of the Trust or any Series. Subject to the provisions of the 1940 Act, the Trust
may maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, Agents or employees of the Trust and any Series in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer, Agent or
employee of the Trust and any Series shall, in the performance of such Person's
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or any Series (whether or not the Trust or
any Series would have the power to indemnify such Persons against such
liability), upon an opinion of counsel, or upon reports made to the Trust or any
Series by any of its officers, Agents or employees or by any Investment Adviser
or Administrator, accountant, appraiser or other experts or consultants selected
with reasonable care by the Trustees, officers, Agents or employees of the Trust
or any Series, regardless of whether such counsel or expert may also be a
Trustee.
5.8. No Repeal or Modification. Any repeal or modification of
this Article V by the Holders, or adoption or modification of any other
provision of this Declaration or the By-Laws inconsistent with this Article V,
shall be prospective only, to the extent that such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
any Person or indemnification available to any indemnified Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. Interests may be sold only to
Institutional Investors, as may be approved by the Trustees, for cash or other
consideration acceptable to the Trustees, subject to the requirements of the
1940 Act. The Interests shall be personal property giving only the rights in
this Declaration specifically set forth. The value of an Interest shall be equal
to the Book Capital Account balance of the Holder of the Interest.
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The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the Interests
in which shall be separate and distinct from the Interests in any other Series.
The Series shall include, without limitation, those Series specifically
established and designated pursuant to Section 6.2 hereof, and such other Series
as the Trustees may deem necessary or desirable. The Trustees shall have
exclusive power without the requirement of Holder approval to establish and
designate such separate and distinct Series, and, subject to the provisions of
this Declaration and the 1940 Act, to fix and determine the rights of Holders of
Interests in such Series, including with respect to the price, terms and manner
of purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have separate
voting rights or no voting rights.
6.2. Establishment and Designation of Series. The establishment
and designation of any Series shall be effective upon the execution by any
Trustee or attorney-in-fact for the Trust pursuant to authorization by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Interests in such
Series, or as otherwise provided in such instrument. At any time that there are
no Interests outstanding of any particular Series previously established and
designated, the Trustees may by resolution adopted by a majority of their
number, and evidenced by an instrument executed by a Trustee or
attorney-in-fact, abolish that Series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the status of
an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above to
establish and designate further Series, the Trustees hereby establish and
designate the Series set forth on Schedule A hereto. The Interests in each of
these Series and any Interests in any further Series that may from time to time
be established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Series at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by the Trust
for the issue or sale of Interests in a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
be held by the Trustees in a separate trust for the benefit of the Holders of
Interests in that Series and shall irrevocably belong to that Series for all
purposes, subject only to the rights of creditors, and shall be so recorded upon
the books of account of the Trust. Such consideration, assets, income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds, in whatever form the same may be, together
with any General Asset Items (as hereinafter defined) allocated to that Series
as provided in the following sentence, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
earnings, profits or proceeds thereof, funds or payments which are not readily
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identifiable as belonging to any particular Series (collectively "General Asset
Items"), the Trustees shall allocate such General Asset Items to and among any
one or more of the Series created from time to time in such manner and on such
basis as the Trustees, in their sole discretion, deem fair and equitable; and
any General Asset Items so allocated to a particular Series shall belong to that
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the Holders of all Series for all purposes. No Series shall have any right
to or interest in the assets belonging to any other Series, and no Holder shall
have any right or interest with respect to the assets belonging to any Series in
which it does not hold an Interest.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series, and shall be so recorded upon the books of account of the Trust. Such
liabilities, expenses, costs, charges and reserves, together with any General
Liability Items (as hereinafter defined) allocated and charged to that Series as
provided in the following sentence, are herein referred to as "liabilities
belonging to" that Series. In the event there are any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series (collectively "General
Liability Items"), the Board of Trustees shall allocate and charge such General
Liability Items to and among any one or more of the Series created from time to
time in such manner and on such basis as the Trustees, in their sole discretion,
deem fair and equitable; and any General Liability Items so allocated and
charged to a particular Series shall belong to that Series. Each such allocation
and charge by the Trustees shall be conclusive and binding upon the Holders of
all Series for all purposes. No Series shall be liable for or charged with the
liabilities belonging to any other Series, and no Holder shall be subject to any
liabilities belonging to any Series in which it does not hold an Interest.
(c) Voting. On each matter submitted to a vote of the Holders, each
Holder shall be entitled to a vote proportionate to its Interest as recorded on
the books of the Trust. Each Series shall vote as a separate class except as to
voting for Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of all Series, only the Holders in the one or more
affected Series shall be entitled to vote. On each matter submitted to a vote of
the Holders, a Holder may apportion its vote with respect to a proposal in the
same proportion as its own shareholders voted with respect to that proposal.
(d) Distributions. Distributions to Holders of a particular Series may
be paid from the assets belonging to that Series, after providing for
liabilities belonging to that Series, at such times and in such manner as the
Trustees may determine and in accordance with Section 8.2
(e) Liquidation. Upon liquidation of the Trust (or a
particular Series), the Holders of each Series (or such particular Series) shall
be entitled to receive, when and as determined by the Trustees and otherwise in
accordance with Article VIII, a liquidating distribution, which shall reflect
the excess of the assets belonging to that Series over the liabilities belonging
to that Series, of cash or other Trust Property of such Series in proportion to
such Holders' Capital Account balances.
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6.3. Non-Transferability. A Holder may not transfer its Interest.
6.4. Register of Interests. A register shall be kept at an office
or agency of the Trust, under the direction of the Trustees, which shall contain
the name, address and Book Capital Account balance of each Holder in each
Series. Such register shall be conclusive as to the identity of the Holders. No
Holder shall be entitled to receive payment of any distribution, nor to have
notice given to it as herein provided, until it has given its address to such
officer or Agent of the Trust as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this Declaration
and to such restrictions as may from time to time be adopted by the Trustees,
each Holder may vary its Interest in any Series at any time by increasing
(through a capital contribution) or decreasing (through a capital withdrawal) or
by a Redemption of its Interest. An increase in the Interest of a Holder in a
Series shall be reflected as an increase in the Book Capital Account balance of
that Holder in that Series and a decrease in the Interest of a Holder in a
Series or the Redemption of the Interest of that Holder shall be reflected as a
decrease in the Book Capital Account balance of that Holder in that Series. The
Trust shall, upon appropriate and adequate notice from any Holder, increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the Trustees;
provided that (a) the amount received by the Holder upon any such decrease or
Redemption shall not exceed the decrease in the Holder's Book Capital Account
balance effected by such decrease or Redemption of its Interest, and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting any such decrease or Redemption, at such rates as the
Trustees may establish, and may, at any time and from time to time, suspend such
right of decrease or Redemption. The procedures for effecting decreases or
Redemptions shall be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of Holders with respect to a particular Series shall be determined on
such days and at such time or times as the Trustees may determine. The Trustees
shall adopt resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations pursuant
to such resolutions may be delegated by the Trustees to the Investment Adviser
or Administrator, custodian, or such other Person as the Trustees may determine.
Upon the Redemption of an Interest, the Holder of that Interest shall be
entitled to receive cash or other assets of the applicable Series in proportion
to such Holder's Book Capital Account balance relative to the aggregate Book
Capital Account balances of all Holders in such Series at such time. A Holder
may not transfer its Book Capital Account balance.
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8.2. Allocations and Distributions to Holders. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall make
with respect to each Series (i) the allocation of unrealized gains and losses,
taxable income, gains, losses and deductions and foreign tax credits, or any
item or items thereof, to each Holder, (ii) the payment of distributions, if
any, to Holders, and (iii) upon liquidation, the final allocation of taxable
items, if any, and the final distribution, if any, to Holders. Such procedures
shall be set forth in writing and be furnished to the Trust's accountants and to
each other Person to whom the Trustees have delegated the power and duty to make
calculations relating to the Holders' Book Capital Account balances. The
Trustees may amend the procedures adopted pursuant to this Section 8.2 from time
to time. The Trustees may retain from the assets of each Series such amount as
they may deem necessary to pay the liabilities and expenses of that Series.
8.3. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income and net assets of the Trust and of each Series, the allocation of any
items of income, gain, loss, deduction or credit of the Trust and of each
Series, the Book Capital Account balance of each Holder, or the payment of
distributions to the Holders as they may deem necessary or desirable to enable
the Trust or a Series to comply with any provision of the 1940 Act or rule
thereunder or any order of exemption issued by the Commission or with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property and
the right to conduct any business described herein are vested exclusively in the
Trustees, and the Holders shall have no right or title therein other than the
beneficial interest conferred by their Interests and they shall have no power or
right to call for any partition or division of any Trust Property.
The Trust shall be entitled to treat a Holder of record as the holder in
fact and shall not be bound to recognize any equitable or other claim of
interest in such Holder's Interest on the part of any other entity except as may
be otherwise expressly provided by law.
In addition, the Holders shall have power to vote only with respect to
(a) the election of Trustees as provided in Article II, Section 2.4; (b) the
removal of Trustees as provided in Article II, Section 2.3; (c) any investment
advisory contract as provided in Article IV, Section 4.1; (d) any dissolution of
a Series as provided in Article X, Section 10.2; (e) the amendment of this
Declaration to the extent and as provided in Article X, Section 10.4; (f) any
merger, consolidation or sale of assets as provided in Article X, Section 10.5;
and (g) such additional matters relating to the Trust as may be required or
authorized by law, by this Declaration or the By-Laws or any registration
statement of the Trust filed with the Commission, or as the Trustees may
consider desirable.
9.2. Meetings of Holders. Meetings of Holders may be called at any time
by a majority of the Trustees and shall be called by any Trustee upon
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written request of Holders holding, in the aggregate, not less than 10% of the
Interests in one or more Series (if the meeting relates solely to such Series),
or not less than 10% of the Interests in the Trust (if the meeting relates to
the Trust and not solely to one or more particular Series), such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or without the State of New York and within or
without the United States of America on such day and at such time as the
Trustees shall designate. Holders of at least one-third of the Interests in one
or more Series (if the meeting relates solely to such one or more Series) or
Holders of at least one-third of the Interests in the Trust (if the meeting
relates to the Trust and not solely to one or more particular Series), present
in person or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other applicable
law, this Declaration or the By-Laws. If a quorum is present at a meeting, an
affirmative vote of the Holders present, in person or by proxy, holding more
than 50% of the total Interests of the Holders present in a Series or the Trust,
as applicable, either in person or by proxy, at such meeting constitutes the
action of the Holders in such Series or the Trust, as applicable, unless a
greater number of affirmative votes is required by the 1940 Act, other
applicable law, this Declaration or the By-Laws, and except that a plurality of
the total Interests of the Holders present shall elect a Trustee. All or any one
of more Holders may participate in a meeting of Holders by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and participation in a meeting
by means of such communications equipment shall constitute presence in person at
such meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder of the Series or the Trust, as the case may be,
at its registered address, mailed at least 10 days and not more than 60 days
before the meeting. Notice of any meeting may be waived in writing by any Holder
either before or after such meeting. The attendance of a Holder at a meeting
shall constitute a waiver of notice of such meeting except in the situation in
which a Holder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting was not lawfully
called or convened. At any meeting, any business properly before the meeting may
be considered whether or not stated in the notice of the meeting. Any adjourned
meeting may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders of the Series
or the Trust, as the case may be, for such purpose.
9.5. Proxies, etc. At any meeting of Holders, any Holder entitled
to vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Trust, or such Agent
as the Trust may appoint for such purpose, 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 Trust or such Agent, a
18
<PAGE>
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 or Agents of the Trust. Only Holders on
the record date shall be entitled to vote. Each such Holder shall be entitled to
a vote proportionate to its Interest in the Series or the Trust, as the case may
be. When an Interest is held jointly by several Persons, any one of them may
vote at any meeting in person or by proxy in respect of such Interest, but if
more than one of them is present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Interest. A proxy purporting
to be executed by or on behalf of a Holder, including proxies received via
telecopy, shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger.
9.6. Reports. As to each Series, the Trustees shall cause to be
prepared and furnished to each Holder thereof, at least annually as of the end
of each Fiscal Year, a report of operations containing a balance sheet and a
statement of income of such Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition, with
respect to each Series furnish to each Holder of such Series at least
semi-annually interim reports of operations containing an unaudited balance
sheet as of the end of such period and an unaudited statement of income for the
period from the beginning of the then-current Fiscal Year to the end of such
period.
9.7. Holder Action by Written Consent. Any action which may be
taken on behalf of the Trust or any Series by Holders may be taken without a
meeting if Holders holding more than 50% of all Interests entitled to vote (or
such larger proportion thereof as shall be required by any express provision of
this Declaration or of applicable law) consent to the action in writing and the
written consents are filed with the records of the meetings of Holders. Such
consents shall be treated for all purposes as a vote taken at a meeting of
Holders. Each such written consent shall be executed by or on behalf of the
Holder delivering such consent and shall bear the date of such execution. No
such written consent shall be effective to take the action referred to therein
unless, within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the records
of the meetings of Holders.
9.8. Notices. Any and all communications, including any and all
notices to which any Holder may be entitled, shall be deemed duly served or
given if mailed, postage prepaid, addressed to a Holder at its last known
address as recorded on the register of the Trust or if delivered to a Holder by
courier or by facsimile or other similar electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or termination in
accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of
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<PAGE>
20 years after the death of the last survivor of the initial Trustees named
herein and the following named persons:
<TABLE>
<CAPTION>
Date of
Name Address Birth
<S> <C> <C>
Reese Atkinson Gibson 48 Main Street
Southborough, MA 01772-9106 06/04/96
Gray Tilton Gibson 48 Main Street
Southborough, MA 01772-9106 05/27/94
Abigail Foote Coolidge 30 Arlington Street 05/04/94
Winchester, MA 01890
Amanda Jehan Sher Coolidge 30 Arlington Street 08/16/89
Winchester, MA 01890
</TABLE>
10.2. Dissolution. Any Series shall be dissolved (i) by the
affirmative vote of the Holders of not less than two-thirds of the Interests in
the Series at any meeting of the Holders or by an instrument in writing, without
a meeting, signed by a majority of the Trustees and consented to in writing by
the Holders of not less than two-thirds of such Interests, or (ii) by the
Trustees by written notice of dissolution to the Holders of the Interests in the
Series. The Series shall be dissolved effective 120 days after the event. The
Trust may be dissolved by action of the Trustees upon the dissolution of the
last remaining Series.
10.3. Termination.
(a) Upon an event of dissolution of the Trust or a Series, unless the
Trust or Series is continued in accordance with the proviso in Section 10.2
above, the Trust or Series, as applicable, shall be terminated in accordance
with the following provisions:
(i) the Trust or Series, as applicable, shall carry on no business
except for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the
affairs of the Trust or Series, as applicable, and all of the
powers of the Trustees under this Declaration shall continue
until the affairs of the Trust or Series have been wound up,
including the power to fulfill or discharge the contracts of the
Trust or Series, collect the assets of the Trust of Series, sell,
convey, assign, exchange or otherwise dispose of all or any part
of the Trust Property affected to one or more Persons at public
or private sale for consideration which may consist in whole or
in part of cash, securities or other property of any kind,
discharge or pay the liabilities of the Trust or Series, and do
all other acts appropriate to liquidate the business of the Trust
or Series; provided that any sale, conveyance, assignment,
exchange or other disposition of all or substantially all the
Trust Property or substantially all of the assets belonging to a
particular Series, other than for cash, shall require approval
20
<PAGE>
of the principal terms of the transaction and the nature and
amount of the consideration by the vote of Holders holding more
than 50% of the total Interests in the Trust or Series, as
applicable; and
(iii) after paying or adequately providing for the
payment of all liabilities of the Trust or of the Series being
terminated, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection,
the Trustees shall distribute the remaining Trust Property of the
Trust or Series, as applicable, in cash or in kind or partly
each, among the Holders according to their respective rights as
set forth in the procedures established pursuant to Sections 6.2
and 8.2 hereof.
(b) Upon termination of the Trust or Series and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and file
with the records of the Trust an instrument in writing setting forth the fact of
such termination and distribution. Upon termination of the Trust, the Trustees
shall thereupon be discharged from all further liabilities and duties hereunder,
and the rights and interests of all Holders shall thereupon cease.
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of Holders, amend, restate or
otherwise supplement this Declaration pursuant to authorization by a majority of
the Trustees and effective upon the execution by any Trustee of an instrument
setting forth such amendment, restatement or supplement, provided that Holders
shall have the right to vote on any amendment (i) which would affect the voting
rights of Holders granted in Article IX, Section 9.1, (ii) to this Section 10.4,
(iii) required to be approved by Holders by law or by the Trust's registration
statement filed with the Commission, or (iv) submitted to them by the Trustees.
Any amendment submitted to Holders which the Trustees determine would affect the
Holders of certain but not all Series shall be authorized by vote of the Holders
of such Series affected and no vote shall be required of Holders of a Series not
affected. Any amendment applicable to the Trust as a whole, unless otherwise
required by law or by this Declaration or the By-Laws, shall be authorized by
vote of the Holders of the Trust. Notwithstanding anything else herein, any
amendment to Article V which would have the effect of reducing the
indemnification and other rights provided thereby and any repeal or amendment of
this sentence shall each require the affirmative vote of the Holders of
two-thirds of the Interests entitled to vote thereon.
(b) No amendment may be made under Section 10.4(i) of this Declaration
which would change any rights with respect to any Interest by reducing the
amount payable thereon upon liquidation of the Trust or any Series or by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or consent of Holders of two-thirds of all Interests which would be so
affected by such amendment.
(c) A certification in recordable form executed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
21
<PAGE>
be conclusive evidence of such amendment when filed with the records of
the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust or any
Series may merge or consolidate with any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
the Trust Property, or assets belonging to such Series, as applicable, including
good will, upon such terms and conditions and for such consideration when and as
authorized at any meeting of Holders called for such purpose by Majority
Interests Vote of Interests in the Series affected by such action, or by an
instrument in writing without a meeting, consented to by Holders of not less
than a majority of the Interests in the Series affected by such action, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the law of the State of
New York, provided however that no such vote shall be required where by
reorganization, purchase of assets or otherwise, the Trust or any affected
Series is the surviving entity.
10.6. Incorporation. Upon a Majority Interests Vote, the Trustees
may cause to be organized or assist in organizing a corporation or corporations
under the law of any jurisdiction or a trust, partnership, association or other
organization to take over the Trust Property or to carry on any business in
which the Trust directly or indirectly has any interest, and to sell, convey and
transfer the Trust Property to any such corporation, trust, partnership,
association or other organization in exchange for the equity interests thereof
or otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contract with any such corporation, trust, partnership,
association or other organization, or any corporation, trust, partnership,
association or other organization in which the Trust holds or is about to
acquire equity interests. The Trustees may also cause a merger or consolidation
between the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent permitted by
law. Nothing contained herein shall be construed as requiring approval of the
Holders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to one or
more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service of Process. If
required by New York law, the Trust shall file, with the Department of State of
the State of New York, a certificate, in the name of the Trust and executed by
an Agent of the Trust, designating the Secretary of State of the State of New
22
<PAGE>
York as an Agent upon whom process in any action or proceeding against the Trust
or any Series may be served.
11.2. Governing Law. This Declaration is executed by the Trustees
and delivered with reference to and under the law of the State of New York, 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 or Agent elected by the Trustees, or
(f) the existence of any fact or facts which in any manner relate to the affairs
of the Trust, shall be conclusive evidence as to the matters so certified in
favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, or with other applicable law and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned Trustee has executed this
Amended and Restated Declaration of Trust of Deutsche Portfolios as of the day
and year first above written.
As Trustee and not individually
DEUT003F
23
<PAGE>
SCHEDULE A
DEUTSCHE PORTFOLIOS
Series
Provesta Portfolio (US Dollar)
Investa Portfolio (US Dollar)
Japanese Equity Portfolio (US Dollar)
European Bond Portfolio (US Dollar)
Global Bond Portfolio (US Dollar)
Top 50 Europe Portfolio (US Dollar)
Top 50 World Portfolio (US Dollar)
Top 50 Asia Portfolio (US Dollar)
Top 50 US Portfolio (US Dollar)
US Money Market Portfolio (US Dollar)
DEUT003F
DEUTSCHE PORTFOLIOS
AMENDED AND RESTATED BY-LAWS
As Adopted July 28, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- Meetings of Holders . . . . . . . . 1
-------------------
Section 1.1 Fixing Record Dates . . . 1
Section 1.2 Records at Holder Meetings . 1
Section 1.3 Inspectors of Election . . . . . 1
Section 1.4 Proxies; Voting . . . . . . . . 2
Section 1.5 Series Holders Meetings . . . . . 2
ARTICLE II -- Meetings of Trustees . . . . . . . . . . . . 2
--------------------
Section 2.1 Annual and Regular Meetings . . . . 2
Section 2.2 Notice . . . . . . . . . . . 2
ARTICLE III -- Officers . . . . . . . . . . . . . . . . 2
--------
Section 3.1 Officers of the Trust . . . . . 2
ARTICLE IV -- Miscellaneous . . . . . . . . . . . . . . . 3
-------------
Section 4.1 Depositories . . . . . . . . . 3
Section 4.2 Signatures . . . . . . . . . 3
Section 4.3 Seal . . . . . . . . . . . 3
Section 4.4 Indemnification . . . . . . . . 3
Section 4.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . 3
ARTICLE V -- Regulations; Amendment of By-Laws . . . . . . . . 4
---------------------------------
Section 5.1 Regulations . . . . . . . . . 4
Section 5.2 Amendment and Repeal of By-Laws . . 4
i
<PAGE>
BY-LAWS
OF
DEUTSCHE PORTFOLIOS
These By-Laws are amended and restated pursuant to Section 2.7 of
the Declaration of Trust establishing Deutsche Portfolios (the "Trust"), dated
as of June 20, 1997, as amended and restated as of July 28, 1997 and as from
time to time further amended (the "Declaration"). All words and terms
capitalized in these By-Laws shall have the meaning or meanings set forth for
such words or terms in the Declaration.
ARTICLE I
Meetings of Holders
Section 1.1. Fixing Record Dates. If the Trustees do not, prior
to any meeting of the Holders, fix a record date, then the date of mailing
notice of the meeting shall be the record date.
Section 1.2. Records at Holder Meetings. At each meeting of the
Holders there shall be open for inspection the minutes of the last previous
meeting of Holders of the Trust and a list of the Holders of the Trust,
certified to be true and correct by a Trustee or proper Agent of the Trust, as
of the record date of the meeting. Such list of Holders shall contain the name
of each Holder in alphabetical order and the address and Interest owned by such
Holder on such record date.
Section 1.3. Inspectors of Election. In advance of any meeting of
the Holders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman, if any, of any meeting of the Holders may, and on the
request of any Holder or his proxy shall, appoint Inspectors of Election. The
number of Inspectors of Election shall be either one or three. If appointed at
the meeting on the request of one or more Holders or proxies, a Majority
Interests Vote shall determine whether one or three Inspectors of Election are
to be appointed, but failure to allow such determination by the Holders shall
not affect the validity of the appointment of Inspectors of Election. In case
any individual appointed as an Inspector of Election fails to appear or fails or
refuses to so act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the individual
acting as chairman of the meeting. The Inspectors of Election shall determine
the Interest owned by each Holder, the Interests represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies, shall
receive votes, ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall count
and tabulate all votes or consents, shall determine the results, and shall do
such other acts as may be proper to conduct the election or vote with fairness
to all Holders. If there are three Inspectors of Election, the decision, act or
1
<PAGE>
certificate of a majority is effective in all respects as the decision, act or
certificate of all. On request of the chairman, if any, of the meeting, or of
any Holder or his proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them.
Section 1.4. Proxies; Voting. No proxy shall be valid after one
year from the date of its execution, unless a longer period is expressly stated
in such proxy.
Section 1.5 Series Holders Meetings. Whenever a matter is
required to be voted by Holders of the Trust in the aggregate under Section 9.1
and 9.2 of the Declaration, the Trust may either hold a meeting of Holders of
all series to vote on such matter, or hold separate meetings of Holders of each
of the individual series to vote on such matter, provided that (i) such separate
meetings shall be held within one year of each other, (ii) a quorum of the
individual series entitled to vote in person or by proxy shall be present at
each such separate meeting, and (iii) a quorum shall be present in the aggregate
at such separate meetings, and the votes of Holders at all such separate
meetings shall be aggregated in order to determine if sufficient votes have been
cast for such matter to be voted.
When separate meetings are held for Holders of each of the
individual series to vote on a matter required to be voted on by Holders of the
Trust in the aggregate, the record date of each such separate meeting shall be
determined in the manner described above in Section 1.1.
ARTICLE II
Meetings of Trustees
Section 2.1. Annual and Regular Meetings. The Trustees shall hold
an annual meeting for the election of officers, if any, and the transaction of
other business which may come before such meeting. The Board of Trustees shall
elect a Chairman from among the Trustees and such Chairman shall preside at all
meetings of the Holders and of the Trustees.
Section 2.2. Notice. Notice of a meeting shall be given by mail,
by telegram (which term shall include a cablegram), by telecopier or delivered
personally (which term shall include by telephone). Neither the business to be
transacted at, nor the purpose of, any meeting of the Trustees need be stated in
the notice or waiver of notice of such meeting, and no notice need be given of
action proposed to be taken by written consent.
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The Trustees may elect such
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
2
<PAGE>
shall assist that officer in the duties of his office. Each officer, employee
and Agent of the Trust shall have such other duties and authorities as may be
conferred upon him by the Trustees or delegated to him by the Trust.
ARTICLE IV
Miscellaneous
Section 4.1. Depositories. The funds of the Trust shall be
deposited in such depositories as the Trustees shall designate and shall be
drawn out on checks, drafts or other orders signed by such officer, officers,
Agent or Agents (including the Investment Manager and Administrator) as the
Trustees may from time to time authorize.
Section 4.2. Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such Trustee, officer, officers,
Agent or Agents as provided in the Declaration of Trust or these By-Laws or as
the Trustees may from time to time by resolution provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed
to any document, and the seal and its attestation may be lithographed, engraved
or otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a New York corporation.
Section 4.4. Indemnification. Insofar as the conditional
advancing of indemnification monies under Section 5.4 of the Declaration for
actions based upon the 1940 Act may be concerned, such payments will be made
only on the following conditions: (i) the advances must be limited to amounts
used, or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on behalf of,
the recipient to repay the amount of the advance which exceeds the amount to
which it is ultimately determined that he is entitled to receive from the Trust
by reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security which
assures that any repayment may be obtained by the Trust without delay or
litigation, which bond, insurance or other form of security must be provided by
the recipient of the advance, or (b) a majority of a quorum of the Trust's
disinterested, non-party Trustees, or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available facts, that
the recipient of the advance ultimately will be found entitled to
indemnification.
Section 4.5. Distribution Disbursing Agents and the Like. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
3
<PAGE>
ARTICLE V
Regulations; Amendment of By-Laws
Section 5.1. Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may deem
expedient concerning the sale and purchase of Interests of the Trust.
Section 5.2. Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or Agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust.
4
The Deutsche Portfolios
INVESTMENT MANAGEMENT AGREEMENT
Agreement, made this 28th day of July, 1997, between the Deutsche
Portfolios, a trust organized under New York law (the "Trust"), and Deutsche
Fund Management, Inc., a Delaware corporation (the "Investment Manager"),
registered as an investment adviser under the Investment Advisers Act of 1940
(the "Advisers Act").
W I T N E S S E T H:
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), and consists initially of the ten sub-trusts listed on Schedule A to this
Agreement (each such sub-trust, together with each other sub-trust of the Trust
hereafter established by the Trustees of the Trust and made subject to this
Agreement in accordance with Section 13 hereof, individually a "Portfolio" and,
collectively, the "Portfolios"); and
WHEREAS, the Board of Trustees of the Trust desires to retain the
Investment Manager to render various investment management services to each
Portfolio, and the Investment Manager is willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth, the parties hereto agree as follows:
The Trust hereby appoints the Investment
Manager to act as investment manager to each of the Portfolios for the period
and the terms set forth in this Agreement, with the understanding that it may
appoint an adviser to perform certain services relating to the management of the
investment operations of the Portfolios as set forth in Section 4. The
Investment Manager accepts such appointment and agrees to render or provide the
services herein set forth, for the compensation herein provided.
The activities of the Investment Manager or
any adviser appointed hereunder shall at all times be
subject to the supervision of the Trustees of the Trust.
NY12527: 44504.4
<PAGE>
The Investment Manager shall manage, or appoint an adviser to
manage, the investment operations of the Portfolios and the composition of each
Portfolio's holdings of securities and investments, including cash, the
purchase, retention and disposition thereof and agreements relating thereto, in
accordance with such Portfolio's investment objectives and policies as stated in
the Registration Statement (as defined in paragraph 6(d) of this Agreement). The
Investment Manager, or in case it appoints an adviser, such adviser, shall
perform such services (the person performing such services being referred to
herein as the "Adviser") subject to the following understandings:
The Adviser in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Declaration of Trust and By-Laws of the Trust and the Registration
Statement and with the instructions and directions of the Trustees of
the Trust and will conform to and comply with the requirements of the
1940 Act and all other applicable federal and state laws and
regulations;
the Adviser shall furnish a continuous investment program
for each Portfolio and determine from time to time what securities,
instruments and other investments, including futures contracts, will be
purchased, retained, sold or lent by such Portfolio, and what portion of
the assets will be invested or held uninvested as cash;
the Adviser shall use the same skill and care in the
management of each Portfolio's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
the Adviser shall determine the securities or other
investments to be purchased, sold or lent by each Portfolio and as agent
for each Portfolio will effect portfolio transactions pursuant to its
determinations either directly with the issuer or with any broker and/or
dealer in such securities, including a broker affiliated with the
Adviser; in placing orders with brokers and/or dealers the Adviser
intends to seek best price and execution for purchases and sales; the
Adviser shall also determine whether or not a Portfolio shall enter into
repurchase or reverse repurchase agreements;
On occasions when the Adviser deems the purchase or sale of a
security or other investment to be in the best interest of a Portfolio
as well as other customers
-2-
NY12527: 44504.4
<PAGE>
of the Adviser, the Adviser 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 on behalf of such Portfolio and
such other customer of the Adviser in order to obtain best execution,
including lower brokerage commissions, if applicable. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its
fiduciary obligations to a Portfolio;
the Adviser shall maintain a set of books and records with
respect to each Portfolio's securities and other investment transactions
as required by the Advisers Act and other applicable laws and
regulations and shall render to the Trustees of the Trust such periodic
and special reports as the Trustees may reasonably request; and
the services of the Adviser to the Trust under this
Agreement are not to be deemed exclusive, and the Adviser shall be free
to render similar services to others.
The Investment Manager is authorized to
appoint an investment adviser to carry out the aforementioned investment
operations of each Portfolio, as Adviser, on the above terms pursuant to an
investment advisory contract conforming to the requirements of the 1940 Act and
subject to approval of the Board of Trustees and the holders of beneficial
interests in the Trust as required by the 1940 Act. Any such investment advisory
contract shall provide that the Adviser is not authorized to make any business,
operational or management decisions on behalf of the Trust or any Portfolio
other than with respect to the investment operations and composition of a
Portfolio's holdings of securities and other investments as set forth herein.
The compensation of any such Adviser will be paid by the Investment Manager.
The Investment Manager shall also provide
certain supervisory and administrative services to the
Trust, including:
negotiating, maintaining, evaluating and coordinating
contractual arrangements with third-party service providers, including,
but not limited to, administrators, custodians, transfer agents, fund
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NY12527: 44504.4
<PAGE>
accounting agents, independent accountants, attorneys,
printers and insurers;
assisting the various third-party service providers
retained by or for the Trust by, among other things, providing any
information to such service providers as the Trustees of the Trust deem
appropriate, including information concerning Portfolio performance and
administration;
reviewing agendas for and minutes of meetings of Trustees
and committees of Trustees; and preparing such supporting documents for
such meetings as the Trustees may request the Investment Manager to
prepare;
arranging, if desired by the Trust, for directors,
officers or employees of the Investment Manager to serve as Trustees,
officers or agents of the Trust if duly elected or appointed to such
positions and subject to their individual consent and to any limitations
imposed by law; and
reviewing all registration statements, amendments thereto
and other documents as may be required for compliance by the Trust and
each Portfolio with all applicable laws and regulations and preparing
such portions thereof as the Trustees of the Trust may request the
Investment Manager to prepare.
Notwithstanding the foregoing, the Investment Manager shall not
be deemed to have assumed any duties under this Agreement with respect to, and
shall not be responsible for, functions specifically assumed by any
administrator, fund accounting agent custodian, private placement agent or
transfer agent of the Trust.
The Trust has delivered copies of each of the
following documents to the Investment Manager and will promptly notify and
deliver to it all future amendments and supplements, if any:
Declaration of Trust of the Trust (such Declaration of
Trust, as presently in effect and as amended from time to time, is
herein called the "Declaration of Trust");
By-Laws of the Trust (such By-Laws, as presently in effect
and as amended from time to time, are herein called the "By-Laws");
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<PAGE>
Certified resolutions of the Trustees of the Trust
authorizing the appointment of the Investment Manager and approving the
form of this Agreement;
The Trust's Notification of Registration on Form N-8A
under the 1940 Act, its Registration Statement on Form N-1A under the
1940 Act (No. ______) and the Registration Statement on Form N-1A of
Deutsche Funds, Inc. (No. 333-27709) under the Securities Act of 1933,
as amended, and the 1940 Act, as filed with the Securities and Exchange
Commission (the "Commission") on May 23, 1997, including all amendments
thereto (together with the Registration Statement of the Trust, the
"Registration Statement").
The Adviser shall keep the books and records
required to be maintained by it pursuant to paragraph 3(e). The Investment
Manager agrees that all records which it maintains for the Trust are the
property of the Trust and it will promptly surrender any of such records to the
Trust upon request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Commission under the 1940 Act any such records
as are required to be maintained by the Adviser with respect to the Portfolios
by Rule 31a-2 of the Commission under the 1940 Act.
During the term of this Agreement the
Investment Manager will pay all expenses, including personnel costs and
overhead, incurred by it in connection with the performance of its obligations
under this Agreement other than the cost of securities and investments purchased
for each Portfolio (including taxes and brokerage commissions, if any) and
extraordinary expenses and shall pay the salaries of Trustees and officers of
the Trust who are affiliated persons (as defined in the 1940 Act) of the
Investment Manager. The Investment Manager shall not be required to pay expenses
of any activity which is intended primarily to result in sales of shares of the
Portfolio.
For the services provided and the expenses
borne pursuant to this Agreement, each Portfolio will pay to the Investment
Manager as full compensation therefor a fee, computed daily and paid monthly in
arrears, at an annual rate equal to the percentage of the average daily net
assets of such Portfolio specified in Schedule A hereto.
The Investment Manager shall not be liable
for any error of judgment or mistake of law or for any loss or expense suffered
by the Trust or any Portfolio in connection with the matters to which this
Agreement relates, except a loss or expense resulting from willful misfeasance,
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<PAGE>
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.
This Agreement shall continue in effect until
the date two years after its execution and shall continue in effect from year to
year thereafter with respect to each Portfolio if such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Trust in its entirety or with respect to any Portfolio, at any time, without the
payment of any penalty, by vote of a majority of all the Trustees of the Trust
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Trust or such Portfolio, as the case may be, on 60 days'
written notice to the Investment Manager, or by the Investment Manager at any
time, without the payment of any penalty, on 90 days' written notice to the
Trust. This Agreement will automatically and immediately terminate in the event
of its assignment (as defined in the 1940 Act).
The Investment Manager shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Trustees of the Trust from time
to time, have no authority to act for or represent the Trust or any Portfolio in
any way or otherwise be deemed an agent of the Trust or any Portfolio.
This Agreement may be amended by mutual
consent, but the consent of the Trust must be approved (a) by vote of a majority
of those Trustees of the Trust who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such amendment, and (b) by vote of a majority of the
outstanding voting securities of the Trust or, in the case of an amendment to
this Agreement affecting only one or several Portfolios, a majority of the
outstanding voting securities of each such Portfolio. In the event that the
Trustees of the Trust establish one or more additional sub-trusts with respect
to which they wish to retain the Investment Manager to act as investment
manager, the Trust and the Investment Manager may amend Schedule A hereto to add
each such sub-trust and specify the fee payable to the Investment Manager in
respect thereof, in which event such sub-trust shall become subject to the
provisions of this Agreement and be deemed a "Portfolio" hereunder to the same
extent as the existing Portfolios, except to the extent that such provisions may
be modified with respect to any additional Portfolio in writing by the
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NY12527: 44504.4
<PAGE>
Trust and the Investment Manager at the time of the addition of the Portfolio.
Notices of any kind to be given to the
Investment Manager by the Trust shall be in writing and shall be duly given if
mailed or delivered to the Investment Manager at 31 West 52nd Street, New York,
New York 10019, Attention: President and Managing Director, or at such other
address or to such other individual as shall be specified by the Investment
Manager to the Trust. Notices of any kind to be given to the Trust by the
Investment Manager shall be in writing and shall be duly given if mailed or
delivered to the Trust at Cardinal Avenue, Grand Cayman, Cayman Islands, BWI or
at such other address or to such other individual as shall be specified by the
Trust to the Investment Manager.
The Trustees of the Trust have authorized the
execution of this Agreement in their capacity as Trustees and not individually
and the Investment Manager agrees that neither the holders of interests in the
Trust nor the Trustees nor any officer, employee, representative or agent of the
Trust shall be personally liable upon, or shall resort be had to their private
property for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Trust or any Portfolio, that the interest holders of the
Portfolios and the trustees, officers, employees, representatives and agents of
the Trust shall not be personally liable hereunder, and that the Investment
Manager shall look solely to the property of the Trust for the satisfaction of
any claim hereunder.
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
original.
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NY12527: 44504.4
<PAGE>
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 28th day
of July, 1997.
DEUTSCHE PORTFOLIOS
By:__________________________________
Trustee
DEUTSCHE FUND MANAGEMENT, INC.
By:__________________________________
President and Managing Director
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NY12527: 44504.4
<PAGE>
Schedule A
Fee (annualized
% of average
daily net assets)
Portfolio
Top 50 World Portfolio 1.00%
Top 50 Europe Portfolio 1.00
Top 50 Asia Portfolio 1.00
Top 50 US Portfolio 1.00
Provesta Portfolio 0.85
Investa Portfolio 0.85
Japanese Equity Portfolio 0.85
Global Bond Portfolio 0.75
European Bond Portfolio 0.75
US Money Market Portfolio 0.15
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NY12527: 44504.4
The Deutsche Portfolios
INVESTMENT ADVISORY AGREEMENT
Agreement made as of July 28, 1997 by and among Deutsche Fund
Management, Inc., a Delaware corporation (the "Investment Manager"), DWS
Portfolio Management GmbH, a company organized under the laws of the Federal
Republic of Germany (hereinafter called the "DWS Adviser"), and Deutsche Morgan
Grenfell Investment Management Inc., a Delaware corporation (hereinafter called
the "DMGIM Adviser").
W I T N E S S E T H:
WHEREAS, the Investment Manager has entered into an Investment
Management Agreement dated July 28, 1997 (the "Investment Management Agreement")
with the Deutsche Portfolios, an open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act") and
organized as a trust under the laws of the State of New York (the "Trust") on
behalf of its ten non-diversified sub-trusts named herein (each such sub-trust,
together with each sub- trust hereafter established by the Trustees of the Trust
and made subject to this Agreement in accordance with Section 11 hereof,
individually a "Portfolio" and, collectively, the "Portfolios"), pursuant to
which the Investment Manager will act as investment manager to the sub-trusts
named in the Investment Management Agreement;
WHEREAS, the Investment Management Agreement contemplates that
the Investment Manager may appoint an adviser to perform certain services
relating to the management of the investment operations of the sub-trusts of the
Trust, and the each of the DWS Adviser and the DMGIM Adviser is willing to
render such investment advisory services to the respective Portfolios designated
herein; and
WHEREAS, each of the DWS Adviser and the DMGIM Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940.
NOW, THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth, the parties hereto agree as follows:
1 The Investment Manager hereby appoints (a) the DWS Adviser to act as adviser
to the Portfolios set forth under its name on Schedule A and (b) the DMGIM
Adviser to act as adviser to the Portfolios set forth under its name on Schedule
A, in each case for the period and on the terms set forth in this Agreement.
Each of the DWS Adviser and the DMGIM Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. In this Agreement, the term "Adviser" shall hereinafter refer to the
DWS
<PAGE>
Adviser, with respect to the Portfolios for which it is appointed to act as
adviser under this Section 1, and to the DMGIM Adviser, with respect to the
Portfolios for which it is appointed to act as adviser under this Section 1.
1 Subject to the general supervision of the Trustees of the Trust and the
Investment Manager, the Adviser shall manage the investment operations of each
Portfolio and the composition of each Portfolio's holdings of securities and
other investments, including cash, the purchase, retention and disposition
thereof and agreements relating thereto, in accordance with such Portfolio's
investment objective and policies as stated in the Registration Statement (as
defined in paragraph 3(d) of this Agreement) and subject to the following
understandings:
1 The Adviser, in the performance of its duties and obligations under this
Agreement, shall act in conformity with the Declaration of Trust and By-Laws of
the Trust and the Registration Statement and with the instructions and
directions of the Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state laws and
regulations;
1 the Adviser shall furnish a continuous investment program for each Portfolio
and determine from time to time what securities, instruments and other
investments including future contracts will be purchased, retained, sold or lent
by such Portfolio, and what portion of the assets will be invested or held
uninvested as cash;
1 the Adviser shall use the same skill and care in the management of each
Portfolio's investments as it uses in the administration of other accounts for
which it has investment responsibility as agent;
1 the Adviser shall determine the securities or other investments to be
purchased, sold or lent by the Portfolio and as agent for each Portfolio will
effect portfolio transactions pursuant to its determinations either directly
with the issuer or with any broker and/or dealer in such securities, including a
broker affiliated with the Adviser; in placing orders with brokers and/or
dealers the Adviser intends to seek best price and execution for purchases and
sales; the Adviser shall also determine whether or not a Portfolio shall enter
into repurchase or reverse repurchase agreements;
On occasions when the Adviser deems the purchase or sale of a
security or other investment to be in the best interest of a Portfolio as well
as other customers of the Adviser, the Adviser 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 on behalf of such Portfolio and such other
customer of the Adviser 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
<PAGE>
by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to a Portfolio;
1 the Adviser shall maintain a set of books and records with respect to each
Portfolio's securities transactions as required by the Advisers Act and other
applicable laws and regulations and shall render to the Trustees of the Trust
such periodic and special reports as the Trustees may reasonably request; and
1 the services of the Adviser to the Trust under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others.
Notwithstanding the foregoing, the Adviser is not authorized, and shall not be
deemed to have assumed any duties under this Agreement, to make any business,
operational or management decisions on behalf of the Trust or any Portfolio
other than with respect to the investment operations and composition of a
Portfolio's holdings of securities and other investments as set forth herein.
1 The Investment Manager has delivered copies of each of the following documents
to the Adviser and will promptly notify and deliver to it all future amendments
and supplements, if any:
(a) Declaration of Trust of the Trust (such
Declaration of Trust, as presently in effect and as amended from time to time,
is herein called the "Declaration of Trust");
(b) By-laws of the Trust (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
Trust authorizing the appointment of the Adviser and approving the form
of this Agreement;
(d) The Trust's Notification of Registration on
Form N-8A under the 1940 Act, its Registration Statement on Form N-1A under the
1940 Act (No. _______) and the Registration Statement on Form N-1A of Deutsche
Funds, Inc. (No. 333-27709) under the Securities Act of 1933, as amended, and
the 1940 Act, as filed with the Securities and Exchange Commission (the
"Commission") on May 23, 1997, including all amendments thereto (together with
the Registration Statement of the Trust, the "Registration Statement").
<PAGE>
1 The Adviser shall keep the books and records required to be maintained by it
pursuant to paragraph 2(e) of this Agreement. The Adviser agrees that all
records that it maintains for the Trust are the property of the Trust and it
will promptly surrender any of such records to the Trust or to the Investment
Manager upon request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Commission under the 1940 Act any such records
as are required to be maintained by the Adviser with respect to the Portfolios
by Rule 31a-2 of the Commission under the 1940 Act.
1 During the term of this Agreement, the Adviser will pay all expenses,
including personnel costs and overhead, incurred by it in connection with its
activities under this Agreement, other than the cost of securities and
investments purchased or sold for the Portfolios (including taxes and brokerage
commissions, if any) and extraordinary expenses.
1 The Investment Manager shall continue to have responsibility for all services
to be provided to the Portfolios pursuant to the Investment Management Agreement
and shall oversee and review the Adviser's performance of its duties under this
Agreement.
1 For the services provided and the expenses borne pursuant to this Agreement,
the Investment Manager will pay to the Adviser, as full compensation therefor a
fee, calculated daily and payable monthly in arrears, at an annual rate equal to
the percentage of the average daily net assets of each Portfolio specified in
Schedule A hereto.
1 The Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Investment Manager, the Trust or any Portfolio 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 from reckless disregard by it of its
obligations and duties under this Agreement.
1 This Agreement shall continue in effect until the date two years
after the date of its execution and shall continue in effect from year
to year thereafter with respect to each Portfolio if such continuance is
specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may
be terminated with respect to the Trust in its entirety or with respect
to any Portfolio, at any time, without the payment of any penalty,(a) by
the Investment Manager or (b) by the Trust, by vote of a majority of all
the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Trust or such
Portfolio, as the case may be, in each case on 60 days' written notice
to the Adviser, or by the Adviser with respect to its respective
Portfolios, at any time, without the payment of any penalty, on 90 days'
written notice to the Investment Manager and to the Trust. This
<PAGE>
Agreement will automatically and immediately terminate in the event of its
"assignment" (as defined in the 1940 Act) or upon termination of the Investment
Management Agreement.
1 The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided herein or authorized
by the Trustees of the Trust and the Investment Manager from time to time, have
no authority to act for or represent the Trust or any Portfolio in any way or
otherwise be deemed an agent of the Trust or any Portfolio.
1 This Agreement may be amended by the mutual consent of the parties. Any such
amendment shall also require the consent of the Trust, which must be approved
(a) by vote of a majority of those Trustees of the Trust who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Trust or, in the case of
any such amendment affecting only one or several Portfolios, a majority of the
outstanding voting securities of each such Portfolio. In the event that the
Trustees of the Trust establish one or more additional sub-trusts with respect
to which they retain the Investment Manager to act as investment manager, the
Investment Manager and the DWS Adviser or the DMGIM Adviser, as the case may be,
may amend Schedule A hereto to add each such sub-trust and specify the fee
payable to such Adviser in respect thereof, in which event such sub-trust shall
become subject to the provisions of this Agreement and be deemed a "Portfolio"
hereunder to the same extent as the existing Portfolios, except to the extent
that such provisions may be modified with respect to any additional Portfolio in
writing by the Investment Manager and such Adviser at the time of the addition
of the Portfolio.
1 Notices of any kind to be given hereunder shall be in writing and shall be
duly given if mailed or delivered as follows: (a) to the Adviser at
Grueneburgweg 113-115, Frankfurt am Main 60323, Germany, Attention: President,
with a copy to the Investment Manager; (b) to the Investment Manager at 31 West
52nd Street, New York, New York 10019, Attention: President and Managing
Director; (c) to the Trust at Cardinal Avenue, George Town, Grand Cayman, Cayman
Islands, BWI; or (d) at such other address or to such other individual as any of
the foregoing shall designate by notice to the others.
1 This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original.
<PAGE>
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 28th day
of July, 1997.
DEUTSCHE FUND MANAGEMENT, INC.
By: ________________________________
President and Managing Director
DWS PORTFOLIO MANAGEMENT GmbH
By: _________________________________
DEUTSCHE MORGAN GRENFELL INVESTMENT MANAGEMENT INC.
By: ________________________________
Acknowledged and Confirmed.
DEUTSCHE PORTFOLIOS
By:________________________
<PAGE>
Schedule A
Fee (annualized
% of average
Portfolio daily net assets)
- --------- -----------------
DWS ADVISER
Top 50 World Portfolio 0.75%
Top 50 Europe Portfolio 0.75
Top 50 Asia Portfolio 0.75
Provesta Portfolio 0.60
Investa Portfolio 0.60
DWS Japan Portfolio 0.60
Inter-Renta Portfolio 0.50
German Bond Portfolio 0.50
DMGIM ADVISER
Top 50 US Portfolio 0.75%
US Money Market Portfolio 0.1125
CUSTODIAN AGREEMENT
BETWEEN
DEUTCHE PORTFOLIOS
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Bank Appointed Custodian................................... 1
2. Definitions................................................ 1
2.1 Authorized Person ....................... 1
2.2 Board ................................ 1
2.3 Security ................................ 1
2.4 Portfolio Security ...................... 1
2.5 Officers' Certificate ................... 1
2.6 Book-Entry System ...................... 2
2.7 Depository.............................. 2
2.8 Proper Instructions .................... 2
3. Separate Accounts ............................................. 2
4. Certification as to Authorized Persons .................. 2
5. Custody of Cash ....................................... 3
5.1 Purchase of Securities................. 3
5.2 Redemptions ...................... 3
5.3 Distributions and Expenses of Fund..... 3
5.4 Payment in Respect of Securities....... 3
5.5 Repayment of Loans .................... 3
5.6 Repayment of Cash ..................... 3
5.7 Foreign Exchange Transactions.......... 4
5.8 Other Authorized Payments.............. 4
5.9 Termination............................ 4
6. Securities .............................................. 4
6.1 Segregation and Registration........... 4
6.2 Voting and Proxies .................... 5
6.3 Corporate Action ...................... 5
6.4 Book-Entry System ..................... 5
6.5 Use of a Depository ................... 6
6.6 Use of Book-Entry System for Commercial Paper... 7
6.7 Use of Immobilization Programs.................. 8
6.8 Eurodollar CDs ...................... 8
6.9 Options and Futures Transactions......... 8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter.... . 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges....... 9
6.10 Segregated Account ..................... 9
<PAGE>
PAGE
6.11 Interest Bearing Call or Time Deposits.............10
6.12 Transfer of Securities.............................11
7. Redemptions ...................................................12
8. Merger, Dissolution, etc. of Fund ................................. 12
9. Actions of Bank Without Prior Authorization....................... 12
10. Collection and Defaults........................................... 13
11. Maintenance of Records..............................................13
12. [Reserved]
13. Additional Services .........................................13
14. Duties of the Bank .........................................14
14.1 Performance of Duties and
Standard of Care .................................14
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States.............14
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States.................15
14.4 Insurance.........................................16
14.5 Fees and Expenses of Bank.........................16
14.6 Advances by Bank ................................16
14.7 Property of the Fund and Confidentiality..........17
14.8 Relief............................................18
15. Limitation of Liability..................................................18
16. Termination.........................................................19
17. Confidentiality of Bank Information.................................20
18. Notices ...........................................................20
19. Amendments..........................................................20
20. Parties ...........................................................20
21. Governing Law.......................................................21
<PAGE>
PAGE
22. Counterparts........................................................ 21
23. Entire Agreement.................................................... 21
24. Limitation of Liability............................................. 21
25. Signature License................................................... 21
APPENDICES
Appendix A ................................... Portfolios
Appendix B ................................... Fee Schedule
Appendix C ................................... Additional Services
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 28th day of September, 1997, between the
Deutsche Portfolios , a New York business trust (the "Fund"), and Investors Bank
& Trust Company, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company, desires, on behalf
of the portfolios listed in APPENDIX A hereto, to place and maintain all of its
portfolio securities and cash in the custody of the Bank. The Bank has at least
the minimum qualifications required by Section 17(f)(1) of the Investment
Company Act of 1940 (the "1940 Act") to act as custodian of the portfolio
securities and cash of the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on APPENDIX B
hereto.
2. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 SECURITY. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 PORTFOLIO SECURITY. Portfolio Security will mean any security
owned by the Fund.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
<PAGE>
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Fund shall cause all oral instructions to be promptly confirmed in writing.
The Bank shall act upon and comply with any subsequent Proper Instruction which
modifies a prior instruction and the sole obligation of the Bank with respect to
any follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action requires
the Bank to act, the Fund shall give the Bank specific Proper Instructions as to
the action required. Upon receipt by the Bank of an Officers' Certificate as to
the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided that
the Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. SEPARATE ACCOUNTS. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all investment
earnings thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to the
Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund will sign a new or amended certification setting forth the
change and the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification received by the Bank.
<PAGE>
5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7) days notice prior to
withdrawal of cash from such an account. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 REDEMPTIONS. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for
the purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
<PAGE>
5.7 FOREIGN EXCHANGE TRANSACTIONS.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements")which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions of
the Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 TERMINATION: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and
hold pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, and will execute and deliver all
such certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank
appropriate instruments to enable it to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Portfolio
Securities which may from time to time be registered in the name of the Fund.
<PAGE>
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials delivered to the Bank with respect to such
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
6.3 CORPORATE ACTION. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). If possible, the Response Deadline shall be at least three business
days after such notification to the Fund, provided that in no event shall the
Response Deadline be later than 48 hours prior to the Response expiration time
set by the depository processing such Corporate Action. The Bank shall forward
to the Fund via telecopier and/or overnight courier all notices, information
statements or other materials relating to the Corporate Action within
twenty-four (24) hours of receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00 p.m.
on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to use its best
efforts in such circumstances shall in no way create any duty upon the Bank to
complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(g) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
6.4 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
<PAGE>
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank shall also, by book
entry or otherwise, identify as belonging to the Fund a quantity of securities
in a fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment for the account of the
Fund. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the Fund, be maintained
for the Fund by the Bank and shall be provided to the Fund at its request. The
Bank shall send the Fund a confirmation, as defined by Rule 17f-4 of the 1940
Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) Anything to the contrary in this Agreement
notwithstanding, the Bank shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Book-Entry System by reason of any
negligence, willful misfeasance or misconduct of the Bank or of any of its
employees or from any negligent failure by the Bank of its duty to undertake
reasonable efforts to enforce effectively such rights as it may have against the
Book-Entry System; at the election of the Fund, it shall be entitled to be
subrogated to the Bank in any claim against the Book-Entry System or any other
person which the Bank 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 loss or damage.
6.5 USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
<PAGE>
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall be subject to the same liability and duty
to the Fund and its shareholders with respect to all securities of the Fund, and
all cash, stock dividends, rights and items of like nature to which the Fund is
entitled, held or received by a central securities system as agent for the Bank,
pursuant to the foregoing authorization, as if the same were held or received by
the Bank at its own offices. In this connection, without limiting the foregoing
duty or liability, the Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such Security is
lost, destroyed, wrongfully taken or otherwise not available to be returned to
the Bank upon its request;
(ii) Proxy materials received by a Depository with
respect to Portfolio Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the
Bank such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.6 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of
<PAGE>
Proper Instructions and upon receipt of confirmation from an Issuer (as defined
below) that the Fund has purchased such Issuer's Book-Entry Paper, the Bank
shall issue and hold in book-entry form, on behalf of the Fund, commercial paper
issued by issuers with whom the Bank has entered into a book-entry agreement
(the "Issuers"). In maintaining procedures for Book-Entry Paper, the Bank agrees
that:
(a) The Bank will maintain all Book-Entry Paper held
by the Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the Fund
may reasonably request from time to time.
.
6.7 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to the Fund and that the books of the Bank identify the European
Branch holding such Portfolio
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.8, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund.
6.9 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ
or Over-the-Counter.
(i) The Bank shall take action as to put options
("puts") and call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if
<PAGE>
necessary, the Fund, relating to the compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange, or of
any similar organization or organizations.
(ii) Unless another agreement requires it to do so,
the Bank shall be under no duty or obligation to see that the Fund has deposited
or is maintaining adequate margin, if required, with any broker in connection
with any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Fund, the propriety of any such purchase
or sale, or the adequacy of any collateral delivered to a broker in connection
with an option or deposited to or withdrawn from a Segregated Account (as
defined in subsection 6.10 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation to: (i) periodically check
or notify the Fund that the amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect such broker or the Fund against
any loss; (ii) effect the return of any collateral delivered to a broker; or
(iii) advise the Fund that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Fund in accordance with
the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(2) of this Section 6.8 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any
agreement among the Fund, the Bank and a broker-dealer registered under the
Exchange Act and a member of the NASD or any Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Options Clearing Corporation, the rules, policies and
interpretations of the Securities and Exchange Commission, and the rules of any
registered national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar organizations
regarding escrow or other arrangements in connection with transactions by the
Fund;
(ii) for the purpose of segregating cash or
securities in connection with options purchased or written by the Fund or
commodity futures purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash,
U.S. Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
<PAGE>
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in
the case of this clause (e), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or of the executive
committee of the Board signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such Segregated Account and declaring such purposes to be proper corporate
purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance
with the provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to
(a)(iii) or (a)(iv) above, for sale or delivery to meet the Fund's obligations
under outstanding forward commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal
or greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding
forward commitment or when-issued agreements for the purchase of portfolio
securities or reverse repurchase agreements are sold to other parties or the
Fund's obligations thereunder are met from assets of the Fund other than those
in the Segregated Account;
(v) for delivery upon settlement of a forward
commitment or when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
<PAGE>
6.12 TRANSFER OF SECURITIES. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section only upon receipt of
Proper Instructions. The Proper Instructions shall state that such transfer,
exchange or delivery is for a purpose permitted under the terms of this Section
6.11, and shall specify the applicable subsection, or describe the purpose of
the transaction with sufficient particularity to permit the Bank to ascertain
the applicable subsection. After receipt of such Proper Instructions, the Bank
will transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
or, unless the Bank has received Proper Instructions providing otherwise for any
specific jurisdiction, against payment to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in which
the transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund
upon authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the Fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
<PAGE>
may deliver such pledged Portfolio Securities to or for the
account of the lender as provided in such loan agreement;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund
to a bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. REDEMPTIONS. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles of Incorporation or Declaration of Trust
and By-laws of the Fund (the "Articles"), from assets available for said
purpose.
8. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Fund all checks, drafts, or other negotiable or transferable instruments
or other orders for the payment of money received by it for
<PAGE>
the account of the Fund and hold for the account of the Fund all income,
dividends, interest and other payments or distributions of cash with respect to
the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and other certificates and affidavits required by the Internal Revenue Code or
the regulations of the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal. The Bank shall provide to the Fund a monthly report, in a form agreed
to by the Bank and the Fund, listing, among other things, overdue or uncollected
items.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
12. [Reserved]
13. ADDITIONAL SERVICES. The Bank shall perform the additional
services for the Fund as are set forth on APPENDIX C hereto. APPENDIX C may
be amended from time to time upon agreement of the
<PAGE>
parties to include further additional services to be provided by the Bank to the
Fund, at which time the fees set forth in APPENDIX B shall be appropriately
increased.
14. DUTIES OF THE BANK.
14.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Articles, By-laws, any federal or state statutes or
any rule or regulation of any governmental agency.
14.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND
HELD IN THE UNITED STATES. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ
subcustodians, provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in the
United States. The Bank shall have no liability to the Fund or any other person
by reason of any act or omission of any subcustodian and the Fund shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
subcustodian, provided, however, that this provision shall not protect the Bank
in the event of the Bank's own negligence, willful misfeasance or misconduct or
from any negligent disregard of its own duties hereunder. Upon request of the
Bank, the
<PAGE>
Fund shall assume the entire defense of any action, suit, or claim subject to
the foregoing indemnity. The Fund shall pay all fees and expenses of any
subcustodian.
14.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS. Pursuant to a
Delegation Agreement of even date herewith by and between the Bank and the Fund
(the "Delegation Agreement"), the Fund has delegated certain responsibilities
concerning the Fund's Portfolio Securities and other assets maintained outside
the United States, including the selection of Eligible Foreign Subcustodians (as
defined in the Delegation Agreement (each, a "Selected Foreign Sub-Custodian").
The terms of the Delegation Agreement shall control as to the items set forth
therein.
(b) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
Selected Foreign Sub-Custodian. Each agreement pursuant to which the Bank
employs a foreign banking institution shall require that such institution
establish a custody account for the Bank and hold in that account Foreign
Portfolio Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.
(c) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Fund held by a Selected Foreign Sub-Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If at any time any Foreign Portfolio Securities shall be registered in the name
of the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any such nominee harmless from any liability by reason of the registration of
such securities in the name of such nominee.
Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for Foreign Portfolio Securities received
for the account of the Fund and delivery of Foreign Portfolio Securities
maintained for the account of the Fund may be effected in accordance with the
customary established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, if applicable, 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 unless the Bank receives Proper Instructions prohibiting
delivery against expectation of later payment in any applicable jurisdiction.
In connection with any action to be taken with
respect to the Foreign Portfolio Securities held hereunder, including, without
limitation, the exercise of any voting rights, subscription rights, redemption
rights, exchange rights, conversion rights or tender rights, or any other action
in connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit to the
Fund such information in connection therewith as is made available to the Bank
by the Foreign Sub-Custodian, and shall promptly forward to the applicable
Foreign Sub-Custodian any instructions, forms or certifications with respect to
such Rights, and any instructions relating to the actions to be taken in
connection therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further duty
or obligation with respect to such Rights, including, without limitation, the
determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any
<PAGE>
applicable laws or regulations, or market practices within the market in which
such action is to be taken or omitted.
(d) LIABILITY OF SELECTED FOREIGN SUB-CUSTODIANS. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement")shall require the institution to
exercise reasonable care in the performance of its duties and to indemnify, and
hold harmless, the Bank and each Fund from and against certain losses, damages,
costs, expenses, liabilities or claims arising out of or in connection with the
institution's performance of such obligations, all as set forth in the
applicable Foreign Sub-Custodian Agreement. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Bank with respect to any
claims against a subcustodian 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. The Fund
acknowledges that the Bank, as a participant in Euro-clear, is subject to the
Terms and Conditions Governing the Euro-Clear System, a copy of which has been
made available to the Fund. The Fund acknowledges that pursuant to such Terms
and Conditions, Morgan Guaranty Brussels shall have the sole right to exercise
or assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.
(e) TAX LAW. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The Bank shall administer the tax reclaim process and shall work with
the Selected Foreign Sub-custodian to pursue any claim for exemption or refund
under the tax law of jurisdictions for which the Fund has provided information
regarding obligations imposed on the Fund.
14.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5. FEES AND EXPENSES OF THE BANK. The Fund will pay or reimburse
the Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper disbursements,
expenses and charges made or incurred by the Bank in the performance of this
Agreement (including any duties listed on any Schedule hereto, if any) including
any indemnities for any loss, liabilities or expense to the Bank as provided
above. For the services rendered by the Bank hereunder, the Fund will pay to the
Bank such compensation or fees at such rate and at such times as shall be agreed
upon in writing by the parties from time to time. The Bank will also be entitled
to reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 ADVANCES BY THE BANK. The Bank may, in its sole
discretion, advance funds on behalf of the Fund to make any payment permitted by
this Agreement upon receipt of any proper authorization required by this
Agreement for such payments by the Fund. Should such a payment or payments, with
advanced funds, result in an overdraft (due to insufficiencies of the Fund's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness a loan made by the Bank to the Fund payable on
demand. Such overdraft shall bear interest at the current rate charged by the
Bank for such loans unless the Fund shall provide the Bank with agreed upon
compensating balances. The Fund agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness, in
and to any property at any time held by it for the Fund's benefit or in which
the Fund has
<PAGE>
an interest and which is then in the Bank's possession or control (or in the
possession or control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in the Bank's sole discretion, at any time to charge any
overdraft or indebtedness, together with interest due thereon, against any
balance of account standing to the credit of the Fund on the Bank's books.
14.7 PROPERTY OF THE FUND AND CONFIDENTIALITY. The Fund's records,
including all those maintained hereunder by the Bank, whether in magnetic media,
hard copy, film form or other format, shall be the Fund's property for all
purposes, and the Bank shall treat confidentially and as proprietary information
of the fund all such records and other information relative to the Fund which is
not independently available to the Bank or in the public domain, and shall use
such records only in connection with the performance of its duties hereunder and
for no other purpose. In particular, the Bank agrees:
(a) that all information and data so acquired by it or its
employees, agents or contractors under this Agreement, or in contemplation
thereof, shall be and shall remain the Fund's exclusive property;
(b) to inform its employees, agents or contractors engaged in
handling such information and data of the confidential nature of such
information and data;
(c) to limit access to such information and data to authorized
employees, agents or contractors of the Bank and the Fund who have a need to
know and use such information and data in connection with this Agreement and the
services to be supplied herein;
(d) to keep, and have their employees, agents and contractors
keep , any and all such information and data confidential;
(e) not to copy or publish or disclose such information and
data to others or authorize their employees, agents, contractors or anyone else,
to copy or publish or disclose such information and data to others without the
other party's prior written approval, except if required by a state or federal
court or agency, and in such an event prompt written notice of such disclosure
requirement shall be provided to the other party if permitted by law; and
(f) that upon termination of this Agreement, all records and
other confidential information of the Fund in the possession of the Bank shall
be returned to the Fund or its designated successor custodian, offshore agent,
administrator, subadministrator or fund accountant, as provided herein.
The confidentiality provisions noted above will survive termination of
this Agreement for a period of two years.
The parties further agree that this Agreement will be considered
confidential during the term of its existence, that access to it will be limited
to those employees, agents, contractors or other persons who have a need to know
of or utilize the Agreement (including, without being limited to, the fund's
Board of Directors or Trustees, the auditors and counsel to the Fund, and
Deutsche Fund Management, Inc. or any of its affiliates), and that neither party
will publish or disclose the Agreement to others without the other party's prior
written approval except if required by a state or federal court or agency, and
in such event prompt written notice of such disclosure requirement shall be
provided to the other party if permitted by law.
<PAGE>
14.8 RELIEF. The Bank recognizes that the property and proprietary
information of the Fund is unique, and that the Fund cannot be fully compensated
by money damages and would be irreparably harmed by the disclosure of its
confidential information and data in violation of the provisions of Paragraph
14.7. The Bank therefore agrees that the Fund may seek immediate relief at
equity for any failure to comply with Paragraph 14.7 hereof, in addition to any
other remedies the Fund may have in law or in equity.
14.9 REPORTS BY INDEPENDENT PUBLIC ACCOUNTANTS. Upon reasonable
request by the Fund, the Bank shall provide the Fund with copies of any reports
created by independent public accounts relating to the accounting system,
internal accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts in connection with the services
provided by the Bank to its clients that are the same or similar as the services
provided under this Agreement.
15. LIMITATION OF LIABILITY.
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the negligence, willful
misfeasance or bad faith of the Bank or any Indemnified Party. Without limiting
the foregoing, neither the Bank nor the Indemnified Parties shall be liable for,
and the Bank and the Indemnified Parties shall be indemnified against, any Claim
arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party
in good faith reliance upon the terms of this Agreement, any Officer's
Certificate, Proper Instructions, resolution of the Board, telegram, telecopier,
notice, request, certificate or other instrument reasonably believed by the Bank
to genuine;
(b) Any act or omission of any subcustodian selected by or at
the direction of the Fund;
(c) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(d) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(e) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of capital stock of the
Fund or (ii) the Yield Calculation; or
(f) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation, the unavailability of energy sources
and other similar happenings or events.
<PAGE>
15.2 Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
16. TERMINATION.
16.1 The term of this Agreement shall be three years commencing upon
the effective date of the Fund's registration statement (the "Initial Term"),
unless earlier terminated as provided herein. After the expiration of the
Initial Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless (i) the Fund delivers a
notice of non-renewal to the Bank no later than six months prior to the
expiration of the Initial Term, or (ii) the Bank delivers a notice of
non-renewal to the Fund no later than one year prior to the expiration of the
Initial Term.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
(b) The Fund may terminate this Agreement during any Renewal
Term upon six months written notice to the Bank. The Bank may terminate this
Agreement during any Renewal Term upon one year written notice to the Fund. Any
termination pursuant to this paragraph 16.1(b) shall be effective upon
expiration of such notice period.
16.2 In the event of the termination of this Agreement, the Bank
will immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (16.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$10,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board. Thereafter, the Bank
shall be released from any and all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement,
except for the Bank's obligations under Section 14.7 hereof and any liability to
the Fund already accrued and payable.
<PAGE>
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. CONFIDENTIALITY OF BANK INFORMATION. The Fund agrees than any
non-public information obtained hereunder concerning the Bank is confidential
and may not be disclosed without the consent of the Bank, except as may be
required by applicable law or at the request of a governmental agency. The Fund
further agrees that a breach of this provision would irreparably damage the Bank
and accordingly the Fund agrees that the Bank is entitled, in addition to all
other remedies at law or in equity to an injunction or injunctions without bond
or other security to prevent breaches of this provision.
18. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Deutsche Portfolios
c/o IBT Trust Company (Cayman) Ltd.
P.O. Box 501
Cardinal Avenue
Georgetown, Grand Cayman
Attention: Carmen Thompson
With a copy to:
Deutsche Fund Management, Inc.
31 W. 52nd Street
New York, NY 10019
Attention: President
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: James Keenan, Director, Client Management
With a copy to: John E. Henry, General Counsel
or at such other place as such party may from time to time
designate in writing.
19. AMENDMENTS. This Agreement may not be altered or amended, except
by an instrument in writing, executed by both parties.
20. PARTIES. This Agreement will be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns; provided,
however, that this Agreement will not be
<PAGE>
assignable by the Fund without the written consent of the Bank or by the Bank
without the written consent of the Fund, authorized and approved by its Board;
and provided further that termination proceedings pursuant to Section 16 hereof
will not be deemed to be an assignment within the meaning of this provision.
21. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. LIMITATION OF LIABILITY. The Bank agrees that the obligations
assumed by the Fund hereunder shall be limited in all cases to the assets of the
Fund and that the Bank shall not seek satisfaction of any such obligation from
the officers, agents, employees, trustees, or shareholders of the Fund.
25. SIGNATURE LICENSE. The Bank shall remain a licensee of Signature Financial
Group, Inc. with respect to the trademarks of Hub(R) and Spoke(R)1 and related
proprietary rights during the term of this Agreement. -------- 1 "Hub" and
"Spoke" and "Hub and Spoke" are registered trademarks of Signature Financial
Group, Inc.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
DEUTSCHE PORTFOLIOS
By:..............................
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:............................
Name:
Title:
<PAGE>
APPENDIX A
PORTFOLIOS
Provesta Portfolio (US Dollar)
Investa Portfolio (US Dollar)
Japanese Equity Portfolio (US Dollar)
Global Bond Portfolio (US Dollar)
European Bond Portfolio (US Dollar)
Top 50 World Portfolio (US Dollar)
Top 50 Europe Portfolio (US Dollar)
Top 50 Asia Portfolio (US Dollar)
Top 50 US Portfolio (US Dollar)
US Money Market Portfolio (US Dollar)
FUND ACCOUNTING AGREEMENT
AGREEMENT made as of this 28th day of September, 1997, between the
Deutsche Portfolios, a New York business trust (the "Fund") and IBT Fund
Services (Canada) Inc. ("IBT").
The Fund, an open-end management investment company desires, on behalf
of the portfolios listed on APPENDIX A hereto, to retain IBT to perform certain
fund accounting services for the several portfolios of the Fund currently
existing and hereafter established (the "Portfolios"), and IBT has indicated its
willingness to so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. DEFINITIONS. Whenever used herein, the terms listed below will have
the following meaning:
1.1 AUTHORIZED PERSON. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
1.2 BOARD. Board will mean the Board of Trustees of the Fund.
1.3 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
1.4 PROPER INSTRUCTIONS. Proper Instructions shall mean instructions
(which may be continuing instructions) regarding matters signed or initialed by
an Authorized Person. Oral instructions will be considered Proper Instructions
if IBT reasonably believes them to have been given by an Authorized Person. The
Fund shall cause all oral instructions to be promptly confirmed in writing. IBT
shall act upon and comply with any subsequent Proper Instruction which modifies
a prior instruction and the sole obligation of IBT with respect to any follow-up
or confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires IBT to
act, the Fund shall give IBT specific Proper Instructions as to the action
required. Upon receipt by IBT of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and IBT agree in writing that such procedures afford adequate safeguards
for the Fund's assets.
2. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with IBT his or her
certification to IBT, in such form as may be acceptable to IBT, of (i) the names
and signatures of the Authorized Persons and (ii) the names of the members of
the Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund will sign a new or amended certification setting forth the
change and the new, additional or omitted names or signatures. IBT will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification received by IBT.
<PAGE>
3. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
4. FUND EVALUATION AND YIELD CALCULATION
4.1 FUND EVALUATION. IBT shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of each Portfolio, such determination to be made in accordance with the
provisions of the Declaration of Trust and By-laws of the Fund and the
Registration Statement relating to each Portfolio, as they may from time to time
be amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Fund, the proper exchange and the NASD or
such other persons as the Fund may request of the results of such computation
and determination. In computing the net asset value hereunder, IBT may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by IBT, (ii)
reserves, if any, authorized by the Board or that no such reserves have been
authorized, (iii) the source of the quotations to be used in computing the net
asset value, (iv) the value to be assigned to any security for which no price
quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and IBT shall
not be responsible for any loss occasioned by such reliance or for any good
faith reliance on any quotations received from a source pursuant to (iii) above.
4.2. YIELD CALCULATION. IBT will compute the performance results of
the Portfolios (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) IBT shall compute the Yield Calculation for the Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, IBT will derive the
items of data necessary for the computation from the records it generates and
maintains for the Fund pursuant Section 3 hereof. IBT shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of IBT, the Fund shall provide, and IBT
shall be entitled to rely on, written standards and guidelines to be followed by
IBT in interpreting and applying the computation methods set forth in the
Releases or any Subsequent Staff Positions as they specifically apply to the
Fund. In the event that the computation methods in the Releases or the
Subsequent Staff Positions or the
<PAGE>
application to the Fund of a standard or guideline is not free from doubt or in
the event there is any question of interpretation as to the characterization of
a particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income or
return of capital, etc.) or otherwise or as to any other element of the
computation which is pertinent to the Fund, the Fund or its designated agent
shall have the full responsibility for making the determination of how the
security or payment is to be treated for purposes of the computation and how the
computation is to be made and shall inform IBT thereof on a timely basis. IBT
shall have no responsibility to make independent determinations with respect to
any item which is covered by this Section, and shall not be responsible for its
computations made in accordance with such determinations so long as such
computations are mathematically correct.
(d) The Fund shall keep IBT informed of all publicly available
information and of any non-public advice, or information obtained by the Fund
from its independent auditors or by its personnel or the personnel of its
investment adviser, or Subsequent Staff Positions related to the computations to
be undertaken by IBT pursuant to this Agreement and IBT shall not be deemed to
have knowledge of such information (except as contained in the Releases) unless
it has been furnished to IBT in writing.
5. FEES. For the services rendered pursuant to this Agreement, the Fund
agrees to pay IBT the fees set forth on APPENDIX B hereto.
6. ADDITIONAL SERVICES. IBT shall perform the additional services for
the Fund as are set forth on APPENDIX C hereto. APPENDIX C may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by IBT to the Fund, at which time the fees set forth in
APPENDIX B shall be appropriately increased.
7. LIMITATION OF LIABILITY.
7.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall IBT or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold IBT and the Indemnified Parties
harmless from and against any and all loss, damage, liability, actions, suits,
claims, costs and expenses, including legal fees, (a "Claim") arising as a
result of any act or omission of IBT or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the negligence, willful
misfeasance or bad faith of IBT or any Indemnified Party. Without limiting the
foregoing, neither IBT nor the Indemnified Parties shall be liable for, and IBT
and the Indemnified Parties shall be indemnified against, any Claim arising as a
result of:
(a) Any act or omission by IBT or any Indemnified Party in
good faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by IBT to genuine;
(b) Information relied on in good faith by IBT and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Fund or
(ii) the Yield Calculation; or
(c) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation, the unavailability of energy sources
and other similar happenings or events.
<PAGE>
7.2 Notwithstanding anything to the contrary in this Agreement, in
no event shall IBT or the Indemnified Parties be liable to the Fund or any third
party for lost profits or lost revenues or any special, consequential, punitive
or incidental damages of any kind whatsoever in connection with this Agreement
or any activities hereunder.
8. TERMINATION.
8.1 The term of this Agreement shall be three years commencing upon
the effective date of the Fund's registration statement (the "Initial Term"),
unless earlier terminated as provided herein. After the expiration of the
Initial Term, the term of this Agreement shall automatically renew for
successive one-year terms (each a "Renewal Term") unless (i) the Fund delivers a
notice of non-renewal to IBT no later than six months prior to the expiration of
the Initial Term, or (ii) IBT delivers a notice of non-renewal to the Fund no
later than one year prior to the expiration of the Initial Term.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
(b) The Fund may terminate this Agreement during any Renewal
Term upon six months written notice to IBT. IBT may terminate this Agreement
during any Renewal term upon one year notice to the Fund. Any termination
pursuant to this paragraph 7.1(b) shall be effective upon expiration of such
notice period.
8.2 The Fund shall reimburse IBT for any reasonable expenses
incurred by IBT in connection with the termination of this Agreement.
8.3 At any time after the termination of this Agreement, the Fund
may, upon written request, have reasonable access to the records of IBT relating
to its performance of its duties as hereunder.
9. PROPERTY OF THE FUND AND CONFIDENTIALITY.
9.1 The Fund's records, including all those maintained hereunder by
the Bank, whether in magnetic media, hard copy, film form or other format, shall
be the Fund's property for all purposes, and the Bank shall treat confidentially
and as proprietary information of the fund all such records and other
information relative to the Fund which is not independently available to the
Bank or in the public domain, and shall use such records only in connection with
the performance of its duties hereunder and for no other purpose. In particular,
the Bank agrees:
(a) that all information and data so acquired by it or its
employees, agents or contractors under this Agreement, or in contemplation
thereof, shall be and shall remain the Fund's exclusive property;
(b) to inform its employees, agents or contractors engaged in
handling such information and data of the confidential nature of such
information and data;
(c) to limit access to such information and data to authorized
employees, agents or contractors of the Bank and the Fund who have a need to
know and use such information and data in connection with this Agreement and the
services to be supplied herein;
<PAGE>
(d) to keep, and have their employees, agents and contractors
keep , any and all such information and data confidential;
(e) not to copy or publish or disclose such information and
data to others or authorize their employees, agents, contractors or anyone else,
to copy or publish or disclose such information and data to others without the
other party's prior written approval, except if required by a state or federal
court or agency, and in such an event prompt written notice of such disclosure
requirement shall be provided to the other party if permitted by law; and
(f) that upon termination of this Agreement, all records and
other confidential information of the Fund in the possession of the Bank shall
be returned to the Fund or its designated successor custodian, offshore agent,
administrator, subadministrator or fund accountant, as provided herein.
The confidentiality provisions noted above will survive termination of
this Agreement for a period of two years.
The parties further agree that this Agreement will be considered
confidential during the term of its existence, that access to it will be limited
to those employees, agents, contractors or other persons who have a need to know
of or utilize the Agreement (including, without being limited to, the fund's
Board of Directors or Trustees, the auditors and counsel to the Fund, and
Deutsche Fund Management, Inc. or any of its affiliates), and that neither party
will publish or disclose the Agreement to others without the other party's prior
written approval except if required by a state or federal court or agency, and
in such event prompt written notice of such disclosure requirement shall be
provided to the other party if permitted by law.
9.2 RELIEF. The Bank recognizes that the property and proprietary
information of the Fund is unique, and that the Fund cannot be fully compensated
by money damages and would be irreparably harmed by the disclosure of its
confidential information and data in violation of the provisions of Paragraph
9.1. The Bank therefore agrees that the Fund may seek immediate relief at equity
for any failure to comply with Paragraph 9.1 hereof, in addition to any other
remedies the Fund may have in law or in equity.
10. CONFIDENTIALITY OF IBT INFORMATION. The Fund agrees that any
non-public information obtained hereunder concerning IBT is confidential and may
not be disclosed without the prior written consent of IBT, except as may be
required by applicable law or at the request of a governmental agency. The Fund
further agrees that a breach of this provision would irreparably damage IBT and
the Fund accordingly agrees that IBT is entitled, in addition to all other
remedies at law or in equity, to an injunction or injunctions without bond or
other security to prevent breaches of this provision.
11. SERVICE LEVEL STANDARDS. Subject to the non-occurrence of an event
of force majeure and the performance of the Fund's obligations described in this
Agreement, the Company agrees that the services will be provided in accordance
with the service level standards specified in APPENDIX D hereto. IBT's fees will
be adjusted based upon performance based reductions as described in APPENDIX D.
12. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (i) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) had delivery with signature to such party at its office at
the address set forth below, namely:
<PAGE>
(a) In the case of notices sent to the Fund to:
Deutsche Portfolios
c/o IBT Trust Company (Cayman) Ltd.
P.O. Box 501
Cardinal Avenue
Georgetown, Grand Cayman
Attention: Carmen Thompson
With a copy to:
Deutsche Fund Management, Inc.
31 W. 52nd Street
New York, NY 10019
Attention: President
(b) In the case of notices sent to IBT to:
IBT Fund Services (Canada) Inc.
1 First Canadian, King Street West
Suite 2800
PO Box 231
Toronto, Canada M5X1C8
Attention:
With a copy to: John E. Henry, General Counsel
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
or at such other place as such party may from time to time
designate in writing.
13. AMENDMENTS. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
14. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of IBT or by IBT without the written consent of the
Fund, authorized and approved by its Board; and provided further that
termination proceedings pursuant to Section 8 hereof will not be deemed to be an
assignment within the meaning of this provision.
15. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
17. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
<PAGE>
18. LIMITATION OF LIABILITY. IBT is hereby expressly put on notice of
the limitation of liability set forth in the Declaration of Trust of the Fund
and agrees that the obligations assumed by the Fund hereunder shall be limited
in all cases to the assets of the Fund and that IBT shall not seek satisfaction
of any such obligation from the officers, agents, employees, trustees, or
shareholders of the Fund.
19. SIGNATURE LICENSE. IBT shall remain a licensee of Signature
Financial Group, Inc. with respect to the trademarks of Hub(R) and Spoke(R)1 and
related proprietary rights during the term of this Agreement.
[Remainder of Page Intentionally Left Blank]
- --------
1 "Hub" and "Spoke" and "Hub and Spoke" are registered trademarks of Signature
Financial Group, Inc.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
DEUTSCHE PORTFOLIOS
By:.........................................
Name:
Title:
IBT FUND SERVICES (CANADA) INC.
By:...........................................
Name:
Title:
<PAGE>
APPENDIX A
PORTFOLIOS
Provesta Portfolio (US Dollar)
Investa Portfolio (US Dollar)
Japanese Equity Portfolio (US Dollar)
Global Bond Portfolio (US Dollar)
European Bond Portfolio (US Dollar)
Top 50 World Portfolio (US Dollar)
Top 50 Europe Portfolio (US Dollar)
Top 50 Asia Portfolio (US Dollar)
Top 50 US Portfolio (US Dollar)
US Money Market Portfolio (US Dollar)
ADMINISTRATION AGREEMENT
BETWEEN
DEUTSCHE PORTFOLIOS
AND
IBT TRUST COMPANY (CAYMAN) LTD.
<PAGE>
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of September 28, 1997 by and
between the Deutsche Portfolios, a New York business trust (the "Fund"), and IBT
Trust Company (Cayman) Ltd.
("IBT").
WHEREAS, the Fund, on behalf of the portfolios listed on APPENDIX 1
hereto, desires to retain IBT to render certain administrative services to the
Fund, with respect to each of its portfolios (the "Portfolios") and IBT is
willing to render such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints IBT to act as Administrator of
the Fund on the terms set forth in this Agreement. IBT accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided.
2. DELIVERY OF DOCUMENTS. The Fund has furnished IBT with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Trustees authorizing the
appointment of IBT to provide certain administrative services to the Fund and
approving this Agreement;
(b) The Fund's Declaration of Trust and all amendments thereto
(the "Declaration");
(c) The Fund's by-laws and all amendments thereto (the
"By-Laws");
(d) The Fund's agreements with all service providers which
include any investment advisory agreements, sub-investment advisory agreements,
custody agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements"); and
(e) Such other certificates, documents or opinions as may
mutually be deemed necessary or appropriate for IBT in the proper performance of
its duties hereunder.
The Fund will immediately furnish IBT with copies of all
amendments of or supplements to the foregoing. Furthermore, the Fund will notify
IBT as soon as possible of any matter which may materially affect the
performance by IBT of its services under this Agreement.
3. DUTIES OF ADMINISTRATOR. Subject to the supervision and direction of
the Trustees of the Fund, IBT, as Administrator, will assist in conducting
various aspects of the Fund's administrative operations and undertakes to
perform the services described in APPENDIX 2 hereto. IBT may, from time to time,
perform additional duties and functions which shall be set forth in an amendment
to such APPENDIX 2executed by both parties. At such time, the fee schedule
included in APPENDIX 3 hereto shall be appropriately amended.
In performing all services under this Agreement, IBT shall act
in conformity with the Fund's Declaration and By-Laws, as the same may be
amended from time to time, and the investment objectives, investment policies
and other practices and policies set forth in the Fund's offering documents, as
the same may be amended from time to time. Notwithstanding any item discussed
herein, IBT has no discretion over the Fund's assets or choice of investments
and cannot be held liable for any problem relating to such investments.
<PAGE>
4. DUTIES OF THE FUND. The Fund agrees to make its legal counsel
available to IBT for instruction with respect to any matter of law arising in
connection with IBT's duties hereunder, and the Fund further agrees that IBT
shall be entitled to rely on such instruction without further investigation on
the part of IBT.
5. FEES AND EXPENSES.
(a) For the services to be rendered and the facilities to be
furnished by IBT, as provided for in this Agreement, the Fund will compensate
IBT in accordance with the fee schedule attached as APPENDIX 3 hereto. Such fees
do not include out-of-pocket disbursements (as delineated on the fee schedule or
other expenses with the prior approval of the Fund's management) of IBT for
which IBT shall be entitled to bill the Fund separately and for which the Fund
shall reimburse IBT.
(b) IBT shall not be required to pay any expenses incurred by
the Fund.
6. LIMITATION OF LIABILITY.
(a) IBT, its directors, officers, employees and agents shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its obligations and
duties under this Agreement, except a loss resulting from willful misfeasance,
bad faith or negligence in the performance of such obligations and duties, or by
reason of its reckless disregard thereof. The Fund will indemnify IBT, its
directors, officers, employees and agents against and hold it and them harmless
from any and all losses, claims, damages, liabilities or expenses (including
legal fees and expenses) resulting from any claim, demand, action or suit (i)
arising out of the actions or omissions of the Fund; (ii) arising out of the
offer or sale of any securities of the Fund in violation of (x) any requirement
under the federal securities laws or regulations, (y) any requirement under the
securities laws or regulations of any state, or (z) any stop order or other
determination or ruling by any federal or state agency with respect to the offer
or sale of such securities; or (iii) not resulting from the willful misfeasance,
bad faith or negligence of IBT in the performance of such obligations and duties
or by reason of its reckless disregard thereof.
(b) IBT may apply to the Fund at any time for instructions and
may consult counsel for the Fund, or its own counsel, and with accountants and
other experts with respect to any matter arising in connection with its duties
hereunder, and IBT shall not be liable or accountable for any action taken or
omitted by it in good faith in accordance with such instruction, or with the
opinion of such counsel, accountants, or other experts. IBT shall not be liable
for any act or omission taken or not taken in reliance upon any document,
certificate or instrument which it reasonably believes to be genuine and to be
signed or presented by the proper person or persons. IBT shall not be held to
have notice of any change of authority of any officers, employees, or agents of
the Fund until receipt of written notice thereof has been received by IBT from
the Fund.
(c) In the event IBT is unable to perform, or is delayed in
performing, its obligations under the terms of this Agreement because of acts of
God, strikes, legal constraint, government actions, war, emergency conditions,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control or other causes reasonably
beyond its control, IBT shall not be liable to the Fund for any damages
resulting from such failure to perform, delay in performance, or otherwise from
such causes.
(d) In no event shall IBT be liable for special, incidental or
consequential damages, even if advised of the possibility of such damages.
<PAGE>
7. TERMINATION OF AGREEMENT.
(a) The term of this Agreement shall be three years commencing
upon the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive one-year terms (each a "Renewal Term")
unless (i) the Fund delivers a notice of non-renewal to IBT no later than six
months prior to the expiration of the Initial Term, or (ii) IBT delivers a
notice of non-renewal to the Fund no later than one year prior to the expiration
of the Initial Term.
(i) Either party hereto may terminate this Agreement
prior to the expiration of the Initial Term in the event the other party
violates any material provision of this Agreement, provided that the violating
party does not cure such violation within 90 days of receipt of written notice
from the non- violating party of such violation.
(ii) The Fund may terminate this Agreement during any
Renewal Term upon six months written notice to IBT. IBT may terminate this
Agreement during any Renewal term upon one year notice to the Fund. Any
termination pursuant to this paragraph 7.1(b) shall be effective upon expiration
of such notice period.
(b) At any time after the termination of this Agreement, the
Fund may, upon written request, have reasonable access to the records of IBT
relating to its performance of its duties as Administrator.
8. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or IBT shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Deutsche Portfolios
c/o IBT Trust Company (Cayman) Ltd.
P.O. Box 501
Cardinal Avenue
Georgetown, Grand Cayman
Attention: Carmen Thompson
With a copy to:
Deutsche Fund Management, Inc.
31 W. 52nd Street
New York, NY 10019
Attention: President
To IBT:
IBT Trust Company (Cayman) Ltd.
P.O. Box 501
Cardinal Avenue
Georgetown, Grand Cayman
Attention: Carmen Thompson
<PAGE>
With a copy to:
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02117-9130
Attention: John E. Henry, General Counsel
(b) This Agreement shall extend to and shall be binding upon
the parties hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its conflict of
laws provisions.
(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
9. PROPERTY OF THE FUND AND CONFIDENTIALITY.
9.1 The Fund's records, including all those maintained hereunder by
the Bank, whether in magnetic media, hard copy, film form or other format, shall
be the Fund's property for all purposes, and the Bank shall treat confidentially
and as proprietary information of the fund all such records and other
information relative to the Fund which is not independently available to the
Bank or in the public domain, and shall use such records only in connection with
the performance of its duties hereunder and for no other purpose. In particular,
the Bank agrees:
(a) that all information and data so acquired by it or its
employees, agents or contractors under this Agreement, or in contemplation
thereof, shall be and shall remain the Fund's exclusive property;
(b) to inform its employees, agents or contractors engaged in
handling such information and data of the confidential nature of such
information and data;
(c) to limit access to such information and data to authorized
employees, agents or contractors of the Bank and the Fund who have a need to
know and use such information and data in connection with this Agreement and the
services to be supplied herein;
(d) to keep, and have their employees, agents and contractors
keep , any and all such information and data confidential;
(e) not to copy or publish or disclose such information and
data to others or authorize their employees, agents, contractors or anyone else,
to copy or publish or disclose such information and data to others without the
other party's prior written approval, except if required by a state or federal
court or agency, and in such an event prompt written notice of such disclosure
requirement shall be provided to the other party if permitted by law; and
(f) that upon termination of this Agreement, all records and
other confidential information of the Fund in the possession of the Bank shall
be returned to the Fund or its designated
<PAGE>
successor custodian, offshore agent, administrator, subadministrator or fund
accountant, as provided herein.
The confidentiality provisions noted above will survive termination of
this Agreement for a period of two years.
The parties further agree that this Agreement will be considered
confidential during the term of its existence, that access to it will be limited
to those employees, agents, contractors or other persons who have a need to know
of or utilize the Agreement (including, without being limited to, the fund's
Trustees or Trustees, the auditors and counsel to the Fund, and Deutsche Fund
Management, Inc. or any of its affiliates), and that neither party will publish
or disclose the Agreement to others without the other party's prior written
approval except if required by a state or federal court or agency, and in such
event prompt written notice of such disclosure requirement shall be provided to
the other party if permitted by law.
9.2 RELIEF. The Bank recognizes that the property and proprietary
information of the Fund is unique, and that the Fund cannot be fully compensated
by money damages and would be irreparably harmed by the disclosure of its
confidential information and data in violation of the provisions of Paragraph
9.1. The Bank therefore agrees that the Fund may seek immediate relief at equity
for any failure to comply with Paragraph 9.1 hereof, in addition to any other
remedies the Fund may have in law or in equity.
10. CONFIDENTIALITY OF IBT INFORMATION. The Fund agrees that any
non-public information obtained hereunder concerning IBT is confidential and may
not be disclosed without the prior written consent of IBT, except as may be
required by applicable law or at the request of a governmental agency. The Fund
further agrees that a breach of this provision would irreparably damage IBT and
the Fund accordingly agrees that IBT is entitled, in addition to all other
remedies at law or in equity, to an injunction or injunctions without bond or
other security to prevent breaches of this provision.
11. USE OF NAME. The Fund shall not use the name of IBT or any of its
affiliates in any prospectus, sales literature or other material relating to the
Fund in a manner not approved by IBT prior thereto in writing; provided however,
that the approval of IBT shall not be required for any use of its name which
merely refers in accurate and factual terms to its appointment hereunder or
which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; PROVIDED FURTHER, that in no event shall such approval be
unreasonably withheld or delayed.
12. SIGNATURE LICENSE. IBT shall remain a licensee of Signature
Financial Group, Inc. with respect to the trademarks of Hub(R) and Spoke(R)1 and
related proprietary rights during the term of this Agreement.
- --------
1 "Hub" and "Spoke" and "Hub and Spoke" are registered trademarks of Signature
Financial Group, Inc.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
DEUTSCHE PORTFOLIOS
By:
Name:
Title:
IBT TRUST COMPANY (CAYMAN) LTD.
By:
Name:
Title:
<PAGE>
APPENDIX 1
PORTFOLIOS
Provesta Portfolio (US Dollar)
Investa Portfolio (US Dollar)
Japanese Equity Portfolio (US Dollar)
Global Bond Portfolio (US Dollar)
European Bond Portfolio (US Dollar)
Top 50 World Portfolio (US Dollar)
Top 50 Europe Portfolio (US Dollar)
Top 50 Asia Portfolio (US Dollar)
Top 50 US Portfolio (US Dollar)
US Money Market Portfolio (US Dollar)
<PAGE>
APPENDIX 2
SERVICES
Registration with Cayman Authorities
Filing and maintenance of governing documents, offshore registration documents,
and offshore regulatory reports
Maintenance of telephone line
1 Provision of authorized signatures
1 Authorization and filing of financial statements
1 Filing of tax return and N-SAR
1 Cayman legal compliance
1 Approval of annual expense budget
1 Authorization of expenses (with Treasurer approval)
1 Distribution of Board materials
1 Authorization of fund distributions (omnibus accounts)
1 Distribution of dividends and capital gains (omnibus accounts)
1 Authorization of shareholder trades (omnibus accounts)
1 Distribution of shareholder statements, tax forms, and shareholder
reports (omnibus accounts)
1 Maintenance of shareholder register (omnibus accounts)
1 Maintenance of necessary offshore books and records
1 Maintenance of omnibus accounts
1 Receipt and response to literature requests
OPERATIONS AGENCY
AGREEMENT
AGREEMENT made as of September 28, 1997, by and between DEUTSCHE
PORTFOLIOS having its principal office and place of business at Cardinal Avenue,
Grand Cayman, Cayman Islands (the "Investment Company"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds") of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania Corporation, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, on behalf of
itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued beneficial interests ("Interest(s)");
WHEREAS, the Fund is a Hub(R) in a Hub(R) and Spoke(R) investment
structure; and
WHEREAS the Investment Company may desire to appoint the Company as its
operations agent to provide it with operations agency services (as herein
defined) and the Company desires to accept such appointment; and
WHEREAS, from time to time the Investment Company may desire and may
instruct the Company to subcontract for the performance of certain of its duties
and responsibilities hereunder to another agent (the "Agent").
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: OPERATIONS AGENCY SERVICES.
ARTICLE 1. APPOINTMENT The Investment Company hereby appoints the Company
as Operations Agent for the period and on the terms and conditions set forth in
this Agreement. The Company accepts such appointment and agrees to furnish the
services set forth in Article 2 of this Agreement in return for the compensation
set forth in Article 6 of this Agreement.
ARTICLE 2. THE COMPANY'S DUTIES. As Operations Agent, and subject to the
supervision and control of the Board, and in accordance with Proper Instructions
(as defined hereafter) from the Investment Company the Company will provide
facilities, equipment, and personnel to carry out the following operations
agency services for operation of the business and affairs of the Investment
Company and each of its portfolios:
<PAGE>
(1) following the organization of the Investment Company, prepare
the Investment Company's governing documents and any amendments thereto,
including the Charter (which has already been prepared and filed), the By-laws
and minutes of meetings of the Board and Investors;
(2) following the Investment Company's effectiveness with the
Securities and Exchange Commission, prepare the registration statements for the
Fund and all amendments thereto, reports to regulatory authorities and
Investors, offering documents, proxy and/or information statements, and such
other documents all as may be necessary to enable the Investment Company to make
a private offering of its shares;
(3) conduct compliance training sessions for the benefit of the
investment advisers of the Funds;
(4) maintain the Investment Company's calendar of reporting and
filing obligations
(5) perform internal audit examinations ;
(6) monitor and supervise the collection of tax reclaims;
(7) plan and prepare for meetings of the Investment Company's Board,
including maintaining the Board's agenda and preparing materials for the Board's
review and consideration;
(8) attend in person, and record the minutes of meetings of, the
Investment Company's Board;
(9) consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs;
(10) prepare materials necessary for shareholder meetings and record
the minutes of shareholder meetings;
(11) prepare expense projections for the Funds;
(12) coordinate the activities of all service providers to the
Investment Company. By way of example, the Company will, in conjunction with
item (4) above, communicate to the other service providers to the Investment
Company lists of information and materials needed for filing obligations, as
well as deadlines for the receipt of such materials. The Company does not take
responsibility for the failure of other service providers to provide such
materials to the Investment Company in a timely fashion or for the performance
of functions for which other service providers are responsible.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Fund under this Section One, shall hereafter
be referred to as "Operations Agency Services."
<PAGE>
ARTICLE 3. RECORDS.
The Company shall maintain a set of all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Operations Agency Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Fund. The Investment
Company, or the Investment Company's authorized representatives, shall have
access to such books and records at all times during the Company 's normal
business hours. Upon the reasonable request of the Investment Company, copies of
any such books and records shall be provided promptly by the Company to the
Investment Company or the Investment Company's authorized representatives.
ARTICLE 4. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.
ARTICLE 5. EXPENSES.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Operations Agency Services to the Fund, including the compensation of the
Company employees who serve as officers of the Fund. The Fund shall be
responsible for all other reasonable and documented expenses incurred by the
Company on behalf of the Fund, including without limitation postage and courier
expenses, printing expenses, travel expenses, registration fees, filing fees,
fees of outside counsel and independent auditors or other professional services,
organizational expenses, insurance premiums, fees payable to persons who are not
the Company employees, trade association dues, and other expenses properly
payable by the Funds and/or Classes.
ARTICLE 6. COMPENSATION.
For the Operations Agency Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an operations agency fee at an annual rate per
portfolio of the Investment Company's shares as specified on Exhibit A.
The compensation and out-of-pocket expenses attributable to the Fund shall
be accrued by the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The Company will
<PAGE>
maintain detailed information about the compensation and out-of-pocket expenses
by the Fund.
ARTICLE 7. RESPONSIBILITY OF OPERATIONS AGENT.
A. The Company shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Investment Company 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 from reckless disregard by it of its obligations
and duties under this Agreement. The Company 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. Any person, even though also an officer, director,
trustee, partner, employee or agent of the Company, who may be or become an
officer, director, trustee, partner, employee or agent of the Investment
Company, shall be deemed, when rendering services to the Investment Company or
acting on any business of the Investment Company (other than services or
business in connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not as an
officer, director, trustee, partner, employee or agent or one under the control
or direction of the Company even though paid by the Company.
B. The Company shall be kept indemnified by the Investment Company
and be without liability for any action taken or thing done by it in performing
the Operations A gency Services in accordance with the above standards. In order
that the indemnification provisions contained in this Article 10 shall apply,
however, it is understood that if in any case the Investment Company may be
asked to indemnify or save the Company harmless, the Investment Company shall be
fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Investment Company. The Investment Company
shall have the right to defend the Company against any claim which may be the
subject of this indemnification. In the event that the Investment Company so
elects, it will so notify the Company and thereupon the Investment Company shall
take over complete defense of the claim, and the Company shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this Article. The Company shall in no case confess any
claim or make any compromise in any case in which the Investment Company will be
asked to indemnify the Company except with the Investment Company's written
consent.
<PAGE>
SECTION TWO: GENERAL PROVISIONS.
ARTICLE 8. PROPER INSTRUCTIONS. As used throughout this Agreement, a
"Proper Instruction" means a writing signed or initialed by one or more person
or persons as the Board shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved. Oral instructions will be deemed to be Proper Instructions if (a) the
Company reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect to the
transaction involved, and (b) the Investment Company, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing. Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Investment Company,
or the Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be amended in
writing.
ARTICLE 9. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Operations Agency Services, the Company may without
further consent on the part of the Investment Company subcontract for the
performance of such services with Federated Administrative Services, a
wholly-owned subsidiary of the Company.
C. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an Agent
selected by the Investment Company, other than as described in B. above;
provided, however, that the Company shall in no way be responsible to the
Investment Company for the acts and omissions of the Agent.
ARTICLE 10. DOCUMENTS.
A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following documents
relating to it:
(1) a copy of its Charter and By-Laws and all amendments
thereto;
(2) a copy of the resolution of its Board authorizing this
Agreement;
(3) all documents relating to the Fund or Investor accounts;and
(4) a copy of its current offering document.
B. The Investment Company will also furnish from time to time the following
documents relating to it:
<PAGE>
(1) a resolution of its Board authorizing the original offering
of its Interests;
(2) a Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect
to the sale of its Interests;
(3) a certified copy of each amendment to the governing
document and the By-Laws of the Investment Company;
(4) certified copies of each vote of the Board authorizing
persons to give Proper Instructions;
(5) such other documents or opinions which the Company may, in
its discretion, deem necessary or appropriate in the proper
performance of its duties; and
(6) revisions to the offering document for each Fund.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) it is duly qualified to carry on its business in the
Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement;
(6) it is in compliance with federal securities law requirements
and in good standing as an administrator and fund
accountant; and
(7) it has obtained all required approvals from all government
or regulatory authorities necessary to enter into this
arrangement and to provide the services contemplated herein.
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) it is an investment company duly organized and existing and
in good standing under the laws of its state of
organization;
(2) it is empowered under applicable laws and by its Charter
and ByLaws to enter into and perform its obligations under
this Agreement;
(3) all corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter
into and perform its obligations under this Agreement; and
(4) it is an open-end investment company registered under the
1940 Act.
ARTICLE 12. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to section One, the Company shall be held to a standard
of reasonable care in carrying out the provisions of this Agreement. The Company
shall be entitled to rely on and may act upon advice of Fund counsel on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice, provided that such action is not in violation
of applicable federal or state laws or regulations, and is in good faith and
without negligence.
B. Indemnification by the Investment Company
The Company shall not be responsible for and the Investment Company
or Fund shall indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(1) the acts or omissions of any Custodian, adviser, sub-adviser or
other party contracted by or approved by the Investment Company;
(2) the reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the Fund, or its Investors
regarding account information, the purchase, sale, redemption or transfer of
Interests;
(b) are received by the Company from independent pricing
services or sources for use in valuing the Interests of the
Fund;
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other third parties contracted by
or approved by such Fund for use in the performance of services under this
Agreement; or
(d) have been prepared and/or maintained by the Fund or
its affiliates or any other person or firm on
behalf of the Investment Company.
Deutsche Portfolios Page 10 1997
<PAGE>
(3) the reliance on, or the carrying out by the Company or
its agents or subcontractors of Proper Instructions of the
Investment Company or the Fund; or
(4) the offer or sale of Interests in violation of any
requirement under the federal securities laws or
regulations; or in violation of any stop order or other
determination or ruling by any federal agency respect to
the offer or sale of such Interest.
Provided, however, that the Company shall not be protected
by this Article 12.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties of failure to
meet the standard of care set forth in 12.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions for matters relating to the
Investment Company or Fund, and may consult with legal counsel with
respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action
is not in violation of applicable federal laws or regulations.
D. Notification
In order that the indemnification provisions contained in this
Article 12 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 13. TERM AND TERMINATION OF AGREEMENT.
The initial term of this Agreement shall commence on the date hereof, and
extend for a period of three years following the date of the commencement of the
public offering of the Fund's shares. After the initial term of this Agreement,
the Agreement will be terminable on not less than 90 days' notice by either the
Company or the Investment Company subject to the payment of all deferred
expenses and unamortized expenses.
Deutsche Portfolios Page 11 1997
<PAGE>
In the event, however, of willful misfeasance, bad faith, negligence or
reckless disregard of its duties by the Company, the Investment Company has the
right to terminate the Agreement upon 30 days written notice, if Company has not
cured such willful misfeasance, bad faith, negligence or reckless disregard of
its duties within that same 30 days. The termination date for all original or
after-added Investment companies which are, or become, a party to this Agreement
shall be coterminous. Investment Companies that merge or dissolve during the
Term shall cease to be a party on the effective date of such merger or
dissolution.
Should the Investment Company exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Article 7 and Article 12
shall survive the termination of this Agreement.
ARTICLE 14. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by a written agreement executed by both parties.
ARTICLE 15. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by all
parties and shall be annexed hereto, PROVIDED that no such interpretive or
additional provisions shall contravene any applicable federal regulations or any
provision of the organizational documents. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
ARTICLE 16. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the State of New York.
ARTICLE 17. NOTICES. Except as otherwise specifically provided herein,
notices and other writings delivered or mailed postage prepaid to the Investment
Company at Cardinal Avenue, Grand Cayman, Cayman Islands, BWI with a copy to
Deutsche Fund Management, Inc. at 31 West 52nd Street, new York, New York 10019,
Attn: President or to the Company at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to such other address as the Investment Company or
the Company may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
Deutsche Portfolios Page 12 1997
<PAGE>
ARTICLE 18. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
ARTICLE 19. SUCCESSOR AGENT.
If a successor agent shall be appointed by the Investment Company, the
Company shall upon termination of this Agreement deliver to such successor agent
at the office of the Company all properties of the Fund held by it hereunder. If
no such successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with such
instructions.
With regard to Section One, in the event that no written order designating a
successor agent or Proper Instructions shall have been delivered to the Company
on or before the date when such termination shall become effective, then the
Company shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $2,000,000, all properties held by the Company under this
Agreement. Thereafter, such bank or trust company shall be the successor of the
Company under this Agreement.
ARTICLE 20. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Investment Company or the Fund as a
result of work stoppage, natural disaster, governmental action, loss or
malfunction of utilities or other impossibility of performance.
Deutsche Portfolios Page 13 1997
<PAGE>
ARTICLE 21. ASSIGNMENT; SUCCESSORS.
Either party may assign all of or a substantial portion of its business to a
party controlling, controlled by, or under common control with such party.
Nothing in this Article 21 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 22. SEVERABILITY.
In the event any provision of this Agreement or any interpretive or
additional provision described in Article 15 are held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 23. LIMITATIONS OF LIABILITY OF TRUSTEES AND INVESTORS OF THE INVESTMENT
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon the
Trustees, the Fund or Investors, but bind only the appropriate property of the
Investment Company, as provided in the Declaration of Trust.
Deutsche Portfolios Page 14 1997
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf under their seals by and through their duly
authorized officers, as of the day and year first above written.
DEUTSCHE PORTFOLIOS
By:
President
FEDERATED SERVICES COMPANY
By:
Senior Vice President
Deutsche Portfolios Page 15 1997
DEUTSCHE PORTFOLIOS
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
September 28, 1997
Edgewood Services, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ladies and Gentlemen:
Re: EXCLUSIVE PLACEMENT AGENT AGREEMENT
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, DEUTSCHE PORTFOLIOS (the "Trust"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), organized as a trust under the laws of the
State of New York, has agreed that Edgewood Services, Inc., a New York
corporation ("Edgewood"), shall be the exclusive placement agent (the "Exclusive
Placement Agent") of beneficial interests ("Trust Interests") of each series of
the Trust.
1. SERVICES AS EXCLUSIVE PLACEMENT AGENT.
1.1 Edgewood will act as Exclusive Placement Agent of the Trust
Interests. In acting as Exclusive Placement Agent under this Exclusive Placement
Agent Agreement, neither EDGEWOOD nor its employees or any agents thereof shall
make any offer or sale of Trust Interests in a manner which would require the
Trust Interests to be registered under the Securities Act of 1933, as amended
(the "1933 Act").
1.2 All activities by Edgewood and its agents and employees as
Exclusive Placement Agent of Trust Interests shall comply with all applicable
laws, rules and regulations, including, without limitation, all rules and
regulations adopted pursuant to the 1940 Act by the Securities and Exchange
Commission (the "Commission").
1.3 Nothing herein shall be construed to require the Trust to accept
any offer to purchase any Trust Interests, all of which shall be subject to
approval by the Trust's Board of Trustees.
1.4 The Trust shall furnish from time to time for use in connection
with the sale of Trust Interests such information with respect to the Trust and
Trust Interests as Edgewood may reasonably request. The Trust shall also furnish
Edgewood upon request with: (a) unaudited semiannual statements of the Trust's
books and accounts prepared by the Trust, and (b) from time to time such
additional information regarding the Trust's financial or regulatory condition
as Edgewood may reasonably request.
1.5 The Trust represents to Edgewood that all registration statements
filed by the Trust with the Commission under the 1940 Act with respect to Trust
Interests have been prepared in conformity with the requirements of such statute
and the rules and
<PAGE>
Edgewood Services, Inc.
September 28, 1997
Page 2
regulations of the Commission thereunder. As used in this Agreement the term
"registration statement" shall mean any registration statement filed with the
Commission, as modified by any amendments thereto that at any time shall have
been filed with the Commission by or on behalf of the Trust. The Trust
represents and warrants to Edgewood that any registration statement will contain
all statements required to be stated therein in conformity with both such
statute and the rules and regulations of the Commission; that all statements of
fact contained in any registration statement will be true and correct in all
material respects at the time of filing of such registration statement or
amendment thereto; and that no registration statement will include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading to a
purchaser of Trust Interests. The Trust may but shall not be obligated to
propose from time to time such amendment to any registration statement as in the
light of future developments may, in the opinion of the Trust's counsel, be
necessary or advisable. If the Trust shall not propose such amendment and/or
supplement within fifteen days after receipt by the Trust of a written request
from Edgewood to do so, Edgewood may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement without
giving Edgewood reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendment to any registration statement as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.6 The Trust agrees to indemnify, defend and hold Edgewood, its
several officers and directors, and any person who controls Edgewood within the
meaning of Section 15 of the 1933 Act or Section 20 of the Securities and
Exchange Act of 1934 (the "1934 Act") (for purposes of this paragraph 1.6,
collectively, the "Covered Persons") free and harmless from and against any and
all claims, demand, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which any Covered Person may incur under
the 1933 Act, the 1934 Act, or otherwise, arising out of or based on any untrue
statement of a material fact contained in any registration statement, private
placement memorandum or other offering material ("Offering Material") or arising
out of or based on any omission to state a material fact required to be stated
in any Offering Material or necessary to make the statements in any Offering
Material not misleading; provided, however, that the Trust's agreement to
indemnify Covered Persons shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any financial and other statements as are
furnished in writing to the Trust by Edgewood in its capacity as Exclusive
Placement Agent for use in the answers to any items of any registration
statement or in any statements made in any Offering Material, or arising out of
or based on any omission or alleged omission to state a material fact in
connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Edgewood and the Trust's representation
and warranties hereinbefore set forth in paragraph 1.5 shall not be deemed to
cover any liability to the Trust or its investors to which a Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of a Covered Person's
reckless disregard of its obligations and duties under this Agreement. The Trust
should be notified of any action brought against a Covered Person, such
notification to be given by letter or by telegram addressed to the Trust,
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779,
Attention: Secretary, with a copy to John Bostelman, Esq., Sullivan and
Cromwell, 125 Broad Street, New York, New York, 10004, promptly after the
summons or other first legal process shall have been duly and completely served
upon such Covered Person. The failure to so notify the Trust of any such action
shall not relieve the Trust from any liability except to the extent the Trust
<PAGE>
Edgewood Services, Inc.
September 28, 1997
Page 3
shall have been prejudiced by such failure, or from any liability that the Trust
may have to the Covered Person against whom such action is brought by reason of
any such untrue statement or omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph. The Trust will be entitled to
assume the defense of any suit brought to enforce any such claim, demand or
liability, but in such case such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Edgewood, which approval shall not
be unreasonably withheld. In the event the Trust elects to assume the defense in
any such suit and retain counsel of good standing approved by Edgewood, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Trust does not elect
to assume the defense of any such suit, or in case Edgewood reasonably does not
approve of counsel chosen by the Trust, the Trust will reimburse the Covered
Person named as defendant in such suit, for the fees and expenses of any counsel
retained by Edgewood or the Covered Persons. The Trust's indemnification
agreement contained in this paragraph and the Trust's representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Covered Persons, and
shall survive the delivery of any Trust Interests. This agreement of indemnity
will inure exclusively to Covered Persons and their successors. The Trust agrees
to notify Edgewood promptly of the commencement of any litigation or proceedings
against the Trust or any of its officers or Trustees in connection with the
issue and sale of any Trust Interests.
1.7 Edgewood agrees to indemnify, defend and hold the Trust, its
several officers and trustees, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for
purposes of this paragraph 1.7, collectively, the "Covered Persons") free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands,
liabilities and any counsel fees incurred in connection therewith) that Covered
Persons may incur under the 1933 Act, the 1934 Act, common law, or otherwise,
but only to the extent that such liability or expense incurred by a Covered
Person resulting from such claims or demands shall arise out of or be based on
(i) any untrue statement of a material fact contained in information furnished
in writing by Edgewood in its capacity as Exclusive Placement Agent to the Trust
for use in the answers to any of the items of any registration statement or in
any statements in any other Offering Material, or (ii) any omission to state a
material fact in connection with such information furnished in writing by
Edgewood to the Trust required to be stated in such answers or necessary to make
such information not misleading. Edgewood shall be notified of any action
brought against a Covered Person, such notification to be given by letter or
telegram addressed to Edgewood at Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA 15222-3779, Attention: Secretary, promptly after the
summons or other first legal process shall have been duly and completely served
upon such Covered Person. Edgewood shall have the right of first control of the
defense of the action with counsel of its own choosing satisfactory to the Trust
if such action is based solely on such alleged misstatement or omission on
Edgewood's part, and in any other event each Covered Person shall have the right
to participate in the defense or preparation of the defense of any such action.
The failure to so notify Edgewood of any such action shall not relieve Edgewood
(i) from any liability except to the extent the Trust shall have been prejudiced
by such failure, or (ii) from any liability that Edgewood may have to Covered
Persons by reason of any such untrue or alleged untrue statement, or omission or
alleged omission, otherwise than on account of Edgewood's indemnity agreement
contained in this paragraph.
1.8 No Trust Interests shall be offered by either Edgewood or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Trust Interests hereunder shall be accepted by the Trust if and so long
as the effectiveness of the
<PAGE>
Edgewood Services, Inc.
September 28, 1997
Page 4
registration statement or any necessary amendments thereto shall be suspended
under any of the provisions of the 1940 Act; provided, however, that nothing
contained in this paragraph shall in any way restrict or have an application to
or bearing on the Trust's obligation to redeem Trust Interests from any investor
in accordance with the provisions of the Trust's registration statement or
Declaration of Trust, as amended from time to time. The Trust shall notify
Edgewood promptly of the suspension of the registration statement or any
necessary amendments thereto, such notification to be given by letter or
telegram addressed to Edgewood at Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA 15222-3779, Attention: Secretary.
1.9 The Trust agrees to advise Edgewood as soon as reasonably practical
by a notice in writing delivered to Edgewood or its counsel:
(a) of any request by the Commission for amendments to the
registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then in effect
or the initiation by service of process on the Trust of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any
statements of a material fact made in the registration statement then in effect
or that requires the making of a change in such registration statement in order
to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement that may from time to time be filed with
the Commission.
For purposes of this paragraph 1.9, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.10 Edgewood agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information not otherwise publicly available relative to the Trust 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 Trust, which approval shall not be unreasonably withheld and may not be
withheld where Edgewood may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.11 In addition to Edgewood's duties as Exclusive Placement Agent, the
Trust understands that Edgewood may, in its discretion, perform additional
functions in connection with transactions in Trust Interests.
The processing of Trust Interest transactions may include, but is not
limited to, compilation of all transactions from Edgewood's various offices;
creation of a transaction tape and timely delivery of it to the Trust's transfer
agent for processing; reconciliation of all transactions delivered to the
Trust's transfer agent; and the recording and reporting of these transactions
executed by the Trust's transfer agent in customer statements; rendering of
periodic customer statements; and the reporting of IRS Form 1099 information at
year end if required.
<PAGE>
Edgewood Services, Inc.
September 28, 1997
Page 5
Edgewood may also provide other investor services, such as
communicating with Trust investors and other functions in administering customer
accounts for Trust investors.
Edgewood understands that these services may result in cost savings to
the Trust or to the Trust's investment manager and neither the Trust nor the
Trust's investment manager will compensate Edgewood for all or a portion of the
costs incurred in performing functions in connection with transactions in Trust
Interests. Nothing herein is intended, nor shall be construed, as requiring
Edgewood to perform any of the foregoing functions.
1.12 Except as set forth in paragraph 1.6 of this Agreement, the Trust
shall not be liable to Edgewood or any Covered Persons as defined in paragraph
1.6 for any error of judgment or mistake of law or for any loss suffered by
Edgewood in connection with the matters to which this Agreement relates, except
a loss resulting from the willful misfeasance, bad faith or gross negligence on
the part of the Trust in the performance of its duties or from reckless
disregard by the Trust of its obligations and duties under this Agreement.
1.13 Except as set forth in paragraph 1.7 of this Agreement, Edgewood
shall not be liable to the Trust or any Covered Persons as defined in paragraph
1.7 for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from the willful misfeasance, bad faith or gross negligence on
the part of Edgewood in the performance of its duties or from reckless disregard
by Edgewood of its obligations and duties under this Agreement.
2. TERM.
This Agreement shall become effective on the date first above written
and, unless sooner terminated as provided herein, shall continue until December
1, 1997 and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually by
(i) the Trust's Board of Trustees or (ii) by a vote of a majority (as defined in
the 1940 Act) of the Trust's outstanding voting securities, provided that in
either event the continuance is also approved by the majority of the Trust's
Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable without penalty, on not less than 60
days' notice, by the Board, by a vote of a majority (as defined in the 1940 Act)
of the Trust's outstanding voting securities, or by Edgewood. This Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act and the rules thereunder).
3. REPRESENTATIONS AND WARRANTIES.
Edgewood and the Trust each hereby represents and warrants to the other
that it has all requisite authority to enter into, execute, deliver and perform
its obligations under this Agreement and that, with respect to it, this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
4. CONCERNING APPLICABLE PROVISIONS OF LAW, ETC.
<PAGE>
Edgewood Services, Inc.
September 28, 1997
Page 6
This Agreement shall be subject to all applicable provisions of law,
including the applicable provisions of the 1940 Act and to the extent that any
provisions herein contained conflict with any such applicable provisions of law,
the latter shall control.
The laws of the Commonwealth of Pennsylvania shall, except to the
extent that any applicable provisions of Federal law shall be controlling,
govern the construction, validity and effect of this Agreement, without
reference to principles of conflicts of law.
The undersigned officer of the Trust has executed this Agreement not
individually, but as President under the Trust's Declaration of Trust, dated as
ofSeptember 28, 1997. Pursuant to the Declaration of Trust the obligations of
this Agreement are not binding upon any of the Trustees or investors of the
Trust individually, but bind only the trust estate.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning the same
to the undersigned, whereupon this Agreement shall constitute a binding contract
between the parties hereto effective at the closing of business on the date
hereof.
Yours very truly,
DEUTSCHE PORTFOLIOS
By:
President
Accepted:
EDGEWOOD SERVICES, INC.
By:
EXHIBIT 13
EDGEWOOD SERVICES, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
September 18, 1997
Deutsche Portfolios
Cardinal Avenue
Grand Cayman, Cayman Islands
Gentlemen:
Edgewood Services, Inc. agrees to invest $1.00 in each of the
portfolios listed below:
Provesta Portfolio (US Dollar)
Investa Portfolio (US Dollar)
Japanese Equity Portfolio (US Dollar)
Global Bond Portfolio (US Dollar)
European Bond Portfolio (US Dollar)
Top 50 World Portfolio (US Dollar)
Top 50 Europe Portfolio (US Dollar)
Top 50 Asia Portfolio (US Dollar)
Top 50 US Portfolio (US Dollar)
US Money Market Portfolio (US Dollar)
This investment was made for investment purposes and Edgewood Services,
Inc. has no present intention of selling its interest in the portfolios.
Very truly yours,
/s/ S. Elliott Cohan
S. Elliott Cohan
Secretary
<PAGE>
EXHIBIT 13
Deutsche Funds, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
September 22, 1997
Deutsche Portfolios
Cardinal Avenue
Grand Cayman, Cayman Islands
Gentlemen:
The following series of the Deutsche Funds, Inc. purchased the
following initial interests in the corresponding portfolios of the Deutsche
Portfolios:
<TABLE>
<CAPTION>
Series: Portfolio: Interest:
<S> <C> <C>
Deutsche European Mid-Cap Fund Provesta Portfolio (US Dollar) $11,111
Deutsche German Equity Fund Investa Portfolio (US Dollar) $11,111
Deutsche Japanese Equity Fund Japanese Equity Portfolio (US Dollar) $11,111
Deutsche Global Bond Fund Global Bond Portfolio (US Dollar) $11,111
Deutsche European Bond Fund European Bond Portfolio (US Dollar) $11,111
Deutsche Top 50 World Top 50 World Portfolio (US Dollar) $11,112
Deutsche Top 50 Europe Top 50 Europe Portfolio (US Dollar) $11,111
Deutsche Top 50 Asia Top 50 Asia Portfolio (US Dollar) $11,111
Deutsche Top 50 US Top 50 US Portfolio (US Dollar) $11,111
Deutsche US Money Market Fund US Money Market Portfolio (US Dollar) $100
Deutsche Institutional US
Money Market Fund US Money Market Portfolio (US Dollar) $100
</TABLE>
These interests were purchased for investment purposes and each series
has no present intention of redeeming these interests.
Very truly yours,
Deutsche Funds, Inc.
/S/ BRIAN A. LEE
Brian A. Lee
President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Top 50 World Portfolio (US Dollar)
<NUMBER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,071
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,114
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Top 50 Europe Portfolio (US Dollar)
<NUMBER> 2
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Top 50 Asia Portfolio (US Dollar)
<NUMBER> 3
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Top 50 US Portfolio (US Dollar)
<NUMBER> 4
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Provesta Portfolio (US Dollar)
<NUMBER> 5
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Investa Portfolio (US Dollar)
<NUMBER> 6
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Japanese Equity Portfolio (US Dollar)
<NUMBER> 7
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> Global Bond Portfolio (US Dollar)
<NUMBER> 8
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 17,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> European Bond Portfolio (US Dollar)
<NUMBER> 9
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-17-1997
<PERIOD-END> SEP-17-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 64,069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 11,112
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the audited
Statement of Assets & Liabilities of Deutsche Portfolios dated September 19,
1997 and is qualified in its entirety by reference to such financial
statement
</LEGEND>
<CIK> 0001045409
<NAME> Deutsche Portfolios
<SERIES>
<NAME> US Money Market Portfolio (US Dollar)
<NUMBER> 10
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-19-1997
<PERIOD-END> SEP-19-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 53,167
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53,167
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 52,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 210
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
