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As filed with the Securities and Exchange Commission on October 18, 1999
Investment Company Act File No. 811-09633
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ ]
(Check appropriate box or boxes)
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Global Financial Services Master Trust
(Exact Name of Registrant as Specified in Charter)
800 Scudders Mill Road, Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)
(Registrant's Telephone Number, Including Area Code) (609) 282-2800
TERRY K. GLENN
800 Scudders Mill Road,
Plainsboro, New Jersey 08536
Mailing Address: P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
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Copies to:
Counsel for the Fund: Michael J. Hennewinkel, Esq.
Joel H. Goldberg, Esq. FUND ASSET MANAGEMENT, L.P.
Swidler Berlin Shereff Friedman, LLP P.O. Box 9011
919 Third Avenue Princeton, New Jersey 08543-9011
New York, NY 10022
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This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"). However, beneficial interests in the Registrant are not being
registered under the Securities Act of 1933, as amended (the "1933 Act") because
such interests will be issued solely in private placement transactions that do
not involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Investments in the Registrant may be made only by a limited number of
institutional investors, including investment companies, common or commingled
trust funds, group trusts and certain other "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.
This Registration Statement has been prepared as a single document
consisting of Parts A, B, and C, none of which are to be used or distributed as
a stand alone document.
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TABLE OF CONTENTS
PART A. INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Front and Back Cover Pages......................................... *
Item 2. Risk/Return Summary: Investments, Risks and Performance............ *
Item 3. Risk/Return Summary: Fee Table..................................... *
Item 4. Investment Objectives, Principal Investment Strategies, and
Related Risks...................................................... 3
Item 5. Management's Discussion of Fund Performance........................ *
Item 6. Management, Organization, and Capital Structure.................... 8
Item 7. Shareholder Information............................................ 9
Item 8. Distribution Arrangements.......................................... 11
Item 9. Financial Highlights Information................................... *
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Contents .................................. 12
Item 11. Trust History...................................................... 12
Item 12. Description of the Portfolio and its Investments and Risks......... 12
Item 13. Management of the Registrant....................................... 27
Item 14. Control Persons and Principal Holders of Securities................ 28
Item 15. Investment Advisory and Other Services............................. 29
Item 16. Brokerage Allocation and Other Practices........................... 30
Item 17. Capital Stock and Other Securities................................. 32
Item 18. Purchase, Redemption and Pricing of Securities..................... 33
Item 19. Taxation of the Trust.............................................. 34
Item 20. Underwriters....................................................... 35
Item 21. Calculation of Performance Data.................................... 35
Item 22. Financial Statements............................................... 36
PART C. OTHER INFORMATION
Item 23. Exhibits.......................................................... C-1
Item 24. Persons Controlled by or under Common Control with Registrant..... C-2
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Item 25. Indemnification................................................... C-2
Item 26. - Business and Other Connections of Investment Adviser............ C-3
Item 27. Principal Underwriters............................................ C-7
Item 28. Location of Accounts and Records.................................. C-7
Item 29. Management Services............................................... C-8
Item 30. Undertakings...................................................... C-8
* Responses to Items 1, 2, 3, 5 and 9 have been omitted pursuant to paragraph
2(b) of Instruction B of the General Instructions to Form N-1A.
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PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM 4. -- INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS.
Global Financial Services Master Trust (the "Trust") is a no-load, open-end
management investment company which was organized as a Delaware business trust
on August 19, 1999. Global Financial Services Portfolio ("Financial Services
Portfolio" or the "Portfolio") is a separate portfolio (i.e., series) of the
Trust. The Portfolio is a diversified investment company with certain investment
objectives and policies. There can, of course, be no assurance that the
investment objectives of the Portfolio can be achieved.
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The Portfolio's main goal is capital appreciation. In other words, it tries to
choose investments that will increase in value. The Portfolio tries to achieve
its goal by investing at least 65% of its assets in equity securities of U.S.
and foreign financial services companies. The Portfolio considers a "financial
services" company to be one that, in the most recent fiscal year derived at
least 50% of its revenues or earnings or devoted at least 50% of its assets to
financial services. Financial services include banking, mortgage lending and
servicing, securities and commodities trading, investment management, insurance,
providing financial guarantees, leasing, credit card servicing and lending.
The Portfolio will invest primarily in equity securities. Equity securities
consist of:
. Common Stock
. Preferred Stock
. Securities convertible into
. Common Stock
. Derivatives, such as futures, forwards and options, the value of which is
based on a common stock or group of common stocks
The Portfolio will focus on investing in common stocks. The Portfolio invests
primarily in common stock of financial services companies that Portfolio
management believes have the potential to increase in value. The Portfolio may
also purchase preferred stock, convertible securities and nonconvertible debt
securities. In managing the portfolio, Portfolio management will focus primarily
on industry allocation and stock selection.
In choosing portfolio securities, Portfolio management emphasizes industries
within the financial services sector that Portfolio management believes may
outperform the market generally. An industry within the financial services
sector may outperform that sector as a whole due to superior growth prospects,
industry consolidation, ability to capitalize on or lesser vulnerability to
stages of the business cycle, or changes in regulation. Portfolio management
chooses individual investments within a financial services industry based on
fundamental financial analysis, and seeks to identify financial services
companies that are undervalued relative to the Portfolio's assessment of their
future earnings potential. The Portfolio looks for companies with strong
management, above-average per share earnings growth, high returns on capital,
pricing flexibility, promising new products or leading market positions that the
Portfolio believes have better prospects for earnings than is anticipated by
other investors. The Portfolio also looks for companies in consolidating
financial services industries that Portfolio management believes may benefit
from consolidation.
The Portfolio may also look for financial services companies that have the
potential to prosper from deregulation or technological innovation.
Historically, financial services and the companies that provide them have been
highly regulated in many countries. Currently, many countries are moving
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to deregulate certain financial services industries, particularly securities
dealing and brokerage, and permit greater competition. At the same time,
technological innovations, such as the development of the internet, are changing
the way services are provided in certain financial services industries.
Deregulation and technological innovations may allow certain financial services
companies to increase earnings at a faster rate. Deregulation and technological
innovations, however, present both risks and opportunities for investors in
financial services companies. Deregulation and technological innovation may
result in certain financial services companies being able to expand and grow
earnings, while others may be forced to defend their core businesses from
increased competition and may therefore be less profitable.
The Portfolio may invest in companies of any size, but Portfolio management
anticipates that it will focus mainly on large and medium-sized companies. As a
global financial services fund, the Portfolio will make investments throughout
the world, and there are no limits on the Portfolio's ability to invest in any
country or geographic region. The Portfolio can invest primarily in U.S.
securities, primarily in foreign securities, or partly in U.S. securities and
partly in foreign securities. The Portfolio may invest in companies in emerging
markets, but the Portfolio's management anticipates that a substantially greater
portion of the Portfolio's investments will be in companies in developed
countries. Currently, Portfolio management anticipates that the Portfolio will
invest more of its assets in U.S. securities than in securities of any other
single country.
The Portfolio may invest in securities denominated in currencies other than the
U.S. dollar. The Portfolio's return on investments denominated in foreign
currencies will be affected by changes in currency exchange rates. The Portfolio
may engage in currency transactions to seek to hedge against the risk of loss
from changes in currency exchange rates, but Portfolio management cannot
guarantee that it will be able to enter into such transactions or that such
transactions will be effective. The Portfolio is not required to hedge and may
choose not to do so.
The Portfolio may invest up to 35% of its assets in nonconvertible debt
securities under normal circumstances, and may invest a greater percentage of
its assets in nonconvertible debt securities on occasion as a temporary
defensive measure. The Portfolio will normally invest a portion of its assets in
short-term debt securities, such as commercial paper. Short-term debt securities
can be sold easily and have limited risk of loss, but earn only limited returns.
The Portfolio invests in short-term debt securities in order to achieve short-
term earnings when the Portfolio is unable to find enough attractive long-term
investments; to reduce exposure to equities when Portfolio management believes
it is advisable to do so; and to be able to meet redemptions, if necessary.
During periods when the Portfolio is heavily invested in short-term debt
securities, the Portfolio's investments in stocks will be limited and the
Portfolio may be unable to meet its investment objective of growth of capital.
The Portfolio may also invest in longer-term nonconvertible debt securities,
including low rated "junk" bonds, when it finds these investments to have
capital appreciation opportunities equal to or greater than equities. The
Portfolio will limit its investments in junk bonds to no more than 5% of its
total assets.
The Portfolio may invest in securities the potential return of which is based on
the change in a specified interest rate or equity index (e.g., an "indexed
note"). For example, the Portfolio may invest in a security that pays a variable
amount of interest or principal based on the current level of a securities
index, such as the Dow Jones Financial Industry Index. Certain indexed notes
have greater sensitivity to changes in interest rates or equity index levels
than other securities, and the Portfolio's investments in such instruments may
decline in value significantly if interest rate or equity index levels move in a
manner not anticipated by Portfolio management.
The Portfolio may also use other derivatives, such as futures, forwards and
options. Derivatives are financial instruments whose value is derived from
another security or an index. The Portfolio may use derivatives for hedging
purposes, including anticipatory hedges, and may also use indexed notes and
options on securities to seek increased return.
The Portfolio has no stated minimum holding period for investments and will buy
or sell securities whenever Portfolio management sees an appropriate
opportunity. The Portfolio does not consider potential tax consequences to
Portfolio shareholders when it sells securities. Because the Portfolio has the
flexibility to take advantage of short term investment opportunities, it may
experience relatively
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high portfolio turnover during certain periods. High turnover increases the
Portfolio's brokerage expenses and may affect shareholders' taxes by possibly
increasing short-term capital gains or losses.
As with any mutual fund, the value of the Portfolio's investments, and therefore
the value of Portfolio shares, may go up or down. Changes in the value of the
Portfolio's investments in stocks may occur because a particular stock or bond
market is rising or falling. At other times, specific factors--such as the
possibility that a company may default on its obligations--may affect the value
of a particular equity or debt investment. The Portfolio is also subject to the
risk that the investments selected by Portfolio management will underperform
the market or other funds with similar investment objectives and investment
strategies. If the value of the Portfolio's investments goes down, you may lose
money. To the extent the Portfolio invests in debt securities, it is subject
to interest rate risk, which is the tendency for the price of debt securities to
decline as interest rates rise. Derivatives are volatile and involve
significant risks, including leverage risk and credit risk. Leverage risk is
the risk that relatively small market movements may result in large changes in
the value of an investment. Credit risk is the risk that the counterparty on a
derivative transaction will be unable to honor its financial obligation to the
Portfolio.
INVESTMENT RISKS
This section contains a summary discussion of the general risks of investing in
the Portfolio. As with any mutual fund, there can be no guarantee that the
Portfolio will meet its goals or that the Portfolio's performance will be
positive over any period of time.
Sector Risk -- Sector risk is the risk that the Portfolio's concentration in the
securities of financial services companies will expose the Portfolio to the
price movements of companies in one industry more than a more broadly
diversified mutual fund. Because the Portfolio invests primarily in one sector,
there is the risk that the Portfolio will perform poorly during a downturn in
that sector. The Portfolio should be considered a vehicle for diversification
and should not be considered a balanced investment program by itself.
When interest rates go up, the value of securities issued by many types of
financial services companies generally goes down. In some countries, financial
services and the companies that provide them are regulated by government
entities, which can increase costs for new services or products and make it
difficult to pass increased costs on to consumers. In certain areas,
deregulation of financial services companies has resulted in increased
competition and reduced profitability for certain companies.
Stock Market and Selection Risk -- Stock market risk is the risk that the stock
market will go down in value, including the possibility that the market will go
down sharply and unpredictably. Because the Portfolio invests in a single
economic sector, the Portfolio's stock market risk is increased. Selection risk
is the risk that the investments that Portfolio management selects will
underperform the market sector or other funds with similar investment objectives
and investment strategies.
Small Company Risk -- Small companies may have limited product lines or markets.
They may be less financially secure than larger, more established companies.
They may depend on a smaller number of key personnel. If a product fails, or if
management changes, or there are other adverse developments, the Portfolio's
investment in a small company may lose substantial value. Small company
securities generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large company securities or the stock market as
a whole.
Interest Rate/Economic Cycle Risk -- The profitability of many types of
financial services companies may be adversely affected by rising interest rates,
which may restrict the availability and increase the cost of capital, and
declining economic conditions, which may cause credit losses due to financial
difficulties of borrowers. Because many types of financial services companies
are vulnerable to these economic circumstances, a large portion of the
Portfolio's investments may lose value during such periods.
Foreign Market Risk -- Since the Portfolio may invest in foreign securities, it
offers the potential for more diversification than an investment only in the
United States. This is because stocks traded on
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foreign markets have often (though not always) performed differently than stocks
in the United States. However, such investments involve special risks not
present in U.S. investments that can increase the chances that the Portfolio
will lose money. In particular, investment in foreign securities involves the
following risks, which are generally greater for investments in emerging
markets.
. The economies of some foreign markets often do not compare favorably
with that of the United States in areas such as growth of gross domestic
product, reinvestment of capital, resources and balance of payments.
Some of these economies may rely heavily on particular industries or
foreign capital. They may be more vulnerable to adverse diplomatic
developments, the imposition of economic sanctions against a particular
country or countries, changes in international trading patterns, trade
barriers and other protectionist or retaliatory measures.
. Investments in foreign markets may be adversely affected by governmental
actions such as the imposition of capital controls, nationalization of
companies or industries, expropriation of assets or the imposition of
punitive taxes.
. The governments of certain countries may prohibit or impose substantial
restrictions on foreign investing in their capital markets or in certain
industries. Any of these actions could severely affect security prices.
They could also impair the Portfolio's ability to purchase or sell
foreign securities or transfer its assets or income back into the United
States, or otherwise adversely affect the Portfolio's operations.
. Other foreign market risks include foreign exchange controls,
difficulties in pricing securities, defaults on foreign government
securities, difficulties in enforcing favorable legal judgments in
foreign courts and political and social instability. Legal remedies
available to investors in some foreign countries may be less extensive
than those available to investors in the United States.
. Because there are generally fewer investors on foreign exchanges and a
smaller number of shares traded each day, it may be difficult for the
Portfolio to buy and sell securities on those exchanges. In addition,
prices of foreign securities may go up and down more than prices of
securities traded in the United States.
. Foreign markets may have different clearance and settlement procedures.
In certain markets, settlements may be unable to keep pace with the
volume of securities transactions. If this occurs, settlement may be
delayed and the Portfolio's assets may be uninvested and not earning
returns. The Portfolio may miss investment opportunities or be unable to
sell an investment because of these delays.
Emerging Market Risks -- The risks of foreign investments are usually much
greater for emerging markets. Investments in emerging markets may be considered
speculative. Emerging markets include those in countries defined as emerging or
developing by the World Bank, the International Finance Corporation, or the
United Nations. Emerging markets are riskier because they develop unevenly and
may never fully develop. They are more likely to experience hyperinflation and
currency devaluations, which adversely affects returns to U.S. investors. In
addition, the securities markets in many of these countries have far lower
trading volumes and less liquidity than developed markets. Because these markets
are less liquid, they may be more likely to suffer sharp and frequent price
changes or long-term price depression because of adverse publicity, investor
perceptions, or the actions of a few large investors. In addition, traditional
measures of investment value used in the United States, such as price to
earnings ratios, may not apply to certain small markets.
Many emerging markets have histories of political instability and abrupt changes
in policies. As a result, their governments are more likely to take actions that
are hostile or detrimental to private enterprise or foreign investment than
those of more developed countries. Certain emerging markets may also face other
significant internal or external risks, including the risk of war, and ethnic,
religious, and racial conflicts. In addition, governments in many emerging
market countries participate to a significant degree in their economies and
securities markets, which may impair investment and economic growth.
Certain Risks of Holding Portfolio Assets Outside the United States -- The
Portfolio generally holds its foreign securities and cash in foreign banks and
securities depositories. Some foreign banks and securities depositories may be
recently organized or new to the foreign custody business. In
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addition, there may be limited or no regulatory oversight over their operations.
Also, the laws of certain countries may put limits on the Portfolio's ability to
recover its assets if a foreign bank, depository or issuer of a security, or any
of their agents, goes bankrupt. In addition, it is often more expensive for the
Portfolio to buy, sell and hold securities in certain foreign markets than in
the U.S. The increased expense of investing in foreign markets reduces the
amount the Portfolio can earn on its investments and typically results in a
higher operating expense ratio for the Portfolio than investment companies
invested only in the U.S.
European Economic and Monetary Union ("EMU") -- A number of European countries
have entered into EMU in an effort to reduce trade barriers between themselves
and eliminate fluctuations in their currencies. EMU establishes a single
European currency (the euro), which was introduced on January 1, 1999 and is
expected to replace the existing national currencies of all initial EMU
participants by July 1, 2002. Certain securities (beginning with government and
corporate bonds) were redenominated in the euro. These securities trade and make
dividend and other payments only in euros. Like other investment companies and
business organizations, including the companies in which the Portfolio invests,
the Portfolio could be adversely affected:
. If the transition to euro, or EMU as a whole, does not proceed as
planned.
. If a participating country withdraws from EMU.
. If the computing, accounting and trading systems used by the Portfolio's
service providers, or by other entities with which the Portfolio or its
service providers do business, are not capable of recognizing the euro
as a distinct currency.
Currency Risk and Exchange Risk -- Securities in which the Portfolio invests are
usually denominated or quoted in currencies other than the U.S. dollar. Changes
in foreign currency exchange rates affect the value of the Portfolio's
portfolio. Generally, when the U.S. dollar rises in value against a foreign
currency, a security denominated in that currency loses value because the
currency is worth fewer U.S. dollars. Similarly, when the U.S. dollar decreases
in value against a foreign currency, a security denominated in the currency
gains value because the currency is worth more U.S. dollars. This risk,
generally known as "currency risk," means that a stronger U.S. dollar will
reduce returns for U.S. investors while a weak U.S. dollar will increase those
returns.
Governmental Supervision and Regulation/Accounting Standards -- Many foreign
governments supervise and regulate stock exchanges, brokers and the sale of
securities less than the United States does. Other countries may not have laws
to protect investors the way that the U.S. securities laws do. For example, some
foreign countries may have no laws or rules against insider trading. Insider
trading occurs when a person buys or sells a company's securities based on non-
public information about that company. Accounting standards in other countries
are not necessarily the same as in the United States. If the accounting
standards in another country do not require as much detail as U.S. accounting
standards, it may be harder for the Portfolio management to completely and
accurately determine a company's financial condition. Also, brokerage
commissions and other costs of buying or selling securities often are higher in
foreign countries than they are in the United States. This reduces the amount
the Portfolio can earn on its investments.
Borrowing and Leverage -- The Portfolio may borrow for temporary emergency
purposes including to meet redemptions. Borrowing may exaggerate changes in the
net asset value of Portfolio shares and in the yield on the Portfolio's
portfolio. Borrowing will cost the Portfolio interest expense and other fees.
The cost of borrowing may reduce the Portfolio's return. Certain securities that
the Portfolio buys may create leverage including, for example, when issued
securities, forward commitments and options.
Derivatives -- The Portfolio may use derivative instruments including futures,
forwards and options. Derivatives allow the Portfolio to increase or decrease
its risk exposure more quickly and efficiently than other types of instruments.
Derivatives are volatile and involve significant risks, including:
Leverage Risk -- the risk associated with certain types of investments or
trading strategies (such as borrowing money to increase the amount of
investments) that relatively small market movements may result in large
changes in the value of an investment. Certain investments or
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trading strategies that involve leverage can result in losses that greatly
exceed the amount originally invested.
Credit Risk -- the risk that the counterparty (the party on the other side
of the transaction) on a derivative transaction will be unable to honor its
financial obligation to the Portfolio.
Currency Risk -- the risk that changes in the exchange rate between
currencies will adversely affect the value (in U.S. dollar terms) of an
investment.
Liquidity Risk -- the risk that certain securities may be difficult or
impossible to sell at the time that the Portfolio would like or at the
price that the Portfolio believes the security is currently worth.
Hedging is a strategy in which the Portfolio uses a derivative to offset the
risk that other Portfolio holdings may decrease in value. While hedging can
reduce losses, it can also reduce or eliminate gains if the market moves in a
different manner than anticipated by the Portfolio or if the cost of the
derivative outweighs the benefit of the hedge. Hedging also involves the risk
that changes in the value of the derivative will not match those of the holdings
being hedged as expected by the Portfolio, in which case any losses on the
holdings being hedged may not be reduced. There can be no assurance that the
Portfolio's hedging strategy will reduce risk or that hedging transactions will
be either available or cost effective. The Portfolio is not required to use
hedging and may choose not to do so.
Convertible Securities -- Convertibles are generally debt securities or
preferred stocks that may be converted into common stock. Convertibles typically
pay current income as either interest (debt security convertibles) or dividends
(preferred stocks). A convertible's value usually reflects both the stream of
current income payments and the value of the underlying common stock. The market
value of a convertible performs like regular debt securities; that is, if market
interest rates rise, the value of a convertible usually falls. Since it is
convertible into common stock, the convertible also has the same types of market
and issuer risk as the value of the underlying common stock.
Illiquid Securities -- The Portfolio may invest up to 15% of its assets in
illiquid securities that it cannot easily resell within seven days at current
value or that have contractual or legal restrictions on resale. If the Portfolio
buys illiquid securities it may be unable to quickly resell them or may be able
to sell them only at a price below current value.
ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE.
INVESTMENT ADVISER
Fund Asset Management L.P. ("FAM") is the Investment Adviser or Manager and
manages the Portfolio's investments and its business operations under the
overall supervision of the Board of Trustees of Global Financial Services Master
Trust. The Investment Adviser has the responsibility for making all investment
decisions for the Portfolio.
FAM and its affiliates manage portfolios with over $516 billion in assets
for individuals and institutions seeking investments worldwide as of June 1999.
This amount includes assets managed for Fund Asset Management affiliates.
With respect to the Global Financial Services Portfolio, the Investment
Adviser is paid at the rate of .40% of the Portfolio's average daily net assets.
James Ellman, a First Vice President of the Manager since 1999, as well as
a Senior Vice President of the Trust and Portfolio and Portfolio Manager of the
Portfolio and Merrill Lynch Global Financial Services Fund, Inc., is primarily
responsible for the day-to-day management of the Portfolio's portfolio. Mr.
Ellman was the portfolio manager for the AIM Global Financial Services Fund
series of AIM Investment Funds, Inc. ("AIM GFS Fund"), from May 31, 1995 to June
10, 1999.
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Robert C. Doll is a Senior Vice President of the Trust as well as a Senior
Vice President of the Manager since 1999. Mr. Doll was Chief Investment Officer
of Oppenheimer Funds, Inc. in 1999 and Executive Vice President thereof from
1991 to 1999.
CAPITAL STOCK
Investors in the Trust have no preemptive or conversion rights and
beneficial interests in the Trust are fully paid and non-assessable. The Trust
has no current intention to hold annual meetings of investors, except to the
extent required by the Investment Company Act, but 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. Upon liquidation of the Trust or any
Portfolio, investors would be entitled to share, in proportion to their
investment in the Trust or Portfolio (as the case may be), in the assets of the
Trust or Portfolio available for distribution to investors.
The Trust is organized as a Delaware business trust and currently consists
of one Portfolio. Each investor is entitled to a vote in proportion to its
investment in the Trust or the Portfolio (as the case may be). Investors in any
Portfolio will participate equally in accordance with their pro rata interests
in the earnings, dividends and assets of the particular Portfolio. The Trust
reserves the right to create and issue interests in additional Portfolios.
Investments in the Trust may not be transferred except with the prior
written consent of all of the Trustees, but an investor may withdraw all or any
portion of its investment in any Portfolio on any day on which the New York
Stock Exchange is open at net asset value. Additionally, an investor may
transfer any or all of its investment to another current shareholder without the
express prior written consent of the Trustees.
ITEM 7. SHAREHOLDER INFORMATION.
PRICING
The Portfolio calculates its net asset value (generally by using market
quotations) each day the New York Stock Exchange is open ("Pricing Day"), after
the close of business on the Exchange (the Exchange generally closes at 4:00
p.m. Eastern time). The net asset value used in determining the price of an
interest in the Portfolio is the next one calculated after the purchase or
redemption order is placed. The net asset value is determined by deducting the
amount of the Portfolio's total liabilities from the value of its total assets.
Net asset value is generally calculated by valuing each security at its closing
price for the day. Many of the Portfolio's investments are traded on non-U.S.
securities exchanges that close many hours before the New York Stock Exchange.
Events that could affect securities prices that occur between these times
normally are not reflected in the Portfolio's net asset value. Non-U.S.
securities sometimes trade on days that the New York Stock Exchange is closed.
As a result, the Portfolio's net asset value may change on days when an investor
will not be able to purchase or redeem the Portfolio's shares. If an event
occurs after the close of a foreign exchange that is likely to significantly
affect a Portfolio net asset value, "fair value" pricing may be used. This means
that the Portfolio may value its foreign holdings at prices other than their
last closing prices, and the Portfolio's net asset value will reflect this.
Each investor in the Trust may add to or reduce its investment in a
Portfolio on each Pricing Day. The value of each investor's beneficial interest
in a Portfolio will be 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 such Portfolio. Any
additions or withdrawals, which are to be effected on that day, will then be
effected. The investor's percentage of the aggregate beneficial interests in a
Portfolio will then be re-computed as the percentage equal to the fraction (i)
the numerator of which is the value of such investor's investment in the
Portfolio as of the time of determination 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 such 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 will then
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be applied to determine the value of the investor's interest in such Portfolio
as of 15 minutes after the close of business of the New York Stock Exchange on
the next Pricing Day of the Portfolio.
PURCHASE OF SECURITIES
Beneficial interests in the Trust 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 of the Trust may only
be made by a limited number of institutional investors including investment
companies, common or commingled trust funds, group trusts, and certain other
"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.
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 consistent with its investment objectives and policies 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 Portfolio's custodian bank by a
Federal Reserve Bank) or in marketable securities acceptable to the Investment
Adviser and consistent with the investment objective, policies and restrictions
of the Portfolio.
The Portfolio reserves the right to cease accepting investments at any time
or to reject any investment order.
REDEMPTION
An investor in the Trust may withdraw all or a portion of its investment in
any Portfolio on any Pricing Day at the net asset value next determined after a
withdrawal request in proper form is furnished by the investor to the Portfolio.
The proceeds of the withdrawal will be paid by the Portfolio normally on the
business day on which the withdrawal is effected, but in any event within seven
days. Investments in any Portfolio of the Trust may not be transferred without
the prior written consent of all of the Trustees except that an investor may
transfer any or all of its investment to another current shareholder with such
consent.
Tax Consequences.
Under the anticipated method of operation of the Portfolio, the Portfolio
will be treated as a separate taxable entity for federal income tax purposes
which will have the status of partnership pursuant to Treasury Regulation
Section 301.7701-3(b)(1). Thus, the Portfolio will not be subject to any income
tax. Based upon the status of the Portfolio as a partnership, each investor in a
Portfolio will be taxed on its share (as determined in accordance with the
governing instruments of the Portfolio) of such 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 Code and Treasury 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 any 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.
A Note About Year 2000
Many computer systems were designed using only two digits to designate
years. These systems may not be able to distinguish the year 2000 from the year
1900 (commonly known as the "Year 2000 Problem"). The Portfolio could be
adversely affected if the computer systems used by the Investment Adviser or
other Portfolio service providers do not properly address this problem before
January 1, 2000. The Investment Adviser expects to have addressed this problem
before then, and does not anticipate that the services it provides will be
adversely affected. The Portfolio's other service providers have told the
Investment Adviser that they also expect to resolve the year 2000 Problem, and
the Investment Adviser will continue to monitor the situation as the year 2000
approaches.
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However, if the problem has not been fully addressed, the Portfolio could be
negatively affected. The Year 2000 Problem could also have a negative impact on
the companies in which the Portfolio invests. This negative impact may be
greater for companies in foreign markets, since they may be less prepared for
the Year 2000 Problem than domestic companies and markets. If the companies in
which the Portfolio invests have Year 2000 Problems, the Portfolio could be
adversely affected.
ITEM 8.--DISTRIBUTION ARRANGEMENTS.
Investments in the Portfolio will be made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. The net asset value of the Portfolio is determined on
each Pricing Day. The Trust's placement agent is Merrill Lynch Funds
Distributor, Inc.
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PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE AND TABLE OF CONTENTS.
Global Financial Services Master Trust (the "Trust") currently consists of
one portfolio: Global Financial Services Portfolio ("Financial Services
Portfolio" or the "Portfolio").
This Registration Statement has been prepared as a single document
consisting of Parts A, B, and C, none of which are to be used or distributed as
a stand alone document. This Registration Statement has been filed with the
Securities and Exchange Commission (the "Commission") and copies can be
obtained, without charge, by calling the Trust at (800) 637-3863, or by writing
to Global Financial Services Master Trust, P.O. Box 9011, Princeton, New Jersey
08543-9011 or by writing to the Trust's Placement Agent, Merrill Lynch Funds
Distributor, Inc., P.O. Box 9081, Princeton, New Jersey 08543-9081.
A consolidated table of contents for this Registration Statement is
included on page 1.
ITEM 11. TRUST HISTORY.
The Trust is a Delaware business trust organized on August 19, 1999.
Financial Services Portfolio is a separate portfolio (i.e., series) of the
Trust.
ITEM 12. DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENTS AND RISKS.
The investment objective of the Portfolio is capital appreciation. The
Portfolio tries to achieve its goal by investing at least 65% of its assets in
equity securities of U.S. and foreign financial services companies. The
Portfolio considers a "financial services" company to be one that, in the most
recent fiscal year, derived at least 50% of its revenues or earnings or devoted
at least 50% of its assets to financial services. Financial services include
banking, mortgage lending and servicing, securities and commodities trading,
investment management, insurance, providing financial guarantees, leasing,
credit card servicing and lending. The investment objective of the Portfolio is
a fundamental policy of the Portfolio, which may not be changed without a vote
of a majority of its outstanding shares as defined below. The investment
objective and policies are described in more detail in Part A. We cannot
guarantee that the Portfolio will achieve its goal.
Because FAM manages the Portfolio's assets by investing in a specific
economic sector, the Portfolio may be more susceptible than would be a more
widely diversified fund to any single economic, political or regulatory
occurrence or to changes in the financial condition of issuers in a single
industry within that sector.
The Portfolio may invest in the securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") or other securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe that evidence a similar
ownership arrangement. Generally, ADRs, which are issued in registered form, are
designed for use in the United States securities markets and EDRs, which are
issued in bearer form, are designed for use in European securities markets. GDRs
are tradeable both in the U.S. and Europe and are designed for use throughout
the world.
The Portfolio generally will invest without regard to tax considerations
applicable to distributions to shareholders and therefore its shares may appeal
particularly to investors for whom current tax liability is not a major
consideration such as employee benefit plans and individuals retirement accounts
("IRAs"). Because the Portfolio is designed for investors for whom current tax
liability is not a consideration, the Portfolio has the flexibility to take
advantage of short term investment opportunities when determined appropriate by
the Investment Adviser.
Investment emphasis will be on equities, primarily common stocks and, to a
lesser extent, securities convertible into common stocks, preferred stock and
other instruments the return on which is linked to the performance of a common
stock or a basket or index of common stocks ("equity securities"). The Portfolio
also may invest in convertible and non-convertible debt securities, including up
to 5% of its assets in debt securities rated below investment grade by a
nationally recognized rating agency (e.g., rated below Baa by Moody's Investors
Services, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P")) or
in unrated debt securities that, in the judgment of FAM, possess
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similar credit characteristics as debt securities rated investment grade or debt
securities rated below investment grade (commonly known as "junk bonds"). For a
description of ratings of debt securities, see the Appendix.
The Portfolio will at all times, except during temporary defensive periods,
or during extraordinary periods to meet redemptions, maintain at least 65% of
its total assets invested in equity securities. The Portfolio may also invest up
to 20% of its total assets under normal circumstances and in excess of 20% of
its total assets during temporary defensive periods, or during extraordinary
periods to meet redemptions, in other types of securities, including, debt
securities, short term U.S. Government securities, money market securities, and
repurchase agreements, and cash or cash equivalents, in such proportions as, in
the opinion of the Investment Adviser, prevailing market or economic conditions
warrant.
Inasmuch as the Portfolio is authorized to invest in bonds and other fixed-
income securities, it is important to note that the portion of the Portfolio's
net asset value attributable to such securities may fall when interest rates
rise and may rise when interest rates fall. In general, fixed-income securities
with longer maturities will be subject to greater volatility resulting from
interest rate fluctuations than will fixed-income securities with shorter
maturities.
The Portfolio's investment objective and policies are described in Part A.
Certain types of securities in which the Portfolio may invest and certain
investment practices that the Portfolio may employ are discussed more fully
below.
Other Investment Policies, Practices, and Risk Factors
Convertible Securities
Convertible securities entitle the holder to receive interest payments paid
on corporate debt securities or the dividend preference on a preferred stock
until such time as the convertible security matures or is redeemed or until the
holder elects to exercise the conversion privilege.
The characteristics of convertible securities include the potential for
capital appreciation as the value of the underlying common stock increases, the
relatively high yield received from dividend or interest payments as compared to
common stock dividends and decreased risks of decline in value relative to the
underlying common stock due to their fixed-income nature. As a result of the
conversion feature, however, the interest rate or dividend preference on a
convertible security is generally less than would be the case if the securities
were issued in nonconvertible form.
In analyzing convertible securities, the Investment Adviser will consider
both the yield on the convertible security and the potential capital
appreciation that is offered by the underlying common stock.
Convertible securities are issued and traded in a number of securities
markets. Even in cases where a substantial portion of the convertible securities
held by the Portfolio is denominated in United States dollars, the underlying
equity securities may be quoted in the currency of the country where the issuer
is domiciled. With respect to convertible securities denominated in a currency
different from that of the underlying equity securities, the conversion price
may be based on a fixed exchange rate established at the time the security is
issued. As a result, fluctuations in the exchange rate between the currency in
which the debt security is denominated and the currency in which the share price
is quoted will affect the value of the convertible security.
Apart from currency considerations, the value of convertible securities is
influenced by both the yield of nonconvertible securities of comparable issuers
and by the value of the underlying common stock. The value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value." To the
extent interest rates change, the investment value of the convertible security
typically will fluctuate. However, at the same time, the value of the
convertible security will be influenced by its "conversion value,"
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which is the market value of the underlying common stock that would be obtained
if the convertible security were converted. Conversion value fluctuates directly
with the price of the underlying common stock. If, because of a low price of the
common stock the conversion value is substantially below the investment value of
the convertible security, the price of the convertible security is governed
principally by its investment value.
To the extent the conversion value of a convertible security increases to a
point that approximates or exceeds its investment value, the price of the
convertible security will be influenced principally by its conversion value. A
convertible security will sell at a premium over the conversion value to the
extent investors place value on the right to acquire the underlying common stock
while holding a fixed-income security.
Holders of convertible securities generally have a claim on the assets of
the issuer prior to the common stockholders but may be subordinated to other
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by the Portfolio
is called for redemption, the Portfolio will be required to redeem the security,
convert it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security under certain
circumstances.
Foreign Investment Risks
Foreign Market Risk. Because the Portfolio may invest a substantial portion
of its total assets in foreign securities, the Portfolio offers you more
diversification than an investment only in the United States since prices of
securities traded on foreign markets have often, though not always, moved
independently of prices in the United States. Foreign security investment,
however, involves special risks not present in U.S. investments that can
increase the chances that the Portfolio will lose money. In particular, the
Portfolio is subject to the risk that because there are generally fewer
investors on foreign exchanges and a smaller number of shares traded each day,
it may be difficult for the Portfolio to buy and sell securities on those
exchanges. In addition, prices of foreign securities may fluctuate more than
prices of securities traded in the United States.
Foreign Economy Risk. The economies of certain foreign markets often do not
compare favorably with that of the United States with respect to such issues as
growth of gross national product, reinvestment of capital, resources, and
balance of payments position. Certain such economies may rely heavily on
particular industries or foreign capital and are more vulnerable to diplomatic
developments, the imposition of economic sanctions against a particular country
or countries, changes in international trading patterns, trade barriers, and
other protectionist or retaliatory measures. Investments in foreign markets may
also be adversely affected by governmental actions such as the imposition of
capital controls, nationalization of companies or industries, expropriation of
assets, or the imposition of punitive taxes. In addition, the governments of
certain countries may prohibit or impose substantial restrictions on foreign
investing in their capital markets or in certain industries. Any of these
actions could severely affect security prices, impair the Portfolio's ability to
purchase or sell foreign securities or transfer the Portfolio's assets or income
back into the United States, or otherwise adversely affect the Portfolio's
operations. Other foreign market risks include foreign exchange controls,
difficulties in pricing securities, defaults on foreign government securities,
difficulties in enforcing favorable legal judgments in foreign courts, and
political and social instability. Legal remedies available to investors in
certain foreign countries may be less extensive than those available to
investors in the United States or other foreign countries.
Currency Risk and Exchange Risk. Securities in which the Portfolio invests
may be denominated or quoted in currencies other than the U.S. dollar. Changes
in foreign currency exchange rates will affect the value of the securities of
the Portfolio. Generally, when the U.S. dollar rises in value against a foreign
currency, your investment in a security denominated in that currency loses value
because the currency is worth fewer U.S. dollars. Similarly when the U.S. dollar
decreases in value against a foreign currency, your investment in a security
denominated in that currency gains
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value because the currency is worth more U.S. dollars. This risk is generally
known as "currency risk," which is the possibility that a stronger U.S. dollar
will reduce returns for U.S. investors investing overseas and a weak U.S. dollar
will increase returns for U.S. investors investing overseas.
European Economic and Monetary Union ("EMU"). For a number of years,
certain European countries have been seeking economic unification that would,
among other things, reduce barriers between countries, increase competition
among companies, reduce government subsidies in certain industries, and reduce
or eliminate currency fluctuations among these European countries. The Treaty on
European Union (the "Maastricht Treaty") seeks to set out a framework for the
European Economic and Monetary Union ("EMU") among the countries that comprise
the European Union ("EU"). Among other things, EMU establishes a single common
European currency (the "euro") that was introduced on January 1, 1999 and is
expected to replace the existing national currencies of all EMU participants by
July 1, 2002. EMU took effect for the initial EMU participants as of January 1,
1999, and was implemented over the weekend January 1, 1999 through January 3,
1999 ("conversion weekend"). Upon implementation of EMU, certain securities
issued in participating EU countries (beginning with government and corporate
bonds) were redenominated in the euro, and thereafter, were listed, traded, and
made dividend and other payments only in euros.
Because any participating country may opt out of EMU within the first three
years, it is possible that a significant participant could choose to abandon
EMU, which would diminish its credibility and influence. Any of these
occurrences could have adverse effects on the markets of both participating and
non-participating countries, including sharp appreciation or depreciation of the
participants' national currencies and a significant increase in exchange rate
volatility, a resurgence in economic protectionism, an undermining of confidence
in the European markets, an undermining of European economic stability, the
collapse or slowdown of the drive toward European economic unity, and/or
reversion of the attempts to lower government debt and inflation rates that were
introduced in anticipation of EMU. Also, withdrawal from EMU at any time after
the conversion weekend by an initial participant could cause disruption of the
financial markets as securities redenominated in euros are transferred back into
that country's national currency, particularly if the withdrawing country is a
major economic power. Such developments could have an adverse impact on the
Portfolio's investments in Europe generally or in specific countries
participating in EMU. Gains or losses resulting from the euro conversion may be
taxable to Portfolio shareholders under foreign or, in certain limited
circumstances, U.S. tax laws.
Governmental Supervision and Regulation/Accounting Standards. Many foreign
governments supervise and regulate stock exchanges, brokers and the sale of
securities less than the United States does. Some countries may not have laws to
protect investors the way that the United States securities laws do. Accounting
standards in other countries are not necessarily the same as in the United
States. If the accounting standards in another country do not require as much
detail as U.S. accounting standards, it may be harder for the Portfolio's
portfolio manager to completely and accurately determine a company's financial
condition. Also, brokerage commissions and other costs of buying or selling
securities often are higher in foreign countries than they are in the United
States. This reduces the amount the Portfolio can earn on its investments.
Certain Risks of Holding Portfolio Assets Outside the United States. The
Portfolio generally holds the foreign securities and cash in which it invests
outside the United States in foreign banks and securities depositories. Certain
of such foreign banks and securities depositories may be recently organized or
new to the foreign custody business. They may also have operations subject to
limited or no regulatory oversight. Also, the laws of certain countries may put
limits on the Portfolio's ability to recover its assets if a foreign bank or
depository or issuer of a security or any of their agents goes bankrupt. In
addition, it can be expected that it will be more expensive for the Portfolio to
buy, sell and hold securities in certain foreign markets than it is in the U.S.
market due to higher brokerage, transaction, custody and/or other costs. The
increased expense of investing in foreign markets reduces the amount the
Portfolio can earn on its investments.
Settlement and clearance procedures in certain foreign markets differ
significantly from those in the United States. Foreign settlement and clearance
procedures and trade regulations also may involve certain risks (such as delays
in payment for or delivery of securities) not typically
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involved with the settlement of U.S. investments. Communications between the
United States and emerging market countries may be unreliable, increasing the
risk of delayed settlements or losses of security certificates. Settlements in
certain foreign countries at times have not kept pace with the number of
securities transactions; these problems may make it difficult for the Portfolio
to carry out transactions. If the Portfolio cannot settle or is delayed in
settling a purchase of securities, it may miss attractive investment
opportunities and certain of its assets may be uninvested with no return earned
thereon for some period. If the Portfolio cannot settle or is delayed in
settling a sale of securities, it may lose money if the value of the security
then declines or, if it has contracted to sell the security to another party,
the Portfolio could be liable to that party for any losses incurred.
Dividends or interest on, or proceeds from the sale of, foreign securities
may be subject to foreign withholding taxes, and special U.S. tax considerations
may apply.
Small Cap Companies
The Portfolio may invest in securities of smaller capitalization issuers.
The securities of smaller companies may be subject to more abrupt or erratic
market movements than larger, more established companies or the market average
in general. These companies may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group.
While smaller companies may offer greater opportunities for capital
appreciation than large cap issuers, investments in smaller companies may
involve greater risks and thus may be considered speculative.
Small companies are generally little known to most individual investors,
although some may be dominant in their respective industries. The Portfolio may
invest in securities of small issuers in the relatively early stages of business
development that have a new technology, a unique or proprietary product or
service, or a favorable market position. Such companies may not develop into
major industrial companies, but eventual recognition of their special value
characteristics by the investment community may provide above-average long-term
growth.
Derivatives
The Portfolio is authorized to use certain derivative instruments
("Derivatives"), including options and futures, and to purchase and sell foreign
exchange, as described below. Although certain risks are involved in options and
futures transactions (as discussed below in "Risk Factors in Options, Futures
and Currency Instruments"), the Investment Adviser believes that, because the
Portfolio will engage in these transactions only for hedging purposes (other
than options on securities that may be used to seek increased return), the
options and futures portfolio strategies of the Portfolio will not subject the
Portfolio to the risks frequently associated with the speculative use of options
and futures transactions. While the Portfolio's use of hedging strategies is
intended to reduce the volatility of the net asset value of Portfolio shares,
the Portfolio's net asset value will fluctuate. There can be no assurance that
the Portfolio's hedging transactions will be effective. Furthermore, the
Portfolio will only engage in hedging activities from time to time and may not
necessarily be engaging in hedging activities when movements in the equity
markets, interest rates or currency exchange rates occur.
Options on Securities and Securities Indices
Purchasing Options. For hedging purposes, the Portfolio is authorized to
purchase put options on equity securities held in its portfolio or securities
indices the performance of which is substantially correlated with securities
held in its portfolio. When the Portfolio purchases a put option, in
consideration for an upfront payment (the "option premium") the Portfolio
acquires a right to sell to another party specified securities owned by the
Portfolio at a specified price (the "exercise price") on or before a specified
date (the "expiration date"), in the case of an option on securities, or to
receive from another party a payment based on the amount a specified securities
index declines below a specified level on or before the expiration date, in the
case of an option on a securities index. The purchase of a put option limits the
Portfolio's risk of loss in the event of a decline in the market value of the
portfolio holdings underlying the put option prior to the option's expiration
date. If the market
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value of the portfolio holdings associated with the put option increases rather
than decreases, however, the Portfolio will lose the option premium and will
consequently realize a lower return on the portfolio holdings than would have
been realized without the purchase of the put.
The Portfolio is also authorized to purchase call options on securities
held in its portfolio on which it has written call options, securities it
intends to purchase or securities indices the performance of which substantially
correlates with the performance of the types of securities it intends to
purchase. When the Portfolio purchases a call option, in consideration for the
option premium the Portfolio acquires a right to purchase from another party
specified securities at the exercise price on or before the expiration date, in
the case of an option on securities, or to receive from another party a payment
based on the amount a specified securities index increases beyond a specified
level on or before the expiration date, in the case of an option on a securities
index. The purchase of a call option may protect the Portfolio from having to
pay more for a security as a consequence of increases in the market value for
the security during a period when the Portfolio is contemplating its purchase,
in the case of an option on a security, or attempting to identify specific
securities in which to invest in a market the Portfolio believes to be
attractive, in the case of an option on an index (an "anticipatory hedge"). In
the event the Portfolio determines not to purchase a security underlying a call
option, however, the Portfolio may lose the entire option premium.
The Portfolio will not purchase put options on securities or securities
indices if, as a result of such purchase, the aggregate cost of all outstanding
options on securities and securities indices held by the Portfolio would exceed
5% of the market value of the Portfolio's total assets. The Portfolio is also
authorized to purchase put or call options in connection with closing out put or
call options it has previously sold.
Writing Options. The Portfolio is authorized to write (i.e., sell) call
options on equity securities held in its portfolio or securities indices the
performance of which is substantially correlated to securities held in its
portfolio. When the Portfolio writes a call option, in return for an option
premium the Portfolio gives another party the right to buy specified securities
owned by the Portfolio at the exercise price on or before the expiration date,
in the case of an option on securities, or agrees to pay to another party an
amount based on any gain in a specified securities index beyond a specified
level on or before the expiration date, in the case of an option on a securities
index. The Portfolio may write call options on securities to earn income,
through the receipt of option premiums; the Portfolio may write call options on
securities indices for hedging purposes. In the event the party to which the
Portfolio has written an option fails to exercise its rights under the option
because the value of the underlying securities is less than the exercise price,
the Portfolio will partially offset any decline in the value of the underlying
securities through the receipt of the option premium. By writing a call option,
however, the Portfolio limits its ability to sell the underlying securities, and
gives up the opportunity to profit from any increase in the value of the
underlying securities beyond the exercise price, while the option remains
outstanding. The Portfolio may not write covered call options in underlying
securities in an amount exceeding 15% of the market value of its total assets.
The Portfolio may also write put options on securities or securities
indices. When the Portfolio writes a put option, in return for an option premium
the Portfolio gives another party the right to sell to the Portfolio a specified
security at the exercise price on or before the expiration date, in the case of
an option on a security, or agrees to pay another party an amount based on any
decline in a specified securities index below a specified level on or before the
expiration date, in the case of an option on a securities index. The Portfolio
may write put options on securities to earn income, through the receipt of
option premiums; the Portfolio may write put options on securities indices for
hedging purposes. In the event the party to which the Portfolio has written an
option fails to exercise its rights under the option because the value of the
underlying securities is greater than the exercise price, the Portfolio will
profit by the amount of the option premium. By writing a put option, however,
the Portfolio will be obligated to purchase the underlying security at a price
that may be higher than the market value of the security at the time of exercise
as long as the put option is outstanding, in the case of an option on a
security, or make a cash payment reflecting any decline in the index, in the
case of an option on an index. Accordingly, when the Portfolio writes a put
option it is exposed to a risk of loss in the event the value of the underlying
securities falls below the exercise price, which loss
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potentially may substantially exceed the amount of option premium received by
the Portfolio for writing the put option. The Portfolio will write a put option
on a security or a securities index only if the Portfolio would be willing to
purchase the security at the exercise price for investment purposes (in the case
of an option on a security) or is writing the put in connection with trading
strategies involving combinations of options--for example, the sale and purchase
of options with identical expiration dates on the same security or index but
different exercise prices (a technique called a "spread").
The Portfolio is also authorized to sell put or call options in connection
with closing out call options it has previously purchased.
Other than with respect to closing transactions, the Portfolio will write
only call or put options that are "covered." A put option will be considered
covered if the Portfolio has segregated costs with respect to such option in the
manner described in "Risk Factors in Options, Futures and Currency Instruments"
below. A call option will be considered covered if the Portfolio owns the
securities it would be required to deliver upon exercise of the option (or, in
the case of an option on a securities index, securities that substantially
correlate with the performance of such index) or owns a call option, warrant or
convertible instrument that is immediately exercisable for, or convertible into,
such security.
Types of Options. The Portfolio may engage in transactions in the options
on securities or securities indices described above on exchanges and in the
over-the-counter ("OTC") markets. In general, exchange-traded options have
standardized exercise prices and expiration dates and require the parties to
post margin against their obligations, and the performance of the parties'
obligations in connection with such options is guaranteed by the exchange or a
related clearing corporation. OTC options have more flexible terms negotiated
between the buyer and seller, but generally do not require the parties to post
margins and are subject to greater risk of counterparty default. See "Additional
Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives"
below.
Futures
The Portfolio may engage in transactions in futures and options thereon.
Futures are standardized, exchange traded contracts that obligate a purchaser to
take delivery, and a seller to make delivery, of a specific amount of a
commodity at a specified future date at a specified price. No price is paid upon
entering a futures contract. Rather, upon purchasing or selling a futures
contract the Portfolio is required to deposit collateral ("margin") equal to a
percentage (generally less than 10%) of the contract value. Each day thereafter
until the futures position is closed, the Portfolio will pay additional margin
representing any loss experienced as a result of the futures position the prior
day or be entitled to a payment representing any profit experienced as a result
of the futures position the prior day.
The sale of a futures contract limits the Portfolio's risk of loss through
a decline in the market value of portfolio holdings correlated with the futures
contract prior to the futures contract's expiration date. In the event the
market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, the Portfolio will realize a loss on
the futures position and a lower return on the portfolio holdings than would
have been realized without the purchase of the futures contract.
The purchase of a futures contract may protect the Portfolio from having to
pay more for securities as a consequence of increases in the market value for
such securities during a period when the Portfolio was attempting to identify
specific securities in which to invest in a market the Portfolio believes to be
attractive. In the event that such securities decline in value or the Portfolio
determines not to complete an anticipatory hedge transaction relating to a
futures contract, however, the Portfolio may realize a loss relating to the
futures position.
The Portfolio will limit transactions in futures and options on futures to
financial futures contracts (i.e., contracts for which the underlying commodity
is a currency or securities or interest rate index) purchased or sold for
hedging purposes (including anticipatory hedges). The Portfolio will
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further limit transactions in futures and options on futures to the extent
necessary to prevent the Portfolio from being deemed a "commodity pool operator"
under regulations of the Commodity Futures Trading Commission.
Foreign Exchange Transactions
The Portfolio may engage in spot and forward foreign exchange transactions,
purchase and sell options on currencies and purchase and sell currency futures
and related options thereon (collectively, "Currency Instruments") for purposes
of hedging against possible variations in foreign exchange rates. Such
transactions may be effected with respect to hedges on non-U.S. dollar
denominated securities owned by the Portfolio, sold by the Portfolio but not yet
delivered, or committed or anticipated to be purchased by the Portfolio.
Forward foreign exchange transactions are OTC contracts to purchase or sell
a specified amount of a specified currency or multinational currency unit at a
price and future date (up to one year) set at the time of the contract. Spot
foreign exchange transactions are similar but require current, rather than
future, settlement. The Portfolio will enter into foreign exchange transactions
only for purposes of hedging either a specific transaction or a portfolio
position. The Portfolio may enter into a foreign exchange transaction for
purposes of hedging a specific transaction by, for example, purchasing a
currency needed to settle a security transaction or selling a currency in which
the Portfolio has received or anticipates receiving a dividend or distribution.
The Portfolio may enter into a foreign exchange transaction for purposes of
hedging a portfolio position by selling forward a currency in which a portfolio
position of the Portfolio is denominated or by purchasing a currency in which
the Portfolio anticipates acquiring a portfolio position in the near future.
The Portfolio may also hedge against in decline in the value of a currency
against the U.S. dollar through use of currency futures or options thereon.
Currency futures are similar to forward foreign exchange transactions except
that futures are standardized, exchange-traded contracts. See "Futures" above.
The Portfolio may also hedge against the decline in the value of a currency
against the U.S. dollar through the use of currency options. Currency options
are similar to options on securities, but in consideration for an option premium
the writer of a currency option is obligated to sell (in the case of a call
option) or purchase (in the case of put option) a specified amount of a
specified currency on or before the expiration date for a specified amount of
another currency. The Portfolio may engage in transactions in options on
currencies either on exchanges or OTC markets. See "Types of Options" above and
"Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Strategic Instruments" below.
The Portfolio will not speculate in Currency Instruments. Accordingly, the
Portfolio will not hedge a currency in excess of the aggregate market value of
the securities which it owns (including receivables for unsettled securities
sales), or has committed to or anticipates purchasing, which are denominated in
such currency.
Risk Factors in Hedging Foreign Currency Risks. While the Portfolio's use
of Currency Instruments to effect hedging strategies is intended to reduce the
volatility of the net asset value of the Portfolio's shares, the net asset value
of the Portfolio's shares will fluctuate. Moreover, although Currency
Instruments will be used with the intention of hedging against adverse currency
movements, transactions in Currency Instruments involve the risk that
anticipated currency movements will not be accurately predicted and that the
Portfolio's hedging strategies will be ineffective. To the extent that the
Portfolio hedges against anticipated currency movements that do not occur, the
Portfolio may realize losses, and decrease its total return, as the result of
its hedging transactions. Furthermore, the Portfolio will only engage in hedging
activities from time to time and may not be engaging in hedging activities when
movements in currency exchange rates occur. It may not be possible for the
Portfolio to hedge against currency exchange rate movements, even if correctly
anticipated, in the event that (i) the currency exchange rate movement is so
generally anticipated that the Portfolio is not able to enter into a hedging
transaction at an effective price, or (ii) the currency exchange rate movement
relates
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to a market with respect to which Currency Instruments are not available (such
as certain developing markets) and it is not possible to engage in effective
foreign currency hedging.
Risk Factors in Options, Futures, and Currency Instruments
Use of Derivatives for hedging purposes involves the risk of imperfect
correlation in movements in the value of the Derivatives and the value of the
instruments being hedged. If the value of the Derivatives moves more or less
than the value of the hedged instruments the Portfolio will experience a gain or
loss that will not be completely offset by movements in the value of the hedged
instruments.
The Portfolio intends to enter into transactions involving Derivatives only
if there appears to be a liquid secondary market for such instruments or, in the
case of illiquid instruments traded in OTC transactions, such instruments
satisfy the criteria set forth below under "Additional Risk Factors of OTC
Transactions; Limitations on the Use of OTC Derivatives." However, there can be
no assurance that, at any specific time, either a liquid secondary market will
exist for a Derivative or the Portfolio will otherwise be able to sell such
instrument at an acceptable price. It may therefore not be possible to close a
position in a Derivative without incurring substantial losses, if at all.
Certain transactions in Derivatives (e.g., forward foreign exchange
transactions, futures transactions, sales of put options) may expose the
Portfolio to potential losses that exceed the amount originally invested by the
Portfolio in such instruments. When the Portfolio engages in such a transaction,
the Portfolio will deposit in a segregated account at its custodian liquid
securities with a value at least equal to the Portfolio's exposure, on a mark-
to-market basis, to the transaction (as calculated pursuant to requirements of
the Commission). Such segregation will ensure that the Portfolio has assets
available to satisfy its obligations with respect to the transaction, but will
not limit the Portfolio's exposure to loss.
Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives.
Certain Derivatives traded in OTC markets, including OTC options, may be
substantially less liquid than other instruments in which the Portfolio may
invest. The absence of liquidity may make it difficult or impossible for the
Portfolio to sell such instruments promptly at an acceptable price. The absence
of liquidity may also make it more difficult for the Portfolio to ascertain a
market value for such instruments. The Portfolio will therefore acquire illiquid
OTC instruments (i) if the agreement pursuant to which the instrument is
purchased contains a formula price at which the instrument may be terminated or
sold, or (ii) for which the Investment Adviser anticipates the Portfolio can
receive on each business day at least two independent bids or offers, unless a
quotation from only one dealer is available, in which case that dealer's
quotation may be used.
The staff of the Commission has taken the position that purchased OTC
options and the assets underlying written OTC options are illiquid securities.
The Portfolio has therefore adopted an investment policy pursuant to which it
will not purchase or sell OTC options (including OTC options on futures
contracts) if, as a result of such transactions, the sum of the market value of
OTC options currently outstanding that are held by the Portfolio, the market
value of the securities underlying OTC call options currently outstanding that
have been sold by the Portfolio and margin deposits on the Portfolio's
outstanding OTC options exceeds 15% of the total assets of the Portfolio, taken
at market value, together with all other assets of the Portfolio that are deemed
to be illiquid or are otherwise not readily marketable. However, if an OTC
option is sold by the Portfolio to a dealer in U.S. government securities
recognized as a "primary dealer" by the Federal Reserve Bank of New York and the
Portfolio has the unconditional contractual right to repurchase such OTC option
at a predetermined price, then the Portfolio will treat as illiquid such amount
of the underlying securities as equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., current market value of the underlying
security minus the option's exercise price). The repurchase price with the
primary dealers is typically a formula price which is generally based on a
multiple of the premium received for the option, plus the amount by which the
option is "in-the-money." This policy as to OTC options is not a fundamental
policy of the Portfolio and may be amended by the Trustees of the Trust, without
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the approval of the Portfolio's shareholders. However, the Portfolio will not
change or modify this policy prior to the change or modification by the
Commission staff of its position.
Because Derivatives traded in OTC markets are not guaranteed by an exchange
or clearing corporation and generally do not require payment of margin, to the
extent that the Portfolio has unrealized gains in such instruments or has
deposited collateral with its counterparty, the Portfolio is at risk that its
counterparty will become bankrupt or otherwise fail to honor its obligations.
The Portfolio will attempt to minimize the risk that a counterparty will become
bankrupt or otherwise fail to honor its obligations by engaging in transactions
in Derivatives traded in OTC markets only with financial institutions that have
substantial capital or have provided the Portfolio with a third-party guaranty
or other credit enhancement.
Additional Limitations on the Use of Derivatives
The Portfolio may not use any Derivative to gain exposure to an asset or
class of assets that it would be prohibited by its investment restrictions from
purchasing directly.
When Issued Securities, Delayed Delivery Securities and Forward Commitments
The Portfolio may purchase or sell securities that it is entitled to
receive on a when issued basis. The Portfolio may also purchase or sell
securities on a delayed delivery basis. The Portfolio may also purchase or sell
securities through a forward commitment. These transactions involve the purchase
or sale of securities by the Portfolio at an established price with payment and
delivery taking place in the future. The Portfolio enters into these
transactions to obtain what is considered an advantageous price to the Portfolio
at the time of entering into the transaction. The Portfolio has not established
any limit on the percentage of its assets that may be committed in connection
with these transactions. When the Portfolio purchases securities in these
transactions, the Portfolio segregates liquid securities in an amount equal to
the amount of its purchase commitments.
There can be no assurance that a security purchased on a when issued basis
will be issued or that a security purchased or sold through a forward commitment
will be delivered. The value of securities in these transactions on the delivery
date may be more or less than the Portfolio's purchase price. The Portfolio may
bear the risk of a decline in the value of the security in these transactions
and may not benefit from an appreciation in the value of the security during the
commitment period.
Borrowing and Leverage
The use of leverage by the Portfolio creates an opportunity for greater
total return, but, at the same time, creates special risks. For example,
leveraging may exaggerate changes in the net asset value of Portfolio shares and
in the yield on the Portfolio's portfolio. Although the principal of such
borrowings will be fixed, the Portfolio's assets may change in value during the
time the borrowings are outstanding. Borrowings will create interest expenses of
the Portfolio that can exceed the income from the assets purchased with the
borrowings. To the extent the income or capital appreciation derived from
securities purchased with borrowed funds exceeds the interest the Portfolio will
have to pay on the borrowings, the Portfolio's return will be greater than if
leverage had not been used. Conversely, if the income or capital appreciation
from the securities purchased with such borrowed funds is not sufficient to
cover the cost of borrowing, the return to the Portfolio will be less than if
leverage had not been used, and therefore the amount available for distribution
to shareholders as dividends and other distributions will be reduced. In the
latter case, the Investment Adviser in its best judgment nevertheless may
determine to maintain the Portfolio's leveraged position if it expects that the
benefits to the Portfolio's shareholders of maintaining the leveraged position
will outweigh the current reduced return.
Certain types of borrowings by the Portfolio may result in the Portfolio
being subject to covenants in credit agreements relating to asset coverage,
portfolio composition requirements and other matters. It is not anticipated that
observance of such covenants would impede the Investment Adviser from managing
the Portfolio's portfolio in accordance with the Portfolio's investment
objectives and
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policies. However, a breach of any such covenants not cured within the specified
cure period may result in acceleration of outstanding indebtedness and require
the Portfolio to dispose of portfolio investments at a time when it may be
disadvantageous to do so.
The Portfolio at times may borrow from affiliates of the Investment
Adviser, provided that the terms of such borrowings are no less favorable than
those available from comparable sources of funds in the marketplace.
Standby Commitment Agreements
The Portfolio may enter into standby commitment agreements. These
agreements commit the Portfolio, for a stated period of time, to purchase a
stated amount of securities which may be issued and sold to the Portfolio at the
option of the issuer. The price of the security is fixed at the time of the
commitment. At the time of entering into the agreement the Portfolio is paid a
commitment fee, regardless of whether or not the security is ultimately issued.
The Portfolio will enter into such agreements for the purpose of investing in
the security underlying the commitment at a price that is considered
advantageous to the Portfolio. The Portfolio will not enter into a standby
commitment with a remaining term in excess of 90 days and will limit its
investment in such commitments so that the aggregate purchase price of
securities subject to such commitments, together with the value of portfolio
securities subject to legal restrictions on resale that affect their
marketability, will not exceed 15% of its net assets taken at the time of the
commitment. The Portfolio will maintain a segregated account with its custodian
of cash, cash equivalents, U.S. Government securities or other liquid securities
in an aggregate amount equal to the purchase price of the securities underlying
the commitment.
There can be no assurance that the securities subject to a standby
commitment will be issued, and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Since the issuance of
the security underlying the commitment is at the option of the issuer, the
Portfolio may bear the risk of a decline in the value of such security and may
not benefit from an appreciation in the value of the security during the
commitment period.
The purchase of a security subject to a standby commitment agreement and
the related commitment fee will be recorded on the date on which the security
can reasonably be expected to be issued, and the value of the security
thereafter will be reflected in the calculation of the Portfolio's net asset
value. The cost basis of the security will be adjusted by the amount of the
commitment fee. In the event the security is not issued, the commitment fee will
be recorded as income on the expiration date of the standby commitment.
Repurchase Agreements. The Portfolio may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or primary dealer in U.S. Government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, upon entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Repurchase
agreements usually cover short periods, such as under one week. The Portfolio
may not invest more than 15% of its total assets in repurchase agreements
maturing in more than seven days. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. The Portfolio will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement. In the
event of default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Portfolio
but only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Portfolio may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In the
event of a default under such a repurchase agreement, instead of the contractual
fixed rate of return, the rate of return to the Portfolio shall be dependent
upon intervening fluctuations of the market value of such security and the
accrued interest on the security. In such event, the Portfolio would have rights
against the seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to perform.
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Junk Bonds
The Portfolio may invest in junk bonds. Junk bonds are debt securities that
are rated below investment grade by the major rating agencies (e.g., rated below
Baa by Moody's Investors Services, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P")) or are unrated securities that Portfolio management
believes are of comparable quality. Although junk bonds generally pay higher
rates of interest than investment grade bonds, they are high-risk investments
that may cause income and principal losses for the Portfolio. The major risks in
junk bond investments include:
Junk bonds may be issued by less creditworthy companies. These securities
are vulnerable to adverse changes in the issuer's industry and to general
economic conditions. Issuers of junk bonds may be unable to meet their interest
or principal payment obligations because of an economic downturn, specific
issuer development or the unavailability of additional financing.
The issuers of junk bonds may have a larger amount of outstanding debt
relative to their assets than issuers of investment grade bonds. If the issuer
experiences financial stress, it may be unable to meet its debt obligations. The
issuer's ability to pay its debt obligations also may be lessened by specific
issuer developments, or the unavailability of additional financing.
Junk bonds are frequently ranked junior in claims by other creditors. If
the issuer cannot meet its obligations, the senior obligations are generally
paid off before the junior obligations.
Junk bonds frequently have redemption features that permit an issuer to
repurchase the security from the Portfolio before it matures. If the issuer
redeems the junk bonds the Portfolio may have to invest the proceeds in bonds
with lower yields and may lose income.
Prices of junk bonds are subject to extreme price fluctuations. Negative
economic developments may have a greater impact on the prices of junk bonds than
on other higher rated fixed-income securities.
Junk bonds may be less liquid than higher rated fixed-income securities
even under normal economic conditions. There are fewer dealers in the junk bond
market, and there may be significant differences in the prices quoted for junk
bonds by the dealers. Because they are less liquid, judgment may play a greater
role in valuing certain of the Portfolio's portfolio securities than in the case
with securities trading in a more liquid market.
The Portfolio may incur expenses to the extent necessary to seek recovery
upon default or to negotiate new terms with a defaulting issuer.
Other Risks
Securities Lending. The Portfolio may lend securities with a value not
exceeding 33 1/3% of its total assets (subject to investment restriction (5)
below) to banks, brokers and other financial institutions. In return, the
Portfolio receives collateral in an amount equal to at least 100% of the current
market value of the loaned securities in cash or securities issued or guaranteed
by the United States Government. The Portfolio receives securities as collateral
for the loaned securities, and the Portfolio and the borrower negotiate a rate
for the loan premium to be received by the Portfolio for the loaned securities,
which increases the Portfolio's yield. The Portfolio may receive a flat fee for
its loans. The loans are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The
Portfolio may pay reasonable finder's, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Portfolio could experience delays and costs in gaining access to the
collateral and could suffer a loss to the extent the value of the collateral
falls below the market value of the borrowed securities.
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Illiquid or Restricted Securities. The Portfolio may invest up to 15% of
its total assets in securities that lack an established secondary trading market
or otherwise are considered illiquid. Liquidity of a security relates to the
ability to dispose easily of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for a
comparable more liquid security. Illiquid securities may trade at a discount
from comparable, more liquid investments. Investment of the Portfolio's assets
in illiquid securities may restrict the ability of the Portfolio to dispose of
its investments in a timely fashion and for a fair price as well as its ability
to take advantage of market opportunities. The risks associated with illiquidity
will be particularly acute where the Portfolio's operations require cash, such
as when the Portfolio redeems shares or pays dividends, and could result in the
Portfolio borrowing to meet short term cash requirements or incurring capital
losses on the sale of illiquid investments.
The Portfolio may invest in securities that are not registered ("restricted
securities)" under the Securities Act of 1933, as amended ("Securities Act").
Restricted securities may be sold in private placement transactions between the
issuers and their purchasers and may be neither listed on an exchange nor traded
in other established markets. In many cases, privately placed securities may not
be freely transferable under the laws of the applicable jurisdiction or due to
contractual restrictions on resale. As a result of the absence of a public
trading market, privately placed securities may be less liquid and more
difficult to value than publicly traded securities. To the extent that privately
placed securities may be resold in privately negotiated transactions, the prices
realized from the sales, due to illiquidity, could be less than those originally
paid by the Portfolio or less than their fair market value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed securities held by the
Portfolio are required to be registered under the securities laws of one or more
jurisdictions before being resold, the Portfolio may be required to bear the
expenses of registration. Certain of the Portfolio's investments in private
placements may consist of direct investments and may include investments in
smaller, less-seasoned issuers, which may involve greater risks. These issuers
may have limited product lines, markets or financial resources, or they may be
dependent on a limited management group. In making investments in such
securities, the Portfolio may obtain access to material nonpublic information
which may restrict the Portfolio's ability to conduct portfolio transactions in
such securities.
144A Securities. The Portfolio may purchase restricted securities that can
be offered and sold to "qualified institutional buyers" under Rule 144A under
the Securities Act. The Board of Trustees has determined to treat as liquid Rule
144A securities that are either (i) freely tradable in their primary markets
offshore or (ii) non-investment grade debt securities that the Portfolio's
management determines are as liquid as publicly-registered non-investment grade
debt securities. The Board of Trustees has adopted guidelines and delegated to
the Portfolio's management the daily function of determining and monitoring
liquidity of restricted securities. The Board of Trustees, however, will retain
sufficient oversight and be ultimately responsible for the determinations. Since
it is not possible to predict with assurance exactly how this market for
restricted securities sold and offered under Rule 144A will continue to develop,
the Board of Trustees will carefully monitor the Portfolio's investments in
these securities. This investment practice could have the effect of increasing
the level of illiquidity in the Portfolio to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
securities.
Suitability. The economic benefit of an investment in the Portfolio depends
upon many factors beyond the control of the Portfolio, the Investment Adviser
and its affiliates. Because of its emphasis on equity securities in a particular
economic sector, the Portfolio should be considered a vehicle for
diversification and not as a balanced investment program. The suitability for
any particular investor of a purchase of shares in the Portfolio will depend
upon, among other things, such investor's investment objectives and such
investor's ability to accept the risks associated with investing in such equity
securities, including the risk of loss of principal.
Investment Restrictions
The Trust has adopted the following restrictions and policies relating to
the investment of the Portfolio's assets and activities, which are fundamental
policies and may not be changed with respect
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to the Portfolio without the approval of the holders of a majority of the
Portfolio's outstanding voting securities (which for this purpose and under the
Investment Company Act means the lesser of (i) 67% of the shares represented at
a meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares). The Portfolio may not:
(1) Make any investment inconsistent with the Portfolio's classification as
a diversified company under the Investment Company Act.
(2) Invest more than 25% of its total assets, taken at market value, in the
securities of issuers in any particular industry or group of industries
(excluding the U.S. Government and its agencies and instrumentalities),
except that the Portfolio will, during normal market conditions, invest at
least 25% of its total assets in the financial services sector, a group of
industries that includes banking, mortgage lending and servicing,
securities and commodities trading, investment management, insurance,
providing financial guarantees, leasing, credit card servicing and lending.
(3) Make investments for the purpose of exercising control or management.
(4) Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Portfolio may invest in securities directly or
indirectly secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein.
(5) Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that the Portfolio may lend its portfolio securities, provided that
the lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Prospectus and this
Statement of Additional Information, as they may be amended from time to
time.
(6) Issue senior securities to the extent such issuance would violate
applicable law.
(7) Borrow money, except that (i) the Portfolio may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Portfolio may, to
the extent permitted by applicable law, borrow up to an additional 5% of
its total assets for temporary purposes, (iii) the Portfolio may obtain
such short term credit as may be necessary for the clearance of purchases
and sales of portfolio securities and (iv) the Portfolio may purchase
securities on margin to the extent permitted by applicable law. The
Portfolio may not pledge its assets other than to secure such borrowings
or, to the extent permitted by the Portfolio's investment policies as set
forth in the Prospectus and this Statement of Additional Information, as
they may be amended from time to time, in connection with hedging
transactions, short sales, when issued and forward commitment transactions
and similar investment strategies.
(8) Underwrite securities of other issuers except insofar as the Portfolio
technically may be deemed an underwriter under the Securities Act in
selling portfolio securities.
(9) Purchase or sell commodities or contracts on commodities, except to the
extent that the Portfolio may do so in accordance with applicable law and
the Prospectus and this Statement of Additional Information, as they may be
amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
In addition, the Trust has adopted non-fundamental investment restrictions
that may be changed with respect to the Portfolio by the Board of Trustees
without a vote of the Portfolio's shareholders. Under the non-fundamental
investment restrictions, the Portfolio may not:
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(a) Purchase securities of other investment companies, except to the extent
permitted by applicable law. As a matter of policy, however, the Portfolio
will not purchase shares of any registered open-end investment company or
registered unit investment trust, in reliance on Section 12(d)(1)(F) or (G)
(the "fund of funds" provisions) of the Investment Company Act at any time
the Portfolio's shares are owned by another investment company that is part
of the same group of investment companies as the Portfolio.
(b) Make short sales of securities or maintain a short position, except to
the extent permitted by applicable law. The Portfolio currently does not
intend to engage in short sales, except short sales "against the box."
(c) Invest in securities that cannot be readily resold because of legal or
contractual restrictions or that cannot otherwise be marketed, redeemed or
put to the issuer or a third party, if at the time of acquisition more than
15% of its total assets would be invested in such securities. This
restriction shall not apply to securities that mature within seven days or
securities that the Directors of the Trust have otherwise determined to be
liquid pursuant to applicable law. Securities purchased in accordance with
Rule 144A under the Securities Act and determined to be liquid by the
Trust's Board of Trustees are not subject to the limitations set forth in
this investment restriction.
(d) Notwithstanding fundamental investment restriction (7) above, borrow
amounts in excess of 20% of its total assets taken at market value
(including the amount borrowed), and then only from banks as a temporary
measure for extraordinary or emergency purposes such as the redemption of
Portfolio shares.
(e) Invest more than 5% of its assets in debt securities rated below
investment grade by a nationally recognized rating agency (e.g., rated
below Baa by Moody's Investors Services, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Group ("S&P")) or in unrated debt securities
that, in the judgment of FAM, possess similar credit characteristics as
debt securities rated investment grade or debt securities rated below
investment grade (commonly known as "junk bonds").
In addition, the Portfolio will not purchase securities while borrowings
are outstanding except to honor prior commitments and to exercise subscription
rights.
Portfolio securities of the Portfolio generally may not be purchased from,
sold or loaned to the Investment Adviser or its affiliates or any of their
directors, general partners, officers or employees, acting as principal, unless
pursuant to a rule or exemptive order under the Investment Company Act.
Because of the affiliation of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") with the Investment Adviser, the Portfolio is
prohibited from engaging in certain transactions involving Merrill Lynch or its
affiliates except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order under the Investment Company Act. See "Portfolio
Transactions and Brokerage." Without such an exemptive order the Portfolio would
be prohibited from engaging in portfolio transactions with Merrill Lynch or any
of its affiliates acting as principal.
Portfolio Turnover
The Portfolio will effect portfolio transactions without regard to holding
period only if, in its management's judgment, such transactions are advisable in
light of a change in circumstances of a particular company or within a
particular industry or in general market, economic or financial conditions. As a
result of the Portfolio's investment policies, under certain market conditions,
the Portfolio's portfolio turnover may be higher than that of other investment
companies. The portfolio turnover rate is calculated by dividing the lesser of
the Portfolio's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of all securities with maturities at the time of acquisition
of one year or less) by the monthly average value of the securities in the
portfolio during the year.
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ITEM 13. MANAGEMENT OF THE REGISTRANT
Trustees and Officers
Information about the Trustees, executive officers and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Trustee is P.O. Box
9011, Princeton, New Jersey 08543-9011.
Terry K. Glenn (58) -- President and Trustee(1)(2) -- Executive Vice President
of the Investment Adviser and Fund Asset Management, L.P. ("FAM") since 1983;
Executive Vice President and Director of Princeton Services since 1993;
President of Princeton Funds Distributor, Inc. ("PFD") since 1986 and Director
thereof since 1991.
Ronald W. Forbes (58) -- Trustee(2) -- 1400 Washington Avenue, Albany, New York
12222. Professor of Finance, School of Business, State University of New York at
Albany, since 1989; Consultant Urban Institute, Washington, D.C. since 1995.
Cynthia A. Montgomery (46) -- Trustee(2) -- Harvard Business School, Soldiers
Field Road, Boston, Massachusetts 02163. Professor, Harvard Business School
since 1989; Associate Professor, J.L. Kellogg Graduate School of Management,
Northwestern University from 1985 to 1989; Assistant Professor, Graduate School
of Business Administration, The University of Michigan from 1979 to 1985;
Director, UNUM Corporation since 1990 and Director of Newell Co. since 1995.
Charles C. Reilly (67) -- Trustee(2) -- 9 Hampton Harbor Road, Hampton Bays, New
York 11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior Vice
President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business from 1990 to 1991;
Adjunct Professor, Wharton School, University of Pennsylvania, from 1989 to
1990; Partner, Small Cities Cable Television from 1986 to 1997.
Kevin A. Ryan (66) -- Trustee(2) -- 127 Commonwealth Avenue, Chestnut Hill,
Massachusetts 02167. Founder and current Director of The Boston University
Center for the Advancement of Ethics and Character; Professor of Education at
Boston University since 1982; formerly taught on the faculties of The University
of Chicago, Stanford University and Ohio State University.
Richard R. West (61) -- Trustee(2) -- Box 604, Genoa, Nevada 89411. Professor of
Finance since 1984, and Dean from 1984 to 1993, and currently Dean Emeritus of
New York University, Leonard N. Stern School of Business Administration;
Director of Bowne & Co., Inc. (financial printers), Vornado Realty Trust, Inc.
(real estate holding corporation), and Alexander's Inc. (real estate company).
Arthur Zeikel (66) -- Trustee(1)(2) -- 300 Woodland Avenue, Westfield, New
Jersey 07090 -- Chairman of MLAM and FAM from 1997 to 1999; President of MLAM
and FAM from 1977 to 1997; Chairman of Princeton Services since 1997 and
Director thereof since 1993; President of Princeton Services from 1993 to 1997;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") from 1990 to
1999.
Robert Doll (45) -- Senior Vice President(1)(2) -- Senior Vice President of the
Investment Adviser and MLAM since 1999; Senior Vice President of Princeton
Services since 1999; Chief Investment Officer of Oppenheimer Funds, Inc. in
1999 and Executive Vice President thereof from 19991 to 1999.
James Ellman (31) -- Senior Vice President and Portfolio Manager(1)(2) -- First
Vice President of the Investment Adviser, as well as Portfolio Manager of the
Portfolio since 1999; Portfolio Manager with AIM Advisors, Inc. and its
predecessors from 1995 to 1999.
Donald C. Burke (38) -- Vice President and Treasurer(1)(2) -- Senior Vice
President and Treasurer of the Investment Adviser and FAM since 1999; Senior
Vice President and Treasurer of Princeton Services since 1999; Vice President of
PFD since 1999; First Vice President of the Investment Adviser from 1997 to
1999; Vice President of the Investment Adviser from 1990 to 1997.
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Ira P. Shapiro (36) -- Secretary(1)(2) -- First Vice President of the Investment
Adviser since 1998. Director (Legal Advisory) of the Investment Adviser from
1997 to 1998; Vice President of the Investment Adviser from 1996 to 1997;
Attorney with the Investment Adviser from 1993 to 1996.
- - ----------------
(1) Interested person, as defined in the Investment Company Act, of the Trust.
(2) Such Trustee or officer is a director, trustee or officer of certain other
investment companies for which the Investment Adviser or its affiliate, MLAM,
acts as investment adviser.
As of September 30, 1999 the officers and Directors of the Trust as a
group (11 persons) owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co., and owned an aggregate of less than 1% of
the outstanding shares of the Portfolio.
Compensation of Trustees
Merrill Lynch Global Financial Services Fund, Inc. (the "Fund"), the
registered investment company which invests all of its assets in the Portfolio,
and the Trust pay each individual who serves as a Director/Trustee not
affiliated with the Investment Adviser (each a "non-affiliated
Director/Trustee") a fee of $2,000 per year plus $400 per meeting attended,
together with such individual's actual out-of-pocket expenses relating to
attendance at meetings. The Fund and the Trust also compensates members of its
Audit and Nominating Committee (the "Committee"), which consists of all the
non-affiliated Directors/Trustees with a fee of $900 per year; the Chairman of
the Committee receives an additional annual fee of $1,000 per year. For the
fiscal year ended May 31, 1999 and through September 30, 1999, no fees or
expenses were paid to non-affiliated Directors/Trustees that were allocated to
the Trust.
The following table sets forth the compensation earned by non-affiliated
Directors/Trustees from the Fund and the Trust for the fiscal year ended May 31
and the aggregate compensation paid to non-affiliated Directors/Trustees from
all registered investment companies advised by FAM and its affiliate, Merrill
Lynch Asset Management, L.P., ("MLAM") ("FAM/MLAM Advised Funds") for the
calendar year ended December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Compensation
From Fund and
Aggregate Pension or Retirement FAM/MLAM Advised
Name of Director/ Compensation Benefits Accrued as Funds Paid to Director
Trustee From Fund Part of Fund Expenses Trustee (1)
- - ----------------- ------------ --------------------- ------------------
Ronald W. Forbes..... $ 0 0 $ 192,567
Cynthia A. Montgomery $ 0 0 $ 192,567
Charles C. Reill..... $ 0 0 $ 362,858
Kevin A. Ryan........ $ 0 0 $ 192,567
Richard R. West...... $ 0 0 $ 346,125
</TABLE>
- - ----------
(1) In addition to the Fund and the Trust, the Directors/Trustees serve on the
boards of MLAM/FAM Advised Funds as follows: Mr. Forbes (42 registered
investment companies consisting of 55 portfolios); Ms. Montgomery (42 registered
investment companies consisting of 55 portfolios); Mr. Reilly (60 registered
investment companies consisting of 73 portfolios); Mr. Ryan (42 registered
investment companies consisting of 55 portfolios); and Mr. West (62 registered
investment companies consisting of 86 portfolios).
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
Merrill Lynch Global Financial Services Fund, Inc. (the "Fund"), a Maryland
corporation, and the Investment Adviser control Global Financial Services
Portfolio (the "Portfolio"). As of October 15, 1999, the Fund owns 100% of the
currently outstanding interests of the Portfolio and the Investment Adviser owns
100% of the currently outstanding interests of the Fund.
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All holders of interests ("Holders") are entitled to vote in proportion to
the amount of their interest in a Portfolio or in the Trust, as the case may be.
There is no cumulative voting. Accordingly, the Holder or Holders of more than
50% of the aggregate beneficial interests of the Trust would be able to elect
all the Trustees. With respect to the election of Trustees and ratification of
accountants the shareholders of separate Portfolios vote together; they
generally vote separately by Portfolios on other matters.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
The Trust has entered into a management agreement with the Investment
Adviser (the "Management Agreement" or "Advisory Agreement" ). The Investment
Adviser provides the Trust with investment advisory and management services.
Subject to the supervision of the Board of Trustees, the Investment Adviser is
responsible for the actual management of the Portfolio's portfolio and
constantly reviews the Portfolio's holdings in light of its own research
analysis and that from other relevant sources. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser. The Investment Adviser performs certain of the other administrative
services and provides all the office space, facilities, equipment and necessary
personnel for management of the Portfolio.
Securities held by the Portfolio of the Trust may also be held by, or be
appropriate investments for, other funds or investment advisory clients for
which the Investment Adviser or its affiliates act as an adviser. Because of
different objectives or other factors, a particular security may be bought for
one or more clients when one or more clients are selling the same security. If
purchases or sales of securities by the Investment Adviser for the Portfolio or
other funds for which it acts as investment adviser or for its advisory clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client of the Investment Adviser or its affiliates
during the same period may increase the demand for securities being purchased or
the supply of securities being sold there may be an adverse effect on price.
As discussed in Part A, the Investment Adviser receives for its services to
the Portfolio monthly compensation at the annual rate of .40% of the average
daily net assets of the Portfolio.
Payment of Portfolio Expenses. The Management Agreement obligates the
Investment Adviser to provide investment advisory services and to pay all
compensation of and furnish office space for officers and employees of the Trust
connected with investment and economic research, trading and investment
management of the Trust, as well as the fees of all Trustees who are affiliated
persons of the Investment Adviser or any of their affiliates. The Portfolio pays
all other expenses incurred in the operation of the Portfolio, (except to the
extent paid by the Placement Agent), including, among other things, taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports, copies of the Registration Statements,
charges of the Custodian, any Sub-custodian and Transfer Agent, expenses of
portfolio transactions, expenses of redemption of shares, Securities and
Exchange Commission fees, expenses of registering the shares under federal,
state or foreign laws, fees and out-of-pocket expenses of unaffiliated Trustees,
accounting and pricing costs (including the daily calculation of net asset
value), insurance, interest, brokerage costs, litigation and other extraordinary
or non-recurring expenses, and other expenses properly payable by the Trust or
the Portfolio. The Placement Agent will pay certain of the expenses of the Trust
incurred in connection with the offering of its shares of beneficial interest of
the Portfolio. Accounting services are provided to the Trust by the Investment
Adviser or an affiliate of the Investment Adviser, and the Trust reimburses the
Investment Adviser or an affiliate of the Investment Adviser for its costs in
connection with such services.
Organization of the Investment Adviser. Fund Asset Management, L.P. is
located at P.O. Box 9011, Princeton, New Jersey 08543-9011. The Investment
Adviser is a limited partnership, the partners of which are ML & Co. and
Princeton Services. ML & Co. and Princeton Services are "controlling persons" of
the Investment Adviser as defined under the Investment Company Act because of
their ownership of its voting securities or their power to exercise a
controlling influence over its management or policies.
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Duration and Termination. Unless earlier terminated as described below, the
Management Agreement will remain in effect for two years from the date of its
commencement. Thereafter, it will remain in effect from year to year with
respect to the Portfolio if approved annually (a) by the Board of Trustees or by
a majority of the outstanding shares of the Portfolio and (b) by a majority of
the Trustees who are not parties to such contract or interested persons (as
defined in the Investment Company Act) of any such party. Such contract is not
assignable and may be terminated without penalty on 60 days' written notice at
the option of either party thereto or by the vote of the shareholders of the
Portfolio.
Code of Ethics
The Board of Trustees of the Trust have adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act which incorporates the Code of Ethics of the
Trust and of the Investment Adviser (together, the "Codes"). The Codes
significantly restrict the personal investing activities of all employees of the
Investment Adviser and, as described below, impose additional, more onerous,
restrictions on fund investment personnel.
The Codes require that all employees of the Investment Adviser pre-clear
any personal securities investment (with limited exceptions, such as government
securities). The pre-clearance requirement and associated procedures are
designed to identify any substantive prohibition or limitation applicable to the
proposed investment. The substantive restrictions applicable to all employees of
the Investment Adviser include a ban on acquiring any securities in a "hot"
initial public offering and a prohibition from profiting on short-term trading
in securities. In addition, no employee may purchase or sell any security that
at the time is being purchased or sold (as the case may be), or to the knowledge
of the employee is being considered for purchase or sale, by any fund advised by
the Investment Adviser. Furthermore, the Codes provide for trading "blackout
periods" which prohibit trading by investment personnel of the Trust within
periods of trading by the Portfolio in the same (or equivalent) security (15 or
30 days depending upon the transaction).
Independent Accountants.
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540 has
been selected as the independent auditors of the Trust. The independent auditors
are responsible for auditing the annual financial statements of the Portfolio.
Custodian.
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, acts as the custodian of the Portfolios' assets. Under its contract with
the Trust, the Custodian is authorized to establish separate accounts in foreign
currencies and to cause foreign securities owned by the Portfolios to be held in
its offices outside the United States and with certain foreign banks and
securities depositors. The Custodian is responsible for safe guarding and
controlling the Portfolios' cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Portfolios'
investments.
Legal Counsel.
Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, New York, New York
10022, is counsel for the Trust.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Subject to policies established by the Board of Trustees, the Investment
Adviser is primarily responsible for the execution of the Portfolio's portfolio
transactions and the allocation of brokerage. The Trust has no obligation to
deal with any dealer or group of dealers in the execution of transactions in
portfolio securities of the Portfolio. Where possible, the Trust deals directly
with the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. It is
the policy of the Trust to obtain the best results in conducting portfolio
transactions for the Portfolio, taking into account such factors as price
(including the
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<PAGE>
applicable dealer spread or commission), the size, type and difficulty of the
transaction involved, the firm's general execution and operations facilities and
the firm's risk in positioning the securities involved. The portfolio securities
of the Portfolio generally are traded on a principal basis and normally do not
involve either brokerage commissions or transfer taxes. The cost of portfolio
securities transactions of the Portfolio primarily consists of dealer or
underwriter spreads. While reasonable competitive spreads or commissions are
sought, the Trust will not necessarily be paying the lowest spread or commission
available. Transactions with respect to the securities of small and emerging
growth companies in which the Portfolio may invest may involve specialized
services on the part of the broker or dealer and thereby entail higher
commissions or spreads than would be the case with transactions involving more
widely trading securities.
Subject to obtaining the best price and execution, broker-dealers who
provide supplemental investment research (such as quantitative and modeling
information assessments and analyses of the business or prospects of a company,
industry or economic sector) to the Investment Adviser may receive orders for
transactions by the Trust. Information so received will be in addition to and
not in lieu of the services required to be performed by the Investment Adviser
under its Management Agreement and the expense of the Investment Adviser will
not necessarily be reduced as a result of the receipt of such supplemental
information. If in the judgment of the Investment Adviser the Trust will be
benefitted by supplemental research services, the Investment Adviser is
authorized to pay brokerage commissions to a broker-dealer furnishing such
services which are in excess of commissions which another broker-dealer may have
charged for effecting the same transaction. Supplemental investment research
obtained from such broker-dealers might be used by the Investment Adviser in
servicing all of its accounts and all such research might not be used by the
Investment Adviser in connection with the Trust. Consistent with the Conduct
Rules of the National Association of Securities Dealers, Inc. and policies
established by the Trustees, the Investment Adviser may consider sales of shares
of investors in the Trust as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Trust.
Under the Investment Company Act, persons affiliated with the Trust and
persons who are affiliated with such persons are prohibited from dealing with
the Trust as principal in the purchase and sale of securities unless a
permissive order allowing such transactions is obtained from the Commission.
Since transactions in the OTC market usually involve transactions with dealers
acting as principal for their own accounts, affiliated persons of the Trust,
including Merrill Lynch and any of its affiliates, will not serve as the Trust's
dealer in such transactions. However, affiliated persons of the Trust may serve
as its broker in listed or OTC transactions conducted on an agency basis
provided that, among other things, the fee or commission received by such
affiliated broker is reasonable and fair compared to the fee or commission
received by non-affiliated brokers in connection with comparable transactions.
In addition, the Trust may not purchase securities during the existence of any
underwriting syndicate for such securities of which Merrill Lynch is a member or
in a private placement in which Merrill Lynch serves as placement agent except
pursuant to procedures adopted by the Board of Trustees of the Trust that either
comply with rules adopted by the Commission or with interpretations of the
Commission staff.
Certain court decisions have raised questions as to the extent to which
investment companies should seek exemptions under the Investment Company Act in
order to seek to recapture underwriting and dealer spreads from affiliated
entities. The Trustees have considered all factors deemed relevant and have made
a determination not to seek such recapture at this time. The Trustees will
reconsider this matter from time to time.
Section 11(a) of the Exchange Act generally prohibits members of the U.S.
national securities exchanges from executing exchange transactions for their
affiliates and institutional accounts that they manage unless the member (i) has
obtained prior express authorization from the account to effect such
transactions, (ii) at least annually furnishes the account with a statement
setting forth the aggregate compensation received by the member in effecting
such transactions, and (iii) complies with any rules the Commission has
prescribed with respect to the requirements of clauses (i) and (ii). To the
extent Section 11(a) would apply to Merrill Lynch acting as a broker for the
Trust in any of its portfolio transactions executed on any such securities
exchange of which it is a member, appropriate consents have been obtained from
the Trust and annual statements as to aggregate compensation will be
31
<PAGE>
provided to the Trust. Securities may be held by, or be appropriate investments
for, the Portfolio as well as other funds or investment advisory clients of the
Investment Advisor or MLAM.
Because of different objectives or other factors, a particular security may
be bought for one or more clients of the Investment Adviser or an affiliate when
one or more clients of the Investment Adviser or an affiliate are selling the
same security. If purchases or sales of securities arise for consideration at or
about the same time that would involve the Trust or other clients or funds for
which the Investment Adviser or an affiliate acts as manager, transactions in
such securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all to the extent that transactions on
behalf of more than one client of the Investment Adviser or an affiliate during
the same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust that establishes the Trust, a Delaware
business trust, the Trustees are authorized to issue beneficial interests in
each Portfolio of the Trust. Investors are entitled to participate, in
proportion to their investment, in distributions of taxable income, loss, gain
and deduction with respect to the Portfolio in which they have invested. Upon
liquidation or dissolution of a Portfolio, investors are entitled to share in
proportion to their investment in such Portfolio's net assets available for
distribution to its investors. Interests in a Portfolio have no preference,
preemptive, conversion or similar rights and are fully paid and nonassessable,
except as set forth below. Investments in a Portfolio generally may not be
transferred.
Each investor is entitled to a vote in proportion to the amount of its
interest in a Portfolio or in the Trust, as the case may be. Investors in the
Trust, or in any Portfolio, do not have cumulative voting rights, and investors
holding more than 50% of the aggregate beneficial interests in the Trust may
elect all of the Trustees of the Trust if they choose to do so and in such event
the other investors in the Trust 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 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.
A Portfolio shall be dissolved (i) by the affirmative vote of the Holders
holding not less than two-thirds of the beneficial interests in the Portfolio,
at any meeting of such Holders or by an instrument in writing, without a meeting
signed by a majority of the Trustees and consented to by the Holders holding not
less than two-thirds of the beneficial interests in such Portfolio, or (ii) by
unanimous consent of the Trustees by written notice of such dissolution to the
Holders in such Portfolio. The Trust shall be dissolved upon the dissolution of
the last remaining Portfolio.
The Declaration of Trust provides that obligations of the Trust and the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. The Declaration of Trust
provides that the Trust may maintain appropriate insurance (for example,
fidelity bond and errors and omissions insurance) for the protection of the
Portfolio, their Holders, Trustees, officers, employees and agents covering
possible tort and other liabilities. Pursuant to Section 3804 of the Delaware
Business Trust Act, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Portfolio of
the Trust shall be enforceable against the assets of such Portfolio only and not
against the assets of the Trust generally or any other Portfolio thereof, and
none of the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to the Trust generally or any other
Portfolio thereof shall be enforceable against the assets of such Portfolio.
The Trust currently consists of one Portfolio. The Trust reserves the
right to create and issue interests in a number of additional Portfolios. As
indicated above, Holders of each Portfolio participate equally in the earnings
and assets of the particular Portfolio. Holders of each Portfolio are entitled
to vote separately to approve advisory agreements or changes in investment
policy, but Holders of all
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Portfolios vote together in the election or selection of Trustees and
accountants for the Trust. Upon liquidation or dissolution of a Portfolio, the
Holders of such Portfolio are entitled to share in proportion to their
investment in the net assets of such Portfolio available for distribution to
Holders.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Trust are not offered to the public and 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
Trust may be made only by a limited number of institutional investors, including
investment companies, common or commingled trust funds, group trusts and certain
other entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. [The number of Holders of any Portfolio shall be limited
to fewer than 100.] 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 net asset value of the shares of the Portfolio is determined once daily
Monday through Friday after the close of business on the NYSE on each day the
NYSE is open for trading (a "Pricing Day"). The NYSE generally closes at 4:00
p.m., Eastern time. Any assets or liabilities initially expressed in terms of
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers on the day of valuation.
The NYSE is not open for trading on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
The net asset value is computed by deducting the amount of the Portfolio's
total liabilities from the value of its total assets, dividing the market value
of the securities held by a Portfolio plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time, rounded to the nearest cent. Expenses, including the fees payable to the
Investment Adviser, are accrued daily.
A Portfolio's securities which are traded on stock exchanges are valued at
the last sale price (regular way) on the exchange on which such securities are
traded as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price for long positions and at
the last available ask price for short positions. In cases where securities are
traded on more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Trustees as the primary market. Long
positions in securities traded in the OTC market are valued at the last
available bid price in the OTC market prior to the time of valuation. Portfolio
securities that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market. Short positions
in securities traded in the OTC market are valued at the last available ask
price in the OTC market prior to the time of valuation. When the Portfolio
writes an option, the amount of the premium received is recorded on the books of
the Portfolio as an asset and an equivalent liability. The amount of the
liability is subsequently valued to reflect the current market value of the
option written, based upon the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last asked
price. Options purchased by the Portfolio are valued at their last sale price in
the case of exchange-traded options or, in the case of options traded in the OTC
market, the last bid price. Other investments, including financial futures
contracts and related options, are stated at market value. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Trustees of the
Trust, including valuations furnished by a pricing service retained by the
Trust. Such valuations and procedures will be reviewed periodically by the
Trustees.
Generally, trading in non-U.S. securities, as well as U.S. Government
securities and money market instruments, is substantially completed each day at
various times prior to the close of business on the NYSE. The values of such
securities used in computing the net asset value of a Portfolio's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that will not be reflected in the computation of a Portfolio's net asset
value. If
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events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by the Trustees.
Each investor in the Trust may add to or reduce its investment in any
Portfolio on each Pricing Day. The value of each investor's interest in a
Portfolio will be determined after the close of business on the NYSE (generally
4:00 p.m., New York Time) 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 interests in such Portfolio. Any additions or withdrawals, which
are to be effected on that day, will then be effected. The investor's percentage
of the aggregate beneficial interests in a Portfolio will then be recomputed as
the percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the time or determination 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 such 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
will then be applied to determine the value of the investor's interest in such
Portfolio as of 15 minutes after the close of business of the NYSE on the next
Pricing Day of the Portfolio. For further information concerning the Portfolio'
net asset value, and the valuation of the Portfolio's assets, see Part A.
Redemptions.
An investor in the Trust may withdraw all or a portion of its investment in
any Portfolio on any Pricing Day at the net asset value next determined after a
withdrawal request in proper form is furnished by the investor to the Portfolio.
The proceeds of the withdrawal will be paid by the Portfolio normally on the
business day on which the withdrawal is effected, but in any event within seven
days. Investments in any Portfolio of the Trust may not be transferred.
ITEM 19. TAXATION OF THE TRUST.
The Trust is organized as a Delaware business trust. The Portfolio is
treated as a separate taxable entity under the Internal Revenue Code of 1986
(the "Code") which will have the status of partnership pursuant to Treasury
Regulation Section 301.7701-3(b)(1) and, thus, is not subject to income tax.
Based upon the status of the Portfolio as a partnership, each investor in a
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of such Portfolio) of such 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 Code and regulations promulgated
thereunder.
Although, as described above, the Portfolio will not be subject to federal
income tax, it will file appropriate income tax returns. Each prospective
Investor Fund which is a regulated investment company ("RIC") will be required
to agree, in its subscription agreement, that, for purposes of determining its
required distribution under Code Section 4982(a), it will account for its share
of its items of income, gain, loss and deduction of a Portfolio as they are
taken into account by the Portfolio.
The Portfolio may invest in futures contracts or options, certain options,
futures contracts and options on futures contracts are "section 1256 contracts."
Any gains or losses on section 1256 contracts are generally considered 60% long-
term and 40% short-term capital gains or losses ("60/40"). Also, section 1256
contracts held by a Portfolio at the end of each taxable year are treated for
federal income tax purposes as being sold on such date for their fair market
value. The resultant paper gains or losses are also treated as 60/40 gains or
losses. When the section 1256 contract is subsequently disposed of, the actual
gain or loss will be adjusted by the amount of any preceding year-end gain or
loss.
Foreign currency gains or losses on non-U.S. dollar denominated bonds and
other similar debt instruments and on any non-U.S. dollar denominated futures
contracts, options and forward contracts that are not Section 1256 contracts
generally will be treated as ordinary income or loss.
34
<PAGE>
Certain hedging transactions undertaken by a Portfolio may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Portfolio. In addition, losses
realized by the Portfolio on positions that are part of a straddle may be
deferred, rather than being taken into account in calculating taxable income for
the taxable year in which such losses are realized. The Portfolio may make one
or more of the elections available under the Code which are applicable to
straddles. If the Portfolio makes any of the elections, the amount, character
and timing of the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to the elections
made. The rules applicable under certain of the elections operate to accelerate
the recognition of gains or losses from the affected straddle positions.
Additionally, the conversion transaction or constructive sale rules may apply to
certain transactions (including straddles) to change the character of capital
gains to ordinary income or require the recognition of income prior to the
economic recognition of such income.
The Portfolio may be subject to a tax on dividend or interest income
received from securities of a non-U.S. issuer withheld by a foreign country at
the source. The United States has entered into tax treaties with many foreign
countries which entitle the Portfolio to a reduced rate of tax or exemption from
tax on such income. It is impossible to determine the effective rate of foreign
tax in advance since the amount of the Portfolio's assets to be invested within
various countries is not known.
The Portfolio may make investments that produce income that is not matched
by a corresponding cash receipt by the Portfolio, such as investments in
obligations having original issue discount or market discount (if a Portfolio
elects to accrue the market discount on a current basis with respect to such
instruments). Because such income may not be matched by a corresponding cash
receipt, the Portfolio may be required to borrow money or dispose of other
securities to be able to make distributions to investors.
The Portfolio's taxable income will in most cases be determined on the
basis of reports made to such Portfolio by the issuers of the securities in
which such Portfolio invests. The tax treatment of certain securities in which a
Portfolio may invest is not free from doubt, and it is possible that an Internal
Revenue Service examination of the issuers of such securities or of such
Portfolio could result in adjustments to the income of the Portfolio.
Under the Trust, the Portfolio is to be managed in compliance with the
provisions of the Code applicable to RICs as though such requirements were
applied at the Portfolio level. Thus, consistent with its investment objectives,
the Portfolio will meet the income and diversification of assets tests of the
Code applicable to RICs. Before accepting investments by RICs, the Portfolio
will have received rulings from the Internal Revenue Service that Holders of
interests in the Portfolio that are RICs will be treated as owners of their
proportionate shares of the Portfolio's assets and income for purposes of the
Code's requirements applicable thereto.
ITEM 20. UNDERWRITERS.
The exclusive placement agent for the Portfolio of the Trust is Merrill
Lynch Funds Distributor, Inc., a division of Princeton Funds Distributor, Inc.,
which receives no compensation for serving in this capacity. The Placement Agent
is located at P.O. Box 9081, Princeton, New Jersey 08543-9081. Investment
companies, common and commingled trust funds and similar organizations and
entities may continuously invest in the Portfolio.
ITEM 21. CALCULATION OF PERFORMANCE DATA.
Beneficial interests in the Trust are not offered to the public and 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. Accordingly, the
Trust will not advertise the Portfolio's performance. However, certain of the
Trust's Holders may from time to time advertise their performance, which will be
based upon the Trust's performance.
35
<PAGE>
Total return figures are based on historical performance and are not
intended to indicate future performance. Average annual total return is
determined in accordance with a formula specified by the Securities and Exchange
Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses.
Annual, average annual and annualized total return and aggregate total
return performance data, both as a percentage and as a dollar amount, are based
on a hypothetical $1,000 investment and computed as described above, except that
as required by the periods of the quotations, actual annual, annualized or
aggregate data, rather than average annual data, may be quoted. Actual annual or
annualized total return data generally will be lower than average annual total
return data since the average rates of return reflect compounding of return;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over a
longer period of time.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average number of shares outstanding during the period that were
entitled to receive dividends multiplied by the maximum offering price per share
on the last day of the period.
ITEM 22. FINANCIAL STATEMENTS.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Investor,
Global Financial Services Master Trust:
We have audited the accompanying statement of assets and liabilities of
Global Financial Services Master Trust as of October 15, 1999. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, such financial statement presents fairly, in all material
respects, the financial position of the Global Financial Services Master Trust
as of October 15, 1999 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 15, 1999
Global Financial Services Portfolio of
Global Financial Services Master Trust
Statements of Assets and Liabilities
October 15, 1999
Global Financial
Services
Portfolio
-----------------
Assets:
Cash $100,100
Prepaid offering costs (Note 3) 14,500
-----------------
Total Assets 114,600
-----------------
Less liabilities and accrued expenses 14,500
-----------------
Net Assets applicable to investors' Interest
In the Portfolio. (Note 1) $100,100
=================
- - ----------------
Notes to Financial Statement.
(1) Global Financial Services Master Trust (the "Trust") was organized as a
Delaware business trust on August 19, 1999. Global Financial Services
Portfolio (the "Portfolio") is a portfolio of the Trust. To date, the
Portfolio has not had any transactions other than those relating to
organizational matters, an indirect $100,000 capital contribution to the
Portfolio by Fund Asset Management, L.P., (the "Investment Adviser")
through the corresponding portfolio of Merrill Lynch Global Financial
Services Fund, Inc., and a $100 partnership contribution to the Portfolio
by Merrill Lynch Funds Distributor, Inc.
(2) The Trust on behalf of the Portfolio has entered into an investment
advisory agreement (the "Advisory Agreement") with the investment Adviser.
(See "Investment Advisory and Other Services" in Part B of the Registration
Statement.) Certain Officers and/or Trustees of the Trust are officers
and/or directors of the Investment Adviser.
(3) Prepaid offering costs consist of legal and printing fees related to
preparing the registration statement, and will be amortized over a 12 month
period beginning with the commencement of operations of the Portfolio. The
Investment Adviser on behalf of the Portfolio will incur organization
costs, estimated at $19,500.
36
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APPENDIX
RATINGS OF FIXED INCOME SECURITIES
Description of Moody's Investors Service Inc.'s ("Moody's") Corporate Ratings
Aaa Bonds that 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
issue.
Aa Bonds that 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 that 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 that are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds that are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note. Moody's may apply numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier I indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of Moody's Commercial Paper Ratings
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act of
1933, as amended. Moody's commercial paper ratings are
A-1
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opinions of the ability of issuers to repay punctually promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representation that such obligations are exempt from registration under the
Securities Act of 1933, nor does it represent that any specific note is a valid
obligation of a rated issuer or issued in conformity with any applicable law.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries
- High rates of return on funds employed
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation
- Well established access to a range of financial markets and assured
sources of alternate liquidity
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.
Description of Moody's Preferred Stock Ratings
Because of the fundamental differences between preferred stocks and bonds,
a variation of the bond rating symbols is being used in the quality ranking of
preferred stocks. The symbols, presented below, are designed to avoid comparison
with bond quality in absolute terms. It should always be borne in mind that
preferred stocks occupy a junior position to bonds within a particular capital
structure and that these securities are rated within the universe of preferred
stocks.
Preferred stock rating symbols and their definitions are as follows:
aaa An issue that is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
A-2
<PAGE>
aa An issue that is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a An issue that is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa An issue that is rated "baa" is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba An issue that is rated "ba" is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
caa An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.
ca An issue that is rated "ca" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
c This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Description of Standard & Poor's ("Standard & Poor's") Corporate Debt Ratings
A Standard & Poor's corporate or municipal rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
A-3
<PAGE>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
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 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. Debt
rated BB, B, CCC, CC and C are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB-rating.
B Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB-rating.
CCC Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied B or B-rating.
CC The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed but debt
service payments are continued.
CI The rating CI is reserved for income bonds on which no interest is being
paid.
D Debt rated D is in default. The D rating is assigned on the day an interest
or principal payment is missed. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and
A-4
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timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood or risk of default upon failure of such completion. The investor
should exercise judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
insured by the Federal Savings & Loan Insurance Corp. or the Federal
Deposit Insurance Corp. and interest is adequately collateralized.
* Continuance of the rating is contingent upon Standard & Poor's receipt of
an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories ("AAA," "AA," "A," "BBB," commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
Description of Standard & Poor's Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The four categories are as
follows:
A Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-l This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
sign designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-l."
A-3 Issues carrying this designation have a satisfactory capacity for timely
payment. They are however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
B Issues rated "B" are regarded as having only adequate capacity for timely
payment. However, such capacity may be damaged by changing conditions or
short-term adversities.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D This rating indicates that the issue is either in default or is expected to
be in default upon maturity.
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The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
Description of Standard & Poor's Preferred Stock Ratings
A Standard & Poor's preferred stock rating is an assessment of the capacity
and willingness of an issuer to pay preferred stock dividends and any applicable
sinking fund obligations. A preferred stock rating differs from a bond rating
inasmuch as it is assigned to an equity issue, which issue is intrinsically
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the bond rating symbol assigned to, or that would be assigned to, the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment--capacity and willingness of the issuer to
meet the timely payment of preferred stock dividends and any
applicable sinking fund requirements in accordance with the terms of
the obligation.
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA This is the highest rating that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the "A"
category.
BB, Preferred stock rated "BB," "B," and "CCC" are regarded, on balance, as
predominantly
B, B, speculative with respect to the issuer's capacity to CCC pay preferred
stock
CCC obligations. "BB" indicates the lowest degree of speculation and "CCC" the
highest degree of speculation. While such issues will likely have some
quality and protection characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
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NR indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
Plus (+) or minus (-): To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing within the major rating
categories.
The preferred stock ratings are not a recommendation to purchase or sell a
security, inasmuch as market price is not considered in arriving at the rating.
Preferred stock ratings are wholly unrelated to Standard Poor's earnings and
dividend rankings for common stocks.
The ratings are based on current information furnished to Standard & Poor's
by the issuer, and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information.
A-7
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PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
Exhibit
Number Description
- - ------ -----------
1(a) Declaration of Trust of Registrant.
1(b) Certificate of Trust.
1(c) Amendment to Declaration of Trust.
1(d) Certificate of Amendment to Certificate of Trust
2(a) By-Laws of Registrant.
2(b) Amended and Restated By-Laws of Registrant
3 Instrument of defining Rights of shareholders. Incorporated
by reference to Exhibits 1 and 2 above.
4(a) Form of Management Agreement between the Trust on behalf of
Global Financial Services Portfolio and Fund Asset
Management, L.P.
4(b) Form of Sub-Advisory Agreement between Fund Asset
Management, L.P. on behalf of the Trust and Merrill Lynch
Asset Management U.K. Limited
5 Form of Placement Agent Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc., a division of
Princeton Funds Distributor, Inc.
6 Not applicable.
7 Form of Custody Agreement between Brown Brothers Harriman &
Co. and Trust.
8 Not applicable.
9 Not applicable.
10(a) Accountant's consent.
10(b) Consent of Swidler Berlin Shereff Friedman, LLP,
Counsel for Registrant.
11 Not applicable.
12 Certificate of Holders of Beneficial Interests
13 Not applicable.
14 Not applicable.
15 Not applicable.
16 Powers of Attorney.
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ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Merrill Lynch Global Financial Services Fund, Inc. (the "Fund") and Fund
Asset Management, L.P. (the "Investment Adviser") each control Global Financial
Services Portfolio of the Trust (the "Portfolio"). The Fund currently owns
[100%] of the currently outstanding interests of the Portfolio and the
Investment Adviser owns [100%] of the currently outstanding interests of the
Fund. Therefore, the Fund is under common control with the Portfolio.
ITEM 25. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940, as amended (the "1940 Act"), and pursuant to Sections 8.2, 8.3 and 8.4, of
Article VIII of the Registrant's Declaration of Trust (Exhibit 1 to this
Registrant Statement), Trustees, officers, employees and agents of the Trust
will be indemnified to the maximum extent permitted by Delaware law and the 1940
Act.
Article VIII, Section 8.2 provides, inter alia, that no Trustee, officer,
employee or agent of the Registrant shall be liable to the Registrant, its
holders, or to any other Trustee, officer, employee or agent for any action or
omission except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties.
Article VIII, Section 8.3 of the Registrant's Declaration of Trust
provides:
Section 8.3 Indemnification. The Trust shall indemnify each of its Trustees,
officers, employees, and agents (including persons who serve at its request as
directors, officers or trustees of another organization in which it 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 him in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened, while in office or thereafter, by reason of his being or
having been such a Trustee, officer, employee or agent, except with respect to
any matter as to which he shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of his
duties, such liabilities and expenses being liabilities belonging to 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 said payment of for
any other expenses shall be provided unless there has been a determination that
such Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or, in the
absence of a judicial determination, by a reasonable determination, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that he did not engage in such conduct, which determination hall be made by a
majority of a quorum of Trustees who are neither interested persons of the
Registrant (within the meaning of the 1940 Act) nor parties to the action, suit
or proceeding, or by written opinion from independent legal counsel approved by
the Trustees. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the Trust Property. The
Trustees may make advance payments in connection with indemnification under this
Section 8.3; Provided that any advance payment of expenses by the Trust to any
Trustee, officer, employee or agent shall be made only upon the undertaking by
such Trustee, officer, employee or agent to repay the advance unless it is
ultimately determined that he is entitled to indemnification as above provided,
and only if one of the following conditions is met:
(a) the Trustee, officer, employee or agent to be indemnified provides a
security for his undertaking; or
(b) the Trust shall be insured against losses arising by reason of any
lawful advances; or
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<PAGE>
(c) there is a determination, based on a review of readily available facts,
that there is reason to believe that the Trustee, officer, employee or
agent to be indemnified ultimately will be entitled to indemnification,
which determination shall be made by:
(i) a majority of a quorum of Trustees who are neither Interested
Persons of the Trust nor parties to the Proceedings; or
(ii) an independent legal counsel in a written opinion.
Article VIII, Section 8.4 of the Registrant's Declaration of Trust further
provides:
Section 8.4. No Protection Against Certain 1940 Act Liabilities.
Nothing contained in Sections 8.1, 8.2 or 8.3 hereof shall protect any
Trustee or officer of the Trust from any liability to the Trust or its
Holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Nothing contained in
Sections 8.1, 8.2 or 8.3 hereof or in any agreement of the character
described in Section 4.1 or 4.2 hereof shall protect any Investment
Adviser to the Trust or any Series against any liability to the Trust
or any Series to which he would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance
of his or its duties to the Trust or Series, or by reason of his or
its reckless disregard to his or its obligations and duties under the
agreement pursuant to which he serves as Investment Adviser to the
Trust or any Series.
As permitted by Article VIII, Section 8.7, the Registrant may insure its
Trustees and officers against certain liabilities, and certain costs of
defending claims against such Trustees and officers, to the extent such Trustees
and officers are not found to have committed conduct constituting conflict of
interest, intentional non-compliance with statutes or regulations or dishonest,
fraudulent or criminal acts or omissions. The Registrant will purchase an
insurance policy to cover such indemnification obligation. The insurance policy
also will insure the Registrant against the cost of indemnification payments to
Trustees and officers under certain circumstances. Insurance will not be
purchased that protects, or purports to protect, any Trustee or officer from
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Declaration of Trust and Bylaws in a manner consistent with
Release No. 11330 of the Securities and Exchange Commission under the 1940 Act
so long as the interpretation of Section 17(h) and 17(i) of such Act remain in
effect and are consistently applied.
ITEM 26. - BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Fund Asset Management, L.P. ("FAM" or the "Investment Adviser" ) acts as
the investment adviser for the following open-end registered investment
companies: CBA Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA
Multi- State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The
Corporate Fund Accumulation Program, Inc., Financial Institutions Series Trust,
Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series
Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Corporate High
Yield Fund, Inc., Merrill Lynch Emerging Tigers Fund, Inc., Merrill Lynch
Federal Securities Trust, Merrill Lynch Funds for Institutions Series, Merrill
Lynch Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch Multi-
State Municipal Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill
Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch
World Income Fund, Inc., and The Municipal Fund Accumulation Program, Inc.; and
for the following closed-end registered investment companies: Apex Municipal
Fund, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc.,
Corporate High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt Strategies
Fund II, Inc., Debt Strategies Fund III, Inc., Income Opportunities Fund 1999,
Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Municipal Strategy
Fund, Inc., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniHoldings Fund,
Inc., MuniHoldings Fund II, Inc.,
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<PAGE>
California Insured Fund, Inc., MuniHoldings California Insured Fund II, Inc.,
MuniHoldings California Insured Fund III, Inc., MuniHoldings California Insured
Fund IV, Inc., MuniHoldings California Insured Fund V, Inc., MuniHoldings
Florida Insured Fund, MuniHoldings Florida Insured Fund II, MuniHoldings Florida
Insured Fund III, MuniHoldings Florida Insured Fund IV, MuniHoldings Florida
Insured Fund V, MuniHoldings Michigan Insured Fund, Inc., MuniHoldings Michigan
Insured Fund II, Inc., MuniHoldings Insured Fund, Inc., MuniHoldings Insured
Fund IV, Inc., MuniHoldings New Jersey Insured Fund, Inc., MuniHoldings New
Jersey Insured Fund II, Inc., MuniHoldings New Jersey Insured Fund III, Inc.,
MuniHoldings New York Fund, Inc., MuniHoldings New York Insured Fund, Inc.,
MuniHoldings New York Insured Fund II, Inc., MuniHoldings New York Insured Fund
III, Inc., MuniHoldings New York Insured Fund IV, Inc., MuniInsured Fund, Inc.,
MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest Florida Fund, MuniVest
Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield California
Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield California
Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund,
MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Michigan Fund,
Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc.,
MuniYield New York Insured Fund II, Inc., MuniYield Pennsylvania Fund, MuniYield
Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income
Portfolio, Inc. and Worldwide DollarVest Fund, Inc.
Merrill Lynch Asset Management, L.P. ("MLAM"), an affiliate of FAM, acts as
the investment adviser for the following open-end registered investment,
companies: Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch
Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill
Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill
Lynch Capital Fund, Inc., Merrill Lynch Convertible Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Disciplined Equity Fund,
Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Global Allocation Fund, Inc.,
Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch
Global Growth Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch
Global Technology Fund, Inc., Merri ll Lynch Global Utility Fund, Inc., Merrill
Lynch Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill
Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Real Estate Fund, Inc., Merrill Lynch Retirement Series Trust, Merrill
Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund, Inc.,
Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Inc.,
Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch Variable
Series Funds, Inc. and Hotchkis and Wiley funds (advised by Hotchkis and Wiley,
a division of MLAM); and for the following closed-end registered investment
companies: Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Senior Floating Rate Fund, Inc. and Merrill Lynch Senior Floating Rate Fund II,
Inc. MLAM also acts as sub-adviser to Merrill Lynch World Strategy Portfolio
and Merrill Lynch Basic Value Equity Portfolio, two investment portfolios of EQ
Advisors Trust.
The address of each of these registered investment companies is P.O. Box
9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Intermediate Government Bond
Fund is One Financial Center, 23rd Floor, Boston, Massachusetts 02111- 2665. The
address of MLAM, FAM, Princeton Services, Inc. ("Princeton Services") and
Princeton Administrators, L.P. ("Princeton Administrators") is also P.O. Box
9011, Princeton, New Jersey 08543-9011. The address of Princeton Funds
Distributor, Inc. ("PFD") and of Merrill Lynch Funds Distributor ("MLFD") is
P.O. Box 9081, Princeton, New Jersey 08543-9081. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co.,
Inc. ("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New
York, New York 10281-1201. The address of the Fund's transfer agent, Financial
Data Services, Inc. ("FDS"), is 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each
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<PAGE>
such person or entity has been engaged since November 1, 1996 for his, her or
its own account or in the capacity of director, officer, partner or trustee. In
addition Mr. Glenn is President and Mr. Burke is Vice President and Treasurer of
all or substantially all of the investment companies described in the first two
paragraphs of this Item 26, and Messrs. Giordano and Monagle are officers of one
or more of such companies.
Officers and partners of FAM are set forth as follows:
<TABLE>
<CAPTION>
Position(s) with the Other Substantial Business,
Name Investment Adviser Profession, Vocation or Employment
- - ------------------------ --------------------------- -----------------------------------
<S> <C> <C>
ML & Co.................................................... Limited Partner Financial Services Holding
Company; Limited Partner of FAM
Princeton Services......................................... General Partner General Partner of FAM
Arthur Zeikel.............................................. None Chairman of FAM; President of
MLAM and FAM from to 1997.
Jeffrey M. Peek............................................ President President of FAM; President and
Director of Princeton Services;
Executive Vice President of ML &
Co.; Managing Director and
Co-Head of the Investment Banking
Division of Merrill Lynch in 1997;
Senior President and Director of the
Global Securities and Economics
division of Merrill Lynch from 1995
to 1997.
Terry K. Glenn............................................. Executive Vice President Executive Vice President of FAM;
Executive Vice President and
Director of Princeton Services;
President and Director of PFD;
Director of FDS; President of
Princeton Administrators
Donald C. Burke............................................ Senior Vice President, Senior Vice President and
Treasurer and Director Treasurer of FAM; Senior
of Taxation Vice President and Treasurer of
Princeton Services; Vice President of
PFD; First Vice President of MLAM
from 1997 to 1999; Vice President of
MLAM from1990 to 1997.
Michael G. Clark................... Senior Vice President Senior Vice President of FAM;
Senior Vice of Princeton Services;
Director and Treasurer of PFD; First
Vice President of MLAM from 1997
to 1999; Vice President of MLAM
from 1996 to 1997.
Linda L. Federici.......................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services.
Vincent R. Giordano........................................ Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services
Michael J. Hennewinkel..................................... Senior Vice President, Senior Vice President, Secretary and
Secretary and General General Counsel of FAM; Senior
Counsel Vice President of Princeton Services
Philip L. Kirstein........................................ Senior Vice President Senior Vice President of FAM;
Senior Vice President, Director and
Secretary of Princeton Services
Ronald M. Kloss........................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Debra W. Landsman-Yaros.................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services; Vice President of PFD
Stephen M. M. Miller....................................... Senior Vice President Executive Vice President of
Princeton Administrators; Senior
Vice President of Princeton Services.
Joseph T. Monagle, Jr...................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services.
Brian A. Murdock........................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services.
Gregory D. Upah........................................... Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services
</TABLE>
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") acts as sub-
adviser for the following registered investment companies: The Corporate Fund
Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Corporate High Yield Fund III, Inc., Debt Strategies Fund,
Inc., Debt Strategies Fund II, Inc., Debt Strategies Fund III, Inc., Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill
Lynch Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc.,
Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc.,
Merrill Lynch Basic Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch Consults International Portfolio, Merrill Lynch Convertible Fund, Inc.,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Developing Capital
Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch Emerging
Tigers Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth
Fund, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global
Bond Fund for Investment and Retirement, Merrill Lynch Global Growth Fund, Inc.,
Merrill Lynch Global Holdings, Inc., Merrill Lynch Global Resources Trust,
Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch Global Technology Fund,
Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch Global Value Fund,
Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill
Lynch Middle East/Africa Fund, Inc., Merrill Lynch Pacific Fund, Inc., Merrill
Lynch Phoenix Fund, Inc., Merrill Lynch Real Estate Fund, Inc., Merrill Lynch
Series Fund, Inc., Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Special Value Fund, Inc.,
Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund, Inc.,
Merrill Lynch Utility Income Fund, Inc., Merrill Lynch Variable Series Funds,
Inc., Merrill Lynch World Income Fund, Inc., The Municipal Fund Accumulation
Program, Inc. and Worldwide DollarVest Fund, Inc. The address of each of these
registered investment companies is P.O. Box 9011, Princeton, New Jersey 08543-
9011. The address of MLAM U.K. is 33 King William Street, London, England.
Set forth below is a list of each executive officer and director of MLAM
U.K. indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since July 1,
1996, for his or her own account or in the capacity of director, officer,
partner or trustee.
<TABLE>
<CAPTION>
Positions Other Substantial Business,
Name with MLAM U.K. Profession, Vocation or Employment
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
Terry K. Glenn........................ Director and Chairman Executive Vice President of MLAM
and FAM; Executive Vice and
Director of Princeton Services;
President and Director of PFD;
President of Princeton
Administrators
Donald C. Burke....................... Treasurer Senior Vice President and Treasurer
of FAM and MLAM since 1999;
Senior Vice President and Treasurer
of Princeton since 1999; Vice
President of PFD since 1999; First
Vice
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
President of MLAM from 1997
to 1999; Vice President of MLAM
from 1990 to1997; Director of
Taxation of MLAM since 1990
Nicholas C.D. Hall.................... Director Director of Merrill Lynch Europe
PLC; General Counsel of Mercury
Asset Management Group PLC
Carol Ann Langham..................... Company Secretary Employee of Merrill Lynch
International
Debra Anne Searle..................... Assistant Company Employee of Merrill Lynch
Secretary International
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) MLFD, a division of PFD, acts as the placement agent for the
Registrant, principal underwriter for Merrill Lynch Global Financial Services
Fund, Inc. and its affiliates act as principal underwriter for each of the open-
end registered investment companies referred to in the first two paragraphs of
Item 26 except CBA Money Fund, CMA Government Securities Fund, CMA Money Fund,
CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund,
The Corporate Fund Accumulation Program, Inc. and The Municipal Fund
Accumulation Program, Inc.; MLFD also acts as the principal underwriter for the
following closed-end registered investment companies: Merrill Lynch High Income
Municipal Bond Fund, Inc., Merrill Lynch Municipal Strategy Fund, Inc. and
Merrill Lynch Senior Floating Rate Fund, Inc. A separate division of PFD acts as
the principal underwriter of a number of other investment companies.
(b) Set forth below is information concerning each director and officer of
PFD. The principal business address of each such person is P.O. Box 9081,
Princeton, New Jersey 08543-9081, except that the address of Messrs. Breen,
Crook, Fatseas and Wasel is One Financial Center, 23rd Floor, Boston,
Massachusetts 02111-2665.
<TABLE>
<CAPTION>
Position(s) and Office(s) Position(s) and Office(s)
Name with PFD with Registrant
- - ------ ------------------------- ------------------
<S> <C> <C>
Terry K. Glenn..........President and Director President
Michael G. Clark........Director and Treasurer None
Thomas J. Verage........Director None
Robert W. Crook.........Senior Vice President None
Michael J. Brady........Vice President None
William M. Breen........Vice President None
Donald C. Burke.........Vice President Vice President and Treasurer
James T. Fatseas........Vice President None
Debra W. Landsman-
Yaros..................Vice President None
Michelle T. Lau.........Vice President None
Salvatore Venezia.......Vice President None
William Wasel...........Vice President None
Robert Harris...........Secretary None
</TABLE>
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder are maintained at the
offices of the Registrant, 800 Scudders Mill Road, Plainsboro, New Jersey
08536), and its transfer agent, Financial Data Services, Inc. (4800 Deer Lake
Drive East, Jacksonville, Florida 32246-6484).
ITEM 29. MANAGEMENT SERVICES.
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<PAGE>
Other than as set forth under the caption "Management of the Trust" in Part
A of the Registration Statement and under "Management of the Trust" in Part B of
the Registration Statement, the Registrant is not a party to any management-
related service contract.
ITEM 30. UNDERTAKINGS.
Not applicable.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant certifies that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Plainsboro, and the State of New Jersey, on the 15th day of October,
1999.
Global Financial Services Master Trust
(Registrant)
By: /s/ TERRY K. GLENN
-----------------------------
Terry K. Glenn, President
This Registration Statement of Global Financial Services Master Trust has
been signed below by the following persons in the capacities and on the date(s)
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
President and Trustee October 15, 1999
/s/ Terry K. Glenn (Principal Executive
- - ------------------------------------- Officer)
Terry K. Glenn
/s/ Donald C. Burke* Treasurer October 15, 1999
- - ------------------------------------- (Principal Financial
Donald C. Burke and Accounting Officer)
/s/ Ronald W. Forbes* Trustee October 15, 1999
- - -------------------------------------
Ronald W. Forbes
/s/ Cynthia A. Montgomery* Trustee October 15, 1999
- - -------------------------------------
Cynthia A. Montgomery
/s/ Charles C. Reilly* Trustee October 15, 1999
- - -------------------------------------
Charles C. Reilly
/s/ Kevin A. Ryan* Trustee October 15, 1999
- - -------------------------------------
Kevin A. Ryan
/s/ Richard R. West* Trustee October 15, 1999
- - -------------------------------------
Richard R. West
/s/ Arthur Zeikel* Trustee October 15, 1999
- - -------------------------------------
Arthur Zeikel
</TABLE>
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<PAGE>
* Terry K. Glenn, by signing his name hereto, signs this document on behalf
of the persons so indicated above pursuant to powers of attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
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<PAGE>
EXHIBIT INDEX
(Exhibits submitted herewith)
Exhibit
Number Description
- - -------- -------------
1(a) Declaration of Trust of Registrant.
1(b) Certificate of Trust.
1(c) Amendment to Declaration of Trust.
1(d) Certificate of Amendment to Certificate of Trust
2(a) By-Laws of Registrant.
2(b) Amended and Restated By-Laws of Registrant
3 Instrument of defining Rights of shareholders. Incorporated
by reference to Exhibits 1 and 2 above.
4(a) Form of Management Agreement between the Trust on behalf of
Global Financial Services Portfolio and Fund Asset
Management, L.P.
4(b) Form of Sub-Advisory Agreement between Fund Asset
Management, L.P. on behalf of the Trust and Merrill Lynch
Asset Management U.K. Limited
5 Form of Placement Agent Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc., a division of
Princeton Funds Distributor, Inc.
7 Form of Custody Agreement between Brown Brothers Harriman &
Co. and Trust.
10(a) Accountant's consent.
10(b) Consent of Swidler Berlin Shereff Friedman, LLP, Counsel
for Registrant.
12 Certificate of Holders of Beneficial Interests
16 Powers of Attorney.
<PAGE>
EXHIBIT 1(A)
GLOBAL FINANCIAL SERVICES FUND
DECLARATION OF TRUST
Dated: August 19, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
NAME AND DEFINITIONS......................................................1
Section 1.1. Name........................................................1
Section 1.2. Definitions.................................................1
ARTICLE II
TRUSTEES..................................................................4
Section 2.1. Number of Trustees and Qualification........................4
Section 2.2. Term and Election...........................................4
Section 2.3. Resignation and Removal.....................................5
Section 2.4. Vacancies...................................................5
Section 2.5. Meetings....................................................5
Section 2.6. Officers; Chairman..........................................6
Section 2.7. By-Laws.....................................................6
ARTICLE III
POWERS OF TRUST...........................................................6
Section 3.1. General.....................................................6
Section 3.2. Activities and Investments..................................7
Section 3.3. Legal Title.................................................8
Section 3.4. Sale of Interests; Reclassification.........................9
Section 3.5. Borrowing Money; Pledging Trust Assets; Lending Property....9
Section 3.6. Delegation; Committees......................................9
Section 3.7. Collection and Payment......................................9
Section 3.8. Expenses....................................................9
Section 3.9. Common Items...............................................10
Section 3.10. Litigation.................................................10
Section 3.11. Tax Matters................................................10
Section 3.12. Miscellaneous Powers.......................................11
Section 3.13. Manner of Acting...........................................11
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND PLACEMENT AGENT ARRANGEMENTS; CUSTODIAN..............................11
Section 4.1. Investment Advisory and Other Arrangements.................11
Section 4.2. Parties to Contract........................................12
Section 4.3. Custodian..................................................12
ARTICLE V
INTERESTS IN THE TRUST...................................................12
Section 5.1. Interests..................................................12
Section 5.2. Establishment and Designation of Series....................13
Section 5.3. Rights of Holders..........................................14
Section 5.4. Purchase of or Increase in Interests.......................14
Section 5.5. Register of Interests......................................15
Section 5.6. Non-Transferability........................................15
Section 5.7. Notices....................................................15
Section 5.8. Limitation on Number of Holders............................15
Section 5.9. No Liability of Holders....................................15
ARTICLE VI
DECREASES AND WITHDRAWALS................................................16
Section 6.1. Decreases and Withdrawals..................................16
<PAGE>
ARTICLE VII
DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
NET INCOME AND DISTRIBUTIONS............................................16
Section 7.1. Book Capital Account Balances.............................16
Section 7.2. Allocations and Distributions to Holders..................16
Section 7.3. Power to Modify Foregoing Procedures......................17
ARTICLE VIII
LIABILITY FOR TRUST OBLIGATIONS.........................................17
Section 8.1. Liabilities of Series.....................................17
Section 8.2. No Personal Liability of Trustees, etc. ..................17
Section 8.3. Indemnification...........................................18
Section 8.4. No Protection Against Certain 1940 Act Liabilities........19
Section 8.5. No Bond Required of Trustees..............................19
Section 8.6. No Duty of Investigation; Notice in Trust
Instruments, etc. ........................................19
Section 8.7. Insurance.................................................20
Section 8.8. Reliance on Experts, etc. ................................20
ARTICLE IX
HOLDERS.................................................................20
Section 9.1. Meetings of Holders.......................................20
Section 9.2. Notice of Meetings........................................20
Section 9.3. Record Date for Meetings..................................21
Section 9.4. Proxies, etc. ............................................21
Section 9.5. Reports...................................................21
Section 9.6. Inspection of Records.....................................21
Section 9.7. Holder Action by Written Consent..........................21
ARTICLE X
DURATION; TERMINATION OFTRUST OR SERIES; AMENDMENT; MERGERS; ETC. ......22
Section 10.1. Duration..................................................22
Section 10.2. Dissolution of Series or Trust............................22
Section 10.3. Termination of Trust or Series............................22
Section 10.4. Amendment Procedure.......................................23
Section 10.5. Merger, Consolidation and Sale of Assets..................24
ARTICLE XI
MISCELLANEOUS...........................................................24
Section 11.1. Certificate of Trust; Registered Agent....................24
Section 11.2. Governing Law.............................................24
Section 11.3. Counterparts..............................................25
Section 11.4. Reliance by Third Parties.................................24
Section 11.5. Provisions in Conflict with Law or Regulations............25
Section 11.6. Trust Only................................................25
SIGNATURE PAGE...............................................................27
<PAGE>
DECLARATION OF TRUST
OF
GLOBAL FINANCIAL SERVICES FUND
Dated: August 19, 1999
DECLARATION OF TRUST of Global Financial Services Fund made the ____ day
of August, 1999, by Michael J. Hennewinkel, as trustee (such individual, so long
as he shall continue in office in accordance with the provisions of this
Declaration of Trust, and all other Persons who may hereafter be duly elected or
appointed, qualified and serving as trustees in accordance with the provisions
hereof, being hereinafter called "Trustees").
W I T N E S S E T H:
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WHEREAS, the Trustees desire to establish a business trust under the
Delaware Business Trust Act (the "Act") consisting of one or more series or
portfolios for the investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees hereby declare that all money and property
hereafter contributed to the Series established hereby shall be held and managed
in trust for the benefit of the holders of beneficial interests issued hereunder
with respect to each respective Series from time to time and subject to the
provisions hereof, to wit:
ARTICLE I
NAME AND DEFINITIONS
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Section 1.1. Name. The name of the trust established hereby (the
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"Trust") is "Global Financial Services Fund," and, insofar as may be
practicable, the Trust shall conduct its activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever herein
used) shall refer to the Trust as a separate legal entity, and shall not refer
to the Trustees, officers, agents, employees or Holders. If the Trustees
determine that the Trust's use of such name is not advisable, the Trustees may
adopt such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name and the filing of a Certificate of
Amendment under the Act. Any such instrument shall have the status of an
amendment to this Declaration.
Section 1.2. Definitions. Wherever they are used herein, the following
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terms have the respective meanings assigned to them below:
(a) "Administrator" shall mean any party furnishing services to the
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Trust and the Series pursuant to any administrative services contract
described in Section 4.1.
(b) "Act" shall mean the Delaware Business Trust Act, as the same may
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be amended from time to time.
(c) "Affiliated Person" has the meaning assigned to it in Section
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2(a)(3) of the 1940 Act.
(d) "Assets belonging to" a Series shall have the meaning ascribed in
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Section 5.2(a).
(e) "Book Capital Account" shall mean, for any Holder at any time, the
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Book Capital Account of the Holder at such time with respect to such
Holder's interest in the Trust Property of
<PAGE>
any Series, determined in accordance with generally accepted accounting
principles and the provisions of the 1940 Act, and each Holder shall have a
separate Book Capital Account for each Series in which it holds an
Interest.
(f) "By-Laws" means the By-Laws referred to in Section 2.7 hereof, as
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amended and in effect from time to time.
(g) "Code" shall mean the Internal Revenue Code of 1986 and the rules
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and regulations thereunder, each as amended from time to time.
(h) "Commission" means the Securities and Exchange Commission.
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(i) "Custodian" means the party, other than the Trust or the Series,
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to the agreement described in Section 4.3 hereof.
(j) "Declaration" means this Declaration of Trust, as amended and in
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effect from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein," "hereby" and "hereunder" shall be deemed
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to refer to this Declaration rather than the article or section in which
such words appear.
(k) "Fundamental Policies" means the investment policies and
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restrictions applicable to any Series which are set forth and designated as
fundamental policies in the Registration Statement.
(l) "Holders" shall mean as of any particular time all holders of
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record of Interests in the Trust Property of any Series at such time.
(m) "Institutional Investor(s)" shall mean any registered investment
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company (including a unit investment trust), insurance company separate
account, common or commingled trust fund, group trust or similar
organization or entity that is an "accredited investor" within the meaning
of Regulation D under the Securities Act of 1933, and shall not include any
individual, S corporation, partnership, or grantor trust beneficially owned
by any individual, S corporation or partnership.
(n) "Interested Person" has the meaning ascribed to it in Section
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2(a)(19) of the 1940 Act.
(o) "Interest(s)" shall mean the interest of a Holder in the Trust
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Property of any Series, including all rights, powers and privileges
accorded to Holders in this Declaration, which interest may be expressed as
a percentage, determined by calculating, as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance in
the Trust Property of any Series to the total of all Holders' Book Capital
Account balances in the Trust Property of any such Series. Reference
herein to a specific percentage in, or fraction of, Interests of the
Holders means Holders whose combined Book Capital Accounts represent such
specified percentage or fraction of the Book Capital Accounts of all
Holders of the Trust Property of any Series or of the Trust as a whole (as
the context may require).
(p) "Investment Adviser" means the party, other than the Trust or the
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Series, to any investment advisory contract described in Section 4.1
hereof.
(q) "Liabilities belonging to" a Series shall have the meaning
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ascribed in Section 5.2(b).
(r) "1940 Act" means the provisions of the Investment Company Act of
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1940 and the rules and regulations thereunder as amended from time to time
and any order or orders thereunder which may from time to time be
applicable to the Trust.
<PAGE>
(s) "Person" means and includes individuals, corporations,
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partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(t) "Registration Statement" means the Trust's currently effective
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Registration Statement under the 1940 Act, as it may be amended or
supplemented from time to time.
(u) "Series" refers to the Series of the Trust established and
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designated under or in accordance with Sections 3804 and 3806 of the Act
and the provisions of Article V hereof, each of which shall be accounted
for and maintained as a separate series or portfolio of the Trust.
(v) "Trust" means the master trust established hereby by whatever name
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it may then be known, inclusive of each and every Series established
hereunder.
(w) "Trust Property" means any and all assets, real or personal,
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tangible or intangible, which is owned or held by the Trust, each and every
asset of which shall be allocated and belong to a specific Series to the
exclusion of all other Series.
(x) "Trustees" means the individuals who have signed this Declaration,
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so long as they shall continue in office in accordance with the provisions
hereof, and all other Persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees shall
refer to such individual or Persons in their capacity as trustees
hereunder.
(y) The use herein of the masculine or feminine gender or the neutral
shall be construed to refer to the other gender or the neutral as well, and
the use herein of the singular shall be construed to include the plural and
the plural to include the singular, as the context may require.
ARTICLE II
TRUSTEES
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Section 2.1. Number of Trustees and Qualification. The number of
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Trustees shall initially be one (1) and shall thereafter be such number as shall
be fixed from time to time by a written instrument signed by a majority of the
Trustees then in office, provided, however, that the number of Trustees shall,
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subsequent to any sale of Interests other than sales made solely for the
purposes of meeting any applicable seed money requirement under the 1940 Act, in
no event be less than three (3) or more than fifteen (15). Any vacancy created
by an increase in Trustees may be filled by the appointment of any Person having
the qualifications described in this Article made by a written instrument signed
by a majority of the Trustees then in office. Any such appointment shall not
become effective, however, until the Person 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 in the number of Trustees shall occur, until such vacancy is
filled as provided in this Section and Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
Section 2.2. Term and Election. Each Trustee named herein, or elected
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or appointed prior to the first meeting of the Holders, shall (except in the
event of resignations or removals or vacancies pursuant to Section 2.3 or 2.4
hereof) hold office until his or her successor has been elected at such meeting
and has qualified to serve as Trustee, as required under the 1940 Act. Beginning
with the Trustees elected at the first meeting of Holders, each Trustee shall
hold office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
<PAGE>
Section 2.3. Resignation and Removal. Any Trustee may resign his or her
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trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees, and such resignation
shall be effective upon such delivery or at any later date according to the
terms of the instrument. Any of the Trustees may be removed by the action of
two-thirds of the remaining Trustees; provided, that if the removal of one or
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more Trustees would have the effect of reducing the number of remaining Trustees
below the minimum number prescribed by Section 2.1 hereof, then subject to
Section 16(a) of the 1940 Act, at the time of the removal of such Trustee or
Trustees, the remaining Trustees shall elect or appoint a number of additional
Trustees at least sufficient to increase the number of Trustees holding office
to the minimum number prescribed by Section 2.1 hereof. Upon the resignation or
removal of a Trustee, or his or her otherwise ceasing to be a Trustee due to
death or legal disability, he 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 his or her name. Upon the
death or legal disability of any Trustee, his or her legal representative shall
execute and deliver on his or her behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence. However, the
execution and delivery of such documents by a former Trustee or his or her legal
representative shall not be requisite to the vesting of title to the Trust
Property in the remaining Trustees as provided in Section 3.3 hereof.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate
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and a vacancy shall occur in the event of such Trustee's death, resignation,
removal, bankruptcy, adjudicated incompetence or other legal disability to
perform the duties of the office of Trustee. No such vacancy shall operate to
annul this Declaration or to revoke any existing obligations created pursuant to
the terms of this Declaration. In the case of a vacancy, the Holders of at
least a majority of the Interests entitled to vote, acting at any meeting of the
Holders held in accordance with Section 9.1 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.
Section 2.5. Meetings. Regular meetings of the Trustees may be held on
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such notice at such place or places and times as may be fixed by the By-Laws or
by resolution of the Trustees. Special Meetings of the Trustees shall be held
upon the call of the Chairman, if any, the president, the secretary or any two
Trustees, by oral or telegraphic or written notice duly served on or sent,
mailed or sent by telecopy to each Trustee not less than one day before the
meeting. No notice need be given to any Trustee who attends in person or to any
Trustee who, in writing signed and filed with the records of the meeting either
before or after the holding thereof, waives notice. Notice or waiver of notice
need not state the purpose or purposes of the meeting. The Trustees may act
with or without a meeting, subject to the requirements of the 1940 Act. A
quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof 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 persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting.
<PAGE>
Section 2.6. Officers; Chairman. The Trustees shall, from time to time,
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elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman who shall preside at all meetings of the
Trustees and carry out such other duties as the Trustees shall designate. The
Trustees may elect or appoint or authorize the President to appoint such other
officers or agents with such powers as the Trustees may deem to be advisable.
The President, the Secretary and the Treasurer may, but need not, be Trustees,
and shall be agents of the Trust.
Section 2.7. By-Laws. The Trustees may adopt By-Laws not inconsistent
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with this Declaration for the conduct of activities of the Trust and may amend
or repeal such By-Laws to the extent such power is not reserved to the Holders
by express provision of such By-Laws. This Declaration and the By-Laws shall
together constitute the "governing instrument" of the Trust within the meaning
of Section 3801(f) of the Act.
ARTICLE III
POWERS OF TRUSTEES
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Section 3.1. General. The Trustees shall have exclusive and absolute
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control over the Trust Property and over the activities of the Trust and each
Series to the same extent as if the Trustees were the sole owners of the Trust
Property in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
activities of the Trust and any Series and to carry on their operations and
maintain offices both within and without the State of Delaware, in any and all
states of the United States of America, and in the District of Columbia, in any
foreign country, 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 or desirable in order to
promote the interests of the Trust and each Series although such things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust or any Series 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 will not be
required to obtain any court order to deal with Trust Property.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Activities and Investments. The Trustees shall have the
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power with respect to the Trust and each Series:
(a) to conduct, operate and carry on the activities of an investment
company, and, in connection therewith:
(i) to subscribe for, purchase or otherwise acquire and invest
and reinvest in, to hold for investment or otherwise, to sell,
transfer, assign, negotiate, exchange, lend or otherwise dispose of,
and to turn to account or realize upon and generally deal in and with,
domestic or foreign securities (which term, "securities," shall
include without limitation any and all bills, notes, bonds, debentures
or other obligations or evidences of indebtedness, certificates of
deposit, bankers acceptances, commercial paper, repurchase agreements
or other money market instruments; stocks, shares or other equity
ownership interests (including non-publicly traded or illiquid
securities and those securities the disposition of which is restricted
under the Federal securities laws); convertible securities; mortgage-
backed or other asset-backed securities; and warrants, options or
other instruments representing rights to subscribe for, purchase,
receive or otherwise acquire or to sell, transfer, assign or otherwise
dispose of, and scrip, certificates, receipts or other instruments
evidencing any ownership rights or interests in, any of the foregoing;
and "forward commitment", "when issued" and "delayed delivery"
contracts for securities, issued, guaranteed or sponsored by any
governments, political subdivisions or
<PAGE>
governmental authorities, agencies or instrumentalities, by any
individuals, firms, companies, corporations, syndicates, associations
or trusts, or by any other organizations or entities whatsoever,
irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit,
and whether they be domestic or foreign with respect to the State of
Delaware or the United States of America); and
(ii) to acquire and become the owner of or interested in any
securities by delivering or issuing in exchange or payment therefor,
in any lawful manner, any of the Trust Property; and
(iii) to exercise while the owner of any securities or interests
therein any and all of the rights, powers and privileges of ownership
of such securities or interests, including without limitation any and
all voting rights and rights of assent, consent or dissent pertaining
thereto, and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value thereof; and
(iv) to purchase, sell and hold currencies and enter into
contracts for the future purchase or sale of currencies, including but
not limited to forward foreign currency exchange contracts; and
(v) to enter into futures and forward contracts, and to purchase
and write put and call options on futures contracts, securities,
currencies and securities indexes; and
(vi) to make loans to the extent provided in the Registration
Statement from time to time; and
(vii) to engage in such other activities as may be disclosed in
the Registration Statement from time to time; and
(b) to conduct, operate and carry on any other lawful activities which
the Trustees, in their sole and absolute discretion, consider to be (i)
incidental to the activities of the Trust and each Series as an investment
company, (ii) conducive to or expedient for the benefit or protection of
the Trust or any Series or the Holders, or (iii) calculated in any other
manner to promote the interests of the Trust or any Series or the Holders.
The Trustees shall not be limited to investing in securities maturing before the
possible termination of the Trust or any Series, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Notwithstanding anything to the contrary herein contained but consistent with
the applicable investment objectives, the Trust and each Series shall be managed
in compliance with the requirements of the Code applicable to regulated
investment companies as though such requirements were applied at the Series
level.
Section 3.3. Legal Title. Legal title to all the Trust Property shall
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be vested in the Trust as a separate legal entity, except that the Trustees
shall have 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 any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided, that the interest of the Trust or any Series
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therein is appropriately protected. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the termination of the term of office of a
Trustee as provided in Section 2.2 or 2.4 hereof, such Trustee shall
automatically cease to have any right, title or interest in any of the Trust
Property, and all right, title and interest of such 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 as provided in Section 2.3 hereof.
Section 3.4. Sale of Interests; Reclassification. Subject to more
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detailed provisions set forth in Article V and the Trustees' duty of
impartiality to the Holders, the Trustees shall have the power to permit
<PAGE>
Persons to purchase Interests and to add to or reduce, in whole or in part,
their Interests in any Series, provided that from and after the commencement of
the private placement of Interests, Interests shall be sold only to
Institutional Investors, and the original Holders shall withdraw their entire
Interests from the Series. The Trustees shall also have the power to acquire,
hold, resell, dispose of, transfer, classify, reclassify and otherwise deal in
Interests of the Trust or any Series. The Trustees may hold as treasury
Interests, re-issue for such consideration and on such terms as they determine,
or cancel, in their discretion from time to time, any Interests of any Series or
class thereof reacquired by the Trust.
Section 3.5. Borrowing Money; Pledging Trust Assets; Lending Property.
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Subject to any applicable Fundamental Policies of the Trust or any Series or any
applicable provision of the By-Laws, the Trustees shall have power, on behalf of
the Trust or any Series, to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security any
of the Trust Property, to endorse, guarantee, or undertake the performance of
any obligation, contract or engagement of any other Person and to lend Trust
Property; provided that Trust Property belonging to a Series shall not be
pledged, encumbered or subject to liabilities belonging to any other Series.
Section 3.6. Delegation; Committees. The Trustees shall have power,
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consistent with their continuing exclusive authority over the management of the
Trust, each Series and the Trust Property, to delegate from time to time to such
committee or committees as they may from time to time appoint from among their
own number or to such officers, employees or agents of the Trust as they may
from time to time designate the doing of such things and the execution of such
instruments either in the name of the Trust or any Series or the names of the
Trustees or otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
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collect all property due to the Trust or any Series; to pay all claims,
including taxes, against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust Property; to foreclose any security
interest securing any obligations by virtue of which any property is owed to the
Trust or any Series; and to enter into releases, agreements and other
instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur and
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pay, out of the income or the principal of the Trust Property of the Series, any
expenses which, in the opinion of the Trustees, are necessary or incidental to
carrying out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees; provided
that no Series will be liable for the debts and obligations of any other Series,
and expenses, fees, charges, taxes, and liabilities incurred or arising in
connection with a particular Series, or in connection with the management
thereof, shall be paid out of the Trust Property belonging to that Series and
not out of the Trust Property belonging to any other Series. The Trustees shall
not be obligated to account to the Holders for the retention of compensation,
and each Holder agrees that compliance with the accounting requirements of the
1940 Act and of this Declaration shall constitute satisfactory accounting with
respect to all acts of the Trustees. The Trustees shall fix the compensation of
all officers, employees and Trustees of the Trust and may pay such compensation
out of the Trust Property without reduction of the Trustees' compensation.
Section 3.9. Common Items. All expenses and other items of the Trust
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which are common to the Series shall be borne by or allocated to the Series
proportionately based upon the relative net asset values of each. Such common
items shall include, but not be limited to, Trustees' fees; 1940 Act
registration expenses; organizational expenses of the Trust, exclusive of
organizational expenses attributable to any specific Series; and accounting
expenses relating to the Trust which are not attributable to any specific
Series.
Section 3.10. Litigation. The Trustees shall have the power to engage in
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and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust or any Series or the Trust Property, and, out of the Trust
Property, to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business judgment,
consenting to dismiss any action, suit, proceeding, dispute, claim or demand,
brought by any Person, including, to the
<PAGE>
extent permitted by applicable law, a Holder in such Holder's own name or in the
name of the Trust or any Series, whether or not the Trust, a Series or any of
the Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust or any Series.
Section 3.11. Tax Matters. The Trustees shall have the exclusive power,
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authority and responsibility with respect to the Trust and the Series regarding
(i) preparation and filing of tax returns; (ii) providing reports to the Holders
regarding tax information necessary to the filing of their respective tax
returns; (iii) making any and all available elections with respect to the tax
treatment of the Series and their investments; (iv) representing the Series
before the Internal Revenue Service and/or any state taxing authority and
exercising the powers and authorities of a tax matters partner under the Code
with respect to the Series' partnership tax returns; (v) exercising such
responsibility as may be imposed by law with respect to withholding from a
Holder's share of income or distributions; (vi) providing to the accountants of
the Series such instructions regarding allocations of realized income, gains and
losses as may be necessary or appropriate to assure compliance with applicable
provisions of the Code and Treasury Regulations; and (vii) any and all other tax
matters.
Section 3.12. Miscellaneous Powers. The Trustees shall have the power
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to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the activities of the Trust or any Series and eliminate
such employees or contractual relationships as they consider appropriate; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
subject to and in accordance with Sections 2.3 and 2.4 hereof; elect and remove
at will such officers and appoint and terminate such agents or employees as they
consider appropriate; and appoint from their own number and terminate at will
any one or more committees which may exercise some or all of the power and
authority of the Trustees as the Trustees may determine; (d) purchase, and pay
for out of Trust Property, insurance policies insuring the Trust Property, and,
to the extent permitted by law and not inconsistent with any applicable
provision of this Declaration or the By-Laws, insuring the Investment Adviser,
Administrator, placement agent, Holders, Trustees, officers, employees, agents
or independent contractors of the Trust or any Series against all claims arising
by reason of holding any such position or by reason of any action taken or
omitted to be taken by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust or any Series would have
the power to indemnify such Person against such liability; (e) indemnify any
person with whom the Trust or any Series has dealings, including the Holders,
Trustees, officers, employees, agents, Investment Adviser, Administrator,
placement agent and independent contractors of the Trust or any Series, to such
extent permitted by law and not inconsistent with the applicable provisions of
this Declaration; (f) subject to applicable Fundamental Policies, 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 (g) adopt a seal for the Trust or any Series, but the absence
of such seal shall not impair the validity of any instrument executed on behalf
of the Trust or Series.
Section 3.13. Manner of Acting. Except as otherwise provided herein, in
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the By-Laws, in the 1940 Act or in any other applicable provision of law, any
action to be taken by the Trustees may be taken in the manner set forth in
Section 2.5 hereof.
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
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AND PLACEMENT AGENT ARRANGEMENTS; CUSTODIAN
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Section 4.1. Investment Advisory and Other Arrangements. The Trustees
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may in their discretion, from time to time, cause the Series to separately enter
into investment advisory and administrative services contracts or placement
agent agreements whereby the other party to such contract or agreement shall
undertake to furnish to the Series specified therein such investment advisory,
administrative, placement agent and/or other services as the Trustees shall,
from time to time, consider desirable with respect to such Series and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions 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
<PAGE>
effect purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (and all without further action by the Trustees). Any such
purchase, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees.
Section 4.2. Parties to Contract. Any contract of the character
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described in Section 4.1 of this Article IV 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 person 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 said 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 (including a firm, corporation,
trust, or association) may be the other party to contracts entered into pursuant
to Section 4.1 above or the By-Laws of the Trust, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.2.
Section 4.3. Custodian. The Trustees may appoint one or more banks or
------------ ---------
trust companies as custodian of the securities and cash belonging to the Series.
The agreement providing for such appointment shall contain such terms and
conditions as the Trustees in their discretion determine to be not inconsistent
with this Declaration, the applicable provisions of the 1940 Act and any
applicable provisions of the By-Laws of the Trust. One or more subcustodians
may be appointed in a manner not inconsistent with this Declaration, the
applicable provisions of the 1940 Act and any applicable provisions of the By-
Laws of the Trust.
ARTICLE V
INTERESTS IN THE TRUST
----------------------
Section 5.1. Interests. Subject to the limitations contained in Section
------------ ---------
5.8 relating to the number of permitted Holders, the beneficial interests in the
Trust Property shall consist of an unlimited number of non-transferable
Interests which shall be denominated in dollars corresponding to the value of
such Interests determined by reference to the corresponding Book Capital
Accounts. All Interests shall be validly issued, fully paid and nonassessable
when issued for such consideration as the Trustees shall determine. The
Trustees may permit the purchase of Interests (for cash or other consideration
acceptable to the Trustees, subject to the requirements of the 1940 Act) but
only if the purchaser is an Institutional Investor. Subject to applicable law,
the provisions hereof and such restrictions as may be adopted by the Trustees, a
Holder may increase its Interest by contributions or decrease its Interest by
withdrawals without limitation.
Pursuant to Section 3806(b) of the Act, the Trustees shall have authority,
from time to time, to establish Interests of a Series, each of 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 in Section 5.2 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.
Section 5.2. Establishment and Designation of Series. The establishment
------------ ---------------------------------------
and designation of any Series shall be effective upon the execution by the
Secretary or an Assistant Secretary of the Trust, pursuant to authorization by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Interests of such
Series, or as otherwise provided in such instrument. At any time that there are
no Interests outstanding of any particular Series previously
<PAGE>
established and designated, the Trustees may by resolution adopted by a majority
of their number, and evidenced by an instrument executed by the Secretary or an
Assistant Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above to establish
and designate further Series, the Trustees hereby establish and designate one
Series: Merrill Lynch Global Financial Services Fund, Inc. The Interests of
this Series and any Interests of 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 of 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 of that Series and shall
irrevocably belong to that Series for all purposes, and shall be so
recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as "assets belonging
to" that Series. No Series shall have any right to or interest in the
assets belonging to any other Series, and no Holder shall have any right or
interest with respect to the assets belonging to any Series in which it
does not hold an Interest.
(b) Liabilities Belonging to Series. The assets belonging to each
-------------------------------
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series. The liabilities, expenses, costs, charges and reserves so charged
to a Series are herein referred to as "liabilities belonging to" that
Series. Subject to Section 8.1 hereof, no Series shall be liable for or
charged with the liabilities belonging to any other Series.
(c) Voting. On each matter submitted to a vote of the Holders, each
------
Holder of an Interest in each Series shall be entitled to a vote
proportionate to its Interest in such Series as recorded on the books of
the Trust and all Holders of Interests in each Series shall vote as a
separate class except as to voting for Trustees and as otherwise required
by the 1940 Act, in which case all Holders shall vote together as a single
class. As to any matter which does not affect the interest of a particular
Series, only the Holders of Interests of the one or more affected Series
shall be entitled to vote.
Section 5.3. Rights of Holders. The ownership of the Trust Property of
------------ -----------------
every description and the right to conduct any activities hereinbefore described
shall be vested exclusively in the Trust, and the Holders shall have no interest
therein other than the beneficial interest conferred by their Interests, and
they shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust or any Series. No Holder shall have
any interest in or rights with respect to any Series in which it does not hold
an Interest. The Interests shall be personal property giving only the rights
specifically set forth in this Declaration. The Holders shall have no right to
demand payment for their Interests or any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenter's rights by a shareholder of a corporation
organized under the General Corporation Law of the State of Delaware or
otherwise. Holders shall have no preemptive or other rights to subscribe for
additional Interests or other securities issued by the Trust. No action may be
brought by a Holder on behalf of the Trust unless Holders owning not less than
25% of the then-outstanding Interests join in the bringing of such action. All
Persons, by virtue of acquiring an Interest in the Trust and being registered as
a Holder in accordance with Section 5.5 hereof, shall be deemed to have assented
to, and shall be bound by, this Declaration to the same extent as if such Person
was a party hereto.
<PAGE>
Section 5.4. Purchase of or Increase in Interests. The Trustees, in
------------ ------------------------------------
their discretion, may, from time to time, without a vote of the Holders, permit
the purchase of additional Interests of any Series by such Person or Persons
(including existing Holders), subject to the provisions of Section 5.1 hereof,
and 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.
Section 5.5. Register of Interests. A register shall be kept by the
------------ ---------------------
Trust which shall contain the names and addresses of the Holders and the Book
Capital Account balances of each Holder in each Series. Each such register
shall be conclusive as to who the Holders are and who shall be entitled to
payments of distributions or otherwise to exercise or enjoy the rights of
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 shall keep the said register
for entry thereon.
Section 5.6. Non-Transferability. Interests shall not be transferable
------------ -------------------
except with the prior written consent of all of the Trustees and all remaining
Holders of Interests.
Section 5.7. Notices. Any and all notices to which any Holder hereunder
------------ -------
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Holder of record at its last
known address as recorded on the register of the Trust.
Section 5.8. Limitation on Number of Holders. Notwithstanding any
------------ -------------------------------
provision hereof to the contrary, the number of Holders of Interests in any
Series shall be limited to fewer than 100. Solely for purposes of determining
the number of Holders of Interests in any Series under this Section 5.8, each
beneficial owner of a grantor trust which is itself a Holder shall be treated as
a Holder of such Interest.
Section 5.9. No Liability of Holders. All Interests, when issued in
------------ -----------------------
accordance with this Declaration, shall be fully paid and nonassessable.
Holders shall be entitled to the protection against personal liability for the
obligations of the Trust under Section 3803(a) of the Act. The Trust shall
indemnify and hold each Holder harmless from and against any claim or liability
to which such Holder may become subject solely by reason of his or her being or
having been a Holder and not because of such Holder's acts or omissions or for
some other reason, and shall reimburse such Holder for all legal and other
expenses reasonably incurred by him or her in connection with any such claim or
liability (upon proper and timely request by the Holder); provided, however,
that no Holder shall be entitled to indemnification by an Series unless such
Holder is a Holder of Interests of such Series.
ARTICLE VI
DECREASES AND WITHDRAWALS
-------------------------
Section 6.1. Decreases and Withdrawals. A Holder shall have the right
------------ -------------------------
on any day the New York Stock Exchange is open to decrease its Interest in any
Series, and to withdraw completely from any Series, at the next determined net
asset value attributable to the Interest (or portion thereof) being withdrawn,
and an appropriate adjustment therefor shall be made to such Holder's Book
Capital Account. The rights of a Holder upon withdrawal from a Series shall be
limited to the assets belonging to the Series from which the withdrawal is made.
The Trust may, subject to compliance with the 1940 Act, charge fees for
effecting such decrease or withdrawal, at such rates as the Trustees may
establish, and may at any time and from time to time, suspend such right of
decrease or withdrawal. The procedures for effecting decreases or withdrawals
shall be as determined by the Trustees from time to time, subject to the
requirements of the 1940 Act.
<PAGE>
ARTICLE VII
DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
-----------------------------------------------
NET INCOME AND DISTRIBUTIONS
----------------------------
Section 7.1. Book Capital Account Balances. The Book Capital Account
------------ -----------------------------
balances of Holders of the Trust with respect to each Series shall be determined
on such days and at such time or times as the Trustees may determine, consistent
with the requirements of the 1940 Act, with income, gains and losses of each
Series determined in accordance with generally accepted accounting principles to
be allocated among the Holders of such Series in accordance with their
Interests. The power and duty to make calculations of the Book Capital Account
balances of the Holders may be delegated by the Trustees to the Investment
Adviser, Administrator, Custodian, or such other person as the Trustees may
determine.
Section 7.2. Allocations and Distributions to Holders. In compliance
------------ ----------------------------------------
with the Treasury Regulations promulgated under applicable provisions of the
Code, the Trustees shall (i) allocate items of taxable income, gain, loss and
deduction with respect to each Series to Holders of the Interests in such
Series, provided that, except as may otherwise be specifically provided in the
Treasury Regulations, in all cases allocations of specific types of income shall
be proportionate to the Interests of the Holders in that Series, and (ii) upon
liquidation of a Series, make final distribution of the net assets of such
Series among the Holders of the Interests in such Series in accordance with
their respective Book Capital Accounts. The Trustees shall provide each Holder
that is a regulated investment company, as defined in Section 851(a) of the
Code, information which will enable it to take into account its share of items
of taxable income, gain, loss and deduction as they are taken into account by
the Series in order to facilitate compliance with Code Section 4982. Any income
tax withholding or other withholding of taxes required by law with respect to
the allocable share of income of, or distributions to, a Holder shall be
accounted for as a distribution to and charged to the Book Capital Account of
such Holder at the time of payment of such taxes to the applicable taxing
authority. The Trustees may always retain from the assets belonging to a Series
such amount as they may deem necessary to pay the liabilities belonging to that
Series.
Section 7.3. Power to Modify Foregoing Procedures. Notwithstanding any
------------ ------------------------------------
of the foregoing provisions of this Article VII, 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 as they may deem necessary
or desirable to enable the Trust to comply with any provision of the 1940 Act,
any rule or regulation thereunder, or any order of exemption issued by said
Commission, all as in effect now or hereafter amended or modified.
ARTICLE VIII
LIABILITY FOR TRUST OBLIGATIONS
-------------------------------
Section 8.1. Liabilities of Series. Without limitation of the provisions
------------ ---------------------
of Section 5.2(b) hereof, but subject to the right of the Trustees in their
discretion to allocate general liabilities, expenses, costs, charges or services
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of any other Series. Notice of this limitation on interseries liabilities
shall be set forth in the certificate of trust of the Trust (whether originally
or by amendment) as filed or to be filed in the Office of the Secretary of State
of the State of Delaware pursuant to Section 3810 of the Act, and upon the
giving of such notice in the certificate of trust, the statutory provisions of
Section 3804 of the Act relating to limitations on interseries liabilities (and
the statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series.
Every note, bond, contract or other undertaking issued by or on behalf of a
particular Series shall include a recitation limiting the obligation represented
thereby to that Series and its assets.
Section 8.2. No Personal Liability of Trustees, etc.
------------ --------------------------------------
(a) Trustees. The Trustees shall be entitled to the protection
--------
against personal liability for the obligations of the Trust under Section
3803(b) of the Act. No Trustee shall be liable to the
<PAGE>
Trust, its Holders, or to any Trustee, officer, employee, or agent thereof
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 his or her own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or her duties.
(b) Officers, Employees or Agents of the Trust. The officers,
------------------------------------------
employees and agents of the Trust shall be entitled to the protection
against personal liability for the obligations of the Trust under Section
3803(c) of the Act. No officer, employee or agent of the Trust shall be
liable to the Trust, its Holders, or to any Trustee, officer, employee, or
agent thereof 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 his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
(c) The provisions of this Declaration, to the extent that they
expand or restrict the duties and liabilities of the Trustees, officers,
employees or agents of the Trust otherwise existing at law or in equity,
are agreed by the Holders to modify to that extent such other duties and
liabilities.
Section 8.3. Indemnification. The Trust shall indemnify each of its
----------- ---------------
Trustees, officers, employees, and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
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 him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his or
her being or having been such a Trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duties, such liabilities and expenses being liabilities belonging to 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 said
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
his office by the court or other body approving the settlement or other
disposition or, in the absence of a judicial determination, by a reasonable
determination, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that he did not engage in such conduct, which
determination shall be made by a majority of a quorum of Trustees who are
neither Interested Persons of the Trust nor parties to the action, suit or
proceeding, or by written opinion from independent legal counsel approved by the
Trustees. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
--------
Person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the Trust Property. The
Trustees may make advance payments in connection with indemnification under this
Section 8.3; provided that any advance payment of expenses by the Trust to any
--------
Trustee, officer, employee or agent shall be made only upon the undertaking by
such Trustee, officer, employee or agent to repay the advance unless it is
ultimately determined that he is entitled to indemnification as above provided,
and only if one of the following conditions is met:
(a) the Trustee, officer, employee or agent to be indemnified provides
a security for his or her undertaking; or
(b) the Trust shall be insured against losses arising by reason of any
lawful advances; or
(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Trustee, officer, employee
or agent to be indemnified ultimately will be entitled to indemnification,
which determination shall be made by:
<PAGE>
(i) a majority of a quorum of Trustees who are neither
Interested Persons of the Trust nor parties to the
Proceedings; or
(ii) an independent legal counsel in a written opinion.
Section 8.4. No Protection Against Certain 1940 Act Liabilities.
----------- --------------------------------------------------
Nothing contained in Sections 8.1, 8.2 or 8.3 hereof shall protect any Trustee
or officer of the Trust from any liability to the Trust or its Holders to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. Nothing contained in Sections 8.1, 8.2 or 8.3 hereof or in any
agreement of the character described in Section 4.1 or 4.2 hereof shall protect
any Investment Adviser to the Trust or any Series against any liability to the
Trust or any Series to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her or
its duties to the Trust or Series, or by reason of his or her or its reckless
disregard to his or her or its obligations and duties under the agreement
pursuant to which he serves as Investment Adviser to the Trust or any Series.
Section 8.5. No Bond Required of Trustees. No Trustee shall be
----------- ----------------------------
obligated to give any bond or other security for the performance of any of his
or her duties hereunder.
Section 8.6. No Duty of Investigation; Notice in Trust Instruments, etc.
----------- ----------------------------------------------------------
No purchaser, lender, seller or other Person dealing with the Trustees or with
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, lent or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every contract, undertaking, instrument,
certificate, interest or obligation or other security of the Trust, and every
other act or thing whatsoever executed in connection with the Trust, shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by the Trustees or by any officer, employee or agent of the Trust,
in his or her capacity as such, may contain an appropriate recital to the effect
that the Holders, Trustees, officers, employees and agents of the Trust shall
not personally be bound by or liable thereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to the Declaration,
and may contain any further recital which they may deem appropriate, but the
omission of such recital shall not operate to impose personal liability on any
of the Holders, Trustees, officers, employees or agents of the Trust.
Section 8.7. Insurance. The Trustees may maintain insurance for the
----------- ---------
protection of the Trust Property, its Holders, Trustees, officers, employees and
agents 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.
Section 8.8. Reliance on Experts, etc. Each Trustee, officer or
----------- ------------------------
employee of the Trust shall, in the performance of his or her 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, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser, the
Administrator, accountant, appraiser or other expert or consultant selected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee; provided that nothing
--------
in this Section shall be deemed to exonerate the Trustees from their duties of
reasonable care, diligence and prudence or any other duties imposed by the 1940
Act.
ARTICLE IX
HOLDERS
-------
Section 9.1. Meetings of Holders. Meetings of the Holders may be called
----------- -------------------
at any time by a majority of the Trustees and shall be called by any Trustee
upon written request of Holders holding, in the
<PAGE>
aggregate, not less than 10% of the Interests of a Series (if the meeting
relates solely to that Series), or not less than 10% of the Interests of the
Trust (if the meeting relates to the Trust and not solely to a 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
Delaware on such day and at such time as the Trustees shall designate. Holders
of at least one-third of the Interests of the Series (if the meeting relates
solely to that Series) or Holders of at least one-third of the Interests of the
Trust (if the meeting relates to the Trust and not solely to a 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
or other applicable law or by this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote by the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust require a greater number of affirmative votes.
Section 9.2. Notice of Meetings. Notice of all meetings of the 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 his or her registered address, mailed at least 10 days and not more than 90
days before the meeting. At any such 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.
Section 9.3. Record Date for Meetings. For the purpose of determining
----------- ------------------------
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 the Holders or payment of distributions or other action,
as the case may be, as a record date for the determination of the Persons to be
treated as Holders of record of a particular Series or the Trust for such
purposes.
Section 9.4. Proxies, etc. At any meeting of Holders, any Holder
----------- ------------
entitled to vote thereat may vote by proxy, provided that no proxy shall be
--------
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Holders of record shall be entitled to vote. Each Holder shall be entitled
to vote proportionate to his or her Interest in the Trust or in any Series (as
the context may require). When Interests are held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest. A proxy purporting to be executed by or on behalf of a Holder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the Holder is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of his or her Interest, he
or she may vote by his or her guardian or such other person appointed or having
such control, and such vote may be given in person or by proxy.
Section 9.5. Reports. The Trustees shall cause to be prepared, at least
----------- -------
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of each 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,
furnish to the Holders at least semi-annually interim reports containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current fiscal
year to the end of such period.
Section 9.6. Inspection of Records. The records of the Trust shall be
----------- ---------------------
open to inspection by Holders during normal business hours for any purpose not
harmful to the Trust.
<PAGE>
Section 9.7. Holder Action by Written Consent. Any action which may be
----------- --------------------------------
taken by Holders may be taken without a meeting if Holders holding more than 50%
of the total Interests entitled to vote (or such larger proportion thereof as
shall be required by any express provision of this Declaration) shall consent to
the action in writing and the written consents are filed with the records of the
meetings of Holders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Holders.
ARTICLE X
DURATION; TERMINATION OF
------------------------
TRUST OR SERIES; AMENDMENT; MERGERS; ETC.
----------------------------------------
Section 10.1. Duration. Subject to possible termination or dissolution
------------ --------
in accordance with Sections 10.2 and 10.3, respectively, the Trust created
hereby shall have perpetual existence.
Section 10.2. Dissolution of Series or Trust. Any Series shall be
------------ ------------------------------
dissolved by unanimous consent of the Trustees by written notice of dissolution
to the Holders of the Interests of the Series. The Trust shall be dissolved upon
the dissolution of the last remaining Series.
Section 10.3. Termination of Trust or Series.
------------ ------------------------------
(a) Upon an event of dissolution of the Trust or a Series, the Trust
or Series shall be terminated in accordance with the following provisions:
(i) The Trust (or Series, as applicable) shall thereafter 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, as applicable) shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust
(or Series, as applicable), collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property (or assets belonging to the Series, as
applicable) 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 its
liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
--------
transfer or other disposition of all or substantially all of the Trust
Property or substantially all of the assets belonging to a particular
Series other than for cash, shall require approval of the principal
terms of the transaction and the nature and amount of the
consideration by the vote at a meeting, or by written consent, of
Holders holding more than 50% of the total outstanding Interests of
the Trust or Series, as the case may be, entitled to vote.
(iii) After paying or adequately providing for the payment of
all liabilities belonging to the Series subject of termination and
upon receipt of such releases, indemnities and refunding agreements as
they deem necessary for their protection, the Trustees may distribute
the remaining Trust Property or assets belonging to such Series, in
cash or in kind or partly each, among the Holders of such Series
according to their Book Capital Accounts in such Series. In all
cases, as herein provided, the rights of Holders of Interests in a
Series upon termination and liquidation of that Series shall be
limited to the assets belonging to that Series.
(b) After termination of the Trust or Series and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination. Upon termination of the Trust, the Trustees
shall file a certificate of cancellation in accordance with Section 3810 of
the Act and such
<PAGE>
Trustees shall thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all Holders shall
thereupon cease.
Section 10.4. Amendment Procedure.
------------- -------------------
(a) Two-thirds (2/3) of the Trustees then in office may amend this
Declaration at any time for any purpose without the approval of the Holders
of Interests; provided, that the vote or a written consent of Holders
holding more than 50% of the total outstanding Interests or of Holders of
67% or more of the Interests voting or consenting, if Holders of at least
50% of such Interests vote or consent, shall be necessary to approve any
amendment whenever such vote or consent is required under the 1940 Act.
(b) Nothing contained in this Declaration shall permit the amendment
of this Declaration to impair the exemption from personal liability of
Holders, Trustees, officers, employees and agents of the Trust.
(c) A certificate signed by a Trustee or by the Secretary or any
Assistant Secretary of the Trust, 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, certified by a Trustee or the
Secretary or any Assistant Secretary of the Trust, certifying that such
Declaration is a true and correct copy of the Declaration as amended, shall
be conclusive evidence of such amendment when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as Interests
are first sold to an Institutional Investor, this Declaration may be terminated
or amended in any respect by vote or written consent of the Trustees.
Section 10.5. Merger, Consolidation and Sale of Assets.
------------ ----------------------------------------
(a) Any Series may merge into or consolidate with any corporation,
association, other trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property belonging to such
Series, including its good will, upon such terms and conditions and for
such consideration when and as authorized by vote or written consent of
two-thirds (2/3) of the Trustees then in office. In accordance with Section
3815(f) of the Act, an agreement of merger or consolidation may effect any
amendment to this Declaration or the By-Laws or effect the adoption of a
new declaration or by-laws of the Trust if the Trust is the surviving or
resulting entity.
(b) The Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of
the Trust Property, or Series thereof or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property or Series thereof to any such
corporation, trust, association or 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 contracts with any such
corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or 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, as provided under the
law then in effect. 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 such organizations or entities.
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Certificate of Trust; Registered Agent. The initial
------------- --------------------------------------
Trustees shall file a certificate of trust in accordance with Section 3810 of
the Act.
Section 11.2. Governing Law. This Declaration is executed by all of the
------------ -------------
Trustees and delivered with reference to Act and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the Act
and the laws of the State of Delaware (unless and to the extent otherwise
provided for and/or preempted by the 1940 Act or other applicable federal
securities laws); provided, however, that there shall not be applicable to the
Trust, the Trustees or this Declaration (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Act) pertaining to trusts which
are inconsistent with the rights, duties, powers, limitations or liabilities of
the Trustees or the Holders set forth or referenced in this Declaration.
Section 11.3. Counterparts. The 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 such original
counterpart.
Section 11.4. Reliance by Third Parties. Any certificate executed by an
------------ -------------------------
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary, Assistant Secretary, Treasurer or Assistant Treasurer
of the Trust, 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 officers 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 and their successors.
Section 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, the regulated investment
company provisions of the Code, the Act or, consistent with Section 11.2,
any other applicable Delaware law regarding administration of trusts, or
with other applicable laws and regulations, the conflicting provisions
shall be deemed superseded by such law or regulation to the extent
necessary to eliminate such conflict; 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 pertain 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.
Section 11.6. Trust Only. It is the intention of the Trustees to create
------------ ----------
only a business trust under the Act with the relationship of trustee and
beneficiary between the Trustees and each Holder from time to time. It is not
the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a Delaware business trust except to the extent
such trust is deemed to constitute a partnership under the Code and applicable
state tax laws. Nothing in this Declaration shall be construed to make the
Holders, either by themselves or with the Trustees, partners or members of a
joint stock association.
<PAGE>
SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
19th day of August, 1999.
/s/ Michael J. Hennewinkel
- - --------------------------
Michael J. Hennewinkel, as Trustee
<PAGE>
EXHIBIT 1(b)
CERTIFICATE OF TRUST OF
GLOBAL FINANCIAL SERVICES FUND
THIS Certificate of Trust of Global Financial Services Fund (the
"Trust"), dated August 19, 1999, is being duly executed and filed by Michael J.
Hennewinkel, as sole trustee, to form a business trust under the Delaware
Business Trust Act (12 Del. C. (S) 3801, et seq.).
------- -------
1. Name. The name of the business trust formed hereby is Global
----
Financial Services Fund.
2. Registered Agent. The business address of the registered office of
----------------
the Trust in the State of Delaware is 1013 Centre Road, Wilmington, Delaware
19805. The name of the Trust's registered agent at such address is The
Corporation Service Company.
3. Effective Date. This Certificate of Trust shall be effective upon the
--------------
date and time of filing.
4. Series Trust. Notice is hereby given that pursuant to Section 3804 of
------------
the Delaware Business Trust Act, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of such
series only and not against the assets of the Trust generally. The Trust will
be a registered investment company under the Investment Company Act of 1940, as
amended.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
/s/ Michael J. Hennewinkel
--------------------------
Michael J. Hennewinkel, Sole Trustee
<PAGE>
EXHIBIT 1(c)
GLOBAL FINANCIAL SERVICES MASTER TRUST
AMENDED DECLARATION OF TRUST
Dated: September 21, 1999
<PAGE>
TABLE OF CONTENTS PAGE
ARTICLE I
NAME AND DEFINITIONS....................................................... 1
Section 1.1. Name......................................................... 1
Section 1.2. Definitions.................................................. 1
ARTICLE II
TRUSTEES................................................................... 4
Section 2.1. Number of Trustees and Qualification......................... 4
Section 2.2. Term and Election............................................ 4
Section 2.3. Resignation and Removal...................................... 5
Section 2.4. Vacancies.................................................... 5
Section 2.5. Meetings..................................................... 5
Section 2.6. Officers; Chairman........................................... 6
Section 2.7. By-Laws...................................................... 6
ARTICLE III
POWERS OF TRUSTEES......................................................... 6
Section 3.1. General...................................................... 6
Section 3.2. Activities and Investments................................... 7
Section 3.3. Legal Title.................................................. 8
Section 3.4. Sale of Interests; Reclassification.......................... 9
Section 3.5. Borrowing Money; Pledging Trust Assets; Lending Property..... 9
Section 3.6. Delegation; Committees....................................... 9
Section 3.7. Collection and Payment....................................... 9
Section 3.8. Expenses..................................................... 9
Section 3.9. Common Items................................................. 10
Section 3.10. Litigation................................................... 10
Section 3.11. Tax Matters.................................................. 10
Section 3.12. Miscellaneous Powers......................................... 11
Section 3.13. Manner of Acting............................................. 11
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND PLACEMENT AGENT ARRANGEMENTS; CUSTODIAN................................ 11
Section 4.1. Investment Advisory and Other Arrangements................... 11
Section 4.2. Parties to Contract.......................................... 12
Section 4.3. Custodian.................................................... 12
ARTICLE V
INTERESTS IN THE TRUST..................................................... 12
Section 5.1. Interests.................................................... 12
Section 5.2. Establishment and Designation of Series...................... 13
Section 5.3. Rights of Holders............................................ 14
Section 5.4. Purchase of or Increase in Interests......................... 14
Section 5.5. Register of Interests........................................ 15
Section 5.6. Non-Transferability.......................................... 15
Section 5.7. Notices...................................................... 15
Section 5.8. Limitation on Number of Holders.............................. 15
Section 5.9. No Liability of Holders...................................... 15
ARTICLE VI
DECREASES AND WITHDRAWALS.................................................. 16
Section 6.1. Decreases and Withdrawals.................................... 16
<PAGE>
ARTICLE VII
DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
NET INCOME AND DISTRIBUTIONS............................................... 16
Section 7.1. Book Capital Account Balances................................ 16
Section 7.2. Allocations and Distributions to Holders..................... 16
Section 7.3. Power to Modify Foregoing Procedures......................... 17
ARTICLE VIII
LIABILITY FOR TRUST OBLIGATIONS............................................ 17
Section 8.1. Liabilities of Series........................................ 17
Section 8.2. No Personal Liability of Trustees, etc....................... 17
Section 8.3. Indemnification.............................................. 18
Section 8.4. No Protection Against Certain 1940 Act Liabilities........... 19
Section 8.5. No Bond Required of Trustees................................. 19
Section 8.6. No Duty of Investigation; Notice in Trust Instruments, etc... 19
Section 8.7. Insurance.................................................... 20
Section 8.8. Reliance on Experts, etc..................................... 20
ARTICLE IX
HOLDERS.................................................................... 20
Section 9.1. Meetings of Holders.......................................... 20
Section 9.2. Notice of Meetings........................................... 20
Section 9.3. Record Date for Meetings..................................... 21
Section 9.4. Proxies, etc................................................. 21
Section 9.5. Reports...................................................... 21
Section 9.6. Inspection of Records........................................ 21
Section 9.7. Holder Action by Written Consent............................. 21
ARTICLE X
DURATION; TERMINATION OFTRUST OR SERIES; AMENDMENT; MERGERS; ETC........... 22
Section 10.1. Duration..................................................... 22
Section 10.2. Dissolution of Series or Trust............................... 22
Section 10.3. Termination of Trust or Series............................... 22
Section 10.4. Amendment Procedure.......................................... 23
Section 10.5. Merger, Consolidation and Sale of Assets..................... 24
ARTICLE XI
MISCELLANEOUS.............................................................. 24
Section 11.1. Certificate of Trust; Registered Agent....................... 24
Section 11.2. Governing Law................................................ 24
Section 11.3. Counterparts................................................. 25
Section 11.4. Reliance by Third Parties.................................... 24
Section 11.5. Provisions in Conflict with Law or Regulations............... 25
Section 11.6. Trust Only................................................... 25
SIGNATURE PAGE............................................................. 27
<PAGE>
AMENDED DECLARATION OF TRUST
OF
GLOBAL FINANCIAL SERVICES MASTER TRUST
Dated: September 21, 1999
AMENDED DECLARATION OF TRUST of Global Financial Services Master Trust made
the 21st day of September, 1999, by Terry K. Glenn, as trustee (such individual,
so long as he shall continue in office in accordance with the provisions of this
Declaration of Trust, and all other Persons who may hereafter be duly elected or
appointed, qualified and serving as trustees in accordance with the provisions
hereof, being hereinafter called "Trustees").
W I T N E S S E T H:
-------------------
WHEREAS, the Trustees desire to establish a business trust under the
Delaware Business Trust Act (the "Act") consisting of one or more series or
portfolios for the investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees hereby declare that all money and property
hereafter contributed to the Series established hereby shall be held and managed
in trust for the benefit of the holders of beneficial interests issued hereunder
with respect to each respective Series from time to time and subject to the
provisions hereof, to wit:
ARTICLE I
NAME AND DEFINITIONS
--------------------
Section 1.1. Name. The name of the trust established hereby (the
----------- ----
"Trust") is changed to "Global Financial Services Master Trust" from "Global
Financial Services Fund," and, insofar as may be practicable, the Trust shall
conduct its activities, execute all documents and sue or be sued under that
name, which name (and the word "Trust" wherever herein used) shall refer to the
Trust as a separate legal entity, and shall not refer to the Trustees, officers,
agents, employees or Holders. If the Trustees determine that the Trust's use of
such name is not advisable, the Trustees may adopt such other name for the Trust
as they deem proper and the Trust may hold its property and conduct its
activities under such other name. Any name change shall become effective upon
the execution by a majority of the then Trustees of an instrument setting forth
the new name and the filing of a Certificate of Amendment under the Act. Any
such instrument shall have the status of an amendment to this Declaration.
Section 1.2. Definitions. Wherever they are used herein, the following
----------- -----------
terms have the respective meanings assigned to them below:
(a) "Administrator" shall mean any party furnishing services to the
-------------
Trust and the Series pursuant to any administrative services contract
described in Section 4.1.
(b) "Act" shall mean the Delaware Business Trust Act, as the same may
---
be amended from time to time.
(c) "Affiliated Person" has the meaning assigned to it in Section
-----------------
2(a)(3) of the 1940 Act.
(d) "Assets belonging to" a Series shall have the meaning ascribed in
-------------------
Section 5.2(a).
(e) "Book Capital Account" shall mean, for any Holder at any time, the
--------------------
Book Capital Account of the Holder at such time with respect to such
Holder's interest in the Trust Property of
<PAGE>
any Series, determined in accordance with generally accepted accounting
principles and the provisions of the 1940 Act, and each Holder shall have a
separate Book Capital Account for each Series in which it holds an
Interest.
(f) "By-Laws" means the By-Laws referred to in Section 2.7 hereof, as
-------
amended and in effect from time to time.
(g) "Code" shall mean the Internal Revenue Code of 1986 and the rules
----
and regulations thereunder, each as amended from time to time.
(h) "Commission" means the Securities and Exchange Commission.
----------
(i) "Custodian" means the party, other than the Trust or the Series,
---------
to the agreement described in Section 4.3 hereof.
(j) "Declaration" means this Declaration of Trust, as amended and in
-----------
effect from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein," "hereby" and "hereunder" shall be deemed
------------ ------ ------ ------ ---------
to refer to this Declaration rather than the article or section in which
such words appear.
(k) "Fundamental Policies" means the investment policies and
--------------------
restrictions applicable to any Series which are set forth and designated as
fundamental policies in the Registration Statement.
(l) "Holders" shall mean as of any particular time all holders of
-------
record of Interests in the Trust Property of any Series at such time.
(m) "Institutional Investor(s)" shall mean any registered investment
-------------------------
company (including a unit investment trust), insurance company separate
account, common or commingled trust fund, group trust or similar
organization or entity that is an "accredited investor" within the meaning
of Regulation D under the Securities Act of 1933, and shall not include any
individual, S corporation, partnership, or grantor trust beneficially owned
by any individual, S corporation or partnership.
(n) "Interested Person" has the meaning ascribed to it in Section
-----------------
2(a)(19) of the 1940 Act.
(o) "Interest(s)" shall mean the interest of a Holder in the Trust
-----------
Property of any Series, including all rights, powers and privileges
accorded to Holders in this Declaration, which interest may be expressed as
a percentage, determined by calculating, as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance in
the Trust Property of any Series to the total of all Holders' Book Capital
Account balances in the Trust Property of any such Series. Reference
herein to a specific percentage in, or fraction of, Interests of the
Holders means Holders whose combined Book Capital Accounts represent such
specified percentage or fraction of the Book Capital Accounts of all
Holders of the Trust Property of any Series or of the Trust as a whole (as
the context may require).
(p) "Investment Adviser" means the party, other than the Trust or the
------------------
Series, to any investment advisory contract described in Section 4.1
hereof.
(q) "Liabilities belonging to" a Series shall have the meaning
------------------------
ascribed in Section 5.2(b).
(r) "1940 Act" means the provisions of the Investment Company Act of
--------
1940 and the rules and regulations thereunder as amended from time to time
and any order or orders thereunder which may from time to time be
applicable to the Trust.
<PAGE>
(s) "Person" means and includes individuals, corporations,
------
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(t) "Registration Statement" means the Trust's currently effective
----------------------
Registration Statement under the 1940 Act, as it may be amended or
supplemented from time to time.
(u) "Series" refers to the Series of the Trust established and
------
designated under or in accordance with Sections 3804 and 3806 of the Act
and the provisions of Article V hereof, each of which shall be accounted
for and maintained as a separate series or portfolio of the Trust.
(v) "Trust" means the master trust established hereby by whatever name
-----
it may then be known, inclusive of each and every Series established
hereunder.
(w) "Trust Property" means any and all assets, real or personal,
--------------
tangible or intangible, which is owned or held by the Trust, each and every
asset of which shall be allocated and belong to a specific Series to the
exclusion of all other Series.
(x) "Trustees" means the individuals who have signed this Declaration,
--------
so long as they shall continue in office in accordance with the provisions
hereof, and all other Persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees shall
refer to such individual or Persons in their capacity as trustees
hereunder.
(y) The use herein of the masculine or feminine gender or the neutral
shall be construed to refer to the other gender or the neutral as well, and
the use herein of the singular shall be construed to include the plural and
the plural to include the singular, as the context may require.
ARTICLE II
TRUSTEES
--------
Section 2.1. Number of Trustees and Qualification. The number of
----------- ------------------------------------
Trustees shall initially be one (1) and shall thereafter be such number as shall
be fixed from time to time by a written instrument signed by a majority of the
Trustees then in office, provided, however, that the number of Trustees shall,
-------- -------
subsequent to any sale of Interests other than sales made solely for the
purposes of meeting any applicable seed money requirement under the 1940 Act, in
no event be less than three (3) or more than fifteen (15). Any vacancy created
by an increase in Trustees may be filled by the appointment of any Person having
the qualifications described in this Article made by a written instrument signed
by a majority of the Trustees then in office. Any such appointment shall not
become effective, however, until the Person 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 in the number of Trustees shall occur, until such vacancy is
filled as provided in this Section and Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
Section 2.2. Term and Election. Each Trustee named herein, or elected
----------- -----------------
or appointed prior to the first meeting of the Holders, shall (except in the
event of resignations or removals or vacancies pursuant to Section 2.3 or 2.4
hereof) hold office until his or her successor has been elected at such meeting
and has qualified to serve as Trustee, as required under the 1940 Act. Beginning
with the Trustees elected at the first meeting of Holders, each Trustee shall
hold office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below.
<PAGE>
Section 2.3. Resignation and Removal. Any Trustee may resign his or her
----------- -----------------------
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees, and such resignation
shall be effective upon such delivery or at any later date according to the
terms of the instrument. Any of the Trustees may be removed by the action of
two-thirds of the remaining Trustees; provided, that if the removal of one or
--------
more Trustees would have the effect of reducing the number of remaining Trustees
below the minimum number prescribed by Section 2.1 hereof, then subject to
Section 16(a) of the 1940 Act, at the time of the removal of such Trustee or
Trustees, the remaining Trustees shall elect or appoint a number of additional
Trustees at least sufficient to increase the number of Trustees holding office
to the minimum number prescribed by Section 2.1 hereof. Upon the resignation or
removal of a Trustee, or his or her otherwise ceasing to be a Trustee due to
death or legal disability, he 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 his or her name. Upon the
death or legal disability of any Trustee, his or her legal representative shall
execute and deliver on his or her behalf such documents as the remaining
Trustees shall require as provided in the preceding sentence. However, the
execution and delivery of such documents by a former Trustee or his or her legal
representative shall not be requisite to the vesting of title to the Trust
Property in the remaining Trustees as provided in Section 3.3 hereof.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate
----------- ---------
and a vacancy shall occur in the event of such Trustee's death, resignation,
removal, bankruptcy, adjudicated incompetence or other legal disability to
perform the duties of the office of Trustee. No such vacancy shall operate to
annul this Declaration or to revoke any existing obligations created pursuant to
the terms of this Declaration. In the case of a vacancy, the Holders of at
least a majority of the Interests entitled to vote, acting at any meeting of the
Holders held in accordance with Section 9.1 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.
Section 2.5. Meetings. Regular meetings of the Trustees may be held on
----------- --------
such notice at such place or places and times as may be fixed by the By-Laws or
by resolution of the Trustees. Special Meetings of the Trustees shall be held
upon the call of the Chairman, if any, the president, the secretary or any two
Trustees, by oral or telegraphic or written notice duly served on or sent,
mailed or sent by telecopy to each Trustee not less than one day before the
meeting. No notice need be given to any Trustee who attends in person or to any
Trustee who, in writing signed and filed with the records of the meeting either
before or after the holding thereof, waives notice. Notice or waiver of notice
need not state the purpose or purposes of the meeting. The Trustees may act
with or without a meeting, subject to the requirements of the 1940 Act. A
quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof 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 persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting.
<PAGE>
Section 2.6. Officers; Chairman. The Trustees shall, from time to time,
----------- ------------------
elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman who shall preside at all meetings of the
Trustees and carry out such other duties as the Trustees shall designate. The
Trustees may elect or appoint or authorize the President to appoint such other
officers or agents with such powers as the Trustees may deem to be advisable.
The President, the Secretary and the Treasurer may, but need not, be Trustees,
and shall be agents of the Trust.
Section 2.7. By-Laws. The Trustees may adopt By-Laws not inconsistent
----------- -------
with this Declaration for the conduct of activities of the Trust and may amend
or repeal such By-Laws to the extent such power is not reserved to the Holders
by express provision of such By-Laws. This Declaration and the By-Laws shall
together constitute the "governing instrument" of the Trust within the meaning
of Section 3801(f) of the Act.
ARTICLE III
POWERS OF TRUSTEES
------------------
Section 3.1. General. The Trustees shall have exclusive and absolute
----------- -------
control over the Trust Property and over the activities of the Trust and each
Series to the same extent as if the Trustees were the sole owners of the Trust
Property in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
activities of the Trust and any Series and to carry on their operations and
maintain offices both within and without the State of Delaware, in any and all
states of the United States of America, and in the District of Columbia, in any
foreign country, 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 or desirable in order to
promote the interests of the Trust and each Series although such things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust or any Series 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 will not be
required to obtain any court order to deal with Trust Property.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Activities and Investments. The Trustees shall have the
----------- --------------------------
power with respect to the Trust and each Series:
(a) to conduct, operate and carry on the activities of an investment
company, and, in connection therewith:
(i) to subscribe for, purchase or otherwise acquire and invest
and reinvest in, to hold for investment or otherwise, to sell,
transfer, assign, negotiate, exchange, lend or otherwise dispose of,
and to turn to account or realize upon and generally deal in and with,
domestic or foreign securities (which term, "securities," shall
include without limitation any and all bills, notes, bonds, debentures
or other obligations or evidences of indebtedness, certificates of
deposit, bankers acceptances, commercial paper, repurchase agreements
or other money market instruments; stocks, shares or other equity
ownership interests (including non-publicly traded or illiquid
securities and those securities the disposition of which is restricted
under the Federal securities laws); convertible securities; mortgage-
backed or other asset-backed securities; and warrants, options or
other instruments representing rights to subscribe for, purchase,
receive or otherwise acquire or to sell, transfer, assign or otherwise
dispose of, and scrip, certificates, receipts or other instruments
evidencing any ownership rights or interests in, any of the foregoing;
and "forward commitment", "when issued" and "delayed delivery"
contracts for securities, issued, guaranteed or sponsored by any
governments, political subdivisions or
<PAGE>
governmental authorities, agencies or instrumentalities, by any
individuals, firms, companies, corporations, syndicates, associations
or trusts, or by any other organizations or entities whatsoever,
irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit,
and whether they be domestic or foreign with respect to the State of
Delaware or the United States of America); and
(ii) to acquire and become the owner of or interested in any
securities by delivering or issuing in exchange or payment therefor,
in any lawful manner, any of the Trust Property; and
(iii) to exercise while the owner of any securities or interests
therein any and all of the rights, powers and privileges of ownership
of such securities or interests, including without limitation any and
all voting rights and rights of assent, consent or dissent pertaining
thereto, and to do any and all acts and things for the preservation,
protection, improvement and enhancement in value thereof; and
(iv) to purchase, sell and hold currencies and enter into
contracts for the future purchase or sale of currencies, including
but not limited to forward foreign currency exchange contracts; and
(v) to enter into futures and forward contracts, and to purchase
and write put and call options on futures contracts, securities,
currencies and securities indexes; and
(vi) to make loans to the extent provided in the Registration
Statement from time to time; and
(vii) to engage in such other activities as may be disclosed in
the Registration Statement from time to time; and
(b) to conduct, operate and carry on any other lawful activities which
the Trustees, in their sole and absolute discretion, consider to be (i)
incidental to the activities of the Trust and each Series as an investment
company, (ii) conducive to or expedient for the benefit or protection of
the Trust or any Series or the Holders, or (iii) calculated in any other
manner to promote the interests of the Trust or any Series or the Holders.
The Trustees shall not be limited to investing in securities maturing before the
possible termination of the Trust or any Series, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
Notwithstanding anything to the contrary herein contained but consistent with
the applicable investment objectives, the Trust and each Series shall be managed
in compliance with the requirements of the Code applicable to regulated
investment companies as though such requirements were applied at the Series
level.
Section 3.3. Legal Title. Legal title to all the Trust Property shall
----------- -----------
be vested in the Trust as a separate legal entity, except that the Trustees
shall have 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 any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided, that the interest of the Trust or any Series
--------
therein is appropriately protected. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the termination of the term of office of a
Trustee as provided in Section 2.2 or 2.4 hereof, such Trustee shall
automatically cease to have any right, title or interest in any of the Trust
Property, and all right, title and interest of such 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 as provided in Section 2.3 hereof.
Section 3.4. Sale of Interests; Reclassification. Subject to more
----------- -----------------------------------
detailed provisions set forth in Article V and the Trustees' duty of
impartiality to the Holders, the Trustees shall have the power to permit
<PAGE>
Persons to purchase Interests and to add to or reduce, in whole or in part,
their Interests in any Series, provided that from and after the commencement of
the private placement of Interests, Interests shall be sold only to
Institutional Investors, and the original Holders shall withdraw their entire
Interests from the Series. The Trustees shall also have the power to acquire,
hold, resell, dispose of, transfer, classify, reclassify and otherwise deal in
Interests of the Trust or any Series. The Trustees may hold as treasury
Interests, re-issue for such consideration and on such terms as they determine,
or cancel, in their discretion from time to time, any Interests of any Series or
class thereof reacquired by the Trust.
Section 3.5. Borrowing Money; Pledging Trust Assets; Lending Property.
----------- --------------------------------------------------------
Subject to any applicable Fundamental Policies of the Trust or any Series or any
applicable provision of the By-Laws, the Trustees shall have power, on behalf of
the Trust or any Series, to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security any
of the Trust Property, to endorse, guarantee, or undertake the performance of
any obligation, contract or engagement of any other Person and to lend Trust
Property; provided that Trust Property belonging to a Series shall not be
pledged, encumbered or subject to liabilities belonging to any other Series.
Section 3.6. Delegation; Committees. The Trustees shall have power,
----------- ----------------------
consistent with their continuing exclusive authority over the management of the
Trust, each Series and the Trust Property, to delegate from time to time to such
committee or committees as they may from time to time appoint from among their
own number or to such officers, employees or agents of the Trust as they may
from time to time designate the doing of such things and the execution of such
instruments either in the name of the Trust or any Series or the names of the
Trustees or otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
----------- ----------------------
collect all property due to the Trust or any Series; to pay all claims,
including taxes, against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust Property; to foreclose any security
interest securing any obligations by virtue of which any property is owed to the
Trust or any Series; and to enter into releases, agreements and other
instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur and
----------- --------
pay, out of the income or the principal of the Trust Property of the Series, any
expenses which, in the opinion of the Trustees, are necessary or incidental to
carrying out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees; provided
that no Series will be liable for the debts and obligations of any other Series,
and expenses, fees, charges, taxes, and liabilities incurred or arising in
connection with a particular Series, or in connection with the management
thereof, shall be paid out of the Trust Property belonging to that Series and
not out of the Trust Property belonging to any other Series. The Trustees shall
not be obligated to account to the Holders for the retention of compensation,
and each Holder agrees that compliance with the accounting requirements of the
1940 Act and of this Declaration shall constitute satisfactory accounting with
respect to all acts of the Trustees. The Trustees shall fix the compensation of
all officers, employees and Trustees of the Trust and may pay such compensation
out of the Trust Property without reduction of the Trustees' compensation.
Section 3.9. Common Items. All expenses and other items of the Trust
----------- ------------
which are common to the Series shall be borne by or allocated to the Series
proportionately based upon the relative net asset values of each. Such common
items shall include, but not be limited to, Trustees' fees; 1940 Act
registration expenses; organizational expenses of the Trust, exclusive of
organizational expenses attributable to any specific Series; and accounting
expenses relating to the Trust which are not attributable to any specific
Series.
Section 3.10. Litigation. The Trustees shall have the power to engage in
------------ ----------
and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust or any Series or the Trust Property, and, out of the Trust
Property, to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business judgment,
consenting to dismiss any action, suit, proceeding, dispute, claim or demand,
brought by any Person, including, to the
<PAGE>
extent permitted by applicable law, a Holder in such Holder's own name or in the
name of the Trust or any Series, whether or not the Trust, a Series or any of
the Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust or any Series.
Section 3.11. Tax Matters. The Trustees shall have the exclusive power,
------------ -----------
authority and responsibility with respect to the Trust and the Series regarding
(i) preparation and filing of tax returns; (ii) providing reports to the Holders
regarding tax information necessary to the filing of their respective tax
returns; (iii) making any and all available elections with respect to the tax
treatment of the Series and their investments; (iv) representing the Series
before the Internal Revenue Service and/or any state taxing authority and
exercising the powers and authorities of a tax matters partner under the Code
with respect to the Series' partnership tax returns; (v) exercising such
responsibility as may be imposed by law with respect to withholding from a
Holder's share of income or distributions; (vi) providing to the accountants of
the Series such instructions regarding allocations of realized income, gains and
losses as may be necessary or appropriate to assure compliance with applicable
provisions of the Code and Treasury Regulations; and (vii) any and all other tax
matters.
Section 3.12. Miscellaneous Powers. The Trustees shall have the power
------------ --------------------
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the activities of the Trust or any Series and eliminate
such employees or contractual relationships as they consider appropriate; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
subject to and in accordance with Sections 2.3 and 2.4 hereof; elect and remove
at will such officers and appoint and terminate such agents or employees as they
consider appropriate; and appoint from their own number and terminate at will
any one or more committees which may exercise some or all of the power and
authority of the Trustees as the Trustees may determine; (d) purchase, and pay
for out of Trust Property, insurance policies insuring the Trust Property, and,
to the extent permitted by law and not inconsistent with any applicable
provision of this Declaration or the By-Laws, insuring the Investment Adviser,
Administrator, placement agent, Holders, Trustees, officers, employees, agents
or independent contractors of the Trust or any Series against all claims arising
by reason of holding any such position or by reason of any action taken or
omitted to be taken by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust or any Series would have
the power to indemnify such Person against such liability; (e) indemnify any
person with whom the Trust or any Series has dealings, including the Holders,
Trustees, officers, employees, agents, Investment Adviser, Administrator,
placement agent and independent contractors of the Trust or any Series, to such
extent permitted by law and not inconsistent with the applicable provisions of
this Declaration; (f) subject to applicable Fundamental Policies, 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 (g) adopt a seal for the Trust or any Series, but the absence
of such seal shall not impair the validity of any instrument executed on behalf
of the Trust or Series.
Section 3.13. Manner of Acting. Except as otherwise provided herein, in
------------ ----------------
the By-Laws, in the 1940 Act or in any other applicable provision of law, any
action to be taken by the Trustees may be taken in the manner set forth in
Section 2.5 hereof.
ARTICLE IV
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
--------------------------------------------
AND PLACEMENT AGENT ARRANGEMENTS; CUSTODIAN
-------------------------------------------
Section 4.1. Investment Advisory and Other Arrangements. The Trustees
----------- ------------------------------------------
may in their discretion, from time to time, cause the Series to separately enter
into investment advisory and administrative services contracts or placement
agent agreements whereby the other party to such contract or agreement shall
undertake to furnish to the Series specified therein such investment advisory,
administrative, placement agent and/or other services as the Trustees shall,
from time to time, consider desirable with respect to such Series and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any other provisions 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
<PAGE>
effect purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (and all without further action by the Trustees). Any such
purchase, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees.
Section 4.2. Parties to Contract. Any contract of the character
----------- -------------------
described in Section 4.1 of this Article IV 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 person 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 said 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 (including a firm, corporation,
trust, or association) may be the other party to contracts entered into pursuant
to Section 4.1 above or the By-Laws of the Trust, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.2.
Section 4.3. Custodian. The Trustees may appoint one or more banks or
----------- ---------
trust companies as custodian of the securities and cash belonging to the Series.
The agreement providing for such appointment shall contain such terms and
conditions as the Trustees in their discretion determine to be not inconsistent
with this Declaration, the applicable provisions of the 1940 Act and any
applicable provisions of the By-Laws of the Trust. One or more subcustodians
may be appointed in a manner not inconsistent with this Declaration, the
applicable provisions of the 1940 Act and any applicable provisions of the By-
Laws of the Trust.
ARTICLE V
INTERESTS IN THE TRUST
----------------------
Section 5.1. Interests. Subject to the limitations contained in Section
----------- ---------
5.8 relating to the number of permitted Holders, the beneficial interests in the
Trust Property shall consist of an unlimited number of non-transferable
Interests which shall be denominated in dollars corresponding to the value of
such Interests determined by reference to the corresponding Book Capital
Accounts. All Interests shall be validly issued, fully paid and nonassessable
when issued for such consideration as the Trustees shall determine. The
Trustees may permit the purchase of Interests (for cash or other consideration
acceptable to the Trustees, subject to the requirements of the 1940 Act) but
only if the purchaser is an Institutional Investor. Subject to applicable law,
the provisions hereof and such restrictions as may be adopted by the Trustees, a
Holder may increase its Interest by contributions or decrease its Interest by
withdrawals without limitation.
Pursuant to Section 3806(b) of the Act, the Trustees shall have authority,
from time to time, to establish Interests of a Series, each of 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 in Section 5.2 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.
Section 5.2. Establishment and Designation of Series. The establishment
----------- ---------------------------------------
and designation of any Series shall be effective upon the execution by the
Secretary or an Assistant Secretary of the Trust, pursuant to authorization by a
majority of the Trustees, of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Interests of such
Series, or as otherwise provided in such instrument. At any time that there are
no Interests outstanding of any particular Series previously
<PAGE>
established and designated, the Trustees may by resolution adopted by a majority
of their number, and evidenced by an instrument executed by the Secretary or an
Assistant Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above to establish
and designate further Series, the Trustees hereby establish and designate one
Series: Global Financial Services Portfolio. The Interests of this Series and
any Interests of 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 of 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 of that Series and shall
irrevocably belong to that Series for all purposes, and shall be so
recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as "assets belonging
to" that Series. No Series shall have any right to or interest in the
assets belonging to any other Series, and no Holder shall have any right or
interest with respect to the assets belonging to any Series in which it
does not hold an Interest.
(b) Liabilities Belonging to Series. The assets belonging to each
-------------------------------
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series. The liabilities, expenses, costs, charges and reserves so charged
to a Series are herein referred to as "liabilities belonging to" that
Series. Subject to Section 8.1 hereof, no Series shall be liable for or
charged with the liabilities belonging to any other Series.
(c) Voting. On each matter submitted to a vote of the Holders, each
------
Holder of an Interest in each Series shall be entitled to a vote
proportionate to its Interest in such Series as recorded on the books of
the Trust and all Holders of Interests in each Series shall vote as a
separate class except as to voting for Trustees and as otherwise required
by the 1940 Act, in which case all Holders shall vote together as a single
class. As to any matter which does not affect the interest of a particular
Series, only the Holders of Interests of the one or more affected Series
shall be entitled to vote.
Section 5.3. Rights of Holders. The ownership of the Trust Property of
----------- -----------------
every description and the right to conduct any activities hereinbefore described
shall be vested exclusively in the Trust, and the Holders shall have no interest
therein other than the beneficial interest conferred by their Interests, and
they shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust or any Series. No Holder shall have
any interest in or rights with respect to any Series in which it does not hold
an Interest. The Interests shall be personal property giving only the rights
specifically set forth in this Declaration. The Holders shall have no right to
demand payment for their Interests or any other rights of dissenting
shareholders in the event the Trust participates in any transaction which would
give rise to appraisal or dissenter's rights by a shareholder of a corporation
organized under the General Corporation Law of the State of Delaware or
otherwise. Holders shall have no preemptive or other rights to subscribe for
additional Interests or other securities issued by the Trust. No action may be
brought by a Holder on behalf of the Trust unless Holders owning not less than
25% of the then-outstanding Interests join in the bringing of such action. All
Persons, by virtue of acquiring an Interest in the Trust and being registered as
a Holder in accordance with Section 5.5 hereof, shall be deemed to have assented
to, and shall be bound by, this Declaration to the same extent as if such Person
was a party hereto.
<PAGE>
Section 5.4. Purchase of or Increase in Interests. The Trustees, in
----------- ------------------------------------
their discretion, may, from time to time, without a vote of the Holders, permit
the purchase of additional Interests of any Series by such Person or Persons
(including existing Holders), subject to the provisions of Section 5.1 hereof,
and 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.
Section 5.5. Register of Interests. A register shall be kept by the
----------- ---------------------
Trust which shall contain the names and addresses of the Holders and the Book
Capital Account balances of each Holder in each Series. Each such register
shall be conclusive as to who the Holders are and who shall be entitled to
payments of distributions or otherwise to exercise or enjoy the rights of
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 shall keep the said register
for entry thereon.
Section 5.6. Non-Transferability. Interests shall not be transferable
----------- -------------------
except with the prior written consent of all of the Trustees and all remaining
Holders of Interests.
Section 5.7. Notices. Any and all notices to which any Holder hereunder
----------- -------
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Holder of record at its last
known address as recorded on the register of the Trust.
Section 5.8. Limitation on Number of Holders. Notwithstanding any
----------- -------------------------------
provision hereof to the contrary, the number of Holders of Interests in any
Series shall be limited to fewer than 100. Solely for purposes of determining
the number of Holders of Interests in any Series under this Section 5.8, each
beneficial owner of a grantor trust which is itself a Holder shall be treated as
a Holder of such Interest.
Section 5.9. No Liability of Holders. All Interests, when issued in
----------- -----------------------
accordance with this Declaration, shall be fully paid and nonassessable.
Holders shall be entitled to the protection against personal liability for the
obligations of the Trust under Section 3803(a) of the Act. The Trust shall
indemnify and hold each Holder harmless from and against any claim or liability
to which such Holder may become subject solely by reason of his or her being or
having been a Holder and not because of such Holder's acts or omissions or for
some other reason, and shall reimburse such Holder for all legal and other
expenses reasonably incurred by him or her in connection with any such claim or
liability (upon proper and timely request by the Holder); provided, however,
that no Holder shall be entitled to indemnification by an Series unless such
Holder is a Holder of Interests of such Series.
ARTICLE VI
DECREASES AND WITHDRAWALS
-------------------------
Section 6.1. Decreases and Withdrawals. A Holder shall have the right
----------- -------------------------
on any day the New York Stock Exchange is open to decrease its Interest in any
Series, and to withdraw completely from any Series, at the next determined net
asset value attributable to the Interest (or portion thereof) being withdrawn,
and an appropriate adjustment therefor shall be made to such Holder's Book
Capital Account. The rights of a Holder upon withdrawal from a Series shall be
limited to the assets belonging to the Series from which the withdrawal is made.
The Trust may, subject to compliance with the 1940 Act, charge fees for
effecting such decrease or withdrawal, at such rates as the Trustees may
establish, and may at any time and from time to time, suspend such right of
decrease or withdrawal. The procedures for effecting decreases or withdrawals
shall be as determined by the Trustees from time to time, subject to the
requirements of the 1940 Act.
<PAGE>
ARTICLE VII
DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
-----------------------------------------------
NET INCOME AND DISTRIBUTIONS
----------------------------
Section 7.1. Book Capital Account Balances. The Book Capital Account
----------- -----------------------------
balances of Holders of the Trust with respect to each Series shall be determined
on such days and at such time or times as the Trustees may determine, consistent
with the requirements of the 1940 Act, with income, gains and losses of each
Series determined in accordance with generally accepted accounting principles to
be allocated among the Holders of such Series in accordance with their
Interests. The power and duty to make calculations of the Book Capital Account
balances of the Holders may be delegated by the Trustees to the Investment
Adviser, Administrator, Custodian, or such other person as the Trustees may
determine.
Section 7.2. Allocations and Distributions to Holders. In compliance
----------- ----------------------------------------
with the Treasury Regulations promulgated under applicable provisions of the
Code, the Trustees shall (i) allocate items of taxable income, gain, loss and
deduction with respect to each Series to Holders of the Interests in such
Series, provided that, except as may otherwise be specifically provided in the
Treasury Regulations, in all cases allocations of specific types of income shall
be proportionate to the Interests of the Holders in that Series, and (ii) upon
liquidation of a Series, make final distribution of the net assets of such
Series among the Holders of the Interests in such Series in accordance with
their respective Book Capital Accounts. The Trustees shall provide each Holder
that is a regulated investment company, as defined in Section 851(a) of the
Code, information which will enable it to take into account its share of items
of taxable income, gain, loss and deduction as they are taken into account by
the Series in order to facilitate compliance with Code Section 4982. Any income
tax withholding or other withholding of taxes required by law with respect to
the allocable share of income of, or distributions to, a Holder shall be
accounted for as a distribution to and charged to the Book Capital Account of
such Holder at the time of payment of such taxes to the applicable taxing
authority. The Trustees may always retain from the assets belonging to a Series
such amount as they may deem necessary to pay the liabilities belonging to that
Series.
Section 7.3. Power to Modify Foregoing Procedures. Notwithstanding any
----------- ------------------------------------
of the foregoing provisions of this Article VII, 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 as they may deem necessary
or desirable to enable the Trust to comply with any provision of the 1940 Act,
any rule or regulation thereunder, or any order of exemption issued by said
Commission, all as in effect now or hereafter amended or modified.
ARTICLE VIII
LIABILITY FOR TRUST OBLIGATIONS
-------------------------------
Section 8.1. Liabilities of Series. Without limitation of the provisions
----------- ---------------------
of Section 5.2(b) hereof, but subject to the right of the Trustees in their
discretion to allocate general liabilities, expenses, costs, charges or services
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of any other Series. Notice of this limitation on interseries liabilities
shall be set forth in the certificate of trust of the Trust (whether originally
or by amendment) as filed or to be filed in the Office of the Secretary of State
of the State of Delaware pursuant to Section 3810 of the Act, and upon the
giving of such notice in the certificate of trust, the statutory provisions of
Section 3804 of the Act relating to limitations on interseries liabilities (and
the statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series.
Every note, bond, contract or other undertaking issued by or on behalf of a
particular Series shall include a recitation limiting the obligation represented
thereby to that Series and its assets.
Section 8.2. No Personal Liability of Trustees, etc.
----------- --------------------------------------
(a) Trustees. The Trustees shall be entitled to the protection
--------
against personal liability for the obligations of the Trust under Section
3803(b) of the Act. No Trustee shall be liable to the
<PAGE>
Trust, its Holders, or to any Trustee, officer, employee, or agent thereof
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 his or her own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or her duties.
(b) Officers, Employees or Agents of the Trust. The officers,
------------------------------------------
employees and agents of the Trust shall be entitled to the protection
against personal liability for the obligations of the Trust under Section
3803(c) of the Act. No officer, employee or agent of the Trust shall be
liable to the Trust, its Holders, or to any Trustee, officer, employee, or
agent thereof 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 his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
(c) The provisions of this Declaration, to the extent that they
expand or restrict the duties and liabilities of the Trustees, officers,
employees or agents of the Trust otherwise existing at law or in equity,
are agreed by the Holders to modify to that extent such other duties and
liabilities.
Section 8.3. Indemnification. The Trust shall indemnify each of its
----------- ---------------
Trustees, officers, employees, and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
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 him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his or
her being or having been such a Trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duties, such liabilities and expenses being liabilities belonging to 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 said
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
his office by the court or other body approving the settlement or other
disposition or, in the absence of a judicial determination, by a reasonable
determination, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that he did not engage in such conduct, which
determination shall be made by a majority of a quorum of Trustees who are
neither Interested Persons of the Trust nor parties to the action, suit or
proceeding, or by written opinion from independent legal counsel approved by the
Trustees. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
--------
Person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the Trust Property. The
Trustees may make advance payments in connection with indemnification under this
Section 8.3; provided that any advance payment of expenses by the Trust to any
--------
Trustee, officer, employee or agent shall be made only upon the undertaking by
such Trustee, officer, employee or agent to repay the advance unless it is
ultimately determined that he is entitled to indemnification as above provided,
and only if one of the following conditions is met:
(a) the Trustee, officer, employee or agent to be indemnified provides
a security for his or her undertaking; or
(b) the Trust shall be insured against losses arising by reason of any
lawful advances; or
(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Trustee, officer, employee
or agent to be indemnified ultimately will be entitled to indemnification,
which determination shall be made by:
<PAGE>
(i) a majority of a quorum of Trustees who are neither
Interested Persons of the Trust nor parties to the
Proceedings; or
(ii) an independent legal counsel in a written opinion.
Section 8.4. No Protection Against Certain 1940 Act Liabilities.
----------- --------------------------------------------------
Nothing contained in Sections 8.1, 8.2 or 8.3 hereof shall protect any Trustee
or officer of the Trust from any liability to the Trust or its Holders to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office. Nothing contained in Sections 8.1, 8.2 or 8.3 hereof or in any
agreement of the character described in Section 4.1 or 4.2 hereof shall protect
any Investment Adviser to the Trust or any Series against any liability to the
Trust or any Series to which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her or
its duties to the Trust or Series, or by reason of his or her or its reckless
disregard to his or her or its obligations and duties under the agreement
pursuant to which he serves as Investment Adviser to the Trust or any Series.
Section 8.5. No Bond Required of Trustees. No Trustee shall be
----------- ----------------------------
obligated to give any bond or other security for the performance of any of his
or her duties hereunder.
Section 8.6. No Duty of Investigation; Notice in Trust Instruments, etc.
----------- -----------------------------------------------------------
No purchaser, lender, seller or other Person dealing with the Trustees or with
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, lent or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every contract, undertaking, instrument,
certificate, interest or obligation or other security of the Trust, and every
other act or thing whatsoever executed in connection with the Trust, shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by the Trustees or by any officer, employee or agent of the Trust,
in his or her capacity as such, may contain an appropriate recital to the effect
that the Holders, Trustees, officers, employees and agents of the Trust shall
not personally be bound by or liable thereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to the Declaration,
and may contain any further recital which they may deem appropriate, but the
omission of such recital shall not operate to impose personal liability on any
of the Holders, Trustees, officers, employees or agents of the Trust.
Section 8.7. Insurance. The Trustees may maintain insurance for the
----------- ---------
protection of the Trust Property, its Holders, Trustees, officers, employees and
agents 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.
Section 8.8. Reliance on Experts, etc. Each Trustee, officer or
----------- ------------------------
employee of the Trust shall, in the performance of his or her 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, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser, the
Administrator, accountant, appraiser or other expert or consultant selected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee; provided that nothing
--------
in this Section shall be deemed to exonerate the Trustees from their duties of
reasonable care, diligence and prudence or any other duties imposed by the 1940
Act.
ARTICLE IX
HOLDERS
-------
Section 9.1. Meetings of Holders. Meetings of the Holders may be called
------------ -------------------
at any time by a majority of the Trustees and shall be called by any Trustee
upon written request of Holders holding, in the
<PAGE>
aggregate, not less than 10% of the Interests of a Series (if the meeting
relates solely to that Series), or not less than 10% of the Interests of the
Trust (if the meeting relates to the Trust and not solely to a 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
Delaware on such day and at such time as the Trustees shall designate. Holders
of at least one-third of the Interests of the Series (if the meeting relates
solely to that Series) or Holders of at least one-third of the Interests of the
Trust (if the meeting relates to the Trust and not solely to a 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
or other applicable law or by this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote by the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust require a greater number of affirmative votes.
Section 9.2. Notice of Meetings. Notice of all meetings of the 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 his or her registered address, mailed at least 10 days and not more than 90
days before the meeting. At any such 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.
Section 9.3. Record Date for Meetings. For the purpose of determining
----------- ------------------------
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 the Holders or payment of distributions or other action,
as the case may be, as a record date for the determination of the Persons to be
treated as Holders of record of a particular Series or the Trust for such
purposes.
Section 9.4. Proxies, etc. At any meeting of Holders, any Holder
----------- ------------
entitled to vote thereat may vote by proxy, provided that no proxy shall be
--------
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Holders of record shall be entitled to vote. Each Holder shall be entitled
to vote proportionate to his or her Interest in the Trust or in any Series (as
the context may require). When Interests are held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Interest. A proxy purporting to be executed by or on behalf of a Holder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the Holder is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of his or her Interest, he
or she may vote by his or her guardian or such other person appointed or having
such control, and such vote may be given in person or by proxy.
Section 9.5. Reports. The Trustees shall cause to be prepared, at least
----------- -------
annually, a report of operations containing a balance sheet and statement of
income and undistributed income of each 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,
furnish to the Holders at least semi-annually interim reports containing an
unaudited balance sheet as of the end of such period and an unaudited statement
of income and surplus for the period from the beginning of the current fiscal
year to the end of such period.
Section 9.6. Inspection of Records. The records of the Trust shall be
----------- ---------------------
open to inspection by Holders during normal business hours for any purpose not
harmful to the Trust.
<PAGE>
Section 9.7. Holder Action by Written Consent. Any action which may be
----------- --------------------------------
taken by Holders may be taken without a meeting if Holders holding more than 50%
of the total Interests entitled to vote (or such larger proportion thereof as
shall be required by any express provision of this Declaration) shall consent to
the action in writing and the written consents are filed with the records of the
meetings of Holders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Holders.
ARTICLE X
DURATION; TERMINATION OF
------------------------
TRUST OR SERIES; AMENDMENT; MERGERS; ETC.
----------------------------------------
Section 10.1. Duration. Subject to possible termination or dissolution
------------ --------
in accordance with Sections 10.2 and 10.3, respectively, the Trust created
hereby shall have perpetual existence.
Section 10.2. Dissolution of Series or Trust. Any Series shall be
------------ ------------------------------
dissolved by unanimous consent of the Trustees by written notice of dissolution
to the Holders of the Interests of the Series. The Trust shall be dissolved upon
the dissolution of the last remaining Series.
Section 10.3. Termination of Trust or Series.
------------ ------------------------------
(a) Upon an event of dissolution of the Trust or a Series, the Trust
or Series shall be terminated in accordance with the following provisions:
(i) The Trust (or Series, as applicable) shall thereafter 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, as applicable) shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust
(or Series, as applicable), collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property (or assets belonging to the Series, as
applicable) 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 its
liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
--------
transfer or other disposition of all or substantially all of the Trust
Property or substantially all of the assets belonging to a particular
Series other than for cash, shall require approval of the principal
terms of the transaction and the nature and amount of the
consideration by the vote at a meeting, or by written consent, of
Holders holding more than 50% of the total outstanding Interests of
the Trust or Series, as the case may be, entitled to vote.
(iii) After paying or adequately providing for the payment of
all liabilities belonging to the Series subject of termination and
upon receipt of such releases, indemnities and refunding agreements as
they deem necessary for their protection, the Trustees may distribute
the remaining Trust Property or assets belonging to such Series, in
cash or in kind or partly each, among the Holders of such Series
according to their Book Capital Accounts in such Series. In all
cases, as herein provided, the rights of Holders of Interests in a
Series upon termination and liquidation of that Series shall be
limited to the assets belonging to that Series.
(b) After termination of the Trust or Series and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination. Upon termination of the Trust, the Trustees
shall file a certificate of cancellation in accordance with Section 3810 of
the Act and such
<PAGE>
Trustees shall thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all Holders shall
thereupon cease.
Section 10.4. Amendment Procedure.
------------ -------------------
(a) Two-thirds (2/3) of the Trustees then in office may amend this
Declaration at any time for any purpose without the approval of the Holders
of Interests; provided, that the vote or a written consent of Holders
holding more than 50% of the total outstanding Interests or of Holders of
67% or more of the Interests voting or consenting, if Holders of at least
50% of such Interests vote or consent, shall be necessary to approve any
amendment whenever such vote or consent is required under the 1940 Act.
(b) Nothing contained in this Declaration shall permit the amendment
of this Declaration to impair the exemption from personal liability of
Holders, Trustees, officers, employees and agents of the Trust.
(c) A certificate signed by a Trustee or by the Secretary or any
Assistant Secretary of the Trust, 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, certified by a Trustee or the
Secretary or any Assistant Secretary of the Trust, certifying that such
Declaration is a true and correct copy of the Declaration as amended, shall
be conclusive evidence of such amendment when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as Interests
are first sold to an Institutional Investor, this Declaration may be terminated
or amended in any respect by vote or written consent of the Trustees.
Section 10.5. Merger, Consolidation and Sale of Assets.
------------ ----------------------------------------
(a) Any Series may merge into or consolidate with any corporation,
association, other trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property belonging to such
Series, including its good will, upon such terms and conditions and for
such consideration when and as authorized by vote or written consent of
two-thirds (2/3) of the Trustees then in office. In accordance with Section
3815(f) of the Act, an agreement of merger or consolidation may effect any
amendment to this Declaration or the By-Laws or effect the adoption of a
new declaration or by-laws of the Trust if the Trust is the surviving or
resulting entity.
(b) The Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of
the Trust Property, or Series thereof or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property or Series thereof to any such
corporation, trust, association or 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 contracts with any such
corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or 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, as provided under the
law then in effect. 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 such organizations or entities.
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1. Certificate of Trust; Registered Agent. The initial
------------ ---------------------------------------
Trustees shall file a certificate of trust in accordance with Section 3810 of
the Act.
Section 11.2. Governing Law. This Declaration is executed by all of the
------------ -------------
Trustees and delivered with reference to Act and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the Act
and the laws of the State of Delaware (unless and to the extent otherwise
provided for and/or preempted by the 1940 Act or other applicable federal
securities laws); provided, however, that there shall not be applicable to the
Trust, the Trustees or this Declaration (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Act) pertaining to trusts which
are inconsistent with the rights, duties, powers, limitations or liabilities of
the Trustees or the Holders set forth or referenced in this Declaration.
Section 11.3. Counterparts. The 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 such original
counterpart.
Section 11.4. Reliance by Third Parties. Any certificate executed by an
------------ -------------------------
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary, Assistant Secretary, Treasurer or Assistant Treasurer
of the Trust, 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 officers 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 and their successors.
Section 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, the regulated investment
company provisions of the Code, the Act or, consistent with Section 11.2,
any other applicable Delaware law regarding administration of trusts, or
with other applicable laws and regulations, the conflicting provisions
shall be deemed superseded by such law or regulation to the extent
necessary to eliminate such conflict; 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 pertain 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.
Section 11.6. Trust Only. It is the intention of the Trustees to
------------ ----------
create only a business trust under the Act with the relationship of trustee and
beneficiary between the Trustees and each Holder from time to time. It is not
the intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other than a Delaware business trust except to the extent
such trust is deemed to constitute a partnership under the Code and applicable
state tax laws. Nothing in this Declaration shall be construed to make the
Holders, either by themselves or with the Trustees, partners or members of a
joint stock association.
<PAGE>
SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
21st day of September, 1999.
/s/ Michael J. Hennewinkel
- - --------------------------
Michael J. Hennewinkel, Sole Trustee
<PAGE>
EXHIBIT 1(d)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF TRUST
OF
GLOBAL FINANCIAL SERVICES FUND
GLOBAL FINANCIAL SERVICES FUND, a business trust organized and
existing under the Delaware Business Trust Act (12 Del. C. (S) 3801, et seq.),
------- -------
does hereby certify that:
1. Name. The name of the business trust (hereinafter called the "Trust")
----
is Global Financial Services Fund.
2. The Certificate of Trust is hereby amended to change the name of the
Trust to GLOBAL FINANCIAL SERVICES MASTER TRUST.
3. Effective Date. This Certificate of Trust shall be effective upon the
--------------
date and time of filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Amendment as of September 21, 1999.
/s/ Michael J. Hennewinkel
--------------------------
Michael J. Hennewinkel, Sole Trustee
<PAGE>
EXHIBIT 2(a)
BY-LAWS
OF
GLOBAL FINANCIAL SERVICES FUND
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
HOLDERS' MEETINGS................................................... 1
Section 1.1. Chairman...............................................1
Section 1.2. Proxies; Voting........................................1
Section 1.3. Fixing Record Dates....................................1
Section 1.4. Inspectors of Election................................ 1
Section 1.5. Records at Holders' Meetings: Inspection of Records... 2
ARTICLE II
TRUSTEES............................................................ 2
Section 2.1. Annual and Regular Meetings........................... 2
Section 2.2. Special Meetings...................................... 2
Section 2.3. Chairman: Records..................................... 2
ARTICLE III
OFFICERS............................................................ 2
Section 3.1. Executive Officers.................................... 2
Section 3.2. Other Officers and Agents............................. 3
Section 3.3. Election and Tenure................................... 3
Section 3.4. Removal of Officers................................... 3
Section 3.5. Authority and Duties.................................. 3
Section 3.6. Chairman.............................................. 3
Section 3.7. President............................................. 4
Section 3.8. Vice Presidents....................................... 4
Section 3.9. Assistant Vice President.............................. 4
Section 3.10. Secretary............................................. 4
Section 3.11. Assistant Secretaries................................. 5
Section 3.12. Treasurer............................................. 5
Section 3.13. Assistant Treasurers.................................. 5
Section 3.14. Bonds and Surety...................................... 5
ARTICLE IV
MISCELLANEOUS....................................................... 5
Section 4.1. Depositories.......................................... 5
Section 4.2. Signatures............................................ 6
Section 4.3. Seal.................................................. 6
ARTICLE V
NON-TRANSFERABILITY OF INTERESTS.................................... 6
Section 5.1. Non-Transferability of Interests...................... 6
Section 5.2. Regulations........................................... 6
ARTICLE VI
MISCELLANEOUS....................................................... 6
Section 6.1. Amendment and Repeal of By-Laws....................... 6
Section 6.2. Limitation of Liability............................... 7
</TABLE>
<PAGE>
BY-LAWS
OF
GLOBAL FINANCIAL SERVICES FUND
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing Global Financial Services Fund (the "Trust"),
dated August 19, 1999, as from time to time amended (the "Declaration"). All
words and terms capitalized in these By-Laws that are not otherwise defined
herein shall have the meaning or meanings set forth for such words or terms in
the Declaration.
ARTICLE I
HOLDERS' MEETINGS
Section 1.1 Chairman. The president shall act as chairman at all meetings
--------
of the Holders, or the Trustee or Trustees present at each meeting may elect a
temporary chairman for the meeting, who may be one of themselves.
Section 1.2 Proxies; Voting. Holders may vote either in person or by duly
---------------
executed proxy and each Holder shall be entitled to a vote proportionate to his
Interest in the Trust or any Series (as the context may require), all as
provided in Article IX of the Declaration. No proxy shall be valid after eleven
(11) months from the date of its execution, unless a longer period is expressly
stated in such proxy.
Section 1.3 Fixing Record Dates. For the purpose of determining the
-------------------
Holders who are entitled to notice of or to vote or act at a meeting, including
any adjournment thereof, the Trustees may from time to time fix a record date in
the manner provided in Section 9.3 of the Declaration. If the Trustees do not,
prior to any meeting of the Holders, so fix a record date, then the record date
for determining Holders entitled to notice of or to vote at the meeting of
Holders shall be the later of (i) the close of business on the day on which the
notice of meeting is first mailed to any Holder; or (ii) the thirtieth day
before the meeting.
Section 1.4. Inspectors of Election. In advance of any meeting of the
----------------------
Holders, the Trustees may appoint one or more Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not
appointed in advance by the Trustees, the chairman, if any, of any meeting of
the Holders may, and on the request of any Holder or his proxy shall, appoint
one or more Inspectors of Election of the meeting. In case any person appointed
as Inspector fails to appear or fails or refuses to 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 person acting as chairman. The Inspectors of
Election shall determine the Interests owned by Holders, 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,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Holders. If there is more than one
Inspector of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all Inspectors
of Election. 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 1.5. Records at Holders' Meetings: Inspection of Records. At each
---------------------------------------------------
meeting of the Holders there shall be open for inspection the minutes of the
last previous meeting of Holders of the Trust and a list of the Holders of the
Trust, certified to be true and correct by the secretary or other proper agent
of the Trust, as of the record date of the meeting. Such list of Holders shall
contain the name of each Holder in alphabetical order and the address and
Interests owned by such Holder. Holders shall have the right to inspect books
and records of the Trust during normal business hours and for any purpose not
harmful to the Trust.
ARTICLE II
TRUSTEES
<PAGE>
Section 2.1. Annual and Regular Meetings. The Trustees shall hold an
---------------------------
annual meeting for the election of officers and the transaction of other
business which may come before such meeting. Regular meetings of the Trustees
may be held on such notice at such place or places and times as the Trustees may
by resolution provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall be
----------------
held upon the call of the chairman, if any, the president, the secretary or any
two Trustees, by oral or telegraphic or written notice duly served on or sent or
mailed to each Trustee not less than one day before the meeting. No notice need
be given to any Trustee who attends in person or to any Trustee who, in writing
signed and filed with the records of the meeting either before or after the
holding thereof, waives notice. Notice or waiver of notice need not state the
purpose or purposes of the meeting.
Section 2.3. Chairman: Records. The Chairman, if any, shall act as
-----------------
chairman at all meetings of the Trustees; in his absence the President shall act
as chairman; and, in the absence of the Chairman and the President, the Trustees
present shall elect one of their number to act as temporary chairman. The
results of all actions taken at a meeting of the Trustees, or by written consent
of the Trustees, shall be recorded by the Secretary.
ARTICLE III
OFFICERS
Section 3.1. Executive Officers. The executive officers of the Trust shall
------------------
be a president, a secretary, a chief accounting officer and a chief financial
officer or treasurer. If the Trustees shall elect a chairman pursuant to Section
3.6, then the chairman shall also be an executive officer of the Trust. If the
Trustees shall elect one or more vice presidents, each such vice president shall
be an executive officer. The Chairman, if there be one, shall be elected from
among the Trustees, but no other executive officer need be a Trustee. Any two or
more executive offices, except those of president and vice president, may be
held by the same person. A person holding more than one office may not act in
more than one capacity to execute, acknowledge or verify on behalf of the Trust
an instrument required by law to be executed, acknowledged and verified by more
than one officer. The executive officers of the Trust shall be elected at each
annual meeting of Trustees.
Section 3.2. Other Officers and Agents. The Trustees may also elect or may
-------------------------
delegate to the president authority to appoint, remove, or fix the duties,
compensation or terms of office of one or more assistant vice-presidents,
assistant secretaries and assistant treasurers, and such other officers and
agents as the Trustees shall at any time and from time to time deem to be
advisable.
Section 3.3. Election and Tenure. At the initial organization meeting and
-------------------
thereafter at each annual meeting of the Trustees, the Trustees shall elect the
Chairman, if any, President, Secretary, Chief Accounting Officer, Chief
Financial Officer or Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the Trust.
Such officers shall hold office until the next annual meeting of the Trustees
and until their successors have been duly elected and qualified. The Trustees
may fill any vacancy in office or add any additional officers at any time.
Section 3.4. Removal of Officers. Any officer may be removed at any time,
-------------------
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the chairman, if any, president, or secretary, and
such resignation shall take effect immediately, or at a later date according to
the terms of such notice in writing.
Section 3.5. Authority and Duties. All officers as between themselves and
--------------------
the Trust shall have such powers, perform such duties and be subject to such
restrictions, if any, in the management of the Trust as may be provided in these
By-Laws, or, to the extent not so provided, as may be prescribed by the Trustees
or by the president acting under authority delegated by the Trustees pursuant to
Section 3.2.
<PAGE>
Section 3.6. Chairman. When and if the Trustees deem such action to be
--------
necessary or appropriate, they may elect a Chairman from among the Trustees. The
Chairman shall preside at meetings of the Holders and of the Trustees; and he
shall have such other powers and duties as may be prescribed by the Trustees.
The Chairman shall in the absence or disability of the president exercise the
powers and perform the duties of the president.
Section 3.7. President. The president shall be the chief executive
---------
officer of the Trust. He shall have general and active management of the
activities of the Trust, shall see to it that all orders, policies and
resolutions of the Trustees are carried into effect, and, in connection
therewith, shall be authorized to delegate to any vice president of the Trust
such of his powers and duties as president and at such times and in such manner
as he shall deem advisable. In the absence or disability of the Chairman, or if
there be no Chairman, the president shall preside at all meetings of the Holders
and of the Trustees; and he shall have such other powers and perform such other
duties as are incident to the office of a corporate president and as the
Trustees may from time to time prescribe. The president shall be, ex officio, a
member of all standing committees. Subject to direction of the Trustees, the
president shall have the power, in the name and on behalf of the Trust, to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the president shall
have full authority and power, on behalf of all of the Trustees. to attend and
to act and to vote, on behalf of the Trust at any meetings of business
organizations in which the Trust holds an interest or to confer such powers upon
any other persons, by executing any proxies duly authorizing such persons.
Section 3.8. Vice Presidents. The vice president, if any, or, if there be
---------------
more than one, the vice presidents, shall assist the president in the management
of the activities of the Trust and the implementation of orders, policies and
resolutions of the Trustees at such times and in such manner as the president
may deem to be advisable. If there be more than one vice president, the Trustees
may designate one as the executive vice president, in which case he shall be
first in order of seniority, and the Trustees may also grant to other vice
presidents such titles as shall be descriptive of their respective functions or
indicative of their relative seniority. In the absence or disability of both the
president and the Chairman, or in the absence or disability of the president if
there be no Chairman, the vice president, or, if there be more than one, the
vice presidents in the order of their relative seniority, shall exercise the
powers and perform the duties of those officers. Subject to the direction of the
president, each the vice president shall have the power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in addition,
shall have such other powers and perform such other duties as from time to time
may be prescribed by the president or by the Trustees.
Section 3.9. Assistant Vice President. The assistant vice president, if
------------------------
any, or if there be more than one, the assistant vice presidents, shall perform
such duties as may from time to time be prescribed by the Trustees or by the
president acting under authority delegated by the Trustees pursuant to Section
3.7.
Section 3.10. Secretary. The secretary shall (a) keep the minutes of the
---------
meetings and proceedings and any written consents evidencing actions of the
Holders, the Trustees and any committees of the Trustees in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Trust and each Series, and, when
authorized by the Trustees, cause the seal of the Trust and each Series to be
affixed to any document requiring it, and when so affixed attested by his
signature as secretary or by the signature of an assistant secretary; (d)
perform any other duties commonly incident to the office of secretary in a New
York corporation; and (e) in general, perform such other duties as from time to
time may be assigned to him by the president or by the Trustees.
Section 3.11. Assistant Secretaries. The assistant secretary, if any, or,
---------------------
if there be more than one, the assistant secretaries in the order determined by
the Trustees or by the president, shall in the absence or disability of the
secretary exercise the powers and perform the duties of the secretary, and he or
they shall perform such other duties as the Trustees, the president or the
secretary may from time to time prescribe.
<PAGE>
Section 3.12. Treasurer. The treasurer shall be the chief financial
---------
officer of the Trust. The treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and each Series,
shall deposit all monies and other valuable effects in the name and to the
credit of the Trust and each Series in such depositories as may be designated by
the Trustees, and shall render to the Trustees and the president, at regular
meetings of the Trustees or whenever they or the president may require it, an
account of all his transactions as treasurer and of the financial condition of
the Trust and each Series. Certain of the duties of the treasurer may be
delegated to a chief accounting officer.
If required by the Trustees, the treasurer shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the Trust.
Section 3.13. Assistant Treasurers. The assistant treasurer, if any, or,
--------------------
if there be more than one, the assistant treasurers in the order determined by
the Trustees or by the president, shall in the absence or disability of the
treasurer exercise the powers and perform the duties of the treasurer, and he or
they shall perform such other duties as the Trustees, the president or the
treasurer may from time to time prescribe.
Section 3.14. Bonds and Surety. Any officer may be required by the
----------------
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Depositories. Subject to Section 7.1 of the Declaration, the
------------
funds of the Trust and each Series 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 any adviser,
administrator or manager), 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 and each Series by such officer, officers, agent
or agents, as provided in these By-Laws or as the Trustees may from time to time
by resolution provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed to any
----
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Delaware corporation.
ARTICLE V
NON-TRANSFERABILITY OF INTERESTS
Section 5.1. Non-Transferability of Interests. Except as provided in
--------------------------------
Section 5.6 of the Declaration, Interests shall not be transferable. Except as
otherwise provided by law, the Trust and each Series shall be entitled to
recognize the exclusive right of a person in whose name Interests stand on the
record of Holders as the owner of such Interests for all purposes, including,
without limitation, the rights to receive distributions, and to vote as such
owner, and the Trust and each Series shall not be bound to recognize any
equitable or legal claim to or interest in any such Interests on the part of any
other person.
Section 5.2. 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.
ARTICLE VI
AMENDMENT; LIMITATION OF LIABILITY
<PAGE>
Section 6.1. 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.
Section 6.2. Limitation of Liability. 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;
provided, that nothing contained in the Declaration or the By-Laws shall protect
- - --------
any Trustee or officer of the Trust from any liability to the Trust, any Series
or its Holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the involved
in the conduct of his office.
<PAGE>
EXHIBIT 2(b)
AMENDED AND RESTATED BY-LAWS
OF
GLOBAL FINANCIAL SERVICES MASTER TRUST
<PAGE>
TABLE OF CONTENTS
ARTICLE I
HOLDERS' MEETINGS................................................ 1
Section 1.1. Chairman............................................. 1
Section 1.2. Proxies; Voting...................................... 1
Section 1.3. Fixing Record Dates.................................. 1
Section 1.4. Inspectors of Election.............................. 1
Section 1.5. Records at Holders' Meetings: Inspection of Records. 2
ARTICLE II
TRUSTEES......................................................... 2
Section 2.1. Annual and Regular Meetings......................... 2
Section 2.2. Special Meetings.................................... 2
Section 2.3. Chairman: Records................................... 2
ARTICLE III
OFFICERS......................................................... 2
Section 3.1. Executive Officers.................................. 2
Section 3.2. Other Officers and Agents........................... 3
Section 3.3. Election and Tenure................................. 3
Section 3.4. Removal of Officers................................. 3
Section 3.5. Authority and Duties................................ 3
Section 3.6. Chairman............................................ 3
Section 3.7. President........................................... 4
Section 3.8. Vice Presidents..................................... 4
Section 3.9. Assistant Vice President............................ 4
Section 3.10. Secretary.......................................... 4
Section 3.11. Assistant Secretaries.............................. 5
Section 3.12. Treasurer.......................................... 5
Section 3.13. Assistant Treasurers............................... 5
Section 3.14. Bonds and Surety................................... 5
ARTICLE IV
MISCELLANEOUS.................................................... 5
Section 4.1. Depositories........................................ 5
Section 4.2. Signatures.......................................... 6
Section 4.3. Seal................................................ 6
ARTICLE V
NON-TRANSFERABILITY OF INTERESTS................................. 6
Section 5.1. Non-Transferability of Interests.................... 6
Section 5.2. Regulations......................................... 6
ARTICLE VI
MISCELLANEOUS.................................................... 6
Section 6.1. Amendment and Repeal of By-Laws..................... 6
Section 6.2. Limitation of Liability............................. 7
<PAGE>
BY-LAWS
OF
GLOBAL FINANCIAL SERVICES MASTER TRUST
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing Global Financial Services Master Trust (the
"Trust"), dated September 21, 1999, as from time to time amended (the
"Declaration"). All words and terms capitalized in these By-Laws that are not
otherwise defined herein shall have the meaning or meanings set forth for such
words or terms in the Declaration.
ARTICLE I
HOLDERS' MEETINGS
Section 1.1 Chairman. The president shall act as chairman at all meetings
--------
of the Holders, or the Trustee or Trustees present at each meeting may elect a
temporary chairman for the meeting, who may be one of themselves.
Section 1.2 Proxies; Voting. Holders may vote either in person or by duly
---------------
executed proxy and each Holder shall be entitled to a vote proportionate to his
Interest in the Trust or any Series (as the context may require), all as
provided in Article IX of the Declaration. No proxy shall be valid after eleven
(11) months from the date of its execution, unless a longer period is expressly
stated in such proxy.
Section 1.3 Fixing Record Dates. For the purpose of determining the
-------------------
Holders who are entitled to notice of or to vote or act at a meeting, including
any adjournment thereof, the Trustees may from time to time fix a record date in
the manner provided in Section 9.3 of the Declaration. If the Trustees do not,
prior to any meeting of the Holders, so fix a record date, then the record date
for determining Holders entitled to notice of or to vote at the meeting of
Holders shall be the later of (i) the close of business on the day on which the
notice of meeting is first mailed to any Holder; or (ii) the thirtieth day
before the meeting.
Section 1.4. Inspectors of Election. In advance of any meeting of the
----------------------
Holders, the Trustees may appoint one or more Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not
appointed in advance by the Trustees, the chairman, if any, of any meeting of
the Holders may, and on the request of any Holder or his proxy shall, appoint
one or more Inspectors of Election of the meeting. In case any person appointed
as Inspector fails to appear or fails or refuses to 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 person acting as chairman. The Inspectors of
Election shall determine the Interests owned by Holders, 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,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Holders. If there is more than one
Inspector of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all Inspectors
of Election. 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 1.5. Records at Holders' Meetings: Inspection of Records. At each
---------------------------------------------------
meeting of the Holders there shall be open for inspection the minutes of the
last previous meeting of Holders of the Trust and a list of the Holders of the
Trust, certified to be true and correct by the secretary or other proper agent
of the Trust, as of the record date of the meeting. Such list of Holders shall
contain the name of each Holder in alphabetical order and the address and
Interests owned by such Holder. Holders shall have the right to inspect books
and records of the Trust during normal business hours and for any purpose not
harmful to the Trust.
<PAGE>
ARTICLE II
TRUSTEES
Section 2.1. Annual and Regular Meetings. The Trustees shall hold an
---------------------------
annual meeting for the election of officers and the transaction of other
business which may come before such meeting. Regular meetings of the Trustees
may be held on such notice at such place or places and times as the Trustees may
by resolution provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall be
----------------
held upon the call of the chairman, if any, the president, the secretary or any
two Trustees, by oral or telegraphic or written notice duly served on or sent or
mailed to each Trustee not less than one day before the meeting. No notice need
be given to any Trustee who attends in person or to any Trustee who, in writing
signed and filed with the records of the meeting either before or after the
holding thereof, waives notice. Notice or waiver of notice need not state the
purpose or purposes of the meeting.
Section 2.3. Chairman: Records. The Chairman, if any, shall act as
-----------------
chairman at all meetings of the Trustees; in his absence the President shall act
as chairman; and, in the absence of the Chairman and the President, the Trustees
present shall elect one of their number to act as temporary chairman. The
results of all actions taken at a meeting of the Trustees, or by written consent
of the Trustees, shall be recorded by the Secretary.
ARTICLE III
OFFICERS
Section 3.1. Executive Officers. The executive officers of the Trust shall
------------------
be a president, a secretary, a chief accounting officer and a chief financial
officer or treasurer. If the Trustees shall elect a chairman pursuant to Section
3.6, then the chairman shall also be an executive officer of the Trust. If the
Trustees shall elect one or more vice presidents, each such vice president shall
be an executive officer. The Chairman, if there be one, shall be elected from
among the Trustees, but no other executive officer need be a Trustee. Any two or
more executive offices, except those of president and vice president, may be
held by the same person. A person holding more than one office may not act in
more than one capacity to execute, acknowledge or verify on behalf of the Trust
an instrument required by law to be executed, acknowledged and verified by more
than one officer. The executive officers of the Trust shall be elected at each
annual meeting of Trustees.
Section 3.2. Other Officers and Agents. The Trustees may also elect or may
-------------------------
delegate to the president authority to appoint, remove, or fix the duties,
compensation or terms of office of one or more assistant vice-presidents,
assistant secretaries and assistant treasurers, and such other officers and
agents as the Trustees shall at any time and from time to time deem to be
advisable.
Section 3.3. Election and Tenure. At the initial organization meeting and
-------------------
thereafter at each annual meeting of the Trustees, the Trustees shall elect the
Chairman, if any, President, Secretary, Chief Accounting Officer, Chief
Financial Officer or Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the Trust.
Such officers shall hold office until the next annual meeting of the Trustees
and until their successors have been duly elected and qualified. The Trustees
may fill any vacancy in office or add any additional officers at any time.
Section 3.4. Removal of Officers. Any officer may be removed at any time,
-------------------
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the chairman, if any, president, or secretary, and
such resignation shall take effect immediately, or at a later date according to
the terms of such notice in writing.
<PAGE>
Section 3.5. Authority and Duties. All officers as between themselves and
--------------------
the Trust shall have such powers, perform such duties and be subject to such
restrictions, if any, in the management of the Trust as may be provided in these
By-Laws, or, to the extent not so provided, as may be prescribed by the Trustees
or by the president acting under authority delegated by the Trustees pursuant to
Section 3.2.
Section 3.6. Chairman. When and if the Trustees deem such action to be
--------
necessary or appropriate, they may elect a Chairman from among the Trustees. The
Chairman shall preside at meetings of the Holders and of the Trustees; and he
shall have such other powers and duties as may be prescribed by the Trustees.
The Chairman shall in the absence or disability of the president exercise the
powers and perform the duties of the president.
Section 3.7. President. The president shall be the chief executive
---------
officer of the Trust. He shall have general and active management of the
activities of the Trust, shall see to it that all orders, policies and
resolutions of the Trustees are carried into effect, and, in connection
therewith, shall be authorized to delegate to any vice president of the Trust
such of his powers and duties as president and at such times and in such manner
as he shall deem advisable. In the absence or disability of the Chairman, or if
there be no Chairman, the president shall preside at all meetings of the Holders
and of the Trustees; and he shall have such other powers and perform such other
duties as are incident to the office of a corporate president and as the
Trustees may from time to time prescribe. The president shall be, ex officio, a
member of all standing committees. Subject to direction of the Trustees, the
president shall have the power, in the name and on behalf of the Trust, to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the president shall
have full authority and power, on behalf of all of the Trustees. to attend and
to act and to vote, on behalf of the Trust at any meetings of business
organizations in which the Trust holds an interest or to confer such powers upon
any other persons, by executing any proxies duly authorizing such persons.
Section 3.8. Vice Presidents. The vice president, if any, or, if there be
---------------
more than one, the vice presidents, shall assist the president in the management
of the activities of the Trust and the implementation of orders, policies and
resolutions of the Trustees at such times and in such manner as the president
may deem to be advisable. If there be more than one vice president, the Trustees
may designate one as the executive vice president, in which case he shall be
first in order of seniority, and the Trustees may also grant to other vice
presidents such titles as shall be descriptive of their respective functions or
indicative of their relative seniority. In the absence or disability of both the
president and the Chairman, or in the absence or disability of the president if
there be no Chairman, the vice president, or, if there be more than one, the
vice presidents in the order of their relative seniority, shall exercise the
powers and perform the duties of those officers. Subject to the direction of the
president, each the vice president shall have the power in the name and on
behalf of the Trust to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and, in addition,
shall have such other powers and perform such other duties as from time to time
may be prescribed by the president or by the Trustees.
Section 3.9. Assistant Vice President. The assistant vice president, if
------------------------
any, or if there be more than one, the assistant vice presidents, shall perform
such duties as may from time to time be prescribed by the Trustees or by the
president acting under authority delegated by the Trustees pursuant to Section
3.7.
Section 3.10. Secretary. The secretary shall (a) keep the minutes of the
---------
meetings and proceedings and any written consents evidencing actions of the
Holders, the Trustees and any committees of the Trustees in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Trust and each Series, and, when
authorized by the Trustees, cause the seal of the Trust and each Series to be
affixed to any document requiring it, and when so affixed attested by his
signature as secretary or by the signature of an assistant secretary; (d)
perform any other duties commonly incident to the office of secretary in a New
York corporation; and
<PAGE>
(e) in general, perform such other duties as from time to time may be assigned
to him by the president or by the Trustees.
Section 3.11. Assistant Secretaries. The assistant secretary, if any, or,
---------------------
if there be more than one, the assistant secretaries in the order determined by
the Trustees or by the president, shall in the absence or disability of the
secretary exercise the powers and perform the duties of the secretary, and he or
they shall perform such other duties as the Trustees, the president or the
secretary may from time to time prescribe.
Section 3.12. Treasurer. The treasurer shall be the chief financial
---------
officer of the Trust. The treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and each Series,
shall deposit all monies and other valuable effects in the name and to the
credit of the Trust and each Series in such depositories as may be designated by
the Trustees, and shall render to the Trustees and the president, at regular
meetings of the Trustees or whenever they or the president may require it, an
account of all his transactions as treasurer and of the financial condition of
the Trust and each Series. Certain of the duties of the treasurer may be
delegated to a chief accounting officer.
If required by the Trustees, the treasurer shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the Trust.
Section 3.13. Assistant Treasurers. The assistant treasurer, if any, or,
--------------------
if there be more than one, the assistant treasurers in the order determined by
the Trustees or by the president, shall in the absence or disability of the
treasurer exercise the powers and perform the duties of the treasurer, and he or
they shall perform such other duties as the Trustees, the president or the
treasurer may from time to time prescribe.
Section 3.14. Bonds and Surety. Any officer may be required by the
----------------
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Depositories. Subject to Section 7.1 of the Declaration, the
------------
funds of the Trust and each Series 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 any adviser,
administrator or manager), 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 and each Series by such officer, officers, agent
or agents, as provided in these By-Laws or as the Trustees may from time to time
by resolution provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed to any
----
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Delaware corporation.
ARTICLE V
NON-TRANSFERABILITY OF INTERESTS
Section 5.1. Non-Transferability of Interests. Except as provided in
--------------------------------
Section 5.6 of the Declaration, Interests shall not be transferable. Except as
otherwise provided by law, the Trust and
<PAGE>
each Series shall be entitled to recognize the exclusive right of a person in
whose name Interests stand on the record of Holders as the owner of such
Interests for all purposes, including, without limitation, the rights to receive
distributions, and to vote as such owner, and the Trust and each Series shall
not be bound to recognize any equitable or legal claim to or interest in any
such Interests on the part of any other person.
Section 5.2. 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.
ARTICLE VI
AMENDMENT; LIMITATION OF LIABILITY
Section 6.1. 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.
Section 6.2. Limitation of Liability. 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;
provided, that nothing contained in the Declaration or the By-Laws shall protect
- - --------
any Trustee or officer of the Trust from any liability to the Trust, any Series
or its Holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the involved
in the conduct of his office.
<PAGE>
EXHIBIT 4(a)
MANAGEMENT AGREEMENT
AGREEMENT made as of _____________________, 1999, by and between GLOBAL
FINANCIAL SERVICES MASTER TRUST, a Delaware business trust (hereinafter referred
to as the "Trust") on behalf of its portfolio named in the Addendum hereto (the
"Portfolio") and FUND ASSET MANAGEMENT, L.P., a Delaware limited partnership,
doing business as FUND ASSET MANAGEMENT (hereinafter referred to as the
"Manager"). This Agreement and the Addendum pertaining to the Portfolio shall
constitute the "investment advisory contract" for the Portfolio for purposes of
Section 15(a) of the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Trustees of the Trust (the "Trustees") are authorized to
establish separate portfolios of securities, each of which may offer separate
classes of shares; and
WHEREAS, the Trustees have established and designated the Portfolio as a
portfolio of the Trust; and
WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Trust desires to retain the Manager to provide management and
investment advisory services to the Portfolio in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Portfolio on the terms and conditions hereafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Manager hereby agree as follows:
<PAGE>
ARTICLE I
---------
Duties of the Manager
---------------------
The Trust hereby employs the Manager to act as a manager and investment
adviser of the Portfolio and to furnish, or arrange for affiliates to furnish,
the management and investment advisory services described below, subject to the
policies of, review by and overall control of the Trustees, for the period and
on the terms and conditions set forth in this Agreement. The Manager hereby
accepts such employment and agrees during such period, at its own expense, to
render, or arrange for the rendering of, such services and to assume the
obligations herein set forth for the compensation provided for herein. The
Manager and its affiliates shall for all purposes herein be deemed to be
independent contractors and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust or the Portfolio
in any way or otherwise be deemed agents of the Trust or the Portfolio.
(a) Management Services. The Manager shall perform (or arrange for
-------------------
the performance by affiliates of) the management and administrative services
necessary for the operation of the Trust and the Portfolio including
administering shareholder accounts and handling shareholder relations. The
Manager shall provide the Trust and the Portfolio with office space, facilities,
equipment and necessary personnel and such other services as the Manager,
subject to review by the Trustees, shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement. The
Manager shall also, on behalf of the Trust and the Portfolio, conduct relations
with custodians, depositories, transfer agents, dividend disbursing agents,
other shareholder servicing agents, accountants, attorneys, underwriters,
brokers and dealers, corporate fiduciaries, insurers, banks and such other
persons in any such other capacity deemed to be necessary or desirable. The
Manager shall generally monitor the Trust's and the Portfolio' compliance with
investment policies and restrictions as set forth in the Registration Statement
of the Trust filed with the Securities and Exchange Commission under the
Investment Company Act, as amended from time to time (the "Registration
Statement"). The Manager shall make reports to the Trustees of its performance
of obligations hereunder and furnish advice and recommendations with respect to
such other aspects of the business and affairs of the Portfolio as it shall
determine to be desirable.
(b) Investment Advisory Services. The Manager shall provide (or
----------------------------
arrange for affiliates to provide) the Trust with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Portfolio, shall furnish
continuously an investment program for the Portfolio and shall determine from
time to time which securities shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held in the various securities
and other financial instruments in which the Portfolio invests or cash, subject
always to the restrictions of the Declaration of Trust and By-Laws of the Trust,
as amended from time to time, the provisions of the Investment Company Act and
the statements relating to the Portfolio' investment objectives, investment
policies and investment restrictions as the same are set forth in the Trust's
current Registration Statement. The Manager shall make decisions for the Trust
as to the manner in which voting rights, rights to consent to corporate action
and any other rights pertaining to the Portfolio's securities shall be
exercised. Should the Trustees at any time, however, make any definite
determination as to investment policy and notify the Manager thereof in writing,
the Manager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Manager shall take, on behalf of the Portfolio, all actions
which it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or sale
of portfolio securities for the Portfolio's account with brokers or dealers
selected by it, and to that end, the Manager is authorized as the agent of the
Trust to give instructions to the custodian of the Portfolio as to deliveries of
securities and payments of cash for the account of the Portfolio. In connection
with the selection of such brokers or dealers and the placing of such orders
with respect to assets of the Portfolio, the Manager is directed at all times to
seek to obtain execution and price within the policy guidelines determined by
the Trustees and set forth in the current Registration Statement. Subject to
this requirement and the provisions of the Investment Company Act, the
Securities Exchange Act of 1934, as amended, and other applicable provisions of
law, the Manager may select brokers or dealers with which it or the Trust is
affiliated.
<PAGE>
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
(a) The Manager. The Manager assumes and shall pay for maintaining the staff
-----------
and personnel necessary to perform its obligations under this Agreement,
and shall, at its own expense, provide the office space, facilities and
necessary personnel which it is obligated to provide under Article I
hereof, and shall pay compensation of all Officers of the Trust and all
Trustees of the Trust who are affiliated persons of the Manager.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all other
---------
expenses of the Trust and the Portfolio (except for the expenses paid by
the Distributor), including, without limitation: taxes, expenses for legal
and auditing services, costs of printing proxies, stock certificates,
shareholder reports, copies of the Registration Statement, charges of the
custodian, any sub-custodian and transfer agent, expenses of portfolio
transactions, expenses of redemption of shares, Securities and Exchange
Commission fees, expenses of registering the shares under Federal, state
and foreign laws, fees and actual out-of-pocket expenses of Trustees who
are not affiliated persons of the Manager, accounting and pricing costs
(including the daily calculation of the net asset value), insurance,
interest, brokerage costs, litigation and other extraordinary or non-
recurring expenses, and other expenses properly payable by the Portfolio.
It is also understood that the Trust shall reimburse the Manager for its
costs in providing accounting services to the Trust and the Portfolio. The
Distributor will pay certain of the expenses of the Portfolio incurred in
connection with the continuous offering of shares of beneficial interest of
the Portfolio.
ARTICLE III
-----------
Compensation of the Manager
---------------------------
Management and Investment Advisory Fee. For the services rendered, the
--------------------------------------
facilities furnished and expenses assumed by the Manager, the Portfolio shall
pay to the Manager at the end of each calendar month a fee based upon the
average daily value of the net assets of the Portfolio, as determined and
computed in accordance with the description of the determination of net asset
value contained in the Registration Statement, at the annual rate of set forth
on the Addendum or Addenda pertaining to the Portfolio, commencing on the day
following effectiveness hereof. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fee as set forth
above. Payment of the Manager's compensation for the preceding month shall be
made as promptly as possible after completion of the computations contemplated
above. During any period when the determination of net asset value is suspended
by the Trustees, the net asset value of a share as of the last business day
prior to such suspension shall for this purpose be deemed to be the net asset
value at the close of each succeeding business day until it is again determined.
ARTICLE IV
----------
Limitation of Liability of the Manager
--------------------------------------
The Manager shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
management of the Trust and the Portfolio, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Manager" shall include any affiliates of the Manager
performing services for the Trust or the Portfolio contemplated hereby and
partners, directors, officers and employees of the Manager and such affiliates.
<PAGE>
ARTICLE V
---------
Activities of the Manager
-------------------------
The services of the Manager to the Trust and the Portfolio are not to be
deemed to be exclusive, and the Manager and each affiliate is free to render
services to others. It is understood that Trustees, officers, employees and
shareholders of the Trust and the Portfolio are or may become interested in the
Manager and its affiliates, as directors, officers, employees, partners and
shareholders or otherwise, and that the Manager and directors, officers,
employees, partners and shareholders of the Manager and its affiliates are or
may become similarly interested in the Trust or the Portfolio as shareholders or
otherwise.
ARTICLE VI
----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective with respect to the Portfolio as of
the date such Portfolio commences investment operations, and shall remain in
force with respect to such Portfolio for two years thereafter or, if sooner,
until such date as may be set forth in the Addendum pertaining to the Portfolio,
and thereafter, but only so long as such continuance is specifically approved at
least annually by (i) the Trustees, or with respect to any Portfolio by the vote
of a majority of the outstanding voting securities of the Portfolio, and (ii) a
majority of those Trustees who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or with respect to the Portfolio by the vote of a
majority of the outstanding voting securities of the Portfolio, or by the
Manager, on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
-----------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) (a) with respect to the Portfolio, by the vote of a
majority of outstanding voting securities of the Portfolio, and (b) with respect
to any one Portfolio by the vote of a majority of outstanding voting securities
of such Portfolio; and (ii) a majority of those Trustees who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
ARTICLE VIII
------------
Definitions of Certain Terms
----------------------------
The terms "vote of majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
----------
Governing Law
-------------
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
<PAGE>
ARTICLE X
---------
Limitation of Obligations of the Portfolio
------------------------------------------
The obligations of the Portfolio hereunder shall be limited to the assets
of that Portfolio, shall be separate from the obligations of each other
Portfolio, and no Portfolio shall be liable for the obligations of any other
portfolio.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
GLOBAL FINANCIAL SERVICES MASTER TRUST
By:___________________________________
(signature)
Name:_________________________________
Title:________________________________
FUND ASSET MANAGEMENT, L.P.
By:___________________________________
(signature)
Name:_________________________________
Title:________________________________
<PAGE>
ADDENDUM A TO MANAGEMENT AGREEMENT
Name of Portfolio Management Fee
----------------- --------------
Global Financial Services Portfolio............... .40%
<PAGE>
EXHIBIT 4(b)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the _____________ day of ________________, 1999, by
and between FUND ASSET MANAGEMENT, L.P., a Delaware limited partnership
(hereinafter referred to as "FAM"), and MERRILL LYNCH ASSET MANAGEMENT U.K
LIMITED, a corporation organized under the laws of England and Wales
(hereinafter referred to as "MLAM U.K.").
W I T N E S S E T H:
WHEREAS, GLOBAL FINANCIAL SERVICES MASTER TRUST (the "Trust") is a Delaware
business trust engaged in business as a diversified, open-end investment company
registered under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, FAM and MLAM U.K. are engaged principally in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940, as amended; and
WHEREAS, MLAM U.K. is regulated by the Investment Management Regulatory
Organization, a self-regulating organization organized under the Financial
Services Act of 1986 of the United Kingdom (hereinafter referred to as "IMRO"),
and the conduct of its investment business is regulated by IMRO; and
WHEREAS, FAM has entered into a management agreement (the "Management
Agreement") dated _________ _________, 1999, pursuant to which FAM provides
management and investment and advisory services to the Trust, with respect to
the portfolio of the Trust; and
WHEREAS, MLAM U.K is willing to provide investment advisory services to FAM
in connection with the Fund's operations on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, MLAM U.K and FAM hereby agree as follows:
ARTICLE I
---------
Duties of MLAM U.K.
-------------------
FAM hereby employs MLAM U.K. to act as investment adviser to FAM and to
furnish, or arrange for affiliates to furnish, the investment advisory services
described below, subject to the broad supervision of FAM and the Fund, for the
period and on the terms and conditions set forth in this Agreement. MLAM U.K
hereby accepts such employment and agrees during such period, at its own
expense, to render, or arrange for the rendering of, such services and to assume
the obligations herein set forth for the compensation provided for herein. FAM
and its affiliates shall for all purposes herein be deemed a Non-private
Customer as defined under the rules promulgated by IMRO (hereinafter referred to
as the "IMRO Rules"). MLAM U.K. and its affiliates shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
MLAM U.K. shall have the right to make unsolicited calls on FAM and shall
provide FAM with such investment research, advice and supervision as the latter
may from time to time consider necessary for the proper supervision of the
assets of the Fund; shall make recommendations from time to time as to which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests,
options, futures, options on futures or cash; all of the foregoing subject
always to the restrictions of the Articles of Incorporation and By-Laws of the
Fund, as they may be amended and/or restated from time to time, the provisions
<PAGE>
of the Investment Company Act and the statements relating to the Fund's
investment objective, investment policies and investment restrictions as the
same are set forth in the currently effective prospectus and statement of
additional information relating to the shares of the Fund under the Securities
Act of 1933, as amended (the "Prospectus" and "Statement of Additional
Information", respectively). MLAM U.K. shall make recommendations and effect
transactions with respect to foreign currency matters, including foreign
exchange contracts, foreign currency options, foreign currency futures and
related options on foreign currency futures and forward foreign currency
transactions. MLAM U.K. shall also make recommendations or take action as to
the manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the portfolio securities of the Fund shall be
exercised. MLAM U.K. will not hold money on behalf of FAM or the Fund, nor will
MLAM U.K. be the registered holder of the registered investments of FAM or the
Fund or be the custodian of documents or other evidence of title.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
MLAM U.K. assumes and shall pay for maintaining the staff and personnel
necessary to perform its obligations under this Agreement and shall at its own
expense provide the office space, equipment and facilities which it is obligated
to provide under Article I hereof and shall pay all compensation of officers of
the Fund and all Directors of the Fund who are affiliated persons of MLAM U.K.
ARTICLE III
-----------
Compensation of MLAM U.K.
-------------------------
For the services rendered, the facilities furnished and expenses assumed by
MLAM U.K., FAM shall pay to MLAM U.K. a fee in an amount to be determined from
time to time by FAM and MLAM U.K. but in no event in excess of the amount that
FAM actually receives for providing services to the Fund pursuant to the
Management Agreement.
ARTICLE IV
----------
Limitation of Liability of MLAM U.K.
------------------------------------
MLAM U.K. shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
performance of sub-advisory services rendered with respect to the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article IV, MLAM U.K. shall include any affiliates
of MLAM U.K. performing services for FAM contemplated hereby and directors,
officers and employees of MLAM U.K. and such affiliates.
ARTICLE V
---------
Activities of MLAM U.K.
-----------------------
The services of MLAM U.K. to the Fund are not to be deemed to be exclusive,
MLAM U.K. and any person controlled by or under common control with MLAM U.K.
(for purposes of this Article V referred to as "affiliates") being free to
render services to others. It is understood that Trustees, officers, employees
and shareholders of the Fund are or may become interested in MLAM U.K. and its
affiliates, as directors, officers, employees and shareholders or otherwise and
that directors, officers, employees and shareholders of MLAM U.K. and its
affiliates are or may become similarly interested in the Fund, and that MLAM
U.K. and directors, officers, employees, partners and shareholders of its
affiliates may become interested in the Fund as shareholders or otherwise.
ARTICLE VI
----------
MLAM U.K. Statements Pursuant to IMRO Rules
-------------------------------------------
Any complaints concerning MLAM U.K. should be in writing addressed to the
attention of the Managing Director of MLAM U.K. FAM has the right to obtain
from MLAM U.K. a copy of the IMRO complaints procedure and to approach IMRO and
the Investment Ombudsman directly.
<PAGE>
MLAM U.K. may make recommendations, subject to the investment restrictions
referred to in Article I herein, regarding Investments Not Readily Realizable
(as that term is used in the IMRO Rules) or investments denominated in a
currency other than British pound sterling. There can be no certainty that
market makers will be prepared to deal in unlisted or thinly traded securities
and an accurate valuation may be hard to obtain. The value of investments
recommended by MLAM U.K. may be subject to exchange rate fluctuations which may
have favorable or unfavorable effects on investments.
MLAM U.K. may make recommendations, subject to the investment restrictions
referred to in Article I herein, regarding options, futures or contracts for
differences. Markets can be highly volatile and such investments carry a high
degree of risk of loss exceeding the original investment and any margin on
deposit.
ARTICLE VII
-----------
Duration And Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until the date of termination of the Management
Agreement (but not later than two years after the date hereof) and thereafter,
but only so long as such continuance is specifically approved at least annually
by (i) the Trustees of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by FAM or by vote of a majority of the outstanding voting securities of
the Fund, or by MLAM U.K., on sixty days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement. Any termination
shall be without prejudice to the completion of transactions already initiated.
ARTICLE VIII
------------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Trustees of the Fund or by the vote of a
majority of outstanding voting securities of the Fund and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
ARTICLE IX
----------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE X
---------
Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FUND ASSET MANAGEMENT, L.P.
By:
________________________________________________________________
(signature)
Name:
______________________________________________________________
Title:
_____________________________________________________________
MERRILL LYNCH ASSET MANAGEMENT U.K. LIMITED
By:
_________________________________________________________________
(signature)
Name:
_______________________________________________________________
Title:
______________________________________________________________
<PAGE>
EXHIBIT 5
PLACEMENT AGENT AGREEMENT
AGREEMENT made as of ___________________________________, 1999, between
GLOBAL FINANCIAL SERVICES MASTER TRUST, a Delaware business trust (the "Trust"),
on behalf of its series listed on Appendix A hereto (the "Series"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Placement Agent").
The obligations of the Series hereunder shall be limited to the assets of that
Series, shall be separate from the obligations of any other Series, and no
Series shall be liable for the obligations of any other Series.
W I T N E S S E T H :
-------------------
WHEREAS, the Trust has filed a registration statement (the "Registration
Statement") pursuant to Section 8(b) of the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, the Trustees (the "Trustees") are authorized to establish separate
series relating to separate portfolios of securities, each of which may offer
beneficial interests in the Series ("Interests"); and
WHEREAS, the Trustees have established and designated the Series as series
of the Trust; and
WHEREAS, the Trust and the Placement Agent wish to enter into an agreement
with each other with respect to the distribution of Interests in the Series.
NOW, THEREFORE, the parties agree as follows:
Section 10. Appointment of the Placement Agent; Private Offering.
----------------------------------------------------
(a) The Trust hereby appoints the Placement Agent as placement agent in
connection with the distribution of the Interests.
(b) The Placement Agent understands that: (i) The Interests are not being
registered under the Securities Act of 1933, as amended (the "Securities
Act"); (ii) Such Interests are to be issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act; (iii) Investments in the Series may
be made only by a limited number of institutional investors, including
investment companies, common or commingled trust funds, group trusts and
certain other "accredited investors" within the meaning of Regulation D
under the Securities Act; and (iv) The Registration Statement is not
intended to constitute an offer to sell, or the solicitation of an offer to
buy, any beneficial interests in the Series.
(c) In carrying out its duties hereunder, the Placement Agent agrees that it
will act in a manner consistent with the foregoing and, unless otherwise
instructed by the Trust in writing, will not take any actions which would
cause the Trust to make a "public offering" within the meaning of Section
4(2) of the Securities Act.
Section 11. Exclusive Nature of Duties. The Placement Agent shall be the
--------------------------
exclusive representative of the Series to act as placement agent in respect of
the distribution of the Interests, except that:
(a) The Trust may, with respect to the Series, upon written notice to the
Placement Agent, from time to time designate other placement agents with respect
to areas other than the United States as to which the Placement Agent may have
expressly waived in writing its right to act as such. If such designation is
deemed exclusive, the right of the Placement Agent under this Agreement in
respect of such areas so designated shall terminate, but this Agreement shall
remain otherwise in full effect until terminated in accordance with the other
provisions hereof.
(b) The exclusive right granted to the Placement Agent hereunder shall not
apply to Interests issued in connection with the merger or consolidation of any
other investment company or personal holding
<PAGE>
company with the Series or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Series.
(c) Such exclusive right also shall not apply to Interests issued by the
Series pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Interests issued by the
Series pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Interests as shall be agreed between the
Trust and the Placement Agent from time to time.
Section 12. Duties of the Trust.
-------------------
(a) The Trust shall furnish to the Placement Agent copies of all
information, financial statements and other papers which the Placement Agent may
reasonably request for use in connection with its duties hereunder, and this
shall include, upon request by the Placement Agent, one certified copy of all
financial statements prepared for the Trust by independent public accountants.
(b) Consistent with Section 1 hereof, the Trust shall use its best efforts
to qualify and maintain the qualification of the Interests for sale under the
securities laws of such jurisdictions as the Placement Agent and the Trust may
approve. Any such qualification may be withheld, terminated or withdrawn by the
Trust at any time in its discretion. The expense of qualification and
maintenance of qualification shall be borne by the Trust. The Placement Agent
shall furnish such information and other material relating to its affairs and
activities as may be required by the Trust in connection with such
qualification.
(c) The Trust will furnish, in reasonable quantities upon request by the
Placement Agent, copies of annual and interim reports of the Series.
Section 13. Duties of the Placement Agent.
-----------------------------
(a) The Placement Agent shall devote reasonable time and effort to its
duties hereunder. The services of the Placement Agent to the Trust hereunder are
not to be deemed exclusive and nothing herein contained shall prevent the
Placement Agent from entering into like arrangements with other investment
companies so long as the performance of its obligations hereunder is not
impaired thereby.
(b) In performing its duties hereunder, the Placement Agent shall use its
best efforts in all respects duly to conform with the requirements of all
applicable laws relating to the sale of securities. Neither the Placement Agent
nor any other person is authorized by Trust to give any information or to make
any representations, other than those contained in the Trust's registration
statement or any supplemental literature specifically approved by the Trust.
Section 14. Payment of Expenses.
-------------------
(a) The Trust shall bear all costs and expenses of the Series, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements under the
Investment Company Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, or interim reports or proxy materials).
(b) The Trust shall bear any cost and expenses of qualification of the
Shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Trust as a broker or dealer in such
states of the United States or other jurisdictions as shall be selected by the
Trust and the Placement Agent pursuant to Section 3 hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Trust decides to discontinue such qualification pursuant to Section 3
hereof.
Section 15. Indemnification.
---------------
<PAGE>
(a) The Trust shall indemnify and hold harmless the Placement Agent and
each person, if any, who controls the Placement Agent against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), as incurred,
arising by reason of any person acquiring any Interests, which may be based upon
the Securities Act, or on any other statute or at common law, on the ground that
any registration statement or other offering materials, as from time to time
amended and supplemented, or an annual or interim report to interest holders of
the Series, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Placement Agent; provided, however,
that in no case (i) is the indemnity of the Trust in favor of the Placement
Agent and any such controlling persons to be deemed to protect such Placement
Agent or any such controlling persons thereof against any liability to the Trust
or its interest holders to which the Placement Agent or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of their duties or by reason of the
reckless disregard of their obligations and duties under this Agreement; or (ii)
is the Trust to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Placement Agent or any such
controlling persons, unless the Placement Agent or such controlling persons, as
the case may be, shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Placement Agent or such
controlling persons (or after the Placement Agent or such controlling persons
shall have received notice of such service on any designated agent), but failure
to notify the Trust of any such claim shall not relieve it from any liability
which it may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Trust will be entitled to participate at its own expense in the defense or, if
it so elects, to assume the defense of any suit brought to enforce any such
liability, but if the Trust elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the Placement Agent or
such controlling person or persons, defendant or defendants in the suit. In the
event the Trust elects to assume the defense of any such suit and retain such
counsel, the Placement Agent or such controlling person or persons, defendant or
defendants in the suit shall bear the fees and expenses, as incurred, of any
additional counsel retained by them, but in case the Trust does not elect to
assume the defense of any such suit, it will reimburse the Placement Agent or
such controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses, as incurred, of any counsel retained by them. The
Trust shall promptly notify the Placement Agent of the commencement of any
litigation or proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any of the Interests.
(b) The Placement Agent shall indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage or expense, as incurred,
described in the foregoing indemnity contained in subsection (a) of this
Section, but only with respect to statements or omissions made in reliance upon,
and in conformity with, information furnished to the Trust in writing by or on
behalf of the Placement Agent for use in connection with the registration
statement or other offering materials, as from time to time amended, or the
annual or interim reports to shareholders. In case any action shall be brought
against the Trust or any person so indemnified, in respect of which indemnity
may be sought against the Placement Agent, the Placement Agent shall have the
rights and duties given to the Trust, and the Trust and each person so
indemnified shall have the rights and duties given to the Placement Agent by the
provisions of subsection (a) of this Section 6.
Section 16. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until ______________________________________ and thereafter, but only for
so long as such continuance is specifically approved at least annually by (i)
the Trustees or by the vote of a majority of the outstanding voting securities
of the Trust and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Trust, or by the Placement Agent, on
<PAGE>
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 17. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Trustees or by the vote of a majority of outstanding voting securities of the
Trust and (ii) by the vote of a majority of those Trustees who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
Section 18. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GLOBAL FINANCIAL SERVICES MASTER TRUST
By:
---------------------------------------------------------------
(Signature)
Name:
-------------------------------------------------------------
Title:
------------------------------------------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By:
---------------------------------------------------------------
(Signature)
Name:
-------------------------------------------------------------
Title:
------------------------------------------------------------
<PAGE>
Appendix A
Series of Global Financial Services Master Trust
Global Financial Services Portfolio
As of ________________________________________, 1999
<PAGE>
EXHIBIT 7
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
GLOBAL FINANCIAL SERVICES MASTER TRUST
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this _______ day of 1999, between GLOBAL FINANCIAL SERVICES
MASTER TRUST (the "Fund") and BROWN BROTHERS HARRIMAN & CO. (the "Custodian");
WITNESSETH: That in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian for
the term and subject to the provisions of this Agreement. The Custodian shall
not be under any duty or obligation to require the Fund to deliver to it any
securities or funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so delivered. The Fund
will deposit with the Custodian copies of the Certificate of Incorporation and
By-Laws (or comparable documents) of the Fund and all amendments thereto, and
copies of such votes and other proceedings of the Fund as may be necessary for
or convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by subcustodians appointed
pursuant to the provisions of Section 3 hereof, the Custodian shall have and
perform the following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have been
-----------
delivered to the Custodian and from time to time to receive delivery of
securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
----------------------------
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2S).
C. Registered Name; Nominee - To hold registered securities of the Fund
------------------------
(1) in the name or any nominee name of the Custodian or the Fund, or in the name
or any nominee name of any agent appointed pursuant to Section 5E, or (2) in
street certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper Instructions, as defined in Section
---------
V on Page 14, insofar as funds are available for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being
1
<PAGE>
made only upon receipt of the securities (1) by the Custodian, or (2) by a
clearing corporation of a national securities exchange of which the Custodian is
a member, or (3) by a Securities System. However, (i) in the case of repurchase
agreements entered into by the Fund, the Custodian may release funds to a
Securities System or to a Subcustodian prior to the receipt of advice from the
Securities System or Subcustodian that the securities underlying such repurchase
agreement have been transferred by book entry into the Account (as defined in
Section 2S) of the Custodian maintained with such Securities System or
Subcustodian, so long as such payment instructions to Securities System or
Subcustodian include a requirement that delivery is only against payment of
securities, and (ii) in the case of time deposits, call account, deposits,
currency deposits, and other deposits, contracts or options pursuant to Sections
2K, 2L and 2M, the Custodian may make payment therefor without receiving an
instrument evidencing said deposit so long as such payment instructions detail
specific securities to be acquired.
E. Exchanges - Upon receipt of proper instructions, to exchange securities
---------
held by it for the account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in accordance with
the terms of any reorganization or protective plan. Without such instructions,
the Custodian may surrender securities in temporary form for definitive
securities, may surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian and further provided custodian shall at the time of
surrendering securities or instruments receive a receipt or other evidence of
ownership thereof.
F. Sales of Securities - Upon receipt of proper instructions, to make
-------------------
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct
-------------------
a subcustodian appointed pursuant to Section 3 hereof (a "Subcustodian") or an
agent of the Custodian appointed pursuant to Section 5E hereof (an "Agent") to
surrender securities to the depositary used by an issuer of American Depositary
Receipts or International
2
<PAGE>
Depositary Receipts (hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Subcustodian or Agent that
the depositary has acknowledged receipt of instructions to issue with respect to
such securities ADRs in the name of the Custodian, or a nominee of the
Custodian, for delivery to the Custodian in Boston, Massachusetts, or at such
other place as the Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to the issuer
thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or an Agent.
H. Exercise of Rights; Tender Offers - Upon timely receipt of proper
---------------------------------
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
----------------------------
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Borrowings - Upon receipt of proper instructions, to deliver securities
----------
of the Fund to lenders or their agents as collateral for borrowings effected by
the Fund, provided that such borrowed money is payable to or upon the
Custodian's order as Custodian for the Fund.
K. Demand Deposit Bank Accounts - To open and operate an account or
----------------------------
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided
3
<PAGE>
that such account(s) shall be in the name of the Custodian for account of the
Fund and subject only to the Custodian's draft or order. Such accounts may be
opened with Banking Institutions in the United States and in other countries and
may be denominated in either U. S. Dollars or other currencies as the Fund may
determine. All such deposits shall be deemed to be portfolio securities of the
Fund and accordingly the responsibility of the Custodian therefore shall be the
same as and neither lesser nor greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund.
L. Interest Bearing Call or Time Deposits - To place interest bearing
--------------------------------------
fixed term and call deposits with such banks and in such amounts as the Fund may
authorize pursuant to proper instructions. Such deposits may be placed with the
Custodian or with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U. S. Dollars or other currencies and
need not be evidenced by the issuance or delivery of a certificate to the
Custodian, provided that the Custodian shall include in its records with respect
to the assets of the Fund, appropriate notation as to the amount and currency of
each such deposit, the accepting Banking Institution, and other appropriate
details. Such deposits, other than those placed with the Custodian, shall be
deemed portfolio securities of the Fund and the responsibilities of the
Custodian therefor shall be the same as those for demand deposit bank accounts
placed with other banks, as described in Section K of this agreement. The
responsibility of the Custodian for such deposits accepted on the Custodian's
books shall be that of a U. S. bank for a similar deposit.
M. Foreign Exchange Transactions and Futures Contracts - Pursuant to
---------------------------------------------------
proper instructions, to enter into foreign exchange contracts or options to
purchase and sell foreign currencies for spot and future delivery on behalf and
for the account of the Fund. Such transactions may be undertaken by the
Custodian with such Banking Institutions, including the Custodian and
Subcustodian(s) as principals, as approved and authorized by the Fund. Foreign
exchange contracts and options other than those executed with the custodian,
shall be deemed to be portfolio securities of the Fund and the responsibilities
of the Custodian therefor shall be the same as those for demand deposit bank
accounts placed with other banks as described in Section 2-K of this agreement.
Upon receipt of proper instructions, to receive and retain confirmations
evidencing the purchase or sale of a futures contract or an option on a futures
contract by the Fund; to deposit and maintain in a segregated account, for the
benefit of any futures commission merchant or to pay to such futures commission
merchant, assets designated by the fund as initial, maintenance or variation
"margin" deposits intended to secure the Fund's performance of its obligations
under any
4
<PAGE>
futures contracts purchased or sold or any options on futures contracts written
by the Fund, in accordance with the provisions of any agreement or agreements
among any of the Fund, the Custodian and such futures commission merchant,
designated to comply with the rules of the Commodity Futures Trading Commission
and/or any contract market, or any similar organization or organizations,
regarding such margin deposits; and to release and/or transfer assets in such
margin accounts only in accordance with any such agreements or rules.
N. Stock Loans - Upon receipt of proper instructions to deliver securities
-----------
of the Fund, in connection with loans of securities by the Fund, to the borrower
thereof upon the receipt of the cash collateral, if any, for such borrowing. In
the event U.S. Government securities are to be used as collateral, the Custodian
will not release the securities to be loaned until it has received confirmation
that such collateral has been delivered to the Custodian. The Custodian and
Fund understand that the timing of receipt of such confirmation will normally
require that the delivery of securities to be loaned will be made one day after
receipt of the U. S. Government collateral.
O. Collections - To collect, receive and deposit in said account or
-----------
accounts all income and other payments with respect to the securities held
hereunder, and to execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection with transfer
of securities, and pursuant to proper instructions to take such other actions
with respect to collection or receipt of funds or transfer of securities which
involve an investment decision.
P. Dividends, Distributions and Redemptions - Upon receipt of proper
----------------------------------------
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
5
<PAGE>
Q. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
---------------------
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
R. Bills - Upon receipt of proper instructions from the Administrator, to
-----
pay or cause to be paid, insofar as funds are available for the purpose, bills,
statements, or other obligations of the Fund.
S. Deposit of Fund Assets in Securities Systems - The Custodian may
--------------------------------------------
deposit and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart O, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in accordance
with applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry
6
<PAGE>
on the records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall Transfer securities sold for the
account of the Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices from the Securities
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian or an Agent as referred to
above, and be provided to the Fund at its request. The Custodian shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the Custodian will terminate the
use of any such Securities System on behalf of the Fund as promptly as
practicable.
T. Other Transfers - Upon receipt of Proper Instructions, to deliver
--------------- -----------------------------------
securities, funds and other property of the Fund to a Subcustodian or another
custodian of the Fund; and, upon receipt of proper instructions, to make such
other disposition of securities, funds or other property of the Fund in a manner
other than or for purposes other than as enumerated elsewhere in this Agreement,
provided that the instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons to whom
delivery is to be made.
U. Investment Limitations - In performing its duties generally, and more
----------------------
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Certificate
of Incorporation or By-Laws (or comparable documents) or votes
7
<PAGE>
or proceedings of the shareholders or Directors of the Fund. The Custodian shall
in no event be liable to the Fund and shall be indemnified by the Fund for any
violation which occurs in the course of carrying out instructions given by the
Fund of any investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to make expenditures, encumber
securities, borrow or take similar actions affecting its portfolio.
V. Proper Instructions - Proper instructions shall mean a tested telex
-------------------
from the Fund or a written request, direction, instruction or certification
signed or initialled on behalf of the Fund by two or more persons as the Board
of Directors of the Fund shall have from time to time authorized, provided,
however, that no such instructions directing the delivery of securities or the
payment of funds to an authorized signatory of the Fund shall be signed by such
person. Those persons authorized to give proper instructions may be identified
by the Board of Directors by name, title or position and will include at least
one officer empowered by the Board to name other individuals who are authorized
to give proper instructions on behalf of the Fund. Telephonic or other oral
instructions given by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. Oral instructions will be confirmed by tested telex or in writing in
the manner set forth above but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to the Custodian by or on behalf of
the Fund (including any of its officers, Directors, employees or agents) and
will deliver to the Custodian a similar authorization from any investment
manager or adviser or person or entity with similar reponsibilities which is
authorized to give proper instructions on behalf of the Fund to the Custodian.
Proper instructions may relate to specific transactions or to types or classes
of transactions, and may be in the form of standing instructions.
Proper instructions may include communications effected directly between
electro-mechanical or electronic devices or systems, in addition to tested
telex, provided that the Fund and the Custodian agree to the use of such device
or system.
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a custodian or a foreign
custodian under the Investment Company Act of 1940 and the rules and regulations
thereunder) to act as a Subcustodian for the Fund, provided that
8
<PAGE>
the Fund shall have approved in writing (1) any such bank or trust company and
the subcustodian agreement to be entered into between such bank or trust company
and the Custodian, and (2) if the subcustodian is a bank organized under the
laws of a country other than the United States, the holding of securities, cash
and other property of the Fund in the country in which it is proposed to utilize
the services of such subcustodian. Upon such approval by the Fund, the Custodian
is authorized on behalf of the Fund to notify each Subcustodian of its
appointment as such. The Custodian may, at any time in its discretion, remove
any bank or trust company that has been appointed as a Subcustodian but will
promptly notify the Fund of any such action.
Those Subcustodians, their offices or branches which the Fund has approved
to date are set forth on Appendix A hereto. Such Appendix shall be amended
from time to time as Subcustodians, branches or offices are changed, added or
deleted. The Fund shall be responsible for informing the Custodian sufficiently
in advance of a proposed investment which is to be held at a location not listed
on Appendix A, in order that there shall be sufficient time for the Fund to give
the approval required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian pursuant to such
subcustodian agreement.
Although the Fund does not intend to invest in a country before the
foregoing procedures have been completed, in the event that an investment is
made prior to approval, if practical, such security shall be removed to an
approved location or if not practical such security shall be held by such agent
as the Custodian may appoint. In such event, the Custodian shall be liable to
the Fund for the actions of such agent if and only to the extent the Custodian
shall have recovered from such agent for any damages caused the Fund by such
agent and provided that the Custodian shall pursue its rights against such
agent.
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At
the election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
9
<PAGE>
At the written request of the Fund, the Custodian will terminate any
subcustodian Appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty
days after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature.
5. A. The Custodian shall not be liable for any action taken or omitted
in reliance upon proper instructions believed by it to be genuine or upon any
other written notice, request, direction, instruction, certificate or other
instrument believed by it to be genuine and signed by the proper party or
parties.
The Chairman of the Board of the Fund shall certify to the Custodian the names,
signatures and scope of authority of all persons authorized to give proper
instructions or any other such notice, request, direction instruction,
certificate or instrument on behalf of the Fund, the names and signatures of
the officers of the Fund, the name and address of the Shareholder Servicing
Agent, and any resolutions, votes, instructions or directions of the Fund's
Board of Directors or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until receipt of a
similar certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, (but only to
the extent such expenses are reasonable) to receive and act upon advice of
counsel (who may be counsel for the Fund) on all matters, and the Custodian
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
10
<PAGE>
B. With respect to the portfolio securities, cash and other property of
the Fund held by a Securities System, the Custodian shall be liable to the Fund
only for any loss or damage to the Fund resulting from use of the Securities
System if caused by any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from any failure of
the Custodian or any such agent to enforce effectively such rights as it may
have against the Securities System.
C. The Custodian shall be liable to the Fund for any loss or damage to the
Fund caused by or resulting from the acts or omissions of any Subcustodian if
such acts or omissions would be deemed to be negligence, gross negligence or
willful misconduct hereunder if such acts or omissions were those of the
Custodian taken or omitted by the Custodian in the country in which the
Subcustodian is operating. The Custodian shall also be liable to the Fund for
its own negligence in transmitting any instructions received by it from the Fund
and for its own negligence in connection with the delivery of any securities or
funds held by it to any Subcustodian.
D. Except as may otherwise be set forth in this Agreement with respect to
particular matters, the Custodian shall be held only to the exercise of
reasonable care and diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any applicable law. However, nothing herein shall
exempt the Custodian from liability due to its own negligence or willful
misconduct. The Fund agrees to indemnify and hold harmless the Custodian and
its nominees from all claims and liabilities (including reasonable counsel fees)
incurred or assessed against it or its nominees in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's breach of the relevant standard of conduct set forth in this
Agreement. Without limiting the foregoing indemnification obligation of the
Fund, the Fund agrees to indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee.
In order that the indemnification provisions contained in this Paragrapgh
5-C shall apply, however, it is understood that if in any case the Fund may be
asked to indemnify or hold the Custodian harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation which
11
<PAGE>
presents or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to defend the
Custodian against any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify the Custodian, and
thereupon the Fund shall take over complete defense of the claim, and the
Custodian shall in such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Paragraph 5-C. The Custodian
shall in no case confess any claim or make any compromise in any case in which
the Fund will be asked to indemnify the Custodian except with the Fund's prior
written consent.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, an agent of the Custodian or a
Subcustodian, a Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a Sovereign
Risk. A "Sovereign Risk" shall mean nationalizaton, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's property; or acts of war, terrorism, insurrection or revolution; or any
other similar act or event beyond the Custodian's control.
E. The Custodian shall be entitled to receive reimbursement from the Fund
on demand, in the manner provided in Section 6, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries and usual
overhead expenses.
F. The Custodian may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the appointment of such
Agent (other than an Agent appointed pursuant to the third paragraph of Section
3) shall not relieve the Custodian of any of its responsibilities under this
agreement.
G. Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
6. The Fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be
12
<PAGE>
agreed upon in writing by the Custodian and the Fund. Such fee, together with
all amounts for which the Custodian is to be reimbursed in accordance with
Section 5D, shall be billed to the Fund in such a manner as to permit payment by
a direct cash payment to the Custodian.
7. This Agreement shall continue in full force and effect until terminated
by either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect not sooner than
seventy five (75) days after the date of such delivery or mailing. In the event
of termination the Custodian shall be entitled to receive prior to delivery of
the securities, funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated by Sections 5D and 6,
upon receipt by the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that
the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the Fund in execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
8. This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof. No provision of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative 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. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
9. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
10. Notices and other writings delivered or mailed postage prepaid to the
Fund addressed to the Fund in care of Global Financial Services Master Trust,
800 Scudders Mill Road, Plainsboro, New Jersey 08536 or to such other address
as the Fund may have designated to the Custodian in writing, or to the Custodian
at 40 Water Street, Boston, Massachusetts 02109, Attention: Manager, Securities
Department, or to such other address as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
13
<PAGE>
11. This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
12. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original. This Agreement shall become effective when
one or more counterparts have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
GLOBAL FINANCIAL SERVICES BROWN BROTHERS HARRIMAN & CO.
MASTER TRUST
By:________________________ By: _________________________
Name: Name:
Title: Title:
14
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Global Financial Services Portfolio of
Global Financial Services Master Trust:
We consent to the use in the Registration Statement on Form N-1A of our report
on Global Financial Services Master Trust dated October 15, 1999 appearing in
the Statement of Additional Information part of such Registration Statement.
Deloitte & Touche LLP
Princeton, New Jersey
October 15, 1999
<PAGE>
EXHIBIT 10(b)
CONSENT OF SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
We hereby consent to the reference to our firm included in Part A and Part
B of Global Financial Services Master Trust, filed as part of Registration
Statement No. 811-09633.
/s/ Swidler Berlin Shereff Friedman, LLP
----------------------------------------
Swidler Berlin Shereff Friedman, LLP
New York, New York
October 15, 1999
<PAGE>
EXHIBIT 12
CERTIFICATE OF HOLDERS OF BENEFICIAL INTERESTS
Merrill Lynch Global Financial Services Fund, Inc., and Merrill Lynch Funds
Distributor, a division of Princeton Funds Distributor, Inc., each a holder of
the beneficial interests in the amounts indicated below, of the Global Financial
Services Portfolio of Global Financial Services Master Trust (the "Trust"), do
hereby confirm to the Trust their representations that they purchased such
interests for investment purposes, with no present intention of redeeming or
reselling any portion thereof.
Merrill Lynch Global Financial Services Fund, Inc.
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Title: Vice President
Merrill Lynch Funds Distributor,
a division of Princeton Funds Distributor, Inc.
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Title: Vice President
Dated: October 15, 1999
==============================================================================
Global Financial Services Portfolio of Global Financial Services Master Trust
==============================================================================
Merrill Lynch Global Financial Services
Funds, Inc.
$100,000
- - --------------------------------------------------------------------------------
Merrill Lynch Funds Distributor,
a division of Princeton Funds
Distributor, Inc.
$100
- - --------------------------------------------------------------------------------
Total
$100,100
7048538.1
<PAGE>
EXHIBIT 16
POWER OF ATTORNEYS
------------------
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose name appears
below, being a Trustee of GLOBAL FINANCIAL SERVICES MASTER TRUST (the "Trust"),
hereby nominates, constitutes and appoints Terry K. Glenn, Michael J.
Hennewinkel and Donald C. Burke (with full power to each of them to act alone)
his or her true and lawful attorney-in-fact and agent, for him or her and on his
or her behalf and in his or her place and stead in any and all capacities, to
make, execute and sign all amendments and supplements to:
(1) the Registration Statement of the Trust on Form N-8A under the
Investment Company Act of 1940;
(2) the Registration Statement of the Trust on Form N-1A under the
Investment Company Act of 1940; and
(3) the Registration Statement of MERRILL LYNCH GLOBAL FINANCIAL SERVICES
FUND, INC. (the "Fund") on Form N-1A under the Investment Company Act of
1940 and the Securities Act of 1933
and to file the same with the Securities and Exchange Commission, and any other
regulatory authority having jurisdiction over the registration of the Trust or
the Fund or over the offer and sale of interests of the Trust or of shares of
common stock of the Fund, and any and all exhibits and other documents requisite
in connection therewith, granting unto said attorneys and each of them, full
power and authority to perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as each of the undersigned himself or herself might or could do.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her
hand this 9th day of September, 1999.
/s/ Terry K. Glenn
- - ----------------------------
Terry K. Glenn, Trustee
/s/ Ronald W. Forbes
- - ----------------------------
Ronald W. Forbes, Trustee
/s/ Cynthia A. Montgomery
- - ----------------------------
Cynthia A. Montgomery, Trustee
/s/ Charles C. Reilly
- - ----------------------------
Charles C. Reilly, Trustee
/s/ Kevin A. Ryan
- - ----------------------------
Kevin A. Ryan, Trustee
/s/ Richard R. West
- - ----------------------------
Richard R. West, Trustee
/s/ Arthur Zeikel
- - ----------------------------
Arthur Zeikel, Trustee
/s/ Donald C. Burke
- - ----------------------------
Donald C. Burke, Treasurer
