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As filed with the Securities and Exchange Commission
on November 21, 2000
Registration No. 811-10091
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
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/ X / REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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CTB Securities Trust Fund
(Exact Name of Registrant as Specified in Charter)
22939 Hawthorne Boulevard
Torrance, California 90505
(Address of Principal Executive Offices)
(310) 791-8002
(Registrant's Telephone Number, including Area Code)
Helen Lin
22939 Hawthorne Boulevard
Torrance, California 90505
(Name and Address of Agent for Service)
Copies to:
MARTIN E. LYBECKER, ESQ.
ROPES & GRAY
ONE FRANKLIN SQUARE
1301 K STREET, N.W.
SUITE 800 EAST
WASHINGTON, D.C. 20005
Approximate Date of Proposed Public Offering: Not Applicable
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended (the "1940 Act").
However, units of beneficial interest in the Registrant are not being registered
under the Securities Act of 1933, as amended (the "1933 Act") since such units
will be issued solely in private placement transactions which do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by "accredited investors" within
the meaning of Regulation D under the 1933 Act which generally includes
institutional investors. This Registration Statement does not constitute an
offer to sell, or the solicitation of an offer to buy, any units of beneficial
interest of the Registrant.
Pursuant to General Instruction G3 of Form N-2, a registration statement filed
under only the 1940 Act shall consist of the facing sheet of the Form, responses
to all items of Parts A and B except Items 1, 2, 3.2, 4, 5, 6 and 7 of Part A
thereof, responses to all items of Part C except Items 24.2h, 24.2l, 24.2n and
24.2o, required signatures, and all other documents that are required or which
the Registrant may file as part of the registration statement.
PART A
ITEM 1. OUTSIDE FRONT COVER
Not Applicable.
ITEM 2. COVER PAGES; OTHER OFFERING INFORMATION
Not Applicable.
ITEM 3. FEE TABLE AND SYNOPSIS
3.1. Expense Information
<TABLE>
<S> <C>
Shareholder Transaction Expenses
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Sales Load (as a percentage of offering price)....................... None
Dividend Reinvestment and Cash Purchase Plan Fees.................... None
Annual Expenses
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Management Fees...................................................... None
Other expenses(1).................................................... 0.095%
Total Annual Expenses ............................................... 0.095%
</TABLE>
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(1) "Other expenses" are based on estimated amounts for the current fiscal
year.
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Example 1 year 3 years 5 years 10 years
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You would pay the
following expenses
on a $1,000 investment,
assuming a 5% annual
return: $3 $9 $16 $36
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The purpose of the preceding table is to assist the investor in
understanding the various costs and expenses that an investor in CTB Securities
Trust Fund (the "Fund") will bear directly or indirectly.
The example above should not be considered a representation of future
expenses, which may be higher or lower.
3.2. Not Applicable.
3.3. Not Applicable.
ITEM 4. FINANCIAL HIGHLIGHTS
Not Applicable.
ITEM 5. PLAN OF DISTRIBUTION
Not Applicable.
ITEM 6. SELLING SHAREHOLDERS
Not Applicable.
ITEM 7. USE OF PROCEEDS
Not Applicable.
ITEM 8. GENERAL DESCRIPTION OF THE REGISTRANT
8.1. General
The Fund was formed as a business trust under the laws of the
Commonwealth of Massachusetts on August 28, 2000, and is a non-diversified
closed-end management investment company registered under the Investment Company
Act of 1940, as amended.
8.2. Investment Objectives and Policies
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The Fund's investment objective is to seek current income consistent
with preservation of capital. The investment objective of the Fund may be
changed without the vote of the holders of a majority of voting securities.
The Fund intends to achieve its objective by investing in a portfolio
of medium to high quality debt securities which the Managers believe does not
involve undue risk to income or principal. Under normal market conditions, the
Fund will invest substantially all of its assets in (i) Construction Loans, (ii)
Mortgage-Backed Securities, (iii) Collateralized Mortgage Obligations ("CMOs"),
(iv) Asset-Backed Securities, (v) Corporate Debt Securities, (vi) U.S.
Government Agency Securities, (vii) U.S. Treasury Securities, (viii) Trade
Finance Loans, (ix) Commercial Real Estate Loans, (x) Warehouse Loans, (xi)
SBA-Government Secured Loans, and (xii) Unsecured and Secured Commercial Loans
that invest in such obligations. (Construction and Development Loans and Fixed
and Floating Rate Commercial Real Estate Mortgages are collectively referred to
as "Whole Loans.") It is anticipated that substantially all of the Fund's assets
will be contributed by Shareholders of the Fund in exchange for Shares of the
Fund. Each of the Whole Loans will have been originated or purchased by
Chinatrust Bank (U.S.A.) pursuant to its underwriting procedures and guidelines.
The Fund also expects to invest in Limited Liability Companies that make new
advances on the Whole Loans they hold and that fund new Whole Loans. The
Managers will seek to balance the risk and return potential of the Fund's
investments in a manner that attempts to maximize return while minimizing the
risk of losses to the Fund through defaults on portfolio securities. An
investment in the Fund may not be appropriate for all investors and there is no
assurance that the Fund will achieve its investment objective. The Fund is
designed primarily as a long-term investment and not as a trading vehicle.
The discussion below describes in greater detail the principal
categories of securities in which the Fund intends to invest.
Whole Loans. Whole Loans include Construction Loans, Single Family
Residential Mortgages, Fixed and Floating Rate Commercial Real Estate Mortgages
and Syndicated Loans that Chinatrust Bank (U.S.A.) either originated or
purchased. Construction and Development Loans are short-term real estate loans
to finance building costs. The funds are typically disbursed as needed or in
accordance with a prearranged plan, and the money is repaid on completion of the
project, usually from the proceeds of a mortgage loan. Single Family Residential
Mortgages are entire ownership interests in mortgage loans on residential
property, typically single family residences. Commercial Real Estate Mortgages
are mortgage loans secured by commercial property, such as industrial and
warehouse properties, office buildings, retail space and shopping malls,
multifamily properties and cooperative apartments, hotels and motels, nursing
homes, hospitals and senior living centers. Fixed-rate loans have interest rates
that are fixed and that do not fluctuate with general market conditions while
floating-rate loans have variable interest rates that are periodically adjusted
in response to market conditions. Syndicated Loans typically represent
participations in larger loans extended to non-investment grade, leveraged
borrowers. These loans typically finance a buyout, acquisition or
recapitalization transaction and rely on "enterprise value" to mitigate
deficient equity or collateral values. Syndicated Loans may be agented by
Chinatrust Bank (U.S.A.) or another commercial bank.
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Mortgage-Backed Securities. Mortgage-Backed Securities are securities
that, directly or indirectly, represent participations in, or are secured by and
payable from, loans secured by real property including pass-through securities
such as Ginnie Mae, Fannie Mae and Freddie Mac Certificates, private
pass-through securities, commercial mortgage-backed securities and certain
collateralized mortgage obligations. Mortgage-Backed Securities may have fixed
or adjustable interest rates. There are currently three basic types of
Mortgage-Backed Securities: (i) those issued or guaranteed by the United States
Government or one of its agencies or instrumentalities, such as Ginnie Mae,
Fannie Mae and Freddie Mac; (ii) those issued by non-governmental issuers that
represent interests in, or are collateralized by, Mortgage-Backed Securities
issued or guaranteed by the United States Government or one of its agencies or
instrumentalities; and (iii) those issued by non-governmental issuers that
represent an interest in, or are collateralized by, whole mortgage loans or
Mortgage-backed Securities without a government guarantee but usually with
over-collateralization or some other form of private credit enhancement.
Non-governmental issuers referred to in (ii) and (iii) above include originators
of and investors in mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks investment banks and special purpose
subsidiaries of the foregoing.
Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed
Securities ("SMBSs") are derivative multi-class mortgage securities. SMBSs may
be issued by agencies or instrumentalities of the United States Government or by
private originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage bankers, commercial banks, investment banks and
special purpose subsidiaries of the foregoing.
There are generally two types of classes of SMBSs, one of which (the
"IO class") entitles the holders thereof to receive distributions consisting
solely or primarily of all or a portion of the interest in the underlying pool
of mortgage loans or Mortgage-Backed Securities ("Mortgage-Assets") and the
other of which (the "PO class") entitles the holders thereof to receive
distributions consisting solely or primarily of all or a portion of the
principal of the underlying pool of Mortgage Assets. The cash flows and yields
on IO and PO classes are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets. For example,
a rapid or slow rate of principal payments may have a material adverse effect on
the yield to maturity of IOs or POs, respectively. If the underlying Mortgage
Assets experience greater than anticipated prepayments of principal, an investor
may incur substantial losses, even if the IO class is rated AAA. Conversely, if
the underlying Mortgage Assets experience slower than anticipated prepayments of
principal, the yield on a PO class will be affected more severely than would be
the case with a traditional Mortgage-Backed Security.
CMOs. CMOs are debt instruments issued by special purpose entities
which are secured by pools of mortgage loans or other Mortgage-Backed
Securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the CMO. CMOs may be issued by agencies or
instrumentalities of the United States Government or by private organizations.
The Fund may not invest in CMOs issued by private organizations.
In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," is issued at a
specified coupon rate and has a stated
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maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. Interest is paid or accrues on
all classes of a CMO on a monthly, quarterly or semi-annual basis. The principal
and interest of the underlying mortgages may be allocated among the several
classes of a series of a CMO in many ways. In a common structure, payments of
principal, including any principal prepayments, on the underlying mortgages are
applied to the classes of the series of a CMO in the order of their respective
stated maturities or final distribution dates, so that no payment of principal
will be made on any class of a CMO until all other classes having an earlier
stated maturity or final distribution date have been paid in full.
The Fund may also invest in inverse or reverse floating CMOs. Inverse
or reverse floating CMOs constitute a tranche of a CMO with a coupon rate that
moves in the reverse direction to an applicable index such as the London
Interbank Offered Rate ("LIBOR"). Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse or reverse floating CMOs are
typically more volatile than fixed or adjustable rate tranches of CMOs.
Investments in inverse or reverse floating CMOs would be purchased by the Fund
to attempt to protect against a reduction in the income earned on the Fund's
investments due to a decline in interest rates. The Fund would be adversely
affected by the purchase of such CMOs in the event of an increase in interest
rates since the coupon rate thereon will decrease as interest rates increase,
and, like other Mortgage-Backed Securities, the value will decrease as interest
rates increase.
U.S. Government Securities. U.S. Government Securities are obligations
issued or guaranteed by the United States Government, its agencies, authorities
or instrumentalities. Securities issued by the U.S. Government, such as United
States Treasury bills, Treasury notes and Treasury bonds (collectively, "U.S.
Treasury Securities"), which differ only in their interest rates, maturities and
times of issuance, are supported by the full faith and credit of the United
States. U.S. Government Agency Securities, which are securities issued by
agencies and instrumentalities of the U.S. Government such as Ginnie Mae, Fannie
Mae, SBA and Freddie Mac, are supported by: (i) the full faith and credit of the
United States, such as securities issued by Ginnie Mae and SBA; (ii) the right
of the issuer to borrow from the United States Treasury, such as securities of
the Federal Home Loan Banks; or (iii) only the credit of the issuer, such as
securities of the Student Loan Marketing Association.
U.S. Government Securities may include zero coupon securities that are
issued or purchased at a significant discount from face value. The discount
approximates the total amount of interest the security will accrue and compound
over the period until maturity or the particular interest payment date at a rate
of interest reflecting the market rate of the security at the time of issuance.
Zero coupon U.S. Government Securities do not require the periodic payment of
interest. These investments may experience greater volatility in market value
than U.S. Government Securities that make regular payments of interest.
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INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may
not be changed without the affirmative vote of a "majority of the outstanding
voting securities" of the Fund, which is defined in the 1940 Act to mean the
affirmative vote of the lesser of (1) more than 50% of the outstanding Shares of
the Fund, or (2) 67% or more of the Shares present at the meeting in person or
by proxy. The Fund:
1. May not concentrate investments in a particular industry or
group of industries, as concentration is defined under the 1940 Act, or
the rules and regulations thereunder, as such statute, rules or
regulations may be amended from time to time, except that the Fund will
concentrate in securities which represent interests in mortgages on
real property.
2. May issue senior securities to the extent permitted by the
1940 Act, or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
3. May lend or borrow money to the extent permitted by the
1940 Act, or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
4. May purchase or sell commodities, commodities contracts,
futures contracts, or real estate to the extent permitted by the 1940
Act, or the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.
5. May underwrite securities to the extent permitted by the
1940 Act, or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.
6. May pledge, mortgage or hypothecate any of its assets to
the extent permitted by the 1940 Act, or the rules or regulations
thereunder, as such statute, rules or regulations may be amended from
time to time.
The fundamental limitations of the Fund have been adopted to avoid
wherever possible the necessity of shareholder meetings otherwise required by
the 1940 Act. This recognizes the need to react quickly to changes in the law or
new investment opportunities in the securities markets and the cost and time
involved in obtaining shareholder approvals for diversely held investment
companies. However, the Fund also has adopted non-fundamental limitations, set
forth below, which in some instances may be more restrictive than the
fundamental limitations. Any changes in the Fund's non-fundamental limitations
will be communicated to the Fund's shareholders prior to effectiveness.
The following investment limitations of the Fund are non-fundamental policies.
The Fund may not:
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1. Purchase any securities (other than obligations issued or
guaranteed by the United States Government or by its agencies or
instrumentalities), if as a result more than 5% of the Fund's total
assets would then be invested in securities of a single issuer or if as
a result the Fund would hold more than 10% of the outstanding voting
securities of any single issuer; provided that, with respect to 50% of
the Fund's assets, the Fund may invest up to 25% of its assets in the
securities of any one issuer. For purposes of this restriction, the
term issuer includes both the borrower under a loan agreement and the
lender selling a participation to the Fund together with any other
persons interpositioned between such lender and the Fund with respect
to a participation.
2. Make investments for the purpose of exercising control or
participation in management, except to the extent that exercise by the
Fund of its rights under loan agreements would be deemed to constitute
such control or participation.
3. Borrow money, except for temporary or emergency purposes
and then only in an amount not exceeding one-third of the value of
total assets and except that a Fund may borrow from banks or enter into
reverse repurchase agreements for temporary emergency purposes in
amounts up to 15% of the value of its total assets at the time of such
borrowing.
4. Pledge, mortgage or hypothecate assets except to secure
temporary borrowings permitted by (3) above in aggregate amounts not to
exceed 15% of total assets taken at current value at the time of the
incurrence of such loan, except as permitted with respect to securities
lending.
5. Invest more than 25% of its total assets in the securities
of issuers in any one industry; provided that this limitation shall not
apply with respect to obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities; and provided
further that the Fund shall, under normal market conditions, invest
more than 25% and up to 100% of its assets in securities which
represent interests in mortgages on real property.
6. Make short sales of securities, maintain a short position
or purchase securities on margin, except that the Fund may obtain
short-term credits as necessary for the clearance of security
transactions.
7. Act as an underwriter of securities of other issuers except
as it may be deemed an underwriter in selling a Fund security.
8. Issue senior securities, as defined in the 1940 Act, other
than (i) preferred shares which immediately after issuance will have
asset coverage of at least 200%, (ii) indebtedness which immediately
after issuance will have asset coverage of at least 300%, or (iii) the
borrowings permitted by investment restriction 3 above.
All percentage limitations on investments described in this
Registration Statement will apply at the time of investment and shall not be
considered violated unless an excess or deficiency occurs or exists immediately
after and as a result of such investment. The other
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investment policies described in this Registration Statement are also not
fundamental and may be changed by approval of the Fund's Trustees.
SELECTION OF INVESTMENTS
Initially, substantially all of the Fund's assets will be contributed
by Shareholders of the Fund in connection with this offering. Subsequently, the
Managers will buy and sell securities for the Fund's portfolio with a view to
seeking a high level of current income, and will select investments which the
Managers believe do not involve undue risk to income or principal considered in
relation to the particular investment policies of the Fund. At the time of
making investments in the categories discussed above, the Managers will consider
the quality of the securities in which the Fund may invest. All investments must
be in securities that are medium to high quality. As a result, the Fund will not
necessarily invest in the highest yielding investments permitted by its
investment policies if the Managers determine that market risks or credit risks
associated with such investments would subject the Fund's portfolio to excessive
risk. The potential for realization of capital gains resulting from possible
changes in interest rates will not be a major consideration. The Managers will
be free to take full advantage of the entire range of maturities offered by
fixed-income securities and may adjust the average maturity of the Fund's
portfolio from time to time, depending on their assessment of the relative
yields available on securities of different maturities and its expectations of
future changes in interest rates.
Investors should also note that new types of mortgage-related assets,
and other securities in which the Fund may invest are developed and marketed
from time to time and that, consistent with its investment limitations, the Fund
expects to invest in those securities and instruments that the Managers believe
may assist the Fund in achieving its investment objectives. These investments
will be disclosed to shareholders in the Fund's annual and semi-annual reports.
The Managers seek to minimize the risks involved in investing in
mortgage-related assets and other fixed-income securities through careful
investment analysis. It should be noted, however, that the amount of information
about the financial condition of an issuer of securities may not be as extensive
as that which is made available by corporations whose securities are publicly
traded.
PORTFOLIO TURNOVER AND SHORT TERM TRADING
The Managers may buy and sell securities for the Fund to accomplish its
investment objective. Although it is impossible to predict portfolio turnover
rate, the Managers expects that the annual portfolio turnover rate of the Fund
will be low and should not exceed 30%. Portfolio turnover generally involves
some expense to the Fund, including transaction costs on the sale of securities
and reinvestment in other securities, and may result in realization of ordinary
income or capital gains.
The Fund believes that in general the secondary market for some
fixed-income securities is less liquid than that for other fixed-income
securities. Also, there may be limited liquidity for certain fixed income
securities, such as Whole Loans, that the Fund may purchase or hold.
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Accordingly, the ability of the Fund to buy and sell securities may, at any
particular time and with respect to any particular securities, be limited.
8.3. Risk Factors
a. General
No Operating History; Reliance on Management. The Fund is newly
organized and does not have an investment track record. It is anticipated that
initially all of the Fund's assets will be contributed by Shareholders of the
Fund. Subsequently, the Fund will be wholly dependent for the selection,
structuring, closing, and monitoring of its investments on the diligence and
skill of its Managers, acting under the supervision of the Board. The Managers,
Henry Peng, Jesse Kung, and Yu-Ching Lau, will have responsibility for the
selection of investments, the negotiation of the terms of such investments, and
the monitoring of such investments after they are made. There can be no
assurance that Mr. Peng, Mr. Kung, or Ms. Lau will remain associated with the
Fund or that, in the event they ceased to be associated with the Fund, the Fund
would be able to find a qualified person or persons to fill their positions. See
Item 9 - Management.
Limited Transferability of Shares. The Fund has been organized to make
investments in illiquid debt securities. The Shares will not be registered under
the federal or state securities laws and are subject to substantial restrictions
on transfer. There will be no trading market for the Shares. Fund shares,
subject to Board and shareholder approval, are expected to be subject to
redemption from time to time as discussed in Item 10 - Capital Stock: Repurchase
of Shares.
The Shares will not be registered under the 1933 Act or under the
securities laws of the various states (except as necessary to claim a limited
offering exemption) on the grounds that their issuance and sale is exempt from
such registration requirements as not involving a public offering pursuant to
Section 4(2) of the 1933 Act and applicable provisions of the securities laws of
the various states.
Because the Shares will be acquired by investors in transactions not
involving a public offering, they will be "restricted securities" and may be
required to be held indefinitely. Shares may not be sold, transferred, assigned,
pledged, or otherwise disposed of without registration under applicable federal
or state securities laws or pursuant to an exemption from registration (in which
case the Shareholder will at the option of the Fund be required to provide the
Fund with a legal opinion, in form and substance satisfactory to the Fund, that
registration is not required). Accordingly, an investor must be willing to bear
the economic risk of investment in the Shares until Shares are redeemed or the
Fund is liquidated. No sale, transfer, assignment, pledge, or other disposition,
whether voluntary or involuntary, of the Shares may be made except by
registration by the transfer agent on the Fund's books. Each transferee will be
required to execute an instrument agreeing to be bound by these restrictions and
to execute such other instruments or certifications as are reasonably required
by the Fund or the transfer agent. The Fund may withhold consent to such an
assumption at its absolute discretion.
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Illiquidity of Investments. From time to time, the Fund's investments
in fixed-income securities may include securities as to which the Fund, by
itself or together with other funds or accounts managed by the Managers or
Chinatrust Bank (U.S.A.), holds a major portion or all of an issue of such
securities. Because there may be relatively few potential purchasers for such
investments and, in some cases, there may be contractual restrictions on
resales, the Fund may find it more difficult to sell such securities at a time
when the Managers believe it is advisable to do so. In addition, in order to
enforce its rights in the event of a default in the payment of interest or
repayment of principal, or both, the Fund may be required to take possession of
and manage the assets securing the issuer's obligations on such securities,
which may increase the Fund's operating expenses and adversely affect the net
asset value of the Fund. In addition, the Fund's intention to qualify as a
"regulated investment company" ("RIC") under the Internal Revenue Code of 1986,
as amended, may limit the extent to which the Fund may exercise its rights by
taking possession of such assets, because as a RIC the Fund is subject to
certain limitations on its investments and on the nature of its income. See Item
10.4 - Taxes.
Non-Diversified Status. The Fund is classified as non-diversified
within the meaning of the 1940 Act, which means that the Fund is not limited by
the 1940 Act in the proportion of its assets that it may invest in securities of
a single issuer. Because the Fund may invest a larger portion of its assets in
the securities of a single issuer than a diversified fund, an investment in the
Fund may be subject to greater fluctuations in value than an investment in a
diversified fund.
Tax Status. The Fund must meet a number of requirements, described
under Item 10.4 - Taxes to qualify as a RIC and, if qualified, to continue to
qualify. If the Fund experiences difficulty in meeting the diversification
requirement for any fiscal quarter, it might accelerate capital calls or
borrowings in order to increase the portion of the Fund's total assets
represented by cash, cash items, and U.S. government securities as of the close
of the following fiscal quarter and thus attempt to meet the diversification
requirement. However, the Fund would incur additional interest and other
expenses in connection with any such accelerated borrowings, and increased
investments by the Fund in cash, cash items, and U.S. government securities
(whether the funds to make such investments are derived from called equity
capital or from accelerated borrowings) are likely to reduce the Fund's return
to investors. Furthermore, there can be no assurance that the Fund would be able
to meet the diversification requirements through such actions. Failure to
qualify as a RIC would subject the Fund's distributed and undistributed income
to federal income taxation, and in a year in which the Fund has taxable income
or net realized gain, would have a significant adverse effect on the return to
investors. See Item 10.4 - Taxes.
Risks of Whole Loans. While Whole Loans in which the Fund will invest
generally will have a higher yield than Mortgage-Backed Securities, holders of
such interests may bear a greater risk of loss arising from a default on the
part of the borrower of the underlying loans than do holders of Mortgage-Backed
Securities. This is because Whole Loans, unlike most Mortgage-Backed Securities,
generally are not backed by any government guarantee or private credit
enhancement. Such risk may be greater during a period of declining or stagnant
real estate values. In addition, individual loans underlying Whole Loans may be
larger than those underlying Mortgage-Backed Securities. There may be certain
costs and delays in the event of a foreclosure, and there is no assurance that
the subsequent sale of the property will produce an
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amount equal to the sum of the unpaid principal balance of the loan as of the
date the borrower went into default, accrued but unpaid interest and all
foreclosure expenses, in which case the Fund may suffer a loss.
The Managers will themselves or through third parties hired on their
behalf, with respect to the Fund's investments in Whole Loans, review to the
extent practicable the documents generated in connection with the underlying
loans with a view towards determining, among other things, that: (i) the Fund
upon purchase or acquisition thereof will acquire valid loans (or interests
therein) and a perfected security interest in the property securing the loans;
(ii) there are no claims to the property superior to that of the underlying
mortgage or contract holder (except, in the case of second mortgage loans, those
of the first mortgage holders); and (iii) the Fund's purchase or acquisition
will not give rise to rights on the part of third parties, the exercise of which
could adversely affect the Fund. It may, however, be impracticable for the
Managers to examine prior to purchase every relevant document within the limited
due diligence period afforded by the financial institution selling or
contributing the loans, and in some cases the document files may not be
well-maintained and important documents or contracts may be missing. The
Managers will make certain assumptions regarding the rate and severity of
defaults on the mortgages or installment sales contracts underlying Whole Loans
purchased by the Fund and will determine the acquisition price for such
investments accordingly. There can be no assurance, however, that the actual
rate and/or severity of defaults will not be greater than that anticipated by
the Managers.
Interest Rate Risk. Because the prices of the Fund's assets will
fluctuate with changes in prevailing interest rates, the net asset value of the
Fund's Shares can also fluctuate in relation to interest rate changes. When
interest rates decline, the value of a portfolio invested substantially in fixed
income securities can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested substantially in fixed-income securities can
be expected to decline. The values of securities rated in the lower rating
categories generally fluctuate more than those of securities rated on the higher
rating category.
Prepayment Risk. The yield characteristics of mortgage-related assets
differ from traditional debt securities. The major differences typically include
more frequent interest and principal payments (usually monthly) and the
possibility that prepayments of principal may be made at any time. As a result,
if the Fund purchases a security at a premium, a prepayment rate that is faster
than expected will reduce yield to maturity while a prepayment rate that is
slower than expected will increase yield to maturity. Conversely, if the Fund
purchases the securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Prepayment rates are influenced by changes in current interest rates and a
variety of other economic, geographic, social and other factors.
Amounts available for reinvestment by the Fund are likely to be greater
during a period of declining interest rates than during a period of rising
interest rates as prepayments on the loans or other collateral underlying the
securities in which the Fund has invested result in prepayments of the Fund's
securities. The yield on the securities in which such amounts are reinvested is
likely to be lower than the yield on the securities that were prepaid or the
yield that could be achieved if such amounts were reinvested during a time of
rising interest rates. Mortgage-
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<PAGE> 13
Related Assets may decrease in value as a result of increases in interest rates
and may benefit less than other fixed income securities from declining interest
rates because of the risk of prepayment.
Credit Risk. All investments purchased by the Fund will be medium to
high quality. Credit risk is the possibility that the issuer of a security, or
the counterparty to a contract, will default or otherwise become unable to honor
a financial obligation. Generally speaking, the lower a security's credit
rating, the higher its credit risk. If a security's credit rating is downgraded,
its price tends to decline sharply, especially as it becomes more probable that
the issuer will default. Although credit risk for the Fund should generally be
low, there can be no assurance that the credit rating of an investment will
remain unchanged over the period of the Fund's ownership of that investment.
b. Effects of Leverage
Not applicable.
8.4. Other Policies
The Fund may also invest in the following types of securities:
Asset-Backed Securities. Asset-Backed Securities are securities that
directly or indirectly represent a participation in or are secured by and
payable from a pool of assets representing the obligation of a number of
different parties.
The securitization techniques used to develop Mortgage-Backed
Securities are now being applied to a broad range of assets. Through the use of
trusts and special purpose corporations, various types of assets, primarily
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above or in
a pay-through structure similar to the CMO structure.
In general, the collateral supporting Asset-Backed Securities is of
shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Furthermore, the effect of prepayments on securities
that have shorter maturities such as Asset-Backed Securities is much smaller
than the effect of prepayments on securities having longer maturities such as
Mortgage-Backed Securities. As with Mortgage-Backed Securities, Asset-Backed
Securities are often backed by a pool of assets representing the obligations of
a number of different parties and use similar credit enhancement techniques.
Asset-Backed Securities do not have the benefit of the same security
interest in the related collateral as do Mortgage-Backed Securities. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit cards,
thereby reducing the balance due. Most issuers of automobile receivables permit
the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest
13
<PAGE> 14
superior to that of the holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a perfected security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
Corporate Debt Securities. Corporate Debt Securities are fixed income
securities of United States corporations, which securities, at the time of
investment, are rated BBB or higher by S&P or, if unrated, determined by the
Managers to be of comparable quality. Securities rated in the four highest
categories as assigned by S&P (BBB or higher) are considered "investment grade;"
however, securities rated "BBB" have speculative characteristics. S&P's
description of securities rated "BBB" states that whereas such securities
"normally exhibit 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 in higher rated
categories."
The values of Corporate Debt Securities typically will fluctuate in
response to general economic conditions, to changes in interest rates and, to a
greater extent than the values of Mortgage-Backed Securities, to business
conditions affecting the specific industries in which the issuers are engaged.
Corporate Debt Securities will decrease in value as a result of increases in
interest rates.
Money Market Mutual Funds. The Fund may invest in the securities of
money market mutual funds to the extent permitted by the 1940 Act. Currently,
the 1940 Act permits a Fund to invest up to 5% of its total assets in the shares
of one investment company, but it may not own more than 3% of the securities of
any one registered investment company or invest more than 10% of its assets in
the securities of other investment companies.
Municipal Securities. The Fund may invest in municipal securities,
which are interest-paying debt securities issued by municipal issuers. The
income from municipal securities is generally exempt from federal taxation,
which causes such securities to have lower yields than taxable securities of
comparable quality and maturity. The Fund does not intend to purchase municipal
securities the income from which is not exempt from federal income tax.
There are variations in the credit quality of municipal obligations,
depending on numerous factors. The yields and market values of municipal
obligations are dependent on a variety of factors, including general economic
and monetary conditions, money market factors, conditions of the municipal
obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue.
Other Investments. From time to time, the Fund may also invest in other
investments, not previously listed, that a California state chartered
non-Federal Reserve member bank may invest in, including, but not limited to,
bullion and mint certificates, obligations of foreign governments and their
political sub-divisions, and railroad bonds.
14
<PAGE> 15
OTHER INVESTMENT PRACTICES
The following discussion describes in greater detail some of the other
investment management practices that the Fund may employ from time to time to
earn income, facilitate portfolio management and mitigate risk.
Derivative Instruments - Interest Rate Transactions. To preserve a
return or spread on a particular investment or portion of its portfolio, or for
other non-speculative purposes, the Fund may enter into interest rate swaps and
the purchase or sale of interest rate caps and floors. The Fund does not intend
to use these transactions for speculative purposes. Interest rate swaps involve
the exchange by the Fund with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate payments for fixed
rate payments. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from the
party selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such interest rate
floor.
The Fund may enter into interest rate swaps, caps and floors on either
an asset-based or liability-based basis, depending upon whether it is hedging
its assets or its liabilities, and will usually enter into interest rate swaps
on a net basis, i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims paying ability of the
other party thereto is rated at least A by S&P or, if unrated, determined by the
Managers to be of comparable quality. The Managers will monitor the
creditworthiness of counterparties on an ongoing basis. If there is a default by
the other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. The Managers have determined that, as a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
There is no limit on the amount of interest rate swap transactions that
may be entered into by the Fund. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive. The aggregate purchase price of caps and floors held by the Fund may
not exceed 5% of the Fund's total assets.
Forward Commitments. The Fund may make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time ("forward
commitments") if it holds, and maintains until the settlement date in a
segregated account, cash or high-grade debt obligations in
15
<PAGE> 16
an amount sufficient to meet the purchase price, or if it enters into offsetting
contracts for the forward sale of other securities it owns. Forward commitments
may be considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Fund's other
assets. Where such purchases are made through dealers, the Fund relies on the
dealer to consummate the sale. The dealer's failure to do so may result in the
loss to the Fund of an advantageous yield or price. Although the Fund will
generally enter into forward commitments with the intention of acquiring
fixed-income securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment prior to
settlement if the Managers deem it appropriate to do so. The Fund may realize
short-term capital gains or losses upon the sale of forward commitments.
Repurchase Agreements. The Fund may enter into repurchase agreements
with respect to up to 25% of its total assets (taken at current value). A
repurchase agreement is a contract under which the Fund acquires a security for
a relatively short period (usually not more than one week) subject to the
obligation of the seller to repurchase and the Fund to resell such security at a
fixed time and price (representing the Fund's cost plus interest). It is the
Fund's present intention to enter into repurchase agreements only with
commercial banks and registered broker-dealers. Repurchase agreements may also
be viewed as loans made by the Fund which are collateralized by the securities
subject to repurchase. The Managers will monitor such transactions to ensure
that the value of the underlying securities will be at least equal at all times
to the total amount of the repurchase obligations, including the interest
factor. If the seller defaults, the Fund could realize a loss on the sale of the
underlying security to the extent that the proceeds of sale including accrued
interest are less than the resale price provided in the agreement including
interest. In addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the Fund may incur delay and costs in selling the
underlying security or may suffer a loss of principal and interest if the Fund
is treated as an unsecured creditor and required to return the underlying
collateral to the seller's estate.
Reverse Repurchase Agreements. Under a reverse repurchase agreement,
the Fund sells securities and agrees to repurchase them at a mutually agreed
upon date and price. Reverse repurchase agreements involve the risk that the
market value of the securities retained in lieu of sale by the Fund may decline
more than or appreciate less than the securities the Fund has sold but is
obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities and the Fund's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decisions. Reverse repurchase agreements create leverage, a
speculative factor, and will be considered borrowings for purposes of the Fund's
limitation on borrowing.
16
<PAGE> 17
DEFENSIVE STRATEGIES
At times the Managers may judge that conditions in the markets for
mortgage-related assets and other fixed-income securities make pursuing the
Fund's basic investment strategy inconsistent with the best interests of its
Shareholders. At such times the Managers may use alternative strategies,
primarily designed to reduce fluctuations in the value of the Fund's assets. In
implementing these "defensive" strategies, the Fund may invest substantially all
of its assets in high-quality fixed-income obligations such as U.S. Treasury
Securities; commercial paper; certificates of deposit and bankers' acceptances;
repurchase agreements with respect to any of the foregoing investments; or any
other fixed-income securities that the Managers consider consistent with such
strategy including the use of interest rate derivative transactions. It is
impossible to predict when, or for how long, the Fund will use these alternative
strategies.
8.5. Share Price Data
Not Applicable.
8.6. Business Development Companies
Not Applicable.
ITEM 9. MANAGEMENT
9.1. General
(a) BOARD OF TRUSTEES. The Trustees set broad policies for the Fund and
choose its officers. The Fund has five (5) Trustees. No more than 60% of the
Trustees are "interested persons" of the Fund, as defined in the 1940 Act.
(b) INVESTMENT MANAGER. The Fund's investment managers are Henry Peng,
Jesse Kung, and Yu-Ching Lau. The Managers are also employees of Chinatrust Bank
(U.S.A.). Mr. Peng is currently the President and Chief Executive Officer of
Chinatrust Bank (U.S.A.). Mr. Peng has over 8 years of experience managing
fixed-income securities. He holds a B.A. degree in Economics from Soochow
University and a Masters degree in Economics from the Chinese Culture
University. Mr. Kung is currently the Senior Executive Vice President and Chief
Operating Officer of Chinatrust Bank (U.S.A.). Mr. Kung has over 5 years of
experience managing fixed-income securities. He holds a B.A. degree in Business
Administration from National Taiwan University and a Masters degree in Business
Administration from Northern Illinois University. Ms. Lau is currently the
Executive Vice-President and Chief Financial Officer of Chinatrust Bank
(U.S.A.). Ms. Lau has over 21 years of experience managing fixed-income
securities. She holds a B.S. degree in Business Administration from National
Taiwan University and a Masters of Business Administration degree in Accounting
and Finance from the University of California, Los Angeles.
There is no management contract between the Fund and the Managers.
Subject to such policies as the Trustees may determine, the Managers furnish
continuously an investment
17
<PAGE> 18
program for the Fund, make investment decisions on behalf of the Fund, including
determination of the Fund's net asset value, but excluding transfer agency
services, and place all orders for the purchase and sale of the Fund's portfolio
securities.
The Fund will not pay the Managers any compensation for the services
rendered and expenses borne by the Managers.
As an employee of the Fund, the Managers shall not be subject to any
liability to the Fund or to any shareholder of the Fund for any act or omission
in the course of or connected with rendering services to the Fund in the absence
of the Managers' willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
The Managers may be terminated without penalty by vote of the Trustees
or the Shareholders of the Fund. The continuance of the Managers will be
considered at least annually by vote of either the Trustees or the Shareholders,
and, in either case, by a majority of the Trustees who are not "interested
persons" of China Trust Holdings Corp. or the Fund.
(c) PORTFOLIO MANAGER. The Fund's portfolio managers will be Henry
Peng, Jesse Kung, and Yu-Ching Lau. See Item 9.1 (b) above.
(d) ADMINISTRATOR. Not Applicable.
(e) CUSTODIAN. Chinatrust Bank (U.S.A.) (the "Bank"), located at 22939
Hawthorne Boulevard, Torrance, California 90505, will serve as the Fund's
custodian, fund accountant, transfer agent, and dividend disbursing agent.
(f) EXPENSES
The Fund's service providers bear all expenses in connection with the
performance of their respective services, except that the Fund will bear the
following expenses relating to its operations: taxes, interest, brokerage fees
and commissions, if any, fees and travel expenses of Trustees who are not
partners, officers, Trustees, shareholders or employees of China Trust Holdings
Corp. or any of its subsidiaries other than the Fund, Securities and Exchange
Commission fees and state fees and expenses, certain insurance premiums, outside
and, to the extent authorized by the Fund, inside auditing and legal fees and
expenses, fees and reasonable out-of-pocket expenses of the custodian and
transfer agent, expenses incurred for pricing securities owned by the Fund,
costs of maintenance of corporate existence, costs and expenses of Shareholders'
and Trustees' reports and meetings and any extraordinary expenses.
(g) AFFILIATED BROKERAGES
None.
9.2. Non-resident Managers
Not Applicable.
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<PAGE> 19
9.3. Control Persons
As of November 13, 2000, Chinatrust Bank (U.S.A.), a wholly-owned
subsidiary of China Trust Holdings Corp., owned 100% of the outstanding Shares
of the Fund.
ITEM 10. CAPITAL STOCK, LONG-TERM DEBT, AND OTHER SECURITIES
10.1. Capital Stock
The Fund's units of beneficial interest ("Shares") have no preemptive,
conversion, exchange or redemption rights. Each Share has equal voting rights.
Shareholders are entitled to one vote per Share. All voting rights for the
election of Trustees are non-cumulative, which means that the holders of more
than 50% of the Shares can elect 100% of the Trustees then nominated for
election if they choose to do so and, in such event, the holders of the
remaining Fund's Shares will not be able to elect any Trustees. The Fund's
Shares outstanding are and those offered hereby, when issued, will be fully paid
and non-assessable. The rights of the Fund's shares with respect to dividends
and distributions are described in this Item 10.1 under Dividends and
Distributions. Each Share is entitled to participate equally in the net
distributable assets of the Fund upon liquidation or termination.
This offering of the Shares has been approved by the Board of Trustees of the
Fund. The Fund may from time to time sell additional Shares. Any additional
offering will be subject to the requirements of the 1940 Act that Shares may not
be sold at a price below the then current net asset value, exclusive of sales
loads and commissions, except in connection with an offering to existing
shareholders or with consent of the holders of a majority of the Fund's
outstanding voting securities.
REPURCHASE OF SHARES
Since the Fund is a closed-end investment company, Shareholders of the
Fund do not, and will not, have the right to redeem their Shares. It is not
expected that any trading market in Shares of the Fund will ever emerge.
Although the Fund has no present intention to do so, the Fund may, from
time to time, consider repurchasing its Shares or to tender for its Shares at
their net asset value. The Fund currently has no established tender offer or
share repurchase program, and no established schedule for considering the
adoption of such programs. No assurance can be given that the Fund will, in
fact, decide to undertake any tender offers or share repurchases in the future.
Subject to the Fund's investment restrictions with respect to
borrowings and subject to the Fund's compliance with the 1940 Act, the Fund may
incur debt to finance repurchases and/or tenders. See Item 8.2 - Investment
Objectives and Policies: Investment Restrictions. Interest on any such
borrowings will reduce the Fund's net investment income.
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<PAGE> 20
Although share repurchases and tenders could have a favorable effect
for the owners of the Fund's Shares, it should be recognized that the
acquisition of Shares by the Fund will decrease the total assets of the Fund
and, therefore, will have the effect of increasing the Fund's expense ratio.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to make annual distributions to Shareholders from net
investment income. Net investment income of the Fund consists of all interest
and other income (excluding capital gains and losses) accrued on portfolio
assets less all expenses of the Fund allocable thereto. Expenses of the Fund are
accrued each day. It is currently anticipated that amounts which economically
represent net realized long-term capital gains, if any, will be distributed to
Shareholders at least annually.
To permit the Fund to maintain a more stable annual distribution, the
Fund may from time to time pay out less than the entire amount of available net
investment income and net realized short-term capital gains to Shareholders
earned in any particular period. Any such amount retained by the Fund would be
available to stabilize future distributions. As a result, the distributions made
by the Fund for any particular period may be more or less than the amount of net
investment income and net realized short-term capital gains actually earned by
the Fund during such period. For information concerning the tax treatment of
such dividends and distributions to Shareholders, see Item 10.4 - Taxes. The
Fund intends, however, to make such distributions as are necessary for it to
qualify as a regulated investment company that is not subject to federal tax.
10.2. Long-Term Debt
None.
10.3. General
None.
10.4. Taxes
The following discussion is based on the advice of KPMG LLP, and
reflects provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing Treasury regulations and IRS published rulings, as of the date
of this Registration Statement.
The following is a general summary of certain of the United States
federal income tax laws relating to the Fund. This discussion is based on the
Code, regulations thereunder, published rulings, procedures and announcements
and court decisions as of the date hereof. The tax law, as well as the
implementation thereof, is subject to change, and any such change might
interfere with the Fund's ability to qualify as a RIC or, if the Fund so
qualifies, to maintain such qualification. This discussion does not purport to
deal with all of the United States federal income tax consequences applicable to
the Fund or to all categories of investors, some of whom
20
<PAGE> 21
may be subject to special rules. In addition, it does not address state, local,
foreign or other taxes to which the Fund or its investors may be subject, or any
proposed changes in applicable tax laws. Investors should consult their tax
advisers with respect to an investment in Fund Shares, including in particular
with respect to the new regulations concerning disclosure of arrangements a
significant effect of which is to reduce corporate federal income tax liability.
TAXATION OF THE FUND AS AN ORDINARY CORPORATION.
It is anticipated that the Fund will seek to meet the requirements to
qualify for the special pass-through status available to RICs under the Code,
and thus to be relieved of federal income tax on that part of its net investment
income and realized capital gains that it distributes to shareholders. If the
Fund's status as a RIC is not respected, it should be taxed as an ordinary
corporation on its taxable income for that year and assuming certain ownership
requirements are met, should be included in the Federal consolidated return of
its corporate shareholder. There is no assurance that the Fund will meet the
requirements to qualify as a RIC, or that the shareholders will be entitled to
the benefits of ownership of shares of a RIC.
TAXATION OF THE FUND AS A RIC
RIC Qualification Requirements. To qualify as a RIC, the Fund must be
registered under the 1940 Act as an investment company (which in the opinion of
Fund counsel, Ropes & Gray, the Fund became so registered upon the filing of its
Form N-8A with the U.S. Securities and Exchange Commission on August 30, 2000).
The Fund must also distribute to its shareholders for each taxable year at least
90% of its investment company taxable income (consisting generally of net
investment income and net short-term capital gain) and must meet several
additional requirements. It should be noted that a distribution of warrants or
equity investments of the Fund will be treated as a sale by the Fund of such
assets with the excess of the fair market value of those assets over their tax
basis being the amount of the income or gain to the Fund. Among the requirements
are the following: (a) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to loans or
securities and gains from the sale or other disposition of securities or other
income derived with respect to its business of investing in securities; (b) the
Fund must diversify its assets so that, at the close of each quarter of the
Fund's taxable year, (i) not more than 25% of the market value of its total
assets is invested in the securities of a single issuer, or in the securities of
two or more issuers that the Fund controls and that are engaged in the same or
similar trades or businesses or related trades or businesses, and (ii) at least
50% of the market value of its total assets is represented by cash, cash items,
government securities, securities of other RICs and other securities (with each
investment in such other securities limited so that not more than 5% of the
market value of the Fund's total assets is invested in the securities of a
single issuer and the Fund does not own more than 10% of the outstanding voting
securities of a single issuer); and (c) the Fund must file an election to be
treated as a RIC. If, after initially qualifying as a RIC, the Fund fails to
qualify for treatment as a RIC for a taxable year, it would be taxed as an
ordinary corporation on its taxable income for that year and, assuming certain
ownership requirements are met, it should be included in the Federal
consolidated return of its corporate shareholder. In such a case, there could be
substantial tax and other costs associated with re-qualifying as a RIC. However,
under the final version of the applicable regulations expected to be adopted,
the foregoing should not apply
21
<PAGE> 22
upon requalification so long as the Fund had qualified as a RIC for at least one
taxable year period prior to such disqualification, and had remained
disqualified for only one taxable year.
The Fund will be subject to a non-deductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year at least 98% of
its ordinary income for such calendar year and 98% of its capital gain net
income for the one-year period ending on October 31 of such calendar year, plus
certain other amounts. For these purposes, any taxable income retained by the
Fund, and on which it pays federal income tax, will be treated as having been
distributed.
The Fund currently intends to distribute in each year for which it
qualifies as a RIC substantially all of its net investment income and capital
gain net income so as to not be subject to federal income or excise taxes.
TAXATION OF THE FUND'S SHAREHOLDERS IF THE FUND QUALIFIES AS A RIC
General. Dividends paid to shareholders that are attributable to the
Fund's net investment income will be taxable to shareholders as ordinary income.
Capital gain distributions are taxable as long-term capital gains regardless of
how long the shareholder has held the shares. It is not anticipated that any
portion of the Fund's dividends will qualify for the dividends-received
deduction for shareholders in respect of their Fund dividends.
Distributions are generally taxable to shareholders at the time the
distribution is received. Any distribution, however, declared by the Fund in
October, November or December, made payable to shareholders of record in such a
month and paid the following January, is deemed paid by the Fund and received by
shareholders on December 31 of the year declared. This will prevent the
application of the excise tax, discussed above, to the Fund as a result of the
delay in the payment of the dividends.
If, for any calendar year, the Fund's total distributions exceed its
net investment income and net capital gains, the excess will generally be
considered a tax-free return of capital to a shareholder to the extent of the
shareholder's adjusted tax basis in its shares and then as capital gain. The
amount treated as tax-free return of capital will reduce the adjusted tax basis
of a shareholder's shares, thereby increasing the potential gain or reducing the
potential loss on the sale of the shares.
In general, upon the sale or other disposition of shares of the Fund by
a shareholder, the shareholder will recognize a gain or loss equal to the
difference between the amount realized on the sale and the seller's adjusted tax
basis in the shares. Any loss realized will be disallowed to the extent the
seller has acquired (or entered into a contract to acquire) substantially
identical shares within a period beginning 30 days before the disposition of
shares and ending 30 days after the disposition. In such case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Gain or loss
realized upon sale of shares or interest generally will be treated as a capital
gain or loss. The gain or loss will be a long-term capital gain or loss if the
shares were held for more than one year. In addition, if the shares sold by a
shareholder were not held for more than six months, any loss on the sale will be
treated as long-term capital loss to the extent of any capital gain dividend
received by the shareholder with respect to such shares.
22
<PAGE> 23
The Fund is required to withhold 31% of reportable payments (which may
include dividends and capital gain distributions) to individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number or who otherwise are subject to backup
withholding. The certification of a shareholder's taxpayer identification number
will be provided to the Fund.
Federal withholding taxes at a rate of 30% (or a lesser treaty rate)
may apply to distributions to shareholders of the Fund who are nonresident
aliens or foreign limited liability companies, trust or corporations. The rules
governing United States federal income taxation of foreign shareholders and
members of a partnership are complex, and prospective non-U.S. owners should
consult with their own tax advisors to determine the impact of federal, state
and local income tax laws with regard to an investment in shares, including any
reporting requirements.
Individuals and certain other persons who are shareholders will be
required to include in their gross income an amount of certain Fund expenses
relating to the production of gross income that are allocable to the Fund. These
shareholders, therefore, will be deemed to receive gross income from the Fund in
excess of the distributions they actually receive. Such allocated expenses may
be deductible by an individual shareholder as a miscellaneous itemized
deduction, subject to the limitation on miscellaneous itemized deductions not
exceeding 2% of adjusted gross income.
The Fund will notify its shareholders following the end of each
calendar year of the amounts of dividends and capital gain distributions paid or
deemed paid during the year.
In certain circumstances the IRS may disallow the federal income tax
benefits provided by a particular arrangement when the arrangement significantly
reduces or postpones corporate tax liability, or when tax avoidance is a
significant purpose of the arrangement. Shareholders should consult their tax
advisers about the availability of the benefits anticipated through investment
in the Fund, and possible disclosure obligations relating to that investment.
10.5. Outstanding Securities
<TABLE>
<CAPTION>
Amount Held by Amount Outstanding Exclusive
Amount Registrant or for its of Amount Shown Under
Title of Class Authorized Account Previous Column
-------------------- ------------------- ----------------------- --------------------------
<S> <C> <C> <C>
Units of Unlimited None 8,651,103
beneficial interest
</TABLE>
10.6. Securities Ratings
None.
23
<PAGE> 24
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES
11.1. None.
11.2. None.
ITEM 12. LEGAL PROCEEDINGS.
None.
PART B
ITEM 16. GENERAL INFORMATION AND HISTORY
Not Applicable.
ITEM 17. INVESTMENT OBJECTIVE AND POLICIES
See Item 8.2 Investment Objective and Policies.
ITEM 18. MANAGEMENT
18.1 through 18.3. Management Information.
TRUSTEES AND OFFICERS
The Trustees of the Fund are responsible for the general oversight of
the Fund's business. The Trustees and executive officers of the Fund and their
principal occupations during the last five years are set forth below. The
mailing address of each of the officers and Trustees is 22939 Hawthorne
Boulevard, Torrance, California 90505, unless otherwise indicated.
<TABLE>
<CAPTION>
Present principal occupation and principal
Name Position with Fund occupation during the past five years
---- ------------------ ------------------------------------------
<S> <C> <C>
*Jeffrey L. S. Koo Trustee and Chairman From 1999 to present, Chairman, CTC Bank of Canada;
Age: 67 from 1997 to present, Chairman, Chinatrust Bank
(U.S.A.) and Chairman, P.T. Bank Chinatrust Tamara;
from 1996 to present, Chairman, Chinatrust
(Phillippines) Commercial Bank; from 1992 to 1997,
Chairman, Chinatrust Commercial Bank (Taiwan)
*Henry Peng Trustee and President From March 1995 to present, President and Chief
Age: 53 Executive Officer, Chinatrust Bank (U.S.A.)
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C>
Nick Chen From 1988 to present, Vice-President, Sharp
Age: 34 Trustee Industries; from 1988 to present, Vice-President,
Santec Corporation
Sherry Chen Trustee From 1998 to present, Associate Product Manager,
Age: 28 Mattel, Inc.; from 1996 to 1998, MBA Candidate, The
Anderson School at UCLA; from 1994 to 1996, Marketing
Assistant, Arthur Andersen LLP
Clark Hsu Trustee From 1999 to present, President, Microtek Lab, USA;
Age: 30 from 1997 to 1998, Vice-President of Special
Projects, Microtek Lab, USA; from 1995 to 1997, MBA
Candidate, the Anderson School at UCLA
Yu-Ching Lau Chief Financial Officer From 2000 to present, Executive Vice President and
Age: 53 Chief Financial Officer, Chinatrust Bank (U.S.A.);
from 1997 to 1999 Senior Vice President and Chief
Financial Officer, Chinatrust Bank (U.S.A.); from
1991 to 1997, Senior Vice President and Chief
Financial Officer, Preferred Bank
Helen Lin Corporate Secretary From 2000 to present, First Vice President and
Age: 35 Manager of Human Resources and General Affairs,
Corporate Secretary, Chinatrust Bank (U.S.A.); from
1995 to 1999, Vice President and Manager of Human
Resources and General Affairs, Corporate Secretary,
Chinatrust Bank (U.S.A.)
Jesse Kung Senior Executive From 2000 to present, Senior Executive Vice President
Age: 45 Vice President and Chief Operating Officer of Chinatrust Bank
(U.S.A.); from 1995 to 1999, Executive Vice President
and Chief Operating Officer, Chinatrust Bank
(U.S.A.); from January 1993 to March 1995, Executive
Vice President, Grand Pacific Financing Corporation
</TABLE>
--------------------
* Trustees who are "interested persons" (as defined in the 1940 Act) of
the Fund or China Trust Holdings Corp.
25
<PAGE> 26
Except as stated below, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such employers.
None of the Trustees are trustees of any other funds associated with
China Trust Holdings Corp. Each Trustee of the Fund that is not an interested
person will receive a fee of $1,500 for each Trustees' meeting attended. It is
anticipated that there will be at least four meetings each year.
The Declaration of Trust of the Fund provides that the Fund will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Fund, unless it is determined in the manner specified in the
Declaration of Trust that they have not acted in good faith in the reasonable
belief that their actions were in the best interests of the Fund or that such
indemnification would relieve any officer or Trustee of any liability to the
Fund or its shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
18.4 Compensation Information
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Pension or
Retirement Estimated Total
Aggregate Benefits Accrued Annual Compensation
Compensation As Part of Benefits Upon From the Fund
NAME, POSITION From Fund Fund Expenses Retirement Paid to Trustees
-------------- --------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Jeffrey L. S. Koo None None None None
Trustee
Henry Peng None None None None
Trustee
Nicholas Chen $3,000 None None $3,000
Trustee
Sherry Chen Hsu $3,000 None None $3,000
Trustee
Clark Hsu $3,000 None None $3,000
Trustee
</TABLE>
(1) Figures are estimated amounts for the Fund's fiscal year ending December 31,
2000.
26
<PAGE> 27
18.5 Code of Ethics
The Fund has adopted a Code of Ethics ("Code") under Rule 17j-1 of the
Investment Company Act, and this Code permits personnel subject to the Code to
invest in securities, including securities that may be purchased or held by the
Fund.
This Code can be reviewed and copied at the Commission's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at (202) 942-8090. This
Code is available on the EDGAR Database on the Commission's Internet site at
http://www.sec.gov. Copies of this Code may be obtained, after paying a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference Section,
Washington, D.C. 20549-0102.
ITEM 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
19.1. As of November 13, 2000, Chinatrust Bank (U.S.A.), a California
corporation, whose principal office is located at 22939 Hawthorne Boulevard,
Torrance, California 90505, owns 100% of the voting shares of the Registrant.
Chinatrust Bank (U.S.A.) is a wholly-owned subsidiary of China Trust Holdings
Corp., which is a bank holding company that is a Delaware corporation whose
principal office is located at 366 Madison Avenue, New York, New York 10017. As
of June 30, 2000, China Trust Holdings Corp. had assets of approximately
$1,388,312,000.
19.2. See 19.1 above.
19.3. None.
ITEM 20. INVESTMENT ADVISORY AND OTHER SERVICES
1-6. See Item 9 - Management.
7. The Fund will provide audited annual financial statements to its
Shareholders. For the Fund's first fiscal year, the independent auditors engaged
to audit the Fund's financial statements are KPMG LLP, 355 South Grand Avenue,
Los Angeles, California 90071; thereafter the selection of independent auditors
by the Fund's Trustees will be ratified annually by Shareholders at the Fund's
annual meeting.
8. See Item 9 - Management.
ITEM 21. BROKERAGE ALLOCATION AND OTHER PRACTICES
INVESTMENT DECISIONS
27
<PAGE> 28
Investment decisions for the Fund are made with a view to achieving its
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold by the Managers even though it could
have been bought or sold for Chinatrust Bank (U.S.A.) at the same time.
Likewise, a particular security may be bought by the Managers when Chinatrust
Bank (U.S.A.) is selling the security. There may be circumstances when purchases
or sales of portfolio securities by the Managers for Chinatrust Bank (U.S.A.)
will have an adverse effect on the Fund.
BROKERAGE AND RESEARCH SERVICES
Whole Loans, mortgage-related assets and other fixed-income securities
will generally be acquired by the Fund from the issuer thereof in
privately-negotiated transactions not involving payment of brokerage
commissions. The Fund may occasionally pay a commission or other fee to an
unaffiliated third party for brokerage or referral services. Some fixed-income
securities may be purchased through dealers on a "net" basis without a stated
commission.
ITEM 22. TAX STATUS
See Item 10.4 - Taxes.
ITEM 23. FINANCIAL STATEMENTS
28
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholder
CTB Securities Trust Fund:
We have audited the accompanying statement of assets and liabilities of the CTB
Securities Trust Fund (the Fund) as of August 30, 2000. This financial statement
is the responsibility of the Fund's management. Our responsibility is to express
an opinion on the financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the statement of
assets and liabilities is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall statement of assets and liabilities presentation. We
believe that our audit of the statement of assets and liabilities provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the CTB
Securities Trust Fund as of August 30, 2000 in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
October 27, 2000
<PAGE> 30
CTB SECURITIES TRUST FUND
Statement of Assets and Liabilities
August 30, 2000
<TABLE>
<S> <C>
Assets - cash $ 1,000
=============
Net assets represented by units of beneficial interest $ 1,000
=============
Units outstanding ($100 par value) 10
=============
Net asset value per unit $ 100
=============
</TABLE>
See accompanying note to statement of assets and liabilities.
CTB SECURITIES TRUST FUNDS
Note to Statement of Assets and Liabilities
August 30, 2000
CTB Securities Trust Fund (the Fund), a business trust under the laws of the
Commonwealth of Massachusetts, is registered under the Investment Company Act of
1940, as amended, as a nondiversified closed-end management investment company.
The Fund is an indirect wholly owned subsidiary of Chinatrust Bank (U.S.A). As
of the date of this report, the Fund consisted of the initial capital
contribution of $ 1,000 and the issuance of the initial units. All organization
costs have been borne by Chinatrust Bank (U.S.A.).
3
<PAGE> 31
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
(a) Included in Part A None.
(b) Included in Part B Statement of Assets and Liabilities as of
August 30, 2000
(2) (a) Declaration of Trust of CTB Securities Trust Fund dated
August 28, 2000 is filed herewith.
(b) Bylaws of CTB Securities Trust Fund are filed herewith.
(c) None.
(d) The following portions of the Fund's Declaration of Trust
filed as exhibit 2(a) hereto, defines the rights of
shareholders:
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The Trustees may, without
Shareholder approval, authorize one or more classes of Shares (which classes may
be divided into two or more series), Shares of each such class or series having
such preferences, voting powers and special or relative rights or privileges
(including conversion rights, if any) as the Trustees may determine and as shall
be set forth in the Bylaws. The number of Shares of each class or series
authorized shall be unlimited except as the Bylaws may otherwise provide. The
Trustees may from time to time divide or combine the Shares of any class or
series into a greater or lesser number without thereby changing the
proportionate beneficial interest in the class or series.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
transfer of Shares and similar matters. The record books of the Trust as kept by
the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each class or, series and as to the
number of Shares of each class or series held from time to time by each
Shareholder.
Section 4. No Preemptive Rights. Shareholders shall have no preemptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
31
<PAGE> 32
Section 5. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this Declaration of Trust or the Bylaws. Every Shareholder by virtue of
having become a Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the Bylaws and to have become a
party thereto. The death of a shareholder during the continuance of the Trust
shall not operate to terminate the same nor entitle the representative of any
deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust property or right to
call for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally any Shareholder, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE IV
The Trustees
Section 1. Election and Tenure. The initial Trustee shall be Joseph
Germain. The Trustees may fix the number of Trustees, fill vacancies in the
Trustees, including vacancies arising from an increase in the number of
Trustees, or remove Trustees with or without cause. Each Trustee shall serve
during the continued lifetime of the Trust until he or she dies, resigns or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. Any Trustee may resign at any time by written instrument signed
by him or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose and to the extent required
by applicable law, including paragraphs (a) and (b) of Section 16 of the 1940
Act.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt Bylaws not inconsistent
with this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders of one or more classes or series. Subject
to the voting power of one or more classes or series of Shares as set forth in
the Bylaws, the Trustees may fill vacancies in or add to their number, and may
elect and remove such officers and appoint and
32
<PAGE> 33
terminate such agents as they consider appropriate; they may appoint from their
own number, and terminate, any one or more committees consisting of two or more
Trustees, including an executive committee which may, when the Trustees are not
in session, exercise some or all of the power and authority of the Trustees as
the Trustees may determine; they may employ one or more custodians of the assets
of the Trust and may authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems for the central
handling of securities, retain a transfer agent or a Shareholder servicing
agent, or both, provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various matters, and in general
delegate such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust except as
otherwise provided in Article IX, Section 5;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or otherwise;
(f) To the extent necessary or appropriate to give effect to the
preferences, special or relative rights and privileges of any classes
or series of Shares, to allocate assets, liabilities, income and
expenses of the Trust to a particular class or classes or series of
Shares or to apportion the same among two or more classes or series;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of
which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer,
and to pay calls or subscriptions with respect to any security held in
the Trust;
(h) To join other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any
33
<PAGE> 34
security to, any such committee, depositary or trustee, and to delegate
to them such power and authority with relation to any security (whether
or not so deposited or transferred) as the Trustees shall deem proper,
and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees
shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(k) To borrow funds or other property;
(l) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any of or all
such obligations;
(m) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including without limitation, insurance policies insuring
the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment
advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all
of the Trustees, officers, employees and agents of the Trust; and
(o) To purchase or otherwise acquire Shares.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by Trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any
action to be taken by the Trustees may be taken by a majority of the
Trustees present at a meeting of the Trustees (a quorum being present),
within or without Massachusetts, including any meeting held by means of
a conference
34
<PAGE> 35
telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in
person at a meeting, or by written consent of a majority of the
Trustees then in office.
Section 6. Advisory, Management and Distribution. Subject to such
requirements and restrictions as may be set forth in the Bylaws, the Trustees
may, at any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services with any corporation, trust, association or
other organization (the "Manager"), every such contract to comply with such
requirements and restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with such requirements
and restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is
a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or
agent of or for any corporation, trust, association, or other
organization, or of or for any parent or affiliate of any
organization, with which an advisory or management contract,
or principal underwriter's or distributor's contract, or
transfer, Shareholder servicing or other agency contract may
have been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal
underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract may have been
or may hereafter be made also has an advisory or management
contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency
contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests
(iii) shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer, of the Trust
from voting upon or executing the same or create any liability
or accountability to the Trust or its Shareholders.
ARTICLE V
35
<PAGE> 36
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the voting powers of one or more
classes or series of Shares as set forth in this Declaration of Trust or in the
Bylaws, the Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Article IV, Section 1, (ii) for the removal of Trustees
as provided in Article IV, Section 1, (iii) with respect to any manager as
provided in Article IV, Section 6, (iv) with respect to any termination of this
Trust to the extent and as provided in Article IX, Section 4, (v) with respect
to any merger, consolidation or sale of assets of the Trust to the extent and as
provided in Article IX, Section 5, (vi) with respect to any conversion of the
Trust as provided in Article IX, Section 6, (vii) with respect to any amendment
of this Declaration of Trust to the extent and as provided in Article IX,
Section 9, (viii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders, and (ix) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the Bylaws or any registration of the Trust with the Securities and
Exchange Commission (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. Notwithstanding any other
provision of this Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall, except as
otherwise provided in the Bylaws, be voted in the aggregate as a single class
without regard to classes or series of Shares. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares of any class or
series are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such class or series.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 and for such other purposes as may be prescribed by law,
by this Declaration of Trust or by the Bylaws. Meetings of the Shareholders may
also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Notice of any meeting of Shareholders, stating the time and place of
the meeting, shall be given or caused to be given by the Trustees to each
Shareholder by mailing such notice, postage prepaid, at least seven days before
such meeting, at the Shareholder's address as it appears on the records of the
Trust, or by facsimile or other electronic transmission, at least seven days
before such meeting, to the telephone or facsimile number or e-mail or other
electronic address most recently furnished to the Trust (or its agent) by the
Shareholder. Whenever notice of a meeting is
36
<PAGE> 37
required to be given to a Shareholder under this Declaration of Trust or the
Bylaws, a written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the records of
the meeting, shall be deemed equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by law, by the Bylaws or by this Declaration of Trust, 40% of the
Shares entitled to vote shall constitute a quorum at a Shareholders' meeting.
When any one or more Series or classes is to vote as a single class separate
from any other Shares which are to vote on the same matters as a separate class
or classes, 40% of the Shares of each such class entitled to vote shall
constitute a quorum at a Shareholders' meeting of that class. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is present, and the
meeting may be held as adjourned within a reasonable time after the date set for
the original meeting without further notice. When a quorum is present at any
meeting, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws or by law. If any question
on which the Shareholders are entitled to vote would adversely affect the rights
of any Series or class of Shares, the vote of a majority (or such larger vote as
is required as aforesaid) of the Shares of such Series or class which are
entitled to vote, voting separately, shall also be required to decide such
question.
Section 4. Action by Written Consent. Any action taken by Shareholders
may be taken without a meeting if a majority of Shareholders entitled to vote on
the matter (or such different proportion thereof as shall be required by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series or class who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than 90 days before the date of any meeting of
Shareholders, as the record date for determining the Shareholders of such Series
or class having the right to notice of and to vote at such meeting and any
adjournment thereof, and in such case only Shareholders of record on such record
date shall have such right, notwithstanding any transfer of Shares on the books
of the Trust after the record date. For the purpose of determining the
Shareholders of any Series or class who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be on or before the date for the payment of such dividend or
such other payment, as the record date for determining the Shareholders of such
Series or class having the right to receive such dividend or distribution.
Without fixing a record date the Trustees may for voting and/or distribution
purposes close the register or transfer books for one or more Series or classes
for all or any part of the period prior to a meeting of Shareholders or the
payment of a
37
<PAGE> 38
distribution. Nothing in this Section shall be construed as precluding the
Trustees from setting different record dates for different Series or classes.
Section 6. Additional Provisions. The Bylaws may include further
provisions, not inconsistent with this Declaration of Trust, regarding
Shareholders' voting powers, the conduct of meetings and related matters.
Section 7. Removal of Trustees. No natural person shall serve as
Trustee after the holders of record of not less than two-thirds of the
outstanding Shares have declared that such Trustee be removed from that office
either by declaration in writing filed with the Trust's custodian or by votes
cast in person or by proxy at a meeting called for the purpose. The Trustees
shall promptly call a meeting of Shareholders for the purpose of voting upon the
question of removal of any Trustee when requested in writing so to do by the
record holders of not less than 10 per centum of the outstanding Shares.
ARTICLE VI
Distributions
The Trustees shall each year, or more frequently if they so determine
in their sole discretion, distribute to the Shareholders of each class or series
such amounts as the Trustees may determine subject to the preferences, special
or relative rights and privileges of the various classes or series of Shares.
Any such distribution to the Shareholders of a particular class or series shall
be made to said Shareholders pro rata in proportion to the number of Shares of
such class or series held by each of them. Such distributions shall be made in
cash or Shares or other property or a combination thereof as determined by the
Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any officer,
agent, employee, manager or principal underwriter of the Trust, nor shall any
Trustee be responsible for the act of omission of any other Trustee, but nothing
herein contained shall protect any Trustee against any liability to which he or
she 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. Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
38
<PAGE> 39
ARTICLE VIII
Indemnification
Section 1. Trustees, Officers, etc. The Trust shall indemnify each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interest of the Trust or (b)
to be liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise or as fines or penalties), shall be paid from time
to time by the Trust in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article, provided, however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the Trust shall be
insured against. Losses arising from any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered Person will be found
entitled to indemnification under this Article.
Section 2. Compromise Payment. As to any matter disposed of (whether by
a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication by a court, or by any other body before which the proceeding was
brought, that such Covered Person either (a) did not act in good faith in the
reasonable belief that his or her action was in the best interests of the Trust
or (b) is liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, indemnification shall be provided
if (a) approved as in the best interests of the Trust, after notice that it
involves such indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the disinterested
Trustees then in office act on the matter) upon a determination, based upon a
review of readily available facts (as opposed to a full trial type inquiry) that
such Covered Person acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and is not
39
<PAGE> 40
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (b) there has been obtained an opinion in
writing of independent legal counsel, based upon a review of readily available
facts (as opposed to a full trial type inquiry), to the effect that such Covered
Person appears to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Trust and that such indemnification
would not protect such Covered Person against any liability to the Trust to
which he or she 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. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with this Section as indemnification if such Covered Person
is subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered Person's action
was in the best interests of the Trust or to have been liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Section 3. Indemnification Not Exclusive. The right of indemnification
hereby provided shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and administrators
and a "disinterested Trustee" is a Trustee who is not an "interested person" of
the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been
exempted from being an "interested person" by any rule, regulation or order of
the Securities and Exchange Commission) and against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending. Nothing contained in this
Article shall affect any rights to indemnification to which personnel of the
Trust, other than Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Section 4. Shareholders. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representative or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss and expense
arising from such liability.
ARTICLE IX
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim, and neither the Shareholders nor the Trustees, nor
any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any
40
<PAGE> 41
Trustee against any liability to which such Trustee would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officer or officers shall give notice that
this Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officer or officers and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recital as he or she or they may deem appropriate, but the omission
thereof shall not operate to bind any Trustee or Trustees or officer or officers
or Shareholder or Shareholders individually.
Section 5. Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of its
assets, including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose, or may liquidate or dissolve when and as authorized, by the
affirmative vote of the holders of not less than two-thirds of the Shares
entitled to vote, provided, however, that if such merger, consolidation, sale,
lease or exchange is recommended by two-thirds of the total number of Trustees
then in office, the vote of the holders of a majority of the Shares entitled to
vote shall be sufficient authorization. Nothing contained herein shall be
construed as requiring approval of the Shareholders for any sale of assets in
the ordinary course of business of the Trust. The provisions of this Section
shall be subject to the voting powers of one or more classes or series of Shares
as set forth in the Bylaws.
Section 6. Conversion. Subject to the voting powers of one or more
classes or series of Shares as set forth in the Bylaws, the Trust may be
converted at any time from a "closed-end company" to an "open-end" company as
those terms are defined in Section 5(a)(2) and 5(a)(1), respectively, of the
1940 Act, upon the approval of such a proposal, together with any necessary
amendments to the Declaration of Trust to permit such a conversion, by the
holders of two-thirds of the Shares entitled to vote, except that if such
proposal is recommended by two-thirds of the total number of Trustees then in
office, such proposal may be adopted by a vote of the majority of the Shares
entitled to vote.
Section 9. Amendments. Subject to the voting powers of one or more
classes or series of Shares, as set forth in the Bylaws, this Declaration of
Trust may be amended at any time by an instrument in writing signed by a
majority of the then Trustees (a) when authorized to do so by vote of
Shareholders holding a majority of the Shares entitled to vote, except that an
amendment amending or effecting the provisions of Section 1 of Article IV,
Section 4, 5 or 6 of this Article IX or this sentence shall require the vote of
Shareholders holding two-thirds of the Shares entitled to vote, or (b) without
Shareholder approval as may be necessary or desirable in order to authorize one
or more classes or series of Shares as provided in Section 1 of Article III.
Amendments having the purpose of changing the name of the Trust or of supplying
any
41
<PAGE> 42
omission, curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained herein shall not require
authorization by Shareholder vote.
(e) None.
(f) None.
(g) None.
(h) Not Applicable.
(i) None.
(j) Custodian Agreement between CTB Securities Trust Fund and
Chinatrust Bank (U.S.A.) dated as of August 30, 2000 is filed
herewith.
(k) Fund Accounting Agreement between CTB Securities Trust Fund and
Chinatrust Bank (U.S.A.) dated as of August 30, 2000 is filed
herewith.
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
(p) Purchase Agreement between CTB Securities Trust Fund and Henry Peng
dated as of August 30, 2000 is filed herewith.
(q) None.
(r) Code of Ethics of CTB Securities Trust Fund is filed herewith.
ITEM 25. MARKETING ARRANGEMENTS
None.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
None.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
See Chart Below
42
<PAGE> 43
<TABLE>
<S> <C>
OWNERSHIP STRUCTURE OF CTB SECURITIES TRUST FUND
CHINA TRUST HOLDINGS N.V. (NETHERLANDS ANTILLES CORPORATION)
Curacao Corporation Company N.V.
| |
| | (100% ownership)
| |
| CHINA TRUST CAPITAL A S (DENMARK CORPORATION)
(66.62% ownership) | |
| |
| | (100% ownership)
| |
| CHINA TRUST CAPITAL B.V. (NETHERLANDS CORPORATION)
| |
| | (33.38% ownership)
| |
CHINA TRUST HOLDINGS CORP. (DELAWARE CORPORATION)
|
(100% ownership) |
|
CHINATRUST BANK (U.S.A.) (CALIFORNIA CORPORATION)
|
(100% ownership) |
|
CTB SECURITIES TRUST FUND
(Massachusetts business trust)
</TABLE>
43
<PAGE> 44
ITEM 28. NUMBER OF HOLDERS OF SECURITIES OF THE FUND
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Units of beneficial interest 1
</TABLE>
ITEM 29. INDEMNIFICATION
Under Massachusetts law, holders of units of interest in a business
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. However, CTB Securities Trust Fund's
Declaration of Trust provides that Shareholders shall not be subject to any
personal liability for the obligations of CTB Securities Trust Fund, and that
every written agreement, obligation, instrument, or undertaking made by CTB
Securities Trust Fund shall contain a provision to the effect that the
Shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any Shareholder held
personally liable solely by reason of his or her being or having been a
Shareholder. The Declaration of Trust, as amended, also provides that CTB
Securities Trust Fund shall, upon request, assume the defense of any claim made
against any Shareholder for any act or obligation of CTB Securities Trust Fund,
and shall satisfy any judgment thereon. Thus, the risk of a Shareholder
incurring financial loss on account of Shareholder liability is limited to
circumstances in which CTB Securities Trust Fund itself would be unable to meet
its obligations.
The Declaration of Trust states further that no Trustee, officer, or
agent of CTB Securities Trust Fund shall be personally liable in connection with
the administration or preservation of the assets of the trust or the conduct of
CTB Securities Trust Fund's business, nor shall any Trustee, officer, or agent
be personally liable to any person for any action or failure to act except for
his own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his duties. The Declaration of Trust also provides that all persons having
any claim against the Trustees or CTB Securities Trust Fund shall look solely to
the assets of the trust for payment.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See Item 9 - Management.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
(1) Chinatrust Bank (U.S.A.), 22939 Hawthorne Boulevard,
Torrance, California 90505 (records relating to management of
the Fund and to Chinatrust Bank (U.S.A.)'s function as
custodian and transfer agent)
44
<PAGE> 45
(2) Ropes & Gray, One Franklin Square, 1301 K Street,
N.W., Suite 800 East, Washington, DC 20005 (the Registrant's
Declaration of Trust, Bylaws and Minute Books)
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. UNDERTAKINGS
Not Applicable.
45
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Torrance,
California on the 21st day of November, 2000.
CTB Securities Trust Fund
By: */s/ Henry Peng
---------------------------------------
Henry Peng
Trustee and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
*/s/ Jeffrey L. S. Koo Trustee and Chairman November 21, 2000
-----------------------
Jeffrey L. S. Koo
*/s/ Henry Peng Trustee and President November 21, 2000
-----------------------
Henry Peng
*/s/ Yu-Ching Lau Chief Financial Officer November 21, 2000
-----------------------
Yu-Ching Lau
*/s/ Nicholas Chen Trustee November 21, 2000
-----------------------
Nicholas Chen
*/s/Sherry Chen Hsu Trustee November 21, 2000
-----------------------
Sherry Chen Hsu
*/s/Clark Hsu Trustee November 21, 2000
-----------------------
Clark Hsu
*By: /s/ DAVID J. BAUM
------------------
David J. Baum
Attorney-In-Fact, pursuant to
powers of attorney filed herewith
46
<PAGE> 47
POWER OF ATTORNEY
Jeffrey L.S. Koo whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Jeffrey L.S. Koo and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
This Power of Attorney shall terminate on November 20, 2001, and shall
be revocable during this term.
Dated: November 20, 2000 /s/ Jeffrey L.S. Koo
---------------------------- ----------------------------
Jeffrey L.S. Koo
<PAGE> 48
POWER OF ATTORNEY
Henry Peng whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Henry Peng and/or officer of
the Fund any and all such amendments filed with the Securities and Exchange
Commission under said Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
Dated: November 14, 2000 /s/ Henry Peng
---------------------------- ----------------------------
Henry Peng
<PAGE> 49
POWER OF ATTORNEY
Yu-Ching Lau whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Yu-Ching Lau and/or officer
of the Fund any and all such amendments filed with the Securities and Exchange
Commission under said Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
Dated: November 14, 2000 Yu-Ching Lau
---------------------------- ----------------------------
Yu-Ching Lau
<PAGE> 50
POWER OF ATTORNEY
Nicholas Chen whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund(the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Nicholas Chen and/or officer
of the Fund any and all such amendments filed with the Securities and Exchange
Commission under said Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
Dated: November 14, 2000 /s/ Nicholas Chen
--------------------------- ---------------------------
Nicholas Chen
<PAGE> 51
POWER OF ATTORNEY
Sherry Chen Hsu whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund(the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Sherry Chen Hsu and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue thereof.
Dated: November 14, 2000 /s/ Sherry Chen Hsu
---------------------------- ---------------------------
Sherry Chen Hsu
<PAGE> 52
POWER OF ATTORNEY
Clark Hsu whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, David J. Baum, and Lisa N. Larkin, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable CTB Securities
Trust Fund(the "Fund"), to comply with the Investment Company Act of 1940, as
amended, ("the Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments to the Fund's Registration
Statement on Form N-2 pursuant to said Act, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign in the
name and on behalf of the undersigned as a director Clark Hsu and/or officer of
the Fund any and all such amendments filed with the Securities and Exchange
Commission under said Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
Dated: November 14, 2000 /s/ Clark Hsu
----------------------------- --------------------------
Clark Hsu
<PAGE> 53
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(2)(a) Declaration of Trust of CTB Securities Trust Fund dated as of
August 28, 2000.
(2)(b) Bylaws of CTB Securities Trust Fund.
(2)(j) Custodian Agreement between CTB Securities Trust Fund and
Chinatrust Bank (U.S.A.) dated as of August 30, 2000.
(2)(k) Fund Accounting Agreement between CTB Securities Trust Fund. and
Chinatrust Bank (U.S.A.) dated as of August 30, 2000.
(2)(p) Purchase Agreement between CTB Securities Trust Fund. and Henry
Peng dated as of August 30, 2000.
(2)(r) Code of Ethics of CTB Securities Trust Fund.
