<PAGE>
As filed with the Securities and Exchange
Commission on January 30, 1998
File Nos. 2-33889
and 811-01897
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No. 53 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940
Amendment No. 33 X
Fiduciary Management Associates
(Exact Name of Registrant as Specified in Charter)
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York l0105
(Name and address of agent for service)
It is proposed that this filing will become effective
(check appropriate box)
x immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (1)
<PAGE>
on (date) pursuant to paragraph (a) (1)
75 days after filing pursuant to paragraph (a) (2)
on (date) pursuant to paragraph (a) (2) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-lA Item No. Location in Prospectus (Caption)
PART A
Item 1. Cover Page.......................... Cover Page
Item 2. Synopsis............................ Expense
Information
Item 3. Condensed Financial Information..... Financial
Highlights
Item 4. General Description of Registrant... Description of the
Fund; General
Information
Item 5. Management of the Fund.............. Management of the
Fund; General
Information
Item 6. Capital Stock and Other Securities.. General
Information;
Dividends,
Distributions and
Taxes
Item 7. Purchase of Securities Being Offered. Purchase and
Redemption of
Shares; General
Information
Item 8. Redemption or Repurchase............. Purchase and
Redemption of
Shares
Item 9. Pending Legal Proceedings........... Not Applicable
Location in Statement
PART B of Additional Information (Caption)
Item 10. Cover Page.......................... Cover Page
Item 11. Table of Contents................... Cover Page
<PAGE>
Item 12. General Information and History..... Investment
Policies and
Restrictions;
Management of the
Fund; General
Information
Item 13. Investment Objectives and Policies.. Investment
Policies and
Restrictions
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Location in Statement
N-lA Item No. of Additional Information (Caption)
PART B (continued)
Item 14. Management of the Registrant........ Management of the
Fund
Item 15. Control Persons and Principal
Holders of Securities ............ Management of the
Fund
Item 16. Investment Advisory and
Other Services.................... Management of the
Fund
Item 17. Brokerage Allocation and
Other Practices................... Portfolio
Transactions
Item 18. Capital Stock and Other Securities... General
Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered........ Purchase and
Redemption of
Shares
Item 20. Tax Status.......................... Dividends,
Distributions and
Taxes
Item 21. Underwriters........................ General
Information
Item 22. Calculation of Performance Data..... General
Information
Item 23. Financial Statements................ Financial
Statements; Report
of Independent
Auditors
<PAGE>
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
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c/o Alliance Fund Services, Inc.
P.O. Box 1520 Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
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Fiduciary Management Associates--Growth Portfolio (the "Fund") is a diversi-
fied, open-end management investment company that seeks capital appreciation
by investing principally in equity securities. Current income is incidental to
the objective of capital growth. The Fund is designed for investors seeking
superior gains and willing to accept the relatively greater risks associated
with aggressive investment techniques.
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PURCHASE INFORMATION
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Shares of the Fund may be purchased only by investment management clients of
Alliance Capital Management L.P., the Fund's investment adviser (the "Advis-
er") or its affiliates and by institutional investors. The minimum initial in-
vestment is $5,000,000, except that investment management clients of the Ad-
viser or its affiliates may invest in any amount. There is no minimum for
subsequent investments. Further information can be obtained from Alliance Fund
Services, Inc., the Fund's transfer agent ("AFS" or the "Transfer Agent") at
the telephone number or address shown above.
An investment in the Fund is not a deposit or obligation of, or guaranteed or
endorsed by, any bank and is not federally insured by the Federal Deposit In-
surance Corporation, the Federal Reserve Board or any other agency.
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ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
This Prospectus sets forth concisely the information which a prospective in-
vestor should know about the Fund before investing. A "Statement of Additional
Information" dated February 2, 1998, which provides further information re-
garding certain matters discussed in this Prospectus and other matters which
may be of interest to some investors, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For a free copy,
call or write AFS, Inc. at the address or telephone number shown above.
(R)/SM : These are registerd marks used under licenses from the owner, Alli-
ance Capital Management L.P.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS/February 2, 1998
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
<PAGE>
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EXPENSE INFORMATION
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SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load or deferred sales load on purchases or reinvested
dividends.
The Fund has no redemption fee.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fees......................................................... .70%
12b-1 Fees.............................................................. None
Other Expenses.......................................................... .29%
----
Total Fund Operating Expenses............................................ .99%
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$10 $32 $55 $121
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Fund will bear di-
rectly or indirectly. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as man-
dated by Securities and Exchange Commission (the "Commission") regulations.
The Example should not be considered a representation of past or future ex-
penses; actual expenses may be greater or less than those shown.
2
<PAGE>
XFINANCIAL HIGHLIGHTS--GROWTH PORTFOLIO
PER SHARE INCOME AND CAPITAL CHANGES
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
The following information as to net asset value, ratios and certain supple-
mental data for each of the periods shown below has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose unqualified report thereon
(referring to financial highlights) for each of the five years in the period
ended September 30, 1997 appears in the Statement of Additional Information.
The following information should be read in conjunction with the financial
statements and related notes included in the Statement of Additional Informa-
tion.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $39.00 $32.90 $29.94 $31.29 $27.41 $30.93 $23.09 $40.61 $29.08 $47.26
------- -------- -------- -------- -------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss)................. (.14)(a) (.14) (.07) (.20) (.10) (.07) .07 .08 .11 (.02)
Net realized and
unrealized gain (loss)
on investments......... 7.39 11.75 7.51 (.93) 7.29 (2.24) 8.28 (10.45) 11.87 (8.08)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
in net asset value from
operations............. 7.25 11.61 7.44 (1.13) 7.19 (2.31) 8.35 (10.37) 11.98 (8.10)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net
investment income...... -0- -0- -0- -0- -0- (.07) (.10) (.07) (.05) -0-
Distributions from net
realized gains......... (12.48) (5.51) (4.48) (.22) (3.31) (1.14) (.41) (7.08) (.40) (10.08)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.......... (12.48) (5.51) (4.48) (.22) (3.31) (1.21) (.51) (7.15) (.45) (10.08)
------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year................... $33.77 $39.00 $32.90 $29.94 $31.29 $27.41 $30.93 $23.09 $40.61 $29.08
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN
Total investment return
based on net asset
value(b)............... 27.28% 41.04% 30.94% (3.63)% 27.79 % (7.52)% 37.03% (29.53)% 41.94% (9.51)%
======= ======== ======== ======== ======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000's omitted)........ $86,241 $160,441 $128,135 $106,435 $138,932 $129,188 $183,538 $130,082 $187,046 $135,357
Ratio of expenses to
average net assets..... .99 % 1.05 % 1.11 % .98 % .97 % .92 % .96% .90 % .96% .93 %
Ratio of net investment
income (loss) to
average net assets..... (.44)% (.40)% (.26)% (.42)% (.31)% (.19)% .25% .30 % .31% (.05)%
Portfolio turnover rate. 212 % 194 % 159 % 116 % 100 % 122 % 102% 87 % 101% 60 %
Average commission
rate(c)................ $ .0543 $ 0.0598 -- -- -- -- -- -- -- --
</TABLE>
- -------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and re-
demption on the last day of the period.
(c) For fiscal years beginning on or after September 1, 1995, a Fund is re-
quired to disclose an average commission rate per share for trades on
which commissions are charged.
Further information about the Fund's performance is contained in the Portfo-
lio's annual report to shareholders which may be obtained by shareholders
without charge by contacting AFS at the address or telephone number shown on
the cover of the Prospectus.
3
<PAGE>
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DESCRIPTION OF THE FUND
- --------------------------------------------------------------------------------
INTRODUCTION TO THE FUND
The Fund is a diversified, open-end management investment company commonly
known as a "mutual fund."
The Fund's investment objective is "fundamental" and cannot be changed with-
out shareholder vote. Except as noted, the Fund's investment policies are not
designated "fundamental policies" and may, therefore, be changed by the Trust-
ees without a shareholder vote. However, the Fund will not change its invest-
ment policies without contemporaneous written notice to shareholders. There
can be, of course, no assurance that the Fund will achieve its investment ob-
jective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to emphasize growth of capital. The
Fund's investments will be made based upon their potential for capital appre-
ciation. Therefore, current income will be incidental to the objective of cap-
ital growth.
INVESTMENT POLICIES
Within this basic framework, the policy of the Fund will be to invest in any
companies and industries and in any type of securities which are believed to
offer possibilities for capital appreciation. Investments may be made in well-
known and established companies as well as in new and unseasoned companies,
but the Fund may invest in the securities of a new company with a record of
less than three years of continuous operation only if immediately thereafter
less than 10% of the Fund's assets are invested in the securities of such new
companies.
The Fund will invest in both listed and unlisted securities and in foreign
as well as domestic securities. While the Fund has no present intention of in-
vesting any significant portion of its assets in foreign securities, it re-
serves the right to invest in foreign securities if purchase thereof would not
cause more than 15% of the value of the Fund's total assets, at the time of
purchase, to be invested in foreign securities.
Critical factors which will be considered in the selection of securities
will include the economic and political outlook, the values of individual se-
curities relative to other investment alternatives, trends in the determinants
of corporate profits, and management capability and practices. Generally
speaking, disposal of a security will be based upon factors such as (i) actual
or potential deterioration of the issuer's earning power which the Fund be-
lieves may adversely affect the price of the issuer's securities, (ii) in-
creases in the price level of the security or of securities generally which
the Fund believes reflect earnings growth too far in advance, and (iii)
changes in the relative opportunities offered by various securities.
It is expected that under normal circumstances substantially all of the
Fund's assets will be invested in equity securities (common stocks, securities
convertible into common stocks or rights or warrants to subscribe for or pur-
chase common stocks). The Fund at times may also invest in debt securities and
preferred stocks offering a significant opportunity for price appreciation.
The average dollar weighted maturity of the Fund's portfolio of debt securi-
ties is expected to vary between 1 and 30 years.
The Fund may invest in warrants which entitle the holder to buy equity secu-
rities at a specific price for a specific period of time. Warrants may be con-
sidered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the se-
curities which may be purchased nor do they represent any rights in the
4
<PAGE>
assets of the issuing company. Also, the value of a warrant does not necessar-
ily change with the value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to the expiration date.
Defensive Position. When business or financial conditions warrant, the Fund
may assume a temporary defensive position and invest without limit in invest-
ment grade debt securities or preferred stocks or hold its assets in cash
equivalents. Such cash equivalents may include (i) obligations of the U.S.
Government and its agencies or instrumentalities, (ii) certificates of depos-
it, bankers' acceptances and interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are members of the Federal De-
posit Insurance Corporation, and (iii) commercial paper of prime quality rated
A-1 or higher by Standard & Poor's Ratings Services ("S&P") or Prime-1 or
higher by Moody's Investors Services, Inc. ("Moody's") or, if not rated, is-
sued by companies which have an outstanding debt issue rated A or higher by
Moody's or S&P.
Restricted Securities. The Fund may invest in restricted securities (i.e.,
securities that must be registered under the Securities Act of 1933 before
they may be offered or sold to the public) and in other assets having no ready
market if such purchases at the time thereof would not cause more than 10% of
the value of the Fund's net assets to be invested in all such restricted or
not readily marketable (or other illiquid) assets. Unless so registered, re-
stricted securities may be sold only in privately negotiated transactions or
pursuant to Rule 144 or 144A under such Act.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." The Fund will actively use trading to achieve its investment ob-
jectives and policies, and the effect on its shareholders of the different tax
treatment of long and short-term capital gains will not be a factor in the
Fund's decision to dispose of any security. Accordingly, the Fund may be sub-
ject to a greater degree of turnover and, therefore, a higher incidence of
short-term capital gain taxable as ordinary income than might be expected from
investment companies which invest substantially all of their funds on a long-
term basis, and correspondingly larger brokerage or mark-up charges can be ex-
pected to be borne by the Fund. See "Dividends Distribution and Taxes" and
"General Information--Portfolio Transactions."
Certain Fundamental Investment Policies. To maintain portfolio diversifica-
tion and reduce investment risk, as a matter of fundamental policy, the Fund
may not: (i) invest more than 5% of the value of its total assets in the secu-
rities of any one issuer, other than securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, except that up to 25% of
the value of the Fund's total assets may be invested without regard to this
limitation; (ii) purchase the securities of any one issuer (other than the
U.S. government and its agencies or instrumentalities) if immediately after
and as a result of such purchase the Fund owns more than 10% of the outstand-
ing securities or of any one class of securities of such issuer; (iii) pur-
chase securities on margin, but it may obtain such short-term credits from
banks as may be necessary for the clearance of purchases and sales of securi-
ties; or (iv) borrow money except for the short-term credits from banks re-
ferred to in (iii) above and except for temporary or emergency purposes and
then only from banks and in an aggregate amount not exceeding 5% of the value
of its total assets at the time any such borrowing is made.
Year 2000. Many computer software systems in use today cannot properly proc-
ess date-related information from and after January 1, 2000. Should any of the
computer systems em -
5
<PAGE>
ployed by the Fund's major service providers fail to process this type of in-
formation properly, that could have a negative impact on the Fund's operations
and the services that are provided to the Fund's shareholders. The Adviser,
Alliance Fund Distributors, Inc, the Fund's principal underwriter ("AFD" or
the "Distributor,") and the Transfer Agent have advised the Fund that they are
reviewing all of their computer systems with the goal of modifying or replac-
ing such systems prior to January 1, 2000 to the extent necessary to foreclose
any such negative impact. In addition, the Adviser has been advised by the
Fund's custodian that it is also in the process of reviewing its systems with
the same goal. As of the date of this Prospectus, the Fund and its Adviser
have no reason to believe that these goals will not be achieved.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
ADVISER
Alliance Capital Management L.P., a Delaware limited partnership with prin-
cipal offices at 1345 Avenue of the Americas, New York, New York 10105, has
been retained under an advisory agreement (the "Advisory Agreement") to pro-
vide investment advice and, in general, to conduct the management and invest-
ment program of the Fund subject to the general supervision and control of the
Trustees. The employees of the Adviser principally responsible for the Fund's
investment program are Alden M. Stewart and Randall E. Haase, who are, respec-
tively, Vice Chairman and a Senior Vice President of Alliance Capital Manage-
ment Corporation ("ACMC"). Mr. Stewart has been associated with Alliance since
prior to 1993 and Mr. Haase has been associated with Alliance since 1993.
Prior thereto, Mr. Haase was associated with Equitable Capital.
The Adviser is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 of more than $217 billion (of
which approximately $81 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 56 registered investment companies managed by the Ad-
viser comprising 118 separate investment portfolios currently have over two
million shareholders. As of September 30, 1997, the Adviser was retained as an
investment manager of employee benefit fund assets for 28 of the Fortune 100
companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary of The Equi-
table Life Assurance Society of the United States ("Equitable"), one of the
largest life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company con-
trolled by AXA-UAP, a French insurance holding company. Certain information
concerning the ownership and control of Equitable by AXA-UAP is set forth in
the Fund's Statement of Additional Information under "Management of the Fund."
The Advisory Agreement between the Fund and the Adviser provides that the
Adviser will furnish advice and recommendations with respect to the Fund's
portfolio and will provide persons satisfactory to the Fund's Trustees to act
as officers and employees of the Fund. Such officers and employees, as well as
certain Trustees of the Fund, may be employees of the Adviser or its affili-
ates. For the services rendered by the Adviser under the Advisory Agreement,
the Fund pays a quarterly fee on the first business day of July, October, Jan-
uary and April in each year of .1875 of 1% (approximately .75 of 1% on an
annualized basis) of the Fund's net assets. For the fiscal year ended Septem-
ber 30, 1997, the Adviser received from the Fund, a fee equivalent to .75% of
the Fund's average net assets.
6
<PAGE>
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PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
Shares of the Fund are offered on a continuous basis at net asset value,
without any sales or other charge, directly by the Fund and by the Distribu-
tor, acting as agent for the Fund. The minimum for initial investments is
$5,000,000, except that investment management clients of the Adviser or its
affiliates may invest in any amount. There is no minimum for subsequent in-
vestments.
Shares of the Fund may be purchased only by investment management clients of
the Adviser or its affiliates and by institutional investors, which for this
purpose are persons other than (i) individuals, sole proprietors or profes-
sional corporations or (ii) individual retirement accounts and employer-spon-
sored retirement plans of the types commonly referred to as Keogh or H.R. 10
plans.
The subscriber should use the subscription application found at the back of
this Prospectus for its initial investment and enclose with the subscription
application a check in the amount of its subscription. Shareholders wishing to
purchase additional shares of the Fund should send a check payable to the Fund
directly to the Fund at the address listed on the cover of this Prospectus.
Orders for shares received by the Fund or by the Distributor prior to the
close of business on a Fund business day as defined below are priced at the
net asset value of shares of the Fund computed as of the close of regular
trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m.
New York time) on that day. If orders are received after the close of a Fund
business day, such orders are priced as of the close of regular trading on the
Exchange on the next succeeding Fund business day.
Full and fractional shares are credited to a subscriber's account in the
amount of its subscription. As a convenience to the subscriber, and to avoid
unnecessary expense to the Fund, certificates representing shares of the Fund
are not issued except upon written request of the shareholder. This facili-
tates later redemption and relieves the shareholder of the responsibility and
inconvenience of preventing the share certificates from becoming lost or sto-
len. No certificates are issued for fractional shares, although such shares
remain in the shareholder's account on the books of the Fund.
The Fund may refuse any order to purchase shares. In this regard, the Fund
reserves the right to restrict purchases of shares (including through ex-
changes) when there appears to be evidence of a pattern of frequent purchases
and sales made in response to short-term considerations.
REDEMPTION
The Fund redeems its shares at a redemption price equal to their net asset
value as next computed following the receipt of shares tendered for redemption
in proper form. There is no redemption charge. Proceeds generally will be sent
to you within seven days. However, for shares recently purchased by check or
electronic funds transfer, the Fund will not send proceeds until it is reason-
ably satisfied that the check or electronic funds transfer has been collected
(which may take up to 15 days).
To redeem shares of the Fund for which no share certificates have been is-
sued, the registered owner or owners should forward a letter to the Fund con-
taining a request for redemption. The signature or signatures on the letter
must be guaranteed by a national bank, other bank or by a savings and loan as-
sociation which is insured by the Federal Deposit Insurance Corporation or by
an institution that is an "eligible guarantor" as defined in Rule 17Ad-15 un-
der the Securities Exchange Act of 1934, as amended.
7
<PAGE>
To redeem shares represented by share certificates, the investor should for-
ward the appropriate share certificate or certificates, endorsed in blank or
with blank stock powers attached, to the Fund with the request that the shares
represented thereby, or a specified portion thereof, be redeemed. The stock
assignment form on the reverse side of each share certificate surrendered to
the Fund for redemption must be signed by the registered owner or owners ex-
actly as the registered name appears on the face of the certificate or, alter-
natively, a stock power signed in the same manner may be attached to the cer-
tificate or certificates or, where tender is made by mail, separately mailed
to the Fund. The signature or signatures on the assignment form must be guar-
anteed in the manner described above.
GENERAL
The Fund reserves the right to close out an account that through redemption
has remained below $1,000,000 for 90 days. Shareholders will receive 60 days'
written notice to increase the account value before the account is closed.
The net asset value per share for purchases and redemptions of shares of the
Fund is determined in accordance with the Fund's Agreement and Declaration of
Trust and By-Laws at the next close of regular trading on the Exchange (cur-
rently 4:00 p.m. New York time) following receipt of a purchase order or re-
demption order for shares, on any Fund business day on which such an order is
received and trading in the types of securities in which the Fund invests
might materially affect the value of its shares. A Fund business day is any
weekday exclusive of national holidays on which the Exchange is closed and
Good Friday. Net asset value per share is calculated by adding the market
value of all securities held in the Fund and other assets, subtracting the
Fund's liabilities incurred or accrued, and dividing by the number of shares
of the Fund outstanding.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Fund intends to distribute to shareholders, after the end of each fiscal
year of the Fund, substantially all of such Fund's net investment income for
such year.
Net capital gains realized during a fiscal year of the Fund will usually be
distributed to its shareholders after the end of such fiscal year.
U.S. FEDERAL INCOME TAXES
The Fund intends to qualify to be taxed as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, (the "Code"). Qualifica-
tion as a regulated investment company relieves the Fund of Federal income
taxes on the portion of its investment company taxable income and net capital
gain distributed to its shareholders. To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign curren-
cies, or certain other income (including but not limited to gains from op-
tions, futures and forward contracts) derived with respect to its business of
investing in stock, securities or currencies; and (ii) diversify its holdings
so that, at the end of each quarter of its taxable year, the following two
conditions are met: (a) at least 50% of the total value of the Fund's assets
is represented by cash, U.S. Government Securities, securities of other regu-
lated investment companies and other securities (for this purpose, such other
securities will qualify only if the Fund's investment is limited, in respect
of any one issuer, to an amount not greater than 5% of
8
<PAGE>
the Fund's total assets and 10% of the outstanding voting securities of such
issuer) and (b) not more than 25% of the total value of the Fund's assets is
invested in securities of any one issuer (other than U.S. Government Securi-
ties or securities of other regulated investment companies).
Each income dividend and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or reinvested in additional full and fractional shares of the
Fund. Election to receive dividends and distributions in cash or shares is
made at the time the shares are subscribed for and may be changed by notice
received by the Fund from a shareholder at least 30 days prior to the record
date for a particular dividend or distribution. There is no charge in connec-
tion with the reinvestment of dividends and capital gains distributions.
There is no fixed dividend rate and there can be no assurance that the Fund
will pay any dividends or realize any capital gains. The amount of any divi-
dend or distribution paid by the Fund must necessarily depend upon the reali-
zation by the Fund of income and capital gains from its investments. All divi-
dends and distributions will be made to shareholders solely from assets of the
Fund. Such dividends or distributions are subject to applicable taxes to the
extent that the investor is subject to such taxes.
For Federal income tax purposes, dividends of net ordinary income and dis-
tributions of any net realized short-term capital gain, whether paid in cash
or reinvested in shares of the Fund, are taxable to shareholders as ordinary
income. In the case of corporate shareholders, such dividends are eligible for
the dividends-received deduction, except that the amount eligible for the de-
duction is limited to the amount of qualifying dividends received by the Fund.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply
to net capital gains--that is, the excess of net gains from capital assets
held for more than one year over net losses from capital assets held for not
more than one year. One rate (generally 28%) applies to net gains on capital
assets held for more than one year but not more than 18 months ("mid-term
gains"), and a second rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such, re-
gardless of how long a shareholder has held shares in the Fund. Distributions
of net capital gains are not eligible for the dividends-received deduction re-
ferred to above.
A dividend or capital gains distribution with respect to Fund shares held by
a tax-deferred or qualified plan, such as a corporate pension or profit shar-
ing plan, generally will not be taxable to the plan. Distributions from such
plans will be taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the qualified plan.
Under current Federal income tax law, the amount of an income dividend or
capital gain distribution declared by the Fund during October, November and
December of a year to shareholders of record as of a specified date in such a
month that is paid during January of the following year is includable in the
prior year's taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of the Fund
will have the effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend or distribu-
tion made shortly after the purchase of such shares by a shareholder, although
in effect a return of capital to that particular shareholder, would be taxable
to the shareholder as described above. If a shareholder held shares for six
months or less and during that period received a distribution of net capital
gain, any loss realized on the sale of
9
<PAGE>
such shares during such six-month period would be a long-term capital loss to
the extent of such distribution.
Shareholders will be advised annually as to the Federal tax status of divi-
dends and capital gains distributions made by the Fund for the preceding year.
Distributions by the Fund may be subject to state and local taxes.
FOREIGN INCOME TAXES
Investment income received by the Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trustees of the Fund, the Adviser
is responsible for the investment decisions and the placing of the orders for
portfolio transactions for the Fund.
The Fund has no obligation to enter into transactions in portfolio securi-
ties with any broker, dealer, issuer, underwriter or other entity. In placing
orders, it is the policy of the Fund to obtain the best price and execution
for its transactions. Where best price and execution may be obtained from more
than one broker or dealer, the Adviser may, in its discretion, purchase and
sell securities through brokers and dealers who provide research, statistical
and other information to the Adviser. Such services may be used by the Adviser
for all of its investment advisory accounts and, accordingly, not all such
services may be used by the Adviser in connection with the Fund. There may be
occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Fund determines in good faith that
the amount of such transaction cost is reasonable in relation to the value of
the brokerage and research and statistical services provided by the executing
broker. The supplemental information received from a broker or dealer is in
addition to the services required to be performed by the Adviser under the Ad-
visory Agreement, and the expenses of the Adviser will not necessarily be re-
duced as a result of the receipt of such information. Consistent with the Con-
duct Rules of the National Association of Securities Dealers, Inc., and
subject to seeking best execution, the Fund may consider sales of its shares
as a factor in the selection of brokers and dealers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the purchase or sale of se-
curities with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the Adviser, and with brokers which may have their transactions
cleared or settled, or both, by the Pershing Division of DLJ for which DLJ may
receive a portion of the brokerage commission in accordance with Section 11(a)
of the Securities Exchange Act of 1934. In such instances, the placement of
orders with such brokers will be consistent with the Fund's objective of ob-
taining best price and execution and will not be dependent upon the fact that
DLJ is an affiliate of the Adviser.
CAPITALIZATION
The Fund was organized as a Delaware corporation on May 12, 1969 under the
name "Fiduciary Growth Associates, Incorporated." As of March 12, 1986, the
Fund was reorganized under its current name as a business trust under the laws
of Massachusetts. The Fund has an unlimited number of authorized shares of
beneficial interest, par value $.01 per share, which may, without shareholder
approval, be divided into an unlimited number of series. Shares of the Fund
are normally entitled to one vote for all purposes. Massachusetts law does not
require annual meetings of shareholders and it is anticipated
10
<PAGE>
that shareholder meetings will be held only when required by Federal law.
Shareholders have available certain procedures for the removal of Trustees.
Shares of the Fund are freely transferable, are entitled to dividends as de-
termined by the Trustees and, in liquidation of the Fund, are entitled to re-
ceive the net assets of the Fund. Shareholders have no pre-emptive rights.
DISTRIBUTOR
Alliance Fund Distributors, Inc., 1345 Avenue of the Americas, New York, New
York, 10105, the Fund's distributor, is an indirect wholly-owned subsidiary of
the Adviser. The Adviser may, from time to time and from its own resources,
make payments for distribution services to Alliance Fund Distributors, Inc.;
the latter may in turn pay part or all of such compensation to brokers (which
may include DLJ) or other persons for their distribution assistance.
CUSTODIANS
State Street Bank and Trust Company, 225 Franklin Street, Boston Massachu-
setts 02110, acts as custodian for the securities and cash of the Fund, but
plays no part in deciding on the purchase or sale of securities.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Alliance Fund Services, Inc., an indirect wholly-owned subsidiary of the Ad-
viser, located at 500 Plaza Drive, Secaucus, New Jersey 07094, is the Fund's
registrar, transfer agent and dividend-disbursing agent for a fee based upon
the number of shareholder accounts maintained for the Fund.
PERFORMANCE INFORMATION
From time to time the Fund advertises its "total return".
Advertisements of total return disclose the Fund's average annual compounded
total return for recent one, five and ten-year periods. The Fund's total re-
turn for such period is computed by finding, through the use of a formula pre-
scribed by the Commission, the average annual compounded rate of return over
the period that would equate an assumed initial amount invested to the value
of the investment at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on shares of the
Fund are assumed to have been reinvested when paid.
ADDITIONAL INFORMATION
Shareholder inquiries may be directed to the shareholder's broker or to Al-
liance Fund Services, Inc. at the address or telephone number listed on the
cover of this Prospectus. This Prospectus and the Statement of Additional In-
formation, which has been incorporated by reference herein, does not contain
all the information set forth in the Registration Statement filed by the Fund
with the Commission under the Securities Act of 1933, as amended. Copies of
the Registration Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the office of the Commission
in Washington, D.C.
11
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
12
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
SUBSCRIPTION APPLICATION
(SEE INSTRUCTIONS ON PAGE 15)
1. NAME (IMPORTANT: PLEASE PRINT)
-------------------------------------------- ----------------
-------------------------------------------- ----------------
Indicate name of corporation, other Tax Ident. No.
organization or fiduciary capacity; if
trustee, include date of trust instrument
2. ADDRESS
- ------------------------------------- -------------------------------------
street city state zip
- -------------------------------------
area code telephone
3. INITIAL INVESTMENT
We hereby subscribe for the largest number of full and fractional shares of
Fiduciary Management Associates that may be purchased with the enclosed check
or draft payable to Fiduciary Management Associates for $ .
[_] Growth Portfolio.
4. DISTRIBUTION OPTIONS
Income Dividends Capital Gains Distributions
- ------------------------------------- -------------------------------------
ELECT ONE ELECT ONE
[_] reinvest dividends [_] reinvest capital gains
[_] pay dividends in cash [_] pay capital gains in cash
If no election is made, dividends and capital gains will be automatically
reinvested in additional shares at net asset value.
5. SIGNATURE AND TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
WE CERTIFY UNDER PENALTY OF PERJURY THAT THE TAXPAYER IDENTIFICATION NUMBER
SHOWN IN PART 1 OF THIS FORM IS CORRECT AND THAT WE HAVE NOT BEEN NOTIFIED
THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATION TO AVOID BACK-UP WITHHOLDING.
We are of legal age and capacity and have received and read the Prospectus
and agree to its terms.
- --------------------------------- ---------------------
Authorized Signature date
- --------------------------------- --------------------- Acceptance Date:
Authorized Signature date ----
13
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
14
<PAGE>
INSTRUCTIONS FOR SUBSCRIPTION APPLICATION
OPENING YOUR ACCOUNT
Complete the application and mail it to:
Fiduciary Management Associates
P.O. Box 1520
Secaucus, New Jersey, 07096
Please enclose with your subscription application your check payable to Fi-
duciary Management Associates in the amount of your investment. The Fund will
not accept checks drawn on banks outside the United States.
MINIMUM INVESTMENTS
Except as provided in the Prospectus, the minimum initial investment is
$5,000,000, except that investment management clients of the Adviser or its
affiliates may invest in any amount. There is no minimum for subsequent in-
vestments.
REDEMPTIONS
Shares can be redeemed in any amount and at any time by the methods de-
scribed in the Prospectus. In the case of redemptions of shares recently pur-
chased by check, redemption proceeds will not be made available until the Fund
is reasonably assured that the check has cleared, normally up to fifteen cal-
endar days following the purchase date.
Certain legal documents will be required from corporations or other organi-
zations, executors and trustees, or if redemption is requested by anyone other
than the shareholder of record. If you have any questions concerning a redemp-
tion, contact Alliance Fund Services, Inc. toll-free at (800) 221-5672.
SIGNATURES--BE SURE TO SIGN THE APPLICATION
If shares are registered in the name of:
--a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
--a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).
15
<PAGE>
FMA PRO 2/97
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
<S> <C>
Expense Information 2
Financial Highlights 3
Description of the Fund 4
Management of the Fund 6
Purchase and Redemption of Shares 7
Dividends, Distributions and Taxes 8
General Information 10
Subscription Application 13
</TABLE>
INVESTMENT ADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
FIDUCIARY
------------------------
MANAGEMENT
------------------------
ASSOCIATES
------------------------
Prospectus and Application
February 2, 1998
[LOGO OF ALLIANCE CAPITAL APPEARS HERE]
<PAGE>
[LOGO] FIDUCIARY MANAGEMENT ASSOCIATES
c/o Alliance Fund Services, Inc.
P.O Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 2, 1998
_________________________________________________________________
This Statement of Additional Information is not a prospectus, but
supplements, and should be read in conjunction with the Fund's
current Prospectus. A copy of the Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or
telephone number shown above.
TABLE OF CONTENTS
Page
Investment Policies and Restrictions......................
Management of the Fund....................................
Purchase and Redemption of Shares.........................
Net Asset Value...........................................
Dividends, Distributions and Taxes........................
Portfolio Transactions....................................
General Information.......................................
Report of Independent Auditors and Financial
Statements................................................
Appendix A (Description of Obligations Issued or
Guaranteed by U.S. Government Agencies
or Instrumentalities)............................ A-1
Appendix B (Bond and Commercial Paper Ratings).............. B-1
Appendix C (Futures Contracts and Options on Futures
Contracts and Foreign Currencies)................ C-1
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
________________________________________________________________
The following investment policies and restrictions
supplement, and should be read in conjunction with the
information regarding the investment objectives, policies and
restrictions of the Fiduciary Management Associates-Growth
Portfolio (the "Fund") set forth in the Prospectus of the Fund.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of such percentage limitation.
Investment Policies
General. In seeking to attain its objective of capital
growth, the Fund will make investments based upon their potential
for capital appreciation. Therefore, current income will be
incidental to the objective of capital growth. There obviously
can be no assurance that the Fund's investment objective will be
achieved, and the nature of the Fund's investment objective and
policies may involve a somewhat greater degree of short-term risk
than would be present in a more conservative investment approach.
There is also no assurance that the Fund will at any
particular time engage in all or any of the investment activities
in which it is authorized to engage. In the opinion of the
Fund's management, however, the ability to engage in such a broad
range of activities provides an opportunity which is deemed to be
desirable in order to achieve the Fund's investment objective.
The Fund does not intend to concentrate its investments in any
one industry, but has reserved the right to invest up to 25% of
its assets in a particular industry.
The Fund may invest in both listed and unlisted domestic
and foreign securities, and in restricted securities, and in
other assets having no ready market, but not more than 10% of the
Fund's total assets may be invested in all such restricted or not
readily marketable assets at any one time. Restricted securities
may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under the Securities Act of 1933, as amended (the
"Securities Act") or pursuant to Rule 144 or 144A promulgated
2
<PAGE>
under such Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If during such a
period adverse market conditions were to develop, the Fund might
obtain a less favorable price than that which prevailed when it
decided to sell. Restricted securities and other not readily
marketable assets will be valued in such manner as the Trustees
of the Fund in good faith deem appropriate to reflect their fair
market value.
U.S. Government Securities. For a description of obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, see Appendix A.
Certificates of Deposit and Bankers' Acceptances. Certificates
of deposit are receipts issued by a depository institution in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited plus interest to the bearer of the receipt on
the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers'
acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally
guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting
bank as an earning asset or it may be sold in the secondary
market at the going rate of discount for a specific maturity.
Although maturities for acceptance can be as long as 270 days,
most acceptances have maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A
variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest
varying amounts. For a description of commercial paper ratings,
see Appendix B.
Illiquid Securities. The Fund has adopted the following
investment policy which may be changed by the vote of the
Trustees.
3
<PAGE>
The Fund will not invest in illiquid securities if
immediately after such investment more than 10% of the Fund's
total assets (taken at market value) would be invested in such
securities. In addition, the Fund will not maintain more than
15% of its net assets in illiquid securities. For this purpose,
illiquid securities include, among others, (a) securities that
are illiquid by virtue of the absence of a readily available
market or legal or contractual restriction on resale, (b) options
purchased by the Fund over-the-counter and the cover for options
written by the Fund over-the-counter and (c) repurchase
agreements not terminable within seven days.
Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act,
securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the
Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other
illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven
days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
During the coming year, the Fund may invest up to 5% of
its total assets in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration
"transactions by an issuer not involving any public offering."
Section 4(2) instruments are restricted in the sense that they
can only be resold through the issuing dealer and only to
4
<PAGE>
institutional investors; they cannot be resold to the general
public without registration.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. Alliance Capital Management L.P. (the
"Adviser") anticipates that the market for certain restricted
securities such as institutional commercial paper will expand
further as a result of this regulation and the development of an
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the NASD.
The Adviser, acting under the supervision of the
Trustees of the Fund, will monitor the liquidity of restricted
securities held by the Fund that are eligible for resale pursuant
to Rule 144A. In reaching liquidity decisions, the Adviser will
consider, inter alia, the following factors: (1) the frequency of
trades and quotes for the security; (2) the number of dealers
wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in
the security and; (4) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics
of the transfer).
Investment Restrictions
The following restrictions, which supplement those set
forth in the Prospectus, may not be changed without the approval
of a majority of the outstanding voting securities of the Fund
which means the vote of (i) 67% or more of the shares of the Fund
represented at a meeting at which more than 50% of the
outstanding shares of the Fund are represented or (ii) more than
50% of the outstanding shares of the Fund, whichever is less.
Whenever any investment restriction states a maximum percentage
of the Fund's assets which may be invested in any security or
other asset, it is intended that such maximum percentage
limitation be determined immediately after and as a result of the
Fund's acquisition of such securities or other assets.
Accordingly, any later increase or decrease in percentage beyond
the specified limitation resulting from a change in values or net
assets will not be considered a violation.
5
<PAGE>
The Fund may not:
1. Make loans of its funds or assets to any other
person, which shall not be considered as including
the purchase of a portion of an issue of publicly-
distributed debt securities; except that the
Portfolio may purchase non-publicly distributed
securities subject to the limitations applicable to
restricted or not readily marketable securities;
2. Purchase the securities of any other investment
company or investment trust, except by purchase in
the open market where to the best information of
the Fund no commission or profit to a sponsor or
dealer (other than the customary broker's
commission) results from such purchase, and such
purchase does not result in the securities of any
such issuer exceeding 5% of the value of the Fund's
assets, except when such purchase is part of a
merger, consolidation or acquisition of assets;
3. Act as underwriter of securities of other issuers,
except that, to the extent consistent with its
investment objective and policies, the Fund may
acquire restricted or not readily marketable
securities under circumstances where, if sold, the
Fund might be deemed to be an underwriter for
purposes of the Securities Act;
4. Invest in the securities of any issuer, other than
securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities,
which shall have a record of less than three years
of continuous operations (including the operation
of any predecessor) if such purchase at the time
thereof would cause more than 10% of the value of
the total assets of the Fund to be invested in the
securities of such issuer or issuers;
5. Pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings,
provided however, that this limitation does not
apply to deposits made in connection with the
entering into and holding of futures contracts;
6. Invest more than 10% of the value of its total
assets in the aggregate in illiquid investments;
7. Make short sales of securities;
6
<PAGE>
8. Purchase or sell real estate, commodities or
commodity contracts;
9. Participate on a joint or a joint and several basis
in any securities trading account; or
10. Invest in companies for the purpose of exercising
control.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Trustees (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1997 of more than $217 billion (of which
approximately $81 billion represented the assets of investment
companies). The Adviser's clients are primarily major corporate
employee benefit funds, public employee retirement systems,
investment companies, foundation and endowment funds. As of
September 30, 1997, the Adviser was an investment manager of
employee benefit fund assets for 28 of the FORTUNE 100 companies.
As of that date, the Adviser and its subsidiaries employed
approximately 1,500 employees who operated out of domestic
offices and the offices of subsidiaries in Bahrain, Bangalore,
Chennai, Istanbul, London, Madrid, Mumbai, Paris, Singapore,
Tokyo and Toronto and affiliate offices located in Vienna,
Warsaw, Hong Kong, Sao Paulo and Moscow. The 56 registered
investment companies comprising more than 118 separate investment
portfolios managed by the Adviser currently have more than two
million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
7
<PAGE>
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997,
Alliance Capital Management Corporation and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
subsidiary of Equitable, together with Equitable, owned in the
aggregate approximately 57% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays quarterly on the first business
day of July, October, January and April in each year of .1875 of
8
<PAGE>
1% (approximately .75 of 1% on an annualized basis) of the Fund's
net assets. For the fiscal years ended September 30, 1995, 1996
and 1997, respectively, the Adviser received advisory fees of
$833,866, $1,155,617 and $942,821 respectively.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement continues in effect for successive
twelve month periods computed from each October 1 with respect to
the Fund provided that such continuance is specifically approved
at least annually by the Trustees or by a majority vote of the
holders of the outstanding voting securities of such Fund, and,
in either case, by a majority of the Trustees who are not parties
to the Agreement or interested persons. Most recently, the
continuance of the Advisory Agreement until September 30, 1998
was approved by a vote cast in person of the Trustees, including
a majority of the Trustees who are not parties to the Advisory
Agreement or interested persons, at a meeting called for that
purpose and held on July 18, 1997. The Agreement may be
terminated with respect to any Fund at any time, without the
payment of any penalty, by vote of a majority of the outstanding
voting securities of the Fund, or by a vote of a majority of the
Trustees on 60 days' written notice to the Adviser, or by the
Adviser on 60 days' written notice to the Fund. The Advisory
Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Adviser, or of
reckless disregard of its obligations thereunder, the Adviser
shall not be liable for any action or failure to act in
accordance with its duties thereunder.
The Adviser pays from its own funds all advertising and
promotional expenses except that the Fund pays for printing of
prospectuses and other reports to existing shareholders and all
expenses and fees related to proxy solicitation and registrations
and filings with the Securities and Exchange Commission
("Commission") and with state regulatory authorities. The Fund
pays all other expenses incurred in its organization and
operation, as described in the Prospectus. As to the obtaining of
services other than those specifically provided to the Fund by
the Adviser, the Fund may employ its own personnel. For such
services, it also may utilize personnel employed by the Adviser
or its affiliates and, in such event, the services will be
provided to the Fund at cost and the payments therefor must be
specifically approved by the Fund's Trustees.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of the particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
9
<PAGE>
sold, there may be an adverse effect on price. It is the policy
of the Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the
Adviser to the accounts involved, including the Fund. When two or
more of the clients of the Adviser (including the Fund) are
purchasing the same security on a given day from the same broker-
dealer, such transactions may be averaged as to price.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of the Fund, plus reimbursement for out-of-pocket
expenses. For the fiscal year ended September 30, 1997, the Fund
paid Alliance Fund Services, Inc. $19,336 for transfer agency
services.
Trustees and Officers
The Trustees and officers of the Fund, their ages and
their principal occupations during the past five years are set
forth below. Each such Trustee and officer is also a trustee,
director or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the address
of each of the following persons is 1345 Avenue of the Americas,
New York, New York 10105.
Trustees
JOHN D. CARIFA,1 52, - Chairman of the Trustees, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1993.
RUTH BLOCK, 67, - was formerly Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco
Corporation (oil and gas). Her address is Box 4653, Stamford,
Connecticut, 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he was associated since prior to
1993 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1993. From
____________________
1. An "interested person" of the Fund as defined in the
Investment Company Act of 1940 (the "1940 Act").
10
<PAGE>
1987 to 1992, he was a Director of ACMC. His address is 105 West
55th Street, New York, New York 10019.
WILLIAM H. FOULK, JR., 65, is an investment advisor and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
prior to 1993. His address is 2 Hekma Road, Greenwich,
Connecticut 06831.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1993. He was formerly President of New York University, the New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 58, is a partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1993. He is Chief Executive Officer of Wenonah
Development Company (investments) and Director of Placer Dome,
Inc. (mining). His address is 80 Pine Street, New York, New York
10005.
DONALD J. ROBINSON, 63, was formerly a senior partner in
the law firm of Orrick, Herrington & Sutcliffe and is currently
senior counsel to that firm. His address is 599 Lexington Avenue,
26th Floor, New York, New York 10022.
Officers
JOHN D. CARIFA, Chairman, see biography above.
ALDEN M. STEWART, President, 51, has been an Executive
Vice President of ACMC since July 1993. Prior thereto he was
associated with Equitable Capital Management Corporation.
THOMAS J. BARDONG, Vice President, 52, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
RANDALL E. HAASE, Vice President, 32, has been a Vice
President of ACMC since July, 1993. Prior thereto he was
associated with Equitable Capital Management Corporation.
DANIEL V. PANKER, Vice President, 58, is a Senior Vice
President of ACMC, with which he had been associated since prior
to 1993.
11
<PAGE>
TIMOTHY D. RICE, Vice President, 31, is a Vice President
of ACMC with which he has been associated since prior to
1993.
EDMUND P. BERGAN, JR., Secretary, 47, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") with which he has been associated since prior to
1993.
DOMENICK PUGLIESE, Assistant Secretary, 36, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Holding Corporation since 1994
and Vice President and Associate General Counsel of Prudential
Securities since 1993.
ANDREW L. GANGOLF, Assistant Secretary, 43, has been a
Vice President and Assistant General Counsel of AFD since
December 1994. Prior thereto he was a Vice President and
Assistant Secretary of Delaware Management Company, Inc. since
October 1992 and a Vice President and Counsel to Equitable since
prior to 1993.
EMILIE D. WRAPP, Assistant Secretary, 42, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to
1993.
VINCENT S. NOTO, Controller, 33, is an Assistant Vice
President of AFS, with which he has been associated since
1993.
The aggregate compensation paid by the Fund to each of
the Trustees during its fiscal year ended September 30, 1997, the
aggregate compensation paid to each of the Trustees during
calendar year 1997 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies in the Alliance Fund Complex
with respect to which each of the Trustees serves as a director
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Trustees is a director or trustee of one or more other registered
investment companies in the Alliance Fund Complex.
12
<PAGE>
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance within the
Total Fund Complex, Alliance Fund
Compensation Including the Complex
From the Fund, as to including the
Aggregate Alliance Fund which the Fund,as to which
Compensation Complex, Trustee is a the Trustee
Name of Trustee From the Including the Director or is a Director
of the Fund Fund Fund Trustee or Trustee
John D. Carifa $ -0- $ -0- 54 118
Ruth Block $2,328 $163,997 40 80
David H. Dievler $2,330 $188,526 47 83
John H. Dobkin $2,288 $127,775 44 80
William H. Foulk, Jr. $2,352 $174,996 48 113
Dr. James Hester $2,332 $156,499 40 76
Clifford L. Michel $1,947 $194,499 41 92
Donald J. Robinson $2,315 $235,500 41 94
As of January 12, 1998, the Trustees and officers of the Fund as
a group owned less than 1% of the shares of the Fund.
________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________
General
Shares of the Fund are offered at net asset value,
without any sales or other charge, on a continuous basis directly
by the Fund and Alliance Fund Distributors, Inc., the Fund's
Distributor, acting as agent for the Fund. The minimum for
initial investments is $5,000,000, except that investment
management clients of the Adviser or its affiliates may invest in
any amount. There is no minimum for subsequent investments.
Shares of the Fund may be purchased only by
institutional investors, which for this purpose are persons other
than (i) individuals, sole proprietors or professional
corporations or (ii) individual retirement plans of the types
commonly referred to as Keogh or H.R. 10 plans.
The net asset value per share of shares of the Fund is
computed in accordance with the Fund's Agreement and Declaration
of Trust and By-Laws, at the next close of regular trading on the
New York Stock Exchange (the "Exchange") (currently 4:00 p.m. New
13
<PAGE>
York time) following receipt of a purchase or redemption for
shares of the Fund, on the Fund business day on which such an
order is received and trading in the types of securities in which
the Fund invests might materially affect the value of its shares.
A Fund business day is any weekday exclusive of national holidays
on which the Exchange is closed and Good Friday. Net asset value
per share of the Fund is calculated by adding the market value of
all securities held in the Fund and other assets, subtracting the
Fund's liabilities incurred or accrued, and dividing by the
number of shares of the Fund outstanding.
The subscriber should use the subscription application
found in the back of the Prospectus for its initial investment
and enclose with the subscription application a check in the
amount of its subscription. Shareholders wishing to purchase
additional shares of the Fund should send a check payable to the
Fund directly at the address listed on the cover of the
Prospectus or this Statement of Additional Information.
Orders for shares of the Fund received by the Fund or by
Alliance Fund Distributors, Inc. prior to the close of business
of the Exchange on each day the Exchange is open for trading are
priced at the net asset value of shares of the Fund computed as
of the close of regular trading on the Exchange on that day. If
orders are received after the close of regular trading on the
Exchange or on a day on which it is not open for trading, such
orders are priced as of the close of regular trading on the
Exchange on the next succeeding date on which the Exchange is
open for trading. The Fund reserves the right to reject any
subscription in its sole discretion or to suspend the sale of its
shares to the public in response to market conditions or for
other reasons.
Full and fractional shares are credited to a
subscriber's account in the amount of his subscription. As a
convenience to the subscriber, and to avoid unnecessary expense
to the Fund, certificates representing shares of the Fund are not
issued except upon written request of the shareholder or his
authorized selected dealer or selected agent. This facilitates
later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen
certificates. No share certificates are issued for fractional
shares, although such shares remain in the shareholder's account
on the books of the Fund.
Redemption
Subject only to the limitations described below, the
Fund's Agreement and Declaration of Trust requires that the Fund
redeem the shares of the Fund as described below, at a redemption
price equal to their net asset value as next computed following
14
<PAGE>
the receipt of shares tendered for redemption in proper form.
There is no redemption charge. Payment of the redemption price
will be made within seven days after the Fund's receipt of such
tender for redemption.
To redeem shares of the Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
To redeem shares represented by share certificates, the
investor should forward the appropriate share certificate or
certificates, endorsed in blank or with blank stock powers
attached, to the Fund with the request that the shares
represented thereby, or a specified portion thereof, be redeemed.
The stock assignment form on the reverse side of each share
certificate surrendered to the Fund for redemption must be signed
by the registered owner or owners exactly as the registered name
appears on the face of the certificate or alternatively, a stock
power signed in the same manner may be attached to the
certificate or certificates or, where tender is made by mail,
separately mailed to the Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described above.
The right of redemption shall be exercisable by a tender
made by surrendering the appropriate share certificate or
certificates, endorsed in blank or with blank stock powers
attached, to the Fund with the request that the shares be
represented thereby or a specified portion thereof be redeemed.
The stock assignment form on the reverse side of each share
certificate surrendered to the Fund for redemption must be signed
by the registered owner or owners exactly as the registered name
appears on the face of the certificate or, alternatively, a stock
power signed in the same manner may be attached to each share
certificate or where tender is made by mail, separately mailed to
the Fund. All signatures must be guaranteed in the manner
described above.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practical for the Fund fairly to determine the value
15
<PAGE>
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund. Payment of the redemption price will be made in cash.
General
The Fund reserves the right to close out an account that
through redemption has remained below $1,000,000 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of shares of the Fund recently purchased
by check, redemption proceeds will not be made available until
the Fund is reasonably assured that the check has cleared,
normally up to 15 calendar days following the purchase date.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Agreement and Declaration of Trust and By-Laws at
the next close of regular trading on the Exchange (ordinarily
4:00 p.m. Eastern time) following receipt of a purchase or
redemption order by the Fund on each Fund business day on which
such an order is received and on such other days as the Trustees
deem appropriate or necessary in order to comply with Rule 22c-1
under the 1940 Act. The Fund's per share net asset value is
calculated by dividing the value of the Fund's total assets, less
its liabilities, by the total number of its shares then
outstanding. A Fund business day is any weekday on which the
Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Trustees. The
Trustees have delegated to the Adviser certain of the Trustees'
duties with respect to the following procedures. Readily
marketable securities listed on the Exchange or on a foreign
securities exchange (other than foreign securities exchanges
whose operations are similar to those of the United States over-
the-counter market) are valued, except as indicted below, at the
last sale price reflected on the consolidated tape at the close
of the Exchange or, in the case of a foreign securities exchange,
at the last quoted sale price, in each case on the business day
as of which such value is being determined. If there has been no
sale on such day, the securities are valued at the mean of the
closing bid and asked prices on such day. If no bid or asked
prices are quoted on such day, then the security is valued in
good faith at fair value by, or in accordance with procedures
16
<PAGE>
established by, the Trustees. Readily marketable securities not
listed on the Exchange or on a foreign securities exchange but
listed on other United States national securities exchanges or
traded on The Nasdaq Stock Market, Inc. are valued in like
manner. Portfolio securities traded on the Exchange and on one
or more foreign or other national securities exchanges, and
portfolio securities not traded on the Exchange but traded on one
or more foreign or other national securities exchanges are valued
in accordance with these procedures by reference to the principal
exchange on which the securities are traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Trustees determine that this method
does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
17
<PAGE>
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Trustees.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Trustees at fair value.
The Trustees may suspend the determination of the
Fund's, net asset value (and the offering and sale of shares),
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Trustees.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
18
<PAGE>
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). Qualification relieves the Fund of
Federal income tax liability on that part of its net ordinary
income and net realized capital gains which it pays out to its
shareholders. Such qualification does not, of course, involve
governmental supervision of management or investment practices or
policies. Investors should consult their own counsel for a
complete understanding of the requirements the Fund must meet to
qualify for such treatment. The information set forth in the
Prospectus and the following discussion relate solely to the U.S.
Federal income taxes on dividends and distributions by the Fund
and assumes that the Fund qualifies as a regulated investment
company. Investors should consult their own counsel for further
details, including the application of state and local tax laws to
his or her particular situation.
The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% Federal excise tax imposed on certain undistributed
income of regulated investment companies. The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year at least
98% of its ordinary income for the calendar year plus 98% of its
capital gain net income for the twelve months ended October 31 of
such year, and any ordinary income or capital gain net income
from the preceding calendar year that was not distributed during
such year. For this purpose, income or gain retained by the Fund
that is subject to corporate income tax will be considered to
have been distributed by the Fund by year-end. Certain
distributions of the Fund which are paid in January of a given
year but are declared in the prior October, November or December
to shareholders of record as of a specified date during such a
month may be treated as having been distributed in December and
will be taxable to shareholders as if received in December.
Dividends of net ordinary income and distributions of
any net realized short-term capital gain are taxable to
shareholders as ordinary income. The amount of dividends and
distributions paid by the Fund that is eligible for the
dividends-received deduction for corporations is limited to the
amount of qualifying dividends actually received by the Fund. A
corporation's dividends-received deduction will be disallowed
19
<PAGE>
unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days prior to the ex-
dividend date. Furthermore, provisions of the tax law disallow
the dividends-received deduction to the extent a corporation's
investment in shares of the Fund is financed with indebtedness.
In view of the Fund's investment policies, it is expected that
dividends from domestic corporations will be a significant part
of the investment income of the Fund and, accordingly, that a
significant part of the dividends paid by the Fund will be
eligible for the dividends-received deduction; however, this is
largely dependent on the Fund's investment activities, and
accordingly cannot be predicted with certainty.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the
extent designated by the Fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as adjusted net capital gains,
regardless of how long a shareholder has held shares in the Fund.
Any dividend or distribution received by a shareholder on shares
of the Fund will have the effect of reducing the net asset value
of such shares by the amount of such dividend or distribution.
Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be
taxable to the shareholder as described above. If a shareholder
has held shares in the Fund for six months or less and during
that period has received a distribution of net capital gains, any
loss recognized by the shareholder on the sale of those shares
during the six-month period will be treated as a long-term
capital loss to the extent of the distribution.
Dividends and distributions are taxable in the manner
discussed regardless of whether they are paid to the shareholder
in cash or are reinvested in additional shares of a Fund.
The Fund generally will be required to withhold tax at
the rate of 31% with respect to distributions of net ordinary
income and net realized capital gains payable to a noncorporate
shareholder unless the shareholder certifies on his subscription
application that the social security or taxpayer identification
number provided is correct and that the shareholder has not been
20
<PAGE>
notified by the Internal Revenue Service that he is subject to
backup withholding.
Currency Fluctuations - "Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. To the
extent that such distributions exceed such shareholder's basis,
each distribution will be treated as a gain from the sale of
shares.
Foreign Income Taxes. Investment income received by the
Fund from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of such taxes or exemption
from taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the
Fund's assets to be invested within various countries is not
known.
Taxation of Foreign Shareholders. The foregoing
discussion relates only to U.S. Federal income tax law as it
affects shareholders who are U.S. residents or U.S. corporations.
The effects of Federal income tax law on shareholders who are
non-resident aliens or foreign corporations may be substantially
different. Foreign investors should consult their counsel for
further information as to the U.S. tax consequences of receipt of
income from the Fund.
21
<PAGE>
________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
________________________________________________________________
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers or dealers
regarding the placement of securities transactions because of
research or statistical services they provide. To the extent that
such persons or firms supply investment information to the
Adviser for use in rendering investment advice to the Fund, such
information may be supplied at no cost to the Adviser and,
therefore, may have the effect of reducing the expenses of the
Adviser in rendering advice to the Fund. While it is impossible
to place an actual dollar value on such investment information,
its receipt by the Adviser probably does not reduce the overall
expenses of the Adviser to any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Exchange Act and is
designed to augment the Adviser's own internal research and
investment strategy capabilities. Research and statistical
services furnished by brokers through which the Fund effects
securities transactions are used by the Adviser in carrying out
its investment management responsibilities with respect to all
its client accounts but not all such services may be utilized by
the Adviser in connection with the Fund.
The Fund will deal in some instances in equity
securities which are not listed on a national stock exchange but
are traded in the over-the-counter market.
The Fund may from time to time place orders for the
purchase or sale of securities with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), an affiliate of the Adviser, and
with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ. With respect
to orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the Act and Rule 17e-1 thereunder, which permit an
affiliated person of a registered investment company (such as the
Fund), or any affiliated person of such person, to receive a
brokerage commission from such registered investment company
provided that such commission is reasonable and fair compared to
the commissions received by other brokers in connection with
comparable transactions involving similar securities during a
comparable period of time.
During the fiscal years ended September 30, 1995, 1996
and 1997, the Fund incurred brokerage commissions amounting in
22
<PAGE>
the aggregate to $470,250, $609,329 and $940,817. During the
fiscal years ended September 30, 1995, 1996 and 1997, brokerage
commissions amounting in the aggregate to $6,616, $-0- and $-0-
respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $-0-, $-0- and $-0-, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended September 30, 1997, the brokerage
commissions paid to DLJ constituted -0-% of the Fund's aggregate
brokerage commissions and the brokerage commissions paid to
brokers utilizing the Pershing Division of DLJ constituted -0-%
of the Fund's aggregate brokerage commissions. During the fiscal
year ended September 30, 1997, of the Fund's aggregate dollar
amount of brokerage transactions involving the payment of
commissions, -0-% were effected through DLJ and -0-% were
effected through brokers utilizing the Pershing Division of
DLJ.
During the fiscal year ended September 30, 1997,
transactions in portfolio securities of the Fund aggregating
$294,557,613 with associated brokerage commissions of
approximately $438,346 were allocated to persons or firms
supplying research services to the Fund or the Adviser.
For the fiscal years ended September 30, 1996 and 1997,
the annual portfolio turnover rates of securities of the Fund
were 194% and 212%, respectively.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
All shares of the Fund when duly issued will be fully
paid and non-assessable. The Trustees are authorized to
reclassify and issue any unissued shares to any number of
additional series without shareholder approval. Accordingly, the
Trustees in the future, for reasons such as the desire to
establish one or more additional Funds with different investment
objectives, policies or restrictions, may create additional
series of shares. Any issuance of shares of such additional
series would be governed by the Act and the laws of the
Commonwealth of Massachusetts.
Certain procedures for the removal by shareholders of
the Trustees of the Fund, similar to those set forth in Section
l6(c) of the Act are available to shareholders of the Fund.
At the close of business of January 12, 1998 there were
4,107,845 shares of the Fund outstanding. Set forth below is
23
<PAGE>
certain information as to all persons who owned of record or
beneficially 5% or more of the Fund's outstanding shares at
January 12, 1998.
No. of % of
Name and Address Shares Class
Ortho & Company Trust Dept 2,205,521 54%
Ford General Retirement Plan
C/O Commercial Bank
Mutual Funds Unit/MC 3446
P.O. Box 75000
Detroit, MI 48275-3446
3M Co. 1,523,372 37%
c/o Boston Safe Deposit & Trust
Attn: Hannah Buxbaum, Admin.
ITD Division 5th Floor
31 St. James Avenue
Park Square Building
Boston, MA 02116
Virtually all of the Fund's shares are held by
discretionary managed accounts of the Adviser, which exercises
investment discretion with respect to such shares.
Counsel and Independent Auditors
Legal matters in connection with the issuance of the
shares of beneficial interest offered hereby are passed upon by
Seward & Kissel, New York, New York.
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Performance Information
From time to time, the Fund advertises its "total
return". The Fund's "total return" is its averaged annual total
return for its most recent one-, five- and ten-year periods (or
the period since the Fund's inception). The Fund's total return
for each such period is computed, through the use of a formula
prescribed by the Commission, by finding the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of a Fund are assumed to have been reinvested when
paid.
24
<PAGE>
The Fund's average annual compounded total return for
the one-, five- and ten-year periods ended September 30, 1997
most recent table sheet (or since inception through that date, as
noted) was as follows:
12 Months Ended 5 Years Ended 10 Years Ended
9/30/97 9/30/97 9/30/9
27.28% 23.68% 12.70%
*Inception Date: 19.86
The Fund's total return is not fixed and will fluctuate
in response to prevailing market conditions or as a function of
the type and quality of the securities held by the Fund and the
Fund's expenses. An investor's principal invested in the Fund is
not fixed and will fluctuate in response to prevailing market
conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in newspapers,
magazines or other media on behalf of the Fund.
Additional Information
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
25
<PAGE>
_________________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_________________________________________________________________
26
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
--------------------------------------------------
500 PLAZA DRIVE, SECAUCUS, NJ 07094, (201) 319-4000
ANNUAL REPORT
SEPTEMBER 30, 1997
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS AND OTHER INVESTMENTS-95.7%
CONSUMER PRODUCTS & SERVICES-33.3%
ADVERTISING-1.0%
Snyder Communications, Inc. (a) 32,100 $ 882,750
AIRLINES-4.4%
Alaska Air Group, Inc. (a) 52,300 1,719,363
Continental Airlines, Inc. Cl.B (a) 52,000 2,047,500
------------
3,766,863
APPAREL-4.6%
Nautica Enterprises, Inc. (a) 43,800 1,231,875
Stride Rite Corp. 71,900 975,144
Tefron, Ltd. (a) 4,900 98,000
Timberland Co. Cl.A (a) 4,900 390,775
Tommy Hilfiger Corp. (a) 24,900 1,243,443
------------
3,939,237
AUTO & RELATED-6.8%
Avis Rent A Car, Inc. (a) 22,700 541,963
Budget Group, Inc. Cl.A (a) 63,500 2,095,500
Miller Industries, Inc. (a) 143,200 1,709,450
Monaco Coach Corp. (a) 32,500 767,812
Watsco, Inc. 24,600 768,750
------------
5,883,475
BROADCASTING & CABLE-1.5%
Globecomm Systems, Inc. (a) 25,000 437,500
Sinclair Broadcast Group, Inc. Cl.A (a) 22,200 896,325
------------
1,333,825
CONTAINERS & PACKAGING-1.8%
Silgan Holdings, Inc. (a) 20,200 808,000
U.S. Can Corp. (a) 43,400 721,525
------------
1,529,525
ENTERTAINMENT & LEISURE-0.8%
Florida Panthers Holdings, Inc. Cl.A (a) 25,800 607,913
Trendwest Resorts, Inc. (a) 4,100 96,350
------------
704,263
RESTAURANTS & LODGING-1.8%
Extended Stay America, Inc. (a) 34,908 523,620
Interstate Hotels Co. (a) 15,100 492,638
Suburban Lodges of America, Inc. (a) 19,900 524,862
------------
1,541,120
RETAILING-8.3%
Abercrombie & Fitch Co. Cl.A (a) 26,500 695,625
Circuit City Stores, Inc -
Car Max Group (a) 76,300 1,263,719
Filene's Basement Corp. (a) 32,500 270,156
Furniture Brands International, Inc. (a) 39,300 741,787
Industrie Natuzzi S.p.A. (ADR) (b) 48,800 1,155,950
Pacific Sunwear of California (a) 25,500 1,045,500
St. John Knits, Inc. 21,300 957,169
The Finish Line Cl.A (a) 32,200 609,787
Wet Seal, Inc. Cl.A (a) 18,500 432,438
------------
7,172,131
MISCELLANEOUS-2.3%
Equity Corp. International (a) 22,900 533,856
International Alliance Services, Inc. (a) 55,000 543,125
warrants, expiring 12/30/99 (a) 191,000 357,743
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TeleTech Holdings, Inc. (a) 38,100 $ 535,781
------------
1,970,505
------------
28,723,694
BASIC INDUSTRIES-23.2%
BUILDING & RELATED-0.8%
Hughes Supply, Inc. 21,800 658,088
CHEMICALS-1.6%
Crompton & Knowles Corp. 40,000 1,062,500
Polymer Group, Inc. (a) 28,389 365,508
------------
1,428,008
ENVIRONMENTAL CONTROL-1.8%
American Disposal Services, Inc. (a) 26,520 828,750
Superior Services, Inc. (a) 26,100 743,850
------------
1,572,600
FOREST PRODUCTS-0.6%
Buckeye Cellulose Corp. (a) 12,500 503,906
METAL HARDWARE-4.7%
Bethlehem Steel Corp. (a) 132,100 1,362,281
Birmingham Steel Corp. 26,400 457,050
Kaiser Aluminum Corp. (a) 61,900 878,206
Steel Dynamics, Inc. (a) 21,100 495,850
WHX Corp. (a) 67,400 876,200
------------
4,069,587
METALS & MINING-0.4%
Pegasus Gold, Inc. (a) 23,500 132,188
Royal Oak Mines, Inc. (a) 79,200 222,750
------------
354,938
TEXTILE PRODUCTS-4.1%
Mohawk Industries, Inc. (a) 94,900 2,597,888
Novel Denim Holdings, Ltd. (a) 33,900 915,300
------------
3,513,188
TRANSPORTATION & SHIPPING-9.2%
Consolidated Freightways Corp. (a) 140,800 2,481,600
Genesee & Wyoming, Inc. Cl.A (a) 17,100 540,788
Knightsbridge Tankers, Ltd. 43,400 1,228,762
OMI Corp. (a) 233,500 2,918,750
Roadway Express, Inc. 27,100 741,862
------------
7,911,762
------------
20,012,077
TECHNOLOGY-15.6%
AEROSPACE & DEFENSE-0.6%
Doncasters Plc (ADR) (a)(c) 16,200 486,000
COMMUNICATION EQUIPMENT-1.4%
Comverse Technology, Inc. (a) 23,300 1,229,075
COMPUTER PERIPHERALS-0.4%
Read-Rite Corp. (a) 13,900 340,550
COMPUTER SOFTWARE & SERVICES-5.1%
Check Point Software Technologies, Ltd. (a) 30,800 954,800
Checkfree Corp. (a) 39,400 832,325
Cognos, Inc. (a) 21,900 520,125
DBT Online, Inc. (a) 12,100 747,175
QAD, Inc. (a) 31,300 582,962
Rational Software Corp. (a) 48,900 782,400
------------
4,419,787
NETWORKING SOFTWARE-1.1%
The Registry, Inc. (a) 20,100 927,113
6
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT-2.7%
Actel Corp. (a) 45,400 $ 873,950
CFM Technologies, Inc. (a) 18,000 705,375
PMC-Sierra, Inc. (a) 29,900 762,450
------------
2,341,775
TELECOMMUNICATIONS-4.3%
ACC Corp. (a) 14,100 463,538
Millicom International Cellular, SA (a)(d) 30,000 1,567,500
Telephone and Data Systems, Inc. 37,800 1,701,000
------------
3,732,038
------------
13,476,338
HEALTH CARE-10.5%
BIOTECHNOLOGY-6.7%
Endovascular Technologies (a) 22,300 381,887
GelTex Pharmaceuticals, Inc. (a) 73,600 1,968,800
IDEC Pharmaceuticals Corp. (a) 18,000 753,750
Medimmune, Inc. (a) 41,200 1,514,100
Neurex Corp. (a) 75,000 1,106,250
------------
5,724,787
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES-3.8%
AutoCyte, Inc. (a) 31,900 271,150
Mid Atlantic Medical Services, Inc. (a) 50,900 804,856
National Surgery Centers, Inc. (a) 53,600 1,165,800
Physio-Control International Corp. (a) 39,000 660,563
Synetic, Inc. (a) 9,700 397,700
------------
3,300,069
------------
9,024,856
ENERGY-7.4%
OIL & GAS SERVICES-7.4%
Costilla Energy, Inc. (a) 65,000 926,250
Parker Drilling Co. (a) 203,900 3,096,731
Southern Union Co. 45,900 1,118,813
Valero Energy Corp. 37,700 1,237,031
------------
6,378,825
FINANCIAL SERVICES-4.4%
REAL ESTATE-4.4%
CCA Prison Realty Trust 17,100 645,525
Chelsea GCA Realty, Inc. 20,400 851,700
Glenborough Realty Trust, Inc. 22,000 609,125
Security Capital Group, Inc. Cl.B (a) 49,000 1,684,375
------------
3,790,725
MULTI INDUSTRY-0.9%
Culligan Water Technologies, Inc. (a) 17,100 786,600
PRIVATE PLACEMENTS-0.4%
Menlo Ventures III, A Limited
Partnership (a)(e) 1,000,000 83,405
Oak Investment Partners III (a)(e) 2,000,000 162,728
Oscco II, A Limited Partnership (a)(e) 750,000 13,878
RCS II, A Limited Partnership (a)(e) 1,000,000 62,774
------------
322,785
Total Common Stocks and Other Investments
(cost $71,031,250) 82,515,900
7
PORTFOLIO OF INVESTMENTS (CONTINUED)
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM DEBT SECURITY-5.1%
Federal Home Loan Bank
5.90%, 10/01/97
(amortized cost $4,400,000) $4,400 $ 4,400,000
TOTAL INVESTMENTS-100.8%
(cost $75,431,250) $86,915,900
Other assets less liabilities-(0.8%) (674,842)
NET ASSETS-100% $86,241,058
(a) Non-income producing security.
(b) Country of origin--Italy.
(c) Country of origin--Great Britain.
(d) Country of origin--Luxembourg.
(e) Restricted and illiquid securities, valued at fair value (see Notes A & D).
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $75,431,250) $86,915,900
Cash 18,994
Receivable for investment securities sold 942,318
Dividends receivable 21,225
Total assets 87,898,437
LIABILITIES
Payable for investment securities purchased 1,378,672
Advisory fee payable 161,735
Accrued expenses 116,972
Total liabilities 1,657,379
NET ASSETS $86,241,058
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 25,538
Additional paid-in capital 44,848,659
Undistributed net investment income 1,507
Accumulated net realized gain on investment transactions 29,880,704
Net unrealized appreciation of investments 11,484,650
$86,241,058
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(based on 2,553,778 shares of beneficial interest outstanding) $33.77
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1997
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,747) $401,762
Interest 339,867 $ 741,629
EXPENSES
Advisory fee 942,821
Custodian 122,443
Administrative 108,000
Audit and legal 100,106
Transfer agency 19,336
Printing 17,131
Trustees' fees 16,000
Registration 3,923
Miscellaneous 8,991
Total expenses 1,338,751
Net investment loss (597,122)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 33,153,626
Net change in unrealized appreciation of investments (5,556,721)
Net gain on investment transactions 27,596,905
NET INCREASE IN NET ASSETS FROM OPERATIONS $26,999,783
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (597,122) $ (577,222)
Net realized gain on investment transactions 33,153,626 51,214,394
Net change in unrealized appreciation
of investments (5,556,721) (1,028,571)
Net increase in net assets from operations 26,999,783 49,608,601
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (51,863,971) (21,476,505)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (49,335,287) 4,173,519
Total increase (decrease) (74,199,475) 32,305,615
NET ASSETS
Beginning of year 160,440,533 128,134,918
End of year (including undistributed
net investment income of $1,507) $ 86,241,058 $160,440,533
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Fiduciary Management Associates - Growth Portfolio (the "Fund"), which is a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as a diversified, open-end management investment company. The following
is a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last reported sales price, or, if no sale occurred, at the mean of the bid and
ask price at the regular close of the New York Stock Exchange. Over-the-counter
securities not traded on national securities exchanges are valued at the mean
of the closing bid and asked price. Securities which mature in 60 days or less
are valued at amortized cost which approximates market value. Securities for
which current market quotations are not readily available are valued at their
fair value as determined in good faith by the Board of Trustees.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to net investment loss, resulted in a net increase in accumulated
net investment loss and a corresponding decrease in accumulated net realized
gain on investment transactions. This reclassification had no effect on net
assets.
NOTE B: ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at a quarterly rate
equal to .1875 of 1% (approximately .75 of 1% on an annual basis) of the net
assets of the Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $108,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended September 30, 1997.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $18,000 for the year ended September 30, 1997.
Brokerage commissions paid on investment transactions for the year ended
September 30, 1997 amounted to $940,817, none of which was paid to affiliated
brokers.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $269,732,258 and $362,365,624,
respectively, for the year ended September 30, 1997. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
September 30, 1997. At September 30, 1997, the cost of securities for federal
income tax purposes was $76,762,340. Accordingly, gross unrealized appreciation
of investments was $14,559,702 and gross unrealized depreciation of investments
was $4,406,142 resulting in net unrealized appreciation of $10,153,560.
NOTE D: RESTRICTED AND ILLIQUID SECURITIES
DATE
ACQUIRED COST
---------- ----------
Menlo Ventures III, A Limited Partnership 7/28/83 $ 371,161
Oak Investment Partners III 9/28/83 1,337,231
Oscco II, A Limited Partnership 2/16/84 617,218
RCS II, A Limited Partnership 12/29/82 147,462
----------
$2,473,072
The securities shown above are restricted and illiquid and have been valued at
fair value in accordance with procedures described in Note A.
The value of these securities at September 30, 1997 was $322,785 representing
0.4% of net assets.
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial interest
authorized. Transactions in shares were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------ -------------- --------------
Shares sold 83,725 31,000 $ 2,874,332 $ 1,145,925
Shares issued in
reinvestment of
distributions 1,948,769 736,943 51,759,317 21,430,299
Shares redeemed (3,593,101) (548,790) (103,968,936) (18,402,705)
Net increase
(decrease) (1,560,607) 219,153 $(49,335,287) $ 4,173,519
12
FINANCIAL HIGHLIGHTS
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $39.00 $32.90 $29.94 $31.29 $27.41
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.14)(a) (.14) (.07) (.20) (.10)
Net realized and unrealized gain (loss)
on investment transactions 7.39 11.75 7.51 (.93) 7.29
Net increase (decrease) in net asset
value from operations 7.25 11.61 7.44 (1.13) 7.19
LESS: DISTRIBUTIONS
Distributions from net realized gains (12.48) (5.51) (4.48) (.22) (3.31)
Net asset value, end of year $33.77 $39.00 $32.90 $29.94 $31.29
TOTAL RETURN
Total investment return based on net
asset value (b) 27.28% 41.04% 30.94% (3.63)% 27.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $86,241 $160,441 $128,135 $106,435 $138,932
Ratio of expenses to average net assets .99% 1.05% 1.11% .98% .97%
Ratio of net investment loss to
average net assets (.44)% (.40)% (.26)% (.42)% (.31)%
Portfolio turnover rate 212% 194% 159% 116% 100%
Average commission rate (c) $.0543 $.0598 -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
13
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
FIDUCIARY MANAGEMENT ASSOCIATES - GROWTH PORTFOLIO
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
FIDUCIARY MANAGEMENT ASSOCIATES-GROWTH PORTFOLIO
We have audited the accompanying statement of assets and liabilities of
Fiduciary Management Associates-Growth Portfolio, including the portfolio of
investments, as of September 30 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of September 30, 1997, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Fiduciary Management Associates-Growth Portfolio at September 30, 1997, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
New York, New York
November 4, 1997
14
<PAGE>
APPENDIX A
DESCRIPTION OF OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds
issued by a cooperatively owned nationwide system of banks and
associations supervised by the Farm Credit Administration, an
independent agency of the U.S. Government. These bonds are not
guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and
provided by the Department of Transportation of the U.S.
Government and are guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal
Housing Administration of the U.S. Government and are guaranteed
by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which
represent a partial ownership interest in a pool of mortgage
loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Each mortgage loan
included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration.
FHLMC Bonds--are bonds issued and guaranteed by the
Federal Home Loan Mortgage Corporation.
FNMA Bonds--are bonds issued and guaranteed by the
Federal National Mortgage Association.
Federal Home Loan Bank Notes and Bonds--are notes and
bonds issued by the Federal Home Loan Bank System and are not
guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes
and Bonds--are notes and bonds issued by the Student Loan
Marketing Association.
Although this list includes a description of the primary
types of U.S. Government agency or instrumentality obligations in
which the Fund intends to invest, the Fund may invest in
obligations of U.S. Government agencies or instrumentalities
other than those listed above.
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APPENDIX B
BOND AND COMMERCIAL PAPER RATINGS
Standard & Poor's Bond Ratings
A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong. Debt rated "AA" has a very strong
capacity to pay interest and to repay principal and differs from
the highest rated issues only in small degree. Debt rated "A" has
a strong capacity to pay interest and repay principal although it
is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than a debt of a higher
rated category.
The ratings from "AA" and "A" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Bond Ratings
Excerpts from Moody's description of its corporate bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations;
Baa - considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured.
Fitch IBCA, Inc. Bond Ratings
AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of earnings
several times or many times interest requirements with such
stability of applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other features may
enter in, such as a wide margin of protection through collateral
security or direct lien on specific property as in the case of
high class equipment certificates or bonds that are first
mortgages on valuable real estate. Sinking funds or voluntary
reduction of the debt by call or purchase are often factors,
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while guarantee or assumption by parties other than the original
debtor may also influence the rating.
AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A. A securities are strong investments and in many cases
of highly active market, but are not so heavily protected as the
two upper classes or possibly are of similar security but less
quickly salable. As a class they are more sensitive in standing
and market to material changes in current earnings of the
company. With favoring conditions such securities are likely to
work into a high rating, but in occasional instances changes
cause the rating to be lowered.
Standard & Poor's Commercial Paper Ratings
A is the highest commercial paper rating category
utilized by S&P, which uses the number 1+, l, 2 and 3 to denote
relative strength within its A classification. Commercial paper
issues rated A by S&P have the following characteristics:
Liquidity ratios are better than industry average. Long-term debt
rating is A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow
are in an upward trend. Typically, the issuer is a strong company
in a well-established industry and has superior management.
Moody's Commercial Paper Ratings
Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment of short-
term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: Leading
market positions in well established industries; high rates of
return on funds employed; conservative capitalization structures
with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high
internal cash generation; well established access to a range of
financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree.
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Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting
institutions) have an acceptable capacity for repayment of short-
term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement
for relatively high financial leverage. Adequate alternate
liquidity is maintained.
Fitch-1, Fitch-2, Duff 1 and Duff 2 Commercial Paper Ratings
Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is considered
very good grade paper and reflects an assurance of timely payment
only slightly less in degree than the strangest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics: very high certainty of
timely payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.
B-3
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APPENDIX C
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS AND FOREIGN CURRENCIES
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of U.S. Government Securities, foreign government
securities or corporate debt securities. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing
members of the exchange. The Fund will enter into futures
contracts which are based on debt securities that are backed by
the full faith and credit of the U.S. Government, such as long-
term U.S. Treasury Bonds, Treasury Notes, Government National
Mortgage Association modified pass-through mortgage-backed
securities and three-month U.S. Treasury Bills. The Fund may also
enter into futures contracts which are based on bonds issued by
entities other than the U.S. government.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial,
deposit would be approximately 1 1/2%-5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contracts value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
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delivery in the same month. Such a transaction, which is effected
through a member of an exchange, cancels the obligation to make
or take delivery of the securities. Since all transactions in the
futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts
are traded, the Fund will incur brokerage fees when it purchases
or sells futures contracts.
The purpose of the acquisition or sale of a futures
contract, in the case of the portfolio, which holds or intends to
acquire fixed-income securities, is to attempt to protect the
Fund from fluctuations in interest or foreign exchange rates
without actually buying or selling fixed-income securities or
foreign currency. For example, if interest rates were expected to
increase, the Fund might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities
owned by the Fund. If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value
of the futures contracts to the Fund would increase at
approximately the same rate, thereby keeping the net asset value
of the Fund from declining as much as it otherwise would have.
The Fund could accomplish similar results by selling debt
securities and investing in bonds with short maturities when
interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of
futures contracts as an investment technique allows the Fund to
maintain a defensive position without having to sell its
portfolio securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher
prices. Since the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Fund could
take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the
cash market. To the extent the Fund enters into futures contracts
for this purpose, the assets in the segregated asset account
maintained to cover the Fund's obligations with respect to such
futures contracts will consist of cash, cash equivalents or high
quality liquid debt securities from its portfolio in an amount
equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and
variation margin payments made by the Fund with respect to such
futures contracts.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
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markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
In addition, futures contracts entail risks. Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment about the general
direction of interest rates is incorrect, the Fund's overall
performance would be poorer than if it had not entered into any
such contract. For example, if the Fund has hedged against the
possibility of an increase in interest rates which would
adversely affect the price of debt securities held in its
portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell debt
securities from its portfolio to meet daily variation margin
requirements. Such sales of bonds may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The purchase of a call
option on a futures contract is similar in some respects to the
purchase of a call option on an individual security. Depending on
the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than
ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Fund is not
fully invested it may purchase a call option on a futures
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contract to hedge against a market advance due to declining
interest rates.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of
the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of
the option is higher than the exercise price, the Fund will
retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities
which the Fund intends to purchase. If a put or call option the
Fund has written is exercised, the Fund will incur a loss which
will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on
futures may to some extent be reduced or increased by changes in
the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the dollar
value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order
to protect against such diminutions in the value of portfolio
securities, the Fund may purchase put options on the foreign
currency. If the value of the currency does decline, the Fund
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<PAGE>
will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to
the extent anticipated the Fund could sustain losses on
transactions in foreign currency options which would require it
to forego a portion or all of the benefits of advantageous
changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
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consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option is
also covered if the Fund has a call on the same foreign currency
and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high quality liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A
call option on a foreign currency is for cross-hedging purposes
if it is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes the
option by maintaining in a segregated account with the Custodian,
cash or U.S. Government Securities or other high quality liquid
debt securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked to market
daily.
Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To
the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on currencies may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the option
writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.
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Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are subject
to the risk of governmental actions affecting trading in or the
prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability
than in the United States of data, on which to make trading
decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements - Growth Portfolio
Included in the Prospectus: Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments, September 30, 1997.
Statement of Assets and Liabilities, September 30, 199.7
Statement of Operations, year ended September 30, 1997.
Statement of Changes in Net Assets, years ended
September 30, 1996 and September 30, 1997.
Notes to Financial Statements, September 30, 1997.
Financial Highlights - for the years ended
September 30, 1993 through September 30, 1997.
Report of Independent Auditors - November 3, 1997.
Included in Part C of the Registration Statement
All other schedules are either inapplicable or the
required information is contained in the financial
statements.
(b) Exhibits
(1) Agreement and Declaration of Trust - filed
herewith.
(2) By-Laws - filed herewith.
(3) Not applicable.
(4) (a) Specimen of Share Certificate for the Growth
Portfolio - Incorporated by reference to Exhibit 4 to
Post-Effective Amendment No. 34 of Registrant's
Registration Statement (File No. 2-33889) on Form N-1A
filed January 29, 1988.
(b) Specimen of Share Certificate for the
Short-Term Global Income Portfolio - Incorporated by
reference to Exhibit 4 to Post-Effective Amendment No.
43 of Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 29, 1992.
(5) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - filed herewith.
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(6) Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. - filed herewith.
(7) Not applicable.
(8) (a) Custodian Contract between the Registrant and
State Street Bank and Trust Company - filed herewith.
(b) Amendment to the Custodian Contract between the
Registrant and State Street Bank and Trust Company -
filed herewith.
(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - filed herewith.
(10) Not applicable.
(11) Consent of Independent Auditors - filed herewith.
(12) Not applicable.
(13) Not applicable
(14) Not applicable.
(15) Not applicable.
(16) Schedule for computation of total return
performance - Incorporated by reference to Exhibit
16 to Post-Effective Amendment No. 40 of
Registrant's Registration Statement (File No.
2-33889) on Form N-1A filed January 10, 1991.
(27) Financial Data Schedule - filed herewith.
Other Exhibits:
Powers of Attorney of John D. Carifa, Ruth Block,
David H. Dievler, John H. Dobkin, William H.
Foulk, Jr., Dr. James M. Hester, Clifford L. Michel
and Donald J. Robinson - filed herwith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
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ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Class (as of January 12, 1998)
Shares of Beneficial (Growth Portfolio)
Interest par value $.01
Growth Portfolio 25
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its trustees and
officers, employees and other agents as set forth in Article
VIII and Article III of Registrant's Agreement and
Declaration of Trust, filed as Exhibit 1 in response to Item
24 and Section 6 of the Distribution Services Agreement filed
as Exhibit 6 in response to Item 24, all as set forth below.
The liability of the Registrant's trustees and officers is
dealt with in Article VIII of Registrant's Agreement and
Declaration of Trust, as set forth below. The Adviser's
liability for loss suffered by the Registrant or its
shareholders is set forth in Section 4 in response to Item
24, as set forth below.
Article VIII of Registrant's Agreement and Declaration of
Trust reads as follows:
"SECTION 8.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice. The Trustees and officers of the Trust, in
incurring any debts, liabilities or obligations, or in
limiting or omitting any other actions for or in connection
with the Trust, are or shall be deemed to be acting as
Trustees or officers of the Trust and not in their own
capacities. No Shareholder shall be subject to any personal
liability whatsoever in tort, contract or otherwise to any
other Person or Persons in connection with the assets or the
affairs of the Trust or of any Portfolio, and subject to
Section 8.4 hereof, no Trustee, officer, employee or agent of
the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other
Person or Persons in connection with the assets or affairs of
the Trust or of any Portfolio, save only that arising from
his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office or the discharge of his functions. The Trust (or
if the matter relates only to a particular Portfolio, that
Portfolio) shall be solely liable for any and all debts,
claims, demands, judgments, decrees, liabilities or
obligations of any and every kind, against or with respect to
the Trust or such Portfolio in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or
such Portfolio, and all Persons dealing with the Trust or any
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Portfolio shall be deemed to have agreed that resort shall be
had solely to the Trust Property of the Trust or the
Portfolio Assets of such Portfolio, as the case may be, for
the payment or performance thereof.
The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers
or officer shall give notice that this Declaration of Trust
is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same
was executed or made by or on behalf of the Trust or by them
as Trustees or Trustee or as officers or officer, 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, or the particular Portfolio in question, as the case
may be, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually, or to subject the
Portfolio Assets of any Portfolio to the obligations of any
other Portfolio.
SECTION 8.2 Trustees' Good Faith Action; Expert Advice; No
Bond or Surety. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of
fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee,
consultant, Investment Advisor, Administrator, Distributor or
Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting
Agent of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee; (ii) the Trustees
may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust and
their duties as Trustees, and shall be under no liability for
any act or omission in accordance with such advice or for
failing to follow such advice; and (iii) in discharging their
duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and
upon written reports made to the Trustees by any officer
appointed by them, any independent public accountant, and
(with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to Section 5.2
C-4
<PAGE>
hereof. The Trustees as such shall not be required to give
any bond or surety or any other security for the performance
of their duties.
SECTION 8.3 Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be
charged or held to be personally liable for any obligation or
liability of the Trust solely by reason of being or having
been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, the Trust (upon proper
and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal representatives
thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but
solely out of the assets of the Portfolio of which such
Shareholder or former Shareholder is or was the holder of
Shares) to be held harmless from and indemnified against all
loss and expense arising from such liability.
SECTION 8.4 Indemnification of Trustees, Officers, etc.
Subject to the limitations set forth hereinafter in this
Section 8.4, the Trust shall indemnify (from the assets of
the Portfolio or Portfolios to which the conduct in question
relates) 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, together with such Person's heirs, executors,
administrators or personal representative, referred to as a
"Covered Person"]) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, 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 Trustee
or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to
the best interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct
described in (i) and (ii) being referred to hereafter as
C-5
<PAGE>
"Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a
final decision on the merits by a court or other body before
whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by
(a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees
so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time by the Portfolio
or Portfolios to which the conduct in question related in
advance of the final disposition of any such action, suit or
proceeding; provided, that the Covered Person shall have
undertaken to repay the amounts so paid to such Portfolio or
Portfolios if it is ultimately determined that
indemnification of such expenses is not authorized under this
Article VIII and (i) the Covered Person shall have provided
security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the
disinterested Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
SECTION 8.5 Compromise Payment. As to any matter disposed
of by a compromise payment by any such Covered Person
referred to in Section 8.4 hereof, pursuant to a consent
decree or otherwise, no such indemnification either for said
payment or for any other expenses shall be provided unless
such indemnification shall be approved (i) by a majority of a
quorum of the disinterested Trustees or (ii) by an
independent legal counsel in a written opinion. Approval by
the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the
recovery from any Covered Person of any amount paid to such
Covered Person in accordance with either of such clauses 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 or not opposed to the best
interests of the Trust or to have been liable to the Trust or
C-6
<PAGE>
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 8.6 Indemnification Not Exclusive, etc. The right
of indemnification provided by this Article VIII shall not be
exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article
VIII, a "disinterested" Person is one against whom none of
the actions, suits or other proceedings in question, and no
other action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened. Nothing
contained in this Article VIII shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees and 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 8.7 Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound
to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred
to the Trust or upon its order."
Article III of Registrant's Agreement and Declaration of
Trust reads, in pertinent part, as follows:
"Without limiting the foregoing and to the extent not
inconsistent with the 1940 Act or other applicable law,
the Trustees shall have power and authority:
(s) Indemnification. In addition to the mandatory
indemnification provided for in Article VIII hereof
and to the extent permitted by law, to
indemnification with any Person with whom this
Trust has dealings, including, without limitation,
any independent contractor, to such extent as the
Trustees shall determine."
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreement for any mistake of judgment or in any event
whatsoever except for lack of good faith and that nothing
therein shall be deemed to protect, or purport to protect,
Alliance Capital Management L.P. against any liability to
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties
C-7
<PAGE>
thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.
The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the Registrant
will indemnify, defend and hold Alliance Fund Distributors,
Inc., and any person who controls it within the meaning of
Section 15 of the Investment Company Act of 1940, free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund Distributors,
Inc. or any controlling person may incur arising out of or
based upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus and Statement of Additional Information or arising
out of, or based upon any alleged omission to state a
material fact required to be stated in or necessary to make
the statements in either thereof any one of the foregoing not
misleading, provided that nothing therein shall be so
construed as to protect Alliance Fund Distributors, Inc.
against any liability to Registrant or its security holders
to which it would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance
of its duties thereunder, or by reason of reckless disregard
of its obligations and duties thereunder.
The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance Capital
Management L.P. and the Distribution Services Agreement
between Registrant and Alliance Fund Distributors, Inc.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be
permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed
C-8
<PAGE>
in the Securities Act and will be governed by the final
adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its trustees, officers,
investment adviser and principal underwriters only if (1) a
final decision on the merits was issued by the court or other
body before whom the proceeding was brought that the person
to be indemnified (the "indemnitee") was not liable by reason
of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts, that
the indemnitee was not liable by reason of disabling conduct,
by (a) the vote of a majority of a quorum of the trustees who
are neither "interested persons" of the Registrant as defined
in section 2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel in a written
opinion. The Registrant will advance attorneys fees or other
expenses incurred by its trustees, officers, investment
adviser or principal underwriters in defending a proceeding,
upon the undertaking by or on behalf of the indemnitee to
repay the advance unless it is ultimately determined that he
is entitled to indemnification and, as a condition to the
advance, (1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3) a
majority of a quorum of disinterested, non-party trustees of
the Registrant, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
The Registrant participates in a joint trustees/directors and
officers liability insurance policy issued by the ICI Mutual
Insurance Company. Coverage under this policy has been
extended to directors, trustees and officers of the
investment companies managed by Alliance Capital Management
L.P. Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against them
for acts committed in their capacities as trustee or
director. A pro rata share of the premium for this coverage
is charged to each investment company and to the Adviser.
Item 28. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P. under
the captions "Management of the Fund" in the Prospectus and
in the Statement of Additional Information constituting Parts
C-9
<PAGE>
A and B, respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and executive officers of
Alliance Capital Management Corporation, the general partner of
Alliance Capital Management L.P., set forth in Alliance Capital
Management L.P.'s Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and amended
through the date hereof, is incorporated by reference.
Item 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal
Underwriter or Distributor for the following
investment companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
C-10
<PAGE>
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers
of Alliance Fund Distributors, Inc., the
principal place of business of which is 1345
Avenue of the Americas, New York, New York,
10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President &
Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
C-11
<PAGE>
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial
Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Saccullo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Michael E. Brannan Vice President
Casimir F. Bolanowski Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
C-12
<PAGE>
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President &
Controller
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
C-13
<PAGE>
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Robert T. Pignozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
C-14
<PAGE>
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
Charles M. Barrett Assistant Vice President
Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
John W. Cronin Assistant Vice President
Terri J. Daly Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Dunn Assistant Vice President
John E. Englis Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Kristine J. Luisi Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Richard F. Meier Assistant Vice President
Richard J. Olszewski Assistant Vice President
C-15
<PAGE>
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Gayle S. Stamer Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents required
to be maintained by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder are maintained as follows:
journals, ledgers, securities records and other original records
are maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey 07094 and
at the offices of (i) State Street Bank and Trust Company, the
Registrant's Custodian with respect to the Growth Portfolio and
the South Africa-Free International Portfolio, 225 Franklin
Street, Boston, Massachusetts 02110 and (ii) Brown Brothers
Harriman & Co., the Registrant's Custodian with respect to the
Short-Term Global Income Portfolio, 40 Water Street, Boston,
Massachusetts 02109. All other records so required to be
maintained are maintained at the offices of Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York,
10105.
ITEM 31. Management Services. Not applicable.
ITEM 32. Undertakings.
(c) The Registrant undertakes to furnish each person to whom
a Prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of any
Trustee of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.
C-16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
and State of New York, on the 30th day of January, 1998.
FIDUCIARY MANAGEMENT ASSOCIATES
By:/s/ John D. Carifa
_____________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933 this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman January 30, 1998
__________________
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief
___________________ Financial Officer January 30, 1998
Mark D. Gersten
C-17
<PAGE>
3) All of the Trustees
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James H. Hester
Clifford L. Michel
Donald J. Robinson
By /s/ Edmund P. Bergan, Jr. January 30, 1998
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-18
<PAGE>
Index to Exhibits
(1) Agreement and Declaration of Trust
(2) By-Laws
(5) Advisory Agreement
(6) Distribution Agreement
(8)(a) Custodian Contract
(b) Amendment to the Custodian Contract
(9) Transfer Agency Agreement
(11) Consent of Independent Auditors
(27) Financial Data Schedule
Other Exhibits - Powers of Attorney for John D. Carifa, Ruth
Block, David H. Dievler, John H. Dobkin, William H. Foulk, Jr.,
Dr. James M. Hester, Clifford L. Michel and Donald J.
Robinson.
C-19
00250061.AH3
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
AGREEMENT AND DECLARATION OF TRUST
Index
Page
RECITALS....................................................1
ARTICLE I. THE TRUST.....................................2
Section 1.1 Name..........................................2
Section 1.2 Location......................................2
Section 1.3 Nature of Trust...............................2
Section 1.4 Definitions...................................3
Section 1.5 Real Property to be Converted into
Personal Property...........................7
ARTICLE II. PURPOSE OF THE TRUST..........................7
ARTICLE III. POWERS OF THE TRUSTEES........................7
Section 3.1 Powers in General.............................8
(a) Investments..............................9
(b) Disposition of Assets....................9
(c) Ownership Powers.........................9
(d) Form of Holding.........................10
(e) Reorganization, etc.....................10
(f) Voting Trusts, etc......................10
(g) Contracts, etc..........................10
(h) Guarantees, etc.........................11
(i) Partnerships, etc.......................11
(j) Insurance...............................11
(k) Pensions, etc...........................11
(l) Power of Collection and Litigation......11
(m) Issuance and Repurchase of Shares.......12
(n) Offices.................................12
(o) Expenses................................12
(p) Agents, etc.............................12
(q) Accounts................................12
(r) Valuation...............................12
(s) Indemnification.........................13
(t) General.................................13
<PAGE>
Section 3.2 Borrowings; Financings; Issuance of
Securities.................................13
Section 3.3 Deposits.....................................14
Section 3.4 Allocations..................................14
Section 3.5 Further Powers; Limitations..................14
ARTICLE IV. TRUSTEES AND OFFICERS........................15
Section 4.1 Number, Designation, Election,
Term, etc..................................15
(a) Initial Trustee.........................15
(b) Number..................................15
(c) Election and Term.......................15
(d) Resignation and Retirement..............16
(e) Removal.................................16
(f) Vacancies...............................16
(g) Acceptance of Trusts....................16
(h) Effect of Death, Resignation, etc.......17
(i) Conveyance..............................17
(j) No Accounting...........................17
(k) Filings.................................17
Section 4.2 Trustees' Meetings; Participation by
Telephone, etc.............................18
Section 4.3 Committees; Delegation.......................18
Section 4.4 Officers.....................................19
Section 4.5 Compensation of Trustees and Officers........19
Section 4.6 Ownership of Shares and Securities of the
Trust......................................19
Section 4.7 Right of Trustees and Officers to Own
Property or to Engage in Business;
Authority of Trustees to Permit Others
to Do Likewise.............................20
Section 4.8 Reliance on Experts..........................20
Section 4.9 Surety Bonds.................................20
Section 4.10 Apparent Authority of Trustees and
Officers...................................21
Section 4.11 Other Relationships Not Prohibited...........21
<PAGE>
Section 4.12 Payment of Trust Expenses....................22
Section 4.13 Ownership of the Trust Property..............22
ARTICLE V. DELEGATION OF MANAGERIAL
RESPONSIBILITIES...........................22
Section 5.1 Appointment; Action by Less than All
Trustees...................................22
Section 5.2 Certain Contracts............................23
(a) Advisory................................23
(b) Administration..........................24
(c) Distribution............................24
(d) Custodian...............................25
(e) Transfer and Dividend Disbursing
Agency..................................25
(f) Shareholder Servicing...................25
(g) Accounting..............................25
ARTICLE VI. PORTFOLIOS AND SHARES........................26
Section 6.1 Description of Portfolios and Shares.........26
(a) Shares; Portfolios; Series of
Shares................................26
(b) Establishment, etc. of Portfolios;
Authorization of Shares.................26
(c) Character of Separate Portfolios and
Shares Thereof..........................27
(d) Consideration for Shares................27
Section 6.2 Establishment and Designation of Certain
Portfolios; General Provisions for All
Portfolios.................................27
(a) Assets Belonging to Portfolios..........28
(b) Liabilities of Portfolios...............29
(c) Dividends...............................30
(d) Liquidation.............................30
(e) Voting..................................30
(f) Redemption by Shareholder...............30
(g) Redemption at the Option
of the Trust..........................31
(h) Net Asset Value.........................31
(i) Transfer................................32
(j) Equality................................32
<PAGE>
(k) Rights of Fractional Shares.............32
(l) Conversion Rights.......................32
Section 6.3 Ownership of Shares..........................32
Section 6.4 Investments in the Trust.....................33
Section 6.5 No Pre-emptive Rights........................33
Section 6.6 Status of Shares.............................33
ARTICLE VII. SHAREHOLDERS' VOTING
POWERS AND MEETINGS........................34
Section 7.1 Voting Powers................................34
Section 7.2 Number of Votes and Manner of Voting;
Proxies....................................34
Section 7.3 Meetings.....................................35
Section 7.4 Record Dates.................................35
Section 7.5 Quorum and Required Vote.....................36
Section 7.6 Action by Written Consent....................36
Section 7.7 Inspection of Records........................36
Section 7.8 Additional Provisions........................36
ARTICLE VIII. LIMITATION OF LIABILITY;
INDEMNIFICATION.........................36
Section 8.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice..................36
Section 8.2 Trustees' Good Faith. Action; Expert
Advice; No Bond or Surety..................37
Section 8.3 Indemnification of Shareholders..............38
Section 8.4 Indemnification of Trustees,
Officers, etc..............................38
Section 8.5 Compromise Payment...........................39
Section 8.6 Indemnification Not Exclusive, etc...........40
Section 8.7 Liability of Third Persons Dealing with
Trustees...................................40
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ARTICLE IX DURATION; REORGANIZATION; AMENDMENTS............40
Section 9.1 Duration and Termination of Trust............40
Section 9.2 Reorganization...............................41
Section 9.3 Amendments; etc..............................41
Section 9.4 Filing of Copies of Declaration and
Amendments.................................42
ARTICLE X MISCELLANEOUS................................43
Section 10.1 Governing Law................................43
Section 10.2 Counterparts.................................43
Section 10.3 Reliance by Third Parties....................43
Section 10.4 References; Headings.........................43
Signatures ................................................44
Acknowledgments............................................45
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
FIDUCIARY MANAGEMENT ASSOCIATES
This AGREEMENT AND DECLARATION OF TRUST, made at Boston,
Massachusetts this 5th day of February, 1986, by and between the
Settlor and the Trustee whose signature is set forth below (the
"Initial Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Bryan G. Tyson, an individual residing in
Brookline, Massachusetts (the "Settlor"), proposes to deliver to
the Initial Trustee the sum of one hundred dollars ($100.00)
lawful money of the United States of America in trust hereunder
and to authorize the Initial Trustee and all other Persons acting
as Trustees hereunder to employ such funds, and any other funds
coming into their hands or the hands of their successor or
successors as such Trustees, to carry on the business of an
investment company, and as such of buying, selling, investing in
or otherwise dealing in and with stocks, bonds, debentures,
warrants, options, futures contracts and other securities and
interests therein, or calls or puts with respect to any of the
same, or such other and further investment media and other
property as the Trustees may deem advisable, which are not
prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee is willing to accept such
sum, together with any and all additions thereto and the income or
increments thereof, upon the terms, conditions and trusts
hereinafter set forth; and
WHEREAS, it is proposed that the assets held by the
Trustees be divided into separate funds, each with its own
separate investment portfolio, investment objectives, policies and
purposes, and that the beneficial interest in each such fund shall
be divided into transferable Shares of Beneficial Interest, a
separate Series of Shares for each fund, all in accordance with
the provisions hereinafter set forth; and
WHEREAS, it is desired that the trust established hereby
(the "Trust") be managed and operated as a trust with transferable
shares under the laws of Massachusetts, of the type commonly known
as and referred to as a Massachusetts business trust, in
accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Initial Trustee, for himself and his
successors as Trustees, hereby declares, and agrees with the
<PAGE>
Settlor, for himself and for all Persons who shall hereafter
become holders of Shares of Beneficial Interest of the Trust, of
any Series, that the Trustees will hold the sum delivered to them
upon the execution hereof, and all other and further cash,
securities and other property of every type and description which
they may in any way acquire in their capacity as such Trustees,
together with the income therefrom and the proceeds thereof, IN
TRUST NEVERTHELESS, to manage and dispose of the same for the
benefit of the holders from time to time of the Shares of
Beneficial Interest of the several Series being issued and to be
issued hereunder and in the manner and subject to the provisions
hereof, to wit:
ARTICLE I
THE TRUST
SECTION 1.1. Name. The name of the Trust shall be
"FIDUCIARY MANAGEMENT ASSOCIATES",
and so far as may be practicable the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever used in this
Agreement and Declaration of Trust, except where the context
otherwise requires) shall refer to the Trustees in their capacity
as Trustees, and not individually or personally, and shall not
refer to the officers, agents or employees of the Trust or of such
Trustees, or to the holders of the Shares of Beneficial Interest
of the Trust, of any Series. If the Trustees determine that the
use of such name is not practicable ' legal or convenient at any
time or in any jurisdiction, or if the Trust is required to
discontinue the use of such name pursuant to Section 10.5 hereof,
then subject to that Section, the Trustees may use such other
designation, or they may adopt such other name for the Trust as
they deem proper, and the Trust may hold property and conduct its
activities under such designation or name.
SECTION 1.2. Location. The Trust shall have an office
in Boston, Massachusetts, unless changed by the Trustees to
another location in Massachusetts or elsewhere, but such office
need not be the sole or principal office of the Trust. The Trust
may have such other offices or places of business as the Trustees
may from time to time determine to be necessary or expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a
trust with transferable shares under the laws of The Commonwealth
of Massachusetts, of the type referred to in Section 1 of Chapter
182 of the Massachusetts General Laws and commonly termed a
Massachusetts business trust. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general
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partnership, limited partnership, joint venture, corporation or
joint stock company. The Shareholders shall be beneficiaries and
their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them
hereunder.
SECTION 1.4. Definitions. As used in this Agreement and
Declaration of Trust, the following terms shall have the meanings
set forth below unless the context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in
Section 5.2(g) hereof.
"Administrator" shall have the: meaning designated in
Section 5.2(b) hereof.
"Affiliated Person" shall have; the meaning assigned to
it in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended
from time to time.
"Certificate of Designation" shall have the meaning
designated in Section 6.1 hereof.
"Certificate of Termination" shall have the meaning
designated in Section 6.1 hereof.
"Commission" shall have the same meaning as in the 1940
Act.
"Contracting Part " shall have the meaning designated in
the preamble to Section 5.2 hereof.
"Covered Person" shall have the meaning designated in
Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section
5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this
Agreement and Declaration of Trust and all amendments or
modifications thereof as from time to time in effect. References
in this Agreement and Declaration of Trust to "hereof", "herein"
and "hereunder" shall be deemed to refer to the Declaration of
Trust generally, and shall not be limited to the particular text,
Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in
Section 8.4 hereof.
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"Distributor" shall have the meaning designated in
Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning
designated in Section 5.2(e) hereof.
"General Items" shall have the meaning defined in Section
6.2(a) hereof.
"Initial Trustee" shall have the meaning defined in the
preamble hereto.
"Investment Advisor" shall have the meaning stated in
Section 5.2(a) hereof.
"Majority of the Trustees shall mean a majority of the
Trustees in office at the time in question. At any time at which
there shall be only one (1) Trustee in office, such term shall
mean such Trustee.
"Majority Shareholder Vote," as used with respect to the
election of any Trustee at a meeting of Shareholders, shall mean
the vote for the election of such Trustee of a plurality of all
outstanding Shares of the Trust, without regard to Series,
represented in person or by proxy and entitled to vote thereon,
provided that a quorum (as determined in accordance with the By-
Laws) is present, and as used with respect to any other action
required or permitted to be taken by Shareholders, shall mean the
vote for such action of the holders of that majority of all
outstanding Shares (or, where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that
majority of the outstanding Shares of that Series) of the Trust
which consists of: (i) a majority of all Shares (or of Shares of
the particular Series) represented in person or by proxy and
entitled to vote on such action at the meeting of Shareholders at
which such action is to be taken provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if
such action is to be taken by written consent of Shareholders, a
majority of all Shares (or of Shares of the particular Series)
issued and outstanding and entitled to vote on such action;
provide, that (iii) as used with respect to any action requiring
the affirmative vote of "a majority of the outstanding voting
securities", as the quoted phrase is defined in the 1940 Act, of
the Trust or of any Portfolio, "Majority Shareholder Vote" means
the vote for such action at a meeting of Shareholders of the
smallest majority of all outstanding Shares of the Trust (or of
Shares of the particular Portfolio) entitled to vote on such
action which satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment
Company Act of 1940 and the rules and regulations thereunder both
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as amended from time to time, and any order or orders thereunder
which may from time to time be applicable to the Trust.
"Person" shall mean and include individuals, as well as
corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, banks, trust
companies, land trusts, business trusts or other organizations
established under the laws of any jurisdiction, whether or not
considered to be legal entities, and governments and agencies and
political subdivisions thereof.
"Portfolio" or "Portfolios" shall mean one or more of the
separate components of the assets of the Trust which are now or
hereafter established and designated under or in accordance with
the provisions of Article VI hereof.
"Portfolio Assets" shall have the meaning defined in
Section 6.2(a) hereof.
"Principal Underwriter" shall have the meaning designated
in Section 5.2(c) hereof.
"Prospectus," as used with respect to any Portfolio or
Series of Shares, shall mean the prospectus relating to such
Portfolio or Series which constitutes part of the currently
effective Registration Statement of the Trust under the Securities
Act of 1933, as such prospectus may be amended or supplemented
from time to time.
"Securities" shall mean any and all bills, notes, bonds,
debentures or other obligations or evidences of indebtedness,
certificates of deposit, bankers' acceptances, commercial paper,
repurchase agreements or other money market instruments; stocks,
shares or other equity ownership interests; and warrants, options
or other instruments representing rights to subscribe for,
purchase, receive or otherwise acquire or to sell, transfer,
assign or otherwise dispose of, and scrip, certificates, receipts
or other instruments evidencing any ownership rights or interests
in, any of the foregoing and "when issued" and "delayed delivery"
contracts for securities, issued, guaranteed or sponsored by any
governments, political subdivisions or governmental authorities,
agencies or instrumentalities, by any individuals, firms,
companies, corporations, syndicates, associations or trusts, or by
any other organizations or entities whatsoever, irrespective of
their forms or the names by which they may be described, whether
or not they be organized and operated for profit, and whether they
be domestic or foreign with respect to The Commonwealth of
Massachusetts or the United States of America.
"Securities of the Trust" shall mean any Securities
issued by the Trust.
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"Series" shall mean one or more of the series of Shares
authorized by the Trustees to represent the beneficial interest in
one or more of the Portfolios.
"Settlor" shall have the meaning stated in the first
"Whereas" clause set forth above.
"Shareholder" shall mean as of any particular time any
Person shown of record at such time on the books of the Trust as a
holder of outstanding Shares of any Series, and shall include a
pledgee into whose name any such Shares are transferred in pledge.
"Shareholder Servicing Agent" shall have the meaning
designated in Section 5.2(f) hereof.
"Shares" shall mean the transferable units into which the
beneficial interest in the Trust and each Portfolio of the Trust
(as the context may require) shall be divided from time to time,
and includes fractions of Shares as well as whole Shares. All
references herein to "Shares" which are not accompanied by a
reference to any particular Series or Portfolio shall be deemed to
apply to outstanding Shares without regard to Series.
"Single Class Voting," as used with respect to any matter
to be acted upon at a meeting or by written consent of
Shareholders, shall mean a style of voting in which each holder of
one or more Shares shall be entitled to one vote on the matter in
question for each Share standing in his name on the records of the
Trust, irrespective of Series, and all outstanding Shares of all
Series vote as a single class.
"Statement of Additional Information," as used with
respect to any Portfolio or Series of Shares, shall mean the
statement of additional information relating to such Portfolio or
Series, which constitutes part of the currently effective
Registration Statement of the Trust under the Securities Act of
1933, as such statement of additional information may be amended
or supplemented from time to time.
"Transfer Agent" shall have the meaning defined in
Section 5.2(e) hereof.
"Trust" shall have the meaning stated in the fourth
"Whereas" clause set forth above.
"Trust Property" shall mean, as of any particular time,
any and all property which shall have been transferred, conveyed
or paid to the Trust or the Trustees, and all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any
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<PAGE>
reinvestment of such proceeds in whatever form the same may be,
and which at such time is owned or held by, or for the account of,
the Trust or the Trustees, without regard to the Portfolio to
which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee,
so long as he shall continue in office, and all other individuals
who at the time in question have been duly elected or appointed as
Trustees of the Trust in accordance with the provisions hereof and
who have qualified and are then in office. At any time at which
there shall be only one (1) Trustee in office, such term shall
mean such single Trustee.
SECTION 1.5. Real Property to be Converted into Personal
Property. Notwithstanding any other provision, hereof, any real
property at any time forming part of the Trust Property shall be
held in trust for sale and conversion into personal property at
such time or times and in such manner and upon such terms as the
Trustees shall approve, but the Trustees shall have power until
the termination o,f this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for
the purpose of determining the nature of the interest of the
Shareholders therein all such real property shall at all times be
considered as personal property.
ARTICLE II
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the
business of being an investment company, and as such of
subscribing for, purchasing or otherwise acquiring, holding for
investment or trading in, borrowing, lending and selling short,
selling, assigning, negotiating or exchanging and otherwise
disposing of, and turning to account, realizing upon and generally
dealing in and with, in any manner, (a) Securities of all kinds,
(b) precious metals and other minerals, contracts to purchase and
sell, and other interests of every nature and kind in such metals
or minerals, and (c) rare coins and other numismatic items, and
all as the Trustees in their discretion shall determine to be
necessary, desirable or appropriate, and to exercise and perform
any and every act, thing or power necessary, suitable or desirable
for the accomplishment of such purpose, the attainment of any of
the objects or the furtherance of any of the powers given hereby
which are lawful purposes, objects or powers of a trust with
transferable shares of the type commonly termed a Massachusetts
business trust; and to do every other act or acts or thing or
things incidental or appurtenant to or growing out of or in
connection with the aforesaid objects, purposes or powers, or any
of them, which a trust of the type commonly termed a Massachusetts
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business trust is not now or hereafter prohibited from doing,
exercising or performing.
ARTICLE III
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall
have, without other or further authorization, full, entire,
exclusive and absolute power, control and authority over, and
management of, the business of the Trust and over the Trust
Property, to the same extent as if the Trustees were the sole
owners of the business and property of the Trust in their own
right, and with such powers of delegation as may be permitted by
this Declaration, subject only to such Limitations as may be
expressly imposed by this Declaration of Trust or by applicable
law. The enumeration of any specific power or authority herein
shall not be construed as limiting the aforesaid power or
authority or any specific power or authority. Without limiting
the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them to
the extent that such By-Laws do not reserve that right to the
Shareholders; they may select, and from time to time change, the
fiscal year of the Trust; they may adopt and use a seal for the
Trust, provided, that unless otherwise required by the Trustees,
it shall not be necessary to place the seal upon, and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust;
they may from time to time in accordance with the provisions of
Section 6.1 hereof establish one or more Portfolios to which they
may allocate such of the Trust Property, subject to such
liabilities, as they shall deem appropriate, each such Portfolio
to be operated by the Trustees as a separate and distinct
investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as
established by the Trustees, or from time to time changed by them;
they may as they consider appropriate elect and remove officers
and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may
be a Trustee; they may appoint from their own number, and
terminate, any one or more committees consisting of one or more
Trustees, including without implied limitation an Executive
Committee, which may, when the Trustees are not in session and
subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in
accordance with Section 5.2 they may employ one or more Investment
Advisors, Administrators and Custodians and may authorize any
Custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central
handling of Securities, retain Transfer, Dividend Disbursing,
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Accounting or Shareholder Servicing Agents or any of the
foregoing, provide for the distribution of Shares by the Trust
through one or more Distributors, Principal Underwriters or
otherwise, set record dates or times for the determination of
Shareholders entitled to participate in, benefit from or act with
respect to various matters; and in general they may delegate to
any officer of the Trust, to any Committee of the Trustees and to
any employee, Investment Advisor, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any other
agent or consultant of the Trust, such authority, powers,
functions and duties as they consider desirable or appropriate for
the conduct of the business and affairs of the Trust, including
without implied limitation the power and authority to act in the
name of the Trust and of the Trustees, to sign documents and to
act as attorney-in-fact for the Trustees. Without limiting the
foregoing and to the extent not inconsistent with the 1940 Act or
other applicable law, the Trustees shall have power and authority:
(a) Investments. To invest and reinvest cash and
other property; to buy, for cash or on margin, and
otherwise acquire and hold, Securities created or issued
by any Persons, including Securities maturing after the
possible termination of the Trust; to make payment
therefor in any lawful manner in exchange for any of the
Trust Property; and to hold cash or other property
uninvested without in any event being bound or limited by
any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. Upon such terms and
conditions as they deem best, to lend, sell, exchange,
mortgage, pledge, hypothecate, grant security interests
in, encumber, negotiate, convey, transfer or otherwise
dispose of, and to trade in, any and all of the Trust
Property, free and clear of all trusts, for cash or on
terms, with or without advertisement, and on such terms
as to payment, security or otherwise, all as they shall
deem necessary or expedient;
(c) Ownership Powers. To vote or give assent, or
exercise any and all other rights, powers and privileges
of ownership with respect to, and to perform any and all
duties and obligations as owners of, any Securities or
other property forming part of the Trust Property, the
same as any individual might do; to exercise powers and
rights of subscription or otherwise which in any manner
arise out of ownership of Securities, and to receive
powers of attorney from, and to execute and deliver
proxies or powers of attorney to, such Person or Persons
as the Trustees shall deem proper, receiving from or
granting to such Person or Persons such power and
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discretion with relation to Securities or other property
of the Trust, all as the Trustees shall deem proper;
(d) Form of Holding. To hold any Security or other
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 of the Portfolio
to which such Securities or property belong, or in the
name of a Custodian, subcustodian or other nominee or
nominees, or otherwise, upon such terms, in such manner
or with such powers, as the Trustees may determine, and
with or without indicating any trust or the interest of
the Trustees therein;
(e) Reorganization, etc. 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 or any
Portfolio; 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 forming part of the Trust Property;
(f) Voting Trusts, etc. To join with other holders
of any Securities in acting through a committee,
depository, voting trustee or otherwise, and in that
connection to deposit any Security with, or transfer any
Security to, any such committee, depository 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, depository or trustee
as the Trustees shall deem proper;
(g) Contracts, etc. To enter into, make and
perform all such obligations, contracts, agreements and
undertakings of every kind and description, with any
Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business
of the Trust, for such terms as they shall see fit,
whether or not extending beyond the term of office of the
Trustees, or beyond the possible expiration of the Trust;
to amend, extend, release or cancel any such obligations,
contracts, agreements or understandings; and to execute,
acknowledge, deliver and record all written instruments
which they may deem necessary or expedient in the
exercise of their powers;
(h) Guarantees, etc. To endorse or guarantee the
payment of any notes or other obligations of any Person;
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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;
(i) Partnerships, etc. To enter into joint
ventures, general or limited partnerships and any other
combinations or associations;
(j) Insurance. 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, consultants,
Investment Advisors, managers, Administrators,
Distributors, Principal Underwriters, or other
independent contractors, or any thereof (or any Person
connected therewith), 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 in any such
capacity, 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;
(k) Pensions, etc. 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;
(l) Power of Collection and Litigation. To
collect, sue for and receive all sums of money coming due
to the Trust, to employ counsel, and to commence, engage
in, prosecute, intervene in, join, defend, compound,
compromise, adjust or abandon, in the name of the Trust,
any and all actions, suits, proceedings, disputes,
claims, controversies, demands or other litigation or
legal proceedings relating to the Trust, the business of
the Trust, the Trust Property, or the Trustees, officers,
employees, agents and other independent contractors of
the Trust, in their capacity as such, at law or in
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equity, or before any other bodies or tribunals, and to
compromise, arbitrate or otherwise adjust any dispute to
which the Trust may be a party, whether or not any suit
is commenced or any claim shall have been made or
asserted;
(m) Issuance and Repurchase of Shares. To issue,
sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal
in Shares of any Series, and, subject to Article VI
hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any
Series, any of the Portfolio Assets belonging to the
Portfolio to which such Series relates, whether
constituting capital or surplus or otherwise, to the full
extent now or hereafter permitted by applicable law;
provided, that any Shares belonging to the Trust shall
not be voted, directly or indirectly;
(n) Offices. To have one or more offices, and to
carry on all or any of the operations and business of the
Trust, in any of the States, Districts or Territories of
the United States and in any and all foreign countries,
subject to the laws of such State, District, Territory or
country;
(o) Expenses. To incur and pay any and all such
expenses and charges as they may deem advisable
(including without limitation appropriate fees to
themselves as Trustees), and to pay all such sums of
money for which they may be held liable by way of
damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all
such servants, agents, employees, attorneys, brokers,
investment advisers, accountants, architects, engineers,
builders, escrow agents, depositories, consultants,
ancillary trustees, custodians, agents for collection,
insurers, banks and officers, as they think best for the
business of the Trust or any Portfolio, to supervise and
direct the acts of any of the same, and to fix and pay
their compensation and define their duties;
(q) Accounts. To determine, and from time to time
change, the method or form in which the accounts of the
Trust shall be kept;
(r) Valuation. Subject to the requirements of the
1940 Act, to determine from time to time the value of all
or any part of the Trust Property and of any services,
Securities, property or other consideration to be
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furnished to or acquired by the Trust, and from time to
time to revalue all or any part of the Trust Property in
accordance with such appraisals, or other information as
is, in the Trustees' sole judgment, necessary and
satisfactory;
(s) Indemnification. In addition to the mandatory
indemnification provided for in Article VIII hereof and
to the extent permitted by law, to indemnify or enter
into agreements with respect to indemnification with any
Person with whom this Trust has dealings, including,
without limitation, any independent contractor, to such
extent as the Trustees shall determine; and
(t) General. To do all such other acts and things
and to conduct, operate, carry on and engage in such
other lawful businesses or business activities as they
shall in their sole and absolute discretion consider to
be incidental to the business of the Trust or any
Portfolio as an investment company, and to exercise all
powers which they shall in their discretion consider
necessary, useful or appropriate to carry on the business
of the Trust or any Portfolio, to promote any of the
purposes for which the Trust is formed, whether or not
such things are specifically mentioned herein, in order
to protect or promote the interests of the Trust or any
Portfolio, or otherwise to carry out the provisions of
this Declaration.
SECTION 3.2. Borrowings; Financings; Issuance of
Securities. The Trustees have power to borrow or in any other
manner raise such sum or sums of money, and to incur such other
indebtedness for goods or services, or for or in connection with
the purchase or other acquisition of property, as they shall deem
advisable for the purposes of the Trust, in any manner and on any
terms, and to evidence the same by negotiable or non-negotiable
Securities which may mature at any time or times, even beyond the
possible date of termination of the Trust; to issue Securities of
any type for such cash, property, services or other
considerations, and at such time or times and upon such terms, as
they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the
Trustees, be made convertible into Shares of any Series, or may
evidence the right to purchase, subscribe for or otherwise acquire
Shares of any Series, at such times and on such terms as the
Trustees may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of
the 1940 Act, the Trustees shall have power to deposit any moneys
or Securities included in the Trust Property with any one or more
banks trust companies or other banking institutions, whether or
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not such deposits will draw interest. Such deposits are to be
subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any
loss which may occur by reason of the failure of the bank, trust
company or other banking institution with which any such moneys or
Securities have been deposited, other than liability based on
their gross negligence or willful fault.
SECTION 3.4. Allocations. The Trustees shall have power
to determine whether moneys or other assets received by the Trust
shall be charged or credited to income or capital, or allocated
between income and capital, including the power to amortize or
fail to amortize any part or all of any premium or discount, to
treat any part or all of the profit resulting from the maturity or
sale of any asset, whether purchased at a premium or at a
discount, as income or capital, or to apportion the same between
income and capital, to apportion the sale price of any asset
between income and capital, and to determine in what manner any
expenses or disbursements are to be borne as between income and
capital, whether or not in the absence of the power and authority
conferred by this Section 3.4 such assets would be regarded as
income or as capital or such expense or disbursement would be
charged to income or to capital; to treat any dividend or other
distribution on any investment as income or capital, or to
apportion the same between income and capital; to provide or fail
to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in
such amounts and by such methods as they shall determine; to
allocate less than all of the consideration paid for Shares of any
Series to the shares of beneficial interest account of the
Portfolio to which such Shares relate and to allocate the balance
thereof to paid-in capital of that Portfolio, and to reallocate
such amounts from time to time; all as the Trustees may reasonably
deem proper.
SECTION 3.5. Further Powers; Limitations. The Trustees
shall have power to do all such other matters and things, and to
execute all such instruments, as they deem necessary, proper or
desirable in order to carry out, promote or advance the interests
of the Trust, although such matters or things are not herein
specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration of
Trust, the presumption shall be in favor of a grant of power to
the Trustees. The Trustees shall not be required to obtain any
court order to deal with the Trust Property. The Trustees may
limit their right to exercise any of their powers through express
restrictive provisions in the instruments evidencing or providing
the terms for any Securities of the Trust or in other contractual
instruments adopted on behalf of the Trust.
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ARTICLE IV
TRUSTEES AND OFFICERS
SECTION 4.1. Number, Designation, Election, Term, etc.
(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some
other writing in which he accepts such Trusteeship and
agrees to the provisions hereof, the individual whose
signature is affixed hereto as Initial Trustee shall
become the Initial Trustee hereof.
(b) Number. The Trustees serving as such, whether
named above or hereafter becoming Trustees, may increase
(to not more than twenty (20)) or decrease the number of
Trustees to a number other than the number theretofore
determined by a written instrument signed by a Majority
of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees). No decrease
in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration
of his term, but the number of Trustees may be decreased
in conjunction with the removal of a Trustee pursuant to
subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be
elected by the Shareholders of the Trust at the first
meeting of Shareholders immediately prior to the initial
public offering of Shares of the Trust, and the term of
office of any Trustees in office before such election
shall terminate at the time of such election. Subject to
Section 16(a) of the 1940 Act and to the preceding
sentence of this subsection (c), the Trustees shall have
the power to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten their
own terms or make their terms of unlimited duration, to
elect their own successors and, pursuant to
subsection (f) of this Section 4.1, to appoint Trustees
to fill vacancies; provided, that Trustees shall be
elected by a Majority Shareholder Vote at any such time
or times as the Trustees shall determine that such action
is required under Section 16(a) of the 1940 Act or, if
not so required, that such action is advisable; and
further provided, that, after the initial election of
Trustees by the Shareholders, the term of office of any
incumbent Trustee shall continue until the termination of
this Trust or his earlier death, resignation, retirement,
bankruptcy, adjudicated incompetency or other incapacity
or removal, or if not so terminated, until the election
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of such Trustee's successor in office has become
effective in accordance with this subsection (c).
(d) Resignation and Retirement. Any Trustee may
resign his trust or retire as a Trustee, by a written
instrument signed by him and delivered to the other
Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.
(e) Removal. Any Trustee may be removed with or
without cause at any time: (i) by written instrument,
signed by at least two-thirds (2/3) of the number of
Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by
vote of Shareholders holding not less than two-thirds
(2/3) of the Shares of each Series then outstanding, cast
in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds (2/3) of
the Shares of each Series then outstanding and filed with
the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including an increase in the
number of Trustees, may (but need not unless required by
the 1940 Act) be filled by a Majority of the Trustees,
subject to the provisions of Section 16(a) of the 1940
Act, through the appointment in writing of such other
individual as such remaining Trustees in their discretion
shall determine; provide that if there shall be no
Trustees in office, such vacancy or vacancies shall be
filled by vote of the Shareholders. Any such appointment
or election shall be effective upon such individual's
written acceptance of his appointment as a Trustee and
his agreement to be bound by the provisions of this
Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of
retirement, resignation or increase in the number of
Trustees to be effective at a later date shall become
effective only at or after the effective date of said
retirement, resignation or increase in the number of
Trustees.
(g) Acceptance of Trusts. Any individual appointed
as a Trustee under subsection (f), and any individual
elected as a Trustee under subsection (c), of this
Section 4.1 who was not, immediately prior to such
election, acting as a Trustee, shall accept such
appointment or election in writing and agree in such
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writing to be bound by the provisions hereof, and
whenever such individual shall have executed such writing
and any conditions to such appointment or election shall
have been satisfied, such individual shall become a
Trustee and the Trust Property shall vest in the new
Trustee, together with the continuing Trustees, without
any further act or conveyance.
(h) Effect of Death, Resignation, etc. No vacancy,
whether resulting from the death, resignation,
retirement, removal or incapacity of any Trustee, an
increase in the number of Trustees or otherwise, shall
operate to annul or terminate the Trust hereunder or to
revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this
Declaration of Trust. Until such vacancy is filled as
provided in this Section 4.1, the Trustees in office (if
any), regardless of their number, shall have all the
powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration.
A written instrument certifying the existence of such
vacancy signed by a Majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
(i) Conveyance. In the event of the resignation or
removal of a Trustee or his otherwise ceasing to be a
Trustee, such former Trustee or his legal representative
shall, upon request of the continuing Trustees, execute
and deliver such documents as may be required for the
purpose of consummating or evidencing the conveyance to
the Trust or the remaining Trustees of any Trust Property
held in such former Trustee's name, but the execution and
delivery of such documents shall not be requisite to the
vesting of title to the Trust Property in the remaining
Trustees, as provided in subsection (g) of this
Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required
by the 1940 Act or under circumstances which would
justify his removal for cause, no Person ceasing to be a
Trustee (nor the estate of any such Person) shall be
required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
(k) Filings. Whenever there shall be a change in
the composition of the Trustees, the Trust shall cause to
be filed in the office of the Secretary of The
Commonwealth of Massachusetts and in each other place
where the Trust is required to file amendments to this
Declaration a copy of (i) the instrument by which (in the
case of the appointment of a new Trustee, or the election
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of an individual who was not theretofore a Trustee) the
new Trustee accepted his appointment or election and
agreed to be bound by the terms of this Declaration, or
(in the case of a resignation) by which the former
Trustee resigned as such, together in either case with a
certificate of one of the other Trustees as to the
circumstances of such election, appointment or
resignation, or (ii) in the case of the removal or death
of a Trustee, a certificate of one of the Trustees as to
the circumstances of such removal or resignation.
SECTION 4.2. Trustees' Meetings; Participation by
Telephone, etc. An annual meeting of Trustees shall be held not
later than the last day of the fourth month after the end of each
fiscal year of the Trust and special meetings may be held from
time to time, in each case, upon the call of such officers as may
be thereunto authorized by the By-Laws or vote of the Trustees, or
by any two (2) Trustees, or pursuant to a vote of the Trustees
adopted at a duly constituted meeting of the Trustees, and upon
such notice as shall be provided in the By-Laws. The Trustees may
act with or without a meeting, and a written consent to any
matter, signed by a Majority of the Trustees, shall be equivalent
to action duly taken at a meeting of the Trustees, duly called and
held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws,
any action to be taken by the Trustees may be taken by a majority
of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a Majority of the Trustees, being present),
within or without Massachusetts. If authorized by the By-Laws,
all or any one or more Trustees may participate in a meeting of
the Trustees or any Committee thereof by means of conference
telephone or similar means of communication by means of which all
Persons participating in the meeting can hear each other, and
participation in a meeting pursuant to such means of communication
shall constitute presence in person at such meeting. The minutes
of any meeting thus held shall be prepared in the same manner as a
meeting at which all participants were present in person.
SECTION 4.3. Committees; Delegation. The Trustees shall
have power, consistent with their ultimate responsibility to
supervise the affairs of the Trust, to delegate from time to time
to an Executive Committee, and to one or more other Committees, or
to any single Trustee, the doing of such things and the execution
of such deeds or other instruments, either in the name of the
Trust or the names of the Trustees or as their attorney or
attorneys in fact, or otherwise as the Trustees may from time to
time deem expedient, and any agreement, deed, mortgage, lease or
other instrument or writing executed by the Trustee or Trustees or
other Person to whom such delegation was made shall be valid and
binding upon the Trustees and upon the Trust.
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SECTION 4.4. Officers. The Trustees shall annually
elect such officers or agents, who shall have such powers, duties
and responsibilities as the Trustees may deem to be advisable, and
as they shall specify by resolution or in the By-Laws. Except as
may be provided in the By-Laws, any officer elected by the
Trustees may be removed at any time with or without cause. Any
two (2) or more offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers. The
Trustees shall fix the compensation of all officers and Trustees.
Without limiting the generality of any of the provisions hereof,
the Trustees shall be entitled to receive reasonable compensation
for their general services as such, and to fix the amount of such
compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including
legal, accounting, or other professional services, as they in good
faith may deem reasonable. No Trustee or officer resigning and
(except where a right to receive compensation for a definite
future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) no Trustee or
officer removed shall have any right to any compensation as such
Trustee or officer for any period following his resignation or
removal, or any right to damages on account of his removal,
whether his compensation be by the month, by the year or
otherwise.
SECTION 4.6. Ownership of Shares and Securities of the
Trust. Any Trustee, and any officer, employee or agent of the
Trust, and any organization in which any such Person is
interested, may acquire, own, hold and dispose of Shares of any
Series and other Securities of the Trust for his or its individual
account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such
Person were not such a Trustee, officer, employee or agent of the
Trust; subject, in the case of Trustees and officers, to the same
limitations as directors or officers (as the case may be) of a
Massachusetts business corporation; and the Trust may issue and
sell or cause to be issued and sold and may purchase any such
Shares or other Securities from any such Person or any such
organization, subject only to the general limitations,
restrictions or other provisions applicable to the sale or
purchase of Shares of such Series or other Securities of the Trust
generally.
SECTION 4.7. Right of Trustees and Officers to Own
Property or to Engage in Business; Authority of Trustees to Permit
Others to Do Likewise. The Trustees, in their capacity as
Trustees, and (unless otherwise specifically directed by vote of
the Trustees) the officers of the Trust in their capacity as such,
shall not be required to devote their entire time to the business
and affairs of the Trust. Except as otherwise specifically
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provided by vote of the Trustees, or by agreement in any
particular case, any Trustee or officer of the Trust may acquire,
own, hold and dispose of, for his own individual account, any
property, and acquire, own, hold, carry on and dispose of, for his
own individual account, any business entity or business activity,
whether similar or dissimilar to any property or business entity
or business activity invested in or carried on by the Trust, and
without first offering the same as an investment opportunity to
the Trust, and may exercise all rights in respect thereof as if he
were not a Trustee or officer of the Trust. The Trustees shall
also have power, generally or in specific cases, to permit
employees or agents of the Trust to have the same rights (or
lesser rights) to acquire, hold, own and dispose of property and
businesses, to carry on businesses, and to accept investment
opportunities without offering them to the Trust, as the Trustees
have by virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and
officers may consult with counsel, engineers, brokers, appraisers,
auctioneers, accountants, investment bankers, securities analysts
or other Persons (any of which may be a firm in which one or more
of the Trustees or officers is or are members or otherwise
interested) whose profession gives authority to a statement made
by them on the subject in question, and who are reasonably deemed
by the Trustees or officers in question to be competent, and the
advice or opinion of such Persons shall be full and complete
personal protection to all of the Trustees and officers in respect
of any action taken or suffered by them in good faith and in
reliance on or in accordance with such advice or opinion. In
discharging their duties, Trustees and officers, when acting in
good faith, may rely upon financial statements of the Trust
represented to them to be correct by any officer of the Trust
having charge of its books of account, or stated in a written
report by an independent certified public accountant fairly to
present the financial position of the Trust. The Trustees and
officers may rely, and shall be personally protected in acting,
upon any instrument or other document believed by them to be
genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer,
employee or agent of the Trust shall, as such, be obligated to
give any bond or surety or other security for the performance of
any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in
any particular case.
SECTION 4.10. Apparent Authority of Trustees and
Officers. No purchaser, lender, transfer agent or other Person
dealing with the Trustees or any officer of the Trust shall be
bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such
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officer, or to make inquiry concerning or be liable for the
application of money or property paid, loaned or delivered to or
on the order of the Trustees or of such officer.
SECTION 4.11. Other Relationships Not Prohibited. 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
Contracting Party (as defined in Section 5.2 hereof), or
of or for any parent or affiliate of any Contracting
Party, or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in
the Trust or any Portfolio, or that
(ii) any Contracting Party may have a contract
providing for the rendering of any similar services to
one or more other corporations, trusts, associations,
partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance
and assumption of services, duties and responsibilities to, for or
of the Trust and/or the Trustees 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 to
the holders of Shares of any Series; provided, that, in the case
of any relationship or interest referred to in the preceding
clause (i) on the part of any Trustee or officer of the Trust,
either (x) the material facts as to such relationship or interest
have been disclosed to or are known by the Trustees not having any
such relationship or interest and the contract involved is
approved in good faith by a majority of such Trustees not having
any such relationship or interest (even though such unrelated or
disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or
interest and as to the contract have been disclosed to or are
known by the Shareholders entitled to vote thereon and the
contract involved is specifically approved in good faith by vote
of the Shareholders, or (z) the specific contract involved is fair
to the Trust as of the time it is authorized, approved or ratified
by the Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees
are authorized to pay or to cause to be paid out of the principal
or income of the Trust, or partly out of principal and partly out
of income, and according to any allocation to particular
Portfolios made by them pursuant to Section 6.2(b) hereof, all
expenses, fees, charges, taxes and liabilities incurred or arising
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in connection with the business and affairs of the Trust or in
connection with the management thereof, including, but not limited
to, the Trustees' compensation and such expenses and charges for
the services of the Trust's officers, employees, Investment
Advisor, Administrator, Distributor, Principal Underwriter,
auditor, counsel, Custodian, Transfer Agent, Dividend Disbursing
Agent, Accounting Agent, Shareholder Servicing Agent, and such
other agents, consultants, and independent contractors and such
other expenses and charges as the Trustees may deem necessary or
proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal
title to all the Trust Property shall be vested in the Trustees as
joint tenants, except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or of
any particular Portfolio, or in the name of any other Person as
nominee, on such terms as the Trustees may determine; provided,
that the interest of the Trust and of the respective Portfolio
therein is appropriately protected. The right, title and interest
of the Trustees in the Trust Property shall vest automatically in
each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in
Section 4.1(c), (d) or (e) hereof, such Trustee shall
automatically cease to have any right, title or interest in any of
the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed
and delivered pursuant to Section 4.1(i) hereof.
ARTICLE V
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All
Trustees. The Trustees shall be responsible for the general
operating policy of the Trust and for the general supervision of
the business of the Trust conducted by officers, agents, employees
or advisers of the Trust or by independent contractors, but the
Trustees shall not be required personally to conduct all the
business of the Trust and, consistent with their ultimate
responsibility as stated herein, the Trustees may appoint, employ
or contract with one or more officers, employees and agents to
conduct, manage and/or supervise the operations of the Trust, and
may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem
to be necessary or desirable, without regard to whether such
authority is normally granted or delegated by trustees. With
respect to those matters of the operation and business of the
Trust which they shall elect to conduct themselves, except as
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otherwise provided by this Declaration or the By-Laws, if any, the
Trustees may authorize any single Trustee or defined group of
Trustees, or any committee consisting of a number of Trustees less
than the whole number of Trustees then in office without
specification of the particular Trustees required to be included
therein, to act for and to bind the Trust, to the same extent as
the whole number of Trustees could do, either with respect to one
or more particular matters or classes of matters, or generally.
SECTION 5.2. Certain Contracts. Subject to compliance
with the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time in their discretion and without
limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one or
more corporations, trusts, associations, partnerships, limited
partnerships or other types of organizations, or individuals
("Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any
Portfolio, and/or the Trustees, and to provide for the performance
and assumption of such other services, duties and responsibilities
in addition to those set forth below, as the Trustees may deem
appropriate:
(a) Advisory. An investment advisory or management
agreement whereby the Investment Advisor shall undertake
to furnish the Trust such management, investment advisory
or supervisory, administrative, accounting, legal,
statistical and research facilities and services, and
such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all
upon such terms and conditions as the Trustees may in
their discretion determine to be not inconsistent with
this Declaration, the applicable provisions of the 1940
Act or any applicable provisions of the By-Laws. Any
such advisory or management agreement and any amendment
thereto shall be subject to approval by a Majority
Shareholder Vote at a meeting of the Shareholders of the
Trust. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment
Advisor (subject to such general or specific instructions
as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio
securities of the Trust on behalf of the Trustees or may
authorize any officer or employee of the Trust or any
Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of the Investment
Advisor (and all without further action by the Trustees).
Any such purchases, sales, loans and exchanges shall be
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deemed to have been authorized by all of the Trustees.
The Trustees may, in their sole discretion, call a
meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval of continuance
of any such investment advisory or management agreement.
If the Shareholders of any Portfolio should fail to
approve any such investment advisory or management
agreement, the Investment Advisor may nonetheless serve
as Investment Advisor with respect to any other Portfolio
whose Shareholders shall have approved such contract.
(b) Administration. An agreement whereby the
agent, subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with
respect to the operations of the Trust and each
Portfolio, will supervise all or any part of the
operations of the Trust and each Portfolio, and will
provide all or any part of the administrative and
clerical personnel, office space and office equipment and
services appropriate for the efficient administration and
operations of the Trust and each Portfolio (any such
agent being herein referred to as an "Administrator").
(c) Distribution. An agreement providing for the
sale of Shares of any one or more Series to net the Trust
not less than the net asset value per Share (as described
in Section 6.2(h) hereof) and pursuant to which the Trust
may appoint the other party to such agreement as its
principal underwriter or sales agent for the distribution
of such Shares. The agreement shall contain such terms
and conditions as the Trustees may in their discretion
determine to be not inconsistent with this Declaration,
the applicable provisions of the 1940 Act and any
applicable provisions of the By-Laws (any such agent
being herein referred to as a "Distributor" or a
"Principal Underwriter", as the case may be).
(d) Custodian. The appointment of a bank or trust
company having an aggregate capital, surplus and
undivided profits (as shown in its last published report)
of at least two million dollars ($2,000,000) as custodian
of the Securities and cash of the Trust and of each
Portfolio and of the accounting records in connection
therewith (any such agent being herein referred to as a
"Custodian").
(e) Transfer and Dividend Disbursing Agent. An
agreement with an agent to maintain records of the
ownership of outstanding Shares, the issuance and
redemption and the transfer thereof (any such agent being
herein referred to as a "Transfer Agent"), and to
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disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest
any such dividends (any such agent being herein referred
to as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an
agent to provide service with respect to the relationship
of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters
(any such agent being herein referred to as a
"Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to
handle all or any part of the accounting
responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent
being herein referred to as an "Accounting Agent").
The same Person may be the Contracting Party for some or all of
the services, duties and responsibilities to, for and of the Trust
and/or the Trustees, and the contracts with respect thereto may
contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities provided
for, including provisions that are not inconsistent with the 1940
Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or
limit the Trust or a Contracting Party from entering into sub-
contractual arrangements relative to any of the matters referred
to in subsections (a) through (g) of this Section 5.2.
ARTICLE VI
PORTFOLIOS AND SHARES
SECTION 6.1. Description of Portfolios and Shares.
(a) Shares; Portfolios; Series of Shares. The
beneficial interest in the Trust shall be divided into
Shares having a nominal or par value of one cent ($.01)
per Share, and all of one class, of which an unlimited
number may be issued. The Trustees shall have the
authority from time to time to establish and designate
one or more separate, distinct and independent Portfolios
into which the assets of the Trust shall be divided, and
to authorize a separate Series of Shares for each such
Portfolio (each of which Series, including without
limitation each Series authorized in Section 6.2 hereof,
shall represent interests only in the Portfolio with
respect to which such Series was authorized), as they
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deem necessary or desirable. Except as otherwise
provided as to a particular Portfolio herein, or in the
Certificate of Designation therefor, the Trustees shall
have all the rights and powers, and be subject to all the
duties and obligations, with respect to each such
Portfolio and the assets and affairs thereof as they have
under this Declaration with respect to the Trust and the
Trust Property in general.
(b) Establishment, etc. of Portfolios;
Authorization of Shares. The establishment and
designation of any Portfolio in addition to the
Portfolios established and designated in Section 6.2
hereof and the authorization of the Shares thereof shall
be effective upon the execution by a Majority of the
Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees) of an instrument
setting forth such establishment and designation and the
relative rights and preferences of the Shares of such
Portfolio and the manner in which the same may be amended
(a "Certificate of Designation"), and may provide that
the number of Shares of such Series which may be issued
is unlimited, or may limit the number issuable. At any
time that there are no Shares outstanding of any
particular Portfolio previously established and
designated, including any Portfolio established and
designated in Section 6.2 hereof, the Trustees may by an
instrument executed by a Majority of the Trustees (or by
an officer of the Trust pursuant to the vote of a
Majority of the Trustees) terminate such Portfolio and
the establishment and designation thereof and the
authorization of its Shares (a "Certificate of
Termination"). Each Certificate of Designation,
Certificate of Termination and any instrument amending a
Certificate of Designation shall have the status of an
amendment to this Declaration of Trust, and shall be
filed and become effective as provided in Section 9.4
hereof.
(c) Character of Separate Portfolios and Shares
Thereof. Each Portfolio established hereunder shall be a
separate component of the assets of the Trust, and the
holders of Shares of the Series representing the
beneficial interest in the assets of that Portfolio shall
be considered Shareholders of such Portfolio, but such
Shareholders shall also be considered Shareholders of the
Trust for purposes of receiving reports and notices and,
except as otherwise provided herein or in the Certificate
of Designation of a particular Portfolio as to such
Portfolio, or as required by the 1940 Act or other
applicable law, the right to vote, all without
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distinction by Series. The Trustees shall have exclusive
power without the requirement of Shareholder approval to
establish and designate such separate and distinct
Portfolios, and to fix and determine the relative rights
and preferences as between the shares of the respective
Portfolios as to rights of redemption and the price,
terms and manner of redemption, special and relative
rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the
Shareholders of the several Portfolios shall have
separate voting rights or no voting rights.
(d) Consideration for Shares. The Trustees may
issue Shares of any Series for such consideration (which
may include property subject to, or acquired in
connection with the assumption of, liabilities) and on
such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when
so issued on the terms determined by the Trustees shall
be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in
Section 6.2(h) hereof). The Trustees may classify or
reclassify any unissued Shares, or any Shares of any
Series previously issued and reacquired by the Trust,
into Shares of one or more other Portfolios that may be
established and designated from time to time.
SECTION 6.2. Establishment and Designation of Certain
Portfolios; General Provisions for All Portfolios. Without
limiting the authority of the Trustees set forth in Section 6.1(a)
hereof to establish and designate further Portfolios, there are
hereby established and designated the following three (3)
Portfolios: the Growth Portfolio, the High-Yield Portfolio and the
Mortgage Securities Income Portfolio. The Shares of such
Portfolios, and the Shares of any further Portfolios that may from
time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some
further Portfolio at the time of establishing and designating the
same) have the following relative rights and preferences:
(a) Assets Belonging to Portfolios. Any portion of
the Trust Property allocated to a particular Portfolio,
and all consideration received by the Trust for the issue
or sale of Shares of such Portfolio, together with all
assets in which such consideration is invested or
reinvested, all interest, dividends, income, earnings,
profits and gains therefrom, and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments
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derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of
Shares of that Portfolio and shall irrevocably belong to
that Portfolio for all purposes, and shall be so recorded
upon the books of account of the Trust, and the
Shareholders of such Portfolio shall not have, and shall
be conclusively deemed to have waived, any claims to the
assets of any Portfolio of which they are not
Shareholders. Such consideration, assets, interest,
dividends, income, earnings, profits, gains and proceeds,
together with any General Items allocated to that
Portfolio as provided in the following sentence, are
herein referred to collectively as "Portfolio Assets" of
such Portfolio, and as assets "belonging to" that
Portfolio. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as
belonging to any particular Portfolio (collectively
"General Items"), the Trustees shall allocate such
General Items to and among any one or more of the
Portfolios established and designated from time to time
in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General
Items so allocated to a particular Portfolio shall belong
to and be part of the Portfolio Assets of that Portfolio.
Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all Portfolios for
all purposes.
(b) Liabilities of Portfolios. The assets
belonging to each particular Portfolio shall be charged
with the liabilities in respect of that Portfolio and all
expenses, costs, charges and reserves attributable to
that Portfolio, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not
readily identifiable as pertaining to any particular
Portfolio shall be allocated and charged by the Trustees
to and among any one or more of the Portfolios
established and designated from time to time in such
manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The indebtedness,
expenses, costs, charges and reserves allocated and so
charged to a particular Portfolio are herein referred to
as "liabilities of" that Portfolio. Each allocation of
liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the
Shareholders of all Portfolios for all purposes. Any
creditor of any Portfolio may look only to the assets of
that Portfolio to satisfy such creditor's debt.
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(c) Dividends. Dividends and distributions on
Shares of a particular Portfolio may be paid with such
frequency as the Trustees may determine, which may be
daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as
the Trustees may determine, to the Shareholders of that
Portfolio, from such of the income, accrued or realized,
and capital gains, realized or unrealized, and out of the
assets belonging to that Portfolio, as the Trustees may
determine, after providing for actual and accrued
liabilities of that Portfolio. All dividends and
distributions on Shares of a particular Portfolio shall
be distributed pro rata to the Shareholders of that
Portfolio in proportion to the number of such Shares held
by such holders at the date and time of record
established for the payment of such dividends or
distributions, except that in connection with any
dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by
the time or times established by the Trustees under such
program or procedure, or that dividends or distributions
shall be payable on Shares which have been tendered by
the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet
been paid to such Shareholder. Such dividends and
distributions may be made in cash or Shares of that
Portfolio or a combination thereof as determined by the
Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset
value thereof as determined in accordance with subsection
(h) of this Section 6.2.
(d) Liquidation. In the event of the liquidation
or dissolution of the Trust, the Shareholders of each
Portfolio of which Shares are outstanding shall be
entitled to receive, when and as declared by the
Trustees, the excess of the Portfolio Assets over the
liabilities of such Portfolio. The assets so
distributable to the Shareholders of any particular
Portfolio shall be distributed among such Shareholders in
proportion to the number of Shares of that Portfolio held
by them and recorded on the books of the Trust. The
liquidation of any particular Portfolio may be authorized
by vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the outstanding voting
securities" of that Portfolio, as the quoted phrase is
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defined in the 1940 Act, determined in accordance with
clause (iii) of the definition of "Majority Shareholder
Vote" in Section 1.4 hereof.
(e) Voting. The Shareholders shall have the voting
rights set forth in or determined under Article VII
hereof.
(f) Redemption by Shareholder. Each holder of
Shares of a particular Portfolio shall have the right at
such times as may be permitted by the Trust, but no less
frequently than once each week, to require the Trust to
redeem all or any part of his Shares of that Portfolio at
a redemption price equal to the net asset value per Share
of that Portfolio next determined in accordance with
subsection (h) of this Section 6.2 after the Shares are
properly tendered for redemption; provided, that the
Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption. Payment
of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist
which make payment wholly in cash unwise or undesirable,
the Trust may make payment wholly or partly in Securities
or other assets belonging to such Portfolio at the value
of such Securities or assets used in such determination
of net asset value. Notwithstanding the foregoing, the
Trust may postpone payment of the redemption price and
may suspend the right of the holders of Shares of any
Portfolio to require the Trust to redeem Shares of that
Portfolio during any period or at any time when and to
the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each
Share of any Portfolio shall be subject to redemption at
the option of the Trust at the redemption price which
would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (f) of
this Section 6.2: (i) at any time, if the Trustees
determine in their sole discretion that failure to so
redeem may have materially adverse consequences to the
holders of the Shares of the Trust or of any Portfolio,
or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount
as may from time to time be determined by the Trustees
and set forth in the then current Prospectus of such
Portfolio. Upon such redemption the holders of the
Shares so redeemed shall have no further right with
respect thereto other than to receive payment of such
redemption price.
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(h) Net Asset Value. The net asset value per Share
of any Portfolio at any time shall be the quotient
obtained by dividing the value of the net assets of such
Portfolio at such time (being the current value of the
assets belonging to such Portfolio, less its then
existing liabilities) by the total number of Shares of
that Portfolio then outstanding, all determined in
accordance with the methods and procedures, including
without limitation those with respect to rounding,
established by the Trustees from time to time. The
Trustees may determine to maintain the net asset value
per Share of any Portfolio at a designated constant
dollar amount and in connection therewith may adopt
procedures not inconsistent with the 1940 Act for the
continuing declaration of income attributable to that
Portfolio as dividends payable in additional Shares of
that Portfolio at the designated constant dollar amount
and for the handling of any losses attributable to that
Portfolio. Such procedures may provide that in the event
of any loss each Shareholder shall be deemed to have
contributed to the shares of beneficial interest account
of that Portfolio his pro rata portion of the total
number of Shares required to be cancelled in order to
permit the net asset value per Share of that Portfolio to
be maintained, after reflecting such loss, at the
designated constant dollar amount. Each Shareholder of
the Trust shall be deemed to have expressly agreed, by
his investment in any Portfolio with respect to which the
Trustees shall have adopted any such procedure, to make
the contribution referred to in the preceding sentence in
the event of any such loss.
(i) Transfer. All Shares of each particular
Portfolio shall be transferable, but transfers of Shares
of a particular Portfolio will be recorded on the Share
transfer records of the Trust applicable to that
Portfolio only at such times as Shareholders shall have
the right to require the Trust to redeem Shares of that
Portfolio and at such other times as may be permitted by
the Trustees.
(j) Equality. All Shares of each particular
Portfolio shall represent an equal proportionate interest
in the assets belonging to that Portfolio (subject to the
liabilities of that Portfolio), and each Share of any
particular Portfolio shall be equal to each other Share
thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under subsection
(c) of this Section 6.2 that may exist with respect to
dividends and distributions on Shares of the same
Portfolio. The Trustees may from time to time divide or
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combine the Shares of any particular Portfolio into a
greater or lesser number of Shares of that Portfolio
without thereby changing the proportionate beneficial
interest in the assets belonging to that Portfolio or in
any way affecting the rights of the holders of Shares of
any other Portfolio.
(k) Rights of Fractional Shares. Any fractional
Share of any Series shall carry proportionately all the
rights and obligations of a whole Share of that Series,
including rights and obligations with respect to voting,
receipt of dividends and distributions, redemption of
Shares, and liquidation of the Trust or of the Portfolio
to which they pertain.
(1) Conversion Rights. Subject to compliance with
the requirements of the 1940 Act, the Trustees shall have
the authority to provide that holders of Shares of any
Portfolio shall have the right to convert said Shares
into Shares of one or more other Portfolios in accordance
with such requirements and procedures as the Trustees may
establish.
SECTION 6.3. Ownership of Shares. The ownership of
Shares shall be recorded on the books of the Trust or of a
Transfer Agent or similar agent for the Trust, which books shall
be maintained separately for the Shares of each Series that has
been authorized. Certificates evidencing the ownership of Shares
need not be issued except as the Trustees may otherwise determine
from time to time, and the Trustees shall have power to call
outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any Transfer
Agent or similar agent, as the case may be, shall be conclusive as
to who are the Shareholders and as to the number of Shares of each
Portfolio held from time to time by each such Shareholder.
The holders of Shares of each Portfolio shall upon demand
disclose to the Trustees in writing such information with respect
to their direct and indirect ownership of Shares of such Portfolio
as the Trustees deem necessary to comply with the provisions of
the Internal Revenue Code, or to comply with the requirements of
any other authority.
SECTION 6.4. Investments in the Trust. The Trustees may
accept investments in any Portfolio of the Trust from such Persons
and on such terms and for such consideration, not inconsistent
with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any Distributor, Principal
Underwriter, Custodian, Transfer Agent or other Person to accept
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orders for the purchase of Shares that conform to such authorized
terms and to reject any purchase orders for Shares, whether or not
conforming to such authorized terms.
SECTION 6.5. No Pre-emptive Rights. No Shareholder, by
virtue of holding Shares of any Portfolio, shall have any pre-
emptive or other right to subscribe to any additional Shares of
that Portfolio, or to any shares of any other Portfolio, or any
other Securities issued by the Trust.
SECTION 6.6. Status of Shares. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. 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. The
death of a Shareholder during the continuance of the Trust shall
not operate to terminate the Trust or any Portfolio, 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
Declaration of Trust.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees as
provided in Sections 4.1(c) and (e) hereof, (ii) with respect to
the approval or termination in accordance with the 1940 Act of any
contract with a Contracting Party as provided in Section 5.2
hereof as to which Shareholder approval is as required by the 1940
Act, (iii) with respect to any termination or reorganization of
the Trust or any Portfolio to the extent and as provided in
Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section
9.3 hereof, (v) 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 any Portfolio, or the Shareholders of any of them
(provided, however, that a Shareholder of a particular Portfolio
shall not in any event be entitled to maintain a derivative or
class action on behalf of any other Portfolio or the Shareholders
thereof), and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the Trust
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with the Commission (or any successor agency) or any State, or as
the Trustees may consider necessary or desirable. If and to the
extent that the Trustees shall determine that such action is
required by law, they shall cause each matter required or
permitted to be voted upon at a meeting or by written consent of
Shareholders to be submitted to a separate vote of the outstanding
Shares of each Portfolio entitled to vote thereon; provided, that
(i) when expressly required by this Declaration or by the 1940
Act, actions of Shareholders shall be taken by Single Class Voting
of all outstanding Shares of each Series whose holders are
entitled to vote thereon; and (ii) when the Trustees determine
that any matter to be submitted to a vote of Shareholders affects
only the rights or interests of Shareholders of one or more but
not all Portfolios, then only the Shareholders of the Portfolios
so affected shall be entitled to vote thereon.
SECTION 7.2. Number of Votes and Manner of Voting;
Proxies. On each matter submitted to a vote of the Shareholders,
each holder of Shares of any Series shall be entitled to a number
of votes equal to the number of Shares of such Series standing in
his name on the books of the Trust. 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 (2) 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 are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be
called by the Trustees from time to time for the purpose of taking
action upon any matter requiring the vote or authority of the
Shareholders as herein provided, or upon any other matter deemed
by the Trustees to be necessary or desirable. Written notice of
any meeting of Shareholders shall be given or caused to be given
by the Trustees by mailing such notice at least seven (7) days
before such meeting, postage prepaid, stating the time, place and
purpose of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders
for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not
less than ten percent (10%) of the Shares then outstanding. If
the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of thirty (30) days after written
application by Shareholders holding at least ten percent (10%) of
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the Shares then outstanding requesting that a meeting be called
for any other purpose requiring action by the Shareholders as
provided herein or in the By-Laws, then Shareholders holding at
least ten percent (10%) of the Shares then outstanding may call
and give notice of such meeting, and thereupon the meeting shall
be held in the manner provided for herein in case of call thereof
by the Trustees.
SECTION 7.4. Record Dates. For the purpose of
determining the Shareholders who are entitled to vote or act at
any meeting or any adjournment thereof, or who are entitled to
participate in any dividend or distribution, or for the purpose of
any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding thirty (30) days
(except at or in connection with the termination of the Trust), as
the Trustees may determine; or without closing the transfer books
the Trustees may fix a date and time not more than sixty (60) days
prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of
Shareholders entitled to vote at such meeting or any adjournment
thereof or to be treated as Shareholders of record for purposes of
such other action, and any Shareholder who was a Shareholder at
the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action, even
though he has since that date and time disposed of his Shares, and
no Shareholder becoming such after that date and time shall be so
entitled to vote at such meeting or any adjournment thereof or to
be treated as a Shareholder of record for purposes of such other
action.
SECTION 7.5. Quorum and Required Vote. A majority of
the Shares entitled to vote shall be a quorum for the transaction
of business at a Shareholders' meeting, but any lesser number
shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further notice.
A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote is
required or permitted by any provision of the 1940 Act or other
applicable law or by this Declaration of Trust or the By-Laws, or
when the Trustees shall in their discretion require a larger vote
or the vote of a majority or larger fraction of the Shares of one
or more particular Series.
SECTION 7.6. Action by Written Consent. Subject to the
provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a majority
of Shareholders entitled to vote on the matter (or such larger
proportion thereof or of the Shares of any particular Series as
shall be required by the 1940 Act or by any express provision of
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this Declaration of Trust or the By-Laws or as shall be permitted
by the Trustees) consent to the action in writing and if the
writings in which such consent is given are filed with the records
of the meetings of Shareholders, to the same extent and for the
same period as proxies given in connection with a Shareholders'
meeting. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted stockholders of a Massachusetts business
corporation under the Massachusetts Business Corporation Law.
SECTION 7.8. Additional Provisions. The By-Laws may
include further provisions for Shareholders' votes and meetings
and related matters not inconsistent with the provisions hereof.
ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.1. Trustees, Shareholders, etc. Not Personally
Liable; Notice. The Trustees and officers of the Trust, in
incurring any debts, liabilities or obligations, or in limiting or
omitting any other actions for or in connection with the Trust,
are or shall be deemed to be acting as Trustees or officers of the
Trust and not in their own capacities. No Shareholder shall be
subject to any personal liability whatsoever in tort, contract or
otherwise to any other Person or Persons in connection with the
assets or the affairs of the Trust or of any Portfolio, and
subject to Section 8.4 hereof, no Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other Person or
Persons in connection with the assets or affairs of the Trust or
of any Portfolio, save only that arising from his own willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office or the discharge
of his functions. The Trust (or if the matter relates only to a
particular Portfolio, that Portfolio) shall be solely liable for
any and all debts, claims, demands, judgments, decrees,
liabilities or obligations of any and every kind, against or with
respect to the Trust or such Portfolio in tort, contract or
otherwise in connection with the assets or the affairs of the
Trust or such Portfolio, and all Persons dealing with the Trust or
any Portfolio shall be deemed to have agreed that resort shall be
had solely to the Trust Property of the Trust or the Portfolio
Assets of such Portfolio, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall
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give notice that this Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts and shall recite to
the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or
officer, 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, or the particular Portfolio in question, as the case
may be, but the omission thereof shall not operate to bind any
Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Portfolio Assets of
any Portfolio to the obligations of any other portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert Advice;
No Bond or Surety. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (i) the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Advisor,
Administrator, Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing
Agent or Accounting Agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee; (ii) the
Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and
their duties as Trustees, and shall be under no liability for any
act or omission in accordance with such advice or for failing to
follow such advice; and (iii) in discharging their duties, the
Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject
matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the
Trustees pursuant to Section 5.2 hereof. The Trustees as such
shall not be required to give any bond or surety or any other
security for the performance of their duties.
SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be charged
or held to be personally liable for any obligation or liability of
the Trust solely by reason of being or having been a Shareholder
and not because of such Shareholder's acts or omissions or for
some other reason, the Trust (upon proper and timely request by
the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former
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Shareholder (or the heirs, executors, administrators or other
legal representatives thereof, or in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled (but solely out of the assets of the Portfolio of which
such Shareholder or former Shareholder is or was the holder of
Shares) to be held harmless from and indemnified against all loss
and expense arising from such liability.
SECTION 8.4. Indemnification of Trustees, Officers, etc.
Subject to the limitations set forth hereinafter in this Section
8.4, the Trust shall indemnify (from the assets of the Portfolio
or Portfolios to which the conduct in question relates) 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, together with such Person's
heirs, executors, administrators or personal representative,
referred to as a "Covered Person"]) against all liabilities,
including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses,
including reasonable accountants' and counsel fees, 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 Trustee or officer, director or
trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith
in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or (ii) had
acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
Covered Person's office (either and both of the conduct described
in (i) and (ii) being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits
by a court or other body before whom the proceeding was brought
that the Covered Person to be indemnified was not liable by reason
of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that
the indemnitee was not liable by reason of Disabling Conduct by
(a) a vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19)
of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
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judgments, in compromise or as fines or penalties), may be paid
from time to time by the Portfolio or Portfolios to which the
conduct in question related in advance of the final disposition of
any such action, suit or proceeding; provided, that the Covered
Person shall have undertaken to repay the amounts so paid to such
Portfolio or Portfolios if it is ultimately determined that
indemnification of such expenses is not authorized under this
Article VIII and (i) the Covered Person shall have provided
security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested Trustees, or an
independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled
to indemnification.
SECTION 8.5. Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered Person
referred to in Section 8.4 hereof, pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for
any other expenses shall be provided unless such indemnification
shall be approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal counsel in
a written opinion. Approval by the Trustees pursuant to clause
(i) or by independent legal counsel pursuant to clause (ii) shall
not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with either of such
clauses 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 or not opposed to 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 8.6. Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VIII shall not
be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article VIII, a
"disinterested" Person is one against whom none of the actions,
suits or other proceedings in question, and no other action, suit
or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article
VIII shall affect any rights to indemnification to which personnel
of the Trust, other than Trustees and 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.
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SECTION 8.7. Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
ARTICLE IX
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1. Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue without
limitation of time and, without limiting the generality of the
foregoing, no change, alteration or modification with respect to
any Portfolio or Series of Shares shall operate to terminate the
Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not
less than a majority of the Shares outstanding and entitled to
vote of each Portfolio of the Trust, or by an instrument or
instruments in writing without a meeting, consented to by the
holders of not less than a majority of such Shares, or by such
greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such Series
was authorized. Upon termination, after paying or otherwise
providing for all charges, taxes, expenses and liabilities,
whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall in accordance with such procedures as
the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any
combination thereof, and distribute the proceeds to the
Shareholders, in conformity with the provisions of Section 6.2(d)
hereof.
SECTION 9.2. Reorganization. The Trustees may sell,
convey and transfer all or substantially all of the assets of the
Trust, or the assets belonging to any one or more Portfolios, to
another trust, partnership, association or corporation organized
under the laws of any state of the United States, or may transfer
such assets to another Portfolio of the Trust, in exchange for
cash, Shares or other Securities (including, in the case of a
transfer to another Portfolio of the Trust, Shares of such other
Portfolio), or to the extent permitted by law then in effect may
merge or consolidate the Trust or any Portfolio with any other
Trust or any corporation, partnership, or association organized
under the laws of any state of the United States, all upon such
terms and conditions and for such consideration when and as
authorized by vote or written consent of a Majority of the
Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled to
vote of each Portfolio whose assets are affected by such
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transaction, or by an instrument or instruments in writing without
a meeting, consented to by the holders of not less than a majority
of such Shares, and/or by such other vote of any Series as may be
established by the Certificate of Designation with respect to such
Series. Following such transfer, the Trustees shall distribute the
cash, Shares or other Securities or other consideration received
in such transaction (giving due effect to the assets belonging to
and indebtedness of, and any other differences among, the various
Portfolios of which the assets have so been transferred) among the
Shareholders of the Portfolio of which the assets have been so
transferred; and if all of the assets of the Trust have been so
transferred, the Trust shall be terminated. Nothing in this
Section 9.2 shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or
other organizations, and to sell, convey or transfer less than
substantially all of the Trust Property or the assets belonging to
any Portfolio to such organizations or entities.
SECTION 9.3. Amendments; etc. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of Trust
as herein provided, except that no amendment shall repeal the
limitations on personal liability of any Shareholder or Trustee or
the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.2(h)) without the express
consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or
not related to the rights of Shareholders) may be amended at any
time, so long as such amendment does not adversely affect the
rights of any Shareholder with respect to which such amendment is
or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an
instrument in writing signed by a Majority of the Trustees (or by
an officer of the Trust pursuant to the vote of a Majority of the
Trustees). Any amendment to this Declaration of Trust that
adversely affects the rights of all Shareholders may be adopted at
any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a
Majority of the Trustees) when authorized to do so by the vote in
accordance with Section 7.1 hereof of Shareholders holding a
majority of all the Shares outstanding and entitled to vote,
without regard to Series, or if said amendment adversely affects
the rights of the Shareholders of less than all of the Portfolios,
by the vote of the holders of a majority of all the Shares
entitled to vote of each Portfolio so affected. Subject to the
foregoing, any such amendment shall be effective when the
instrument containing the terms thereof and a certificate (which
may be a part of such instrument) to the effect that such
amendment has been duly adopted, and setting forth the
circumstances thereof, shall have been executed and acknowledged
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by a Trustee or officer of the Trust and filed as provided in
Section 9.4 hereof.
SECTION 9.4. Filing of Copies of Declaration and
Amendments. The original or a copy of this Declaration and of
each amendment hereto (including each Certificate of Designation
and Certificate of Termination), as well as the certificates
called for by Section 4.1(k) hereof as to changes in the Trustees,
shall be kept at the office of the Trust where it may be inspected
by any Shareholder, and one copy of each such instrument shall be
filed with the Secretary of The Commonwealth of Massachusetts, as
well as with any other governmental office where such filing may
from time to time be required by the laws of Massachusetts. A
restated Declaration, integrating into a single instrument all of
the provisions of this Declaration which are then in effect and
operative, may be executed from time to time by a Majority of the
Trustees and shall, upon filing with the Secretary of The
Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in
lieu of the original Declaration and the various amendments
thereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Governing Law. This Declaration of Trust
is executed and delivered in The Commonwealth of Massachusetts and
with reference to the laws thereof, and the rights of all parties
and the construction and effect of every provision hereof shall be
subject to and construed according to the laws of said
Commonwealth.
SECTION 10.2. Counterparts. This Declaration of Trust
and any amendment thereto may be simultaneously executed in
several counterparts, each of which so executed shall be deemed to
be an original, and such counterparts, together, shall constitute
but one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.3. Reliance by Third Parties. Any
certificate executed by an individual who, according to the
records in the office of the Secretary of The Commonwealth of
Massachusetts appears to be a Trustee hereunder, certifying to:
(a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing,
(c) the form of any vote passed as a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration of
Trust, (e) the form of any By-Law adopted, or the identity of any
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officers elected, by the Trustees, or (f) the existence or non-
existence of any fact or facts which in any manner relate to the
affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any Person dealing with the
Trustees, or any of them, and the successors of such Person.
SECTION 10.4. References; Headings. The masculine
gender shall include the feminine and neuter genders. Headings
are placed herein for convenience of reference only and shall not
be taken as a part of this Declaration or control or affect the
meaning, construction or effect hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal, for himself and his assigns, and has thereby
accepted the Trusteeship as the Initial Trustee of Fiduciary
Management Associates hereby granted and agreed to the provisions
hereof, all as of the day and year first above written.
/s/ Thomas E. Weesner
_______________________________
Thomas E. Weesner
The undersigned Settlor of Fiduciary Management
Associates, hereby accepts, approves and authorizes the foregoing
Agreement and Declaration of Trust of Fiduciary Management
Associates.
Dated: February 5, 1986
/s/ Bryan G. Tyson
_______________________________
Bryan G. Tyson
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ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: February 5, 1986
Then personally appeared the above named Thomas E.
Weesner and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/
______________________________
Notary Public
M A S S A C H U S E T T S
Suffolk, ss.: February 5, 1986
Then personally appeared the above named Bryan G. Tyson
and acknowledged the foregoing instrument to be his free act and
deed.
Before me,
/s/
_______________________________
Notary Public
44
00250061.AI5
<PAGE>
EXHIBIT A to Written Action
of Initial Trustee
------------------
FIDUCIARY MANAGEMENT ASSOCIATES
By-Laws
------------------
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
By-Laws
Index
Page No.
RECITALS................................................. 1
ARTICLE I - SHAREHOLDERS AND SHAREHOLDERS' MEETINGS...... 1
Section 1.1 Meetings................................. 1
Section 1.2 Presiding Officer; Secretary............. 1
Section 1.3 Authority of Chairman of Meeting
to Interpret Declaration and
By-Laws................................ 1
Section 1.4 Voting; Quorum........................... 2
Section 1.5 Inspectors............................... 2
Section 1.6 Shareholders' Action in Writing.......... 2
ARTICLE II - TRUSTEES AND TRUSTEES' MEETINGS............. 2
Section 2.1 Number of Trustees....................... 2
Section 2.2 Regular Meetings of Trustees............. 2
Section 2.3 Special Meetings of Trustees............. 3
Section 2.4 Notice of Meetings....................... 3
Section 2.5 Quorum................................... 3
Section 2.6 Participation by Telephone............... 3
Section 2.7 Location of Meetings..................... 3
Section 2.8 Votes.................................... 3
Section 2.9 Rulings of Chairman...................... 4
Section 2.10 Trustees' Action in Writing.............. 4
Section 2.11 Resignations............................. 4
<PAGE>
ARTICLE III - OFFICERS................................... 4
Section 3.1 Officers of the Trust.................... 4
Section 3.2 Time and Terms of Election............... 4
Section 3.3 Resignation and Removal.................. 4
Section 3.4 Fidelity Bond............................ 5
Section 3.5 Chairman of the Trustees................. 5
Section 3.6 Vice Chairmen............................ 5
Section 3.7 President................................ 5
Section 3.8 Vice Presidents.......................... 5
Section 3.9 Treasurer and Assistant Treasurers....... 5
Section 3.10 Controller and Assistant Controllers..... 6
Section 3.11 Secretary and Assistant Secretaries...... 6
Section 3.12 Substitutions............................ 6
Section 3.13 Execution of Deeds....................... 6
Section 3.14 Power to Vote Securities................. 6
ARTICLE IV - COMMITTEES.................................. 6
Section 4.1 Power of Trustees to Designate
Committees............................. 6
Section 4.2 Rules for Conduct of Committee Affairs... 6
Section 4.3 Trustees may Alter, Abolish, etc.,
Committees............................. 6
Section 4.4 Minutes; Review by Trustees.............. 6
ARTICLE V - SEAL......................................... 6
<PAGE>
FIDUCIARY MANAGEMENT ASSOCIATES
BY-LAWS
These Articles are the By-Laws of FIDUCIARY MANAGEMENT
ASSOCIATES, a trust with transferable shares established under
the laws of The Commonwealth of Massachusetts (the "Trust"),
pursuant to an Agreement and Declaration of Trust of the Trust
(the "Declaration") made the 5th day of February, 1986, and filed
in the office of the Secretary of the Commonwealth. These
By-Laws have been adopted by the Trustees pursuant to the
authority granted by Section 3.1 of the Declaration.
All words and terms capitalized in these By-Laws, unless
otherwise defined herein, shall have the same meanings as they
have in the Declaration.
ARTICLE I
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders
of the Trust shall be held whenever called by the Trustees and
whenever election of a Trustee or Trustees by Shareholders is
required by the provisions of the 1940 Act. Meetings of
Shareholders shall also be called by the Trustees when requested
in writing by Shareholders holding at least ten percent (10%) of
the Shares then outstanding for the purpose of voting upon
removal of any Trustee, or if the Trustees shall fail to call or
give notice of any such meeting of Shareholders for a period of
thirty (30) days after such application, then Shareholders
holding at least ten percent (10%) of the Shares then outstanding
may call and give notice of such meeting. Notice of
Shareholders' meetings shall be given as provided in the
Declaration.
SECTION 1.2. Presiding Officer; Secretary. The
Chairman of the Trustees, or in his absence the Vice Chairman or
Chairmen, if any,in the order of their seniority or as the
Trustees shall otherwise determine, and in the absence of the
Chairman and all Vice Chairmen, if any, the President, shall
preside at each Shareholders' meeting as chairman of the meeting,
or in the absence of the Chairman, all Vice Chairmen and the
President, the Trustees present at the meeting shall elect one of
their number as chairman of the meeting. Unless otherwise
provided for by the Trustees, the Secretary of the Trust shall be
the secretary of all meetings of Shareholders and shall record
the minutes thereof.
<PAGE>
SECTION 1.3. Authority of Chairman of Meeting to
Interpret Declaration and By-Laws. At any Shareholders' meeting
the chairman of the meeting shall be empowered to determine the
construction or interpretation of the Declaration or these
By-Laws, or any part thereof or hereof, and his ruling shall be
final.
SECTION 1.4. Voting; Quorum. At each meeting of
Shareholders, except as otherwise provided by the Declaration,
every holder of record of Shares entitled to vote shall be
entitled to a number of votes equal to the number of Shares
standing, in his name on the Share register of the Trust.
Shareholders may vote by proxy and the form of any such proxy may
be prescribed from time to time by the Trustees. A quorum shall
exist if the holders of a majority of the outstanding Shares of
the Trust entitled to vote without regard to Series, are present
in person or by proxy, but any lesser number shall be sufficient
for adjournments. At all meetings of the Shareholders, votes
shall be taken by ballot for all matters which may be binding
upon the Trustees pursuant to Section 7.1 of the Declaration. On
other matters, votes of Shareholders need not be taken by ballot
unless otherwise provided for by the Declaration or by vote of
the Trustees, or as required by the Act or the Regulations, but
the chairman of the meeting may in his discretion authorize any
matter to be voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of
Shareholders, the chairman of the meeting may appoint one of more
Inspectors of Election or Balloting to supervise the voting at
such meeting or any adjournment thereof. If Inspectors are not
so appointed, the chairman of the meeting may, and on the request
of any Shareholder present or represented and entitled to vote
shall, appoint one or more Inspectors for such purpose. Each
inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of
Inspector of Election or Balloting, as the case may be, at such
meeting with strict impartiality and according to the best of his
ability. If appointed, Inspectors shall take charge of the polls
and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be
required by law.
SECTION 1.6. Shareholders' Action in Writing. Nothing
in this Article 1 shall limit the power of the Shareholders to
take any action by means of written instruments without a
meeting, as permitted by Section 7.6 of the Declaration.
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ARTICLE II
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. There shall initially
be one (1) Trustee, and the number of Trustees shall thereafter
be such number, authorized by the Declaration, as from time to
time shall be fixed by a vote adopted by a Majority of the
Trustees.
SECTION 2.2. Regular Meetings of Trustees. Regular
meetings of the Trustees may be hold without call or notice at
such places and at such times as the Trustees may from time to
time determine; provided, that notice of such determination, and
of the time, place and purposes of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance
with Section 2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special
meetings of the Trustees may be held at any time and at any place
when called by the Chairman of the Trustees, any Vice Chairman,
the President or the Treasurer or by two (2) or more Trustees, or
if there shall be less than three (3) Trustees, by any Trustee;
provided, that notice of the time, place and purposes thereof is
given to each Trustee in accordance with Section 2.4 hereof by
the Secretary or an Assistant Secretary or by the officer or the
Trustees calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular
or special meeting of the Trustees shall be sufficient if given
in writing to each Trustee, and if sent by mail at least five (5)
days, or by telegram at least twenty-four (24) hours, before the
meeting, addressed to his usual or last known business or
residence address, or if delivered to him in person at least
twenty-four (24) hours before the meeting. Notice of a special
meeting need not be given to any Trustee who was present at an
earlier meeting, not more than thirty-one (31) days prior to the
subsequent meeting, at which the subsequent meeting was called.
Notice of a meeting may be waived by any Trustee by written
waiver of notice, executed by him before or after the meeting,
and such waiver shall be filed with the records of the meeting.
Attendance by a Trustee at a meeting shall constitute a waiver of
notice, except where a Trustee attends a meeting for the purpose
of protesting prior thereto or at its commencement the lack of
notice.
SECTION 2.5. Quorum: Presiding Officer. At any meeting
of the Trustees, a Majority of the Trustees shall constitute a
quorum. Any meeting may be adjourned from time to time by a
majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned
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without further notice. Unless the Trustees shall otherwise
elect, generally or in a particular case, the Chairman of the
Trustees, or in his absence the Vice Chairman or Vice Chairmen,
if any, in the order of their seniority or as the Trustees shall
otherwise determine, or in the absence of the Chairman and all
Vice Chairmen, if any, and if he shall be a Trustee, the
President, shall preside at each meeting of the Trustees as
chairman of the meeting.
SECTION 2.6. Participation by Telephone. One or more
of the Trustees may participate in a meeting thereof or of any
Committee of the Trustees by means of a conference telephone or
similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person
at a meeting.
SECTION 2.7. Location of Meetings. Trustees' meetings
may be held at any place, within or without Massachusetts.
SECTION 2.8. Votes. Voting at Trustees' meetings may
be conducted orally, by show of hands, or, if requested by any
Trustee, by written ballot. The results of all voting shall be
recorded by the Secretary in the minute book.
SECTION 2.9. Rulings of Chairman. All other rules of
conduct adopted and used at any Trustees' meeting shall be
determined by the chairman of such meeting, whose ruling on all
procedural matters shall be final.
SECTION 2.10. Trustees' Action in Writing. Nothing in
this Article II shall limit the power of the Trustees to take
action by means of a written instrument without a meeting, as
provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at
any time by written instrument signed by him and delivered to the
Chairman, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt
unless specified to be effective at some other time.
ARTICLE III
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of
the Trust shall consist of a Chairman of the Trustees, a
President, a Treasurer and a Secretary, and may include one or
more Vice Chairman, Vice Presidents, Assistant Treasurers and
Assistant Secretaries, and such other officers as the Trustees
may designate. Any person may hold more than one office. Except
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for the Chairman and any Vice Chairmen, no officer need be a
Trustee.
SECTION 3.2. Time and Terms of Election. The Chairman,
the President, the Treasurer and the Secretary shall be elected
by the Trustees at their first meeting and thereafter at the
annual meeting of the Trustees, as provided in Section 4.2 of the
Declaration. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors shall
have been duly elected and qualified, and may be removed at any
meeting by the affirmative vote of a Majority of the Trustees.
All other officers of the Trust may be elected or appointed at
any meeting of the Trustees. Such officers shall hold office for
any term, or indefinitely, as determined by the Trustees, and
shall be subject to removal, with or without cause, at any time
by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may
resign at any time by giving written notice to the Trustees.
Such resignation shall take effect at the time specified therein,
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. IF the
office of any officer or agent becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy
occurred. Except to the extent expressly provided in a written
agreement with the Trust, no officer resigning or removed shall
have any right to any compensation for any period following such
resignation or removal, or any right to damage on account of such
removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their
discretion, direct any officer appointed by them to furnish at
the expense of the Trust a fidelity bond approved by the
Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5. Chairman of the Trustees. Unless the
Trustees otherwise provide, the Chairman of the Trustees shall
preside at all meetings of the Shareholders and of the Trustees.
The Chairman shall be the chief executive officer of the Trust
and, subject to the supervision of the Trustees, shall have
general charge and supervision of the business, property and
affairs of the Trust and such other powers and duties as the
Trustees may prescribe, and unless otherwise provided by law, the
Declaration, these By-Laws or specific vote of the Trustees,
shall have and may exercise all of the powers given to the
Trustees by the Declaration and by these By-Laws.
SECTION 3.6. Vice Chairmen. If The Trustees shall
elect one or more Vice Chairmen, the Vice Chairman or if there
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shall be more than one, such Vice Chairmen in the order of their
seniority or as otherwise designated by the Trustees, shall
preside at meetings of the Shareholders and of the Trustees, and
shall exercise such other powers and duties of the Chairman as
the Trustees shall determine.
SECTION 3.7. President. The President shall be the
chief administrative officer of the Trust and, subject to the
supervision of the Chairman, shall have general charge of the
operations of the Trust and general supervision of the personnel
of the Trust, and such other powers and duties as the Trustees or
the Chairman shall prescribe. In the absence or disability of
the Chairman, the President shall exercise the powers and duties
of the Chairman, except to the extent that the Trustees shall
have delegated such powers and duties to the Vice Chairman or
Chairman, and except that he shall not preside at meetings of the
Trustees if he is not himself a Trustee.
SECTION 3.8. Vice Presidents. In the absence or
disability of the President, the Vice President or, if there
shall be more than one, the Vice Presidents in the order of their
seniority or as otherwise designated by the Trustees, shall
exercise all of the powers and duties of The President. The Vice
Presidents shall have the power to execute bonds, notes,
mortgages and other contracts, agreements and instruments in the
name of the Trust, and shall do and perform such other duties as
the Trustees, the Chairman or the President shall direct.
SECTION 3.9. Treasurer and Assistant Treasurers. The
Treasurer shall be the chief financial officer of the Trust, and
shall have the custody of the Trust's funds and Securities, and
shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the
credit of the Trust, in such depositories as may be designated by
the Trustees, taking proper vouchers for such disbursements,
shall have such other duties and powers as may be prescribed from
time to time by the Trustees or the Chairman, and shall render to
The Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Trust. If no Controller is elected, the Treasurer shall also
have the duties and powers of the Controller, as provided in
these By-Laws. Any Assistant Treasurer shall have such duties
and powers as shall be prescribed from time to time by the
Trustees or the Treasurer, and shall be responsible to and shall
report to the Treasurer. In the absence or disability of the
Treasurer, the Assistant Treasurer or, if there shall be more
than one, the Assistant Treasurers in the order of their
seniority or as otherwise: designated by the Trustees or the
Chairman, shall have the powers and duties of the Treasurer.
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SECTION 3.10. Controller and Assistant Controllers. If
a Controller is elected, he shall be the chief accounting officer
of the Trust and shall be in charge of its books of account and
accounting records and of its accounting procedures, and shall
have such duties and powers as are commonly incident to the
office of a controller, and such other duties and powers as may
be prescribed from time To time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in
the ordinary conduct of the Trust's business, shall be under the
supervision of the Treasurer. Any Assistant Controller shall
have such duties and powers as shall be prescribed from time to
time by the Trustees or the Controller, and shall be responsible
to and shall report to the Controller. In the absence or
disability of the Controller, the Assistant Controller or, if
there shall be more than one, the Assistant Controllers in the
order of their seniority or as otherwise designated by the
Trustees or the Chairman, shall have the powers and duties of the
Controller.
SECTION 3.11. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees,
attend all meetings of the Trustees, any Committee of the
Trustees and/or the Shareholders and record all votes and the
minutes of proceedings in a book to be kept for that purpose,
shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders
and shall perform such other duties as may be prescribed by the
Trustees. The Secretary, or in his absence any Assistant
Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary. The
Secretary shall be the custodian of the Share records and all
other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements,
certificates and other documents and records required by law are
properly kept and filed. In the absence or disability of the
Secretary, the Assistant Secretary or, if there shall be more
than one, the Assistant Secretaries in the order of their
seniority or as otherwise designated by the Trustees or the
Chairman, shall have the powers and duties of the Secretary.
SECTION 3.12. Substitutions. In case of the absence or
disability of any officer of the Trust, or for any other reason
that the Trustees may deem sufficient, the Trustees may delegate,
for the time being, the powers or duties, or any of them, of such
officer to any other officer, or to any Trustee.
SECTION 3.13. Execution of Deeds, etc. Except as the
Trustees may generally or in particular cases otherwise authorize
or direct, all deeds, leases, transfers, contracts, proposals,
bonds, notes, checks, drafts and other obligations made, accepted
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or endorsed by the Trust shall be signed or endorsed on behalf of
the Trust by the Chairman, the President, one of the Vice
Presidents or the Treasurer.
SECTION 3.14. Power to Vote Securities. Unless
otherwise ordered by the Trustees, the Treasurer shall have full
power and authority on behalf of the Trust to give proxies for,
and/or to attend and to act and to vote at, any meeting of
stockholders of any corporation in which the Trust may hold
stock, and at any such meeting the Treasurer or his proxy shall
possess and may exercise any and all rights and powers incident
to the ownership of such stock which, as the owner thereof, the
Trust might have possessed and exercised if present. The
Trustees, by resolution from time to time, or, in the absence
thereof, the Treasurer, may confer like powers upon any other
person or persons as attorneys and proxies of the Trust.
ARTICLE IV
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees.
The Trustees, by vote of a Majority of the Trustees, may elect
from their number an Executive Committee and any other Committees
and may delegate thereto some or all of their powers except those
which by law, by the Declaration or by these By-Laws may not be
delegated; provided, that the Executive Committee shall not be
empowered to elect the Chairman of the Trustees, the President,
the Treasurer or the Secretary, to amend the By-Laws, to exercise
the powers of the Trustees under this Section 4.1 or under
Section 4.3 hereof, or to perform any act for which the action of
a Majority of the Trustees is required by law, by the Declaration
or by these By-Laws. The members of any such Committee shall
serve at the pleasure of the Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs.
Except as otherwise provided by the Trustees, each Committee
elected or appointed pursuant to this Article IV may adopt such
standing rules and regulations for the conduct of its affairs as
it may deem desirable, subject to review and approval of such
rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or
any contrary provisions by the Trustees, the business of each
Committee shall be conducted, so far as practicable, in the same
manner as provided herein and in the Declaration for the
Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc.,
Committees. The Trustees may at any time alter or abolish any
Committee, change the membership of any Committee, or revoke,
rescind or modify any action of any Committee or the authority of
8
<PAGE>
any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any
third parties.
SECTION 4.4. Minutes; Review by Trustees. Any
Committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its
actions to the Trustees.
ARTICLE V
SEAL
The seal of the Trust shall,consist of a flat-faced
circular die with the word "Massachusetts", together with the
name of the Trust, the words "Trust Seal", and the year of its
organization cut or engraved thereon, but, unless otherwise
required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any
document, instrument or, other paper executed and delivered by or
an behalf of the Trust.
ARTICLE VI
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may
issue Shares of any or all Series either in certificated or
uncertificated form, they may issue certificates to the holders
of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series
in certificated form, they may at any time discontinue the
issuance of Share certificates for such Series and may, by
written notice to such Shareholders of such Series require the
surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect
the ownership of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Series of
Shares for which the Trustees issue Shares without certificates,
the Trust or the Transfer Agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such Shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of such
Shares as if they had received certificates therefor and shall be
held to have expressly assented and agreed to the terms hereof
and of the Declaration.
SECTION 6.3. Share Certificates. For any Series of
Shares for which the Trustees shall issue Share certificates,
each Shareholder of such Series shall be entitled to a
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certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the Chairman or a Vice
Chairman, or the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Trust. Such signatures may be
facsimiles if the certificate is countersigned by a Transfer
Agent, or by a Registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate
shall cease to be such officer before such certificate is issued,
it may be issued by the Trust with the same effect as if he were
such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen,
destroyed or mutilated, the for certificated Shares shall be lost
Trustees may authorize the issuance of a new certificate of the
same tenor and for the same number of Shares in lieu thereof.
The Trustees shall require the surrender of any mutilated
certificate in respect of which a new certificate is issued, and
may, in their discretion, before the issuance of a new
certificate, require the owner of a lost, stolen or destroyed
certificate, or the owner's legal representative, to make an
affidavit or affirmation setting forth such facts as to the loss,
theft, or destruction as they deem necessary, and to give the
Trust a bond in such reasonable sum as the Trustees direct, in
order to indemnify the Trust.
SECTION 6.5. Record Transfer of Pledged Shares. A
pledgee of Shares pledged as collateral security shall be
entitled to a new certificate in his name as pledgee, in the case
of certificated Shares, or to be registered as the holder in
pledge of such Shares in the case of uncertificated Shares;
provided, that the instrument of pledge substantially describes
the debt or duty that is intended to be secured thereby. Any
such new certificate shall express on its face that it is held as
collateral security, and the name of the pledgor shall be stated
thereon, and any such registration of uncertificated Shares shall
be in a form which indicates that the registered holder holds
such Shares in pledge. After such issue or registration, and
unless and until such pledge is released, such pledgee and his
successors and assigns shall alone be entitled to the rights of a
Shareholder, and entitled to vote such Shares.
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ARTICLE VII
CUSTODIAN
The Trust shall at all times employ a bank or trust
company having a capital, surplus and undivided profits of at
least Two Million Dollars ($2,000,000) as Custodian of the
capital assets of the Trust. The Custodian shall be compensated
for its services by the Trust upon such basis as shall be agreed
upon from time to time between the Trust and the Custodian.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. By-Laws Subject to Amendment. These
By-Laws may be altered, amended or repealed, in whole or in part,
at any time by vote of the holders of a majority of the Shares
(or whenever there shall be more than one Series of Shares, of
the holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a
Majority of the Trustees, may alter, amend or repeal these
By-Laws, in whole or in part, including By-Laws adopted by the
Shareholders, except with respect to any provision hereof which
by law, the Declaration or these By-Laws requires action by the
Shareholders; provided, that no later than the time of giving
notice of the meeting of Shareholders next following the
alteration, amendment or repeal of these By-Laws, in whole or in
part, notice thereof, stating the substance of such action shall
be given to all Shareholders entitled to vote. By-Laws adopted by
the Trustees may be altered, amended or repealed by the
Shareholders.
SECTION 8.2. Notice of Proposal to Amend By-Laws
Required. No proposal to amend or repeal these By-Laws or to
adopt new By-Laws shall be acted upon at a meeting unless either
(i) such proposal is stated in the notice or in the waiver of
notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the
Trustees or Shareholders, as the case may be, are present at such
meeting and all agree to consider such proposal without
protesting the lack of notice.
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00250061.AI7
<PAGE>
ADVISORY AGREEMENT
FIDUCIARY MANAGEMENT ASSOCIATES
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Capital Management
L.P. 1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We herewith confirm our agreement with you as
follows:
1. We are an open-end, diversified management
investment company registered under the Investment Company
Act of 1940 (the "Act"). We are currently authorized to
issue three classes of shares and our Trustees are
authorized to reclassify and issue any unissued shares to
any number of additional classes or series (Portfolios) each
having its own investment objective, policies and
restrictions, all as more fully described in the Prospectus
and the Statement of Additional Information constituting
parts of the Registration Statement filed on our behalf
under the Securities Act of 1933 and the Act. We are engaged
in the business of investing and reinvesting our assets in
securities of the type and in accordance with the
limitations specified in our Agreement and Declaration of
Trust, By-Laws, Registration Statement filed with the
Securities and Exchange Commission under the Securities Act
<PAGE>
of 1933 and the Act, and any representations made in our
Prospectus and Statement of Additional Information, all in
such manner and to such extent as may from time to time be
authorized by our Trustees. We enclose copies of the
documents listed above and will from time to time furnish
you with any amendments thereof.
2. (a) We hereby employ you to manage the
investment and reinvestment of the assets in each of our
Portfolios as above specified, and, without limiting the
generality of the foregoing, to provide management and other
services specified below.
(b) You will make decisions with respect to all
purchases and sales of securities in each of our Portfolios.
To carry out such decisions, you are hereby authorized, as
our agent and attorney-in-fact, for our account and at our
risk and in our name, to place orders for the investment and
reinvestment of our assets. In all purchases, sales and
other transactions in securities in each of our Portfolios
you are authorized to exercise full discretion and act for
us in the same manner and with the same force and effect as
we might or could do with respect to such purchases, sales
or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct
of such purchases, sales or other transactions.
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<PAGE>
(c) You will report to our Trustees at each
meeting thereof all changes in each Portfolio since the
prior report, and will also keep us in touch with important
developments affecting any Portfolio and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual companies whose securities
are included in our Portfolios, the industries in which they
invest, or the condition's prevailing in the economy
generally.
You will also furnish us with such statistical and
analytical information with respect to securities in each of
our Portfolios as you may believe appropriate or as we
reasonably may request. In making such purchases and sales
of securities, you will bear in mind the policies set from
time to time by our Trustees as well as the limitations
imposed by our Agreement and Declaration of Trust and in
our Registration Statement under the Act and the Securities
Act of 1933, the limitations in the Act and of the Internal
Revenue Code in respect of regulated investment companies
and the investment objective, policies and restrictions of
each of our Portfolios.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the
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<PAGE>
execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation
may be incurred on our behalf in any such respect. During
the continuance of this agreement at our request you will
provide to us persons satisfactory to our Trustees to serve
as our officers. You or your affiliates will also provide
persons, who may be our officers, to render such clerical,
accounting and other services to us as, we may from time to
time request of you. Such personnel may be employees of you
or your affiliates. We will pay to you or your affiliates
the cost of such personnel for rendering such services to us
at such rates as shall from time to time be agreed upon
between us, provided that all time devoted to the investment
or reinvestment of securities in each of our Portfolios
shall be for your account. Nothing contained herein shall be
construed to restrict our right to hire our own employees or
to contract for services to be performed by third parties.
Furthermore, you or your affiliates (other than us) shall
furnish us without charge with such,management supervision
and assistance and such office facilities as you may believe
appropriate or as we may reasonably request subject to the
requirements of any regulatory authority to which you may be
subject. You or your affiliates (other than us) shall also
be responsible for the payment of any expenses incurred in
promoting the sale of our shares (other than the portion of
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<PAGE>
the promotional expenses to be borne by us in accordance
with an effective plan pursuant to Rule 12b-1 under the Act
and the costs of printing our prospectuses and other reports
to shareholders and fees related to registration with the
Securities and Exchange commission and with state regulatory
authorities).
3. It is further agreed that you will pay us on
the first business day of October in each year the amount,
if any, by which the net expenses of each Portfolio (except
interest, taxes, brokerage, distribution service fees paid
in accordance with an effective plan pursuant to Rule 12b-1
under the Act and extraordinary expenses, all to the extent
permitted by applicable state law and regulation)
(collectively "Excludable Expenses") incurred by us exceeded
for the prior fiscal year the limits applicable to such
Portfolio under the laws or regulations of any state in
which our shares are qualified for sale. We hereby confirm
that, subject to the foregoing, we shall be responsible and
hereby assume the obligation for payment of all our other
expenses, including: (a) payment of the fee payable to you
under paragraph 5 hereof; (b) custody, transfer and dividend
disbursing expenses; (c) fees of trustees who are not your
affiliated persons; (d) legal and auditing expenses; (e)
clerical, accounting and other office costs; (f) the cost of
personnel providing services to us, as provided in
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subparagraph (d) of paragraph 2 above; (g) costs of printing
our prospectuses and shareholder reports; (h) cost of
maintenance of our existence as a trust; (i) interest
charges, taxes, brokerage fees and commissions; (j) costs of
stationery and supplies; (k) expenses and fees related to
registration and filing with the Securities and Exchange
Commission and with state regulatory authorities; and (1)
such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act
provided, however, that our payment of such promotional
expenses shall be in the amounts, and in accordance with the
procedures, set forth in such plan.
4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in rendering
these services to us, and we agree as an inducement to your
undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
protect, you against any liability to us or to our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
6
<PAGE>
5. (a) In consideration of the foregoing we shall
pay you a fee which, with respect to our Growth Portfolio
and South Africa-Free International Portfolio, will be
payable for the preceding quarter on the first business day
of October, January, April and July, in an amount equal to
the Applicable Percentage, as specified below, of the value
of the net assets of each such Portfolio at the close of
business on the last business day immediately preceding such
payment date; provided, however, that for the portion of any
quarter if this agreement becomes effective after the
beginning of such quarter or terminates prior to the end of
such quarter, such compensation shall be prorated according
to the proportion which such portion of a quarter bears to a
full quarter. The Applicable Percentage shall be (i) for our
Growth Portfolio, .1875 of 1% and (ii) for our South Africa-
Free International Portfolio, .1750 of 1%.
(b) With respect to our Short-Term Global Income
Portfolio, Short Duration Mortgage Portfolio and Short
Duration Government Portfolio, such fee shall be at an
annual rate equal to .45 of 1% of the average daily value of
the net assets of each such Portfolio. Such payments shall
be accrued by us daily and shall be payable in arrears on
the last day of each calendar month for services performed
hereunder during such month.
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(c) Your reimbursement, if any, of our expenses
pursuant to paragraph 3 hereof will be annualized on a daily
(monthly in the case of the Growth Portfolio and South
Africa-Free Portfolio) basis. Payment of the advisory fee
pursuant to paragraph 5 will be reduced or postponed, if
necessary, with any adjustment made after the end of the
year.
6. This agreement shall become effective on the
date hereof and shall remain in effect until September 30,
1992 and thereafter for successive twelve-month periods
(computed from each October 1) with respect to each such
Portfolio, provided that such continuance is specifically
approved at least annually by our Trustees or by majority
vote of the holders of the outstanding voting securities (as
defined in the Act) of such Portfolio, and, in either case,
by a majority of our Trustees who are not parties to this
agreement or interested persons, as defined in the Act, of
any such party (other than as trustees of our Trust);
provided further, however, that if the continuation of this
agreement is not approved as to a Portfolio, you may
continue to render to such Portfolio the services described
herein in the manner and to the extent permitted by the Act
and the rules and regulations thereunder. Upon the
effectiveness of this agreement, it shall supersede all
previous agreements between us covering the subject matter
8
<PAGE>
hereof. This agreement may be terminated with respect to any
Portfolio at any time, without the payment of any penalty,
by vote of a majority of the outstanding voting securities
(as so defined) of such Portfolio, or by a vote of a
majority of our Trustees on sixty days' written notice to
you, or by you with respect to any Portfolio on sixty days'
written notice to us.
7. This agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by
you and this agreement shall terminate automatically in the
event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and
"sale" as used in this paragraph shall have the meanings
ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
8. (a) Except to the extent necessary to perform
your obligations hereunder, nothing herein shall be deemed
to limit or restrict your right, or the right of any of your
employees or any of the Directors of Alliance Capital
Management Corporation, general partner, who may also be a
trustee, officer or employee of ours, or persons otherwise
affiliated with us (within the meaning of the Act) to engage
in any other business or to devote time and attention to the
management or other aspects of any other business, whether
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<PAGE>
of a similar or dissimilar nature, or to render services of
any kind to any other trust, corporation, firm, individual
or association.
(b) You will notify us of any change in the
general partners of your partnership within a reasonable
time after such change.
9. Notice is hereby given that this agreement is
entered into on our behalf by an officer of our Trust in his
capacity as an officer and not individually and that the
obligations of, or arising out of, this agreement are not
binding upon any of our Trustees, officers, employees or
agents individually but are binding only upon the assets and
property of our Trust.
10
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If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
FIDUCIARY MANAGEMENT ASSOCIATES
/s/ Paul H. Jenkel
By_________________________
Paul H. Jenkel
Executive Vice President
Accepted: As of July 22, 1992
Alliance Capital Management L.P.
By Alliance Capital Management Corporation,
its general partner
/s/ John D. Carifa
By________________________
John D. Carifa
Executive Vice President
11
00250061.AI2
<PAGE>
DISTRIBUTION AGREEMENT
Fiduciary Management Associates
1345 Avenue of the Americas New
York, New York 10105
July 22, 1992
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
This is to confirm that, in consideration of the mutual
agreements herein contained and on the terms and conditions set
forth herein, we have agreed that you shall be, for the period of
this agreement, a distributor, as our agent, for the unsold
portion of such number of our shares of beneficial interest ($.01
par value) as may from time to time be effectively registered
under the Securities Act of 1933, as amended (hereinafter
referred to as the "Act").
1. We hereby agree to offer through you as our agent,
and to solicit, through you as our agent, offers to subscribe to
the unsold balance of shares as shall then be effectively
registered under the Act, and you are appointed our agent for
such purpose. All subscriptions for. our shares obtained by you
shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make
binding subscriptions on our behalf. We reserve the right to sell
our shares through other distributors or directly to investors
<PAGE>
through subscriptions received by us at our principal office in
New York, New York. The right given to you under this agreement
shall not apply to shares issued in connection with (a) the
merger or consolidation of any other investment company with us,
(b) our acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment
company or (c) the reinvestment in our shares by our stockholders
of dividends or other distributions or any other offering of
shares to our stockholders.
2. You will use your best efforts to obtain
subscriptions to our shares upon the terms and conditions
contained herein and in the then current Prospectus and Statement
of Additional Information, including the offering price. You will
send to us promptly all subscriptions placed with you. We shall
advise you of the approximate net asset value per share or net
asset value per share (as used in the Prospectus and Statement of
Additional Information) on any date requested by you and at such
other times as it shall have been determined by us. We shall
furnish you from time to time, for use in connection with the
offering of our shares, such other information with respect to us
and our shares as you may reasonably request. We shall supply you
with such copies of our current Prospectus and Statement of
Additional Information in effect from time to time as you may
request. You are not authorized to give any information or to
make any representations, other than those contained in the
2
<PAGE>
Registration Statement or Prospectus and Statement of Additional
Information, as then in effect, filed under the Act covering our
shares or which we may authorize in writing. You may use
employees and agents at your cost and expenses to assist you in
carrying out your obligations hereunder but no such employee or
agent shall be deemed to be our agent or have any rights under
this agreement.
3. We reserve the right to suspend the offering of our
shares at any time, in the absolute discretion of our Trustees,
and upon notice of such suspension you shall cease to offer our
shares hereunder.
4. Both of us will cooperate with each other in taking
such action as may be necessary to qualify our shares for sale
under the securities laws of such states as we may designate,
provided, that, you shall not be required to register as a
broker-dealer or file a consent to service of process in any such
state. Pursuant to our Advisory Agreement dated July 22, 1992
with Alliance Capital Management L.P., we will pay all fees and
expenses of registering our Shares under the Act and of
qualification of our shares and our qualification under
applicable state securities laws. You shall pay all expenses
relating to your broker-dealer qualification.
5. We represent to you that our Registration
Statement, Prospectus and Statement of Additional Information (as
in effect from time to time) under the Act have been or will be,
3
<PAGE>
as the case may be, carefully prepared in conformity with the
requirements of the Act and the rules and regulations of the
Securities and Exchange Commission thereunder. We represent and
warrant to you that our Registration Statement, Prospectus and
Statement of Additional Information contain or will contain all
statements required to be stated therein in accordance with the
Act and the rules and regulations of said commission, and that
all statements of fact contained or to be contained therein are
or will be true and correct at the time indicated or the
effective date as the case may be; that neither our Registration
Statement nor our Prospectus and Statement of Additional
Information, when it shall become effective or be authorized for
use, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a
purchaser of our shares. We will from time to time file such
amendment or amendments to our Registration Statement, Prospectus
and Statement of Additional Information as, in the light of
future developments, shall, in the opinion of our counsel, be
necessary in order to have our Registration Statement, Prospectus
and Statement of Additional Information at all times contain all
material facts required to be stated therein or necessary to make
any statements therein not misleading to a purchaser of our
shares, but, if we shall not file such amendment or amendments
within fifteen days after receipt by us of a written request from
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<PAGE>
you to do so, you may, at your option, terminate this agreement
immediately. We shall not file any amendment to our Registration
Statement or Prospectus and Statement of Additional Information
without giving you reasonable notice thereof in advance;
provided, however, that nothing contained in this agreement shall
in any way limit our right to file at any time such amendments to
our Registration Statement or Prospectus and Statement of
Additional Information, of whatever character, as we may deem
advisable, such right being in all respects absolute and
unconditional. We represent and warrant to you that any amendment
to our Registration Statement or Prospectus and Statement of
Additional Information hereafter filed by us will, when it
becomes effective, contain all statements required to be stated
therein in accordance with the Act and the rules and regulations
of said Commission, that all statements of fact contained therein
will, when the same shall become effective, be true and correct
and that no such amendment, when it becomes effective, will
include an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary
to make statements therein not misleading to a purchaser of our
shares.
6. We agree to indemnify, defend and hold you, and any
person who controls you within the meaning of Section 15 of the
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
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<PAGE>
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which you
or any such controlling person may incur, under the Act, or under
common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in our Registration
Statement or Prospectus and Statement of Additional Information
in effect from time to time under the Act or arising out of or
based upon any alleged omission to state a material fact required
to be stated in either thereof or necessary to make the
statements in either thereof not misleading; provided, however,
that in no event shall anything herein contained be so construed
as to protect you against any liability to us or our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the
performance of your duties, or by reason of your reckless
disregard of your obligations and duties under this agreement.
Our agreement to indemnify you and any such controlling person as
aforesaid is expressly conditioned upon our being notified of any
action brought against you or any such controlling person, such
notification to be given by letter or by telegram addressed to us
at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days
after the summons or other first legal process shall have been
served. The failure so to notify us of any such action shall not
relieve us from any liability which we may have to the person
6
<PAGE>
against whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of our
indemnity agreement contained in this paragraph 6. We will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by us
and approved by you. In the event we do elect to assume the
defense of any such suit and retain counsel of good standing
approved by you, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by
any of them; but in case we do not elect to assume the defense of
any such suit, or in case you do not approve of counsel chosen by
us, we will reimburse you or the controlling person or persons
named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 6 and our
representations and warranties in this agreement shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of you or any controlling
person and shall survive the sale of any of our shares made
pursuant to subscriptions obtained by you. This agreement of
indemnity will inure exclusively to your benefit, to the benefit
of your successors and assigns, and to the benefit of any
controlling persons and their successors and assigns. We agree
promptly to notify you of the commencement of any litigation or
7
<PAGE>
proceeding against us in connection with the issue and sale of
any of our shares.
7. You agree to indemnify, defend and hold us, our
several officers and trustees, and any person who controls us
within the meaning of Section 15 of the Act, free and harmless
from and against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or
trustees, or any such controlling person may incur under the Act
or under common law or otherwise, but only to the extent that
such liability, or expense incurred by us, our officers or
trustees or such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished
in writing by you to us for use in our Registration Statement or
Prospectus and Statement of Additional Information in effect from
time to time under the Act, or shall arise out of or be based
upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration
Statement or Prospectus and Statement of Additional Information
or necessary to make such information not misleading. Your
agreement to indemnify us, our officers and trustees, and any
such controlling person as aforesaid is expressly conditioned
upon your being notified of any action brought against us, our
8
<PAGE>
officers or trustees or any such controlling person, such
notification to be given by letter or telegram addressed to you
at your principal office in New York, New York, and sent to you
by the person against whom such action is brought, within ten
days after the summons or other first legal process shall have
been served. You shall have a right to control the defense of
such action, with counsel of your own choosing, satisfactory to
us, if such action is based solely upon such alleged misstatement
or omission on your part, and in any other event you and we, our
officers or trustees or such controlling person shall each have
the right to participate in the defense or preparation of the
defense of such action. The failure to so notify you of any such
action shall not relieve you from any liability which you may
have to us, to our officers or trustees, or to such controlling
person by reason of any such untrue statement or omission on your
part otherwise than on account of your indemnity agreement
contained in this paragraph 7.
8. We agree to advise you immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to our Registration Statement or
Prospectus and Statement of Additional Information or for
additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of our Registration Statement or Prospectus and
9
<PAGE>
Statement of Additional Information or the initiation of any
proceedings for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in our Registration Statement or
Prospectus and Statement of Additional Information or which
requires the making of a change in either thereof in order to
make the statements therein not misleading, and
(d) of all action of the Securities and Exchange
Commission with respect to any amendments to our Registration
Statement or Prospectus and Statement of Additional Information
which may from time to time be filed with the Securities and
Exchange commission under the Act.
9. This agreement shall become effective as of
July 22, 1992 and shall remain in effect until September 30, 1992
and thereafter automatically for successive twelve-month periods
(computed from each October 1) provided that such continuance is
specifically approved at least annually by a vote of a majority
of outstanding voting securities, as defined in the Investment
Company Act of 1940, or by our Trustees and in either case by a
majority of our trustees who are not parties to this agreement or
interested persons, as defined in the Investment Company Act of
1940, of any such party. This agreement may be terminated at any
time, without the payment of any penalty, by vote of a majority
of our outstanding voting securities (as so defined), or by a
vote of a majority of our entire Board of Trustees, on sixty
10
<PAGE>
days, written notice to you, or by you, on sixty days' written
notice to us.
10. This agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations
promulgated by the Securities and Exchange Commission thereunder.
11. Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your officers,
directors or employees who may also be a trustee, officer or
employee of ours, to engage in any other business or to devote
time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm,
individual or association.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
FIDUCIARY MANAGEMENT ASSOCIATES
/s/ Paul H. Jenkel
By______________________________
11
<PAGE>
Paul H. Jenkel
Executive Vice President
Accepted as of the date first set
forth above
ALLIANCE FUND DISTRIBUTORS, INC.
/s/ Robert Errico
By___________________________
Robert Errico
President
12
00250061.AI0
<PAGE>
EXHIBIT 8
CUSTODIAN CONTRACT
Between
FIDUCIARY MANAGEMENT ASSOCIATES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held
By It................................................2
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United
States...............................................3
2.1 Holding Securities..............................3
2.2 Delivery of Securities..........................3
2.3 Registration of Securities......................7
2.4 Bank Accounts...................................8
2.5 Investment and Availability of Federal Funds....9
2.6 Collection of Income............................9
2.7 Payment of Fund Moneys ........................10
2.8 Liability for Payment in Advance of Receipt
of Securities Purchased........................13
2.9 Appointment of Agents..........................13
2.10 Deposit of Securities in Securities System.....14
2.11 Segregated Account.............................17
2.12 Ownership Certificates for Tax Purposes........18
2.13 Proxies........................................18
2.14 Communications Relating to FundPortfolio
Securities.....................................18
2.15 Reports to Fund by Independent Public
Accountants....................................19
3. Duties of the Custodian with Respect to Property
of the Fund Held Outside of the United States.......20
3.1 Appointment of Foreign Sub-Custodians..........20
3.2 Assets to be Held..............................20
<PAGE>
3.3 Foreign Securities Depositories................21
3.4 Segregation of Securities......................21
3.5 Agreements with Foreign Banking
Institutions...................................21
3.6 Access of Independent Accountants of the
Fund...........................................22
3.7 Reports by Custodian...........................22
3.8 Transactions in Foreign Custody Account........23
3.9 Liability of Foreign Sub-Custodians............24
3.10 Monitoring Responsibilities....................25
3.11 Branches of U.S. Banks.........................25
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund...............................26
5. Proper Instructions.................................27
6. Actions Permitted Without Express Authority.........27
7. Evidence of Authority...............................28
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income..........................................28
9. Records.............................................29
10. Opinion of Fund's Independent Accountant............30
11. Compensation of Custodian...........................30
12. Responsibility of Custodian.........................30
13. Effective Period, Termination and Amendment.........32
14. Successor Custodian.................................33
15. Interpretive and Additional Provisions..............35
16. Additional Funds....................................35
<PAGE>
17. Massachusetts Law to Apply..........................35
18. Prior Contracts.....................................36
<PAGE>
CUSTODIAN CONTRACT
This Contract between Fiduciary Management Associates, a
business trust organized and existing under the laws of
Massachusetts, having its principal place of business at
140 Broadway, New York, New York 10005, hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts
corporation, having its principal place of business at
225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in
three series, the Growth Portfolio, High-Yield Portfolio and the
Mortgage Securities Income Portfolio (such series together with
all other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 16, being
herein referred to as the "'Fund(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
<PAGE>
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of
its assets, including securities it desires to be held in places
within the United States ("domestic securities") and securities it
desires to be held outside the United States ("foreign
securities") pursuant to the provisions of the Declaration of
Trust. The Fund agrees to deliver to the Custodian all securities
and cash owned by it, and all payments of income, payments of
principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares of
its beneficial interest, ("Shares") of the Fund as may be issued
or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning
of Article 5), the Custodian shall from time to time employ one or
more sub-custodians located in the United States, but only in
accordance with an applicable vote by the Trustees of the Fund,
and provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as
sub-custodians for the Fund's securities and other assets the
foreign banking institutions and foreign securities depositories
2
<PAGE>
designated in Schedule "A" hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the
Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all non-
cash property, to be held by it in the United States,
including all domestic securities owned by the Fund,
other than securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by the Fund held by the
Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of
the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Fund;
3
<PAGE>
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.10 hereof;
4) To the depository agent in connection with
tender or other similar offers for portfolio
securities of the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in any
such case, the cash or other consideration is
to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Fund or into the
name of any nominee or nominees of the
Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-
custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing the
same aggregate face amount or number of units;
provided that, in any such case, the new
securities are to be delivered to the
Custodian;
4
<PAGE>
7) To the broker selling the same for examination
in accordance with the "street delivery"
custom;
8) For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization,
reorganization or readjustment of the
securities of the issuer of such securities, or
pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the
new securities and cash, if any, are to be
delivered to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim receipts
or temporary securities for definitive
securities; provided that, in any such case,
the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
receipt of adequate collateral as agreed upon
from time to time by the Custodian and the
Fund, which may be in the form of cash or
5
<PAGE>
obligations issued by the United States
government, its agencies or instrumentalities,
except that in connection with any loans for
which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable
or responsible for the delivery of securities
owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of
assets by the Fund, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions
of any agreement among the Fund, the Custodian
and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange
Act") and a member of The National Association
of Securities Dealers, Inc. ("NASD"), relating
to compliance with the rules of The Options
Clearing Corporation and of any registered
national securities exchange, or of any similar
organization or organizations, regarding escrow
6
<PAGE>
or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions
of any agreement among the Fund, the Custodian,
and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract
Market, or any similar organization or
organizations, regarding account deposits in
connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, as may be described from
time to time in the Fund's currently effective
prospectus and statement of additional
information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution
of the Trustees or of the Executive Committee
7
<PAGE>
signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary,
specifying the securities to be delivered,
setting forth the purpose for which such
delivery is to be made, declaring such purposes
to be proper corporate purposes, and naming the
person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by
the Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered
investment companies having the same investment adviser
as the Fund, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Contract shall
be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of the Fund, subject only to draft or order by
8
<PAGE>
the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it
from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every
such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and
that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be
approved by vote of a majority of the Trustees of the
Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 Investment and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions,
1) invest in such instruments as may be set forth
in such instructions on the same day as
received all federal funds received after a
9
<PAGE>
time agreed upon between the Custodian and the
Fund; and
2) make federal funds available to the Fund as of
specified times agreed upon from time to time
by the Fund and the Custodian in the amount of
checks received in payment for Shares of the
Fund which are deposited into the Fund's
account.
2.6 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect
to United States registered securities held hereunder to
which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to United States bearer securities if, on
the date of payment by the issuer, such securities are
held by the Custodian or agent thereof and shall credit
such income, as collected, to the Fund's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due the Fund on United States securities loaned
pursuant to the provisions of Section 2.2 (10) shall be
10
<PAGE>
the responsibility of the Fund. The Custodian will have
no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as
may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which
the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out moneys of the Fund in the following cases only:
1) Upon the purchase of domestic securities,
futures contracts or options on futures
contracts for the account of the Fund but only
(a) against the delivery of such securities, or
evidence of title to futures contracts or
options on futures contracts, to the Custodian
(or any bank, banking firm or trust company
doing business in the United States or abroad
which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian
and has been designated by the Custodian as its
agent for this purpose) registered in the name
of the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or
in proper form for transfer; (b) in the case of
11
<PAGE>
a purchase effected through a Securities
System, in accordance with the conditions set
forth in Section 2.10 hereof or (c) in the case
of repurchase agreements entered into between
the Fund and the Custodian, or another bank, or
a broker-dealer which is a member of NASD,
(i) against delivery of the securities either
in certificate form or through an entry
crediting the Custodian's account at the
Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the
Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as
set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Fund as set forth in Article 4
hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited
to the following payments for the account of
the Fund: interest, taxes, management,
12
<PAGE>
accounting, transfer agent and legal fees and
operating expenses of the Fund whether or not
such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared
pursuant to the governing documents of the
Fund;
6) For payment of the amount of dividends received
in respect of securities sold short;
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the
Trustees or of the Executive Committee of the
Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant
Secretary, specifying the amount of such
payment, setting forth the purpose for which
such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for
purchase of domestic securities for the account of the
Fund is made by the Custodian in advance of receipt of
13
<PAGE>
the securities purchased in the absence of specific
written instructions from the Fund to so pay in advance,
the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities
had been received by the Custodian, except that in the
case of repurchase agreements entered into by the Fund
with a bank which is a member of the Federal Reserve
System, the Custodian may transfer funds to the account
of such bank prior to the receipt of written evidence
that the securities subject to such repurchase agreement
have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with
the Federal Reserve Bank of Boston or of the safe-keeping
receipt, provided that such securities have in fact been
so transferred by book-entry.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust Company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
14
<PAGE>
2.10 Deposit of Securities in Securities Systems. The
Custodian may deposit and/or maintain domestic securities
owned by the Fund in a clearing agency registered with
the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein
as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to
the following provisions:
1) The Custodian may keep domestic securities of
the Fund in a Securities System provided that
such securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of
the Custodian other than assets held as a
fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
domestic securities of the Fund which are
maintained in a Securities System shall
identify by book-entry those securities
belonging to the Fund;
15
<PAGE>
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon
(i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to
reflect such payment and transfer for the
account of the Fund. The Custodian shall
transfer domestic securities sold for the
account of the Fund upon (i) receipt of advice
from the Securities System that payment for
such securities has been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such
transfer and payment for the account of the
Fund. Copies of all advices from the
Securities System of transfers of domestic
securities for the account of the Fund shall
identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at
its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer
to or from the account of the Fund in the form
of a written advice or notice and shall furnish
to the Fund copies of daily transaction sheets
16
<PAGE>
reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the
Securities System's accounting system, internal
accounting control and procedures for
safeguarding domestic securities deposited in
the Securities System;
5) The Custodian shall have received the initial
or annual certificate, as the case may be,
required by Article 13 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its
agents or of any of its or their employees or
from failure of the Custodian or any such agent
to enforce effectively such rights as it may
have against the Securities System; at the
election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian
with respect to any claim against the
Securities System or any other person which the
17
<PAGE>
Custodian may have as a consequence of any such
loss or damage if and to the extent that the
Fund has not been made whole for any such loss
or damage.
2.11 Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account
by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding
escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection
with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased
or sold by the Fund, (iii) or the purposes of compliance
18
<PAGE>
by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper
corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and
in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Fund or a nominee of the Fund, all proxies,
without indication of the manner in which such proxies
19
<PAGE>
are to be voted, and shall promptly deliver to the Fund
such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Fund all
written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the
Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the
domestic securities whose tender or exchange is sought
and from the party (or his agents) making the tender or
exchange offer. If the Fund desired to take action with
respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian
at least three business days prior to the date on which
the Custodian is to take such action.
2.15. Reports to Fund by Independent Public Accountants. The
Custodian shall provide the Fund, at such times as the
Fund may reasonably require, with reports by independent
20
<PAGE>
public accountants on the accounting system, internal
accounting control and procedures for safeguarding
securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or
maintained in a Securities System, relating to the
services provided by the Custodian under this Contract;
such reports, which shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the
Fund, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and,
if there are no such inadequacies, shall so state.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The Custodian is authorized and instructed to employ as
sub-custodians for the Fund's securities and other assets
maintained outside of the United States the foreign
banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-
custodians"). Upon receipt of "Proper Instructions",
together with a certified resolution of the Fund's
Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designated
additional foreign banking institutions and foreign
securities depositories to act as sub-custodians. Upon
21
<PAGE>
receipt of Proper Instructions from the Fund the
Custodian shall cease the employment of any one or more
of such sub-custodians for maintaining custody of the
Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign securities",
as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund
may determine to reasonably necessary to effect the
Fund's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Custodian and the Fund,
assets of the Fund shall be maintained in foreign
securities depositories only through arrangements
implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall identify
on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-
custodian. Each agreement pursuant to which the
Custodian employs a foreign banking institution shall
require that such Institution establish a custody account
for the Custodian on behalf of the Fund and physically
22
<PAGE>
segregate in that account, securities and other assets of
the Fund, and, in the event that such institutions
deposits the Fund's securities in a foreign securities
depository, that it shall identify on its books as
belonging to the Custodian, as agent for the Fund, the
securities so deposited.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto
and shall provide that: (a) the Fund's assets will not be
subject to any right, charge, security interest, lien or
claim of any kind in favor of the foreign banking
institutions or its creditors, except a claim of payment
for their safe custody or administration; (b) beneficial
ownership for the Fund's assets will be freely
transferable without the payment of money or value other
than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to
the Fund; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accounts for the Fund, will be given access to the
books and records of the foreign banking institution
relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign
23
<PAGE>
sub-custodian will be subject only to the instructions of
the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to
the performance of such foreign banking institutions
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Fund held by foreign sub-custodians, including but
not limited to an identification of entities having
possession of the Fund's securities and other assets and
advices or notifications of any transfers of securities
to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of the
Fund Indicating, as to securities acquired for the Fund,
the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account. (a) Upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, the
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<PAGE>
Custodian shall make or cause its foreign sub-custodian
to transfer, exchange or deliver foreign securities owned
by the Fund, but except to the extent explicitly provided
herein only in one of the circumstances specified in
Section 2.2
(b) Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the
parties the Custodian shall pay out or cause its foreign
sub-custodians to pay out monies of the Fund, but except
to the extent explicitly provided herein only in one of
the circumstances specified in Section 2.8.
(c) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received
for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such securities from such purchaser or
dealer.
25
<PAGE>
(d) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract and the Fund agrees to bold
any such nominee harmless from any liability as a holder
of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign banking
institution as a foreign sub-custodian shall require the
institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold
harmless, the Custodian and each Account from and against
any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and to
the extent that the Fund has not been made whole for any
such loss, damage, cost, expense, liability or claim.
3.10 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June,
information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be
26
<PAGE>
similar in kind and, scope to that furnished to the Fund
in connection with the initial approval of this Contract.
In addition, the Custodian will promptly inform the Fund
In the event that the Custodian learns of a material
adverse change in the financial condition of a foreign
sub-custodian or is notified by a foreign banking
institution employed as a foreign sub-custodian that
there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million
(U.S. dollars or the equivalent thereof) or that is
shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted
U.S. accounting principles).
3.11 Branches of U.S. Banks. Except as otherwise set forth in
this Contract, the provisions hereof shall not apply
where the custody of the Fund assets maintained in a
foreign branch of a banking institution which is a "bank"
as defined by Section 2(a) (5) of the Investment Company
Act of 1940 which meets the qualification set forth in
Section 26(a) Of Said Act. The appointment of any such
branch as a sub-custodian shall be governed by Article 1
of this Contract.
27
<PAGE>
4. Payments for Repurchases or Redemptions and Sales of
Shares of the Fund
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and any
applicable votes of the Trustees of the Fund pursuant thereto, the
Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of Shares who
have delivered to the Transfer Agent a request for redemption or
repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to
or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the
Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are
mutually agreed upon from time to time between the Fund and the
Custodian. The Custodian shall receive from the distributor for
the Fund's Shares or from the Transfer Agent of the Fund and
deposit into the Fund's account such payments as are received for
Shares of the Fund issued or sold from time to time by the Fund.
The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
28
<PAGE>
5. Proper Instructions
Proper Instructions as used herein means a writing signed
or initialled by one or more person or persons as the Trustees
shall have from time to time authorized. Each such writing shall
set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which
such action is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such instructions
with respect to the transaction Involved. The Fund shall cause
all oral instructions to be confirmed in writing. Upon receipt of
a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Trustees of the Fund accompanied by a
detailed description of procedures approved by the Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the
Trustees and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets.
6. Actions Permitted without Express Authority
The Custodian may In its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor expenses
of handling securities or other similar items relating to its
duties under this Contract, provided that all such payments shall
be accounted for to the Fund;
29
<PAGE>
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details
in connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Trustees of
the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or
of any action by the Trustees pursuant to the Declaration of Trust
as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Trustees of
the Fund to keep the books of account of the Fund and/or compute
30
<PAGE>
the net asset value per share of the outstanding shares of the
Fund or, if directed in writing to do so by the Fund, shall itself
keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily
the net income of the Fund as described in the Fund's currently
effective prospectus and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net
asset value per share and the daily income of the Fund shall be
made at the time or times described from time to time in the
Fund's currently effective prospectus.
9. Records
The Custodian shall create and maintain all records
relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the
Fund. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the
31
<PAGE>
Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall
be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for Its services and expenses as Custodian, as agreed
upon from time to time between the Fund and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
32
<PAGE>
believed by it to be genuine and to be signed by the proper party
or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to
the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility by the Custodian with respect to
redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the
Fund.
The Custodian shall be liable for the acts or omissions
of a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent asset forth in
Article 1 hereof with respect to sub-custodians located in the
United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by
paragraph 3.11 hereof, the Custodian shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from, or
caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a
foreign country including, but not limited to, losses resulting
33
<PAGE>
from nationalization, expropriation, currency restrictions, or
acts of war or terrorism. If the Fund requires the Custodian to
take any action with respect to securities, which action involves
the payment of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability
of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
34
<PAGE>
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under
Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Trustees of the Fund have approved the initial use of a particular
Securities System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Trustees have
reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company
Act of 1940, as amended; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust, and further provided, that the Fund may, at
any time by action of its Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this
Contract in the event of the appointment of a conservator or
receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent Jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of
35
<PAGE>
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian shall be appointed by the
Trustees of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Trustees of the Fund, deliver at the office of
the Custodian and transfer such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Trustees
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian
36
<PAGE>
and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to
an account of such successor custodian all of the Fund's
securities held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under
this Contract. In the event that securities, funds and other
properties remain in the possession of the Custodian after the
date of termination hereof owing to failure of the Fund to procure
the certified copy of vote referred to or of the Trustees to
appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the
duties and obligations of the Custodian shall remain in full force
and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties
and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of
37
<PAGE>
the Fund. No interpretive or additional provisions made as
provided, in the preceding sentence shall be deemed to be an
amendment of this Contract.
16. Additional Funds
In the event that the Fund establishes one or more series
of Shares in addition to the Growth Portfolio, the High-Yield
Portfolio and the Mortgage Securities Income Portfolio with
respect to which it desires to have the Custodian render services
as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Fund
hereunder.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
38
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 13th day of November 1986.
ATTEST FIDUCIARY MANAGEMENT ASSOCIATES
/s/ By /s/
_________________________ ____________________________
Secretary Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ By /s/
_________________________ ____________________________
Assistant Secretary Vice President
39
<PAGE>
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Directors of Fiduciary Management Associates for use as
sub-custodians for the Fund's securities and other assets:
ANZ Banking Group Ltd.
Banque Bruxelles Lambert
Canada Trust Company
Kansallis-Osake Pankki
Credit Commercial De France
Berliner Handels Und Frankfurter Bank
Standard Chartered Bank
Credito Italiano
Sumitomo Trust & Banking Company Limited
Bank Mees & Hope, N.V. Algemene Bank Nederland
Christiania Bank OG Kreditkasse
DBS Trustee Ltd.
Skandinaviska Enskilda Banken
Union Bank of Switzerland
40
<PAGE>
EXHIBIT 1
CUSTODIAN AGREEMENT
To:
Gentlemen:
The undersigned ("State Street") hereby requests that you
(the Bank) establish a custody account and a cash account for each
custodian/employee benefit plan identified in the Schedule
attached to this Agreement and each additional account which is
identified to this Agreement. Each such custody or cash account
as applicable will be referred to herein as the "Account" an will
be subject to the following terms and conditions:
1. The Bank shall hold as agent for State Street and
shall physically segregate in the Account such cash,
bullion, coin, stocks, shares, bonds, debentures,
notes and other securities and other property which
is delivered to the Bank for that State Street
Account (the "Property").
2. a. Without the prior approval of State Street it
will not deposit securities in any securities
depository or utilize a clearing agency,
incorporated or organized under the laws of a
country other than the United States, unless
such depository or clearing house operates the
central system for handling of securities or
equivalent book-entries in that country or
operates a transitional system for the central
handling of securities or equivalent book-
entries;
b. When securities held for an Account are
deposited in a securities depository or
clearing agency by the Bank, the Bank shall
identify on its books as belonging to State
Street as agent for such Account, the
securities so deposited.
3. The Bank represents that either:
a. It currently has stockholders' equity in excess
of $200 million (U.S. dollars or the equivalent
of U.S. dollars computed in accordance with
generally accepted U.S. accounting principles)
and will promptly inform State Street in the
event that there appears to be a substantial
41
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likelihood that its stockholders' equity will
decline below $200 million, or in any event, at
such time as its stockholders' equity in fact
decline below $200 million; or
b. It is the subject of an exemptive order issued
by the United States Securities and Exchange
Commission, which such order permits State
Street to employ the Bank as a subcustodian,
notwithstanding the fact that the Bank's
stockholders' equity currently below $200
million or may in the future decline below $200
million due to currency fluctuation.
4. Upon the written instructions of State Street as
permitted by Paragraph 8, the Bank is authorized to
pay cash from the Account and to sell, assign,
transfer, deliver or exchange, or to purchase for
the Account, any and all stocks, shares, bonds,
debentures, notes and other securities
("Securities"), bullion, coin and any other
property, but only as provided in such written
instructions. The bank shall not be held liable for
any act or omission to act on instructions given on
purported to be given should there be any _____ in
such instructions.
5. Unless the Bank receives written instructions of
State Street to the contrary, the Bank is
authorized:
a. To promptly receive and collect all income and
principal with respect to the Property and to
credit cash receipts to the Account;
b. To promptly exchange securities where the
exchange is purely ministerial (including
without limitation, the exchange of temporary
securities for those in definitive form and the
exchange of warrants, or other documents of
entitlement to securities, for the securities
themselves);
c. To promptly surrender securities at maturity or
when called for redemption upon receiving
payment therefor;
d. Whenever notification of a rights entitlement
or a fractional interest resulting from a
rights issue, stock dividend or stock split is
received for the Account and such rights
42
<PAGE>
entitlement or fractional interest bears an
expiration date, the Bank will endeavor to
obtain State Street Bank's instructions, but
should these not be received in time for the
Bank to take timely action, the Bank is
authorized to sell such rights entitlement or
fractional interest and to credit the Account;
e. To hold registered in the name of the nominee
of the Bank or its agents such Securities as
are ordinarily held in registered form;
f. To execute in State Street's name for the
Account, whenever the Bank deems it
appropriate, such ownership and other
certificates as may be required to obtain the
payment of income from the Property; and
g. To pay or cause to be paid, from the Account
any and all taxes and levies in the nature of
taxes imposed on such assets by any
governmental authority and shall use reasonable
efforts, to promptly reclaim any foreign
withholding tax relating to the Account.
6. If the Bank shall receive any proxies, notices,
reports or other communications relative to any of
the Securities of the Account in connection with
tender offers, reorganization, mergers,
consolidations, or similar events which may have an
impact upon the issuer thereof, the Bank shall
promptly transmit any such communication to State
Street Bank by means as will permit State Street
Bank to take timely action with respect thereto.
7. The Bank is authorized in its discretion to appoint
brokers and agents in connection with the Bank's
handling of transactions relating to the Property
provided that any such appointment shall not relieve
the Bank of any of its responsibilities or
liabilities hereunder.
8. Written instructions shall include (i) instructions
in writing signed by such persons as are designated
in writing by State Street; (ii) telex or tested
telex instructions of State Street; (iii) other
forms of instruction in computer readable form as
shall be customarily utilized for the transmission
of like information; and (iv) such other forms of
communication as from time to time shall be agreed
upon by State Street and the Bank.
43
<PAGE>
9. The Bank shall supply periodic reports with respect
to the safe keeping of assets held by it under this
agreement. The content of such reports shall
include but not be limited to any transfer to or
from any account held by the Bank hereunder and such
other information as State Street may reasonably
request.
10. In addition to its obligations under Section 2B
hereof, the Bank shall maintain such other records
as may be necessary to identify the assets;
hereunder as belonging to each custodian/ employee
benefit plan identified in our Schedule attached to
this agreement and each additional account which is
identified to this agreement.
11. The Bank agrees that its books and records relating
to its action under this Agreement shall be opened
to the physical, on-premises inspection and audit at
reasonable times by officers of, auditors employed
by or other representatives of State Street
(including to the extent permitted under __________
law the independent public accountants for any
entity whose Property is being held hereunder' and
shall be retained for such period as shall be agreed
by State Street and the Bank.
12. The Bank shall be entitled to reasonable
compensation for its services and expenses as
custodian under this Agreement, as agreed upon from
time to time by the Bank and State Street.
13. The Bank shall exercise reasonable care in the
performance of its duties, as are set forth or
contemplated herein or contained in instructions
given to the Bank which are not contrary to this
Agreement, shall maintain adequate insurance and
agrees to indemnify and hold harmless, State Street
and each Account from and against loss, damage,
cost, expense, liability or claim arising out of or
in connection with the Bank's performance of its
obligations hereunder.
14. The bank agrees (i) the property hold hereunder is
not subject to any right, charge, security interest,
lien or claim of any kind in favor of the Bank or
any of its agents or its creditors except a claim of
payment for their safe custody and administration
and (ii) the beneficial ownership of the property
shall be freely transferable without the payment of
44
<PAGE>
money or other value other than for safe custody or
administration.
15. The bank agrees to meet State Street Operating
Requirements (See Exhibit A).
16. This Agreement it may be terminated by the Bank or
State Street by 60 days' written notice to the
other, sent by registered mail or express courier.
The Bank, upon the date this Agreement terminate
pursuant to notice which has been given in a timely
fashion, shall deliver the Property to the
beneficial owner unless the Bank has received from
the beneficial owner 60 days, prior to the date on
which this Agreement is to be terminated written
instructions of State Street specifying the name(s)
of the person(s) to whom the Property shall be
delivered.
17. The Bank and State Street shall each use its best
efforts to maintain the confidentiality of the
Property in each Account, subject, however, to the
provisions of any laws requiring the disclosure of
the Property.
18. Unless otherwise specified in this Agreement, all
notices with respect to matters contemplated by this
Agreement shall be deemed duly given when received
in writing or by confirmed telex by the Bank or
State Street at their respective addresses set forth
below or at such other address as be specified in
each case in a notice similarly given:
To State Street Master Trust Division, Global Custody
STATE STREET BANK AND TRUST COMPANY
P.O. Box 1713
Boston, Massachusetts 02105
U.S.A.
To the Bank
19. This Agreement shall be governed by and construed in
accordance with the laws of ________ except to the
extent that such laws are preempted by the laws of
the United States of America.
45
<PAGE>
Please acknowledge your agreement to the foregoing by
executing a copy of this letter.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By:____________________________
Vice President
Date:__________________________
Agreed to by:
By:_________________________
Date:_______________________
46
00250061.AI4
<PAGE>
AMENDMENT TO CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and
Trust Company (the "Custodian") and Fiduciary Management
Associates (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a
Custodian Contract dated March 12, 1986 (the "Custodian
Contract") governing the terms and conditions under which the
Custodian maintains custody of the securities and other assets of
the Fund; and
WHEREAS, the parties hereto desire to amend the
Custodian Contract to provide for for the maintenance of certain
of the Fund's foreign securities and other assets in the custody
of State Street London Limited (the "Trust Company"), a company
incorporated under the laws of the United Kingdom with the power
to act as a trustee and as a custodian of securities;
NOW THEREFORE, in consideration of the premises and
covenants contained herein, the Custodian and the Fund hereby
amend the terms of the Custodian Contract and agree to the
following terms and conditions:
1. The Fund hereby authorizes and instructs the
Custodian to employ the services of the Trust Company, as the
sub-custodian in the United Kingdom, to hold securities and other
assets of the Fund, subject to the terms of the Custodian
Contract, as heretofore amended, and to the terms and conditions
hereof.
<PAGE>
2. The securities to be held by the Trust Company shall
be limited to "foreign securities" as defined by paragraph (c)
(1) of Rule 17f-5 under the Investment Company Act of 1940 (the
"1940 Act").
3. Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the
Fund with the Trust Company, which account shall be subject to
the direction of the Custodian, the Trust Company, or both.
4. The Custodian represents that it has obtained an
order from the Securities and Exchange Commission, pursuant to
Section 6(c) of the 1940 Act, exempting the Custodian and the
Fund from the provisions of Section 17(f) of said Act, to the
extent necessary to permit the securities and other assets of the
Fund to be maintained in the custody of the Trust Company.
5. In delegating custody duties and obligations to the
Trust Company as permitted hereunder, the Custodian agrees that
it shall not be relieved of any responsibility to the Fund for
any loss due to such delegation to the Trust Company, except such
loss as may result from: (a) political risk (including, but not
limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or
armed hostilities) or (b) other risk of loss (excluding
bankruptcy or insolvency of the Trust Company not caused by a
political risk) for which neither the Custodian nor the Trust
Company would be liable (including, but not limited to, losses
2
<PAGE>
due to Acts of God, nuclear incident and other losses under
circumstances where the Custodian and the Trust Company have
exercised reasonable care).
6. Except as specifically superseded or modified herein,
the terms and conditions of the Custodian Contract, as heretofore
amended, shall continue to apply with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 13th day of November, 1986.
ATTEST FIDUCIARY MANAGEMENT ASSOCIATES
/s/ /s/
________________________ By_____________________________
(Title)
ATTEST STATE STREET BANK AND TRUST
COMPANY
/s/ /s/
________________________ By:___________________________
(Assistant Secretary) (Vice President)
3
00250061.AI6
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of November 17, 1988,
between FIDUCIARY MANAGEMENT ASSOCIATES, a Massachusetts
business trust and an open-end investment company registered
with the Securities and Exchange Commission (the "SEC")
under the Investment Company Act of 1940 (the "Investment
Company Act"), having its principal place of business at
1345 Avenue of Americas, New York, New York 10105 (the
"Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware
corporation registered with the SEC as a transfer agent
under the Securities Exchange Act of 1934, having its
principal place of business at 500 Plaza Drive, Secaucus,
New Jersey 07094 ("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
3
<PAGE>
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
<PAGE>
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
5
<PAGE>
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
6
<PAGE>
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
7
<PAGE>
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
9
<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
12
<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
16
<PAGE>
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders' meetings,
proxies and proxy statements and tabulating proxies. Fund
Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
17
<PAGE>
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
18
<PAGE>
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
19
<PAGE>
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the
Fund or counsel to the Fund or Fund Services, and upon
statements of accountants, brokers and other persons
believed by Fund Services in good faith to be expert in the
matters upon which they are consulted. Fund Services shall
not be liable for any action taken in good faith reliance
upon such advice or statements;
(ii) Fund Services shall not be liable for any
action reasonably taken in good faith reliance upon any
Written Instructions or certified copy of any resolution of
the Fund's Board of Directors or Trustees, including a
Written Instruction authorizing Fund Services to make
payment upon redemption of Shares without a signature
20
<PAGE>
guarantee; provided, however, that upon receipt of a Written
Instruction countermanding a prior Instruction that has not
been fully executed by Fund Services, Fund Services shall
verify the content of the second Instruction and honor it,
to the extent possible. Fund Services may rely upon the
genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have
been validly executed;
(iii) Fund Services may rely, and shall be protected
by the Fund in acting, upon any signature, instruction,
request, letter of transmittal, certificate, opinion of
counsel, statement, instrument, report, notice, consent,
order, or other paper or document reasonably believed by it
in good faith to be genuine and to have been signed or
presented by the purchaser, the Fund or other proper party
or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
21
<PAGE>
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
22
<PAGE>
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
23
<PAGE>
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
24
<PAGE>
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
25
<PAGE>
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
WITNESS the following signatures:
FIDUCIARY MANAGEMENT ASSOCIATES
BY: /s/ F. W. Burr
__________________________
TITLE: Executive Vice
President
ALLIANCE FUND SERVICES, INC.
BY: /s/ R. H. Joseph, Jr
___________________________
TITLE: Vice President
26
00250061.AI1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the
captions "Financial Highlights" and "General Information -
Counsel and Independent Auditors" and to the use of our report
dated November 4, 1997, included in this Registration Statement
(Form N-1A No. 2-33889) of Fiduciary Management Associates.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 30, 1998
00250061.AH7
<PAGE>
[ARTICLE] 6
[CIK] 0000035429
[NAME] FIDUCIARY MANAGEMENT ASSOCIATES, INC.
[SERIES]
[NUMBER] 01
[NAME] FIDUCIARY MANAGEMENT ASSOCIATES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1997
[PERIOD-START] OCT-01-1996
[PERIOD-END] SEP-30-1997
[INVESTMENTS-AT-COST] 75,431,250
[INVESTMENTS-AT-VALUE] 86,915,900
[RECEIVABLES] 963,543
[ASSETS-OTHER] 18,994
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 87,898,437
[PAYABLE-FOR-SECURITIES] 1,378,672
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 278,707
[TOTAL-LIABILITIES] 1,657,379
[SENIOR-EQUITY] 25,538
[PAID-IN-CAPITAL-COMMON] 44,848,659
[SHARES-COMMON-STOCK] 2,553,778
[SHARES-COMMON-PRIOR] 4,114,385
[ACCUMULATED-NII-CURRENT] 1,507
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 29,880,704
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11,484,650
[NET-ASSETS] 86,241,058
[DIVIDEND-INCOME] 401,762
[INTEREST-INCOME] 339,867
[OTHER-INCOME] 0
[EXPENSES-NET] (1,338,751)
[NET-INVESTMENT-INCOME] (597,122)
[REALIZED-GAINS-CURRENT] 33,153,626
[APPREC-INCREASE-CURRENT] (5,556,721)
[NET-CHANGE-FROM-OPS] 26,999,783
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (51,863,971)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 83,725
[NUMBER-OF-SHARES-REDEEMED] (3,593,101)
[SHARES-REINVESTED] 1,948,769
[NET-CHANGE-IN-ASSETS] (74,199,475)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 49,189,678
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 943,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,339,000
[AVERAGE-NET-ASSETS] 134,552,468
[PER-SHARE-NAV-BEGIN] 39.00
[PER-SHARE-NII] (0.14)
[PER-SHARE-GAIN-APPREC] 7.39
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (12.48)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 33.77
[EXPENSE-RATIO] .99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250061.AH4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Developing Markets Fund, Inc. Alliance
Global Dollar Government Fund, Inc., Alliance Global
Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance Municipal Trust, Alliance
New Europe Fund, Inc., Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance World
Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., Fiduciary Management Associates, The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust,
and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John D. Carifa
___________________________
John D. Carifa
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates,
The Alliance Fund, Inc. and The Alliance Portfolios, and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Ruth Block
___________________________
Ruth Block
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc. Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates
and The Alliance Fund, Inc. and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ David H. Dievler
___________________________
David H. Dievler
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Growth and Income Fund, Inc.,
Alliance High Yield Fund, Inc., Alliance Income Builder
Fund, Inc., Alliance International Fund, Alliance Limited
Maturity Government Fund, Inc., Alliance Mortgage Securites
Incoem Fund, Inc., Alliance Multi-Market Strategy Trust,
Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates,
The Alliance Fund, Inc., and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ John H. Dobkin
___________________________
John H. Dobkin
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China 97
Fund, Inc., Alliance Growth and Income Fund, Inc., Alliance
High Yield Fund, Inc., Alliance Income Builder Fund, Inc.,
Alliance Limited Maturity Government Fund, Inc., Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance Municipal Trust, Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates,
The Alliance Fund, Inc., The Alliance Portfolios and the
Hudson River Trust, and filing the same, with exhibits
thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact, or their
substitute or substitutes, may do or cause to be done by
virtue hereof.
/s/ William H. Foulk, Jr.
___________________________
William H. Foulk, Jr.
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates
and The Alliance Fund, Inc., and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Dr. James M. Hester
___________________________
Dr. James M. Hester
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance World Income Trust, Inc., Alliance
Worldwide Privatization Fund, Inc., Fiduciary Management
Associates, The Alliance Fund, Inc. and The Hudson River
Trust, and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Clifford L. Michel
___________________________
Clifford L. Michel
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance Municipal Trust, Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust,
Inc., Alliance Worldwide Privatization Fund, Inc., Fiduciary
Management Associates, The Alliance Fund, Inc., The Alliance
Portfolios and The Hudson River Trust, and filing the same,
with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Donald J. Robinson
___________________________
Donald J. Robinson
Dated: September 9, 1997
00250061.AH6
