AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1996
FILE NO. 811-6698
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 4
EQUITY 500 INDEX PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
6 St. James Avenue, Boston, Massachusetts 02116
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 423-0800
Philip W. Coolidge, 6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
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BT0146D
EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant
to Section 8(b) of the Investment Company Act of 1940, as amended. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933 (the "1933 Act") because such interests will be issued
solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any beneficial interests in the Registrant.
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BT0146D
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Equity 500 Index Portfolio (the "Portfolio") is a no-load, diversified,
open-end management investment company which was organized as a trust under the
laws of the State of New York on December 11, 1991. Beneficial interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.
The investment objective of the Portfolio is to provide investment
results that, before expenses, correspond to the total return (I.E., the
combination of capital changes and income) of common stocks publicly traded in
the United States, as represented by the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500" or "Index").
Additional information about the investment policies of the Portfolio
appears in Part B. There can be no assurance that the investment objective of
the Portfolio will be achieved.
The Portfolio is not managed according to traditional methods of
"active" investment management, which involve the buying and selling of
securities based upon economic, financial, and market analyses and investment
judgment. Instead, the Portfolio, utilizing a "passive" or "indexing" investment
approach, attempts to duplicate, before expenses, the performance of the S&P
500.
Under normal conditions when the Portfolio's assets are above $10
million, the Portfolio will invest at least 80% of its assets in common stocks
of companies which compose the S&P 500. In seeking to duplicate the performance
of the S&P 500, Bankers Trust Company ("Bankers Trust"), as the Portfolio's
investment adviser (the "Adviser"), will attempt over time to allocate the
Portfolio's portfolio of investments among common stocks in approximately the
same weightings as the S&P 500, beginning with the heaviest-weighted stocks that
make up a larger portion of the Index's value. Over the long term, Bankers Trust
seeks a correlation between the performance of the Portfolio, before expenses,
and that of the S&P 500 of .98 or better (.95 or better if Portfolio asset
levels are below $10 million). A figure of 1.00 would indicate perfect
correlation. In the unlikely event that the correlation is not achieved, the
Board of Trustees will consider alternative structures.
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The Adviser utilizes a two-stage sampling approach in seeking to obtain
its objective. Stage one, which encompasses large cap stocks, maintains the
stock holdings at or near their benchmark weights. Large capitalization stocks
are defined as those securities which represent 0.10% or more of the index. In
stage two, smaller stocks are analyzed and selected using risk characteristics
and industry weights in order to match the sector and risk characteristics of
the smaller companies in the S&P 500. This approach helps to maximize portfolio
liquidity while minimizing costs.
Bankers Trust generally will seek to match the composition of the S&P
500 but usually will not invest the Portfolio's stock portfolio to mirror the
Index exactly. Because of the difficulty and expense of executing relatively
small stock transactions, the Portfolio may not always be invested in the less
heavily weighted S&P 500 stocks, and may at times have its portfolio weighted
differently from the S&P 500, particularly if the Portfolio has a low level of
assets. When the Portfolio's size is greater, Bankers Trust expects to purchase
more of the stocks in the S&P 500 and to match the relative weighting of the S&P
500 more closely, and anticipates that the Portfolio will be able to mirror,
before expenses, the performance the S&P 500 with little variance at asset
levels of $10 million or more. In addition, the Portfolio may omit or remove any
S&P 500 stock from the Portfolio if, following objective criteria, Bankers Trust
judges the stock to be insufficiently liquid or believes the merit of the
investment has been substantially impaired by extraordinary events or financial
conditions. Bankers Trust will not purchase the stock of Bankers Trust New York
Corporation, which is included in the Index, and instead will overweight its
holdings of companies engaged in similar businesses.
Under normal conditions, Bankers Trust will attempt to invest as much
of the Portfolio's assets as is practical in common stocks included in the S&P
500. However, the Portfolio may maintain up to 25% of its assets in short-term
debt securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks.
When the Portfolio has cash from new investments in the Portfolio or
holds a portion of its assets in money market instruments, it may enter into
stock index futures or options to attempt to increase its exposure to the stock
market. Strategies the Portfolio could use to accomplish this include purchasing
futures contracts, writing put options, and purchasing call options. When the
Portfolio wishes to sell securities, because of shareholder redemptions or
otherwise, it may use stock index futures or options to hedge against market
risk until the sale can be completed. These strategies could include selling
futures contracts, writing call options, and purchasing put options.
Bankers Trust will choose among futures and options strategies based on
its judgment of how best to meet the Portfolio's goals. In selecting futures and
options, Bankers Trust will assess such factors as current and anticipated stock
prices, relative liquidity and price levels in the options and futures markets
compared to the securities markets, and the Portfolio's cash flow and cash
management needs. If Bankers Trust judges these factors incorrectly, or if price
changes in the Portfolio's futures and options positions are not well correlated
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with those of its other investments, the Portfolio could be hindered in the
pursuit of its objective and could suffer losses. The Portfolio could also be
exposed to risks if it could not close out its futures or options positions
because of an illiquid secondary market.
SHORT-TERM INSTRUMENTS. The Portfolio intends to stay invested in the
securities described above to the extent practical in light of its objective and
long-term investment perspective. However, the Portfolio's assets may be
invested in short-term instruments with remaining maturities of 397 days or less
to meet anticipated redemptions and expenses or for day-to-day operating
purposes. Short-term instruments consist of: (i) short-term obligations of the
U.S. Government, its agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated Aa or higher by
Moody's Investors Service, Inc. ("Moody's") or AA or higher by Standard & Poor's
Corporation ("S&P") or, if unrated, of comparable quality in the opinion of
Bankers Trust; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. At the time the Portfolio invests in commercial
paper, bank obligations or repurchase agreements, the issuer or the issuer's
parent must have outstanding debt rated Aa or higher by Moody's or AA or higher
by S&P or outstanding commercial paper or bank obligations rated Prime-1 by
Moody's or A-1 by S&P; or, if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust.
ABOUT THE S&P 500. The S&P 500 is a well-known stock market index that
includes common stocks of 500 companies from several industrial sectors
representing a significant portion of the market value of all common stocks
publicly traded in the United States, most of which are listed on the New York
Stock Exchange Inc. (the "NYSE"). Stocks in the S&P 500 are weighted according
to their market capitalization (I.E., the number of shares outstanding
multiplied by the stock's current price). Bankers Trust believes that the
performance of the S&P 500 is representative of the performance of publicly
traded common stocks in general. The composition of the S&P 500 is determined by
S&P and is based on such factors as the market capitalization and trading
activity of each stock and its adequacy as a representation of stocks in a
particular industry group, and may be changed from time to time.
The Portfolio is not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, implied or express, to purchasers of the
Portfolio or any member of the public regarding the advisability of investing in
index funds or the ability of the S&P 500 to track market performances. S&P does
not guarantee the accuracy and/or the completeness of the S&P 500 or any data
included therein.
S&P makes no warranty, express or implied, as to the results to be
obtained by the Portfolio, owners of the Portfolio, any person or any entity
from the use of the S&P 500 or any data included therein. S&P makes no express
or implied warranties and hereby expressly disclaims all such warranties of
merchantability or fitness for a particular purpose for use with respect to the
S&P 500 or any data included therein.
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For more complete information about the S&P 500, see below and Part B.
The table below shows the performance of the S&P 500 for the ten years
from 1985 through 1995. Stock prices fluctuated widely during the period but
were higher at the end than at the beginning. The results shown should not be
considered as a representation of the income or capital gain or loss which may
be generated by the S&P 500 in the future. Nor should this be considered as a
representation of the past or future performance of the Portfolio.
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*
Year End Price Changes in Dividend Total
YEAR INDEX VALUE INDEX FOR YEAR REINVESTMENT RETURN
1995 615.93 34.11% 3.43% 37.54%
1994 459.27 -1.54% 2.86% 1.32%
1993 466.45 7.06% 2.98% 10.04%
1992 435.71 4.46% 3.15 7.61%
1991 417.09 26.31% 4.09% 30.40%
1990 330.22 -6.56% 3.46% -3.10%
1989 353.40 27.25% 4.37% 31.62%
1988 277.72 12.40% 4.16% 16.56%
1987 247.08 2.03% 3.22% 5.25%
1986 242.17 14.62% 4.05% 18.67%
1985 211.28 26.33% 5.39% 31.72%
*Source: Bloomberg. Total returns for the S&P 500 include the change in
price of S&P 500 stocks and assume reinvestment of all dividends paid by
S&P 500 stocks.
OTHER INVESTMENT TECHNIQUES
DERIVATIVES. The Portfolios may invest in stock index futures and
options thereon which are commonly known as derivatives. Generally, a derivative
is a financial arrangement, the value of which is based on, or "derived" from, a
traditional security, asset or market index. Some "derivatives" such as
mortgage-related adn other asset-backed securities are in many respects like any
other investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities. The
Adviser will only use derivative for cash management purposes. Derivatives will
not be used to increase portfolio risk above the level that could be achieved
using only traditional investment securities or to acquire exposure to changes
in the value of assets or indices that by themselves would not be purchased for
the Portfolio.
INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio
may be invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than that amount,
the Portfolio's ability to achieve its investment objective may be impaired.
These are fundamental investment policies of the Portfolio which may not be
changed without investor approval. No more than 15% of the Portfolio's net
assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits maturing in more than seven
days). Additional investment policies of the Portfolio are contained in Part B.
The investment objective of the Portfolio is also not a fundamental policy.
RISK FACTORS
As described above, the Portfolio invests in an index of securities
that is representative of the stock market as a whole. While the performance of
the S&P 500 has fluctuated considerably, the long-term performance of the S&P
500 has been greater than inflation.
The ability of the Portfolio to meet its investment objective depends
to some extent on the cash flow. Bankers Trust will make investment changes to
accommodate cash flow in an attempt to maintain the similarity of the Portfolio
to the S&P 500. Investors should also be aware that the performance of the S&P
500 is a hypothetical number which does not take into account brokerage
commissions and other costs of investing, unlike the Portfolio which must bear
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these costs. Finally, since the Portfolio seeks to track the S&P 500, Bankers
Trust generally will not attempt to judge the merits of any particular stock as
an investment.
PORTFOLIO TURNOVER. The frequency of portfolio transactions--the
Portfolio's portfolio turnover rate--will vary from year to year depending on
market conditions and the Portfolio's cash flows. The Portfolio's annual
portfolio turnover rate is not expected to exceed 100%. The Portfolio's
portfolio turnover rate for the years ended December 31, 1995, 1994 and 1993 was
6%, 21% and 31%, respectively. The decrease in the Portfolio's turnover rate
from the year ended 1994 to 1995 was due to the growth of assets in the period.
ITEM 5. MANAGEMENT OF THE FUND.
The Board of Trustees provides broad supervision over the affairs of
the Portfolio. Bankers Trust is the Portfolio's Adviser. A majority of the
Portfolio's Trustees are not affiliated with the Adviser. Bankers Trust, the
Portfolio's administrator (the "Administrator"), supervises the overall
administration of the Portfolio. The Portfolio's fund accountant, transfer
agent, custodian and dividend paying agent is also Bankers Trust. Mr. Frank
Salerno, Managing Director of Bankers Trust, is primarily responsible for the
day-to-day management of the Portfolio.
Mr. Frank Salerno, Managing Director of Bankers Trust, is responsible
for the day-to-day management of the Portfolio. Mr. Salerno has been employed by
Bankers Trust since prior to 1989 and has managed the Portfolio's assets since
the Portfolio commenced operations.
Bankers Trust, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly-owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market. As of December
31, 1995, Bankers Trust New York Corporation was the ninth largest bank holding
company in the United States with total assets of approximately $104 billion.
Bankers Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of over 120 offices in more than 40 countries. Investment
management is a core business of Bankers Trust, built on a tradition of
excellence from its roots as a trust bank founded in 1903. The scope of Bankers
Trust's investment management capability is unique due to its leadership
positions in both active and passive quantitative management and its presence in
major equity and fixed income markets around the world. Bankers Trust is one of
the nation's largest and most experienced investment managers, with
approximately $200 billion in assets under management globally. Of that total,
approximately $82 billion are in U.S. equity index assets alone. When bond and
international funds are included, Bankers Trust manages over $94 billion in
total index assets. This makes Bankers Trust one of the nation's leading
managers of index funds.
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Bankers Trust has more than 50 years of experience managing retirement
assets for the nation's largest corporations and institutions. In the past,
these clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise, once available to only the largest institutions
in the U.S., to individual investors for the first time. Bankers Trust's
officers have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of
Trustees, manages the Portfolio in accordance with the Portfolio's investment
objective and stated investment policies, makes investment decisions for the
Portfolio, places orders to purchase and sell securities and other financial
instruments on behalf of the Portfolio and employs professional investment
managers and securities analysts who provide research services to the Portfolio.
Bankers Trust may utilize the expertise of any of its worldwide subsidiaries and
affiliates to assist in its role as investment adviser. All orders for
investment transactions on behalf of the Portfolio are placed by Bankers Trust
with broker-dealers and other financial intermediaries that it selects,
including those affiliated with Bankers Trust. A Bankers Trust affiliate will be
used in connection with a purchase or sale of an investment for the Portfolio
only if Bankers Trust believes that the affiliate's charge for the transaction
does not exceed usual and customary levels. The Portfolio will not invest in
obligations for which Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank. The Portfolio may, however, invest in the obligations
of correspondents and customers of Bankers Trust.
As compensation for its investment advisory services, the Portfolio
will pay Bankers Trust a fee computed daily and paid monthly at the annual rate
of 0.10% of the average daily net assets of the Portfolio pursuant to an
investment advisory agreement.
Bankers Trust has been advised by its counsel that, in counsel's
opinion, Bankers Trust currently may perform the services for the Portfolio
described in this Registration Statement without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. State laws on this issue
may differ from the interpretations of relevant Federal law and banks and
financial institutions may be required to register as dealers pursuant to state
securities law.
Under an administration and services agreement with the Portfolio (the
"Administration and Services Agreement"), Bankers Trust calculates the value of
the assets of the Portfolio and generally assists the Board of Trustees in all
aspects of the administration and operation of the Portfolio. The Administration
and Services Agreement provides for the Portfolio to pay Bankers Trust a fee
computed daily and paid monthly at the rate of 0.05% of the average daily net
assets of the Portfolio. Under the Administration and Services Agreement,
Bankers Trust may delegate one or more of its responsibilities to others at
Bankers Trust's expense.
The Portfolio bears its own expenses. Operating expenses for the
Portfolio generally consist of all costs not specifically borne by Bankers Trust
or
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Signature Broker-Dealer Services, Inc. ("Signature") including investment
advisory and administration and service fees, fees for necessary professional
services, amortization of organizational expenses, the costs associated with
regulatory compliance and maintaining legal existence and investor relations.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (E.G., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable, except as set forth below. The Portfolio
is not required and has no current intention to hold annual meetings of
investors, but the Portfolio will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Changes in fundamental policies will be submitted to investors
for approval. Investors have under certain circumstances (E.G., upon application
and submission of certain specified documents to the Trustees by a specified
number of investors) the right to communicate with other investors in connection
with requesting a meeting of investors for the purpose of removing one or more
Trustees. Investors also have the right to remove one or more Trustees without a
meeting by a declaration in writing by a specified number of investors. Upon
liquidation of the Portfolio, investors would be entitled to share pro rata in
the net assets of the Portfolio available for distribution to investors.
The net asset value of the Portfolio is determined each day on which
the NYSE is open ("Portfolio Business Day") (and on such other days as are
deemed necessary in order to comply with Rule 22c-1 under the Investment Company
Act of 1940, as amended (the "1940 Act")). This determination is made each
Portfolio Business Day as of the close of regular trading on the NYSE (currently
4:00 p.m., New York time) (the "Valuation Time").
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day. At the Valuation Time, on each
such business day, the value of each investor's beneficial interest in the
Portfolio will be determined by multiplying the net asset value of the Portfolio
by the percentage, effective for that day, that represents that investor's share
of the aggregate beneficial interests in the Portfolio. Any additions or
withdrawals, which are to be effected on that day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be re-computed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the Valuation
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Time, on such day plus or minus, as the case may be, the amount of any additions
to or withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value of
the Portfolio as of the Valuation Time on such day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in the Portfolio as of the Valuation Time, on the following business
day of the Portfolio.
The "net income" of the Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of the Portfolio,
less (ii) all actual and accrued expenses of the Portfolio determined in
accordance with generally accepted accounting principles. Interest income
includes discount earned (including both original issue and market discount) on
discount paper accrued ratably to the date of maturity and any net realized
gains or losses on the assets of the Portfolio. All the net income of the
Portfolio is allocated pro rata among the investors in the Portfolio. The net
income is accrued daily and distributed monthly to the investors in the
Portfolio.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any income tax. However, each investor in the
Portfolio will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined if an order is received
by the Portfolio by the designated cutoff time for each accredited investor. The
net asset value of the Portfolio is determined on each Portfolio Business Day.
The Portfolio's portfolio securities are valued primarily on the basis of market
quotations or, if quotations are not readily available, by a method which the
Board of Trustees believes accurately reflects fair value.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
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investments must be made in Federal funds (I.E., monies credited to the account
of the Portfolio's custodian bank by a Federal Reserve Bank).
The Portfolio and Signature reserve the right to cease accepting
investments at any time or to reject any investment order.
The placement agent for the Portfolio is Signature. The principal
business address of Signature is 6 St. James Avenue, Boston, Massachusetts
02116. Signature receives no additional compensation for serving as the
placement agent for the Portfolio.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in
proper form is furnished by the investor to the Portfolio by the designated
cutoff time for each accredited investor. The proceeds of a withdrawal will be
paid by the Portfolio in Federal funds normally on the Portfolio Business Day
the withdrawal is effected, but in any event within seven days. The Portfolio
reserves the right to pay redemptions in kind. Unless requested by an investor,
the Portfolio will not make a redemption in kind to the investor, except in
situations where that investor may make redemptions in kind. Investments in the
Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on the NYSE is restricted or, to the extent otherwise permitted by
the 1940 Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
ADDITIONAL INFORMATION
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements. In a
repurchase agreement the Portfolio buys a security and simultaneously agrees to
sell it back at a higher price. In the event of the bankruptcy of the other
party to either a repurchase agreement or a securities loan, the Portfolio could
experience delays in recovering either its cash or the securities it lent. To
the extent that, in the meantime, the value of the securities repurchased had
decreased or the value of the securities lent had increased, the Portfolio could
experience a loss. In all cases, Bankers Trust must find the creditworthiness of
the other party to the transaction satisfactory. A repurchase agreement is
considered a collateralized loan under the 1940 Act.
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SECURITIES LENDING. The Portfolio is permitted to lend up to 30% of the
total value of its securities. These loans must be secured continuously by cash
or equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risk which, like those associated with other
extensions of credit, includes delays in recovery and possible loss of rights in
the collateral should the borrower fail financially.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.
OPTIONS ON STOCK INDICES. The Portfolio may purchase and write put and
call options on stock indices listed on stock exchanges. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indices are generally similar to options on stock
except that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a specified price, an option on a stock
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (a) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by (b)
a fixed "index multiplier". Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or the option
may expire unexercised.
Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether the
Portfolio will realize a gain or loss from the purchase or writing of options on
an index depends upon movements in the level of stock prices in the stock market
generally
<PAGE>
A-11
or, in the case of certain indices, in an industry or market segment, rather
than movements in the price of a particular stock. Accordingly, successful use
by the Portfolio of options on stock indices will be subject to Bankers Trust's
ability to predict correctly movements in the direction of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
FUTURES CONTRACTS ON STOCK INDICES. The Portfolio may enter into
contracts providing for the making and acceptance of a cash settlement based
upon changes in the value of an index of securities ("Futures Contracts"). This
investment technique is designed only to hedge against anticipated future change
in general market prices which otherwise might either adversely affect the value
of securities held by the Portfolio or adversely affect the prices of securities
which are intended to be purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset an existing futures
position.
In general, each transaction in Futures Contracts involves the
establishment of a position which will move in a direction opposite to that of
the investment being hedged. If these hedging transactions are successful, the
futures positions taken for the Portfolio will rise in value by an amount which
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.
Although Futures Contracts would be entered into for hedging purposes
only, such transactions do involve certain risks. These risks could include a
lack of correlation between the Futures Contract and the equity market being
hedged, a potential lack of liquidity in the secondary market and incorrect
assessments of market trends which may result in poorer overall performance than
if a Futures Contract had not been entered into.
Brokerage costs will be incurred and "margin" will be required to be
posted and maintained as a good-faith deposit against performance of obligations
under Futures Contracts written for the Portfolio. The Portfolio may not
purchase or sell a Futures Contract if immediately thereafter its margin
deposits on its outstanding Futures Contracts would exceed 5% of the market
value of the Portfolio's total assets.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may invest in options on
such Futures Contracts for similar purposes.
ASSET COVERAGE. The Portfolio will cover the Portfolio's transactions
in futures and related options, as well as in when-issued and delayed delivery,
as required under applicable interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated account with the
Portfolio's Custodian containing high grade liquid debt securities in an amount
at all times equal to or exceeding the Portfolio's commitment with respect to
these instruments or contracts.
<PAGE>
A-12
<PAGE>
BT0146D
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS. PAGE
General Information and History . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . B-1
Management of the Fund . . . . . . . . . . . . . . . B-12
Control Persons and Principal Holder
of Securities . . . . . . . . . . . . . . . . B-15
Investment Advisory and Other Services . . . . . . . B-15
Brokerage Allocation and Other Practices . . . . . . B-17
Capital Stock and Other Securities . . . . . . . . . B-18
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . B-20
Tax Status . . . . . . . . . . . . . . . . . . . . . B-20
Underwriters . . . . . . . . . . . . . . . . . . . . B-21
Calculation of Performance Data . . . . . . . . . . . B-21
Financial Statements . . . . . . . . . . . . . . . . B-22
Appendix A. . . . . . . . . . . . . . . . . . . . . . B-23
Appendix B. . . . . . . . . . . . . . . . . . . . . . B-26
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
Part A contains additional information about the investment objective
and policies of Equity 500 Index Portfolio (the "Portfolio"). This Part B should
only be read in conjunction with Part 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 acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
<PAGE>
B-2
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 the Appendix.
ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a remaining maturity of longer than seven calendar days.
Securities which have not been registered under the 1933 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 1933 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 of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to
lend portfolio securities to brokers, dealers and other financial organizations.
The Portfolio will not lend securities to Bankers Trust Company ("Bankers
Trust"), as the Portfolio's investment adviser (the "Adviser"), Signature
Broker-Dealer Services, Inc. ("Signature") or their affiliates. By lending its
securities, the Portfolio can increase its income by continuing to receive
interest on the loaned securities as well as by either investing the cash
collateral in short-term securities or obtaining yield in the form of interest
paid by the borrower when U.S. Government obligations are used as collateral.
There may be risks of delay in receiving additional collateral or risks of delay
in recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. The Portfolio will adhere to
the following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100% cash collateral or equivalent securities from the
borrower;
<PAGE>
B-3
(ii) the borrower must increase this collateral whenever the market value of the
securities including accrued interest rises above the level of the collateral;
(iii) the Portfolio must be able to terminate the loan at any time; (iv) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon the
Adviser's skill and experience with respect to such instruments and usually
depends on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, the Portfolio may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and thus
will be in a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures contracts or
options on futures contracts and movements in the price of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts for the
purchase or sale for future delivery of 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.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 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 Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's 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
<PAGE>
B-4
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 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 Portfolio will incur brokerage fees when
it purchases or sells futures contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those 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 Adviser
believes that use of such contracts will benefit the Portfolio, if the Adviser's
investment judgment about the general direction of interest rates is incorrect,
the Portfolio's overall performance would be poorer than if it had not entered
into any such contract. For example, if the Portfolio 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 Portfolio 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
Portfolio 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 Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS. The Portfolio 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 Portfolio is not fully invested it
may
<PAGE>
B-5
purchase a call option on a futures 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 Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's 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 Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio 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 Portfolio'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 Portfolio 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 Portfolio 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.
The Board of Trustees has adopted the requirement that futures
contracts and options on futures contracts be used only for cash management
purposes and not for speculation. In addition, the Portfolio will not enter into
any futures contracts or options on futures contracts if immediately thereafter
the amount of margin deposits on all the futures contracts of the Portfolio and
premiums paid on outstanding options on futures contracts owned by the Portfolio
would exceed 5% of the market value of the total assets of the Portfolio.
OPTIONS ON SECURITIES INDEXES. The Portfolio may write (sell) covered
call and put options to a limited extent on the Index ("covered options") in an
attempt to increase income. Such options give the holder the right to receive a
cash settlement during the term of the option based upon the difference between
the exercise price and the value of the index. The Portfolio may forgo the
benefits of appreciation on the Index or may pay more than the market price of
the Index pursuant to call and put options written by the Portfolio.
By writing a covered call option, the Portfolio forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during
<PAGE>
B-6
the option period from an increase in the market value of the Index above the
exercise price. By writing a covered put option, the Portfolio, in exchange for
the net premium received, accepts the risk of a decline in the market value of
the Index below the exercise price.
The Portfolio may terminate its obligation as the writer of a call or
put option by purchasing an option with the same exercise price and expiration
date as the option previously written.
When the Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.
The Portfolio may purchase call and put options on the Index. The
Portfolio would normally purchase a call option in anticipation of an increase
in the market value of the Index. The purchase of a call option would entitle
the Portfolio, in exchange for the premium paid, to purchase the underlying
securities at a specified price during the option period. The Portfolio would
ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of the Index ("protective puts"). The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell the underlying securities at a specified price during the option period.
The purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the Index. The Portfolio would ordinarily
recognize a gain if the value of the Index decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value of the
Index remained at or above the exercise price. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing changes in
the value of the Index.
The Portfolio has adopted certain other nonfundamental policies
concerning index option transactions which are discussed below. The Portfolio's
activities
<PAGE>
B-7
in index options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on the Index may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolio's Trustees.
The absence of a liquid secondary market to close out options positions
on securities indices is more likely to occur, although the Portfolio generally
will only purchase or write such an option if the Adviser believes the option
can be closed out.
Because options on securities indices require settlement in cash, the
Adviser may be forced to liquidate portfolio securities to meet settlement
obligations.
RATING SERVICES
The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, Bankers Trust also makes its own evaluation of these
securities, subject to review by the Board of Trustees. After purchase by the
Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require the Portfolio to eliminate the obligation from its portfolio, but
Bankers Trust will consider such an event in its determination of whether the
Portfolio should
<PAGE>
B-8
continue to hold the obligation. A description of the ratings used herein and
in Part A is set forth in the Appendix.
INVESTMENT RESTRICTIONS
The Portfolio has adopted its investment objective and the following
investment restrictions as "fundamental policies," which may not be changed
without approval by holders of a "majority of the outstanding shares" of the
Portfolio, which as used in this Registration Statement means the vote of the
lesser of (i) 67% or more of the outstanding "voting securities" of the
Portfolio present at a meeting, if the holders of more than 50% of the
outstanding "voting securities" of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding "voting securities" of the
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the Investment Company Act of 1940, as amended (the "1940 Act").
As a matter of fundamental policy, the Portfolio may not:
(1) borrow money or mortgage or hypothecate assets of the Portfolio,
except that in an amount not to exceed 1/3 of the current value of the
Portfolio's assets, it may borrow money as a temporary measure for extraordinary
or emergency purposes and enter into reverse repurchase agreements or dollar
roll transactions, and except that it may pledge, mortgage or hypothecate not
more than 1/3 of such assets to secure such borrowings (it is intended that
money would be borrowed only from banks and only either to accommodate requests
for the withdrawal of beneficial interests while effecting an orderly
liquidation of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction or other
similar situations) or reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "State and Federal Restrictions"
below. (As an operating policy, the Portfolio may not engage in dollar roll
transactions);
(2) underwrite securities issued by other persons except insofar as the
Portfolio may technically be deemed an underwriter under the Securities Act of
1933, as amended (the "1933 Act") in selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not exceed 30%
of the Portfolio's total assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types distributed
publicly or privately;
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests
<PAGE>
B-9
in oil, gas or mineral leases, commodities or commodity contracts (except
futures and option contracts) in the ordinary course of business (except that
the Portfolio may hold and sell, for the Portfolio's portfolio, real estate
acquired as a result of the Portfolio's ownership of securities);
(5) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of the Portfolio's investment objective, up to 25% of its total assets may be
invested in any one industry; and
(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and Federal statutes and policies the Portfolio will not as a matter of
operating policy:
(i) borrow money (including through dollar roll transactions) for
any purpose in excess of 10% of the Portfolio's assets (taken
at cost) except that the Portfolio may borrow for temporary or
emergency purposes up to 1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's total assets (taken at market value),
provided that collateral arrangements with respect to options
and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;
(iii) purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
(iv) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale
is made upon the same conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
<PAGE>
B-10
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Portfolio
if such purchase at the time thereof would cause (a) more than
10% of the Portfolio's total assets (taken at the greater of
cost or market value) to be invested in the securities of such
issuers; (b) more than 5% of the Portfolio's total assets
(taken at the greater of cost or market value) to be invested
in any one investment company; or (c) more than 3% of the
outstanding voting securities of any such issuer to be held
for the Portfolio; and provided further that, except in the
case of merger or consolidation, the Portfolio shall not
invest in any other open-end investment company unless the
Portfolio (1) waives the investment advisory fee with respect
to assets invested in other open-end investment companies and
(2) incurs no sales charge in connection with the investment
(as an operating policy the Portfolio will not invest in
another open-end registered investment company);
(vii) invest more than 15% of the Portfolio's net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable not including (a) Rule 144A
securities that have been determined to be liquid by the Board
of Trustees; and (b) commercial paper that is sold under
section 4(2) of the 1933 Act which: (i) is not traded flat or
in default as to interest or principal; and (ii) is rated in
one of the two highest categories by at least two nationally
recognized statistical rating organizations and the
Portfolio's (Fund's) Board of Trustees have determined the
commercial paper to be liquid; or (iii) is rated in one of the
two highest categories by one nationally recognized
statistical rating agency and the Portfolio's (Fund's) Board
of Trustees have determined that the commercial paper is
equivalent quality and is liquid;
(viii) invest more than 10% of the Portfolio's total assets (taken at
the greater of cost or market value) in securities that are
restricted as to resale under the 1933 Act (other than Rule
144A securiteis deemed liquid by the Portfoli's Board of
Trustees);
(ix) no more than 5% of the Portfolio's total assets are invested
in securities issued by issuers which (including predecessors)
have been in operation less than three years;
(x) with respect to 75% of the Portfolio's total assets, purchase
securities of any issuer if such purchase at the time thereof
would cause the Portfolio to hold more than 10% of any class
of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;
<PAGE>
B-11
(xi) if the Portfolio is a "diversified" fund with respect to 75%
of its assets, invest more than 5% of its total assets in the
securities of any one issuer;
(xii) purchase or retain in the Portfolio's portfolio securities any
securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or
Trustee of the Portfolio, or is an officer or partner of the
Adviser, if after the purchase of the securities of such
issuer for the Portfolio one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such
shares or securities, or both, all taken at market value;
(xiii) invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market) (other than warrants
acquired by the Portfolio as part of a unit or attached to
securities at the time of purchase), but not more than 2% of
the Portfolio's net assets may be invested in warrants not
listed on the NYSE or the American Stock Exchange;
(xiv) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration,
for securities of the same issue and equal in amount to, the
securities sold short, and unless not more than 10% of the
Portfolio's net assets (taken at market value) is represented
by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the
Portfolio has no current intention to engage in short
selling);
(xv) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment policies of the Portfolio
and the option is issued by the Options Clearing Corporation,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not
exceed 50% of the Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio
must be owned by the Portfolio at the time the call is sold
and must continue to be owned by the Portfolio until the call
has been exercised, has lapsed, or the Portfolio has purchased
a closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is
written, the Portfolio establishes a segregated account with
its custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Portfolio will be
<PAGE>
B-12
obligated to pay upon exercise of the put (this account must
be maintained until the put is exercised, has expired, or the
Portfolio has purchased a closing put, which is a put of the
same series as the one previously written); and
(xvi) buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national securities or commodities exchange,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate premiums paid on all such options which are held
at any time do not exceed 20% of the Portfolio's total net
assets; and (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed
5% of the Portfolio's total assets.
The Portfolio will comply with the securities laws and regulations of
all states in which any investor in the Portfolio is registered. The Portfolio
will comply with the permitted investments and investment limitations in the
securities laws and regulations of all states in which any registered investment
company investing in the Portfolio is registered.
ITEM 14. MANAGEMENT OF THE FUND.
The Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Portfolio.
In addition, the Trustees review contractual arrangements with companies that
provide services to the Portfolio.
The Trustees and officers of the Portfolio and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. An asterisk indicates that a Trustee is an
"interested person" (as defined in the 1940 Act) of the Portfolio. Unless
otherwise indicated below, the address of each Trustee and officer is 6 St.
James Avenue, Boston, Massachusetts 02116.
TRUSTEES
PHILIP W. COOLIDGE* (age 44) -- President of the Portfolio; Chairman,
Chief Executive Officer and President, Signature Financial Group, Inc. ("SFG")
(since December, 1988) and Signature (since April, 1989).
CHARLES P. BIGGAR (age 65) -- Retired; Director of Chase/NBW Bank
Advisory Board; Director Batemen, Eichler, Hill Richards Inc.; Formerly Vice
President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post Lane, Chappaqua, New York 10514.
<PAGE>
B-13
S. LELAND DILL (age 65) -- Retired; Director, Coutts & Company Group
and Coutts & Co. (U.S.A.) International; Director, Zweig Series Trust; formerly
Partner of KPMG Peat Marwick; Director, Vinters International Company Inc.;
General Partner of Pemco (an investment company registered under the 1940 Act).
His address is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP SAUNDERS, JR. (age 60) -- Trustee; Principal, Philip Saunders
Associates (Consulting); former Director of Financial Industry Consulting, Wolf
& Company; President, John Hancock Home Mortgage Corporation; and Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.
OFFICERS
JOHN R. ELDER (age 47) -- Treasurer; Vice President, SFG (since April
1995); Treasurer, Phoenix Family of Mutual Funds (prior to April 1995).
DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).
BARBARA M. O'DETTE (age 36) -- Assistant Treasurer; Assistant
Treasurer, SFG (since December, 1988); Assistant Treasurer, Signature (since
April, 1989).
DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993).
LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice President, Global
Product Management and Assistant Secretary, SFG (since May, 1992); Assistant
Secretary, Signature (since October, 1992); student, Boston University School of
Law (September, 1989 to May, 1992).
THOMAS M. LENZ (age 37) -- Assistant Secretary; Senior Vice President
and Associate General Counsel, SFG (since November, 1989); Assistant Secretary,
Signature (since February, 1991); Attorney, Ropes & Gray (prior to November,
1989).
MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature
(since April, 1989).
ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Assistant Secretary, Signature (since September, 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992).
Messrs. Coolidge, Elder, Danielson, Lenz, Saldana and Shea and Mss.
Gibson, Mugler and O'Dette also hold similar positions for other investment
companies for which Signature or an affiliate serves as the principal
underwriter.
<PAGE>
B-14
No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Portfolio. No director, officer or employee of Signature or
any of its affiliates will receive any compensation from the Trust or any
Portfolio for serving as an officer or Trustee of the Portfolio. The Portfolio
and Cash Management, Treasury Money, Tax Free Money, NY Tax Free Money,
International Equity, Utility, Short/Intermediate U.S. Government Securities,
Intermediate Tax Free, Capital Appreciation, Asset Management and BT Investment
Portfolios (the "Fund Complex") collectively pay each Trustee who is not a
director, officer or employee of the Adviser, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses.
For the year ended December 31, 1995, the Portfolio accrued Trustees
fees of $1,868. Bankers Trust reimbursed the Fund and Portfolio for a portion of
their Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.
The Trustees of the Portfolio received the following remuneration from
the Portfolios for the year ended December 31, 1995:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
NAME OF PERSON, AGGREGATE COMPENSATION FROM FUND COMPLEX
POSITION FROM PORTFOLIO PAID TO TRUSTEES
<S> <C> <C>
Charles P. Biggar, $705.88 $12,500
Trustee of Portfolio
S. Leland Dill, $705.88 $12,500
Trustee of Portfolio
Philip Saunders, Jr. none none
Trustee of Portfolio
</TABLE>
The Portfolio's Declaration of Trust provides that it will indemnify
its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio, unless, as to liability to the Portfolio or its
investors, it is finally adjudicated that they engaged in wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
their offices, or unless with respect to any other matter it is finally
adjudicated that they did not act in good faith in the reasonable belief that
their actions were in the best interests of the Portfolio. In the case of
settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
<PAGE>
B-15
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of April [ ], 1996, Equity 500 Index Fund and BT Investment Equity
500 Index Fund (each a "Fund") (series of shares of BT Institutional Funds and
BT Pyramid Mutual Funds, respectively) owned 34% and 66%, respectively, of the
value of the outstanding interests in the Portfolio. Because Equity 500 Index
Fund controls the Portfolio, it may take actions without the approval of any
other investor in the Portfolio.[BT TO UPDATE]
Each Fund has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the fundamental policies of the Portfolio, the
Fund will hold a meeting of shareholders and will cast its votes as instructed
by the Fund's shareholders. It is anticipated that other registered investment
companies investing in the Portfolio will follow the same or a similar practice.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
Bankers Trust manages the assets of the Portfolio pursuant to an
investment advisory agreement (the "Advisory Agreement"). Subject to such
policies as the Board of Trustees may determine, the Adviser makes investment
decisions for the Portfolio. Bankers Trust will: (i) act in strict conformity
with the Portfolio's Declaration of Trust, the 1940 Act and the Investment
Advisors Act of 1940, as the same may from time to time be amended; (ii) manage
the Portfolio in accordance with the Portfolio's investment objectives,
restrictions and policies as stated herein; (iii) make investment decisions for
the Portfolio; and (iv) place purchase and sale orders for securities and other
financial instruments on behalf of the Portfolio.
The Adviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio. The Advisory Agreement will
continue in effect if such continuance is specifically approved at least
annually by the Board of Trustees or by a majority vote of the investors in the
Portfolio (with the vote of each being in proportion to the amount of its
investment) and, in either case, by a majority of the Portfolio's Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Advisory Agreement.
The Advisory Agreement is terminable without penalty on 60 days'
written notice by the Portfolio when authorized either by majority vote of the
investors in the Portfolio (with the vote of each being in proportion to the
amount of its investment) or by a vote of a majority of its Board of Trustees,
or by the Adviser, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that neither the Adviser nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in the execution
of security transactions for the Portfolio, except for wilful misfeasance, bad
faith or gross negligence or of reckless disregard of its or their obligations
and duties under the Advisory Agreement.
<PAGE>
B-16
For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $770,530, $428,346 and $74,893, respectively, in compensation for
investment advisory services provided to the Portfolio. During the same period,
Bankers Trust reimbursed $418,814, $249,230 and $72,112, respectively, to the
Portfolio to cover expenses.
Pursuant to an administration and services agreement (the
"Administration Agreement"), Bankers Trust provides administration services to
the Portfolio. Under the Administration Agreement, Bankers Trust is obligated on
a continuous basis to provide such administrative services as the Board of
Trustees reasonably deems necessary for the proper administration of the
Portfolio. Bankers Trust will generally assist in all aspects of the Portfolio's
operations; supply and maintain the Portfolio with office facilities,
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents of the Portfolio),
internal auditing, executive and administrative services, and stationery and
office supplies; prepare reports to investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the Securities and Exchange Commission (the "SEC"); supply supporting
documentation for meetings of the Board of Trustees; provide monitoring reports
and assistance regarding compliance with the Portfolio's Declaration of Trust,
By-Laws, investment objective and policies and with Federal and state securities
laws; arrange for appropriate insurance coverage; calculate the net asset value,
net income and realized capital gains or losses of the Portfolio; and negotiate
arrangements with, and supervise and coordinate the activities of, agents and
others retained by the Portfolio to supply services to the Portfolio and/or its
investors.
Pursuant to a sub-administration agreement (the "Sub-Administration
Agreement"), Signature performs such sub-administration duties for the Portfolio
as from time to time may be agreed upon by Bankers Trust and Signature. The Sub-
Administration Agreement provides that Signature will receive such compensation
as from time to time may be agreed upon by Signature and Bankers Trust. All such
compensation will be paid by Bankers Trust.
Bankers Trust also provides fund accounting, transfer agency and
custodian services to the Portfolio pursuant to the Administration Agreement.
For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $385,265, $214,173 and $37,446, respectively, in compensation for
administrative and other services provided to the Portfolio. Bankers Trust
reimbursed the Portfolio for a portion of its administrative and services fees
for the period above. See "Investment Advisory and Other Services" above.
Coopers & Lybrand L.L.P. are the Independent Accountants for the
Portfolio, providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC. The
principal business address of Coopers & Lybrand L.L.P. is 1100 Main Street,
Suite 900, Kansas City, Missouri 64105.
<PAGE>
B-17
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for the Portfolio,
the selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any. Broker-
dealers may receive brokerage commissions on portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon the exercise of options. Orders may be directed to
any broker-dealer or futures commission merchant, including to the extent and in
the manner permitted by applicable law, Bankers Trust or its subsidiaries or
affiliates. Purchases and sales of certain portfolio securities on behalf of the
Portfolio are frequently placed by the Adviser with the issuer or a primary or
secondary market-maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Transaction costs may also include
fees paid to third parties for information as to potential purchasers or sellers
of securities. Purchases of underwritten issues may be made which will include
an underwriting fee paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for the Portfolio taking into account such
factors as price, commission (negotiable in the case of national securities
exchange transactions), if any, size of order, difficulty of execution and skill
required of the executing broker-dealer through familiarity with commissions
charged on comparable transactions, as well as by comparing commissions paid by
the Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for the Portfolio with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.
Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other policies as
the Portfolio's Trustees may determine, the Adviser may consider sales of
securities of shares of the Portfolio's investors as a factor in the selection
of broker-dealers to execute portfolio transactions. Bankers Trust will make
such allocations if commissions are comparable to those charged by
nonaffiliated, qualified broker-dealers for similar services.
<PAGE>
B-18
Higher commissions may be paid to firms that provide research services
to the extent permitted by law. Bankers Trust may use this research information
in managing the Portfolio's assets, as well as the assets of other clients.
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Portfolio and to the Adviser, it is the
opinion of the management of the Portfolio that such information is only
supplementary to the Adviser's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than the
Portfolio, and not all such information is used by the Adviser in connection
with the Portfolio. Conversely, such information provided to the Adviser by
brokers and dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to the
Portfolio.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as the Portfolio in concerned. However, it is believed that
the ability of the Portfolio to participate in volume transactions will produce
better executions for the Portfolio.
For the years ended December 31, 1995, 1994 and 1993, the Portfolio
incurred brokerage commissions in the amount of $172,924, $97,069 and $63,408,
respectively.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
<PAGE>
B-19
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees if they choose to do so
and in such event the other investors in the Portfolio would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual meetings of investors but the Portfolio will hold special meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
its investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to its percentage of the
beneficial interests in the Portfolio), except that if the Trustees recommend
such sale of assets, the approval by vote of a majority of the investors (with
the vote of each being in proportion to its percentage of the beneficial
interests of the Portfolio) will be sufficient. The Portfolio may also be
terminated (i) upon liquidation and distribution of its assets if approved by
the vote of two thirds of its investors (with the vote of each being in
proportion to the amount of its investment) or (ii) by the Trustees by written
notice to its investors.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
The Declaration of Portfolio further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of wilful
<PAGE>
B-20
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "Purchase of Securities Being
Offered" and "Redemption or Repurchase" in Part A.
The Portfolio determines its net asset value on each day on which the
NYSE is open ("Portfolio Business Day"). This determination is made each
Portfolio Business Day as of the close of regular trading on the NYSE (currently
4:00 p.m., New York time) (the "Valuation Time") by dividing the value of the
Portfolio's net assets (I.E., the value of its securities and other assets less
its liabilities, including expenses payable or accrued) by the value of the
investment of the investors in the Portfolio at the time the determination is
made. (As of the date of this Registration Statement, the NYSE and New York
chartered banks are both open for trading every weekday except for: (a) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas; and (b) the
preceding Friday of the subsequent Monday when one of the calendar-determined
holidays falls on a Saturday or Sunday, respectively. Purchases and withdrawals
will be effected at the time of determination of net asset value next following
the receipt of any purchase or withdrawal order.
Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Board of Trustees.
ITEM 20. TAX STATUS.
The Portfolio is organized as a trust under New York law. Under the
anticipated method of operation of the Portfolio, the Portfolio will not be
subject to any income tax. However each investor in the Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Portfolio) of the Portfolio's ordinary income and capital gain in
determining its income tax liability. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
The Portfolio's taxable year-end is December 31. Although, as described
above, the Portfolio will not be subject to Federal income tax, it will file
appropriate income tax returns.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
<PAGE>
B-21
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to the Portfolio. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such investors
are advised to consult their own tax advisors as to the tax consequences of an
investment in the Portfolio.
FOREIGN SECURITIES. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Portfolio's
assets to be invested in various countries will vary.
If the Portfolio is liable for foreign taxes, and if more than 50% of
the value of the Portfolio's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, it may make an
election pursuant to which certain foreign taxes paid by it would be treated as
having been paid directly by its investors. Pursuant to such election, the
amount of foreign taxes paid will be included in the income of the Portfolio's
investors, and such investors (except tax-exempt investors) may, subject to
certain limitations, claim either a credit or deduction for the taxes. Each such
investor will be notified after the close of the Portfolio's taxable year
whether the foreign taxes paid will "pass through" for that year and, if so,
such notification will designate (a) the investor's portion of the foreign taxes
paid to each such country and (b) the portion which represents income derived
from sources within each such country.
The amount of foreign taxes for which an investor may claim a credit in
any year will generally be subject to a separate limitation for "passive
income," which includes, among other items of income, dividends, interest and
certain foreign currency gains. Because capital gains realized by the Portfolio
on the sale of foreign securities will be treated as U.S.-source income, the
available credit of foreign taxes paid with respect to such gains may be
restricted by this limitation.
ITEM 21. UNDERWRITERS.
The placement agent for the Portfolio is Signature, which receives no
additional compensation for serving in this capacity. Investment companies,
insurance company separate accounts, common and commingled trust funds and
similar organizations and entities may continuously invest in the Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
<PAGE>
B-22
ITEM 23. FINANCIAL STATEMENTS.
The following financial statements of the Portfolio dated December 31,
1995 have been filed with the SEC pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder and are hereby incorporated herein by reference.
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994 Financial Highlights: Selected
ratios and supplemental data for each of the periods presented
Schedule of Portfolio Investments, December 31, 1995 Notes to
Financial Statements Report of Independent Accountants
<PAGE>
B-23
APPENDIX A
Set forth below are descriptions of the ratings of Moody's and S&P,
which represent their opinions as to the quality of the securities which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and are not absolute standards of quality.
S&P'S BOND RATINGS
An S&P 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 S&P. 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.
The rating "AA" may be modified by the addition of a plus or minus sign
to show relative standing within such category.
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.
FITCH INVESTORS SERVICE 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, 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
<PAGE>
B-24
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.
S&P'S COMMERCIAL PAPER RATINGS
A is the highest commercial paper rating category utilized by S&P,
which uses the numbers 1+, 1, 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. 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 INVESTORS SERVICE AND DUFF & PHELPS 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
<PAGE>
B-25
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.
<PAGE>
B-26
APPENDIX B
The table on the following page shows the performance of the S&P 500
Composite Stock Price Index for the periods indicated. Stock prices fluctuated
widely during the periods but were higher at the end than at the beginning. The
results shown should not be considered as a representation of the income or
capital gain or loss which may be generated by the Index in the future. Nor
should this be considered as a representation of the past or future performance
of the Fund.
<PAGE>
B-27
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*
<TABLE>
<CAPTION>
Year Total Return Year Total Return
<S> <C> <C> <C>
1995 37.49% 1960 0.47%
1994 1.32% 1959 11.96%
1993 9.99% 1958 43.36%
1992 7.67% 1957 -10.78%
1991 30.55% 1956 6.56%
1990 -3.17% 1955 31.56%
1989 31.49% 1954 52.62%
1988 16.81% 1953 -0.99%
1987 5.23% 1952 18.73%
1986 18.47% 1951 24.02%
1985 32.16% 1950 31.71%
1984 6.27% 1949 18.79%
1983 22.51% 1948 5.50%
1982 21.41% 1947 5.71%
1981 -4.91% 1946 -8.07%
1980 32.42% 1945 36.44%
1979 18.44% 1944 19.75%
1978 6.56% 1943 25.90%
1977 -7.18% 1942 20.34%
1976 23.84% 1941 -11.59%
1975 37.20% 1940 -9.78%
1974 -26.47% 1939 -0.41%
1973 -14.66% 1938 31.12%
1972 18.98% 1937 -35.03%
1971 14.31% 1936 33.92%
1970 4.01% 1935 47.67%
1969 -8.51% 1934 -1.44%
1968 11.06% 1933 53.99%
1967 23.98% 1932 -8.19%
1966 -10.06% 1931 -43.34%
1965 12.45% 1930 -24.90%
1964 16.48% 1929 -8.42%
1963 22.08% 1928 43.61%
1962 -8.73% 1927 37.49%
1961 26.89% 1926 11.62%
</TABLE>
*Source: Ibbotson Associates
<PAGE>
BT0146D
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
The financial statements called for by this Item are
incorporated by reference to Part B and listed in Item 23
hereof.
(B) EXHIBITS
1. Declaration of Trust of the Registrant.2
1(a). Amendment No. 1 to Declaration of Trust.2
2. By-Laws of the Registrant.2
5. Advisory Agreement between the Registrant and Bankers
Trust Company ("Bankers Trust").2
9. Administration and Services Agreement between the
Registrant and Bankers Trust.1
13. Investment representation letters of initial
investors.1
17. Financial Data Schedule.2
1 Previously filed on June 9, 1992.
2 Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
(AS OF APRIL 15, 1996)
Beneficial Interests 3
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Bankers Trust serves as investment adviser to the Portfolio. Bankers
Trust, a New York banking corporation, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of commercial
banking and trust activities and is a major wholesale supplier of financial
services to the international institutional market.
To the knowledge of the Portfolio, none of the directors or officers of
Bankers Trust, except those set forth below, is engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Bankers Trust New York Corporation. Set forth below are the names and
principal businesses of the directors and officers of Bankers Trust who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
NAME AND PRINCIPAL BUSINESS ADDRESS, PRINCIPAL OCCUPATION AND OTHER INFORMATION
George B. Beitzel, International Business Machines Corporation, Old Orchard
Road, Armonk, NY 10504. Retired Senior Vice President and Director, Member of
Advisory Board of International Business Machines Corporation. Director of
Bankers Trust and Bankers Trust New York Corporation. Director of FlightSafety
<PAGE>
C-2
International, Inc. Director of Phillips Petroleum Company. Director of Roadway
Services, Inc. Director of Rohm and Hass Company.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Plano, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. Director of Bankers Trust and Bankers Trust New York Corporation.
Also a Director of Exxon Corporation, Halliburton Company and Warner-Lambert
Corporation.
Jon M. Huntsman, Huntsman Chemical Corporation, 2000 Eagle Gate Tower, Salt Lake
City, UT 84111. Chairman and Chief Executive Officer, Huntsman Chemical
Corporation, Director of Bankers Trust and Bankers Trust New York Corporation.
Chairman of Constar Corporation, Huntsman Corporation, Huntsman Holdings
Corporation and Petrostar Corporation. President of Autostar Corporation,
Huntsman Polypropylene Corporation and Restar Corporation. Director of
Razzleberry Foods Corporation and Thiokol Corporation. General Partner of
Huntsman Group Ltd., McLeod Creek Partnership and Trustar Ltd.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Washington, DC 20036. Partner, Akin, Gump, Strauss, Hauer
& Feld, LLP. Director of Bankers Trust and Bankers Trust New York Corporation.
Also a Director of American Express Company, Corning Incorporated, Dow Jones,
Inc., J.C. Penney Company, Inc., RJR Nabisco Inc., Revlon Group Incorporated,
Ryder System, Inc., Sara Lee Corporation, Union Carbide Corporation and Xerox
Corporation.
Hamish Maxwell, Philip Morris Companies Inc., 120 Park Avenue, New York, NY
10017. Chairman of the Executive Committee, Philip Morris Companies Inc.
Director of Bankers Trust and Bankers Trust New York Corporation. Director of
The News Corporation Limited.
Donald F. McCullough, Collins & Aikman Corporation, 210 Madison Avenue, New
York, NY 10016. Chairman Emeritus, Collins & Aikman Corporation. Director of
Bankers Trust and Bankers Trust New York Corporation. Director of Massachusetts
Mutual Life Insurance Co. and Melville Corporation.
N.J. Nicholas Jr., 745 Fifth Avenue, New York, NY 10020. Former President,
Co-Chief Executive Officer and Director of Time Warner Inc. Director of Bankers
Trust and Bankers Trust New York Corporation. Also a Director of Xerox
Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation. Also
Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home Loan
Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company, Imasco
Limited, May Department Stores Company and Safeguard Scientifics, Inc. Member,
Radnor Venture Partners Advisory Board.
Didier Pineau-Valencienne, Schneider S.A., 4 Rue de Longchamp, 75116 Paris,
France. Chairman and Chief Executive Officer, Schneider S.A. Director and member
of the European Advisory Board of Bankers Trust and Director of Bankers Trust
New York Corporation. Director of AXA (France) and Equitable Life Assurance
Society of America, Arbed (Luxembourg), Banque Paribas (France), Ciments
Francais (France), Cofibel (Belgique), Compagnie Industrielle de Paris (France),
SIAPAP, Schneider USA, Sema Group PLC (Great Britain), Spie-Batignolles,
Tractebel (Belgique) and Whirlpool. Chairman and Chief Executive Officer of
Societe Parisienne d'Entreprises et de Participations.
Charles S. Sanford, Jr., Bankers Trust Company, 280 Park Avenue, New York, NY
10017. Chairman of the Board of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Mobil Corporation and J.C. Penney Company, Inc.
Eugene B. Shanks, Jr., Bankers Trust Company, 280 Park Avenue, New York, NY
10017. President of Bankers Trust and Bankers Trust New York Corporation.
Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue, New York,
NY 10017. Former Vice President, The Edna McConnell Clark Foundation. Director
of Bankers Trust and Bankers Trust New York Corporation. Director, Borden Inc.,
Continental Corp. and Melville Corporation.
George J. Vojta, Bankers Trust Company, 280 Park Avenue, New York, NY 10017.
Vice Chairman of the Board of Bankers Trust and Bankers Trust New York
Corporation. Director of Northwest Airlines and Private Export Funding Corp.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
C-3
<PAGE>
NAME ADDRESS
Signature Broker-Dealer 6 St. James Avenue
Services, Inc. Boston, MA 02116
(placement agent)
Bankers Trust Company 280 Park Avenue
(investment adviser, administrator, New York, NY 10017
custodian, transfer agent)
Investors Fiduciary Trust Company 127 West 10th Street
Kansas City, MO 64105
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Boston and Commonwealth of Massachusetts on the [ ] day of April, 1996.
EQUITY 500 INDEX PORTFOLIO
By /S/ THOMAS M. LENZ
Thomas M. Lenz
Assistant Secretary
<PAGE>
INDEX TO EXHIBITS
1. Declaration of Trust of the Registrant
1(a). Amendment No. 1 to Declaration of Trust
2. By-Laws of the Registrant
5. Investment Advisory Agreement between the Registrant and Bankers Trust
Company
17. Financial Data Schedules
BT0105
LARGE CAPITALIZATION EQUITY INDEX PORTFOLIO
-----------------------------
DECLARATION OF TRUST
Dated as of December 11, 1991
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I--THE TRUST ....................................................... 1
Section 1.1 Name ............................................... 1
Section 1.2 Definitions ........................................ 1
ARTICLE II--TRUSTEES ....................................................... 3
Section 2.1 Number and Qualification ........................... 3
Section 2.2 Term and Election .................................. 3
Section 2.3 Resignation, Removal and Retirement ................ 3
Section 2.4 Vacancies .......................................... 4
Section 2.5 Meetings ........................................... 4
Section 2.6 Officers; Chairman of the Board .................... 5
Section 2.7 By-Laws ............................................ 5
ARTICLE III--POWERS OF TRUSTEES ............................................ 5
Section 3.1 General ............................................ 5
Section 3.2 Investments ........................................ 6
Section 3.3 Legal Title ........................................ 6
Section 3.4 Sale and Increases of Interests .................... 7
Section 3.5 Decreases and Redemptions of Interests ............. 7
Section 3.6 Borrow Money ....................................... 7
Section 3.7 Delegation; Committees ............................. 7
Section 3.8 Collection and Payment ............................. 7
Section 3.9 Expenses ........................................... 7
Section 3.10 Miscellaneous Powers ............................... 7
Section 3.11 Further Powers ..................................... 8
ARTICLE IV--INVESTMENT ADVISORY, ADMINISTRATION AND PLACEMENT
AGENT ARRANGEMENTS ............................................. 8
Section 4.1 Investment Advisory and Other Arrangements ......... 8
Section 4.2 Parties to Contract ................................ 9
ARTICLE V--LIABILITY OF HOLDERS; LIMITATIONS OF LIABILITY OF TRUSTEES,
OFFICERS, ETC ................................................... 9
Section 5.1 Liability of Holders; Indemnification .............. 9
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties ................................... 10
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc ............................. 10
Section 5.4 Mandatory Indemnification .......................... 10
Section 5.5 No Bond Required of Trustees ....................... 11
i
<PAGE>
PAGE
----
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc ................................... 11
Section 5.7 Reliance on Experts, etc ........................... 11
ARTICLE VI--INTERESTS ...................................................... 12
Section 6.1 Interests .......................................... 12
Section 6.2 Non-Transferability ................................ 12
Section 6.3 Register of Interests .............................. 12
ARTICLE VII--INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS ............. 12
ARTICLE VIII--DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
AND DISTRIBUTIONS ............................................ 13
Section 8.1 Book Capital Account Balances ...................... 13
Section 8.2 Allocations and Distributions to Holders ........... 13
Section 8.3 Power to Modify Foregoing Procedures ............... 13
ARTICLE IX--HOLDERS ........................................................ 13
Section 9.1 Rights of Holders .................................. 13
Section 9.2 Meetings of Holders ................................ 13
Section 9.3 Notice of Meetings ................................. 14
Section 9.4 Record Date for Meetings, Distributions, etc ....... 14
Section 9.5 Proxies, etc ....................................... 14
Section 9.6 Reports ............................................ 15
Section 9.7 Inspection of Records .............................. 15
Section 9.8 Holder Action by Written Consent ................... 15
Section 9.9 Notices ............................................ 15
ARTICLE X--DURATION; TERMINATION; AMENDMENT; MERGERS; ETC .................. 15
Section 10.1 Duration ........................................... 15
Section 10.2 Termination ........................................ 16
Section 10.3 Dissolution ........................................ 17
Section 10.4 Amendment Procedure ................................ 17
Section 10.5 Merger, Consolidation and Sale of Assets ........... 18
Section 10.6 Incorporation ...................................... 18
ARTICLE XI--MISCELLANEOUS .................................................. 19
Section 11.1 Certificate of Designation; Agent for
Service of Process ................................. 19
Section 11.2 Governing Law ...................................... 19
Section 11.3 Counterparts ....................................... 19
Section 11.4 Reliance by Third Parties .......................... 19
Section 11.5 Provisions in Conflict With Law or Regulations ..... 19
ii
<PAGE>
BT0105
DECLARATION OF TRUST
OF
LARGE CAPITALIZATION EQUITY INDEX PORTFOLIO
-------------------------------------------
This DECLARATION OF TRUST of the Large Capitalization Equity Index
Portfolio is made as of the 11th day of December, 1991 by the parties signatory
hereto, as trustees (each such individual, so long as such individual shall
continue in office in accordance with the terms of this Declaration of Trust,
and all other individuals who at the time in question have been duly elected or
appointed and have qualified as trustees in accordance with the provisions of
this Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
W I T N E S S E T H:
--------------------
WHEREAS, the Trustees desire to form a trust fund under the law of the
State of New York for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the trust assets be composed of money and
property contributed thereto by the holders of interests in the trust entitled
to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund and will manage and
dispose of the same for the benefit of the holders of interests in the Trust and
subject to the provisions hereof, to wit:
ARTICLE I
The Trust
---------
1.1. NAME. The name of the trust created hereby (the "Trust") shall be
the Large Capitalization Equity Index Portfolio and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not individually,
and shall not refer to the officers, employees, agents or independent
contractors of the Trust or holders of interests in the Trust.
1.2. DEFINITIONS. As used in this Declaration, the following terms
shall have the following meanings:
The term "Interested Person" shall have the meaning given it in the
1940 Act.
"ADMINISTRATOR" shall mean any party furnishing services to the Trust
pursuant to any administrative services contract described in Section 4.1
hereof.
<PAGE>
"BOOK CAPITAL ACCOUNT" shall mean, for any Holder at any time, the Book
Capital Account of the Holder for such day, determined in accordance with
Section 8.1 hereof.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time, as well as any non-superseded provisions of the
Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"DECLARATION" shall mean this Declaration of Trust as amended from time
to time. References in this Declaration to "DECLARATION", "HEREOF", "HEREIN" and
"HEREUNDER" shall be deemed to refer to this Declaration rather than the article
or section in which any such word appears.
"FISCAL YEAR" shall mean an annual period determined by the Trustees
which ends on December 31 of each year or on such other day as is permitted by
the Code.
"HOLDERS" shall mean as of any particular time all holders of record of
Interests in the Trust.
"INSTITUTIONAL INVESTOR(S)" shall mean any regulated investment
company, segregated asset account, foreign investment company, common trust
fund, group trust or other investment arrangement, whether organized within or
without the United States of America, other than an individual, S corporation,
partnership or grantor trust beneficially owned by any individual, S corporation
or partnership.
"INTEREST(S)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined by
calculating, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances. Reference herein to a
specified percentage of, or fraction of, Interests, means Holders whose combined
Book Capital Account balances represent such specified percentage or fraction of
the combined Book Capital Account balances of all, or a specified group of,
Holders.
"INVESTMENT ADVISER" shall mean any party furnishing services to the
Trust pursuant to any investment advisory contract described in Section 4.1
hereof.
"MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting of Holders,
of (A) 67% or more of the Interests present or represented at such meeting, if
Holders of more than 50% of all Interests are present or represented by proxy,
or (B) more than 50% of all Interests, whichever is less.
2
<PAGE>
"PERSON" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"REDEMPTION" shall mean the complete withdrawal of an Interest of a
Holder the result of which is to reduce the Book Capital Account balance of that
Holder to zero.
"TRUSTEES" shall mean each signatory to this Declaration, so long as
such signatory shall continue in office in accordance with the terms hereof, and
all other individuals who at the time in question have been duly elected or
appointed and have qualified as Trustees in accordance with the provisions
hereof and are then in office, and reference in this Declaration to a Trustee or
Trustees shall refer to such individual or individuals in their capacity as
Trustees hereunder.
"TRUST PROPERTY" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees.
The "1940 ACT" shall mean the United States Investment Company Act of
1940, as amended from time to time, and the rules and regulations thereunder.
ARTICLE II
Trustees
--------
2.1. NUMBER AND QUALIFICATION. The number of Trustees shall be fixed
from time to time by action of the Trustees taken as provided in Section 2.5
hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three or more than 15. Any vacancy created by an increase in
the number of Trustees may be filled by the appointment of an individual having
the qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
2.2. TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting of Holders, shall (except in the event of
resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
3
<PAGE>
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. RESIGNATION, REMOVAL AND RETIREMENT. Any Trustee may resign his or
her trust (without need for prior or subsequent accounting) by an instrument in
writing executed by such Trustee and delivered or mailed to the Chairman, if
any, the President or the Secretary of the Trust and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed by the affirmative vote of Holders of
two-thirds of the Interests or (provided the aggregate number of Trustees, after
such removal and after giving effect to any appointment made to fill the vacancy
created by such removal, shall not be less than the number required by Section
2.1 hereof) with cause, by the action of two-thirds of the remaining Trustees.
Removal with cause includes, but is not limited to, the removal of a Trustee due
to physical or mental incapacity or failure to comply with such written policies
as from time to time may be adopted by at least two-thirds of the Trustees with
respect to the conduct of the Trustees and attendance at meetings. Any Trustee
who has attained a mandatory retirement age, if any, established pursuant to any
written policy adopted from time to time by at least two-thirds of the Trustees
shall, automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such policy,
effective as of the date determined in accordance with such policy. Any Trustee
who has become incapacitated by illness or injury as determined by a majority of
the other Trustees, may be retired by written instrument executed by a majority
of the other Trustees, specifying the date of such Trustee's retirement. Upon
the resignation, retirement or removal of a Trustee, or a Trustee otherwise
ceasing to be a Trustee, such resigning, retired, removed or former Trustee
shall execute and deliver such documents as the remaining Trustees shall require
for the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of such resigning, retired, removed or former Trustee.
Upon the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of such
deceased, removed, retired or resigning Trustee shall execute and deliver on
behalf of such deceased, removed, retired or resigning Trustee such documents as
the remaining Trustees shall require for the purpose set forth in the preceding
sentence.
2.4. VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, retirement,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5. MEETINGS. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary, an
Assistant Secretary or any two Trustees. Regular meetings of the Trustees may be
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held without call or notice at a time and place fixed by the By-Laws or by
resolution of the Trustees. Notice of any other meeting shall be mailed or
otherwise given not less than 24 hours before the meeting but may be waived in
writing by any Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
in the situation in which a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. The Trustees may act with or without a meeting.
A quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all individuals participating in the
meeting can hear each other and participation in a meeting by means of such
communications equipment shall constitute presence in person at such meeting.
2.6. OFFICERS; CHAIRMAN OF THE BOARD. The Trustees shall, from time to
time, elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman of the Board who shall preside at all
meetings of the Trustees and carry out such other duties as the Trustees may
designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other officer may, but need not, be a Trustee.
2.7. BY-LAWS. The Trustees may adopt and, from time to time, amend or
repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
------------------
3.1. GENERAL. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and such business in
their own right, but with such powers of delegation as may be permitted by this
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Declaration. The Trustees may perform such acts as in their sole discretion they
deem proper for conducting the business of the Trust. The enumeration of or
failure to mention any specific power herein shall not be construed as limiting
such exclusive and absolute control. The powers of the Trustees may be exercised
without order of or resort to any court.
3.2. INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution, corporation
or other business entity organized under the law of the United States or under
any foreign law; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of any kind and
description, including, without limitation, the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of such rights, powers and privileges in respect of any of such
investments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional instruments in which the Trustees may determine to
invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be vested in
the Trustees as joint tenants except that the Trustees shall have the power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name or nominee
name of any other Person on behalf of the Trust, on such terms as the Trustees
may determine.
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each individual who may hereafter become a Trustee
upon his due election and qualification. Upon the resignation, removal or death
of a Trustee, such resigning, removed or deceased Trustee shall automatically
cease to have any right, title or interest in any Trust Property, and the right,
title and interest of such resigning, removed or deceased Trustee in the Trust
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Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
3.4. SALE AND INCREASES OF INTERESTS. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
Institutional Investor to purchase an Interest, or increase its Interest, for
such type of consideration, including cash or property, at such time or times
(including, without limitation, each business day), and on such terms as the
Trustees may deem best, and may in such manner acquire other assets (including
the acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. Individuals, S corporations, partnerships and
grantor trusts that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. A Holder who has redeemed its Interest
may not be permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 DECREASES AND REDEMPTIONS OF INTERESTS. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit a
Holder to redeem its Interest, or decrease its Interest, for either cash or
property, at such time or times (including, without limitation, each business
day), and on such terms as the Trustees may deem best.
3.6. BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee, or undertake the performance
of any obligation, contract or engagement of any other Person.
3.7. DELEGATION; COMMITTEES. The Trustees shall have power, consistent
with their continuing exclusive and absolute control over the Trust Property and
over the business of the Trust, to delegate from time to time to such of their
number or to officers, employees, agents or independent contractors of the Trust
the doing of such things and the execution of such instruments in either the
name of the Trust or the names of the Trustees or otherwise as the Trustees may
deem expedient.
3.8. COLLECTION AND PAYMENT. The Trustees shall have power to collect
all property due to the Trust; and to pay all claims, including taxes, against
the Trust Property; to prosecute, defend, compromise or abandon any claims
relating to the Trust or the Trust Property; to foreclose any security interest
securing any obligation, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
3.9. EXPENSES. The Trustees shall have power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the Trust Property to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
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brokerage services, as they in good faith may deem reasonable, and reimbursement
for expenses reasonably incurred by themselves on behalf of the Trust.
3.10. MISCELLANEOUS POWERS. The Trustees shall have power to: (a)
employ or contract with such Persons as the Trustees may deem appropriate for
the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Investment
Adviser, Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not the Trust would have the
power to indemnify such Person against such liability; (d) establish pension,
profit-sharing and other retirement, incentive and benefit plans for the
Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Adviser, Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust, to such extent as the Trustees
shall determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the Fiscal Year of the Trust and the method by
which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of New York, in any
and all states of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper, appropriate or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust which
is made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a grant of
power to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements
--------------------------------
4.1. INVESTMENT ADVISORY AND OTHER ARRANGEMENTS. The Trustees may in
their discretion, from time to time, enter into investment advisory and
administration contracts or placement agent agreements whereby the other party
to such contract or agreement shall undertake to furnish the Trustees such
investment advisory, administration, placement agent and/or other services as
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the Trustees shall, from time to time, consider appropriate or desirable and all
upon such terms and conditions as the Trustees may in their sole discretion
determine. Notwithstanding any provision of this Declaration, the Trustees may
authorize any Investment Adviser (subject to such general or specific
instructions as the Trustees may, from time to time, adopt) to effect purchases,
sales, loans or exchanges of Trust Property on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of any such Investment Adviser
(all without any further action by the Trustees). Any such purchase, sale, loan
or exchange shall be deemed to have been authorized by the Trustees.
4.2. PARTIES TO CONTRACT. Any contract of the character described in
Section 4.1 hereof or in the By-Laws of the Trust may be entered into with any
corporation, firm, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, Trustee, shareholder or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any individual holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was reasonable and fair and not inconsistent with the provisions of this Article
IV or the By-Laws of the Trust. The same Person may be the other party to one or
more contracts entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any individual may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts mentioned in this
Section 4.2 or in the By-Laws of the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
-------------------------------------
5.1. LIABILITY OF HOLDERS; INDEMNIFICATION. Each Holder shall be
jointly and severally liable (with rights of contribution INTER SE in proportion
to their respective Interests in the Trust) for the liabilities and obligations
of the Trust in the event that the Trust fails to satisfy such liabilities and
obligations; provided, however, that, to the extent assets are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and against
any claim or liability to which such Holder may become subject by reason of
being or having been a Holder to the extent that such claim or liability imposes
on the Holder an obligation or liability which, when compared to the obligations
and liabilities imposed on other Holders, is greater than such Holder's Interest
(proportionate share), and shall reimburse such Holder for all legal and other
expenses reasonably incurred by such Holder in connection with any such claim or
liability. The rights accruing to a Holder under this Section 5.1 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described above,
it is intended that each Holder shall remain jointly and severally liable to the
Trust's creditors as a legal matter.
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5.2. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS,
INDEPENDENT CONTRACTORS TO THIRD PARTIES. No Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
shall be subject to any personal liability whatsoever to any Person, other than
the Trust or the Holders, in connection with Trust Property or the affairs of
the Trust; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
arising in connection with the affairs of the Trust.
5.3. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS,
INDEPENDENT CONTRACTORS TO TRUST, HOLDERS, ETC. No Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
shall be liable to the Trust or the Holders for any action or failure to act
(including, without limitation, the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for such Person's own bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. MANDATORY INDEMNIFICATION. The Trust shall indemnify, to the
fullest extent permitted by law (including the 1940 Act), each Trustee, officer,
employee, agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written contract) of
the Trust (including any Person who serves at the Trust's request as a director,
officer or trustee of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be involved or
with which such Person may be threatened, while in office or thereafter, by
reason of such Person being or having been such a Trustee, officer, employee,
agent or independent contractor, except with respect to any matter as to which
such Person shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of such Person's duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for such payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Person's office by the court or other body approving the
settlement or other disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that such Person did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any right
of indemnity or reimbursement granted in this Section 5.4 or in Section 5.2
hereof or to which such Person may be otherwise entitled except out of the Trust
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Property. The Trustees may make advance payments in connection with
indemnification under this Section 5.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification.
5.5. NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance of
any of such Trustee's duties hereunder.
5.6. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender or other Person dealing with any Trustee, officer, employee,
agent or independent contractor of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by such
Trustee, officer, employee, agent or independent contractor or be liable for the
application of money or property paid, loaned or delivered to or on the order of
such Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust, and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by any Trustee, officer, employee, agent or independent contractor
of the Trust, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent contractor of
the Trust shall not personally be bound by or liable thereunder, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any Trustee, officer, employee, agent or independent
contractor of the Trust. Subject to the provisions of the 1940 Act, the Trust
may maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors of the
Trust in such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
5.7. RELIANCE ON EXPERTS, ETC. Each Trustee, officer, employee, agent
or independent contractor of the Trust shall, in the performance of such
Person's duties, be fully and completely justified and protected with regard to
any act or any failure to act resulting from reliance in good faith upon the
books of account or other records of the Trust (whether or not the Trust would
have the power to indemnify such Persons against such liability), upon an
opinion of counsel, or upon reports made to the Trust by any of its officers or
employees or by any Investment Adviser or Administrator, accountant, appraiser
or other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.
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ARTICLE VI
Interests
---------
6.1. INTERESTS. The beneficial interest in the Trust Property shall
consist of non-transferable Interests. The Interests shall be personal property
giving only the rights in this Declaration specifically set forth. The value of
an Interest shall be equal to the Book Capital Account balance of the Holder of
the Interest.
6.2. NON-TRANSFERABILITY. A Holder may not transfer, sell or exchange
its Interest.
6.3. REGISTER OF INTERESTS. A register shall be kept at the Trust under
the direction of the Trustees which shall contain the name, address and Book
Capital Account balance of each Holder. Such register shall be conclusive as to
the identity of the Holders. No Holder shall be entitled to receive payment of
any distribution, nor to have notice given to it as herein provided, until it
has given its address to such officer or agent of the Trust as is keeping such
register for entry thereon.
ARTICLE VII
Increases, Decreases and Redemptions of Interests
-------------------------------------------------
Subject to applicable law and to such restrictions as may from time to
time be adopted by the Trustees, each Holder shall have the right to vary its
investment in the Trust at any time without limitation by increasing (through a
capital contribution) or decreasing (through a capital withdrawal) or by a
Redemption of its Interest. An increase in the investment of a Holder in the
Trust shall be reflected as an increase in the Book Capital Account balance of
that Holder and a decrease in the investment of a Holder in the Trust or the
Redemption of the Interest of a Holder shall be reflected as a decrease in the
Book Capital Account balance of that Holder. The Trust shall, upon appropriate
and adequate notice from any Holder increase, decrease or redeem such Holder's
Interest for an amount determined by the application of a formula adopted for
such purpose by resolution of the Trustees; provided that (a) the amount
received by the Holder upon any such decrease or Redemption shall not exceed the
decrease in the Holder's Book Capital Account balance effected by such decrease
or Redemption of its Interest, and (b) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting any such
decrease or Redemption, at such rates as the Trustees may establish, and may, at
any time and from time to time, suspend such right of decrease or Redemption.
The procedures for effecting decreases or Redemptions shall be as determined by
the Trustees from time to time.
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ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
--------------------------
8.1. BOOK CAPITAL ACCOUNT BALANCES. The Book Capital Account balance of
each Holder shall be determined on such days and at such time or times as the
Trustees may determine. The Trustees shall adopt resolutions setting forth the
method of determining the Book Capital Account balance of each Holder. The power
and duty to make calculations pursuant to such resolutions may be delegated by
the Trustees to the Investment Adviser or Administrator, custodian, or such
other Person as the Trustees may determine. Upon the Redemption of an Interest,
the Holder of that Interest shall be entitled to receive the balance of its Book
Capital Account. A Holder may not transfer, sell or exchange its Book Capital
Account balance.
8.2. ALLOCATIONS AND DISTRIBUTIONS TO HOLDERS. The Trustees shall, in
compliance with the Code, the 1940 Act and generally accepted accounting
principles, establish the procedures by which the Trust shall make (i) the
allocation of unrealized gains and losses, taxable income and tax loss, and
profit and loss to each Holder, (ii) the payment of distributions, if any, to
Holders, and (iii) upon liquidation, the final distribution of items of taxable
income and expense. Such procedures shall be set forth in writing and be
furnished to the Trust's accountants. The Trustees may amend the procedures
adopted pursuant to this Section 8.2 from time to time. The Trustees may retain
from the net profits such amount as they may deem necessary to pay the
liabilities and expenses of the Trust, to meet obligations of the Trust, and as
they may deem desirable to use in the conduct of the affairs of the Trust or to
retain for future requirements or extensions of the business.
8.3. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of the
foregoing provisions of this Article VIII, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the net income
of the Trust, the allocation of income of the Trust, the Book Capital Account
balance of each Holder, or the payment of distributions to the Holders as they
may deem necessary or desirable to enable the Trust to comply with any provision
of the 1940 Act or any order of exemption issued by the Commission.
ARTICLE IX
Holders
-------
9.1. RIGHTS OF HOLDERS. The ownership of the Trust Property and the
right to conduct any business described herein are vested exclusively in the
Trustees, and the Holders shall have no right or title therein other than the
beneficial interest conferred by their Interests and they shall have no power or
right to call for any partition or division of any Trust Property.
9.2. MEETINGS OF HOLDERS. Meetings of Holders may be called at any time
by a majority of the Trustees and shall be called by any Trustee upon written
request of Holders holding, in the aggregate, not less than 10% of the
Interests, such request specifying the purpose or purposes for which such
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meeting is to be called. Any such meeting shall be held within or without the
State of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of one-third of the
Interests, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, this Declaration or the By-Laws of the Trust.
All or any one of more Holders may participate in a meeting of Holders by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting.
9.3. NOTICE OF MEETINGS. Notice of each meeting of Holders, stating the
time, place and purposes of the meeting, shall be given by the Trustees by mail
to each Holder, at its registered address, mailed at least 10 days and not more
than 60 days before the meeting. Notice of any meeting may be waived in writing
by any Holder either before or after such meeting. The attendance of a Holder at
a meeting shall constitute a waiver of notice of such meeting except in the
situation in which a Holder attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. At any meeting, any business properly before
the meeting may be considered whether or not stated in the notice of the
meeting. Any adjourned meeting may be held as adjourned without further notice.
9.4. RECORD DATE FOR MEETINGS, DISTRIBUTIONS, ETC. For the purpose of
determining the Holders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time fix a date, not more than 90 days
prior to the date of any meeting of Holders or the payment of any distribution
or the taking of any other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders for such purpose.
9.5. PROXIES, ETC. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the Secretary, or with
such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote is to be taken. A proxy may be
revoked by a Holder at any time before it has been exercised by placing on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, a later dated proxy or written revocation. Pursuant to a
resolution of a majority of the Trustees, proxies may be solicited in the name
of the Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such Holder
shall be entitled to a vote proportionate to its Interest. When an Interest is
held jointly by several Persons, any one of them may vote at any meeting in
person or by proxy in respect of such Interest, but if more than one of them is
present at such meeting in person or by proxy, and such joint owners or their
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proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Interest. A proxy purporting to be executed by or on
behalf of a Holder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
9.6. REPORTS. The Trustees shall cause to be prepared and furnished to
each Holder, at least annually as of the end of each Fiscal Year, a report of
operations containing a balance sheet and a statement of income of the Trust
prepared in conformity with generally accepted accounting principles and an
opinion of an independent public accountant on such financial statements. The
Trustees shall, in addition, furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income for the period from the
beginning of the then-current Fiscal Year to the end of such period.
9.7. INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours for any purpose not harmful
to the Trust.
9.8. HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by
Holders may be taken without a meeting if Holders holding more than 50% of all
Interests entitled to vote (or such larger proportion thereof as shall be
required by any express provision of this Declaration) consent to the action in
writing and the written consents are filed with the records of the meetings of
Holders. Such consents shall be treated for all purposes as a vote taken at a
meeting of Holders. Each such written consent shall be executed by or on behalf
of the Holder delivering such consent and shall bear the date of such execution.
No such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written consents
executed by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
9.9. NOTICES. Any and all communications, including any and all notices
to which any Holder may be entitled, shall be deemed duly served or given if
mailed, postage prepaid, addressed to a Holder at its last known address as
recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
------------------------
10.1. DURATION. Subject to possible termination or dissolution in
accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
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Date of
Name Address Birth
---- ------- -----
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Merrick, NY 11566
Amanda Jehan Sher Coolidge 400 South Pointe Drive, #803 08/16/89
Miami Beach, FL 33139
David Cornelius Johnson 752 West End Avenue, Apt. 10J 05/02/89
New York, NY 10025
Conner Leahy McCabe 100 Parkway Road, Apt. 3C 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 5H 12/22/88
New York, NY 10028
Emilie Blair Ruble 65 Duck Pond Road 02/24/89
Glen Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
10.2. TERMINATION.
(a) The Trust may be terminated (i) by the affirmative vote of
Holders of not less than two-thirds of all Interests at any meeting of Holders
or by an instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by Holders of not less than two-thirds of all
Interests, or (ii) by the Trustees by written notice to the Holders. Upon any
such termination,
(i) the Trust shall carry on no business except for the purpose of
winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect the assets of the Trust, sell, convey, assign, exchange or
otherwise dispose of all or any part of the Trust Property to one or
more Persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property of
any kind, discharge or pay the liabilities of the Trust, and do all
16
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other acts appropriate to liquidate the business of the Trust; provided
that any sale, conveyance, assignment, exchange or other disposition of
all or substantially all the Trust Property shall require approval of
the principal terms of the transaction and the nature and amount of the
consideration by the vote of Holders holding more than 50% of all
Interests; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees shall distribute the remaining Trust Property, in cash or in
kind or partly each, among the Holders according to their respective
rights.
(b) Upon termination of the Trust and distribution to the Holders
as herein provided, a majority of the Trustees shall execute and file with the
records of the Trust an instrument in writing setting forth the fact of such
termination and distribution. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Holders shall thereupon cease.
10.3. DISSOLUTION. Upon the bankruptcy or expulsion of any Holder, the
Trust shall be dissolved effective 120 days after the event. However, the
Holders (other than such bankrupt or expelled Holder) may, by a unanimous
affirmative vote at any meeting of such Holders or by an instrument in writing
without a meeting executed by a majority of the Trustees and consented to by all
such Holders, agree to continue the business of the Trust even if there has been
such a dissolution.
10.4. AMENDMENT PROCEDURE.
(a) This Declaration may be amended by the vote of Holders of more
than 50% of all Interests at any meeting of Holders or by an instrument in
writing without a meeting, executed by a majority of the Trustees and consented
to by the Holders of more than 50% of all Interests. Notwithstanding any other
provision hereof, this Declaration may be amended by an instrument in writing
executed by a majority of the Trustees, and without the vote or consent of
Holders, for any one or more of the following purposes: (i) to change the name
of the Trust, (ii) to supply any omission, or to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations or the
requirements of the applicable provisions of the Code, (iv) to change the state
or other jurisdiction designated herein as the state or other jurisdiction whose
law shall be the governing law hereof, (v) to effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the law of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the Code,
or (C) to permit the transfer of Interests (or to permit the transfer of any
other beneficial interest in or share of the Trust, however denominated), and
(vi) in conjunction with any amendment contemplated by the foregoing clause (iv)
or the foregoing clause (v) to make any and all such further changes or
17
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modifications to this Declaration as the Trustees find to be necessary or
appropriate, any finding of the Trustees referred to in the foregoing clause (v)
or the foregoing clause (vi) to be conclusively evidenced by the execution of
any such amendment by a majority of the Trustees; provided, however, that unless
effected in compliance with the provisions of Section 10.4(b) hereof, no
amendment otherwise authorized by this sentence may be made which would reduce
the amount payable with respect to any Interest upon liquidation of the Trust
and; provided, further, that the Trustees shall not be liable for failing to
make any amendment permitted by this Section 10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof which
would change any rights with respect to any Interest by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of Holders
of two-thirds of all Interests.
(c) A certification in recordable form executed by a majority of
the Trustees setting forth an amendment and reciting that it was duly adopted by
the Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when filed with the records of the
Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including good will, upon such terms and conditions and for such consideration
when and as authorized at any meeting of Holders called for such purpose by the
affirmative vote of Holders of not less than two-thirds of all Interests, or by
an instrument in writing without a meeting, consented to by Holders of not less
than two-thirds of all Interests, and any such merger, consolidation, sale,
lease or exchange shall be deemed for all purposes to have been accomplished
under and pursuant to the statutes of the State of New York.
10.6. INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the law of any jurisdiction or a trust, partnership, association or other
organization to take over the Trust Property or to carry on any business in
which the Trust directly or indirectly has any interest, and to sell, convey and
transfer the Trust Property to any such corporation, trust, partnership,
association or other organization in exchange for the equity interests thereof
or otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contract with any such corporation, trust, partnership,
association or other organization, or any corporation, trust, partnership,
association or other organization in which the Trust holds or is about to
acquire equity interests. The Trustees may also cause a merger or consolidation
between the Trust or any successor thereto and any such corporation, trust,
18
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partnership, association or other organization if and to the extent permitted by
law. Nothing contained herein shall be construed as requiring approval of the
Holders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to one or
more of such organizations or entities.
ARTICLE XI
Miscellaneous
-------------
11.1. CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The
Trust shall file, with the Department of State of the State of New York, a
certificate, in the name of the Trust and executed by an officer of the Trust,
designating the Secretary of State of the State of New York as an agent upon
whom process in any action or proceeding against the Trust may be served.
11.2. GOVERNING LAW. This Declaration is executed by the Trustees and
delivered in the State of New York and with reference to the law thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed in accordance with the law of the State
of New York and reference shall be specifically made to the trust law of the
State of New York as to the construction of matters not specifically covered
herein or as to which an ambiguity exists.
11.3. COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees.
11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, or with other applicable law and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
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(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the day and year first above written.
/s/Philip W. Coolidge
-------------------------------
Philip W. Coolidge
As Trustee and not Individually
/s/Thomas M. Lenz
-------------------------------
Thomas M. Lenz
As Trustee and not Individually
/s/Donald S. Rumery
-------------------------------
Donald S. Rumery
As Trustee and not Individually
BT0105
20
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LARGE CAPITALIZATION EQUITY INDEX PORTFOLIO
AMENDMENT NO. 1 TO DECLARATION OF TRUST DATED AS OF DECEMBER 11, 1991
Dated as of June 23, 1992
The undersigned, being all the Trustees of Large Capitalization Equity
Index Portfolio, a New York trust, (the "Trust") acting pursuant to Article X,
Section 10.4.(a).(i) of the Trust's Declaration of Trust dated as of December
11, 1991 (the "Declaration") do hereby amend the Declaration and thereby change
the name of the Trust as follows:
Article I Section 1.1. of the Declaration is amended to read in its
entirety as follows:
1.1. NAME. The name of the trust created hereby (the "Trust")
shall be the Equity 500 Index Portfolio and so far as may be
practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which
name (and the word "Trust" wherever hereinafter used) shall refer
to the Trustees as Trustees, and not individually, and shall not
refer to the officers, employees, agents or independent
contractors of the Trust or holders of interests in the Trust.
IN WITNESS WHEREOF, the undersigned have signed this Amendment No. 1 to
the Declaration as of June 23, 1992. This instrument may be executed by each of
the undersigned on separate counterparts but shall be effective only when signed
by all of the undersigned.
/s/Charles P. Biggar
-------------------------------
Charles P. Biggar
As Trustee and not Individually
-------------------------------
/s/Philip W. Coolidge
-------------------------------
Philip W. Coolidge
As Trustee and not Individually
/s/S. Leland Dill
-------------------------------
S. Leland Dill
As Trustee and not Individually
BT0105
LARGE CAPITALIZATION EQUITY INDEX PORTFOLIO
-------------------------------------------
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing the Large Capitalization Equity Index
Portfolio (the "Trust"), dated as of December 11, 1991, as from time to time
amended (hereinafter called the "Declaration"). All words and terms capitalized
in these By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Holders Meetings
----------------
Section 1.1. CHAIRMAN. The President shall act as chairman at all
meetings of the Holders, or the Trustee or Trustees present at each meeting may
elect a temporary chairman for the meeting, who may be one of themselves.
Section 1.2. PROXIES; VOTING. Holders may vote either in person or by
duly executed proxy and each Holder shall be entitled to a vote proportionate to
his Interest in the Trust, all as provided in Article IX of the Declaration. No
proxy shall be valid after eleven 11 months from the date of its execution,
unless a longer period is expressly stated in such proxy.
Section 1.3. FIXING RECORD DATES. For the purpose of determining the
Holders who are entitled to notice of or to vote or act at a meeting, including
any adjournment thereof, or who are entitled to participate in any
distributions, or for any other proper purpose, the Trustees may from time to
time fix a record date in the manner provided in Section 9.3 of the Declaration.
If the Trustees do not, prior to any meeting of the Holders, so fix a record
date, then the date of mailing notice of the meeting shall be the record date.
Section 1.4. INSPECTORS OF ELECTION. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed, the
chairman, if any, of any meeting of the Holders may, and on the request of any
Holder or his proxy shall, appoint Inspectors of Election of the meeting. The
number of Inspectors shall be either one or three. If appointed at the meeting
on the request of one or more Holders or proxies, a Majority Interests Vote
shall determine whether one or three Inspectors are to be appointed, but failure
to allow such determination by the Holders shall not affect the validity of the
appointment of Inspectors of Election. In case any person appointed as Inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment made by the Trustees in advance of the convening of the meeting or
at the meeting by the person acting as chairman. The Inspectors of Election
shall determine the Interests owned by Holders, the Interests represented at the
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meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results, and
do such other acts as may be proper to conduct the election or vote with
fairness to all Holders. If there are three or more Inspectors of Election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. On request of the chairman, if any, of the
meeting, or of any Holder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.
Section 1.5. RECORDS AT HOLDER MEETINGS. At each meeting of the Holders
there shall be open for inspection the minutes of the last previous meeting of
Holders of the Trust and a list of the Holders of the Trust, certified to be
true and correct by the Secretary or other proper agent of the Trust, as of the
record date of the meeting. Such list of Holders shall contain the name of each
Holder in alphabetical order and the address and Interests owned by such Holder.
Holders shall have the right to inspect books and records of the Trust during
normal business hours and for any purpose not harmful to the Trust.
ARTICLE II
Trustees
--------
Section 2.1. ANNUAL AND REGULAR MEETINGS. The Trustees shall hold an
annual meeting for the election of officers and the transaction of other
business which may come before such meeting. Regular meetings of the Trustees
may be held without call or notice at such place or places and times as the
Trustees may by resolution provide from time to time.
Section 2.2. SPECIAL MEETINGS. Special Meetings of the Trustees shall
be held upon the call of the chairman, if any, the President, the Secretary or
any two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.
Section 2.3. NOTICE. Notice of a meeting shall be given by mail or by
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 48 hours preceding
the meeting and if given by telegram, telecopier or personally, such notice
shall be sent or delivery made not later than 24 hours preceding the meeting.
Notice by telephone shall constitute personal delivery for these purposes.
Notice of a meeting of Trustees may be waived before or after any meeting by
signed written waiver. Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Trustees need be stated in the notice or waiver
of notice of such meeting, and no notice need be given of action proposed to be
taken by written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting, at the commencement of such
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
2
<PAGE>
Section 2.4. CHAIRMAN; RECORDS. The Chairman, if any, shall act
as chairman at all meetings of the Trustees; in his absence the President shall
act as chairman; and, in the absence of the Chairman of the Board and the
President, the Trustees present shall elect one of their number to act as
temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary.
ARTICLE III
Officers
--------
Section 3.1. OFFICERS OF THE TRUST. The officers of the Trust shall
consist of a Chairman, if any, a President, a Secretary, a Treasurer and such
other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person. The Trustees may designate a Vice President as an Executive Vice
President and may designate the order in which the other Vice Presidents may
act. The Chairman shall be a Trustee, but no other officer of the Trust,
including the President, need be a Trustee.
Section 3.2. ELECTION AND TENURE. At the initial organization meeting
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the Chairman, if any, President, Secretary, Treasurer and such other officers as
the Trustees shall deem necessary or appropriate in order to carry out the
business of the Trust. Such officers shall hold office until the next annual
meeting of the Trustees and until their successors have been duly elected and
qualified. The Trustees may fill any vacancy in office or add any additional
officers at any time.
Section 3.3. REMOVAL OF OFFICERS. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the Chairman, if any, President, or
Secretary, and such resignation shall take effect immediately, or at a later
date according to the terms of such notice in writing.
Section 3.4. BONDS AND SURETY. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.5. CHAIRMAN, PRESIDENT AND VICE PRESIDENTS. The Chairman, if
any, shall, if present, preside at all meetings of the Holders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustee to the Chairman, if any,
President shall be the chief executive officer of the Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and of its employees and shall exercise such
3
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general powers of management as are usually vested in the office of President of
a corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Holders and, in the absence of the Chairman of
the Board, the President shall preside at all meetings of the Trustees. The
President shall be, ex officio, a member of all standing committees. Subject to
direction of the Trustees, the President shall have the power, in the name and
on behalf of the Trust, to execute any and all loan documents, contracts,
agreements, deeds, mortgages, and other instruments in writing, and to employ
and discharge employees and agents of the Trust. Unless otherwise directed by
the Trustees, the President shall have full authority and power, on behalf of
all of the Trustees, to attend and to act and to vote, on behalf of the Trust at
any meetings of business organizations in which the Trust holds an interest, or
to confer such powers upon any other persons, by executing any proxies duly
authorizing such persons. The President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice Presidents in order of their rank or the
Vice President designated by the Trustees, shall perform all of the duties of
President, and when so acting shall have all the powers of and be subject to all
of the restrictions upon the President. Subject to the direction of the
President, each Vice President shall have the power in the name and on behalf of
the Trust to execute any and all loan documents, contracts, agreements, deeds,
mortgages and other instruments in writing, and, in addition, shall have such
other duties and powers as shall be designated from time to time by the Trustees
or by the President.
Section 3.6. SECRETARY. The Secretary (or any Assistant Secretary)
shall keep the minutes of all meetings of, and record all votes of, Holders,
Trustees and the Executive Committee, if any. He shall be custodian of the seal
of the Trust, if any, and he (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to any
instrument executed by the Trust which would be sealed by a New York corporation
executing the same or a similar instrument and shall attest the seal and the
signature or signatures of the officer or officers executing such instrument on
behalf of the Trust. The Secretary (or any Assistant Secretary) shall also
perform any other duties commonly incident to such office in a New York
corporation, and shall have such other authorities and duties as the Trustees
shall from time to time determine.
Section 3.7. TREASURER. Except as otherwise directed by the Trustees,
the Treasurer shall have the general supervision of the monies, funds,
securities, notes receivable and other valuable papers and documents of the
Trust, and shall have and exercise under the supervision of the Trustees and of
the President all powers and duties normally incident to his office. He may
endorse for deposit or collection all notes, checks and other instruments
payable to the Trust or to its order. He shall deposit all funds of the Trust as
may be ordered by the Trustees or the President. He shall keep accurate account
of the books of the Trust's transactions which shall be the property of the
Trust, and which together with all other property of the Trust in his
possession, shall be subject at all times to the inspection and control of the
Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be
the principal accounting officer of the Trust and shall also be the principal
financial officer of the Trust. He shall have such other duties and authorities
4
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as the Trustees shall from time to time determine. Notwithstanding anything to
the contrary herein contained, the Trustees may authorize any adviser,
administrator or manager to maintain bank accounts and deposit and disburse
funds on behalf of the Trust.
Section 3.8. OTHER OFFICERS AND DUTIES. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each officer,
employee and agent of the Trust shall have such other duties and authority as
may be conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Miscellaneous
-------------
Section 4.1. DEPOSITORIES. In accordance with Section 7.1 of the
Declaration, the funds of the Trust shall be deposited in such depositories as
the Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser,
administrator or manager), as the Trustees may from time to time authorize.
Section 4.2. SIGNATURES. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by resolution
provide.
Section 4.3. SEAL. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a New York corporation.
Section 4.4. INDEMNIFICATION. Insofar as the conditional advancing of
indemnification monies under Section 5.3 of the Declaration of Trust for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a defense
to the action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds that
amount to which it is ultimately determined that he is entitled to receive from
the Trust by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Trust without
delay or litigation, which bond, insurance or other form of security must be
provided by the recipient of the advance, or (b) a majority of a quorum of the
Trust's disinterested, non-party Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily available
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facts, that the recipient of the advance ultimately will be found entitled to
indemnification.
ARTICLE V
Non-transferability of Interests
--------------------------------
Section 5.1. NON-TRANSFERABILITY OF INTERESTS. Interests shall not be
transferable. Except as otherwise provided by law, the Trust shall be entitled
to recognize the exclusive right of a person in whose name Interests stand on
the record of Holders as the owner of such Interests for all purposes,
including, without limitation, the rights to receive distributions, and to vote
as such owner, and the Trust shall not be bound to recognize any equitable or
legal claim to or interest in any such Interests on the part of any other
person.
Section 5.2. REGULATIONS. The Trustees may make such additional rules
and regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the sale and purchase of Interests of the Trust.
Section 5.3. DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The Trustees
shall have the power to employ and compensate such distribution disbursing
agents, warrant agents and agents for the reinvestment of distributions as they
shall deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustee.
ARTICLE VI
Amendment of By-laws
--------------------
Section 6.1. AMENDMENT AND REPEAL OF BY-LAWS. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust.
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BT0128
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 8, 1992 by and between EQUITY 500 INDEX
PORTFOLIO, a New York trust (herein called the "Portfolio"), and BANKERS TRUST
COMPANY (herein called the "Investment Adviser").
WHEREAS, the Portfolio is registered as an open-end diversified
management investment company under the Investment Company Act of 1940;
WHEREAS, the Portfolio desires to retain the Investment Adviser to
render investment advisory and other services, and the Investment Adviser is
willing to so render such services on the terms hereinafter set forth;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the promises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Portfolio hereby appoints the Investment Adviser to
act as investment adviser to the Portfolio for the period and on the terms set
forth in this Agreement. The Investment Adviser accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided.
2. MANAGEMENT. Subject to the supervision of the Board of Trustees of
the Portfolio, the Investment Adviser will provide a continuous investment
program for the Portfolio, including investment research and management with
respect to all securities, investments, cash and cash equivalents in the
Portfolio. The Investment Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Portfolio. The Investment Adviser will provide the services rendered by it
hereunder in accordance with the Portfolio's investment objective(s) and
policies as stated in the Portfolio's then-current Registration Statement on
Form N-1A. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules") and with the
Securities Act of 1933, the Securities Exchange Act of 1934, the Investment
Company Act of 1940 (the "1940 Act") and the Investment Advisers Act of 1940,
all as amended, and will in addition conduct its activities under this Agreement
in accordance with regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies and their subsidiaries;
(b) will place orders pursuant to its investment determinations
for the Portfolio either directly with the issuer or with any broker or dealer
selected by it. In placing orders with brokers and dealers, the Investment
Adviser will use its reasonable best efforts to obtain the best net price and
<PAGE>
the most favorable execution of its orders, after taking into account all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. Consistent with this
obligation, the Investment Adviser may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of any fund and/or other
accounts over which the Investment Adviser or any of its affiliates exercises
investment discretion. Subject to the review of the Portfolio's Board of
Trustees from time to time with respect to the extent and continuation of the
policy, the Investment Adviser is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for effecting a
securities transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Investment Adviser determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Investment Adviser with respect to the accounts
as to which it exercises investment discretion; and
(c) will maintain books and records with respect to the
Portfolio's securities transactions and will render to the Portfolio's Board of
Trustees such periodic and special reports as the Board may request.
3. SERVICES NOT EXCLUSIVE. The investment management services rendered
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to render similar services to others so long as
its services under this Agreement are not impaired thereby.
4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
of the Rules under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Portfolio are the property of the Portfolio
and further agrees to surrender promptly to the Portfolio any of such records
upon the Portfolio's request. The Investment Adviser further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act and to comply in full with the
requirements of Rule 204-2 under the Investment Advisers Act of 1940 pertaining
to the maintenance of books and records.
5. EXPENSES. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Portfolio.
In addition, if the expenses borne by the Portfolio in any fiscal year
of the Portfolio exceed the applicable expense limitations imposed by the
securities regulations of any state in which beneficial interests in the
Portfolio are registered or qualified for sale to the public, the Investment
Adviser shall reimburse the Portfolio for the excess expense to the extent
required by state law.
2
<PAGE>
6. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Portfolio will pay the Investment Adviser and
the Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, in an amount equal to the rate of 0.10% of the
Portfolio's average daily net assets.
7. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER; INDEMNIFICATION.
(a) The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Portfolio in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
(b) Subject to the exceptions and limitations contained in Section
7(c) below:
(i) the Investment Adviser (hereinafter referred to as a
"Covered Person") shall be indemnified by the Portfolio to the fullest extent
permitted by law, against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved, as a party or otherwise, by virtue of his being or having
been the Investment Adviser of the Portfolio, and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or thereafter,
and the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
(c) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Portfolio or its
investors by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Portfolio; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement;
or
3
<PAGE>
(B) by at least a majority of those Trustees who are
neither Interested Persons of the Portfolio nor are parties to the matter based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); or
(C) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any investor in the Portfolio may, by
appropriate legal proceedings, challenge any such determination by the Trustees
or by independent counsel.
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Portfolio, shall be severable, shall not
be exclusive of or affect any other rights to which any Covered Person may now
or hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the successors and assigns of
such person. Nothing contained herein shall affect any rights to indemnification
to which Portfolio personnel and any other persons, other than a Covered Person,
may be entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation
of a defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the Portfolio from time to time
prior to final disposition thereof, upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Portfolio if it is ultimately determined that he is not entitled to
indemnification under this Section 7; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking or
(ii) the Portfolio shall be insured against losses arising out of any such
advance payments, or (iii) either a majority of the Trustees who are neither
Interested Persons of the Portfolio nor parties to the matter, or independent
legal counsel in a written opinion, shall have determined, based upon a review
of readily available facts as opposed to a trial-type inquiry or full
investigation, that there is reason to believe that such Covered Person will be
entitled to indemnification under this Section 7.
8. DURATION AND TERMINATION. This Agreement shall be effective as to
the Portfolio as of the date the Portfolio commences investment operations after
this Agreement shall have been approved by the Board of Trustees of the
Portfolio and the investor(s) in the Portfolio in the manner contemplated by
Section 15 of the 1940 Act and, unless sooner terminated as provided herein,
shall continue until the second anniversary of such date. Thereafter, if not
terminated, this Agreement shall continue in effect as to the Portfolio for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Trustees of the Portfolio who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Portfolio by vote of a majority of the outstanding voting securities of the
Portfolio; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by the Board of
Trustees of the Portfolio, by vote of a majority of the outstanding voting
4
<PAGE>
securities of the Portfolio on 60 days' written notice to the Investment
Adviser, or by the Investment Adviser as to the Portfolio at any time, without
payment of any penalty, on 90 days' written notice to the Portfolio. This
Agreement will immediately terminate in the event of its assignment. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the 1940 Act and the Rules and regulatory constructions thereunder.)
9. AMENDMENT OF THIS AGREEMENT. No material term of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective until approved by vote of a majority of the
Portfolio's outstanding voting securities.
10. (a) REPRESENTATIONS AND WARRANTIES. The Investment Adviser hereby
represents and warrants as follows:
(i) The Investment Adviser is exempt from registration under
the Investment Advisers Act of 1940;
(ii) The Investment Adviser has all requisite authority to
enter into, execute, deliver and perform its obligations under, this Agreement;
(iii) This Agreement is legal, valid and binding, and
enforceable in accordance with its terms; and
(iv) The performance by the Investment Adviser of its
obligations under this Agreement does not conflict with any law to which it is
subject.
(b) COVENANTS. The Investment Adviser hereby covenants and agrees
that, so long as this Agreement shall remain in effect,
(i) The Investment Adviser shall remain either exempt from,
or registered under, the registration provisions of the Investment Advisers Act
of 1940; and
(ii) The performance by the Investment Adviser of its
obligations under this Agreement shall not conflict with any law to which it is
then subject.
11. NOTICES. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (a) to the Investment Adviser at 280 Park Avenue, New York, New York
10015 or (b) to the Portfolio at 6 St. James Avenue, Boston, Massachusetts
02116.
12. WAIVER. With full knowledge of the circumstances and the effect of
its action, the Investment Adviser hereby waives any and all rights which it may
acquire in the future against the property of any investor in the Portfolio,
5
<PAGE>
other than beneficial interests in the Portfolio at their then net asset value,
which arise out of any action or inaction of the Portfolio under this Agreement.
13. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of the State of New York, without reference to principles of conflicts of
law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Attest: EQUITY 500 INDEX PORTFOLIO
/s/Thomas M. Lenz By: /s/Philip W. Coolidge
- ---------------------------------- ----------------------------------
Philip W. Coolidge
President
Attest: BANKERS TRUST COMPANY
/s/Grace Torres By: /s/George B. Jackson
- ---------------------------------- ----------------------------------
George B. Jackson
Senior Vice President
BT0128
6
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Equity
500 Portfolio Annual Report dated December 31, 1995 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000888568
<NAME> EQUITY 500 INDEX PORTFOLIO
<S> <C>
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