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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1995
File No. 811-6699
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
ASSET MANAGEMENT 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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EXPLANATORY NOTE
This Registration Statement has been filed by Asset Management
Portfolio (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, as amended (the "1933 Act")
because such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in the Registrant may 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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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.
Asset Management 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 seek high total return
with reduced risk over the long term by allocating investments among stocks,
bonds and short-term instruments.
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.
INVESTMENT ALLOCATIONS. In seeking to achieve the Portfolio's
investment objective, Bankers Trust Company ("Bankers Trust"), as the
Portfolio's investment adviser (the "Adviser"), allocates the Portfolio's assets
among three principal asset classes (as discussed below): stocks, bonds and
short-term instruments. Bankers Trust will normally allocate the Portfolio's
assets among the asset classes within the following investment parameters: 0-25%
in short-term instruments; 25-55% in bonds (intermediate to long-term debt
securities); and 40% 70% in stocks (equities). The asset classes of the
Portfolio fluctuate around a neutral position of 10% in short-term investments,
35% in bonds and 55% in stocks. As of March 31, 1995, the Portfolio's asset
classes were as follows: short-term instruments, 16%; bonds, 34%; and stocks,
50%.
The Portfolio may make substantial temporary investments in cash and
money market instruments for defensive purposes when, in Bankers Trust's
judgment, market conditions warrant.
Bankers Trust regularly reviews the Portfolio's investment allocations,
and will gradually vary them over time to favor asset classes that, in Bankers
Trust's current judgment, provide the most favorable total return outlook. In
making allocation decisions, Bankers Trust will evaluate projections of risk,
market and economic conditions, volatility, yields and expected return. Bankers
Trust will seek to reduce risk relative to an investment in common stocks by
emphasizing the bond and short-term classes when stocks appear overvalued.
Bankers Trust's management will include use of database systems to help analyze
past situations and trends, research specialists in each of the asset classes to
help in securities selection, portfolio management professionals to determine
asset allocation and to select individual securities, and its own credit
analysis as well as credit analysis provided by rating services to determine the
quality of debt securities.
SHORT-TERM SECURITIES. These securities include all types of domestic
and foreign securities and money market instruments with remaining maturities of
thirteen months or less. Bankers Trust will seek to maximize total return within
the short-term class by taking advantage of yield differentials between
different instruments, issuers and currencies. Short-term instruments may
include foreign and domestic: (i) short-term obligations of sovereign
governments, their 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. These instruments may
be denominated in U.S. dollars or foreign currencies and will have been
determined to be of high quality by a nationally recognized statistical rating
organization ("NRSRO") or, if unrated, by Bankers Trust.
BONDS. These securities include all varieties of investment grade
domestic and foreign fixed-income securities with remaining maturities or
durations greater than thirteen months. Bankers Trust seeks to maximize total
returns within the bond class by adjusting the Portfolio's investments in
securities with different credit qualities, maturities, and coupon or dividend
rates, as well as by exploiting yield differentials between securities.
Securities in this class may include bonds, notes, adjustable rate preferred
stocks, convertible bonds, mortgage-related and asset-backed securities,
domestic and foreign government and government agency securities, zero coupon
bonds, Rule 144A securities and other intermediate and long-term securities. As
with the short-term class, these securities may be denominated in U.S. dollars
or foreign currency. No more than 5% of the Portfolio's net assets (at the time
of investment) may be in lower rated (BB/Ba or lower), high yield bonds. The
Portfolio may retain any bond whose rating drops below investment grade if it is
in the best interest of the Portfolio's investors. Securities rated BB/Ba by a
NRSRO are considered to have speculative characteristics.
See the Appendix in Part B for further information on these securities.
STOCKS. These securities include domestic and foreign equity
securities of all types (other than adjustable rate preferred stocks included in
the bond class). Bankers Trust seeks to maximize total return within this asset
class by actively allocating assets to industry sectors expected to benefit from
major trends, and to individual stocks that it believes to have superior
investment potential. Securities in the stock class may include common stocks,
fixed-rate preferred stocks (including convertible preferred stocks), warrants,
rights, depositary receipts, securities of closed-end investment companies, and
other equity securities issued by companies of any size, located anywhere in the
world.
Bankers Trust believes that diversification of the Portfolio's
investments among the asset classes will, under most market conditions, better
enable the Portfolio to reduce risk while seeking high total return over the
long-term.
MATURITY AND DURATION. The remaining maturity of a fixed-income
instrument is the amount of time left before the bond's principal is due. The
duration of an instrument or a group of instruments measures the instrument's or
group of instruments' value's expected response to changes in interest rates.
FOREIGN INVESTMENTS AND CURRENCY MANAGEMENT. The Portfolio focuses on
U.S. investment opportunities, but may invest a portion of its assets in foreign
securities. The Portfolio will not invest more than 25% of its total assets in
equity securities of foreign issuers under normal conditions. The Portfolio also
will not invest more than 25% of its total assets in each of the bond and
short-term classes in foreign securities and securities denominated in foreign
currencies. Foreign securities of all types will normally constitute less than
50% of the Portfolio's assets.
In connection with the Portfolio's investments denominated in foreign
currencies, Bankers Trust may choose to utilize a variety of currency management
strategies. Bankers Trust seeks to take advantage of different yield, risk, and
return characteristics that different currencies, currency denominations, and
countries can provide to U.S. investors. In doing so, Bankers Trust will
consider such factors as the outlook for currency relationships, current and
anticipated interest rates, levels of inflation within various countries,
prospects for relative economic growth, and government policies influencing
currency exchange rates and business conditions.
To manage exposure to currency fluctuations, the Portfolio may enter
into forward currency exchange contracts (agreements to exchange one currency
for another at a future date), may buy and sell options and futures contracts
relating to foreign currencies, and may purchase securities indexed to foreign
currencies. The Portfolio will use currency exchange contracts in the normal
course of business to lock in an exchange rate in connection with purchases and
sales of securities denominated in foreign currencies. Other currency management
strategies allow Bankers Trust to hedge portfolio securities, to shift
investment exposure from one currency to another, or to attempt to profit from
anticipated declines in the value of a foreign currency relative to the U.S.
dollar. Some of these strategies will require the Portfolio to set aside liquid
assets in a segregated custodial account to cover its obligations. For
additional information on foreign investments and currency management, see the
Appendix and Part B.
OPTIONS AND FUTURES CONTRACTS. The Portfolio may buy and sell options
and futures contracts to manage its exposure to changing interest rates,
security prices and currency exchange rates, and as an efficient means of
managing allocations between asset classes. The Portfolio may invest in options
and futures based on any type of security or index related to the Portfolio's
investments, including options and futures traded on foreign exchanges.
Some options and futures strategies, including selling futures, buying
puts, and writing calls, hedge the Portfolio's investments against price
fluctuations. Other strategies, including buying futures, writing puts, and
buying calls, tend to increase market exposure. Options and futures may be
combined with each other, or with forward contracts, in order to adjust the risk
and return characteristics of an overall strategy. See the Appendix for further
information on options on stocks, options and futures contracts on stock
indexes, options on futures contracts, foreign currency exchange transactions,
and options on foreign currencies.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may buy and
sell securities on a when-issued or delayed-delivery basis. These transactions
involve a commitment by the Portfolio to buy or sell securities at a set price,
with payment and delivery taking place at a future date. When the Portfolio
agrees to purchase a security on a when-issued or delayed-delivery basis, it
sets aside liquid securities in a segregated custodial account to equal the
payment that will be due. Purchasing securities in this manner may cause greater
fluctuations in the Portfolio's share price.
The Portfolio may engage in short sales with respect to securities that
it owns or has the right to obtain (for example, through conversion of a
convertible bond). These transactions, known as short sales "against the box,"
allow the Portfolio to hedge against price fluctuations by locking in a sale
price for securities it does not wish to sell immediately.
The Portfolio may invest in indexed securities whose value depends on
the price of foreign currencies, securities indexes or other financial values or
statistics. Examples include debt securities whose value at maturity is
determined by reference to the relative prices of various currencies or to the
price of a stock index. These securities may be positively or negatively
indexed; that is, their value may increase or decrease if the underlying
instrument appreciates.
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.
The Portfolio may invest in 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 Investment Company Act of 1940, as
amended (the "1940 Act").
ADDITIONAL 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. 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.
RISK FACTORS. The Portfolio allocates its investments within the
parameters described in "General Description of the Registrant." Since the
Portfolio's asset allocation involves significant investment in short-term
instruments and bonds over time, it is expected that the Portfolio will be less
volatile than a fund that invests primarily in common stocks.
The Portfolio's performance may be affected by many different factors,
depending on the Portfolio's emphasis. Short-term instruments are generally the
most stable securities in which the Portfolio will invest . Their returns depend
primarily on current short-term interest rates, although currency fluctuations
can also be significant with respect to foreign securities.
The bond class is affected primarily by interest rates: prices of
fixed-income securities tend to rise when interest rates fall, and fall when
interest rates rise. Interest rate changes will have a greater impact on the
Portfolio if it is heavily invested in long-term or zero-coupon bonds.
Fixed-income securities may also be affected by changes in credit quality.
The stock class is subject to the risks of stock market investing,
including the possibility of sudden or prolonged market declines as well as the
risks associated with individual companies. These risks may be intensified for
investments in smaller or less well-known companies or in foreign securities.
RISKS OF INVESTING IN FOREIGN SECURITIES. The investment in foreign
securities may involve additional risks. Foreign securities usually are
denominated in foreign currencies, which means their value will be affected by
changes in the strength of foreign currencies relative to the U.S. dollar as
well as the other factors that affect security prices. Foreign companies may not
be subject to accounting standards or governmental supervision comparable to
U.S. companies, and there often is less publicly available information about
their operations. Generally, there is less governmental regulation of foreign
securities markets, and security trading practices abroad may offer less
protection to investors such as the Portfolio. The value of such investments may
be adversely affected by changes in political or social conditions, diplomatic
relations, confiscatory taxation, expropriation, nationalization, limitation on
the removal of funds or assets, or imposition of (or change in) exchange control
or tax regulations in those foreign countries. Foreign securities may be less
liquid or more volatile than domestic investments. Bankers Trust considers these
factors in making investments for the Portfolio and limits the amount of the
Portfolio's assets that may be invested in foreign securities to 25% of its
total assets for each asset class and to less than 50% for all classes under
normal conditions. However, within the Portfolio's limitations, investments in
any one country or currency are not restricted.
DERIVATIVES. The Portfolio may invest in various instruments that 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 and
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 current exchanges rates for cash management purposes as a low cost
method of gaining exposure to a particular securities market without investing
directly in those securities. However, some derivatives are used for leverage,
which tends to magnify the effects of an instrument's price changes as market
conditions change. Leverage involves the use of a small amount of money to
control a large amount of financial assets and can, in some circumstances, lead
to significant losses. The Adviser will use derivatives only in circumstances
where the Adviser believes they offer the most economical means of improving the
risk/reward profile of the Portfolio. Derivatives will not be used in 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 indexes that by themselves would not be purchased for the Portfolio. The use
of derivatives for non-hedging purposes may be considered speculative. A
description of the derivatives that the Portfolio may use and some of their
associated risks is found in the Appendix.
The Portfolio's investments in options, futures or forward contracts,
and similar strategies depend on Bankers Trust's judgment as to the potential
risks and rewards of different types of strategies. Options and futures can be
volatile investments, and may not perform as expected. If Bankers Trust applies
a hedge at an inappropriate time or judges price trends incorrectly, options and
futures strategies may lower the Portfolio's return. Options and futures traded
on foreign exchanges generally are not regulated by U.S. authorities, and may
offer less liquidity and less protection to the Portfolio in the event of
default by the other party to the contract. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly correlated
with its other investments, or if it could not close out its positions because
of an illiquid secondary market.
Further descriptions of a number of investments and investment
techniques available to the Portfolio, including foreign investments and the use
of options and futures, and certain risks associated with these investments and
techniques are included in the Appendix.
PORTFOLIO TURNOVER. The frequency of portfolio transactions the
Portfolio's turnover rate will vary from year to year depending on market
conditions. The Portfolio's annual portfolio turnover rate for the fiscal year
ended March 31, 1995 and for the period from September 16, 1993 (commencement of
operations) through March 31, 1994 was 92% and 56% (not annualized),
respectively. Because a higher turnover rate increases transaction costs and may
increase taxable capital gains, Bankers Trust carefully weighs the anticipated
benefits of short-term investment against these consequences.
ITEM 5. MANAGEMENT OF THE TRUST.
The Board of Trustees provides broad supervision over the affairs of
the Portfolio. 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.
Bankers Trust, a New York banking corporation with executive 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, 1994, Bankers Trust New York Corporation was the seventh largest bank
holding company in the United States with total assets of approximately $97
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 129 offices in 38 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 1930. 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 over $185 billion in assets under
management . Of that total, approximately $2.1 billion are in tactical asset
allocation funds. This makes Bankers Trust one of the nation's leading manager
of tactical asset allocation funds.
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 that of the Portfolio. 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.
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 it 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.
Under its Investment Advisory Agreement, Bankers Trust receives a fee
from the Portfolio computed daily and paid monthly at the annual rate of 0.65%
of the average daily net assets of the Portfolio.
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 0.10% 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,
including Signature Broker-Dealer Services, Inc. ("Signature"), 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 Signature , the Trust's placement agent and sub-administrator, 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 Portfolio is open ("Portfolio Business Day") (and on such other days as are
deemed necessary in order to comply with Rule 22c-1 under the 1940 Act). This
determination is made each such day as of the close of regular trading on the
New York Stock Exchange Inc. ("NYSE") which is 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 close of business 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 as of the close of business 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 close of business 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
close of business 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 close of business, 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 the
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,
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 may, at its own option, accept securities in payment for
interests. The securities delivered in payment for interests are valued by the
method described under "Purchase, Redemption and Pricing of Securities" in Part
B as of the day the Portfolio receives the securities. This is a taxable
transaction to the investor. Securities may be accepted in payment for interests
only if they are, in the judgment of Bankers Trust, appropriate investments for
the Portfolio. In addition, securities accepted in payment for interests must:
(i) meet the investment objective and policies of the Portfolio; (ii) be
acquired by the Portfolio for investment and not for resale; (iii) be liquid
securities which are not restricted as to transfer either by law or liquidity of
market; and (iv) if stock, have a value which is readily ascertainable as
evidenced by a listing on a stock exchange, over-the-counter market or by
readily available market quotations from a dealer in such securities. The
Portfolio reserves the right to accept or reject at its own option any and all
securities offered in payment for its interests.
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
calendar days following receipt of the request. 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.
APPENDIX.
GOVERNMENT SECURITIES. Government securities may or may not be backed
by the full faith and credit of the U.S. Government. U.S. Treasury bonds, notes
and bills and certain agency securities, such as those issued by the Federal
Housing Administration, are backed by the full faith and credit of the U.S.
Government and are the highest quality government securities. The Portfolio may
also invest a substantial portion of its portfolio in securities issued by
government agencies or instrumentalities (such as executive departments of the
U.S. Government or independent federal organizations supervised by Congress),
which may have different degrees of government backing but which are not backed
by the full faith and credit of the U.S. Government. There is no guarantee that
the government will support these types of securities, and therefore they
involve more risk than other government obligations.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are securities
representing interests in a pool of mortgages. Principal and interest payments
made on the mortgages in the underlying mortgage pool are passed through to the
investor. Unscheduled prepayments of principal shorten the securities' weighted
average life and may lower their total return. (When a mortgage in the
underlying pool is prepaid, an unscheduled principal prepayment is passed
through to the investor. This principal is returned to the investor at par. As a
result, if a mortgage security were trading at a premium, its total return would
be lowered by prepayments, and if a mortgage security were trading at a
discount, its total return would be increased by prepayments.) The value of
these securities also may change because of changes in the market's perception
of the creditworthiness of the federal agency that issued them. In addition, the
mortgage securities market in general may be adversely affected by changes in
governmental regulation or tax policies.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are pay-through
securities collateralized by mortgages or mortgage-backed securities. CMOs are
issued in classes and series that have different maturities and often are
retired in sequence. CMOs may be issued by governmental or non-governmental
entities such as banks and other mortgage lenders. Non-government securities may
offer a higher yield but also may be subject to greater price fluctuation than
government securities.
ASSET-BACKED SECURITIES. Asset-backed securities consist of undivided
fractional interests in pools of consumer loans (unrelated to mortgage loans)
held in a trust. Payments of principal and interest are passed through to
certificate holders and are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee or
senior/subordination. The degree of credit enhancement varies, but generally
amounts to only a fraction of the asset backed security's par value until
exhausted. If the credit enhancement is exhausted, certificate holders may
experience losses or delays in payment if the required payments of principal and
interest are not made to the trust with respect to the underlying loans. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the loan pool, the
originator of the loans or the financial institution providing the credit
enhancement. Asset-backed securities are ultimately dependent upon payment of
consumer loans by individuals, and the certificate holder generally has no
recourse to the entity that originated the loans. The underlying loans are
subject to prepayments which shorten the securities' weighted average life and
may lower their return. (As prepayments flow through at par, total returns would
be affected by the prepayments: if a security were trading at a premium, its
total return would be lowered by prepayments, and if a security were trading at
a discount, its total return would be increased by prepayments).
ZERO COUPON DEBT SECURITIES. Zero coupon debt securities do not make
regular interest payments. Instead they are sold at a deep discount from their
face value. Because a zero coupon bond does not pay current income, its price
can be very volatile when interest rates change. In calculating its net income
the Portfolio takes into account as income a portion of the difference between a
zero coupon bond's purchase price and its face value.
RULE 144A SECURITIES. The Portfolio may purchase securities in the
United State that are not registered for sale under federal securities laws but
which can be resold to institutions under Securities and Exchange Commission
("SEC") Rule 144A. Provided that a dealer or institutional trading market in
such securities exists, these restricted securities are treated as exempt from
the Portfolio's 15% limit on illiquid securities. Under the supervision of the
Board of Trustees, Bankers Trust determines the liquidity of restricted
securities and, through reports from Bankers Trust, the Board will monitor
trading activity in restricted securities. Because Rule 144A is relatively new,
it is not possible to predict how these markets will develop. If institutional
trading in restricted securities were to decline, the liquidity of the Portfolio
could be adversely affected.
FOREIGN INVESTMENTS. The Portfolio may invest in securities of foreign
issuers directly or in the form of American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs") or other similar securities representing
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are receipts issued by a European financial
institution evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets, and EDRs, in bearer
form, are designed for use in European securities markets.
With respect to certain countries in which capital markets are either
less developed or not easily accessed, investments by the Portfolio may be made
through investment in other investment companies that in turn are authorized to
invest in the securities of such countries. Investment in other investment
companies is limited in amount by the 1940 Act, will involve the indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies and may result in a duplication of fees and expenses.
OPTIONS ON STOCKS. The Portfolio may write and purchase put and call
options on stocks. A call option gives the purchaser of the option the right to
buy, and obligates the writer to sell, the underlying stock at the exercise
price at any time during the option period. Similarly, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying stock at the exercise price at any time during the option period. A
covered call option, which is a call option with respect to which the Portfolio
owns the underlying stock, sold by the Portfolio exposes the Portfolio during
the term of the option to possible loss of opportunity to realize appreciation
in the market price of the underlying stock or to possible continued holding of
a stock which might otherwise have been sold to protect against depreciation in
the market price of the stock. A covered put option sold by the Portfolio
exposes the Portfolio during the term of the option to a decline in price of the
underlying stock. A put option sold by the Portfolio is covered when, among
other things, cash or liquid securities are placed in a segregated account to
fulfill the obligations undertaken.
To close out a position when writing covered options, the Portfolio may
make a "closing purchase transaction," which involves purchasing an option on
the same stock with the same exercise price and expiration date as the option
which it has previously written on the stock. The Portfolio will realize a
profit or loss for a closing purchase transaction if the amount paid to purchase
an option is less or more, as the case may be, than the amount received from the
sale thereof. To close out a position as a purchaser of an option, the Portfolio
may make a "closing sale transaction," which involves liquidating the
Portfolio's position by selling the option previously purchased.
The Portfolio intends to treat over-the-counter options ("OTC Options")
purchased and the assets used to "cover" OTC Options written as not readily
marketable and therefore subject to the limitations described in "Investment
Restrictions" in Part B.
OPTIONS ON STOCK INDEXES. The Portfolio may purchase and write put and
call options on stock indexes listed on stock exchanges. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indexes 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 or, in the case of certain indexes, 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 indexes 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 SECURITIES INDEXES. 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 may be used 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 or as an
efficient means of managing allocations between asset classes. A Futures
Contract may also be entered into to close out or offset an existing futures
position.
When used for hedging purposes, a Futures Contract 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.
Futures Contracts do involve certain risks. These risks could include
a lack of correlation between the Futures Contract and the corresponding
securities market , 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 (other than Futures Contracts
entered into for bona fide hedging purposes) 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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and
sells securities denominated in currencies other than the U.S. dollar and
receives interest, dividends and sale proceeds in currencies other than the U.S.
dollar, the Portfolio from time to time may enter into foreign currency exchange
transactions to convert to and from different foreign currencies and to convert
foreign currencies to and from the U.S. dollar. The Portfolio either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market or uses forward contracts to purchase or
sell foreign currencies.
A forward foreign currency exchange contract is an obligation by the
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. The Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.
The Portfolio may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, the Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write covered put and
call options and purchase put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of portfolio
securities and against increases in the dollar cost of securities to be
acquired. The Portfolio may use options on currency to cross-hedge, which
involves writing or purchasing options on one currency to hedge against changes
in exchange rates for a different, but related currency. As with other types of
options, however, the writing of an option on foreign currency will constitute
only a partial hedge up to the amount of the premium received, and the Portfolio
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may be used to hedge against fluctuations in exchange rates although,
in the event of exchange rate movements adverse to the Portfolio's position, it
may forfeit the entire amount of the premium plus related transaction costs. In
addition, the Portfolio may purchase call options on currency when the Adviser
anticipates that the currency will appreciate in value.
There is no assurance that a liquid secondary market on an options
exchange will exist for any particular option, or at any particular time. If the
Portfolio is unable to effect a closing purchase transaction with respect to
covered options it has written, the Portfolio will not be able to sell the
underlying currency or dispose of assets held in a segregated account until the
options expire or are exercised. Similarly, if the Portfolio is unable to effect
a closing sale transaction with respect to options it has purchased, it would
have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying currency. The
Portfolio pays brokerage commissions or spreads in connection with its options
transactions.
As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. The
Portfolio's ability to terminate over-the-counter options ("OTC Options") will
be more limited than with exchange-traded options. It is also possible that
broker-dealers participating in OTC Options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, the
Portfolio will treat purchased OTC Options and assets used to cover written OTC
Options as illiquid securities. With respect to options written with primary
dealers in U.S. Government securities pursuant to an agreement requiring a
closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to the repurchase formula.
All options that the Portfolio writes will be covered under applicable
requirements of the Securities and Exchange Commission. The Portfolio will write
and purchase options only to the extent permitted by the policies of state
securities authorities in states where shares of the investors in the Portfolio
are qualified for offer and sale.
There can be no assurance that the use of these portfolio strategies
will be successful.
ASSET COVERAGE. To assure that the Portfolio's use of futures and
related options, as well as when-issued and delayed-delivery securities and
foreign currency exchange transactions, are not used to achieve investment
leverage, the Portfolio will cover such transactions, 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>
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS. Page
General Information and History . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . .
Management of the Fund. . . . . . . . . . . . . . . .
Control Persons and Principal Holder
of Securities . . . . . . . . . . . . . . . . .
Investment Advisory and Other Services . . . . . . .
Brokerage Allocation and Other Practices . . . . . .
Capital Stock and Other Securities . . . . . . . . .
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . .
Tax Status . . . . . . . . . . . . . . . . . . . . .
Underwriters . . . . . . . . . . . . . . . . . . . .
Calculation of Performance Data . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . .
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 Asset Management Portfolio (the "Portfolio"). This Part B should
only be read in conjunction with Part A. This section contains supplemental
information concerning the types of securities and other instruments in which
the Portfolio may invest, the investment policies and portfolio strategies that
the Portfolio may utilize and certain risks attendant to those investments,
policies and strategies.
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.
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 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 calendar 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.
The Securities and Exchange Commission (the "SEC") has recently adopted
Rule 144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act for resales of certain securities to qualified institutional buyers. Bankers
Trust Company ("Bankers Trust"), as the Portfolio's investment adviser (the
"Adviser"), anticipates that the market for certain restricted securities such
as institutional commercial paper will expand further as a result of this new
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc. (the "NASD").
The Adviser will monitor the liquidity of Rule 144A securities in the
Portfolio's portfolio under the supervision of the Board of Trustees. In
reaching liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers wishing to purchase or sell
the security; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
the transfer).
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, 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; (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 fixed-income securities or foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. The Portfolio may enter into futures
contracts which are based on debt securities that are backed by the full faith
and credit of the U.S. Government, such as long-term U.S. Treasury bonds,
Treasury notes, Government National Mortgage Association modified pass-through
mortgage-backed securities and three-month U.S. Treasury bills. The Portfolio
may also enter into futures contracts which are based on bonds issued by
entities other than the U.S. Government.
At the same time a futures contract is purchased or sold, the 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 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 purpose of the acquisition or sale of a futures contract, when the
Portfolio holds or intends to acquire fixed-income securities, is to attempt to
protect the Portfolio from fluctuations in interest or foreign exchange rates
without actually buying or selling fixed-income securities or foreign
currencies. For example, if interest rates were expected to increase, the
Portfolio might enter into futures contracts for the sale of debt securities.
Such a sale would have much the same effect as selling an equivalent value of
the debt securities owned by the Portfolio. If interest rates did increase, the
value of the debt security in the Portfolio would decline, but the value of the
futures contracts to the Portfolio would increase at approximately the same
rate, thereby keeping the net asset value of the Portfolio from declining as
much as it otherwise would have. The Portfolio could accomplish similar results
by selling debt securities and investing in bonds with short maturities when
interest rates are expected to increase. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an investment
technique allows the Portfolio to maintain a defensive position without having
to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, the Portfolio could
take advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent the Portfolio enters into futures contracts
for this purpose, the assets in the segregated asset account maintained to cover
the Portfolio's obligations with respect to such futures contracts will consist
of cash, cash equivalents or high quality liquid debt securities from its
portfolio in an amount equal to the difference between the fluctuating market
value of such futures contracts and the aggregate value of the initial and
variation margin payments made by the Portfolio with respect to such 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 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 a further restriction that 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 (other than those entered into for bona
fide hedging purposes) would exceed 5% of the market value of the total assets
of the Portfolio.
Options on Foreign Currencies. The Portfolio may purchase and write
options on foreign currencies for hedging purposes in a manner similar to that
in which futures contracts on foreign currencies, or forward contracts, will be
utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Portfolio may purchase put options on the foreign currency. If the value of
the currency does decline, the Portfolio will have the right to sell such
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, where the Portfolio anticipates a
decline in the dollar value of foreign currency denominated securities due to
adverse fluctuations in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected decline
occurs, the options will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
The Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by the Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.
The Portfolio intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign currency
is for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which the
Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate. In
such circumstances, the Portfolio collateralizes the option by maintaining in a
segregated account with its custodian, cash or U.S. Government securities or
other high quality liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.
Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by the Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. The
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, the
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government Securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
Options on Securities. The Portfolio may write (sell) covered call and
put options to a limited extent on its portfolio securities ("covered options")
in an attempt to increase income. However, the Portfolio may forgo the benefits
of appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Portfolio.
When the Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.
When the Portfolio writes a covered put option, it gives the purchaser
of the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at 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 underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at 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. This transaction is called a "closing
purchase transaction." Where the Portfolio cannot effect a closing purchase
transaction, it may be forced to incur brokerage commissions or dealer spreads
in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.
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 any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security 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 securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's portfolio, 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
Portfolio's portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. The Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities 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 underlying portfolio securities.
The Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code for qualification as a regulated investment company.
The hours of trading for options on securities 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.
Options on Securities Indices. In addition to options on securities,
the Portfolio may also purchase and write (sell) call and put options on
securities indices. 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. Such options will be used for the
purposes described above under "Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. 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.
Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase such options unless
the Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.
Price movements in the Portfolio's portfolio may not correlate
precisely with movements in the level of an index and, therefore, the use of
options on indices cannot serve as a complete hedge. Because options on
securities indices require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations.
Forward Foreign Currency Exchange Contracts. Because the Portfolio buys
and sells securities denominated in currencies other than the U.S. dollar and
receives interest, dividends and sale proceeds in currencies other than the U.S.
dollar, the Portfolio from time to time may enter into foreign currency exchange
transactions to convert to and from different foreign currencies and to convert
foreign currencies to and from the U.S. dollar. The Portfolio either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market or uses forward contracts to purchase or
sell foreign currencies.
A forward foreign currency exchange contract is an obligation by the
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. The Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.
The Portfolio may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, the Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event
the Portfolio's ability to utilize forward contracts in the manner set forth in
Part A to this Registration Statement may be restricted. Forward contracts may
reduce the potential gain from a positive change in the relationship between the
U.S. dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Portfolio than if it had not
entered into such contracts. The use of foreign currency forward contracts may
not eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on the Portfolio's foreign currency denominated
portfolio securities and the use of such techniques will subject the Portfolio
to certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, the Portfolio may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit the Portfolio's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to the Portfolio's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying the Portfolio's cross-hedges and the movements in the exchange rates
of the foreign currencies in which the Portfolio's assets that are the subject
of such cross-hedges are denominated.
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 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 the following investment restrictions as
fundamental policies, which may not be changed without approval by holders of a
"majority of the outstanding voting securities" 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 "majority 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 net 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 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 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;
(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.
As an operating policy the Portfolio will not invest in another
open-end registered investment company.
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 reverse repurchase or dollar
roll transactions) for any purpose in excess of 5% of the
Portfolio's total assets (taken at cost) except that the
Portfolio may borrow for temporary or emergency purposes up to
1/3 of its assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's net 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 securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity
of the Portfolio, and the value of securities of any one
issuer in which the Portfolio is short exceeds the lesser of
2.0% of the value of the Portfolio's net assets or 2.0% of the
securities of any class of any U.S. issuer and, provided that
short sales may be made only in those securities which are
fully listed on a national securities exchange or a foreign
exchange (This provision does not include the sale of
securities of the Portfolio contemporaneously owns or has the
right to obtain securities equivalent in kind and amount to
those sold, i.e., short sales against the box.) (The Portfolio
has no current intention to engage in short selling.);
(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 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; provided further
that, except in the case of a merger or consolidation, the
Portfolio shall not purchase any securities of any 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;
(vii) invest more than 10% of the Portfolio's total assets (taken at
the greater of cost or market value) in securities (excluding
Rule 144A securities) that are restricted as to resale under
the 1933 Act;
(viii) invest more than 15% of the Portfolio's total assets (taken at
the greater of cost or market value) in (a) securities
(including Rule 144A securities) that are restricted as to
resale under the 1933 Act, and (b) securities that are issued
by issuers which (including predecessors) have been in
operation less than three years (other than U.S. Government
securities), provided, however, that 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;
(ix) 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;
(x) with respect to 75% of its assets, invest more than 5% of its
total assets in the securities (excluding U.S. Government
securities) of any one issuer;
(xi) invest in 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;
(xii) invest in warrants (other than warrants acquired by the
Portfolio as part of a unit or attached to securities at the
time of purchase) if, as a result, the investments (valued at
the lower of cost or market) would exceed 5% of the value of
the Portfolio's net assets or if, as a result, more than 2% of
the Portfolio's net assets would be invested in warrants not
listed on a recognized United States or foreign stock
exchange, to the extent permitted by applicable state
securities laws;
(xiii) 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 5% 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
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
(xiv) 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.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
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 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* 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 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.
S. LELAND DILL Retired; Director, Coutts & Co. Trust Holdings Limited
and Coutts & Co. (U.S.A.) International; Director, Zweig Cash Fund and 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.
OFFICERS
JAMES B. CRAVER Treasurer and Secretary; Senior Vice President, SFG
(since January, 1991); Secretary, Signature (since January, 1991); Partner,
Baker & Hostetler (prior to January, 1991).
DAVID G. DANIELSON 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).
JAMES S. LELKO, JR. Assistant Treasurer; Assistant Manager, SFG
(since January 1993); Senior Tax Compliance Accountant, Putnam Investments
(prior to December 1992).
BARBARA M. O'DETTE Assistant Treasurer; Assistant Treasurer, SFG (since
December, 1988); Assistant Treasurer, Signature (since April, 1989).
DANIEL E. SHEA Assistant Treasurer; Assistant Manager, SFG (since
November 1993); Supervisor and Senior Technical Advisor, Putnam Investments
(prior to November 1993).
LINDA T. GIBSON Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since May, 1992); Assistant Secretary, Signature (since October,
1992); student, Boston University School of Law (September, 1989 to May, 1992);
Product Manager, SFG (January, 1989 to September, 1989).
THOMAS M. LENZ Assistant Secretary; 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 Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since December, 1988); Assistant Secretary, Signature (since
April, 1989).
ANDRES E. SALDANA Assistant Secretary; Legal Counsel, SFG (since
November, 1992); Assistant Secretary, Signature (since September, 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992); law student, Yale
Law School (September, 1987 to May, 1990).
Messrs. Coolidge, Craver, Danielson, Lelko, 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.
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 Portfolio for
serving as an officer or Trustee of the Portfolio. The Portfolio, Asset
Management Portfolio II, Asset Management Portfolio III, Cash Management
Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free Money
Portfolio, Equity 500 Index Portfolio, Short/Intermediate U.S. Government
Securities Portfolio, Intermediate Tax Free Portfolio, Utility Portfolio,
Capital Appreciation Portfolio and International Equity Portfolio (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 $500, respectively, per meeting
attended and reimburses them for travel and out-of-pocket expenses.
The Portfolio accrued Trustees fees of $1,212 for the fiscal year ended
March 31, 1995 and $832 for the period September 16, 1993 (commencement of
operations of the Portfolio) to March 31, 1994.
Bankers Trust reimbursed the Portfolio for a portion for a portion of
its Trustees fees for the period above. See "Investment Advisory and Other
Services" below.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED
COMPENSATION AS PART OF ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, FROM PORTFOLIO BENEFITS UPON FROM FUND COMPLEX
POSITION PORTFOLIO EXPENSES RETIREMENT PAID TO TRUSTEE
-------------- ------------ ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
Philip W. Coolidge none none none none
Charles P. Biggar $12,000 none none $12,000
S. Leland Dill $12,000 none none $12,000
</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.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of June 30, 1995, BT Institutional Asset Management Fund and BT
Investment Lifecycle Long Range Fund (each a "Fund") (series of shares of BT
Pyramid Mutual Funds and BT Investment Funds, respectively) owned 80.62% and
19.38%, respectively, of the value of the outstanding interests in the
Portfolio. Because BT Institutional Asset Management Fund controls the
Portfolio, it may take actions without the approval of any other investor in the
Portfolio.
Each Fund has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the Portfolio, the Fund will, except as permitted
by the SEC, hold a meeting of its shareholders and will cast its votes as
instructed by the Fund's shareholders and in the same proportion as the votes of
the Fund's shareholders. Fund shareholders who do not vote will not affect the
Fund's votes at the Portfolio meeting. The percentage of the Fund's votes
representing Fund shareholders not voting will be voted by the Trustees or
officers of the Fund in the same proportion as the Fund shareholders who do, in
fact, vote. Whenever a Fund is requested to vote on a matter pertaining to a
Portfolio, the Fund will vote its shares without a meeting of the Fund
shareholders if the proposal, if made with respect to such Fund, would not
require the vote of the Fund shareholders as long as such action is permissible
under applicable statutory and regulatory requirements. 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.
For compensation of investment advisory services provided to the
Portfolio, Bankers Trust received $576,146 for the fiscal year ended March 31,
1995 and $94,329 for the period from September 16, 1993 (commencement of
operations) through March 31, 1994. For the same periods, Bankers Trust
reimbursed $169,159 and $48,572, 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 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.
In compensation for administrative and other services provided to the
Portfolio, Bankers Trust received $88,368 for the fiscal year ended March 31,
1995 and $14,512 for the period from September 16, 1993 (commencement of
operations) through March 31, 1994. See "Investment Advisory and Other Services"
above.
Coopers & Lybrand are the independent certified public 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 is 1100 Main Street, Suite 900,
Kansas City, Missouri 64105.
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, 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 NASD and such other policies as the Portfolio's Trustees may determine, the
Adviser may consider sales of securities of other investment company clients of
Bankers Trust 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.
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 is concerned. However, it is believed that
the ability of the Portfolio to participate in volume transactions will produce
better executions for the Portfolio.
The Portfolio paid brokerage commissions in the amount of $118,748 for
the fiscal year ended March 31, 1995 and $42,311 for the period from September
16, 1993 (commencement of operations) through March 31, 1994.
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
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 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.
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 is 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; and (c) such other bank holidays as from time to time may
be designated by the appropriate authorities of the state of New York.)
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. Securities for which market quotations are not
available are valued by Bankers Trust pursuant to procedures adopted by the
Portfolio's Board of Trustees. It is generally agreed that securities for which
market quotations are not readily available should not be valued at the same
value as that carried by an equivalent security which is readily marketable.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the:
type of security involved, financial statements,
cost at date of purchase, size of holding,
discount from market value of unrestricted
securities of the same class at the time of
purchase, special reports prepared by analysts,
information as to any transactions or offers with
respect to the security, existence of merger
proposals or tender offers affecting the
security, price and extent of public trading in
similar securities of the issuer or comparable
companies, and other relevant matters.
To the extent that the Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
available, the Adviser of the Portfolio
will value such securities based upon all relevant factors as
outlined in FRR 1.
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 be 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
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.
ITEM 23. FINANCIAL STATEMENTS.
The following financial statements are hereby incorporated by reference
from the Registrant's Annual Reports and have been included in reliance upon the
report of Coopers & Lybrand, independent certified public accountants, as
experts in accounting and auditing.
Statement of Assets and Liabilities, March 31, 1995
Statement of Operations for the year ended March 31, 1995
Statement of Changes in Net Assets for the year ended March 31, 1995
and period ended March 31, 1994
Financial Highlights: Selected ratios and supplemental data for the
periods indicated
Notes to Financial Statements
Report of Independent Accountants
<PAGE>
APPENDIX
BOND AND COMMERCIAL PAPER RATINGS
Set forth below are descriptions of ratings which represent opinions as to the
quality of the securities . It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MOODY'S INVESTORS SERVICE, INC.'S SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year.
Issuers rated PRIME-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries. High
rates of return on funds employed.
-- Conservative capitalization structure 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 P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt 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, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NY: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.
STANDARD & POOR'S RATINGS GROUP'S COMMERCIAL PAPER RATINGS
A: S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH INVESTORS SERVICE, INC. BOND RATINGS
INVESTMENT GRADE
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD GRADE
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
"F-1+" and "F-1" categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
DUFF & PHELPS BOND RATINGS
INVESTMENT GRADE
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
HIGH YIELD GRADE
BB+, BB, AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B, AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
Preferred stocks are rated on the same scale as bonds but the preferred rating
gives weight to its more junior position in the capital structure. Structured
financings are also rated on this scale.
DUFF & PHELPS PAPER/CERTIFICATES OF DEPOSIT RATINGS
CATEGORY 1: TOP GRADE
Duff 1 plus: Highest certainty of timely payment. Short-term liquidity including
internal operating factors and/or ready access to alternative sources of funds,
is outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1 MINUS: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
CATEGORY 2: GOOD GRADE
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
CATEGORY 3: SATISFACTORY GRADE
DUFF 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * * * *
Bonds which are unrated expose the investor to risks with respect to capacity to
pay interest or repay principal which are similar to the risks of lower-rated
bonds. The Fund is dependent on the investment adviser's or investment
subadviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
The financial statements called for by this Item are included
in Part B and listed in Item 23 hereof.
(B) EXHIBITS
1. Declaration of Trust of the Registrant.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 Schedules with respect to the Asset
Management Portfolio.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
Beneficial Interests 2 (as of July 31, 1995)
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 Retired Senior Vice President and Director,
International Business Member of Advisory Board of International
Machines Corporation Business Machines Corporation. Director of
Old Orchard Road Bankers Trust and Bankers Trust New York
Armonk, NY 10504 Corporation. Director of FlightSafety
International, Inc. Director of Phillips
Petroleum Company. Director of Roadway
Services, Inc. Director of Rohm and Hass
Company.
William R. Howell Chairman of the Board and Chief Executive
J.C. Penney Company, Inc. Officer, J.C. Penney Company, Inc. Director
P.O. Box 10001 of Bankers Trust and Bankers Trust New York
Plano, TX 75301-0001 Corporation. Also a Director of Exxon
Corporation, Halliburton Company and
Warner-Lambert Corporation.
Jon M. Huntsman Chairman and Chief Executive Officer, Huntsman
Huntsman Chemical Corporation Chemical Corporation, Director of Bankers
2000 Eagle Gate Tower Trust and Bankers Trust New York Corporation.
Salt Lake City, UT 84111 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. Partner, Akin, Gump, Strauss, Hauer & Feld,
Akin, Gump, Strauss, LLP. Director of Bankers Trust and Bankers
Hauer & Feld, LLP Trust New York Corporation. Also a Director of
1333 New Hampshire Ave., N.W. American Express Company, Corning
Washington, DC 20036 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 Chairman of the Executive Committee, Philip
Philip Morris Companies Inc. Morris Companies Inc. Director of Bankers
120 Park Avenue Trust and Bankers Trust New York Corporation.
New York, NY 10017 Director of The News Corporation Limited.
Donald F. McCullough Chairman Emeritus, Collins & Aikman
Collins & Aikman Corporation Corporation. Director of Bankers Trust and
210 Madison Avenue Bankers Trust New York Corporation. Director
New York, NY 10016 of Massachusetts Mutual Life Insurance Co. and
Melville Corporation.
N.J. Nicholas Jr. Former President, Co-Chief Executive Officer
745 Fifth Avenue and Director of Time Warner Inc. Director of
New York, NY 10020 Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Xerox
Corporation.
Russell E. Palmer Chairman and Chief Executive Officer of The
The Palmer Group Palmer Group. Director of Bankers Trust and
3600 Market Street, Bankers Trust New York Corporation. Also
Suite 530 Director of Allied-Signal Inc., Contel
Philadelphia, PA 19104 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 Chairman and Chief Executive Officer,
Schneider S.A. Schneider S.A. Director and member of the
4 Rue de Longchamp European Advisory Board of Bankers Trust and
75116 Paris, France 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. Chairman of the Board of Bankers Trust and
Bankers Trust Company Bankers Trust New York Corporation. Also a
280 Park Avenue Director of Mobil Corporation and J.C. Penney
New York, NY 10017 Company, Inc.
Eugene B. Shanks, Jr. President of Bankers Trust and Bankers Trust
Bankers Trust Company New York Corporation.
280 Park Avenue
New York, NY 10017
Patricia Carry Stewart Former Vice President, The Edna McConnell
c/o Office of the Secretary Clark Foundation. Director of Bankers Trust
280 Park Avenue and Bankers Trust New York Corporation.
New York, NY 10017 Director, Borden Inc., Continental Corp. and
Melville Corporation.
George J. Vojta Vice Chairman of the Board of Bankers Trust
Bankers Trust Company and Bankers Trust New York Corporation.
280 Park Avenue Director of Northwest Airlines and Private
New York, NY 10017 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:
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 31st day of July, 1995.
ASSET MANAGEMENT PORTFOLIO
By PHILIP W. COOLIDGE
-------------------------
Philip W. Coolidge
President
<PAGE>
ASSET MANAGEMENT PORTFOLIO
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON
FORM N-1A
Exhibit No. Page
1 Declaration of Trust of the Registrant.
2 By-Laws of the Registrant.
5 Advisory Agreement between the Registrant and Bankers Trust
Company.
17 Financial Data Schedules with respect to the Registrant.2
<PAGE>
ASSET MANAGEMENT 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
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
<PAGE>
DECLARATION OF TRUST
OF
ASSET MANAGEMENT PORTFOLIO
--------------------------
This DECLARATION OF TRUST of the Asset Management 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 Asset Management 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.
"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
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 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 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 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
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
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.
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 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.
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.
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
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 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:
<TABLE>
<CAPTION>
Date of
Name Address Birth
<S> <C> <C>
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
</TABLE>
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 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 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, 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.
(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.
-------------------------------
Philip W. Coolidge
As Trustee and not Individually
-------------------------------
Thomas M. Lenz
As Trustee and not Individually
-------------------------------
Donald S. Rumery
As Trustee and not Individually
<PAGE>
ASSET MANAGEMENT PORTFOLIO
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of
the Declaration of Trust establishing the Asset Management 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 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.
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 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
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 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.
<PAGE>
EXHIBIT 99.5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 8, 1992 by and between ASSET MANAGEMENT
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
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.
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 0.65% 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
(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
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,
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: ASSET MANAGEMENT PORTFOLIO
By:
--------------------------------- ----------------------------------
Philip W. Coolidge
President
Attest: BANKERS TRUST COMPANY
By:
--------------------------------- ----------------------------------
George B. Jackson
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Data extracted from the March 31, 1995
BT Asset management Portfolio Anual Report and is qualified in its entirety by
reference to such Annual Report.
</LEGEND>
<CIK> 0000888569
<NAME> BT ASSET MANAGEMENT PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 99,989,525
<INVESTMENTS-AT-VALUE> 101,692,645
<RECEIVABLES> 462,486
<ASSETS-OTHER> 13,994
<OTHER-ITEMS-ASSETS> 19,295
<TOTAL-ASSETS> 102,188,420
<PAYABLE-FOR-SECURITIES> 5,570,952
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 88,704
<TOTAL-LIABILITIES> 5,659,656
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,617,119
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,911,645
<NET-ASSETS> 96,528,764
<DIVIDEND-INCOME> 1,249,032
<INTEREST-INCOME> 2,633,639
<OTHER-INCOME> 0
<EXPENSES-NET> 531,827
<NET-INVESTMENT-INCOME> 3,350,844
<REALIZED-GAINS-CURRENT> (85,052)
<APPREC-INCREASE-CURRENT> 3,010,076
<NET-CHANGE-FROM-OPS> 6,275,868
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 60,245,582
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 576,146
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 700,986
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
