As filed via EDGAR with the Securities and Exchange Commission
on February 28, 1997.
File No. 811-7394
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 6
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
INTERNATIONAL EQUITY PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, New York, 10178
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number, including Area Code: (212) 492-1600
George Martinez, Esq.
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
(Name and Address of Agent for Service)
Copies to:
Niall O'Toole, Esq. Gary Schpero, Esq.
The Chase Manhattan Bank Simpson Thacher & Bartlett
270 Park Avenue 425 Lexington Avenue
New York, New York 10017 New York, New York 10017
==============================================================================
<PAGE>
EXPLANATORY NOTE
This Registration Statement of International Equity Portfolio has been
filed by the Registrant pursuant to Section 8(b) of the Investment Company Act
of 1940, as amended (the "1940 Act"). However, beneficial interests in the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "1933 Act"), since such interests will be offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in 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.
<PAGE>
PART A
Responses to Items 1 through 3 have been omitted pursuant to paragraph 4 of
Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
- -------------------------------------------
International Equity Portfolio (the "Portfolio") is a non-diversified,
open-end management investment company which was organized in the United States
as a trust under the laws of the State of New York on November 18, 1992.
Beneficial interests in the Portfolio are offered solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in 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 Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser
(the "Adviser") and Administrator (the "Administrator"). The address of Chase is
270 Park Avenue, New York, New York 10017. Chase Asset Management (London)
Limited ("CAM London") is the Portfolio's investment sub-adviser (the
"Sub-adviser"). The address of CAM London is Colvile House, 32 Curzon Street,
London W1Y 8AL.
International Equity Portfolio seeks total return from long-term capital
growth and income. The Portfolio is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
The Portfolio will invest principally (under normal market conditions, at
least 65% of its total assets) in a broad portfolio of marketable equity
securities of established foreign companies organized in countries other than
the U.S, and foreign subsidiaries of U.S. companies participating in foreign
economies. Under normal market conditions, the Portfolio will invest at least
65% of its net assets in equity securities. These will include common stocks,
preferred stocks, securities convertible into common stocks, and warrants to
purchase common stocks.
The Portfolio's advisers seek to identify those countries and industries
where economic and political factors, including currency movements, are likely
to produce above-average growth rates. The Portfolio's advisers attempt to
identify those companies in such countries and industries that are best
positioned and managed to take advantage of these economic and political
factors. The Portfolio will seek to diversify investments broadly among issuers
in various countries and normally to have represented in the Portfolio business
activities of not less than three different countries other than the U.S . The
Portfolio may invest a substantial portion of its assets in one or more of such
countries.
The Portfolio intends to invest in companies based in (or governments
located in) the Far East (including Japan, Hong Kong, Singapore and Malaysia),
Western Europe (including the United Kingdom, Germany, Netherlands, France,
Switzerland, Italy and Spain), Scandinavia, Australia, Canada and such other
areas and countries as the Portfolio's advisers may determine from time to time.
Because the Portfolio invests a large portion of its assets in countries
comprising the Morgan Stanley Capital International Europe, Australia and Far
East Index, which is heavily weighted towards companies based in Japan and the
United Kingdom, a substantial portion of the Portfolio's assets may be invested
in companies based in Japan, the United Kingdom and/or other countries
represented in the Index. However, investments may be made from time to time in
companies in, or governments of, developing countries as well as developed
countries.
The Portfolio's advisers will allocate investments among securities
denominated in the U.S. dollar and currencies of
<PAGE>
foreign countries. The advisers may adjust the Portfolio's exposure to each
currency based on their perception of the most favorable markets and issuers.
The percentage of the Portfolio's assets invested in securities of a particular
country or denominated in a particular currency will vary in accordance with the
advisers' assessment of the relative yield and appreciation potential of such
securities and the current and anticipated relationship of a country's currency
to the U.S. dollar. Fundamental economic strength, earnings growth, quality of
management, industry growth, credit quality and interest rate trends are some of
the principal factors which may be considered by the Portfolio's advisers in
determining whether to increase or decrease the emphasis placed upon a
particular type of security, industry sector, country or currency. Securities
purchased by the Portfolio may be denominated in a currency other than that of
the country in which the issuer is domiciled.
Primary emphasis will be placed on equity securities and securities with
equity features. However, the Portfolio may invest in any type of investment
grade debt security including, but not limited to, other convertible securities,
bonds, notes and other debt securities of foreign governmental and private
issuers, and various derivative securities.
The Portfolio will not invest more than 25% of its net assets in debt
securities denominated in a single currency other than the U.S. dollar, nor will
it invest more than 25% of its net assets in debt securities issued by a single
foreign government or supranational organization.
The Portfolio may invest in securities of companies of various sizes,
including smaller companies whose securities may be more volatile and less
liquid than securities of larger companies. 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 closed-end
investment companies that in turn are authorized to invest in the securities of
such countries.
The Portfolio is classified as a "non-diversified" fund under federal
securities law.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest without
limitation in these instruments. At times when the Portfolio's advisers deem it
advisable to limit the Portfolio's exposure to the equity markets, the Portfolio
may invest up to 20% of its total assets in U.S. Government obligations
(exclusive of any investments in money market instruments). To the extent that
the Portfolio departs from its investment policies during temporary defensive
periods, its investment objective may not be achieved.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in Part B, below.
Depositary Receipts. The Portfolio may invest its assets in securities of
foreign issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depository Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying securities
for purposes of its investment policies. The Portfolio will limit its investment
in Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of investment).
U.S. Government Obligations. U.S. Government obligations include
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. These may include U.S. Government
securities, commercial paper of domestic and foreign
A-2
<PAGE>
issuers and obligations of domestic and foreign banks. Investments in foreign
money market instruments may involve certain risks associated with foreign
investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
Supranational and ECU Obligations. The Portfolio may invest in debt
securities issued by supranational organizations, which include organizations
such as The World Bank, the European Community, the European Coal and Steel
Community and the Asian Development Bank. The Portfolio may also invest in
securities denominated in the ECU, which is a "basket" consisting of specified
amounts of the currencies of certain member states of the European Community.
These securities are typically issued by European governments and supranational
organizations.
Indexed Investments. The Portfolio may invest in instruments which are
indexed to certain specific foreign currency exchange rates. The terms of such
instruments may provide that their principal amounts or just their coupon
interest rates are adjusted upwards or downwards (but not below zero) at
maturity or on established coupon payment dates to reflect changes in the
exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal risk,
but offer the potential for realizing gains as a result of changes in foreign
currency exchange rates.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized at
all times. The Portfolio may purchase securities for delivery at a future date,
which may increase its overall investment exposure and involves a risk of loss
if the zalue of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow money
to buy additional securities, known as "leveraging." The Portfolio may also sell
and simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. The Portfolio may use this practice to generate cash for
shareholder redemptions without selling securities during unfavorable market
conditions. Whenever the Portfolio enters into a reverse repurchase agreement,
it will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including those sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Portfolio would acquire
the right to sell a security at an agreed upon price within a specified period
prior to its maturity date. These transactions involve some risk to the
Portfolio if the other party should default on its obligation and the Portfolio
is delayed or prevented from recovering the collateral or completing the
transaction. A put transaction will increase the cost of the underlying security
and consequently reduce the available yield.
A-3
<PAGE>
Convertible Securities. The Portfolio may invest in convertible securities,
which are securities generally offering fixed interest or dividend yields which
may be converted either at a stated price or stated rate for common or preferred
stock. Although to a lesser extent than with fixed-income securities generally,
the market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
STRIPS. The portfolio may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded principal and interest components of
securities) where the underlying obligation is backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS." The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency and interestrate contracts; and (iv) purchase and sell structured
products, which are instruments designed to restructure or reflect the
characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
its advisers to forecast these factors correctly. Inaccurate forecasts could
expose the Portfolio to a risk of loss. There can be no guarantee that there
will be a correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Portfolio is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. Derivatives transactions not involving hedging may have
speculative characteristics, involve leverage and result in losses that may
exceed the original investment of the Portfolio. There can be no assurance that
a liquid market will exist at a time when the Portfolio seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Portfolio may experience a loss. For additional
information concerning derivatives, related instruments and the associated
risks, see Part B.
Portfolio Turnover. The frequency of the Portfolio's buy and sell
transactions will vary from year to year. The Portfolio's investment policies
may lead to frequent changes in investments, particularly in periods of rapidly
changing market conditions. High portfolio turnover rates would generally result
in higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law.
A-4
<PAGE>
Risk Factors
The net asset value of the beneficial interests of the Portfolio will
fluctuate based on the value of the securities held by the Portfolio. As the
Portfolio invests primarily in equity securities of companies outside the U.S.,
an investment in the Portfolio's beneficial interests involves a higher degree
of risk than an investment in a U.S. equity fund. An investment in the Portfolio
should not be considered a complete investment program and may not be
appropriate for all investors.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio's foreign investments may be influenced
by currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign issuers than U.S. issuers, and they
are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. Foreign securities may
be less liquid and more volatile than comparable U.S. securities. Foreign
settlement procedures and trade regulations may involve certain expenses and
risks. One risk would be the delay in payment or delivery of securities or in
the recovery of the Portfolio's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Portfolio assets, political or financial
instability and diplomatic developments could affect the value of the
Portfolio's investments in certain foreign countries. Foreign laws may restrict
the ability to invest in certain countries or issuers and special tax
considerations will apply to foreign securities. Investments in securities of
issuers based in developing countries entails certain additional risks,
including greater risks of expropriation, taxation by withholding Portfolio
assets, nationalization, and less social, political and economic stability.
The small size of markets for securities of issuers based in such countries
and the low or non-existent volume of trading may result in a lack of liquidity
and in price volatility. Certain national policies may restrict the investment
opportunities, including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests. There may be an absence of
developed legal structures governing private or foreign investment and private
property.
The Portfolio may invest in the securities of smaller companies which,
whether foreign or domestic, often trade less frequently and in lower volume.
Consequently, price changes may be more abrupt or erratic than securities of
larger, more established companies. Such companies may have limited product
lines, markets or financial resources, or may depend on a limited management
group.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
Because the Portfolio is "non-diversified," the value of the Portfolio's
beneficial interests may be more susceptible to developments affecting the
specific companies whose securities are owned by the Portfolio.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
A-5
<PAGE>
Item 5. Management of the Fund.
- --------------------------------
The Portfolio's Board of Trustees provides board supervision over the
affairs of the Portfolio. See "Trustees and Officers" in Item 14 of Part B for a
complete description of the Trustees of the Portfolio.
The Portfolio's Advisers. Chase is the Portfolio's investment adviser under
an Investment Advisory Agreement and has overall responsibility for investment
decisions of the Portfolio, subject to the oversight of the Board of Trustees.
Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank
holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Portfolio,
Chase is entitled to receive an annual fee computed daily and paid monthly based
at an annual rate equal to 1.00% of the Portfolio's average daily net assets.
Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management (London) Limited ("CAM London"), a registered
investment adviser, is the Portfolio's sub-investment adviser under a
Sub-Investment Advisory Agreement between CAM London and Chase. CAM London is a
wholly-owned operating subsidiary of Chase. CAM London makes investment
decisions for the Portfolio on day-to-day basis. For these services CAM London
is entitled to receive an advisory fee, payable by Chase from its advisory fee,
at an annual rate equal to 0.50% of the average daily net assets of the
Portfolio. CAM London was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve a portfolio managers with Chase with respect to the Portfolio also serve
as portfolio managers of CAM London. CAM London is located at Colvile House, 32
Curzon Street, London W1Y 8AL.
Portfolio Managers. Michael Browne and David Webb, Vice Presidents
of Chase, are responsible for the day-to-day management of the Portfolio. Mr.
Browne is responsible for investment management and equity research for European
equities. Mr. Browne joined Chase in 1994. Prior to joining Chase, Mr. Browne
was Assistant Director of European equity fund management at BZW Investment
Management in London. Mr. Webb is responsible for investment management and
equity research in the Asia region. Mr. Webb joined Chase in 1992. Prior to
joining Chase, Mr. Webb was with Hambros Bank Limited where he was responsible
for the management of the Hambros Equus Pacific Trust and Hambros Japan Trust.
Administrator. Chase acts as the administrator for the Portfolio and is
entitled to receive from the Portfolio a fee computed daily and paid monthly at
an annual rate equal to 0.05% of its average daily net assets.
A-6
<PAGE>
Expenses. The Portfolio pays the expenses incurred in its operations. These
expenses include investment advisory and administrative fees; the compensation
of the Trustees; registration fees; interest charges; taxes; expenses connected
with the execution, recording and settlement of security transactions; fees and
expenses of the Portfolio's custodian for all services to the Portfolio,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees and
expenses of independent accountants, of legal counsel and of any transfer agent,
registrar or dividend disbursing agent of the Portfolio; insurance premiums; and
expenses of calculating the net asset value of, and the net income on,
beneficial interests in the Portfolio. Service providers to the Portfolio may,
from time to time, voluntarily waive all or a portion of any fees to which they
are entitled.
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 Portfolio's 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 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. Investors have
the right to communicate with other investors to the extent provided in Section
16(c) of the 1940 Act in connection with requesting a meeting of investors for
the purpose of removing one or more Trustees, which removal requires a
two-thirds vote of the Portfolio's beneficial interests. Investors also have
under certain circumstances the right to remove one or more Trustees without a
meeting. 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.
A-7
<PAGE>
The Portfolio does not intend to distribute to its investors its net
investment income or its net realized capital gains, if any. The end of the
Portfolio's fiscal year is October 31.
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 taxable income, gain, loss,
deductions and credits 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.
Investor inquiries may be directed to the Portfolio's exclusive placement
agent, Signature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston, MA
02116.
Item 7. Purchase of Securities Being Offered.
- ----------------------------------------------
Beneficial interests in the Portfolio are issued solely in private
placement transactions which 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 in U.S. dollars without a sales
load at the net asset value next determined after an order is received in "good
order" by the Portfolio. There is no minimum initial or subsequent investment in
the Portfolio. No money may be paid to any intermediary in Hong Kong who is not
a dealer or exempt dealer.
The Portfolio reserves the right to cease accepting investments at any time
or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day the New York Stock Exchange is open for trading. At the
close of regular trading on the New York Stock Exchange on each such day
(normally 4:00 p.m., Eastern time; however, options are priced at 4:15 p.m.
Eastern time), 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, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected as of the close of regular trading on such
day, will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of regular trading on such day plus
or minus, as the case may be, the amount of net additions to or reductions in
the investor's investment in the Portfolio effected as of that time, and (ii)
the denominator of which is the aggregate net asset value of the Portfolio as of
that time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in 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 regular trading on the following day the New York Stock Exchange is open for
trading.
Item 8. Redemption or Repurchase.
- ----------------------------------
An investor in the Portfolio may reduce any portion or all of its
investment at any time without charge at the net asset value next determined
after a request in "good order" is furnished by the investor to the Portfolio.
A-8
<PAGE>
The proceeds of a reduction will be paid in U.S. dollars by the Portfolio
normally on the next business day after the reduction is effected, but in any
event within seven days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any reduction
may be suspended or the payment of the proceeds therefrom postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on such Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
- -----------------------------------
Not applicable.
A-9
<PAGE>
PART B
Item 10. Cover Page.
- ---------------------
Not applicable.
Item 11. Table of Contents.
- ----------------------------
Page
General Information and History............................B-1
Investment Objective and Policies..........................B-1
Management of the Portfolio................................B-16
Control Persons and Principal Holders of Securities........B-19
Investment Advisory and Other Services.....................B-19
Brokerage Allocation and Other Practices...................B-21
Capital Stock and Other Securities.........................B-24
Purchase, Redemption and Pricing of Securities.............B-25
Tax Status.................................................B-27
Underwriters...............................................B-28
Calculation of Performance Data............................B-28
Financial Statements.......................................B-28
Item 12. General Information and History.
- ------------------------------------------
Not applicable.
Item 13. Investment Objective and Policies.
- --------------------------------------------
Part A sets forth the investment objective and various investment policies
of International Equity Portfolio (the "Portfolio"). This Part B supplements and
should be read in conjunction with the related section of Part A. For
descriptions of the securities ratings of Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P") and Fitch Investors Service,
Inc. ("Fitch"), see Appendix B.
Investment Policies
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities of
one year or less), U.S. Treasury notes (maturities of one to ten years) and U.S.
Treasury bonds (generally maturities of greater than ten years); and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow any
amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the U.S. Government agency or instrumentality or (d) the credit of the agency
or instrumentality. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Student Loan Marketing Association, United States
Postal Service, Chrysler Corporate Loan Guarantee Board, Small Business
Administration, Tennessee Valley Authority and any other enterprise established
or sponsored by the U.S. Government. Certain U.S. Government Securities,
including U.S. Treasury bills, notes and bonds, Government National Mortgage
Association certificates and Federal Housing Administration debentures, are
supported by the full faith and credit of the United States. Other U.S.
Government Securities are issued or guaranteed by federal agencies or government
sponsored enterprises and are not supported by the full faith and credit of the
United States. These securities include obligations that are supported by the
right of the issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan
<PAGE>
Banks, and obligations that are supported by the creditworthiness of the
particular instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small Business
Administration, Federal Aviation Administration, Department of Defense, Bureau
of Indian Affairs and Private Export Funding Corporation, which often provide
higher yields than are available from the more common types of government-backed
instruments. However, such specialized instruments may only be available from a
few sources in limited amounts, or only in very large denominations; they may
also require specialized capability in portfolio servicing and in legal matters
related to government guarantees. While they may frequently offer attractive
yields, the limited-activity markets of many of these securities means that, if
the Portfolio were required to liquidate any of them, it might not be able to do
so advantageously; accordingly, the Portfolio investing in such securities
normally to hold such securities to maturity or pursuant to repurchase
agreements, and would treat such securities (including repurchase agreements
maturing in more than seven days) as illiquid for purposes of its limitation on
investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation, and foreign banks (including their
U.S. branches) having total assets in excess of $10 billion (or the equivalent
in other currencies), and such other U.S. and foreign commercial banks which are
judged by the advisers to meet comparable credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit is
a short-term negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased on a discount
basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by
a borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Fixed time
deposits are obligations of branches of United States banks or foreign banks
which are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. Fixed time deposits subject to withdrawal penalties and with
respect to which the Portfolio cannot realize the proceeds thereon within seven
days are deemed "illiquid" for the purposes of its restriction on investments in
illiquid securities. Deposit notes are notes issued by commercial banks which
generally bear fixed rates of interest and typically have original maturities
ranging from eighteen months to five years.
Banks are subject to extensive governmental regulations that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations or
by government regulation. Investors should also be aware that securities of
foreign banks and foreign branches of
B-2
<PAGE>
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
Depositary Receipts. The Portfolio will limit its investment in Depository
Receipts not sponsored by the issuer of the underlying security to no more than
5% of the value of its net assets (at the time of investment). A purchaser of an
unsponsored Depositary Receipt may not have unlimited voting rights and may not
receive as much information about the issuer of the underlying securities as
with a sponsored Depositary Receipt.
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.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of ECU-denominated
securities or the marketability of such securities.
Supranational Obligations. Supranational organizations include
organizations such as The World Bank, which was chartered to finance development
projects in developing member countries; the European Community, which is a
twelve-nation organization engaged in cooperative economic activities; the
European Coal and Steel Community, which is an economic union of various
European nations steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations of the Asian and
Pacific regions.
Repurchase Agreements. The Portfolio will enter into repurchase agreements
only with member banks of the Federal Reserve System and securities dealers
believed creditworthy, and only if fully collateralized by securities in which
the Portfolio is permitted to invest. Under the terms of a typical repurchase
agreement, the Portfolio would acquire an underlying instrument for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase the instrument and the Portfolio to resell the instrument
at a fixed price and time, thereby determining the yield during the Portfolio's
holding period. This procedure results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
are considered under the 1940 Act to be loans collateralized by the underlying
securities. All repurchase agreements entered into by the Portfolio will be
fully collateralized at all times during the period of the agreement in that the
value of the underlying security will be at least equal to the amount of the
loan, including the accrued interest thereon, and the Portfolio or its custodian
or sub-custodian will have possession of the collateral, which the Board of
Trustees believes will give it a valid, perfected security interest in the
collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been conclusively established. This
might become an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities would not be
owned by the Portfolio, but would only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Portfolio may suffer time
delays and incur costs in connection with the disposition of the collateral. The
Board of Trustees believes that the collateral underlying repurchase agreements
may be more susceptible to claims of the seller's creditors than would be the
case with securities owned by the Portfolio. Repurchase agreements maturing in
more than seven days are treated as illiquid for purposes of the Portfolio's
restrictions on purchases of illiquid
B-3
<PAGE>
securities. Repurchase agreements are also subject to the risks described
below with respect to stand-by commitments.
Reverse Repurchase Agreements. Reverse Repurchase Agreements involve the
sale of securities held by the Portfolio with an agreement to repurchase the
securities at an agreed upon price and date. The repurchase price is generally
equal to the original sales price plus interest. Reverse repurchase agreements
are usually for seven days or less and cannot be repaid prior to their
expiration dates. Reverse repurchase agreements involve the risk that the market
value of the portfolio securities transferred may decline below the price at
which the Portfolio is obliged to purchase the securities.
Forward Commitments. In order to invest the Portfolio's assets immediately,
while awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will normally
be purchased. When a commitment to purchase a security on a forward commitment
basis is made, procedures are established consistent with the General Statement
of Policy of the Securities and Exchange Commission concerning such purchases.
Since that policy currently recommends that an amount of the Portfolio's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, a separate account of the Portfolio consisting of cash
or liquid securities equal to the amount of the Portfolio's commitments
securities will be established at the Portfolio's custodian bank. For the
purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market value. If the market value of such
securities declines, additional cash, cash equivalents or highly liquid
securities will be placed in the account daily so that the value of the account
will equal the amount of such commitments by the Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the Portfolio's portfolio
are subject to changes in value based upon the public's perception of the issuer
and changes, real or anticipated, in the level of interest rates. Purchasing
securities on a forward commitment basis can involve the risk that the yields
available in the market when the delivery takes place may actually be higher or
lower than those obtained in the transaction itself. On the settlement date of
the forward commitment transaction, the Portfolio will meet its obligations from
then available cash flow, sale of securities held in the separate account, sale
of other securities or, although it would not normally expect to do so, from
sale of the forward commitment securities themselves (which may have a value
greater or lesser than the Portfolio's payment obligations). The sale of
securities to meet such obligations may result in the realization of capital
gains or losses.
To the extent the Portfolio engages in forward commitment transactions, it
will do so for the purpose of acquiring securities consistent with its
investment objective and policies and not for the purpose of investment
leverage, and settlement of such transactions will be within 90 days from the
trade date.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants but normally have a shorter duration and are distributed
directly by the issuer to shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, the Portfolio may elect to treat as liquid, in accordance
with procedures established by the Board of Trustees, certain investments in
restricted securities for which there may be a secondary market of qualified
institutional buyers as contemplated by Rule
B-4
<PAGE>
144A under the Securities Act of 1933, as amended (the "Securities Act") and
commercial obligations issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act.
("Section 4(2) paper") Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers. Section 4(2) paper is restricted
as to disposition under the federal securities laws, and generally is sold to
institutional investors such as the Portfolio who agree that they are purchasing
the paper for investment and not with a view to public distribution. Any resale
of Section 4(2) paper by the purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid market
for Rule 144A securities or Section 4(2) paper will develop or be maintained.
The Trustees have adopted policies and procedures for the purpose of determining
whether securities that are eligible for resale under Rule 144A and Section 4(2)
paper are liquid or illiquid for purposes of the limitation on investment in
illiquid securities. Pursuant to those policies and procedures, the Trustees
have delegated to the advisers the determination as to whether a particular
instrument is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell and security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature of
the security and the time needed to dispose of the security. The Trustees will
periodically review the Portfolio's purchases and sales of Rule 144A securities
and Section 4(2) paper.
Stand-By Commitments. In a put transaction, the Portfolio acquires the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date, and a stand-by commitment entitles the Portfolio to
same-day settlement and to receive an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. Stand-by commitments are subject to certain risks, which include the
inability of the issuer of the commitment to pay for the securities at the time
the commitment is exercised, the fact that the commitment is not marketable by
the Portfolio, and that the maturity of the underlying security will generally
be different from that of the commitment.
Securities Loans. To the extent specified in Part A, the Portfolio is
permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of the Portfolio's total assets. In
connection with such loans, the Portfolio will receive collateral consisting of
cash, cash equivalents, U.S. Government securities or irrevocable letters of
credit issued by financial institutions. Such collateral will be maintained at
all times in an amount equal to at least 102% of the current market value plus
accrued interest of the securities loaned. The Portfolio can increase its income
through the investment of such collateral. The Portfolio continues to be
entitled to the interest payable or any dividend-equivalent payments received on
a loaned security and, in addition, to receive interest on the amount of the
loan. However, the receipt of any dividend-equivalent payments by the Portfolio
on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with the Portfolio. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delays in
receiving additional collateral or in the recovery of the securities or possible
loss of rights in the collateral should the borrower experience financial
difficulty. Loans will be made only to firms deemed by the advisers to be of
good standing and will not be made unless, in the judgment of the advisers, the
consideration to be earned from such loans justifies the risk.
B-5
<PAGE>
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Portfolio may employ
derivative and related instruments as tools in the management of portfolio
assets. Put briefly, a " derivative" instrument may be considered a security or
other instrument which derives its value from the value or performance of other
instruments or assets, interest or currency exchange rates, or indexes. For
instance, derivatives include futures, options, forward contracts, structured
notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: First,
to reduce risk by hedging (offsetting) an investment position. Second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for the Portfolio.
The Portfolio may invest its assets in derivative and related instruments
subject only to the Portfolio's investment objective and policies and the
requirement that the Portfolio maintain segregated accounts consisting of cash
or other liquid assets (or, as permitted by applicable regulation, enter into
certain offsetting positions) to cover its obligations under such instruments
with respect to positions where there is no underlying portfolio asset so as to
avoid leveraging the Portfolio.
The value of some derivative or similar instruments in which the Portfolio
may invest may be particularly sensitive to changes in prevailing interest rates
or other economic factors, and--like other investments of the Portfolio--the
ability of the Portfolio to successfully utilize these instruments may depend in
part upon the ability of the advisers to forecast interest rates and other
economic factors correctly. If the advisers inaccurately forecast such factors
and have taken positions in derivative or similar instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of a loss.
The Portfolio may not employ any or all of the strategies described herein, and
no assurance can be given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies and
related instruments the Portfolio may employ along with risks or special
attributes associated with them. This discussion is intended to supplement Part
A as well as provide useful information to prospective investors.
Risk Factors
As explained more fully below and in the discussions of particular
strategies or instruments, there are a number of risks associated with the use
of derivatives and related instruments: There can be no guarantee that there
will be a correlation between price movements in a hedging vehicle and in the
portfolio assets being hedged. An incorrect correlation could result in a loss
on both the hedged assets in the Portfolio and the hedging vehicle so that the
portfolio return might have been greater had hedging not been attempted. This
risk is particularly acute in the case of "cross-hedges" between currencies. The
advisers may inaccurately forecast interest rates, market values or other
economic factors in utilizing a derivatives strategy. In such a case, the
Portfolio may have been in a better position had it not entered into such
strategy. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains. Strategies not involving hedging may increase
the risk to the
B-6
<PAGE>
Portfolio. Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Portfolio than hedging
strategies using the same instruments.
There can be no assurance that a liquid market will exist at a time when
the Portfolio seeks to close out an option, futures contract or other derivative
or related position. Many exchanges and boards of trade limit the amount of
fluctuation permitted in option or futures contract prices during a single day;
once the daily limit has been reached on particular contract, no trades may be
made that day at a price beyond that limit. In addition, certain instruments are
relatively new and without a significant trading history. As a result, there is
no assurance that an active secondary market will develop or continue to exist.
Finally, over-the-counter instruments typically do not have a liquid market.
Lack of a liquid market for any reason may prevent the Portfolio from
liquidating an unfavorable position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in these markets. In certain
instances, particularly those involving over-the-counter transactions, forward
contracts, foreign exchanges or foreign boards of trade, there is a greater
potential that a counterparty or broker may default or be unable to perform on
its commitments. In the event of such a default, the Portfolio may experience a
loss. In transactions involving currencies, the value of the currency underlying
an instrument may fluctuate due to many factors, including economic conditions,
interest rates, governmental policies and market forces.
Specific Uses and Strategies
Set forth below are explanations of various strategies involving
derivatives and related instruments which may be used by the Portfolio.
Options on Securities, Securities Indexes, Currencies and Debt Instruments.
The Portfolio may PURCHASE, SELL or EXERCISE call and put options on:
securities; securities indexes; currencies; or debt instruments.
Although in most cases these options will be exchange-traded, the Portfolio
may also purchase, sell or exercise over-the-counter options. Over-the-counter
options differ from exchange-traded options in that they are two-party contracts
with price and other terms negotiated between buyer and seller. As such,
over-the-counter options generally have much less market liquidity and carry the
risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Portfolio intends to purchase pending its
ability to invest in such securities in an orderly manner. The Portfolio may
also use combinations of options to minimize costs, gain exposure to markets or
take advantage of price disparities or market movements. For example, the
Portfolio may sell put or call options it has previously purchased or purchase
put or call options it has previously sold. These transactions may result in a
net gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call option
which is sold. The Portfolio may write a call or put option in order to earn the
related premium from such transactions. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of a similar option.
The Portfolio will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, the
Portfolio writing a covered call (i.e., where the underlying securities are held
by the Portfolio) has, in return for the premium on the option, given up the
opportunity to profit from a price
B-7
<PAGE>
increase in the underlying securities above the exercise price, but has retained
the risk of loss should the price of the underlying securities decline. The
writer of an option has no control over the time when it may be required to
fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction in
order to terminate its obligation under the option and must deliver the
underlying securities at the exercise price.
If a put or call option purchased by the Portfolio is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price or, in the case of
a call, remains less than or equal to the exercise price, the Portfolio will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when the Portfolio seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, the Portfolio may be unable to close out a position.
Futures Contracts and Options on Futures Contracts. The Portfolio may
purchase or sell: interest-rate futures contracts; stock index futures
contracts; foreign currency futures contracts; futures contracts on specified
instruments or indices; and options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
instruments or indices in which the Portfolio may invest such as foreign
currencies, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For example,
the Portfolio may sell a futures contract--or buy a futures option--to protect
against a decline in value, or reduce the duration, of portfolio holdings.
Likewise, these instruments may be used where the Portfolio intends to acquire
an instrument or enter into a position. For example, the Portfolio may purchase
a futures contract--or buy a futures option--to gain immediate exposure in a
market or otherwise offset increases in the purchase price of securities or
currencies to be acquired in the future. Futures options may also be written to
earn the related premiums.
When writing or purchasing options, the Portfolio may simultaneously enter
into other transactions involving futures contracts or futures options in order
to minimize costs, gain exposure to markets, or take advantage of price
disparities or market movements. Such strategies may entail additional risks in
certain instances. The Portfolio may engage in cross-hedging by purchasing or
selling futures or options on a security or currency different from the security
or currency position being hedged to take advantage of relationships between the
two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Portfolio
will only enter into futures contracts or options or futures contracts which are
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system.
Forward Contracts. The Portfolio may use foreign currency and interest-rate
forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest
B-8
<PAGE>
rates and other complex factors, as seen from an international perspective. The
Portfolio may invest in securities denominated in foreign currencies and may, in
addition to buying and selling foreign currency futures contracts and options on
foreign currencies and foreign currency futures, enter into forward foreign
currency exchange contracts to reduce the risks or otherwise take a position in
anticipation of changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be a fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency contract, the Portfolio "locks in"
the exchange rate between the currency it will deliver and the currency it will
receive for the duration of the contract. As a result, the Portfolio reduces its
exposure to changes in the value of the currency it will deliver and increases
its exposure to changes in the value of the currency it will exchange into. The
effect on the value of the Portfolio is similar to selling securities
denominated in one currency and purchasing securities denominated in another.
Transactions that use two foreign currencies are sometimes referred to as
"cross-hedges."
The Portfolio may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from investments or anticipated
investments in securities denominated in foreign currencies. The Portfolio may
also enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another.
The Portfolio may also use forward contracts to hedge against changes in
interest-rates, increase exposure to a market or otherwise take advantage of
such changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future date.
Interest Rate and Currency Transactions. The Portfolio may employ currency
and interest rate management techniques, including transactions in options
(including yield curve options), futures, options on futures, forward foreign
currency exchange contracts, currency options and futures and currency and
interest rate swaps. The aggregate amount of the Portfolio's net currency
exposure will not exceed the total net asset value of its portfolio. However, to
the extent that the Portfolio is fully invested while also maintaining currency
positions, it may be exposed to greater combined risk.
The Portfolio will only enter into interest rate and currency swaps on a
net basis, i.e., the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate and currency swaps do not involve the delivery of
securities, the underlying currency, other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate and currency swaps
is limited to the net amount of interest or currency payments that the Portfolio
is contractually obligated to make. If the other party to an interest rate or
currency swap defaults, the Portfolio's risk of loss consists of the net amount
of interest or currency payments that the Portfolio is contractually entitled to
receive. Since interest rate and currency swaps are individually negotiated, the
Portfolio expects to achieve an acceptable degree of correlation between their
portfolio investments and their interest rate or currency swap positions.
The Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
The Portfolio may purchase or sell without limitation as to a percentage of
its assets forward foreign currency exchange contracts when the advisers
anticipate that the foreign currency will appreciate or depreciate in value, but
securities denominated in that currency do not present attractive
B-9
<PAGE>
investment opportunities and are not held by the Portfolio. In addition, the
Portfolio may enter into forward foreign currency exchange contracts in order to
protect against adverse changes in future foreign currency exchange rates. The
Portfolio may engage in cross-hedging by using forward contracts in one currency
to hedge against fluctuations in the value of securities denominated in a
different currency if its advisers believe that there is a pattern of
correlation between the two currencies. 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 will
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.
The Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. The Portfolio will typically use
interest rate swaps to shorten the effective duration of its portfolio. Interest
rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Currency swaps involve the exchange of
their respective rights to make or receive payments in specified currencies.
Structured Products. The Portfolio may invest in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of certain other investments. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, or specified instruments (such as commercial bank loans) and the issuance
by that entity of one or more classes of securities ("structured products")
backed by, or representing interests in, the underlying instruments. The cash
flow on the underlying instruments may be apportioned among the newly issued
structured products to create securities with different investment
characteristics such as varying maturities, payment priorities and interest rate
provisions, and the extent of the payments made with respect to structured
products is dependent on the extent of the cash flow on the underlying
instruments. The Portfolio may invest in structured products which represent
derived investment positions based on relationships among different markets or
asset classes.
The Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by a
formula to the price of an underlying instrument. Inverse floaters have coupon
rates that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost of
Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in
B-10
<PAGE>
the coupon rate while any drop in the reference rate of an inverse floater
causes an increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities . When the Portfolio invests in notes linked to the
price of an underlying instrument, the price of the underlying security is
determined by a multiple (based on a formula) of the price of such underlying
security. A structured product may be considered to be leveraged to the extent
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. Because they are linked to their underlying
markets or securities, investments in structured products generally are subject
to greater volatility than an investment directly in the underlying market or
security. Total return on the structured product is derived by linking return to
one or more characteristics of the underlying instrument. Because certain
structured products of the type in which the Portfolio may invest may involve no
credit enhancement, the credit risk of those structured products generally would
be equivalent to that of the underlying instruments. The Portfolio may invest in
a class of structured products that is either subordinated or unsubordinated to
the right of payment of another class. Subordinated structured products
typically have higher yields and present greater risks than unsubordinated
structured products. Although the Portfolio's purchase of subordinated
structured products would have similar economic effect to that of borrowing
against the underlying securities, the purchase will not be deemed to be
leverage for purposes of the Portfolio's fundamental investment limitation
related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, an investment in these
structured products may be limited by the restrictions contained in the 1940
Act. Structured products are typically sold in private placement transactions,
and there currently is no active trading market for structured products. As a
result, certain structured products in which the Portfolio invests may be deemed
illiquid and subject to its limitation on illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there currently is no active trading market for structured
products.
Additional Restrictions on the Use of Futures and Option Contracts
The Portfolio is not a "commodity pool" (i.e., a pooled investment vehicle
which trades in commodity futures contracts and options thereon and the operator
of which is registered with the CFTC) and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that the Portfolio may enter into such transactions for purposes other
than bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5% of
the liquidation value of the Portfolio's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation. When the Portfolio purchases a
futures contract, an amount of cash or cash equivalents or high quality debt
securities will be deposited in a segregated account with the Portfolio's
custodian so that the amount so segregated, plus the initial deposit and
variation margin held in the account of its broker, will at all times equal the
value of the futures contract, thereby insuring that the use of such futures is
unleveraged.
The Portfolio's ability to engage in the transactions described herein may
be limited by the current federal income tax requirement that the Portfolio
derives less than 30% of its gross income from the sale or other disposition of
stock or securities held for less than three months.
B-11
<PAGE>
Investment Restrictions
The Portfolio has adopted the following investment restrictions which may
not be changed without approval by a "majority of the outstanding shares" of the
Portfolio which, as used in this Part B, means the vote of the lesser of (i) 67%
or more of the total beneficial interests of the Portfolio present at a meeting,
if the holders of more than 50% of the outstanding total beneficial interests of
the Portfolio are present or represented by proxy, or (ii) more than 50% of the
outstanding total beneficial interests of the Portfolio.
The Portfolio may not:
(1) borrow money, except that the Portfolio may borrow money for temporary
or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its
total assets at the time when the loan is made and may pledge,
mortgage or hypothecate no more than 1/3 of its net assets to secure
such borrowings. Any borrowings representing more than 5% of total
assets must be repaid before the Portfolio may make additional
investments;
(2) make loans, except that the Portfolio may: (i) purchase and hold debt
instruments (including without limitation, bonds, notes, debentures or
other obligations and certificates of deposit, bankers' acceptances
and fixed time deposits) in accordance with its investment objectives
and policies; (ii) enter into repurchase agreements with respect to
portfolio securities; and (iii) lend portfolio securities with a value
not in excess of one-third of the value of its total assets;
(3) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of Portfolio's total assets would be invested in
the securities of companies whose principal business activities are in
the same industry. Notwithstanding the foregoing, with respect to the
Portfolio's permissible futures and options transactions in U.S.
Government securities, positions in such options and futures shall not
be subject to this restriction;
(4) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments but this shall not
prevent the Portfolio from (i) purchasing or selling options and
futures contracts or from investing in securities or other instruments
backed by physical commodities or (ii) engaging in forward purchases
or sales of foreign currencies or securities; -
(5) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the
Portfolio from investing in securities or other instruments backed by
real estate or securities of companies engaged in the real estate
business). Investments by the Portfolio in securities backed by
mortgages on real estate or in marketable securities of companies
engaged in such activities are not hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except that
(a) the Portfolio may engage in transactions that may result in the
issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order;
(b) the Portfolio may acquire other securities, the acquisition
B-12
<PAGE>
of which may result in the issuance of a senior security, to the
extent permitted under applicable regulations or interpretations of
the 1940 Act; and (c) subject to the restrictions set forth above, the
Portfolio may borrow money as authorized by the 1940 Act. For purposes
of this restriction, collateral arrangements with respect to
permissible options and futures transactions, including deposits of
initial and variation margin, are not considered to be the issuance of
a senior security; or
(7) underwrite securities issued by other persons except insofar as the
Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.
For purposes of investment restriction (5) above, real estate includes Real
Estate Limited Partnerships. For purposes of investment restriction (3) above,
industrial development bonds, where the payment of principal and interest is the
ultimate responsibility of companies within the same industry, are grouped
together as an "industry." Investment restriction (3) above, however, is not
applicable to investments in municipal obligations where the issuer is regarded
as a state, city, municipality or other public authority since such entities are
not members of an industry. Supranational organizations are collectively
considered to be members of a single "industry" for purposes of restriction (3)
above.
In addition, the Portfolio is subject to the following nonfundamental
restrictions which may be changed without investor approval:
(1) The Portfolio may not, with respect to 50% of its assets, hold more
than 10% of the outstanding voting securities of an issuer.
(2) The Portfolio may not make short sales of securities,other than short
sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment program of the Portfolio.
(3) The Portfolio may not purchase or sell interests in oil, gas or
mineral leases.
(4) The Portfolio may not invest more than 15% of its net assets in
illiquid securities.
(5) The Portfolio may not write, purchase or sell any put or call option
or any combination thereof, provided that this shall not prevent (i)
the writing, purchasing or selling of puts, calls or combinations
thereof with respect to portfolio securities or (ii) with respect to
the Portfolio's permissible futures and options transactions, the
writing, purchasing, ownership, holding or selling of futures and
options positions or of puts, calls or combinations thereof with
respect to futures.
(6) Except as specified above, the Portfolio may invest up to 5% of its
total assets in the securities of any one investment company, but may
not own more than 3% of the securities of any one investment company
or invest more than 10% of its total assets in the securities of other
investment companies.
It is the Portfolio's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Portfolio has been
advised that the staff of the Securities and Exchange Commission's Division of
Investment Management does not consider these to be United States Government
securities, as defined under the Investment Company Act of 1940, as amended.
B-13
<PAGE>
For purposes of the Portfolio's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
In order to permit the sale of its beneficial interests in certain states,
the Portfolio may make commitments more restrictive than the investment policies
and limitations described above and in Part A. Should the Portfolio determine
that any such commitment is no longer in its best interests, it will revoke the
commitment by terminating sales of its beneficial interests in the state
involved. In order to comply with certain regulatory policies, as a matter of
operating policy, the Portfolio will not: (i) invest more than 5% of its assets
in companies which, including predecessors, have a record of less than three
years' continuous operation, (ii) invest in warrants, valued at the lower of
cost or market, in excess of 5% of the value of its net assets, and no more than
2% of such value may be warrants which are not listed on the New York or
American Stock Exchanges, or (iii) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Portfolio, or is an officer or
director of the Adviser, if after the purchase of the securities of such issuer
by 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.
If a percentage or rating restriction on investment or use of assets set
forth herein or in Part A is adhered to at the time a transaction is effected,
later changes in percentage resulting from any cause other than actions by the
Portfolio will not be considered a violation . If the value of the Portfolio's
holdings of illiquid securities at any time exceeds the percentage limitation
applicable at the time of acquisition due to subsequent fluctuations in value or
other reasons, the Board of Trustees will consider what actions, if any, are
appropriate to maintain adequate liquidity.
Item 14. Management of the Portfolio.
- --------------------------------------
The Trustees and officers of the Portfolio and their principal occupations
for at least the past five years are set forth below. Their titles may have
varied during that period.
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- -------------------------- -------------------------------
Stuart W. Cragin, Jr. Trustee. Retired; formerly, President,
Trustee Fairfield Testing Laboratory, Inc. He has
108 Valley Road previously served in a variety of
Cos Cob, CT 06807 marketing, manufacturing and general
Age: 63 management positions with Union Camp
Corp., Trinity Paper & Plastics Corp., and
Conover Industries.
B-14
<PAGE>
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- --------------------------- ----------------------------------------------
Irving L. Thode Trustee. Retired; Vice President of
Trustee Quotron Systems. He has previously served
80 Perkins Road in a number of executive positions with
Greenwich, CT 06830 Control Data Corp., including President of
Age: 66 its Latin American Operations, and General
Manager of its Data Services business.
H. Richard Vartabedian* Trustee and President. Consultant,
Chairman Republic Bank of New York; formerly,
P.O. Box 296, Beach Road, Senior Investment Officer, Division
Hendrick's Head Executive of the Investment Management
Southport, ME 04576 Division of The Chase Manhattan Bank,
Age: 61 N.A., 1980 through 1991.
Fergus Reid, III Trustee and Chairman.
Trustee Chairman and Chief Executive
202 June Road Officer, Lumelite Corporation, since
Stamford, CT 06903 September 1985; Trustee, Morgan Stanley
Age: 64 Portfolios.
Joseph J. Harkins* Trustee. Retired; Commercial Sector
Trustee Executive and Executive Vice President of
257 Plantation Circle South The Chase Manhattan Bank, N.A. from 1985
Ponte Vedra Beach, FL 32082 through 1989. He was employed by Chase in
Age: 65 numerous capacities and offices from 1954
through 1989. Director of Blessings
Corporation, Jefferson Insurance Company
of New York, Monticello Insurance Company
and National.
Richard E. Ten Haken Trustee. Former District Superintendent
Trustee of Schools, Monroe No. 2 and Orleans
4 Barnfield Road Counties, New York; Chairman of the Board
Pittsfield, NY 14534 and President, New York State Teachers'
Age: 62 Retirement System.
William J. Armstrong Trustee. Vice President and Treasurer,
Trustee Ingersoll-Rand Company.
49 Aspen Way
Upper Saddle River, NJ 07458
Age: 55
John R.H. Blum Trustee. Attorney in private practice;
Trustee formerly, partner in the law firm of
332 Main Street Richards, O'Neil & Allegaert; Commissioner
Lakeville, CT 06039 of Agriculture, State of Connecticut,
Age: 67 1992-1995.
W. Perry Neff* Trustee. Independent Financial Consultant;
Trustee Director of North America Life Assurance
RR 1 Box 102 Co., Petroleum & Resources Corp. and The
Weston, VT 05181 Adams Express Co.; formerly Director and Chairman
Age: 69 of The Hanover Funds Inc.; formerly Director,
Chairman and President of The Hanover
Investments Funds Inc.
B-15
<PAGE>
Names, Position(s) with the Principal Occupations and Business
Portfolio, Address and Age Experience for the Past 5 Years
- --------------------------- ----------------------------------------------
Roland R. Eppley, Jr. Trustee. Retired; formerly President and
Trustee Chief Executive Officer, Eastern States
105 Coventry Place Bankcard Association Inc. (1971-1988);
Palm Beach Gardens, FL Director, Janel Hydraulics, Inc.; formerly
33418. Director of The Hanover Funds, Inc.
Age: 64
W.D. MacCallan Trustee. Director of The Adams Express Co.
Trustee and Petroleum & Resources Corp.; formerly
624 East 45th Street Chairman of the Board and Chief Executive
Savannah, GA 31405 Officer of The Adams Express Co. and
Age: 69 Petroleum & Resources Corp.; formerly Director of
The Hanover Funds, Inc. and The Hanover
Investment Funds, Inc.
W. Anthony Turner Senior Vice President and Regional Client
Secretary Executive, BISYS Fund Services; formerly
125 W. 55th Street Senior Vice President, First Union Brokerage
New York, NY 10019 Services, Inc. and Senior Vice President,
Age: 36 NationsBank.
Martin R. Dean Associate Director, Accounting Services, BISYS
Treasurer Fund Services; formerly Senior Manager, KPMG
3435 Stelzer Road Peat Marwick (1987-1994).
Columbus, OH 43219
Age: 33
*Asterisks indicate those Trustees that are "interested persons" (as defined in
the 1940 Act). Mr. Reid is not an interested person of the Portfolio's
investment advisers or principal underwriter, but may be deemed an interested
person of the Portfolio solely by reason of being Chairman of the Portfolio.
The Board of Trustees of the Portfolio presently has an Audit Committee. The
members of the Audit Committee are Messrs. Vartabedian, Cragin, Thode and Reid.
The function of the Audit Committee is to recommend independent auditors and
monitor accounting and financial matters. The Audit Committee met two times
during the fiscal year ended October 31, 1996.
The Board of Trustees has established an Investment Committee. The members
of the Investment Committee are Messrs. Vartabedian (President) and Reid, as
well as Leonard M. Spalding, President of Vista Capital Management. The function
of the Investment Committee is to review the investment management process of
the Portfolio.
The Trustees and officers of the Portfolio appearing in the table above
also serve in the same capacities with respect to Mutual Fund Group, Mutual Fund
Trust, Mutual Fund Variable Annuity Trust, Mutual Fund Select Group, Mutual Fund
Select Trust, Growth and Income Portfolio, Capital Growth Portfolio and
New Growth Opportunities Portfolio.
B-16
<PAGE>
Remuneration of Trustees and Certain Executive Officers.
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the Adviser is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. Each Trustee
receives a fee, allocated among all investment companies for which the Trustee
serves, which consists of an annual retainer component and a meeting fee
component. Effective August 21, 1995, each Trustee of the Vista Funds receives a
quarterly retainer of $12,000 and an additional per meeting fee of $1,500.
Members of the Committee receive a meeting fee only if the committee meeting is
held on a day other than the day on which a regularly scheduled meeting is held.
Prior to August 21, 1995, the quarterly retainer was $9,000 and the per-meeting
fee was $1,000. The Chairman of the Trustees and the Chairman of the Investment
Committee each receive a 50% increment over regular Trustee total compensation
for serving in such capacity.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1996 for each Trustee of the Portfolio:
Pension or
Compensa- Retirement
tion paid Benefits Total
by Accrued Compensation
Int'l as Fund from "Fund
Equity Expenses Complex"(1)
--------- ----------- ------------
Fergus Reid, III, Trustee $84 $55 $90,000
H. Richard Vartabedian, Trustee 84 41 90,000
Stuart W. Cragin, Jr., Trustee 56 29 60,000
Irving L. Thode, Trustee 56 35 60,000
Joseph J. Harkins 56 45 60,000
Richard E. Ten Haken, Trustee 56 31 58,500
William J. Armstrong, Trustee 56 35 58,500
John R.H. Blum, Trustee 56 40 60,000
W. Perry Neff, Trustee 36 0 43,500
Roland R. Eppley, Jr., Trustee 36 0 43,500
W.D. MacCallan, Trustee 34 0 42,000
(1) Data reflects total compensation earned during the period January 1, 1996
to December 31, 1996 for service as a Trustee to all thirty (Portfolios)
Funds advised by the Adviser.
Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan for
Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not an
employee of the advisers, Administrator or Distributor or any of their
affiliates) may be entitled to certain benefits upon retirement from the Board
of Trustees. Pursuant to the Plan, the normal retirement date is the date on
which the eligible Trustee has attained age 65 and has completed at least five
years of continuous service with one or more of the investment companies
B-17
<PAGE>
advised by the Adviser (collectively, the "Covered Portfolios"). Each Eligible
Trustee is entitled to receive from the Covered Portfolios an annual benefit
commencing on the first day of the calendar quarter coincident with or following
his date of retirement equal to 10% of the highest annual compensation received
from the Covered Portfolios multiplied by the number of such Trustee's years of
service (not in excess of 10 years) completed with respect to any of the Covered
Portfolios. Such benefit is payable to each eligible Trustee in monthly
installments for the life of the Trustee.
Set forth in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of October 31, 1996, the estimated credited years
of service for Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian,
Cragin, Thode, Neff, Eppley and MacCallan are 12, 12, 9, 12, 6, 5, 4, 4, 7, 8
and 7, respectively.
Highest Annual Compensation Paid by All Vista Funds
----------------------------------------------------------------
$40,000 $45,000 $50,000 $55,000 $60,000
Years of
Service Estimated Annual Benefit Upon Retirement
-------- ----------------------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000 $60,000
9 36,000 40,500 45,000 49,500 54,000
8 32,000 36,000 40,000 44,000 48,000
7 28,000 31,500 35,000 38,500 42,000
6 24,000 27,000 30,000 33,000 36,000
5 20,000 22,500 25,000 27,500 30,000
Effective August 21, 1995, the Trustees instituted a Deferred Compensation Plan
for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which each
Trustee (who is not an employee of the advisers, Administrator or Distributor or
any of their affiliates) may enter into agreements with the Funds whereby
payment of the Trustee's fees are deferred until the payment date elected by the
Trustee (or the Trustee's termination of service). The deferred amounts are
invested in shares of Vista funds selected by the Trustee. The deferred amounts
are paid out in a lump sum or over a period of several years as elected by the
Trustee at the time of deferral. If a deferring Trustee dies prior to the
distribution of amounts held in the deferral account, the balance of the
deferral account will be distributed to the Trustee's designated beneficiary in
a single lump sum payment as soon as practicable after such deferring Trustee's
death.
Messrs. Ten Haken, Thode and Vartebedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of October 31, 1996
they had contributed $17,400, $45,000 and $62,500, respectively.
Ownership of Shares of the Portfolios. The Trustees and officers as a group
directly or beneficially own less than 1% of the Portfolio.
The Declaration of Trust provides that the Portfolio 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 with
respect to any matter, unless it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
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
B-18
<PAGE>
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.
The Portfolio pays no direct remuneration to any officer of the Portfolio.
Item 15. Control Persons and Principal Holders of Securities.
- --------------------------------------------------------------
As of October 31, 1996, Vista International Equity Fund owned substantially
all of the value of the outstanding interests in the Portfolio. Because Vista
International Equity Fund controls the Portfolio, Vista International Equity
Fund may take actions without the approval of any other investor.
Vista International Equity Fund has informed the Portfolio that whenever it
is requested to vote on any proposal of the Portfolio, it will hold a meeting of
shareholders and will cast its vote as instructed by its shareholders. It is
anticipated that other investors in the Portfolio will follow the same or a
similar practice.
Item 16. Investment Advisory and Other Services.
- -------------------------------------------------
Adviser and Sub-Adviser
Chase acts as investment adviser to the Portfolio pursuant to an Investment
Advisory Agreement dated as of May 6, 1996 (the "Advisory Agreement"). Subject
to such policies as the Board of Trustees may determine, Chase is responsible
for investment decisions for the Portfolio. Pursuant to the terms of the
Advisory Agreement, Chase provides the Portfolio with such investment advice and
supervision as it deems necessary for the proper supervision of the Portfolio's
investments. The Adviser continuously provides investment programs and
determines from time to time what securities shall be purchased, sold or
exchanged and what portion of the Portfolio's assets shall be held uninvested.
The Adviser to the Portfolio furnishes, at its own expense, all services,
facilities and personnel necessary in connection with managing the investments
and effecting portfolio transactions for the Portfolio. The Advisory Agreement
for the Portfolio will continue in effect from year to year only if such
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the Portfolio's outstanding voting securities and by
a majority of the 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 such Advisory Agreement.
Under the Advisory Agreement, the Adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Portfolio
with greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement and the Sub-adviser's
agreements with the Adviser, the Adviser and Sub-adviser are permitted to render
services to others. The Advisory Agreement is terminable without penalty by the
Portfolio on not more than 60 days', nor less than 30 days', written notice when
authorized either by a majority vote of the Portfolio's investors or by a vote
of a majority of the Board of Trustees of the Portfolio, or by the Adviser or
Sub-adviser on not more than 60 days', nor less than 30 days', written notice,
and will automatically terminate in the event of its "assignment" (as defined in
the 1940 Act). The Advisory Agreement provides that the Adviser or Sub-adviser
under such agreement shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission in
the execution of portfolio transactions for the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties thereunder.
B-19
<PAGE>
With respect to the Portfolio investing in equity securities, the equity
research team of the Adviser looks for two key variables when analyzing stocks
for potential investment by equity portfolios: value and momentum. To uncover
these qualities, the team uses a combination of quantitative analysis,
fundamental research and computer technology to help identify undervalued
stocks.
In the event the operating expenses of the Portfolio, including all
investment advisory, administration and sub-administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary expenses such
as litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Portfolio imposed by the securities laws or
regulations thereunder of any state in which the beneficial interests of the
Portfolio are qualified for sales, as such limitations may be raised or lowered
from time to time, the Adviser shall reduce its advisory fee (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Adviser shall be deducted from the
monthly advisory fee otherwise payable with respect to the Portfolio during such
fiscal year; and if such amounts should exceed the monthly fee, the Adviser
shall pay to the Portfolio its share of such excess expenses no later than the
last day of the first month of the next succeeding fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement provides
that Chase may render services through its own employees or the mployees of one
or more affiliated companies that are qualified to act as an investment adviser
of the Portfolio and are under the common control of Chase as long as all such
persons are functioning as a part of an organized group of persons, managed by
authorized officers of Chase.
Chase, on behalf of the Portfolio, has entered into an investment
sub-advisory agreement with Chase Asset Management (London) Limited ("CAM
London"). With respect to the day-to-day management of the Portfolio, under the
Sub-advisory agreement, CAM London makes decisions concerning, and places all
orders for, purchases and sales of securities and helps maintain the records
relating to such purchases and sales. CAM London may, in its discretion, provide
such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to the
Company under applicable laws and are under the common control of Chase;
provided that (i) all persons, when providing services under the sub-advisory
agreement, are functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by authorized officers
of the Sub-adviser. This arrangement will not result in the payment of
additional fees by the Portfolio.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Also included among Chase's accounts are commingled trust
funds and a broad spectrum of individual trust and investment management
portfolios. These accounts have varying investment objectives.
CAM London is an indirect wholly-owned subsidiary of the Adviser. CAM
London is registered with the Securities and Exchange Commission and is
regulated by the Investment Management Regulatory Organization (IMRO) as an
investment adviser and was formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function, and the same individuals who serve as portfolio
managers of CAM London also serve as portfolio managers for Chase.
In consideration of the services provided by the Adviser pursuant to the
Advisory Agreement, the Adviser is entitled to receive from the Portfolio an
investment advisory fee computed daily and paid monthly based
B-20
<PAGE>
on a rate equal to a percentage of the Portfolio's average daily net assets
specified in Part A. However, the Adviser may voluntarily agree to waive a
portion of the fees payable to it on a month-to-month basis. For its services
under its sub-advisory agreement, CAM London will be entitled to receive, with
respect to the Portfolio, such compensation, payable by the Adviser out of its
advisory fee, as is described in Part A.
For the fiscal years ended October 31, 1994, 1995 and 1996, Chase was paid
or accrued the following investment advisory fees with respect to the Portfolio,
and voluntarily waived the amounts in parentheses following such fees with
respect to each such period:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
October 31, 1994 October 31, 1995 October 31, 1996
-------------------- --------------------- ---------------------
accrued waived accrued waived accrued waived
---------- ------ ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
International Equity Portfolio $462,855 $(202,144) $431,019 $(276,302) $330,983 $(330,983)
</TABLE>
Administrator
Pursuant to an Administration Agreement (the "Administration Agreement"),
Chase is the administrator of the Portfolio. Chase provides certain
administrative services to the Portfolio, including, among other
responsibilities, coordinating the negotiation of contracts and fees with, and
the monitoring of performance and billing of, independent contractors and
agents; preparation for signature by an officer of the Portfolio of all
documents required to be filed for compliance by the Portfolio with applicable
laws and regulations excluding those of the securities laws of various states;
arranging for the computation of performance data, including net asset value and
yield; responding to investor inquiries, and arranging for the maintenance of
books and records and providing, at its own expense, office facilities,
equipment and personnel necessary to carry out its duties. Chase, in its
capacity as administrator, does not have any responsibility or authority for the
management of the Portfolio, the determination of investment policy, or for any
matter pertaining to the distribution of beneficial interests in the Portfolio.
Under the Administration Agreement, Chase is permitted to render
administrative service to others. The Administrative Agreement will continue in
effect from year to year with respect to the Portfolio only if such continuance
is specifically approved at least annually by the Board of Trustees of the
Portfolio or by vote of a majority of the Portfolio's outstanding voting
securities and in either case, by a majority of the Trustees who are not parties
in the Administration Agreement or "interested persons" (as defined in the 1940
Act) of any such party. The Administration Agreement is terminable without
penalty by the Portfolio on 60 days' written notice when authorized either by a
majority vote of the Portfolio's investors or by vote of a majority of the Board
of Trustees, including a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Portfolio, or by Chase on 60 days'
written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The Administration Agreement also
provides that neither Chase nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration of
the Portfolio except for willful misfeasance, bad faith or gross negligence in
the performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Administration Agreement.
In addition, the Administration Agreement provides that, in the event the
operating expenses of the Portfolio, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Portfolio imposed by the securities laws or regulations thereunder of any state
in which the beneficial interests of the Portfolio are qualified for sale, as
such limitations may be raised or lowered from time to time, Chase shall reduce
its administration fee (which fee is described below) to the extent of its share
of such excess expenses. The amount of any such reduction to be borne by Chase
shall be deducted from the monthly administration fee otherwise payable during
such fiscal year; and if such amounts should exceed the monthly fee, Chase shall
pay to the Portfolio its share of such excess expenses no later than the last
day of the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreement, Chase receives from the Portfolio a fee computed daily
and paid monthly at an annual rate equal to 0.05% of its average daily net
assets. Chase may voluntarily waive a portion of the fees payable to it with
respect to the Portfolio on a month-to-month basis.
B-21
<PAGE>
For the fiscal years ended October 31, 1994, 1995 and 1996, Chase was paid
or accrued administration fees with respect to the Portfolio and voluntarily
waived the amount in parentheses following such fees:
<TABLE>
<CAPTION>
11/1/93 through 11/1/94 through 11/1/95 through
10/31/94 10/31/95 10/31/96
---------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Portfolio:........ $23,143 $(23,143) $21,632 $(21,632) $16,550 $(16,550)
</TABLE>
Custodian
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of the Portfolio and receives such compensation as is from time to time
agreed upon by the Portfolio and Chase. As custodian, Chase provides oversight
and record keeping for the assets held in the portfolio of the Portfolio. Chase
also provides or arranges for the provision of fund accounting services for the
income, expenses and beneficial interests outstanding for the Portfolio. Chase
is located at 3 Metrotech Center, Brooklyn, NY 11245.
Independent Accountants
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, independent accountants of the Portfolio, provides the Portfolio with
audit services, tax return preparation and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.
Counsel
Counsel to the Portfolio is Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017.
Item 17. Brokerage Allocation and Other Practices.
- ---------------------------------------------------
Specific decisions to purchase or sell securities for the Portfolio are
made by a portfolio manager who is an employee of the adviser or Sub-adviser and
who is appointed and supervised by senior officers of the Adviser or
Sub-adviser. Changes in the Portfolio's investments are reviewed by the Board of
Trustees. The portfolio manager may serve other clients of the advisers in a
similar capacity.
The frequency of portfolio transactions--portfolio turnover rate--will vary
from year to year depending upon market conditions. Because a high turnover rate
may increase the Portfolio's transaction costs and the possibility of taxable
short-term gains (see "Tax Status" herein), the advisers will weigh the added
costs of short-term investment against anticipated gains. The Portfolio will
engage in portfolio trading if its advisers believe a transaction, net of costs
(including custodian charges), will help it achieve its investment objective.
B-22
<PAGE>
The portfolio turnover rate for the Portfolio for the fiscal years ended
October 31, 1994, 1995 and 1996 was 85%, 137% and 179%, respectively.
Under the Advisory Agreement and the sub-advisory agreement, the Adviser
and Sub-adviser shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Portfolio. In assessing the best
overall terms available for any transaction, the Adviser and Sub-adviser
consider all factors they deem 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, research services provided to the Adviser or
Sub-adviser, and the reasonableness of the commissions, if any, both for the
specific transaction and on a continuing basis. The Adviser and Sub-adviser are
not required to obtain the lowest commission or the best net price for the
Portfolio on any particular transaction, and are not required to execute any
order in a fashion either preferential to the Portfolio relative to other
accounts they manage or otherwise materially adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser or
Sub-adviser to the Portfolio normally seeks to deal directly with the primary
market makers unless, in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser or Sub-adviser on the
tender of the Portfolio's portfolio securities in so-called tender or exchange
offers. Such soliciting dealer fees are in effect recaptured for the Portfolio
by the Adviser and Sub-adviser. At present, no other recapture arrangements are
in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the Adviser or Sub-adviser may
cause the Portfolio to pay a broker-dealer which provides brokerage and research
services to the Adviser or Sub-adviser, the Portfolio and/or other accounts for
which they exercise investment discretion an amount of commission for effecting
a securities transaction for the Portfolio in excess of the amount other
broker-dealers would have charged for the transaction if they determine in good
faith that the greater commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker-dealer viewed
in terms of either a particular transaction or their overall responsibilities to
accounts over which they exercise investment discretion. Not all of such
services are useful or of value in advising the Portfolio. The Adviser and
Sub-adviser report to the Board of Trustees regarding overall commissions paid
by the Portfolio and their reasonableness in relation to the benefits to the
Portfolio. The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or of purchasers or sellers of
securities, furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts, and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement.
The management fees that the Portfolio pays to the Adviser will not be
reduced as a consequence of the Adviser's or Sub-adviser's receipt of brokerage
and research services. To the extent the Portfolio's portfolio transactions are
used to obtain such services, the brokerage commissions paid by the Portfolio
will exceed those that might otherwise be paid by an amount which cannot be
presently determined. Such services generally would be useful and of value to
the Adviser or Sub-adviser in serving ne or more of their other clients and,
conversely, such services obtained by the
B-23
<PAGE>
placement of brokerage business of other clients generally would be useful to
the Adviser and Sub-adviser in carrying out their obligations to the Portfolio.
While such services are not expected to reduce the expenses of the Adviser or
Sub-adviser, the advisers would, through use of the services, avoid the
additional expenses which would be incurred if they should attempt to develop
comparable information through their own staffs.
In certain instances, there may be securities that are suitable for the
Portfolio as well as one or more of the Adviser's or Sub-adviser's other
clients. Investment decisions for the Portfolio and for other clients are made
with a view to achieving their respective investment objectives. It may develop
that the same investment decision is made for more than one client or 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 the Portfolio and one or more other 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 generally produce better executions for
the Portfolio.
The Portfolio paid brokerage commissions as detailed below:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
10/31/94 10/31/95 10/31/96
------------- ------------ ------------
<S> <C> <C> <C>
Vista International Equity Portfolio $285,577 $383,649 $421,518
</TABLE>
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 of the Portfolio 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 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 the amount of
B-24
<PAGE>
their investment), except that if the Trustees of the Portfolio recommend such
sale of assets, the approval by vote of a majority of the investors (with the
vote of each being in proportion to the amount of their investment) 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 of the Portfolio 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 Trust 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 willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Declaration of Trust provides that
the Trustees and officers will be indemnified by the Portfolio 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 willful 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 willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
The Portfolio will continue in existence until 20 years after the death of
the last survivor of certain specified individuals listed in its Declaration of
Trust unless it is terminated or dissolved earlier in accordance with the
provisions of that Declaration.
The Portfolio will furnish to each of its investors at least annually as of
the end of its fiscal year a report of operations containing a balance sheet and
a statement of income prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. The Portfolio will also furnish to each of its investors at least
semiannually an interim report of operations containing an unaudited balance
sheet and an unaudited statement of income.
Item 19. Purchase, Redemption and Pricing of Securities.
- ---------------------------------------------------------
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "Purchase of Securities" and
"Redemption or Repurchase" in Part A.
B-25
<PAGE>
The Portfolio's portfolio securities and other assets are valued as
follows:
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for securities in which there
were no sales during the day or for unlisted securities not reported on the
NASDAQ system. Bonds and other fixed income securities (other than short-term
obligations, but including listed issues) are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the Board
of Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between issue price and stated redemption price at maturity) and premiums
(generally, the excess of purchase price over stated redemption price at
maturity). Interest income on short-term obligations is determined on the basis
of interest and discount accrued less amortization of premium.
Any assets or liabilities initially denominated in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or,
alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks. If
neither of these alternatives is available or both are deemed not to provide a
suitable methodology for converting a foreign currency into U.S. dollars, the
Board of Trustees, in good faith, will establish a conversion rate for such
currency.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each day that the New York Stock Exchange is open for business. As
of the close of regular trading on the New York Stock Exchange on each such day
(normally 4:00 p.m., Eastern time; however options are priced at 4:15 p.m.,
Eastern time), the value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or reductions which are to be effected on that day will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of regular trading on such day plus
or minus, as the case may be, the amount of net additions to or reductions in
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 regular trading on such day plus or minus, as the case may be, the
amount of net additions to or reductions in 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 regular trading on the following day the New York
Stock Exchange is open for trading.
B-26
<PAGE>
The Portfolio reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption by making payment in
whole or in part in readily marketable securities chosen by the Portfolio and
valued as they are for purposes of computing the Portfolio's net asset value (a
redemption in kind). If payment is made in securities, an investor may incur
transaction expenses in converting these securities into cash.
The Portfolio will not redeem in kind except in circumstances in which the
owner of a beneficial interest in the Portfolio is permitted to redeem in kind
or unless requested by such owner.
Item 20. Tax Status.
- ---------------------
The Portfolio will be classified for federal income tax purposes as a
partnership that will not be a "publicly traded partnership." As a result, the
Portfolio will not be subject to federal income taxation. Instead, the investors
in the Portfolio will take into account, in computing their federal income tax
liability, their share of the Portfolio's income, gains, losses, deductions,
credits and tax preference items for the taxable year of the Portfolio ending
within or with the taxable year of the investor, without regard to whether they
have received any cash distributions from the Portfolio. The Portfolio's taxable
year end is October 31. The Portfolio is organized as a New York trust. The
Portfolio is not subject to any income or franchise tax in the State of New
York.
Under current Internal Revenue Service ruling policy, for purposes of
determining whether an investor in a Portfolio satisfies the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") the
investor will be deemed to own a proportionate share of the Portfolio's assets
and will be deemed to be entitled to a proportionate share of the Portfolio's
income. The Portfolio intends to conduct its operations so as to enable
investors to satisfy those requirements.
Distributions received by investors in the Portfolio generally will not
result in the investor's recognizing any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent that any cash
distributed exceeds the investor's basis in its Portfolio interest prior to the
distribution, (2) income or gain may be recognized if the distribution is made
in liquidation of the investor's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, (3)
loss may be recognized if the distribution is made in liquidation of the
investor's entire interest in the Portfolio and consists solely of cash and/or
unrealized receivables and the investor's share of the Portfolio's losses, and
(4) gain or loss may be recognized on a distribution to an investor that
contributed property to the Portfolio. The investor's basis in its interest in
the Portfolio generally will equal the amount of cash and the basis of any
property which the investor invests in the Portfolio, increased by the
investor's share of net income and gains from the Portfolio, and decreased by
the amount of any cash distributions and the basis of any property distributed
from the Portfolio.
The foregoing is intended to be a general summary of certain United States
federal income tax considerations affecting the Portfolio and its investors.
Accordingly, investors are advised to consult their own tax advisers with
respect to the particular federal, state, local and foreign tax consequences of
an investment in the Portfolio.
Item 21. Underwriters.
- -----------------------
Not applicable.
Item 22. Calculation of Performance Data.
- ------------------------------------------
Not applicable.
B-27
<PAGE>
Item 23. Financial Statements.
- -------------------------------
Audited financial statements and reports thereon are incorporated herein by
reference from the Portfolio's Annual Report to Shareholders for the fiscal year
ended October 31, 1996 as filed with Securities and Exchange commission by
Mutual Fund Group via Edgar on Form N-30D on January 3, 1997, accession
number: 000095 0123-97-000025.
B-28
<PAGE>
APPENDIX A
----------
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
---------------------------------------
Federal Farm Credit System Notes and Bonds -- are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds -- are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA Bonds -- are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures -- are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S. Government.
FHA Insured Notes -- are bonds issued by the Farmers Home Administration,
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates -- are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA and
the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-insured
mortgages underlying the Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures may result in the return of the greater part of principal invested
far in advance of the maturity of the mortgages in the pool. Foreclosures impose
no risk to principal investment because of the GNMA guarantee. As the prepayment
rate of individual mortgage pools will vary widely, it is not possible to
accurately predict the average life of a particular issue of GNMA Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates. Principal which is so prepaid will be reinvested although possibly
at a lower rate. In addition, prepayment of mortgages included in the mortgage
pool underlying a GNMA Certificate purchased at a premium could result in a loss
to the Portfolio. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on, among
other things, the level of market rates, the Certificate's coupon rate and the
prepayment experience of the pool of mortgages backing each Certificate. If
agency securities are purchased at a premium above principal, the premium is not
guaranteed by the issuing agency and a decline in the market value to par may
result in a loss of the premium, which may be particularly likely in the event
of a prepayment. When and if available, U.S. Government obligations may be
purchased at a discount from face value.
A-1
<PAGE>
FHLMC Certificates and FNMA Certificates -- are mortgage-backed bonds
issued by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association, respectively, and are guaranteed by the U.S. Government.
GSA Participation Certificates -- are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed by
the U.S. Government.
New Communities Debentures -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds -- are bonds issued by public housing and urban
renewal agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates -- are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures -- are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds -- are bonds issued by
the Washington Metropolitan Area Transit Authority. Some of the bonds issued
prior to 1993 are guaranteed by the U.S. Government.
FHLMC Bonds -- are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds -- are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds -- are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds -- are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates -- are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import Bank
of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
----------
DESCRIPTION OF RATINGS
----------------------
A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
- --------------------------------------------------
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. 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 fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities
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
safeguarded 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 a desirable
investment. Assurance of interest and principal payments or of maintenance and
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 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.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security
B-1
<PAGE>
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.
Standard & Poor's Ratings Group Corporate Bond Ratings
- ------------------------------------------------------
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
AA--Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and differs from "AAA"
issues only in small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" 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 S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
- ----------------------------------------------------
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-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 structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" 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, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
`
B-2
<PAGE>
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
- --------------------------------------------------------
A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
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, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the bigger designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
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 S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
- ------------------
AAA--Bonds rated AAA by Fitch are 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 rated AA by Fitch are 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 issues
is generally rated F-1+ by Fitch
A--Bonds rated A by Fitch are 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 rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
B-3
<PAGE>
interest and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have adverse
consequences 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.
Plus and minus signs are used by Fitch to indicate the relative position of
a credit within a rating category. Plus and minus signs, however, are not used
in the AAA category.
Fitch 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.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1--Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance
for timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term adverse
changes could cause these securities to be rated below investment grade.
LOC--The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds.
After purchase by the Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require a sale of such security by the Portfolio. However,
the Portfolio's investment manager will consider such event in its determination
of whether the Portfolio should continue to hold the security. To the extent the
ratings given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, the Portfolio will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained Part A and Part B.
B-4
<PAGE>
PART C
------
Item 24. Financial Statements and Exhibits.
- --------------------------------------------
(a) Financial Statements Included in Part A:
Not applicable
Financial Statements Included in Part B:
Audited Financial Statements for the fiscal year ended October
31, 1995 incorporated by reference from the Portfolio's Annual
Report tIo Shareholders for the fiscal year ended October 31,
1996 as filed with Securities and Exchange commission by
Mutual Fund Group via EDGAR on Form N-30D on January 3, 1997,
accession number: 000095 0123-97-000025.
Financial Statements Included in Part C:
None.
(b) Exhibits:
1 Declaration of Trust.(1)
2 By-Laws.(1)
5(a) Form of Investment Advisory Agreement.(3)
(b) Form of Investment Sub-Advisory Agreement.(3)
8 Custodian Agreement.(2)
9 Administration Agreement.(2)
99 Powers of Attorney for: Fergus Reid, III, H. Richard
Vartabedian, William J. Armstrong, John R. H. Blum,
Stuart W. Cragin, Jr., Joseph J. Harkins, Richard E.
Ten Haken, Irving L. Thode, W. Perry Neff, Roland R.
Eppley, Jr. and W. D. MacCallan.(4)
- ------------------------
(1) Filed as Exhibit to the Registration Statement on Form N-1A of the
Registrant (File No. 811-7394) as filed with the Securities and Exchange
Commission on December 24, 1992.
(2) Filed as Exhibit to Amendment No. 1 to Registrant's Registration Statement
on Form N-1A as filed with the Securities and Exchange Commission on
February 1, 1993.
(3) Filed as an Exhibit to Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A as filed with the Securities and Exchange Commission
on May 6, 1996.
(4) Filed herewith
Item 25. Persons Controlled by or Under Common Control with Registrant.
- ------------------------------------------------------------------------
Not applicable
Item 26. Number of Holders of Securities.
- ------------------------------------------
Number of Record Holders
Title of Class as of January 31, 1997
-------------- ----------------------
Beneficial Interests 1
Item 27. Indemnification.
- --------------------------
Reference is hereby made to Article V of the Registrant's Declaration of
Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser and 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.
C - 1
<PAGE>
Item 28(a). Business and Other Connections of Investment Adviser.
- ------------------------------------------------------------------
The Chase Manhattan Bank (the "Adviser") is a commercial bank providing a
wide range of banking and investment services.
To the knowledge of the Registrant, none of the directors or executive
officers of the Adviser, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain directors
and executive officers of the Adviser also hold or have held various positions
with bank and non-bank affiliates of the Adviser, including its parent, The
Chase Manhattan Corporation. Each director listed below is also a director of
The Chase Manhattan Corporation.
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ---- ------------------ --------------------------------
Thomas G. Labreque Chairman of the Chairman, Chief Executive
Board, Chief Chairman, Chief Executive
Executive Officer Officer and a Director of The
and Director Chase Manhattan Corporation and
a Director of AMAX, Inc.
Richard J. Boyle Vice Chairman of the Vice Chairman of the Board and
Board and Director a Director of The Chase
Manhattan Corporation and a
Trustee of Prudential Realty
Trust
Robert R. Douglass Vice Chairman of the Vice Chairman of the Board and
Board and Director a Director of The Chase
Manhattan Corporation and
Trustee of HRE Properties
Joan Ganz Cooney Director Chairman of the Executive
Committee of the Board of
Trustees, formerly Chief
Executive Officer, of
Children's Television Workshop
and a Director of each of
Johnson & Johnson, Metropolitan
Life Insurance Company and
Xerox Corporation
Edward S. Finkelstein Director Retired Chairman and Chief
Executive Officer and Director
of R.H. Macy & Co., Inc.; and
Director of Time Warner Inc.
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director
of Amoco Corporation and
Director of Abbott Laboratories
Howard C. Kauffman Director Retired President of Exxon
Corporation and a Director of
each of Pfizer Inc. and Ryder
System, Inc.
Paul W. MacAvoy Director Dean of the Yale School of
Organization and Management
C-2
<PAGE>
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature During the Past Two Years
- ---- ------------------ --------------------------------
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of
each of ARCO Chemical Company
and Westinghouse Electric
Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer
Inc., Celgene Corp., General
Motors Corporation and
International Paper Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone an
also Chief Executive Officer,
of The Taubman Company, Inc.,
majority shareholder and
chairman of Sotheby's Holdings,
Inc., owner of Woodward &
Lothrop, Inc. and its
subsidiary, John Wanamaker,
and Chairman of A&W Restaurants,
Inc. and a Director of
R.H. Macy & Co., Inc.
Donald H. Trautlein Director Retired Chairman and Chief
Executive Officer of Bethlehem
Steel Corporation and a
Director of each of Data
General Corporation and Phoenix
Re Corporation
Kay R. Whitmore Director Chairman of the Board,
President and Chief Executive
Officer and Director of Eastman
Kodak Company
Item 28(b)
Chase Asset Management ("CAM") is an Investment Advisor providing
investment services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of the CAM, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain Directors and
executive officers of the CAM also hold or have held various positions with bank
and non-bank affiliates of the Advisor, including its parent, The Chase
Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
James Zeigon Chairman and Director Director of Chase
Asset Management
(London) Limited
Steven Prostano Executive Vice President Chief Operating Officer
and Chief Operating Officer and Director of Chase
Asset Management
(London) Limited
Mark Richardson President and Chief Chief Investment Officer
Investment Officer and Director of Chase
Asset Management
(London) Limited
Item 28(c)
Chase Asset Management (London) Limited ("CAM London") is an Investment
Advisor providing investment services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of CAM London, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain Directors
and executive officers of CAM London also hold or have held various positions
with bank and non-bank affiliates of the Advisor, including its parent, The
Chase Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
Michael Browne Director Fund Manager, The Chase Manhattan
Bank, N.A.; Fund Manager, BZW
Investment Management
David Gordon Ross Director Head of Global Fixed Income
Management, Chase Asset
Management, Inc.; Vice President,
The Chase Manhattan Bank, N.A.
Brian Harte Director Investment Manager, The Chase
Manhattan Bank, N.A.
Cornelia L. Kiley Director
James Zeigon Director Chairman and Director of Chase
Asset Management, Inc.
Mark Richardson Chief Investment Director, President and Chief
Officer and Director Operating Officer of Chase Asset
Management, Inc.
Steve Prostano Chief Operating Director, Executive Vice President
Officer and and Chief Operating Officer of Chase
Director Asset Management, Inc.
Item 29. Principal Underwriters.
- ---------------------------------
Not applicable
C-3
<PAGE>
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
- ---- -------
The Chase Manhattan Bank 270 Park Avenue
(investment adviser) New York, NY 10017
Chase Asset Management (London) Limited Colvile House
(investment sub-adviser) 32 Curzon Street
London W1Y 8AL
The Chase Manhattan Bank One Chase Square, Tower 7
(administrator) Rochester, NY 14643
The Chase Manhattan Bank 3 Metrotech Center
(custodian) Brooklyn, NY 11245
[Signature Broker-Dealer 6 St. James Avenue, Suite 900
(Services, Inc. Boston, MA 02116
(exclusive placement agent)]
Item 31. Management Services.
- ------------------------------
Not applicable
Item 32. Undertakings.
- -----------------------
Not applicable
C-4
<PAGE>
SIGNATURES
International Equity Portfolio has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of New York, on the 27th day of February, 1997.
INTERNATIONAL EQUITY PORTFOLIO
By /s/ H. Richard Vartabedian
-----------------------------
H. Richard Vartabedian, President
This amendment to the Registration Statement on Form N-1A of International
Equity Portfolio has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- -------------------------- -------------------- ------------
/s/ H. Richard Vartabedian President and Trustee February 27, 1997
- --------------------------
H. Richard Vartabedian
* Trustee February 27, 1997
- --------------------------
Stuart W. Cragin, Jr.
* Chairman and Trustee February 27, 1997
- --------------------------
Fergus Reid, III
* Trustee February 27, 1997
- --------------------------
Irving L. Thode
* Trustee February 27, 1997
- --------------------------
William J. Armstrong
* Trustee February 27, 1997
- --------------------------
Richard E. Ten Haken
* Trustee February 27, 1997
- --------------------------
John R. H. Blum
* Trustee February 27, 1997
- --------------------------
Joseph J. Harkins
* Trustee February 27, 1997
- --------------------------
W. Perry Neff
* Trustee February 27, 1997
- --------------------------
Roland R. Eppley, Jr.
* Trustee February 27, 1997
- --------------------------
W. D. MacCallan
/s/ Martin Dean Treasurer and February 27, 1997
- -------------------------- Principal Accounting
Martin Dean Officer
/s/ H. Richard Vartabedian Attorney-in-Fact February 27, 1997
- --------------------------
H. Richard Vartabedian
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER
- --------------
27 Financial Data Schedule
99 Powers of Attorney for: Fergus Reid, III, H. Richard Vartabedian,
William J. Armstrong, John R. H. Blum, Stuart W. Cragin, Jr., Joseph J.
Harkins, Richard E. Ten Haken, Irving L. Thode, W. Perry Neff, Roland
R. Eppley, Jr. and W. D. MacCallan.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000895535
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<SERIES>
<NUMBER> 010
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 30,144,186
<INVESTMENTS-AT-VALUE> 30,680,057
<RECEIVABLES> 567,946
<ASSETS-OTHER> 14,811
<OTHER-ITEMS-ASSETS> 1,488,322
<TOTAL-ASSETS> 32,751,136
<PAYABLE-FOR-SECURITIES> 359,280
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71,879
<TOTAL-LIABILITIES> 431,159
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<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> 0
<NET-ASSETS> 32,319,977
<DIVIDEND-INCOME> 629,712
<INTEREST-INCOME> 40,468
<OTHER-INCOME> 0
<EXPENSES-NET> 264,804
<NET-INVESTMENT-INCOME> 405,376
<REALIZED-GAINS-CURRENT> 3,618,264
<APPREC-INCREASE-CURRENT> (2,439,963)
<NET-CHANGE-FROM-OPS> 1,583,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,400,056
<NUMBER-OF-SHARES-REDEEMED> 24,033,082
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,049,349)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 330,983
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 612,337
<AVERAGE-NET-ASSETS> 33,082,894
<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> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III,
Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statement
on Form N-1A, and any and all amendments thereto, filed by Capital Growth
Portfolio, Emerging Growth Portfolio, Global Fixed Income Portfolio, Growth and
Income Portfolio or International Equity Portfolio (the "Trusts") with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable the Trusts to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ William J. Armstrong
------------------------
William J. Armstrong
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ John R.H. Blum
------------------------
John R.H. Blum
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Stuart W. Cragin, Jr.
-------------------------
Stuart W. Cragin, Jr.
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Joseph J. Harkins
-------------------------
Joseph J. Harkins
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Richard E. Ten Haken
-------------------------
Richard E. Ten Haken
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Irving L. Thode
-------------------------
Irving L. Thode
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ W. Perry Neff
-------------------------
W. Perry Neff
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Roland R. Eppley, Jr.
-------------------------
Roland R. Eppley, Jr.
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Fergus Reid, III, H.
Richard Vartabedian, Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and
each of them, with full powers of substitution as his true and lawful attorneys
and agents to execute in his name and on his behalf in any and all capacities
the Registration Statement on Form N-1A, and any and all amendments thereto,
filed by Capital Growth Portfolio, Emerging Growth Portfolio, Global Fixed
Income Portfolio, Growth and Income Portfolio or International Equity Portfolio
(the "Trusts") with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trusts to comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ W.D. MacCallan
-------------------------
W.D. McCallan
<PAGE>
CAPITAL GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
GLOBAL FIXED INCOME PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints H. Richard Vartabedian,
Lee Schultheis, Thomas M. Lenz and Andres E. Saldana and each of them, with full
powers of substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities the Registration Statement
on Form N-1A, and any and all amendments thereto, filed by Capital Growth
Portfolio, Emerging Growth Portfolio, Global Fixed Income Portfolio, Growth and
Income Portfolio or International Equity Portfolio (the "Trusts") with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable the Trusts to comply with such Acts,
the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction and the undersigned hereby ratifies and confirms as his own act and
deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents have,
and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
22nd day of August, 1996.
/s/ Fergus Reid, III
--------------------------
Fergus Reid, III
