As filed with the Securities and Exchange Commission on May 20, 1997
FILE NO. 811-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
EMERGING MARKETS PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
Butterfield House, 4th Floor, Fort Street, P.O. Box 2330,
George Town, Grand Cayman, Cayman Islands, BWI
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (809) 949-4719
Philip W. Coolidge, 6 St. James Avenue, Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copy to: John E. Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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EXPLANATORY NOTE
This Registration Statement on Form N1-A (the "Registration Statement")
has been filed by the Registrant pursuant to Section 8(b) of the Investment
Company Act of 1940, as amended. However, beneficial interests in the Registrant
are not being registered under the Securities Act of 1933 (the "1933 Act")
because such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. Investments in the Registrant may only be made by other investment
companies, insurance company separate accounts, common or commingled trust funds
or similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Emerging Markets Portfolio (the "Portfolio") is a non-diversified
open-end investment company which was organized as a trust under the laws of the
State of New York on August 15, 1994. Beneficial interests in the Portfolio are
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). Investments in the Portfolio may only be made by other
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
The Portfolio is advised by Brown Brothers Harriman & Co. (the
"Investment Adviser").
Investments in the Portfolio are neither insured nor guaranteed by the
U.S. Government. Interests in the Portfolio are not deposits or obligations of,
or guaranteed by, Brown Brothers Harriman & Co. or any other bank, and the
interests are not insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other federal, state or other governmental agency.
An investment in the Portfolio is subject to investment risk, including possible
loss of principal amount invested.
Part B contains more detailed information about the Portfolio,
including information related to (i) the investment policies and restrictions of
the Portfolio, (ii) the Trustees, officers, Investment Adviser and administrator
of the Portfolio, (iii) portfolio transactions, (iv) rights and liabilities of
investors, and (v) the audited financial statements of the Portfolio at May 16,
1997.
The investment objective of the Portfolio is described below, together
with the policies employed to attempt to achieve this objective. Additional
information about the investment policies of the Portfolio appears in Part B
under Item 13.
The investment objective of the Portfolio is to provide investors with
long-term maximization of total return, primarily through capital appreciation.
There can be no assurance that the Portfolio's investment objective will be
achieved.
The investment objective of the Portfolio is a fundamental policy and
may be changed only with the approval of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio.
However, the investment policies as described below are not fundamental and may
be changed without such approval.
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The assets of the Portfolio under normal circumstances are fully
invested in equity securities of issuers domiciled in or with substantial
operations in emerging markets. For purposes of this Part A, "emerging markets"
are defined as countries (i) which are included in the MSCI Emerging Markets
Index or the IFC Emerging Markets Investable Index (ii) which have a gross
national product per capita of $2,000 or less at the time of the Portfolio's
investment, or (iii) which are generally considered to be developing or emerging
countries by the United Nations development programme or by the World Bank and
the International Finance Corporation. These emerging markets currently include,
but are not limited to, markets such as China, Hong Kong, India, Indonesia,
Korea, Malaysia, Pakistan, Venezuela, Czech Republic, Greece, Hungary, Israel,
Jordan, Poland, Portugal, Russia, South Africa and Turkey. Appendix A on page
17 provides a comparison of Market Capitalization, GDP and Population of the
emerging countries in which the Portfolio may invest.
Emerging markets now comprise roughly 10% of the world's stock market
capitalization. Many emerging markets are expected to continue to experience
faster economic growth rates than those found in more developed markets such as
the U.S., Japan and Western Europe.
Although the assets of the Portfolio are expected to be invested
primarily in common stocks, other securities with equity characteristics may be
purchased, including securities convertible into common stock, rights and
warrants. These equity securities may be purchased directly or in the form of
American Depository Receipts ("ADRs"), Global Depository Receipts ("GDRs") or
other similar securities representing securities of foreign-based companies.
Although the Portfolio invests primarily in equity securities which are traded
on foreign or domestic securities exchanges, equity securities which are traded
in foreign or domestic over-the-counter markets may be purchased for Portfolio.
(See "Investment Restrictions".)
The Portfolio may invest in securities of appropriate closed-end
investment companies in order to obtain participation in markets which restrict
foreign investment or to obtain more favorable investment terms for the
Portfolio. The Portfolio may invest in emerging market debt securities if the
Investment Adviser determines that the total return of debt securities is likely
to equal or exceed the capital appreciation of equity securities. Such debt
instruments may take the form of bonds, notes, bills, commercial paper and bank
deposits which usually have no rating or a low rating and which are not
considered to be superior in investment quality to equity securities of the same
issuers.
For temporary defensive purposes, the Portfolio may hold, without
limit, debt obligations of the U.S. government and U.S. dollar deposits held at
banks which are rated within the three highest rating categories for debt
obligations by at least two (unless only rated by one) nationally recognized
statistical rating organizations or, if unrated, are of comparable quality as
determined by or under the direction of the Board of Trustees of the Portfolio.
It is impossible to predict for how long such a defensive strategy will be
utilized.
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The Investment Adviser, during normal market conditions, intends to
broadly diversify the Portfolio among emerging markets with no more than 15% of
the assets of the Portfolio in any single market. The Investment Adviser
allocates investment among various countries based upon the economic
environment, liquidity conditions, valuation levels, expected earnings growth,
government policies and political stability. As a result, the Portfolio's assets
are allocated among countries in a manner which does not reflect the relative
size or valuation of the country's capital market or a country's relative gross
domestic product or population.
In constructing the portfolio of securities of the Portfolio, emphasis
is placed on the equity securities of larger companies with strong longer term
fundamentals such as leading industry position, effective management,
competitive products and services, high or improving return on investment and a
sound financial structure. Selection of individual equities is the product of a
disciplined process which systematically evaluates growth expectations relative
to price levels.
HEDGING STRATEGIES
Subject to applicable laws and regulations and solely as a hedge
against changes in the market value of portfolio securities or securities
intended to be purchased, futures contracts on stock indexes may be entered into
for the Portfolio. (See Appendix B on page 19 for more detail.)
For the same purpose, put and call options on stocks, stock indexes and
currencies may be purchased for the Portfolio, although the current intention is
not to do so in such a manner that each put and call option type would put more
than 5% of the Portfolio's net assets at risk. Over-the-counter options ("OTC
Options") purchased are treated as not readily marketable. (See "Investment
Restrictions".)
The Investment Adviser may, on behalf of the Portfolio, enter into
forward foreign exchange contracts in order to protect the dollar value of all
investments in securities denominated in foreign currencies. The precise
matching of the forward contract amounts and the value of the securities
involved is not always possible because the future value of such securities in
foreign currencies changes as a consequence of market movements in the value of
such securities between the date the forward contract is entered into and the
date it matures.
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RISK FACTORS
FOREIGN INVESTMENTS. Investing in equity securities of foreign-based
companies involves risks not typically associated with investing in equity
securities of companies organized and operated in the United States.
The value of the investments of the Portfolio may be adversely affected
by changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations.
Changes in government administrations or economic or monetary policies in the
United States or abroad could result in appreciation or depreciation of
portfolio securities and could favorably or unfavorably affect a Fund's
operations. The economies of individual foreign nations differ from the U.S.
economy, whether favorably or unfavorably, in areas such as growth of GDP, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. It may be more difficult to obtain and enforce a judgment
against a foreign company. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
on foreign investments as compared to dividends and interest paid to each of the
Funds by domestic companies.
In general, less information is publicly available with respect to
foreign- based companies than is available with respect to U.S. companies. Most
foreign- based companies are also not subject to the uniform accounting and
financial reporting requirements applicable to companies based in the United
States.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange. Accordingly, the investments of the
Portfolio are less liquid and their prices are more volatile than comparable
investments in securities of U.S. companies. Moreover, the settlement periods
for foreign securities, which are often longer than those for securities of U.S.
companies, may affect portfolio liquidity. In buying and selling securities on
foreign exchanges, fixed commissions are often paid that are generally higher
than the negotiated commissions charged in the United States. In addition, there
is generally less government supervision and regulation of securities exchanges,
brokers and companies in foreign countries than in the United States.
The foreign investments made for the Portfolio are made in compliance
with the currency regulations and tax laws of the United States and foreign
governments. There may also be foreign government regulations and laws which
restrict the amounts and types of foreign investments.
Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Portfolio holds various foreign
currencies from time to time, the value of the net assets of the Portfolio as
measured in U.S. dollars is affected favorably or unfavorably by changes in
exchange rates. The Portfolio also incurs costs in connection with conversion
between various currencies.
Investments in securities of issuers in emerging markets countries may
involve a high degree of risk and many may be considered speculative.
Investments in developing and emerging markets may be subject to potentially
greater risks than those of other foreign issuers. These risks include: (i)
greater risks of expropriation, confiscatory taxation, nationalization, and less
social, political and economic stability; (ii) the small current size of the
markets for securities of emerging market issuers and the currently
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low or non-existent volume of trading, which result in less liquidity
and in greater price volatility; (iii) certain national policies which may
restrict the Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; and
(iv) the absence of developed legal structures governing private or foreign
investments and private property.
PORTFOLIO BROKERAGE
The Portfolio is managed actively in pursuit of its investment
objective. Securities are not traded for short-term profits but, when
circumstances warrant, securities are sold without regard to the length of time
held. A 100% annual turnover rate would occur, for example, if all portfolio
securities (excluding short-term obligations) were replaced once in a period of
one year. For the fiscal year ending October 31, 1997, the annual turnover rate
of the Portfolio is expected to be 80%. The amount of brokerage commissions and
taxes on realized capital gains to be borne by the investors tend to increase as
the level of portfolio activity increases.
In effecting securities transactions the Investment Adviser seeks to
obtain the best price and execution of orders. In selecting such brokers, the
Investment Adviser considers a number of factors including: the broker's ability
to execute orders without disturbing the market price; the broker's reliability
for prompt, accurate confirmations and on-time delivery of securities; the
broker's financial condition and responsibility; the research and other
information provided by the broker; and the commissions charged. Accordingly,
the commissions charged by any such broker may be greater than the amount
another firm might charge if the Investment Adviser determines in good faith
that the amount of such commissions is reasonable in relation to the value of
the brokerage services and research information provided by such broker.
The Investment Adviser may direct a portion of the Portfolio's
securities transactions to certain unaffiliated brokers which in turn use a
portion of the commissions they receive from the Portfolio to pay other
unaffiliated service providers on behalf of the Portfolio for services provided
for which the Portfolio would otherwise be obligated to pay. Such commissions
paid by the Portfolio are at the same rate paid to other brokers for effecting
similar transactions in listed equity securities.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
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brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
OTHER INVESTMENT TECHNIQUES
SHORT-TERM INSTRUMENTS. The assets of the Portfolio may be invested in
non-U.S. dollar denominated and U.S. dollar denominated short-term instruments,
including U.S. dollar denominated repurchase agreements. Cash is held for the
Portfolio in demand deposit accounts with the Portfolio's custodian bank.
GOVERNMENT SECURITIES. The assets of the Portfolio may be invested in
securities issued by the U.S. Government or sovereign foreign governments, their
agencies or instrumentalities. These securities include notes and bonds, zero
coupon bonds and stripped principal and interest securities.
RESTRICTED SECURITIES. Securities that have legal or contractual
restrictions on their resale may be acquired for the Portfolio. The price paid
for these securities, or received upon resale, may be lower than the price paid
or received for similar securities with a more liquid market. Accordingly, the
valuation of these securities reflects any limitation on their liquidity. (See
"Investment Restrictions".)
LOANS OF PORTFOLIO SECURITIES. Loans of portfolio securities up to 30%
of the total value of the Portfolio are permitted. These loans must be secured
continuously by cash or equivalent collateral or by an irrevocable letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned plus accrued income. By lending
securities, the Portfolio's income can be increased by its continuing to receive
income on the loaned securities as well as by the opportunity to receive
interest on the collateral. Any appreciation or depreciation in the market price
of the borrowed securities which occurs during the term of the loan inures to
the Portfolio and its investors.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Securities may be
purchased for the Portfolio on a when-issued or delayed delivery basis. For
example, delivery and payment may take place a month or more after the date of
the transaction. The purchase price and the interest rate payable on the
securities, if any, are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no income accrues to the
Portfolio until delivery and payment take place. At the time the commitment to
purchase securities on a when-issued or delayed delivery basis is made, the
transaction is recorded and thereafter the value of such securities is reflected
each day in determining the Portfolio's net asset value. The Portfolio maintains
with the Custodian a separate account with a segregated portfolio of securities
in an amount at least equal to these commitments. At the time of its
acquisition, a when-issued or delayed delivery security may be valued at less
than the purchase price. Commitments for such when-issued or delayed delivery
securities are made
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only when there is an intention of actually acquiring the securities. On
delivery dates for such transactions, such obligations are met from maturities
or sales of securities and/or from cash flow. If the right to acquire a when-
issued or delayed delivery security is disposed of prior to its acquisition, the
Portfolio could, as with the disposition of any other portfolio obligation,
incur a gain or loss due to market fluctuation. When-issued or delayed delivery
commitments for the Portfolio may not be entered into if such commitments exceed
in the aggregate 15% of the market value of its total assets, less liabilities
other than the obligations created by when-issued or delayed delivery
commitments.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because securities denominated
in currencies other than the U.S. dollar are bought and sold for the Portfolio,
and interest, dividends and sale proceeds are received by the Portfolio in
currencies other than the U.S. dollar, foreign currency exchange transactions
from time to time are entered into for the Portfolio to convert to and from
different foreign currencies and to convert foreign currencies to and from the
U.S. dollar. Foreign currency exchange transactions are agreements to exchange
currencies at a specific rate either for settlement two days thereafter (i.e.,
spot market or spot contracts) or for settlement on a future date (i.e., forward
contracts).
INVESTMENT COMPANY SECURITIES. Subject to applicable statutory and
regulatory limitations, the assets of the Portfolio may be invested in shares of
other investment companies. Under the 1940 Act, the assets of the Portfolio may
be invested in shares of other investment companies in connection with a merger,
consolidation, acquisition or reorganization or if immediately after such
investment (i) 10% or less of the market value of the Portfolio's total assets
would be so invested, (ii) 5% or less of the market value of the Portfolio's
total assets would be invested in the shares of any one such company, and (iii)
3% or less of the total outstanding voting stock of any other investment company
would be owned by the Portfolio. As an investor of another investment company,
the Portfolio would bear, along with other investors, its PRO RATA portion of
the other investment company's expenses, including advisory fees. These expenses
would be in addition to the advisory and other expenses that a Portfolio bears
directly in connection with its own operations.
INVESTMENT RESTRICTIONS
Part B of this Registration Statement includes a listing of the
specific investment restrictions which govern the investment policies of the
Portfolio. Certain of these investment restrictions are deemed fundamental
policies and may be changed only with the approval of the holders of a "majority
of the outstanding voting securities" (as defined in the 1940 Act) of the
Portfolio, including a restriction that not more than 10% of the net assets of
the Portfolio may be invested in securities that are subject to legal or
contractual restrictions on resale.
As a non-fundamental policy, money is not borrowed by the Portfolio in
an amount in excess of 10% of its assets. It is intended that money will be
borrowed only from banks and only either to accommodate requests for the
withdrawal of part or all of an interest while effecting an orderly liquidation
of portfolio securities or to maintain liquidity in the event of an
unanticipated
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failure to complete a portfolio security transaction or other similar
situations. Securities are not purchased for the Portfolio at any time at which
the amount of its borrowings exceed 5% of its assets.
As a non-fundamental policy of the Portfolio, at least 65% of the value
of the total assets of the Portfolio is invested in equity securities based in
emerging markets. For these purposes, equity securities are defined as common
stock, securities convertible into common stock, rights and warrants, and
include securities purchased directly and in the form of American Depository
Receipts, Global Depository Receipts or other similar securities representing
common stock of foreign-based companies.
In accordance with applicable regulations, the Portfolio does not
purchase any restricted security, OTC option, repurchase agreement maturing in
more than seven days, security of a foreign issuer which is not listed on a
recognized domestic or foreign securities exchange, security of a company which,
including predecessors, has a record of less than three years of operations, or
other security that is not readily marketable, if after such purchase more than
10% of the Portfolio's net assets would be represented by such investments.
The Portfolio is classified as "non-diversified" under the 1940 Act,
which means that the Portfolio is not limited by the 1940 Act with respect to
the portion of its assets which may be invested in securities of a single
company (although certain diversification requirements are imposed by the
Internal Revenue Code of 1986, as amended). The possible assumption of large
positions in the securities of a small number of companies may cause the
performance of the Portfolio to fluctuate to a greater extent than that of a
diversified investment company as a result of changes in the financial condition
or in the market's assessment of the companies.
For a more detailed description of the above investment restrictions,
as well as a description of certain other investment restrictions, see Item 13
in Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Portfolio's Trustees, in addition to supervising the actions of the
Investment Adviser and Administrator, as set forth below, decide upon matters of
general policy with respect to the Portfolio.
The Trustees of the Portfolio are:
H.B. Alvord
RETIRED, FORMER TREASURER AND TAX COLLECTOR OF LOS ANGELES COUNTY
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Richard L. Carpenter
RETIRED, DIRECTOR OF INTERNAL INVESTMENTS OF THE PUBLIC SCHOOL
EMPLOYEES' RETIREMENT SYSTEM
Clifford A. Clark
RETIRED, FORMER SENIOR MANAGER OF BROWN BROTHERS HARRIMAN & CO.
David M. Seitzman
PRACTICING PHYSICIAN WITH SEITZMAN, SHUMAN, KWART AND PHILLIPS
OFFICERS
Because of the services rendered to the Portfolio by the Investment
Adviser and the Administrator, the Portfolio requires no employees, and its
officers, other than the Chairman, receive no compensation from the Portfolio.
(See "Management of the Portfolio" in Part B.)
INVESTMENT ADVISER
The Investment Adviser to the Portfolio is Brown Brothers Harriman &
Co., Private Bankers, a New York limited partnership established in 1818. The
firm is subject to examination and regulation by the Superintendent of Banks of
the State of New York and by the Department of Banking of the Commonwealth of
Pennsylvania. The firm is also subject to supervision and examination by the
Commissioner of Banks of the Commonwealth of Massachusetts.
Brown Brothers Harriman & Co. provides investment advice and portfolio
management services to the Portfolio. Subject to the general supervision of the
Trustees, Brown Brothers Harriman & Co. makes the day-to-day investment
decisions, places the purchase and sale orders for portfolio transactions, and
generally manages the investments of the Portfolio. Brown Brothers Harriman &
Co. provides a broad range of investment management services for customers in
the United States and abroad. At June 30, 1996, it managed total assets of
approximately $25 billion.
The Portfolio is managed on a day-to-day basis by a team of
individuals, including Mr. John A. Nielsen, Ms. Camille M. Kelleher, Mr. A.
Edward Allinson, Mr. G. Scott Clemons, Mr. Paul J. Fraker and Mr. Ben Kottler.
Mr. Nielsen holds a B.A. from Bucknell University, a M.B.A. from Columbia
University and is a Chartered Financial Analyst. He joined Brown Brothers
Harriman & Co. in 1968. Ms. Kelleher holds a B.A. from Barnard College and a
M.B.A. from Columbia University. She joined Brown Brothers Harriman & Co. in
1984. Mr. Allinson holds a B.A. and a M.B.A. from the University of
Pennsylvania. He joined Brown Brothers Harriman & Co. in 1991. Mr. Clemons holds
a A.B. from Princeton University. He joined Brown Brothers Harriman & Co. in
1990. Mr. Fraker holds a B.A. from Carleton College and a M.A. from Johns
Hopkins University. He joined Brown Brothers Harriman & Co. in 1996. Mr. Kottler
holds a B.A. from Durham University. He joined Brown Brothers Harriman & Co. in
1996.
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As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by Brown Brothers Harriman & Co. under the
Investment Advisory Agreement, Brown Brothers Harriman & Co. receives from the
Portfolio an annual fee, computed daily and payable monthly, equal to 0.90% of
the average daily net assets of the Portfolio.
The investment advisory services of Brown Brothers Harriman & Co. to
the Portfolio are not exclusive under the terms of the Investment Advisory
Agreement. Brown Brothers Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.
ADMINISTRATOR
Brown Brothers Harriman Trust Company (Cayman) Limited acts as
Administrator of the Portfolio. Brown Brothers Harriman Trust Company (Cayman)
Limited is a wholly-owned subsidiary of Brown Brothers Harriman Trust Company of
New York, which is a wholly-owned subsidiary of Brown Brothers Harriman & Co.
(See "Administrator" in Part B.)
Brown Brothers Harriman Trust Company (Cayman) Limited, in its capacity
as Administrator, administers all aspects of the Portfolio's operations subject
to the supervision of the Trustees except as set forth above under "Investment
Adviser". In connection with its responsibilities as Administrator and at its
own expense, Brown Brothers Harriman Trust Company (Cayman) Limited (i) provides
the Portfolio with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary in order to
provide effective administration of the Portfolio, including the maintenance of
certain books and records, receiving and processing requests for increases and
decreases in the beneficial interests in the Portfolio, notification to the
Investment Adviser of available funds for investment, reconciliation of account
information and balances between State Street Bank and Trust Company (the
"Custodian") and the Investment Adviser, and processing, investigating and
responding to investor inquiries; (ii) oversees the performance of
administrative and professional services to the Portfolio by others, including
the Custodian; (iii) provides the Portfolio with adequate office space and
communications and other facilities; and (iv) prepares and/or arranges for the
preparation, but does not pay for, the periodic updating of the Portfolio's
registration statement for filing with the Securities and Exchange Commission,
and the preparation of tax returns and reports to investors and the Securities
and Exchange Commission.
For the services rendered to the Portfolio and related expenses borne
by Brown Brothers Harriman Trust Company (Cayman) Limited as Administrator,
Brown
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Brothers Harriman Trust Company (Cayman) Limited receives from the Portfolio an
annual fee, computed daily and payable monthly, equal to 0.035% of the
Portfolio's average daily net assets.
Pursuant to a Subadministrative Services Agreement with Brown Brothers
Harriman Trust Company (Cayman) Limited, Signature Financial Group (Cayman)
Limited ("SFG-Cayman") performs such subadministrative duties for the Portfolio
as are from time to time agreed upon by the parties. The offices of SFG-Cayman
are located at Elizabethan Square, George Town, Grand Cayman BWI. SFG-Cayman is
a wholly-owned subsidiary of Signature Financial Group, Inc. SFG-Cayman's
subadministrative duties may include providing equipment and clerical personnel
necessary for maintaining the organization of the Portfolio, participation in
the preparation of documents required for compliance by the Portfolio with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Trustees of and investors in the Portfolio, and other functions
that would otherwise be performed by the Administrator as set forth above. For
performing such subadministrative services, SFG-Cayman receives such
compensation as is from time to time agreed upon, but not in excess of the
amount paid to the Administrator from the Portfolio.
PLACEMENT AGENT
The Portfolio has not retained the services of a principal underwriter
or distributor, since the interests in the Portfolio are offered solely in
private placement transactions. SFG-Cayman, acting as agent for the Portfolio,
serves as the placement agent of interests in the Portfolio. SFG-Cayman receives
no compensation for serving as placement agent.
CUSTODIAN
State Street Bank and Trust Company ("State Street or "Custodian"), 225
Franklin Street, Boston, Massachusetts 02110, is Custodian for the Portfolio.
As Custodian for the Portfolio, State Street is responsible for
maintaining books and records of portfolio transactions and holding the
Portfolio's securities and cash pursuant to a custodian agreement with the
Portfolio. Cash is held for the Portfolio in demand deposit accounts at the
Custodian. Subject to the supervision of the Administrator, the Custodian
maintains the accounting and portfolio transaction records for the Portfolio and
each day computes the net asset value and net income of the Portfolio.
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INDEPENDENT AUDITORS
Deloitte & Touche, Grand Cayman are the independent auditors for the
Portfolio.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of
New York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) are each liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable, except as set forth below. The Portfolio
is not required and has no current intention of holding annual meetings of
investors, but the Portfolio will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Changes in fundamental policies will be submitted to investors
for approval. Investors have under certain circumstances (e.g., upon application
and submission of certain specified documents to the Trustees by a specified
percentage of the outstanding interests in the Portfolio) the right to
communicate with other investors in connection with requesting a meeting of
investors for the purpose of removing one or more Trustees. Investors also have
the right to remove one or more Trustees without a meeting by a declaration in
writing by a specified percentage of the outstanding interests in the Portfolio.
Upon liquidation of the Portfolio, investors would be entitled to share pro rata
in the net assets of the Portfolio available for distribution to investors.
The net asset value of the Portfolio is determined each day the New
York Stock Exchange is open for regular trading. This determination is made once
each business day as of 4:00 p.m. New York time.
The net income and capital gains and losses, if any, of the Portfolio
are determined at 4:00 p.m., New York time on each business day. Net income for
days other than business days is determined as of 4:00 p.m., New York time on
the immediately preceding business day. All the net income, as defined below,
and capital gains and losses, if any, so determined are allocated pro rata among
the investors in the Portfolio at the time of such determination.
For this purpose the "net income" of the Portfolio (from the time of
the immediately preceding determination thereof) consists of (i) accrued
interest, accretion of discount and amortization of premium less (ii) all actual
and accrued expenses of the Portfolio (including the fees payable to the
Investment Adviser and Administrator).
14
<PAGE>
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 ordinary income and
capital gain in determining its income tax liability. The determination of such
share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to Signature Financial Group (Grand
Cayman) Limited, P.O. Box 2494, Elizabethan Square, 2nd Floor, George Town,
Grand Cayman, Cayman Islands, BWI ([809] 945-1824).
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by other investment companies, insurance company separate accounts,
common or commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 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.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio. The net asset value of the Portfolio
is determined once on each business day.
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Custodian by a Federal Reserve Bank).
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 regular
trading. At 4:00 P.M., New York time on each such business day, the value of
each investor's beneficial interest in the Portfolio is 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
15
<PAGE>
interests in the Portfolio. Any additions or withdrawals, which are to be
effected on that day, are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then 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 4:00 P.M New York time on such day
plus or minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio effected on such day, and (ii)
the denominator of which is the aggregate net asset value of the Portfolio as of
4:00 P.M. New York time, on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined is
then applied to determine the value of the investor's interest in the Portfolio
as of 4:00 P.M., New York time on the following business day of the Portfolio.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may reduce all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
reduction will be paid by the Portfolio in federal funds normally on the next
Portfolio 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 the New York Stock Exchange is restricted
or, to the extent otherwise permitted by the 1940 Act if an emergency exists.
The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
16
<PAGE>
APPENDIX A - INTERNATIONAL STATISTICS
- ---------------------------------------
MARKET GROSS DOMESTIC
CAPITALIZATION PRODUCT POPULATION
-------------- -------------- ----------
MARKETS DOLLARS % OF DOLLARS % OF DOLLARS % OF
DEVELOPED (BILLIONS) TOTAL (MILLIONS) TOTAL (MILLIONS) TOTAL
- --------- -------- ----- --------- ----- ---------- ------
Japan 2,663 25.5 4,149 23.2 125.2 3.0
United Kingdom 1,590 15.2 1,200 6.7 58.3 1.4
Germany 667 6.4 2,241 12.5 81.6 1.9
France 540 5.2 1,473 8.2 58.0 1.4
Hong Kong 449 4.3 143 0.8 6.3 0.1
Netherlands 426 4.1 365 2.0 15.4 0.4
Switzerland 399 3.8 268 1.5 7.0 0.2
Malaysia 282 2.7 84 0.5 20.1 0.5
Australia 266 2.5 374 2.1 18.1 0.4
Singapore 256 2.5 86 0.5 3.0 0.1
Italy 254 2.4 1,072 6.0 57.2 1.4
Sweden 222 2.1 237 1.3 8.8 0.2
Spain 181 1.7 538 3.0 39.2 0.9
Belgium 117 1.1 247 1.4 10.1 0.2
Denmark 66 0.6 164 0.9 5.2 0.1
Finland 62 0.6 118 0.7 5.1 0.1
Norway 53 0.5 144 0.8 4.4 0.1
New Zealand 36 0.3 64 0.4 3.5 0.1
Austria 35 0.3 216 1.2 8.5 0.2
Ireland 31 0.3 64 0.4 3.6 0.1
SUBTOTAL: 8,595 82.4 34,247 74.0 538.6 12.7
----- ---- ------ ---- ----- ----
17
<PAGE>
APPENDIX A - INTERNATIONAL STATISTICS
- -------------------------------------
MARKET GROSS DOMESTIC
CAPITALIZATION PRODUCT POPULATION
-------------- -------------- -----------
MARKETS DOLLARS % OF DOLLARS % OF DOLLARS % OF
DEVELOPED (BILLIONS) TOTAL (MILLIONS) TOTAL (MILLIONS) TOTAL
Taiwan 312 3.0 261 1.5 21.3 0.5
South Africa 230 2.2 90 0.5 41.2 1.0
Brazil 219 2.1 721 4.0 155.8 3.7
Korea 139 1.3 416 2.3 44.9 1.1
India 125 1.2 264 1.5 935.7 22.1
Mexico 110 1.1 279 1.6 90.5 2.1
Thailand 96 0.9 162 0.9 59.4 1.4
Indonesia 91 0.9 192 1.1 193.8 4.6
Pakistan 85 0.8 47 0.3 129.8 3.1
Chile 72 0.7 67 0.4 14.2 0.3
Philippines 57 0.5 73 0.4 70.3 1.7
Argentina 44 0.4 286 1.6 34.8 0.8
Israel 36 0.3 87 0.5 57.2 1.4
Turkey 35 0.3 165 0.9 61.6 1.5
Portugal 31 0.3 89 0.5 9.9 0.2
Greece 24 0.2 108 0.6 10.5 0.2
Czech Republic 20 0.2 46 0.3 10.3 0.2
Venezuela 18 0.2 51 0.3 21.6 0.5
Colombia 17 0.2 79 0.4 35.1 0.8
Peru 14 0.1 59 0.3 23.5 0.6
Egypt 12 0.1 57 0.3 59.0 1.4
Poland 8 0.1 121 0.7 38.6 0.9
Morocco 8 0.1 33 0.2 27.1 0.6
Luxembourg 6 0.1 17 0.1 0.4 0.0
Hungary 5 0.0 45 0.2 10.2 0.2
China 5 0.0 702 3.9 1211.5 28.6
Jordan 5 0.0 6 0.0 5.4 0.1
Zimbabwe 4 0.0 6 0.0 11.5 0.3
Tunisia 4 0.0 18 0.1 8.9 0.2
Bangladesh 2 0.0 28 0.2 120.4 2.8
Sri Lanka 2 0.0 12 0.1 18.4 0.4
Kenya 2 0.0 8 0.0 30.5 0.7
Nigeria 2 0.0 42 0.2 111.7 2.6
Ghana 1 0.0 6 0.0 17.5 0.4
Slovenia 0.5 0.0 14 0.1 2.0 0.0
Botswana 0.3 0.0 4 0.0 1.5 0.0
SUBTOTAL: 1,841.8 17.6 4,661 26.0 3,696 87.3
------- ---- ----- ---- ----- ----
TOTAL: 10,436.8 100 17,908 100 4,234.6 100
-------- ---- ------ ---- ------- ----
Sources:
Market Capitalization: Datastream (as of December 1996)
GDP/Population: International Monetary Fund: International
Financial Statistics (February 1997). International Finance
Corporation: Emerging Stock Markets Factbook (1996).
18
<PAGE>
APPENDIX B - FUTURES CONTRACTS
- -------------------------------
FUTURES CONTRACTS ON STOCK INDEXES AND FOREIGN CURRENCIES. Subject to
applicable laws and regulations and solely as a hedge against changes in the
market value of portfolio securities or securities intended to be purchased,
futures contracts on stock indexes ("Futures Contracts") may be entered into for
the Portfolio.
In order to assure that the Portfolio is not deemed a "commodity pool"
for purposes of the Commodity Exchange Act, regulations of the Commodity Futures
Trading Commission ("CFTC") require that the Portfolio enter into transactions
in futures contracts and options on futures contracts only (i) for bona fide
hedging purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums on such non-
hedging positions does not exceed 5% of the liquidation value of the Portfolio's
assets.
Futures Contracts provide for the making and acceptance of a cash
settlement based upon changes in the value of an index of stocks and are used to
hedge against anticipated future changes in overall stock market prices which
otherwise might either adversely affect the value of securities held for the
Portfolio or adversely affect the prices of securities which are intended to be
purchased at a later date. A Futures Contract may also be entered into to close
out or offset an existing futures position.
In general, each transaction in Futures Contracts involves the
establishment of a position which is expected to move in a direction opposite to
that of the investment being hedged. If these hedging transactions are
successful, the futures positions taken would rise in value by an amount which
19
<PAGE>
approximately offsets the decline in value of the portion of the Portfolio's
investments that is being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized. There is also the risk of a potential lack
of liquidity in the secondary market.
The effectiveness of entering into Futures Contracts as a hedging
technique depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of a Futures Contract depends upon future movements in
the level of the overall stock market measured by the underlying index before
the closing out of the Futures Contract. Accordingly, the successful use of
Futures Contracts is subject to the Investment Adviser's ability both to select
an appropriate index and to predict future price movements over the short term
in the overall stock market. The incorrect choice of an index or an incorrect
assessment of future price movements over the short term in the overall stock
market may result in poorer overall performance than if a Futures Contract had
not been purchased. Brokerage costs are incurred in entering into and
maintaining Futures Contracts.
When the Portfolio enters into a Futures Contract, it is initially
required to deposit, in a segregated account in the name of the broker
performing the transaction, an "initial margin" of cash, U.S. Government
securities or other high grade short-term obligations equal to approximately 3%
of the contract amount. Initial margin requirements are established by the
exchanges on which Futures Contracts trade and may, from time to time, change.
In addition, brokers may establish margin deposit requirements in excess of
those required by the exchanges. Initial margin in futures transactions is
different from margin in securities transactions in that initial margin does not
involve the borrowing of funds by a broker's client but is, rather, a good faith
deposit on the Futures Contract which will be returned upon the proper
termination of the Futures Contract. The margin deposits made are marked to
market daily and the Portfolio may be required to make subsequent deposits of
cash or eligible securities called "variation margin", with its futures contract
clearing broker, which are reflective of price fluctuations in the Futures
Contract.
Currently, investments in Futures Contracts on non-U.S. stock indexes
by U.S. investors, such as the Portfolios, can be purchased on such non-U.S.
stock indexes as the Osaka Stock Exchange (OSE), Tokyo Stock Exchange (TSE),
Hong Kong Futures Exchange (HKFE), Singapore International Monetary Exchange
(SIMEX), London International Financial Futures and Options Exchange (LIFFE),
Marche a Terme International de France (MATIF), Sydney Futures Exchange Ltd.
(SFE), Meff Sociedad Rectora de Productos Financieros Derivados de Renta
Variable, S.A. (MEFF RENTA VARIABLE), Deutsche Terminborse (DTB), Italian Stock
Exchange (ISE), Financiele Termijnmarkt Amsterdam (FTA), and London Securities
and Derivatives Exchange, Ltd. (OMLX).
Exchanges may limit the amount by which the price of a Futures Contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
Another risk which may arise in employing Futures Contracts to protect
against the price volatility of portfolio securities is that the prices of an
20
<PAGE>
index subject to Futures Contracts (and thereby the Futures Contract prices) may
correlate imperfectly with the behavior of the cash prices of portfolio
securities. Another such risk is that the price of the Futures Contract may not
move in tandem with the change in overall stock market prices against which the
Portfolio seeks a hedge.
21
<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-8
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . B-9
Investment Advisory and Other Services . . . . . . . B-10
Brokerage Allocation and Other Practices . . . . . . B-11
Capital Stock and Other Securities . . . . . . . . . B-13
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . . B-14
Tax Status . . . . . . . . . . . . . . . . . . . . . B-14
Underwriters . . . . . . . . . . . . . . . . . . . . B-16
Calculations of Performance Data . . . . . . . . . . B-16
Financial Statements . . . . . . . . . . . . . . . . B-16
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES.
The investment objective of the Emerging Markets Portfolio (the
"Portfolio") is to provide investors with long-term maximization of total
return, primarily through capital appreciation.
Brown Brothers Harriman & Co. is the Portfolio's investment adviser
(the "Investment Adviser").
The following discussion supplements the information contained in Part
A and set forth above concerning the investment objective, policies and
techniques of the Portfolio.
EQUITY INVESTMENTS
Equity investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior
<PAGE>
to the claims of preferred and common shareholders. In the case of convertible
preferred stock, the holder's claims on assets and earnings are subordinated to
the claims of all creditors and are senior to the claims of common shareholders.
DOMESTIC INVESTMENTS
The assets of the Portfolio are not invested in domestic securities
(other than short-term instruments), except temporarily when extraordinary
circumstances prevailing at the same time in a significant number of foreign
countries render investments in such countries inadvisable.
OPTIONS
OPTIONS ON STOCK. For the sole purpose of reducing risk, put and call
options on stocks may be purchased for the Portfolio, although the current
intention is not to do so in such a manner that more than 5% of the Portfolio's
net assets would be at risk. A call option on a stock gives the purchaser of the
option the right to buy the underlying stock at a fixed price at any time during
the option period. Similarly, a put option gives the purchaser of the option the
right to sell the underlying stock at a fixed price at any time during the
option period. To liquidate a put or call option position, a "closing sale
transaction" may be made at any time prior to the expiration of the option which
involves selling the option previously purchased.
Covered call options may also be sold (written) on stocks, although in
each case the current intention is not to do so. A call option is "covered" if
the writer owns the underlying security.
OPTIONS ON STOCK INDEXES. A stock index fluctuates with changes in the
market values of the stocks included in the index. Examples of stock indexes are
the Standard & Poor's 500 Stock Index (Chicago Board of Options Exchange), the
New York Stock Exchange Composite Index (New York Stock Exchange), The Financial
Times-Stock Exchange 100 (London Traded Options Market), the Nikkei 225 Stock
Average (Osaka Securities Exchange) and Tokyo Stock Price Index (Tokyo Stock
Exchange).
Options on stock indexes are generally similar to options on stock
except that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a fixed price ("strike price"), an option
on a stock index gives the holder the right to receive a cash "exercise
settlement amount" equal to (a) the amount, if any, by which the strike price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier". Receipt of this cash amount
depends upon the closing level of the stock index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the price of the option. The amount of cash received is equal to such difference
between the closing price of the index and the strike price of the option
expressed in U.S. dollars or a foreign currency, as the case may be, times a
specified multiple.
B-2
<PAGE>
The effectiveness of purchasing stock index options as a hedging
technique depends upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements of the stock
index selected. The value of an index option depends upon future movements in
the level of the overall stock market measured by the underlying index before
the expiration of the option. Accordingly, the successful use of options on
stock indexes is subject to the Investment Adviser's ability both to select an
appropriate index and to predict future price movements over the short term in
the overall stock market. Brokerage costs are incurred in the purchase of stock
index options and the incorrect choice of an index or an incorrect assessment of
future price movements may result in poorer overall performance than if a stock
index option had not been purchased.
OPTIONS ON CURRENCIES. A call option on a currency gives the purchaser
of the option the right to buy the underlying currency at a fixed price, either
at any time during the option period (American style) or on the expiration date
(European style). Similarly, a put option gives the purchaser of the option the
right to sell the underlying currency at a fixed price, either at any time
during the option period or on the expiration date. To liquidate a put or call
option position, a "closing sale transaction" may be made for the Portfolio at
any time prior to the expiration of the option, such a transaction involves
selling the option previously purchased. Options on currencies are traded both
on recognized exchanges (such as the Philadelphia Options Exchange) and
over-the-counter.
The value of a currency option purchased depends upon future changes in the
value of that currency before the expiration of the option. Accordingly, the
successful use of options on currencies is subject to the Investment Adviser's
ability to predict future changes in the value of currencies over the short
term. Brokerage costs are incurred in the purchase of currency options and an
incorrect assessment of future changes in the value of currencies may result in
a poorer overall performance than if such a currency had not been purchased.
FOREIGN EXCHANGE CONTRACTS
Foreign exchange contracts are made with currency dealers, usually
large commercial banks and financial institutions. Although foreign exchange
rates are volatile, foreign exchange markets are generally liquid with the
equivalent of approximately $500 billion traded worldwide on a typical day.
While the Portfolio may enter into foreign currency exchange
transactions to reduce the risk of loss due to a decline in the value of the
hedged currency, these transactions also tend to limit the potential for gain.
Forward foreign exchange contracts do not eliminate fluctuations in the prices
of the Portfolio's securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible because the future value of such securities in foreign
currencies changes as a consequence of market movements in the value of such
securities between the date the forward contract is entered into and the date it
matures. The projection of currency market movements is extremely difficult, and
the successful execution of a hedging strategy is highly unlikely.
LOANS OF PORTFOLIO SECURITIES
Securities of the Portfolio may be loaned if such loans are secured
continuously by cash or equivalent short-term liquid securities as collateral or
by an irrevocable letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned plus accrued
income. While such securities are on loan, the borrower pays the Portfolio any
income accruing thereon, and cash collateral may be invested for the Portfolio,
thereby earning additional income. All or any portion of interest earned on
invested collateral may be paid to the borrower. Loans are subject to
termination by the Portfolio in the normal settlement time, currently three
business days after notice, or by the borrower on one day's notice. Borrowed
securities are returned when the loan is terminated. Any appreciation or
depreciation in the market price of the borrowed securities which occurs during
the term of the loan inures to the Portfolio and its investors. Reasonable
finders' and custodial fees may be paid in connection with a loan. In addition,
all facts and circumstances, including the creditworthiness of the borrowing
financial institution, are considered before a loan is made and no loan is made
in excess of one year. There is the risk that a borrowed security may not be
returned to the Portfolio. Securities are not loaned to Brown Brothers Harriman
& Co. or to any affiliate of the Portfolio or Brown Brothers Harriman & Co.
B-3
<PAGE>
SHORT-TERM INVESTMENTS
Although it is intended that the assets of the Portfolio stay invested
in the securities described above and in the Part A to the extent practical in
light of the Portfolio's investment objective and long-term investment
perspective, the Portfolio's assets may be invested in short-term instruments to
meet anticipated expenses or for day-to-day operating purposes and when, in the
Investment Adviser's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the equity markets.
In addition, when the Portfolio experiences large cash inflows through
additional investments by its investors or the sale of portfolio securities, and
desirable equity securities that are consistent with its investment objective
are unavailable in sufficient quantities, assets may be held in short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("Standard & Poor's"), or if unrated are of comparable
quality in the opinion of the Investment Adviser; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, fixed time
deposits and bankers' acceptances; and (v) repurchase agreements. Time deposits
with a maturity of more than seven days are treated as not readily marketable
(see clause (vi) under the caption "State and Federal Restrictions"). At the
time the Portfolio's assets are invested in commercial paper, bank obligations
or repurchase agreements, the issuer must have outstanding debt rated A or
higher by Moody's or Standard & Poor's; the issuer's parent corporation, if any,
must have outstanding commercial paper rated Prime-1 by Moody's or A-1 by
Standard & Poor's; or, if no such ratings are available, the instrument must be
of comparable quality in the opinion of the Investment Adviser. The assets of
the Portfolio may be invested in non-U.S. dollar denominated and U.S. dollar
denominated short-term instruments, including U.S. dollar denominated repurchase
agreements.
REPURCHASE AGREEMENTS. Repurchase agreements may be entered into for
the Portfolio only with a "primary dealer" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities. This is an agreement in which
the seller (the "Lender") of a security agrees to repurchase from the Portfolio
the security sold at a mutually agreed upon time and price. As such, it is
viewed as the lending of money to the Lender. The resale price normally is in
excess of the purchase price, reflecting an agreed upon interest rate. The rate
is effective for the period of time assets of the Portfolio are invested in the
agreement and is not related to the coupon rate on the underlying security. The
period of these repurchase agreements is usually short, from overnight to one
week. The securities which are subject to repurchase agreements, however, may
have maturity dates in excess of one week from the effective date of the
repurchase agreement. The Portfolio always receives as collateral securities
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Collateral is marked to the market daily and has a market
value including accrued interest at least equal to 100% of the dollar amount
invested on behalf of the Portfolio in each agreement along with accrued
interest. Payment for such securities is made for the Portfolio only upon
physical delivery or evidence of book entry transfer to the account of State
Street Bank and Trust Company. If the Lender defaults, the Portfolio might incur
a loss if the value of the collateral securing the repurchase agreement declines
and might incur disposition costs in connection with liquidating the collateral.
B-4
<PAGE>
In addition, if bankruptcy proceedings are commenced with respect to the Lender,
realization upon the collateral on behalf of the Portfolio may be delayed or
limited in certain circumstances. A repurchase agreement with more than seven
days to maturity are treated as not readily marketable (see clause (vi) under
the caption "State and Federal Restrictions").
INVESTMENT RESTRICTIONS
The Portfolio is operated under the following investment restrictions
which are deemed fundamental policies and may be changed only with the approval
of the holders of a "majority of the outstanding voting securities" as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), of the
Portfolio. As used in this Part B, the term "majority of the outstanding voting
securities as defined in the 1940 Act" currently means the vote of (i) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities are present in person or represented by
proxy; or (ii) more than 50% of the outstanding voting securities, whichever is
less. The Portfolio is operated under the following investment restrictions
which are deemed fundamental policies and may be changed only with the approval
of the holders of a "majority of the outstanding voting securities" (as defined
in the 1940 Act) of the Portfolio.
The Portfolio may not:
(1) borrow money or mortgage or hypothecate its assets, except that in
an amount not to exceed 1/3 of the current value of its net assets, it may
borrow money as a temporary measure for extraordinary or emergency purposes, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money will be borrowed
only from banks and only either to accommodate requests for the withdrawal of
part or all of an interest in the Portfolio while effecting an orderly
liquidation of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction or other
similar situations), provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this restriction and
except that assets may be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions (see clause
(i) under the caption "State and Federal Restrictions");
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the purchase, ownership,
holding or sale of warrants where the grantor of the warrants is the issuer of
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the underlying securities, or (ii) the purchase, ownership, holding or sale of
futures and options, other than the writing of put options;
(4) underwrite securities issued by other persons except insofar as it
may technically be deemed an underwriter under the the 1933 Act in selling a
portfolio security;
(5) make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of its net
assets (taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations and provided that not more than 10% of
its net assets is invested in repurchase agreements maturing in more than seven
days, or (c) by purchasing, subject to the limitation in paragraph (6) below, a
portion of an issue of debt securities of types commonly distributed privately
to financial institutions, for which purposes the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan;
(6) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements maturing in
not more than seven days) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities is reserved);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of its net
assets (taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (it is the
present intention of management to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes; such
sales would not be made of securities subject to outstanding options);
(9) concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of its investment objective, up to 25%
of its assets, at market value at the time of each investment, may be invested
in any one industry, except that positions in futures or option contracts shall
not be subject to this restriction; or
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(10) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and federal statutes and policies the Portfolio may not as a matter of operating
policy: (i) borrow money for any purpose in excess of 10% of its total assets
(taken at cost) (moreover, securities are not purchased at any time at which the
amount of its borrowings exceed 5% of its total assets (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of its net
assets (taken at market value), provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered a pledge of assets for purposes of this
restriction, (iii) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a right to obtain
securities, without payment of further consideration, equivalent in kind and
amount to the securities sold and provided that if such right is conditional the
sale would be made upon the same conditions, (iv) invest for the purpose of
exercising control or management, (v) purchase securities issued by any
investment company except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company are not purchased if such
purchase at the time thereof would cause more than 10% of its total assets
(taken at the greater of cost or market value) to be invested in the securities
of such issuers or would cause more than 3% of the outstanding voting securities
of any such issuer to be held for it, (vi) invest more than 10% of its net
assets (taken at the greater of cost or market value) in restricted securities,
securities of companies which, including predecessors, have a record of less
than three years of operation, invest more than 15% of its net assets in
over-the-counter options, time deposits with a maturity of more than seven days,
repurchase agreements maturing in more than seven days, securities of foreign
issuers which are not listed on a recognized domestic or foreign securities
exchange and other securities that are illiquid or otherwise not readily
marketable, (vii) purchase securities of any issuer if such purchase at the time
thereof would cause it to hold more than 10% of any class of securities of such
issuer, for which purposes all indebtedness of an issuer is deemed a single
class and all preferred stock of an issuer is deemed a single class, except that
futures and option contracts are not subject to this restriction, (viii) invest
more than 5% of its assets in companies which, including predecessors, have a
record of less than three years of continuous operation, or (ix) 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 partner of the Investment Adviser, if after
the purchase of the securities of such issuer, 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,
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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. These policies are not fundamental and may be changed
without investor approval in response to changes in the various state and
federal requirements.
PERCENTAGE AND RATING RESTRICTIONS. If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in Part A is adhered to at the time an investment is made or assets are so
utilized, a later change in percentage resulting from changes in the value of
the portfolio securities or a later change in the rating of a portfolio security
is not considered a violation of policy. If investment restrictions relating to
any particular investment practice or policy are not consistent, the Portfolio
will adhere to the more restrictive limitation.
ITEM 14. MANAGEMENT OF THE PORTFOLIO.
The Trustees and executive officers of the Portfolio, their business
addresses and principal occupation during the past five years (although their
titles may have varied during the period):
H.B. ALVORD* -- Chairman of the Board and Trustee; Retired; Trustee of
the Trust (from September 1990 to October 1994); Director of The 59 Wall Street
Fund, Inc. (from September 1990 to October 1994); Trustee of Landmark Funds III,
Landmark Tax Free Reserves, Landmark Multi-State Tax Free Funds, Landmark Tax
Free Income Funds, Landmark Fixed Income Funds, Landmark Funds I, Landmark Funds
II, and Landmark International Equity Fund. His business address is P.O. Box
5203, Carmel, CA 93921.
RICHARD L. CARPENTER* -- Trustee; Retired; Director of Internal
Investments, Public School Employees' Retirement System (prior to December
1995). His business address is 61 Cliff Street, Burlington, VT 05401.
CLIFFORD A. CLARK* -- Trustee; Retired; Director of Schmid, Inc. (prior
to July 1993); Managing Director of the Smith-Denison Foundation. His business
address is 42 Clowes Drive, Falmouth, MA 02540.
DAVID M. SEITZMAN* -- Trustee; Practicing Physician with Seitzman,
Shuman, Kwart and Phillips; Director of the National Capital Underwriting
Company, Commonwealth Medical Liability Insurance Co. and National Capital
Insurance Brokerage, Limited. His business address is 7117 Nevis Road, Bethesda,
MD 20817.
OFFICERS
PHILIP W. COOLIDGE -- President; Chief Executive Officer and President
of Signature Financial Group, Inc. ("SFG"), 59 Wall Street Distributors, Inc.
("59 Wall Street Distributors") and 59 Wall Street Administrators, Inc. ("59
Wall Street Administrators") (since June 1993).
JAMES E. HOOLAHAN -- Vice President; Senior Vice President of SFG.
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JOHN R. ELDER -- Treasurer; Vice President of SFG (since April 1995);
Treasurer of Phoenix Family of Mutual Funds (prior to April 1995).
LINDA T. GIBSON -- Secretary; Vice President and Assistant Secretary,
SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall Street
Administrators (since June, 1993); graduate student, Boston University School of
Law (prior to May, 1992).
SUSAN JAKUBOSKI -- Assistant Treasurer and Assistant Secretary of the
Portfolio; Assistant Secretary, Assistant Treasurer and Vice President of
Signature Financial Group (Cayman) Limited (since August 1994); Fund Compliance
Administrator of Concord Financial Group, Inc. (from November 1990 to August
1994). Her business address is Signature Financial Group (Cayman) Limited, Suite
#193, 12 Church Street, Hamilton HM 11, Bermuda.
MOLLY S. MUGLER -- Assistant Secretary; Vice President and Assistant
Secretary of SFG; Assistant Secretary of 59 Wall Street Distributors and 59 Wall
Street Administrators (since June 1993).
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* These Trustees are members of the Audit Committee.
The address of each officer, unless otherwise noted, is 6 St. James
Avenue, Boston, Massachusetts 02116. Messrs. Coolidge, Hoolahan and Elder and
Mss. Gibson, Jakuboski and Mugler also hold similar positions with other
investment companies for which affiliates of SFG serve as the principal
underwriter.
No Trustee is an "interested person" of the Portfolio as that term is
defined in the 1940 Act.
The Trustees of the Portfolio receive a base annual fee of $12,000
(except the Chairman who receives a base annual fee of $17,000) which is paid
jointly by the U.S. Money Market Portfolio, U.S. Small Company Portfolio and
International Equity Portfolio together with the Portfolio (the "Portfolios")
and allocated among the Portfolios based upon their respective net assets. In
addition, the Portfolio which has commenced operations pays an annual fee to
each Trustee of $1,000. The aggregate compensation to each Trustee from the
Portfolios was less than $60,000.
By virtue of the responsibilities assumed by Brown Brothers Harriman &
Co. under the Investment Advisory Agreement with the Portfolio and by Brown
Brothers Harriman Trust Company (Cayman) Limited under the Administration
Agreement with the Portfolio (see "Investment Adviser" and "Administrator"), the
Portfolio requires no employees other than its officers, and none of its
officers devote full time to the affairs of the Portfolio, or, other than the
Chairman, receive any compensation from the Portfolio.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of May 16, 1997, Brown Brothers Harriman Trust Company (Cayman)
Limited owned 99% of the outstanding beneficial interests in the Portfolio. So
long as Brown Brothers Harriman Trust Company (Cayman) Limited controls the
Portfolio, it may take actions without the approval of any other holder of
beneficial interest in the Portfolio.
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Brown Brothers Harriman Trust Company (Cayman) Limited has informed the
Portfolio that whenever it is requested to vote on matters pertaining to the
Portfolio (other than a vote by the Portfolio to continue the operation of the
Portfolio upon the withdrawal of another investor in the Portfolio), it will
hold a meeting of its investors and will cast its vote as instructed by those
investors.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER. Under its Investment Advisory Agreement with the Portfolio,
subject to the general supervision of the Trustees and in conformance with the
stated policies of the Portfolio, Brown Brothers Harriman & Co. provides
investment advice and portfolio management services to the Portfolio. In this
regard, it is the responsibility of Brown Brothers Harriman & Co. to make the
day-to-day investment decisions for the Portfolio, to place the purchase and
sale orders for portfolio transactions and to manage, generally, the Portfolio's
investments.
The Investment Advisory Agreement between Brown Brothers Harriman & Co.
and the Portfolio is dated April 10, 1997 and remains in effect for two years
from such date and thereafter, but only so long as the agreement is specifically
approved at least annually (i) by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio, or
by the Trustees, and (ii) by a vote of a majority of the Trustees who are not
parties to the Investment Advisory Agreement or "interested persons" (as defined
in the 1940 Act) of the Portfolio ("Independent Trustees"), cast in person at a
meeting called for the purpose of voting on such approval. The Investment
Advisory Agreement was most recently approved by the Independent Trustees on
April 10, 1997. The Investment Advisory Agreement terminates automatically if
assigned and is terminable at any time without penalty by a vote of a majority
of the Trustees of the Portfolio or by a vote of the holders of a "majority of
the outstanding voting securities" (as defined in the 1940 Act) of the Portfolio
on 60 days' written notice to Brown Brothers Harriman & Co. and by Brown
Brothers Harriman & Co. on 90 days' written notice to the Portfolio.
The investment advisory fee paid to the Investment Adviser from the
Portfolio is calculated daily and paid monthly at an annual rate equal to 0.90%
of the average daily net assets of the Portfolio.
The Glass-Steagall Act prohibits certain financial institutions from
engaging in the business of underwriting, selling or distributing securities and
from sponsoring, organizing or controlling a registered open-end investment
company continuously engaged in the issuance of its shares. There is presently
no controlling precedent prohibiting financial institutions such as Brown
Brothers Harriman & Co. from performing the investment advisory or
administrative functions described above. If Brown Brothers Harriman & Co. were
to terminate its Investment Advisory Agreement with the Portfolio, or were
prohibited from acting in such capacity, it is expected that the Trustees of the
Portfolio would recommend to the investors that they approve a new investment
advisory agreement for the Portfolio with another qualified adviser.
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ADMINISTRATOR. The Administration Agreement between the Portfolio and Brown
Brothers Harriman Trust Company (Cayman) Limited (dated April 10, 1997) will
remain in effect for two years from such date and thereafter, but only so long
as such agreement is specifically approved at least annually in the same manner
as the Investment Advisory Agreement (see "Investment Adviser"). The Independent
Trustees most recently approved the Administration Agreement on April 10, 1997.
The agreement will terminate automatically if assigned by either party thereto
and is terminable by the Portfolio at any time without penalty by a vote of a
majority of the Trustees, or by a vote of the holders of a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Portfolio.
The Administration Agreement is terminable by the Trustees of the Portfolio and
other investors in the Portfolio on 60 days' written notice to Brown Brothers
Harriman Trust Company (Cayman) Limited. The agreement is terminable by the
Administrator on 90 days' written notice to the Portfolio.
The administrative fee paid to Brown Brothers Harriman Trust Company
(Cayman) Limited by the Portfolio is calculated and paid monthly at an annual
rate equal to 0.035% of the Portfolio's average daily net assets. Brown Brothers
Harriman Trust Company (Cayman) Limited is a wholly-owned subsidiary of Brown
Brothers Harriman Trust Company of New York, which is a wholly-owned subsidiary
of Brown Brothers Harriman & Co.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
In effecting securities transactions the Investment Adviser seeks to
obtain the best price and execution of orders. All of the transactions for the
Portfolio are executed through qualified brokers other than Brown Brothers
Harriman & Co. In selecting such brokers, the Investment Adviser considers a
number of factors including: the broker's ability to execute orders without
disturbing the market price; the broker's reliability for prompt, accurate
confirmations and on-time delivery of securities; the broker's financial
condition and responsibility; the research and other information provided by the
broker; and the commissions charged. Accordingly, the commissions charged by any
such broker may be greater than the amount another firm might charge if the
Investment Adviser determines in good faith that the amount of such commissions
is reasonable in relation to the value of the brokerage services and research
information provided by such broker.
Research services provided by brokers to which Brown Brothers Harriman
& Co. has allocated brokerage business in the past include economic statistics
and forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Investment Adviser's clients and not solely or necessarily
for the benefit of the Portfolio. The Investment Adviser believes that the value
of research services received is not determinable nor does such research
significantly reduce its expenses. The Portfolio does not reduce the fee paid to
the Investment Adviser by any amount that might be attributable to the value of
such services.
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Portfolio securities are not purchased from or sold to the
Administrator or Investment Adviser or any "affiliated person" (as defined in
the 1940 Act) of the Administrator or Investment Adviser when such entities are
acting as principals, except to the extent permitted by law.
A committee, comprised of officers and partners of Brown Brothers
Harriman & Co. who are portfolio managers of some of Brown Brothers Harriman &
Co.'s managed accounts (the "Managed Accounts"), evaluates semi-annually the
nature and quality of the brokerage and research services provided by brokers,
and, based on this evaluation, establishes a list and projected ranking of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to such brokers. However, in any semi-annual period, brokers not on
the list may be used, and the relative amounts of brokerage commissions paid to
the brokers on the list may vary substantially from the projected rankings.
The Trustees review regularly the reasonableness of commissions and
other transaction costs incurred for the Portfolio in light of facts and
circumstances deemed relevant from time to time and, in that connection, receive
reports from the Investment Adviser and published data concerning transaction
costs incurred by institutional investors generally.
Over-the-counter purchases and sales are transacted directly with
principal market makers, except in those circumstances in which, in the judgment
of the Investment Adviser, better prices and execution of orders can otherwise
be obtained. If the Portfolio effects a closing transaction with respect to a
futures or option contract, such transaction normally would be executed by the
same broker-dealer who executed the opening transaction. The writing of options
by the Portfolio may be subject to limitations established by each of the
exchanges governing the maximum number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are written on the same or different exchanges or are
held or written in one or more accounts or through one or more brokers. The
number of options which the Portfolio may write may be affected by options
written by the Investment Adviser for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
On those occasions when Brown Brothers Harriman & Co. deems the
purchase or sale of a security to be in the best interests of the Portfolio as
well as other customers, Brown Brothers Harriman & Co., to the extent permitted
by applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions, if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction are made by Brown Brothers Harriman & Co. in the manner it considers
to be most equitable and consistent with its fiduciary obligations to its
customers, including the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
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ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees if they choose to do so
and in such event the other investors in the Portfolio would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual meetings of investors but the Portfolio will hold special meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
its investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to its percentage of the
beneficial interests in the Portfolio), except that if the Trustees recommend
such sale of assets, the approval by vote of a majority of the investors (with
the vote of each being in proportion to its percentage of the beneficial
interests of the Portfolio) will be sufficient. The Portfolio may also be
terminated (i) upon liquidation and distribution of its assets if approved by
the vote of two thirds of its investors (with the vote of each being in
proportion to the amount of its investment) or (ii) by the Trustees by written
notice to its investors.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also provides
that the Portfolio shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the Portfolio,
its investors, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which both
inadequate insurance existed and the Portfolio itself was unable to meet its
obligations.
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The Portfolio's 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 wilful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
The value of investments listed on a domestic securities exchange is
based on the last sale prices as of the regular close of the New York Stock
Exchange (which is currently 4:00 P.M New York time) or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such Exchange.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. The value of each security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security.
Securities or other assets for which market quotations are not readily
available are valued at fair value in accordance with procedures established by
and under the general supervision and responsibility of the Portfolio's
Trustees. Such procedures include the use of independent pricing services, which
use prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Short-term investments which mature in 60 days or less are
valued at amortized cost if their original maturity was 60 days or less, or by
amortizing their value on the 61st day prior to maturity, if their original
maturity when acquired was more than 60 days, unless this is determined not to
represent fair value by the Trustees of the Portfolio.
If the Portfolio determines that it would be detrimental to the best
interest of the remaining investors in the Portfolio to make payment wholly or
partly in cash, payment of the redemption price may be made in whole or in part
by a distribution in kind of securities from the Portfolio, in lieu of cash, in
conformity with the applicable rules of the Securities and Exchange Commission
(the "SEC"). If interests are redeemed in kind, the redeeming investor might
incur transaction costs in converting the assets into cash. The method of
valuing portfolio securities is described above and such valuation will be made
as of the same time the redemption price is determined.
ITEM 20. TAX STATUS.
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 or the
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Commonwealth of Massachusetts. However each investor in the Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Portfolio) of the Portfolio's ordinary income and capital gain in
determining its income tax liability. The determination of such share will be
made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
Although, as described above, the Portfolio will not be subject to
federal income tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets 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.
Gains or losses on sales of securities by the Portfolio will be treated
as long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, the Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by the
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by the Portfolio pursuant to the
exercise of a put option written by it, the Portfolio will subtract the premium
received from its cost basis in the securities purchased.
Forward currency contracts, options and futures contracts entered into
by the Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, the Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by the
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes--i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
FOREIGN INVESTORS. Allocations of U.S. source dividend income to an
investor who, as to the United States, is a foreign trust, foreign corporation
or other foreign investor will be subject to U.S. withholding tax at the rate of
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30% (or lower treaty rate). Allocations of Portfolio interest or short term or
net long term capital gains to foreign investors will not be subject to U.S.
tax.
FOREIGN TAXES. The Portfolio may be subject to foreign withholding
taxes with respect to income received from sources within foreign countries.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York. Investors are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Portfolio.
ITEM 21. UNDERWRITERS.
The placement agent for the Portfolio is Signature Financial Group
(Cayman) Limited, which receives no compensation for serving in this capacity.
Other investment companies, insurance company separate accounts, common and
commingled trust funds and similar organizations and entities may continuously
invest in the Portfolio.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The Portfolio's statement of assets and liabilities dated May 16, 1997
included herein has been included in reliance upon the report of Deloitte &
Touche, Grand Cayman, independent accounts, as experts in accounting and
auditing.
B-16
<PAGE>
EMERGING MARKETS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
(Expressed in United States Dollars)
May 16, 1997
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $100,100
Total assets . . . . . . . . . . . . . . . . . 100,100
-------
LIABILITIES:
Total liabilities . . . . . . . . . . . . . . . 0
-------
NET ASSETS: . . . . . . . . . . . . . . . . . . . . . . . . . $100,100
=======
NOTES:
(1) Emerging Markets Portfolio, a New York trust (the "Portfolio"), was
organized on August 15, 1994 and has been inactive since that date,
except for matters relating to the organization of the Portfolio, the
registration under the Investment Company Act of 1940, as amended, of
the Portfolio, the sale of a beneficial interest therein at the
purchase price of $100,000 to Brown Brothers Harriman Trust Company
(Cayman) Limited and the sale of a beneficial interest therein at the
purchase price of $100 to Signature Financial Group (Cayman) Ltd.
(2) At the close of each business day of the Portfolio, the value of an
investor's beneficial interest in the Portfolio is equal to the product
of (i) the aggregate net asset value of the Portfolio multiplied by
(ii) the percentage effective for that day representing that investor's
share of the aggregate net asset value of the Portfolio.
WS5484
B-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees of
Emerging Markets Portfolio
We have audited the accompanying statement of assets and liabilities of
Emerging Markets Portfolio as of May 16, 1997 (expressed in United States
dollars). This financial statement is the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement presents fairly, in all material
respects, the financial position of the Portfolio as of May 16, 1997 in
conformity with accounting principles generally accepted in the United States
of America.
/S/DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
May 16, 1997
B-18
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
The financial statements included in Part B, Item 23 of this
Registration Statement are as follows:
Statement of Assets and Liabilities at May 16, 1997
Report of Independent Accountants
(B) EXHIBITS
1 Declaration of Trust of the Registrant as amended.
2 By-Laws of the Registrant.
5 Amended and Restated Investment Advisory Agreement
between the Registrant and Brown Brothers
Harriman & Co.
8 Custodian Contract between the Registrant and State
Street Bank and Trust Company.
9(a) Administration Agreement between the Registrant and
Brown Brothers Harriman Trust Company (Cayman)
Limited.
9(b) Expense Payment Agreement between the Registrant
and Brown Brothers Harriman Trust Company (Cayman)
Limited.
13 Investment representation letters of initial
investors.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Beneficial Interests 2 (as of May 16, 1997)
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant 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, as amended.
C-1
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Registrant's investment adviser, Brown Brothers Harriman & Co., is
a New York limited partnership. Brown Brothers Harriman & Co. conducts a general
banking business and is a member of the New York Stock Exchange.
To the knowledge of the Registrant, none of the general partners or
officers of Brown Brothers Harriman & Co. is engaged in any other business,
profession, vocation or employment of a substantial nature.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder are maintained at the offices of:
Emerging Markets Portfolio
Butterfield House, 4th Floor
Fort Street, P.O. Box 2330
George Town, Grand Cayman
Cayman Islands, BWI
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
(investment adviser)
Brown Brothers Harriman Trust Company (Cayman) Limited
Butterfield House, 4th Floor
Fort Street, P.O. Box 2330
George Town, Grand Cayman,
Cayman Islands, BWI
(administrator)
Signature Financial Group (Cayman) Limited
P.O. Box 2494
Elizabethan Square, 2nd Floor
George Town, Grand Cayman
Cayman Islands, BWI
(placement agent and subadministrator)
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
(custodian)
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
International Equity Portfolio has duly caused this registration statement on
Form N-1A to be signed on its behalf by the undersigned, thereto duly
authorized, in Paget, Bermuda on the 19th day of May, 1997.
EMERGING MARKETS PORTFOLIO
By: /s/SUSAN JAKUBOSKI
----------------------
Susan Jakuboski
Assistant Treasurer
C-3
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
EX-99.B1 Declaration of Trust of the Registrant as amended.
EX-99.B2 By-Laws of the Registrant.
EX-99.B5 Amended and Restated Investment Advisory Agreement between the
Registrant and Brown Brothers Harriman & Co.
EX-99.B8 Custodian Contract between the Registrant and State
Street Bank and Trust Company.
EX-99.B9(a) Administration Agreement between the Registrant and Brown
Brothers Harriman Trust Company (Cayman) Limited.
EX-99.B9(b) Expense Payment Agreement between the Registrant and Brown
Brothers Harriman Trust Company (Cayman) Limited.
EX-99.B9(c) Investment representation letters of initial investors.
SHORT TERM PORTFOLIO
DECLARATION OF TRUST
Dated as of August 15, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
--------
Section 2.1 Number and Qualification . . . . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . . . . 3
Section 2.3 Resignation, Removal and Retirement . . . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . . . . 4
Section 2.6 Officers; Chairman of the Board . . . . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III--POWERS OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . 5
------------------
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investments . . . . . . . . . . . . . . . . . . . 6
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . . . 6
Section 3.4 Sale and Increases of Interests . . . . . . . . . 7
Section 3.5 Decreases and Redemptions of Interests . . . . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . . . 7
Section 3.7 Delegation; Committees . . . . . . . . . . . . . . 7
Section 3.8 Collection and Payment . . . . . . . . . . . . . . 7
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . . . . 7
Section 3.11 Further Powers . . . . . . . . . . . . . . . . . . 8
ARTICLE IV--INVESTMENT MANAGEMENT AND ADMINISTRATION AND PLACEMENT
AGENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Investment Management and Other Arrangements . . . 8
Section 4.2 Parties to Contract . . . . . . . . . . . . . . . 9
ARTICLE V--LIABILITY OF HOLDERS; LIMITATIONS OF LIABILITY OF TRUSTEES,
OFFICERS, ETC. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.1 Liability of Holders; Indemnification 9
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties . . . . . . . . . . . . . . . . 9
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. . . . . . . . . . . . . 10
Section 5.4 Mandatory Indemnification . . . . . . . . . . . . 10
Section 5.5 No Bond Required of Trustees . . . . . . . . . . . 11
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . . 11
Section 5.7 Reliance on Experts, etc. . . . . . . . . . . . . 11
<PAGE>
PAGE
ARTICLE VI--INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------
Section 6.1 Interests . . . . . . . . . . . . . . . . . . . . 11
Section 6.2 Non-Transferability . . . . . . . . . . . . . . . 12
Section 6.3 Register of Interests . . . . . . . . . . . . . . 12
Section 6.4 Series Designation . . . . . . . . . . . . . . . . 12
ARTICLE VII--INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS . . . . . . 15
ARTICLE VIII--DETERMINATION OF BOOK CAPITAL ACCOUNT BALANCES,
AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 15
-----------------
Section 8.1 Book Capital Account Balances . . . . . . . . . . 15
Section 8.2 Allocations and Distributions to Holders . . . . . 15
Section 8.3 Power to Modify Foregoing Procedures . . . . . . . 16
ARTICLE IX--HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------
Section 9.1 Rights of Holders . . . . . . . . . . . . . . . . 16
Section 9.2 Meetings of Holders . . . . . . . . . . . . . . . 16
Section 9.3 Notice of Meetings . . . . . . . . . . . . . . . . 17
Section 9.4 Record Date for Meetings, Distributions, etc. . . 17
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . . . 17
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . . . 17
Section 9.7 Inspection of Records . . . . . . . . . . . . . . 17
Section 9.8 Holder Action by Written Consent . . . . . . . . . 17
Section 9.9 Notices . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE X--DURATION; TERMINATION; AMENDMENT; MERGERS; ETC. . . . . . . . . 18
Section 10.1 Duration . . . . . . . . . . . . . . . . . . . . . 18
Section 10.2 Termination . . . . . . . . . . . . . . . . . . . 19
Section 10.3 Dissolution . . . . . . . . . . . . . . . . . . . 19
Section 10.4 Amendment Procedure . . . . . . . . . . . . . . . 20
Section 10.5 Merger, Consolidation and Sale of Assets . . . . . 21
Section 10.6 Incorporation . . . . . . . . . . . . . . . . . . 21
ARTICLE XI--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 21
-------------
Section 11.1 Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . . 21
Section 11.2 Governing Law . . . . . . . . . . . . . . . . . . 21
Section 11.3 Counterparts . . . . . . . . . . . . . . . . . . . 21
Section 11.4 Reliance by Third Parties . . . . . . . . . . . . 22
Section 11.5 Provisions in Conflict With Law or Regulations . . 22
<PAGE>
WS5150A1.EDG
DECLARATION OF TRUST
OF
SHORT TERM PORTFOLIO
This DECLARATION OF TRUST of the Short Term Portfolio is made
as of the 15th day of August, 1994 by the parties signatory hereto, as Trustees
(as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the
law of the State of New York for the investment and reinvestment of its assets;
and
WHEREAS, it is proposed that the trust assets be composed of
money and property contributed thereto by the holders of interests in the trust
entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and property contributed to the trust fund and will
manage and dispose of the same for the benefit of the holders of interests in
the Trust and subject to the provisions hereof, to wit:
ARTICLE I
THE TRUST
1.1. NAME. The name of the trust created hereby (the "Trust")
shall be the Short Term Portfolio and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall refer to the Trustees as Trustees, and not individually, and shall not
refer to the officers, employees, agents or independent contractors of the Trust
or holders of interests in the Trust.
1.2. DEFINITIONS. As used in this Declaration, the following terms shall
have the following meanings:
The term "Interested Person" shall have the meaning given it
in the 1940 Act.
"BOOK CAPITAL ACCOUNT" shall mean, for any Holder at any time,
the Book Capital Account of the Holder for such day, determined in accordance
with Section 8.1 hereof.
<PAGE>
"CODE" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, as well as any non-superseded provisions of
the Internal Revenue Code of 1954, as amended (or any corresponding provision or
provisions of succeeding law).
"COMMISSION" shall mean the United States Securities and
Exchange Commission.
"DECLARATION" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "DECLARATION", "HEREOF",
"HEREIN" and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which any such word appears.
"FISCAL YEAR" shall mean an annual period determined by the
Trustees which ends on December 31 of each year or on such other day as is
permitted or required by the Code.
"HOLDERS" shall mean as of any particular time all holders of
record of Interests in the Trust.
"INSTITUTIONAL INVESTOR(S)" shall mean any regulated
investment company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual, S
corporation, partnership or grantor trust beneficially owned by any individual,
S corporation or partnership.
"INTEREST(S)" shall mean the interest of a Holder in the
Trust, including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined by
calculating, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to the
total of all Holders' Book Capital Account balances. Reference herein to a
specified percentage of, or fraction of, Interests, means Holders whose combined
Book Capital Account balances represent such specified percentage or fraction of
the combined Book Capital Account balances of all, or a specified group of,
Holders.
"INVESTMENT MANAGER AND ADMINISTRATOR" shall mean any party
furnishing services to the Trust pursuant to any investment management or
administration contract described in Section 4.1 hereof.
"MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at such
meeting, if Holders of more than 50% of all Interests are present or represented
by proxy, or (B) more than 50% of all Interests, whichever is less.
"PERSON" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
2
<PAGE>
"REDEMPTION" shall mean the complete withdrawal of an Interest
of a Holder the result of which is to reduce the Book Capital Account balance of
that Holder to zero, and the term "REDEEM" shall mean to effect a Redemption.
"TRUSTEES" shall mean each signatory to this Declaration, so
long as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been duly
elected or appointed and have qualified as Trustees in accordance with the
provisions hereof and are then in office, and reference in this Declaration to a
Trustee or Trustees shall refer to such individual or individuals in their
capacity as Trustees hereunder.
"TRUST PROPERTY" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 ACT" shall mean the United States Investment Company
Act of 1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
TRUSTEES
2.1. NUMBER AND QUALIFICATION. The number of Trustees shall be
fixed from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall in no
event be less than three or more than 15. Any vacancy created by an increase in
the number of Trustees may be filled by the appointment of an individual having
the qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
2.2. TERM AND ELECTION. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the event
of resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3.RESIGNATION, REMOVAL AND RETIREMENT.Any Trustee may resign
his or her trust (without need for prior or subsequent accounting) by an
instrument in writing executed by such Trustee and delivered or mailed to the
3
<PAGE>
Chairman, if any, the President or the Secretary of the Trust and such
resignation shall be effective upon such delivery, or at a later date according
to the terms of the instrument. Any Trustee may be removed by the affirmative
vote of Holders of two-thirds of the Interests or (provided the aggregate number
of Trustees, after such removal and after giving effect to any appointment made
to fill the vacancy created by such removal, shall not be less than the number
required by Section 2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Removal with cause includes, but is not limited to, the
removal of a Trustee due to physical or mental incapacity or failure to comply
with such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory retirement age,
if any, established pursuant to any written policy adopted from time to time by
at least two-thirds of the Trustees shall, automatically and without action by
such Trustee or the remaining Trustees, be deemed to have retired in accordance
with the terms of such policy, effective as of the date determined in accordance
with such policy. Any Trustee who has become incapacitated by illness or injury
as determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
2.4. VACANCIES. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
retirement, adjudicated incompetence or other incapacity to perform the duties
of the office, or removal, of a Trustee. No such vacancy shall operate to annul
this Declaration or to revoke any existing agency created pursuant to the terms
of this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5. MEETINGS. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary, an Assistant Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice at a time and place fixed by the
By-Laws or by resolution of the Trustees. Notice of any other meeting shall be
mailed or otherwise given not less than 24 hours before the meeting but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Trustee attends a meeting for the
express purpose of
4
<PAGE>
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. The Trustees may act with or without a meeting.
A quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all meetings
of any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee may be
taken at a meeting by vote of a majority of the members present (a quorum being
present) or without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals participating
in the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
2.6. OFFICERS; CHAIRMAN OF THE BOARD. The Trustees shall, from
time to time, elect a President, a Secretary and a Treasurer. The Trustees may
elect or appoint, from time to time, a Chairman of the Board who shall preside
at all meetings of the Trustees and carry out such other duties as the Trustees
may designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other officer may, but need not, be a Trustee.
2.7.BY-LAWS. The Trustees may adopt and, from time to time,
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
POWERS OF TRUSTEES
3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and such
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees may perform such acts as in their
sole discretion they deem proper for conducting the business of the Trust. The
enumeration of or failure to mention any specific power herein shall not be
construed as limiting such exclusive and absolute control. The powers of the
Trustees may be exercised without order of or resort to any court.
5
<PAGE>
3.2. INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution, corporation
or other business entity organized under the laws of the United States or under
any foreign laws; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of any kind and
description, including, without limitation, the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of such rights, powers and privileges in respect of any of such
investments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional instruments in which the Trustees may determine to
invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have the
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name or
nominee name of any other Person on behalf of the Trust, on such terms as the
Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation, removal
or death of a Trustee, such resigning, removed or deceased Trustee shall
automatically cease to have any right, title or interest in any Trust Property,
and the right, title and interest of such resigning, removed or deceased Trustee
in the Trust Property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
3.4. SALE AND INCREASES OF INTERESTS. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit any
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Institutional Investor to purchase an Interest, or increase its Interest, for
such type of consideration, including cash or property, at such time or times
(including, without limitation, each business day), and on such terms as the
Trustees may deem best, and may in such manner acquire other assets (including
the acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. Individuals, S corporations, partnerships and
grantor trusts that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. A Holder which has redeemed its Interest
may not be permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 DECREASES AND REDEMPTIONS OF INTERESTS. Subject to Article
VII hereof, the Trustees, in their discretion, may, from time to time, without a
vote of the Holders, permit a Holder to redeem its Interest, or decrease its
Interest, for either cash or property, at such time or times (including, without
limitation, each business day), and on such terms as the Trustees may deem best.
3.6. BORROW MONEY. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging, pledging
or otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person.
3.7. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the Trust
Property and over the business of the Trust, to delegate from time to time to
such of their number or to officers, employees, agents or independent
contractors of the Trust the doing of such things and the execution of such
instruments in either the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.8. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust or the Trust Property; to foreclose any security
interest securing any obligation, by virtue of which any property is owed to the
Trust; and to enter into releases, agreements and other instruments.
3.9. EXPENSES. The Trustees shall have power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the Trust Property to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees. The Trustees
may pay themselves such compensation for special services, including legal and
brokerage services, as they in good faith may deem reasonable, and reimbursement
for expenses reasonably incurred by themselves on behalf of the Trust.
3.10. MISCELLANEOUS POWERS. The Trustees shall have power to:
(a)employ or contract with such Persons as the Trustees may deem appropriate for
the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
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ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not the Trust would
have the power to indemnify such Person against such liability; (d) establish
pension, profit-sharing and other retirement, incentive and benefit plans for
the Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. FURTHER POWERS. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices, whether within or without the State of New York,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust which is made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
ARTICLE IV
Investment Management and Administration
AND PLACEMENT AGENT ARRANGEMENTS
4.1. INVESTMENT MANAGEMENT AND OTHER ARRANGEMENTS. The
Trustees may in their discretion, from time to time, enter into investment
management and administration contracts or placement agent agreements whereby
the other party to such contract or agreement shall undertake to furnish the
Trustees such investment management and administration, placement agent and/or
other services as the Trustees shall, from time to time, consider appropriate or
desirable and all upon such terms and conditions as the Trustees may in their
sole discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Manager and Administrator (subject to
such general or specific instructions as the Trustees may, from time to time,
adopt) to effect purchases, sales, loans or exchanges of Trust Property on
behalf of the Trustees or may authorize any officer, employee or Trustee to
effect such purchases,
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sales, loans or exchanges pursuant to recommendations of any such Investment
Manager and Administrator (all without any further action by the Trustees). Any
such purchase, sale, loan or exchange shall be deemed to have been authorized by
the Trustees.
4.2. PARTIES TO CONTRACT. Any contract of the character
described in Section 4.1 hereof or in the By-Laws of the Trust may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any individual holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was reasonable and fair and not inconsistent with the provisions of this Article
IV or the By-Laws of the Trust. The same Person may be the other party to one or
more contracts entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any individual may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts mentioned in this
Section 4.2 or in the By-Laws of the Trust.
ARTICLE V
Liability of Holders; Limitations of
LIABILITY OF TRUSTEES, OFFICERS, ETC.
5.1. LIABILITY OF HOLDERS; INDEMNIFICATION. Each Holder shall
be jointly and severally liable (with rights of contribution INTER SE in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of being or having been a Holder to the extent that such claim or
liability imposes on the Holder an obligation or liability which, when compared
to the obligations and liabilities imposed on other Holders, is greater than
such Holder's Interest (proportionate share), and shall reimburse such Holder
for all legal and other expenses reasonably incurred by such Holder in
connection with any such claim or liability. The rights accruing to a Holder
under this Section 5.1 shall not exclude any other right to which such Holder
may be lawfully entitled, nor shall anything contained herein restrict the right
of the Trust to indemnify or reimburse a Holder in any appropriate situation
even though not specifically provided herein. Notwithstanding the
indemnification procedure described above, it is intended that each Holder shall
remain jointly and severally liable to the Trust's creditors as a legal matter.
5.2. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, INDEPENDENT CONTRACTORS TO THIRD PARTIES. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust shall be subject to any personal liability whatsoever to
any Person, other than
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the Trust or the Holders, in connection with Trust Property or the affairs of
the Trust; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
arising in connection with the affairs of the Trust.
5.3. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, INDEPENDENT CONTRACTORS TO TRUST, HOLDERS, ETC. No Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust shall be liable to the Trust or the Holders for any
action or failure to act (including, without limitation, the failure to compel
in any way any former or acting Trustee to redress any breach of trust) except
for such Person's own bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties.
5.4. MANDATORY INDEMNIFICATION. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust (including any Person who serves at the Trust's request
as a director, officer or trustee of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) against all liabilities
and expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably incurred by
such Person in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to any
matter as to which such Person shall have been adjudicated to have acted in bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or otherwise, no
indemnification either for such payment or for any other expenses shall be
provided unless there has been a determination that such Person did not engage
in willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Person's office by the court or other
body approving the settlement or other disposition or by a reasonable
determination, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that such Person did not engage in such conduct by
written opinion from independent legal counsel approved by the Trustees. The
rights accruing to any Person under these provisions shall not exclude any other
right to which such Person may be lawfully entitled; provided that no Person may
satisfy any right of indemnity or reimbursement granted in this Section 5.4 or
in Section 5.2 hereof or to which such Person may be otherwise entitled except
out of the Trust Property. The Trustees may make advance payments in connection
with indemnification under this Section 5.4, provided that the indemnified
Person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that such Person is not entitled to such
indemnification.
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5.5. NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the performance
of any of such Trustee's duties hereunder.
5.6. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent contractor of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
such Trustee, officer, employee, agent or independent contractor or be liable
for the application of money or property paid, loaned or delivered to or on the
order of such Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust, and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by any Trustee, officer, employee, agent or independent contractor
of the Trust, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent contractor of
the Trust shall not personally be bound by or liable thereunder, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any Trustee, officer, employee, agent or independent
contractor of the Trust. Subject to the provisions of the 1940 Act, the Trust
may maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors of the
Trust in such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
5.7. RELIANCE ON EXPERTS, ETC. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the performance
of such Person's duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust (whether or not the
Trust would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any Investment Manager and Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE VI
INTERESTS
6.1.INTERESTS. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. The Interests shall be personal
property giving only the rights in this Declaration specifically set forth.
The value of
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an Interest shall be equal to the Book Capital Account balance of the Holder of
the Interest.
6.2.NON-TRANSFERABILITY. A Holder may not transfer, sell or
exchange its Interest.
6.3. REGISTER OF INTERESTS. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder. Such register shall be
conclusive as to the identity of the Holders. No Holder shall be entitled to
receive payment of any distribution, nor to have notice given to it as herein
provided, until it has given its address to such officer or agent of the Trust
as is keeping such register for entry thereon.
6.4. SERIES DESIGNATION. The Trust may be divided into series,
the number and relative rights, privileges and preferences of which shall be
established and designated by the Trustees, in their discretion, in accordance
with the terms of this Section 6.4. The Trustees may from time to time exercise
their power to authorize the division of the Trust into one or more series by
establishing and designating one or more series of Interests upon and subject to
the following provisions:
(a) All Interests shall be identical except that
there may be such variations as shall be fixed and determined by the Trustees
between different series as to the right of withdrawal and the price, terms and
manner of withdrawal, and special and relative rights as to income allocations
and on liquidation.
(b) The number of authorized Interests and
the number of Interests of each series that may be issued shall be unlimited.
The Trustees may classify or reclassify any unissued Interests or any Interests
previously issued and reacquired of any series into one or more series that may
be established and designated from time to time. The Trustees may reissue for
such consideration and on such terms as they may determine, or cancel any
Interests of any series reacquired by the Trust at their discretion from time to
time.
(c) All consideration received by the Trust for the
issue of Interests of a particular series, together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Holders of all series for all purposes. No Holder of any particular
series shall have any
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claim on or right to any assets belonging to any other series in which it does
not hold an Interest.
(d)The assets belonging to each particular
series shall be charged with the liabilities of the Trust in respect of that
series and all expenses, costs, charges and reserves attributable to that
series, and any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among any one or more of
the series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Holders of all series for all
purposes. Under no circumstances shall the assets allocated or belonging to any
particular series be charged with liabilities attributable to any other series.
All Persons who have extended credit which has been allocated to a particular
series, or who have a claim or contract which has been allocated to any
particular series, shall look only to the assets of that particular series for
payment of such credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the
Trust Property allocated or belonging to any particular series shall be governed
by Section 3.2 hereof unless otherwise provided in the instrument of the
Trustees establishing such series which is hereinafter described.
(f) Each Interest in a series shall represent an Interest in
the net assets allocated or belonging to such series only, and such Interest
shall not extend to the assets of the Trust generally. Distributions and
allocations of a particular series may be paid with such frequency as the
Trustees may determine, which may be made daily or otherwise, pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, to the Holders of that series only, from such of the
income, accrued or realized, from the assets belonging to that series, as the
Trustees may determine, after providing for actual and accrued liabilities
belonging to that series. All distributions and allocations of a particular
series shall be distributed pro rata to the Holders of that series in proportion
to the size of their Interest in that series held by such Holders at the date
and time of record established for the payments of such distributions and
allocation. Interests of any particular series of the Trust may be withdrawn
solely out of Trust Property allocated or belonging to that series. Upon
liquidation or termination of a series of the Trust, Holders of such series
shall be entitled to receive a pro rata share of the net assets of such series
only.
(g) Notwithstanding any provision hereof to the contrary, on
any matter submitted to a vote of the Holders, all interests then entitled to
vote shall be voted by individual series, except that (i) when required by the
1940 Act to vote in the aggregate, Interests shall not be voted by individual
series, and (ii) when the Trustees have determined that the matter affects only
the Interests of one or more series, only Holders of such series shall be
entitled to vote thereon.
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(h) The establishment and designation of any series shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Interests outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
The Trustees also acting pursuant to the last paragraph of
Section 10.4 of the Declaration, hereby amend in its entirety paragraph (a) of
Section 10.4 of the Trust's Declaration of Trust as follows:
(a) This Declaration may be amended by the vote of Holders
of more than 50% of all Interests at any meeting of Holders or by an instrument
in writing without a meeting, executed by a majority of the Trustees and
consented to by the Holders of more than 50% of all Interests. Notwithstanding
any other provision hereof, this Declaration may be amended by an instrument in
writing executed by a majority of the Trustees, and without the vote or consent
of Holders, for any one or more of the following purposes: (i) to change the
name of the Trust, (ii) to supply any omission, or to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, (iii) to
conform this Declaration to the requirements of applicable federal law or
regulations or the requirements of the applicable provisions of the Code, (iv)
to change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to effect
such changes herein as the Trustees find to be necessary or appropriate (A) to
permit the filing of this Declaration under the law of such state or other
jurisdiction applicable to trusts or voluntary associations, (B) to permit the
Trust to elect to be treated as a "regulated investment company" under the
applicable provisions of the Code, (C) to permit the Trust to comply with fiscal
or other statutory or official requirements of any government authority, (D) to
permit the transfer of Interests (or to permit the transfer of any other
beneficial interest in or share of the Trust, however denominated), or (E) to
create separate series of Interests as provided in Section 6.4, and (vi) in
conjunction with any amendment contemplated by the foregoing clause (iv) or the
foregoing clause (v) to make any and all such further changes or modifications
to this Declaration as the Trustees find to be necessary or appropriate, any
finding of the Trustees referred to in the foregoing clause (v) or the foregoing
clause (vi) to be conclusively evidenced by the execution of any such amendment
by a majority of the Trustees; provided, however, that unless effected in
compliance with the provisions of Section 10.4(b) hereof, no amendment otherwise
authorized by this sentence may be made which would reduce the amount payable
with respect to any Interest upon liquidation of the Trust and; provided,
further, that the Trustees shall not be liable for failing to make any amendment
permitted by this Section 10.4(a).
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ARTICLE VII
INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted by the
Trustees, each Holder shall have the right to vary its investment in the Trust
at any time without limitation by increasing (through a capital contribution) or
decreasing (through a capital withdrawal) or by a Redemption of its Interest. An
increase in the investment of a Holder in the Trust shall be reflected as an
increase in the Book Capital Account balance of that Holder and a decrease in
the investment of a Holder in the Trust or the Redemption of the Interest of a
Holder shall be reflected as a decrease in the Book Capital Account balance of
that Holder. The Trust shall, upon appropriate and adequate notice from any
Holder increase, decrease or redeem such Holder's Interest for an amount
determined by the application of a formula adopted for such purpose by
resolution of the Trustees; provided that (a) the amount received by the Holder
upon any such decrease or Redemption shall not exceed the decrease in the
Holder's Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at any
time and from time to time, charge fees for effecting any such decrease or
Redemption, at such rates as the Trustees may establish, and may, at any time
and from time to time, suspend such right of decrease or Redemption. The
procedures for effecting decreases or Redemptions shall be as determined by the
Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
BALANCES AND DISTRIBUTIONS
8.1. BOOK CAPITAL ACCOUNT BALANCES. The Book Capital Account
balance of each Holder shall be determined on such days and at such time or
times as the Trustees may determine. The Trustees shall adopt resolutions
setting forth the method of determining the Book Capital Account balance of each
Holder. The power and duty to make calculations pursuant to such resolutions may
be delegated by the Trustees to the Investment Manager and Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled to
receive the balance of its Book Capital Account. A Holder may not transfer, sell
or exchange its Book Capital Account balance.
8.2. ALLOCATIONS AND DISTRIBUTIONS TO HOLDERS. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall make
(i) the allocation of unrealized gains and losses, taxable income and tax loss,
and profit and loss, or any item or items thereof, to each Holder, (ii) the
payment of distributions, if any, to Holders, and (iii) upon liquidation, the
final distribution of items of taxable income and expense. Such procedures shall
be set forth in writing and be furnished to the Trust's accountants. The
Trustees may amend the procedures adopted pursuant to this Section 8.2 from time
to time. The Trustees may retain from the net profits such amount as they may
deem necessary to pay the liabilities and expenses of the Trust, to meet
obligations
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of the Trust, and as they may deem desirable to use in the conduct of the
affairs of the Trust or to retain for future requirements or extensions of the
business.
8.3. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
income of the Trust, the allocation of income of the Trust, the Book Capital
Account balance of each Holder, or the payment of distributions to the Holders
as they may deem necessary or desirable to enable the Trust to comply with any
provision of the 1940 Act or any order of exemption issued by the Commission or
with the Code.
ARTICLE IX
HOLDERS
9.1. RIGHTS OF HOLDERS. The ownership of the Trust Property
and the right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
power or right to call for any partition or division of any Trust Property.
9.2. MEETINGS OF HOLDERS. Meetings of Holders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of the
Interests, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within or without the
State of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of one-third of the
Interests, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, this Declaration or the By-Laws of the Trust.
All or any one of more Holders may participate in a meeting of Holders by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting.
9.3. NOTICE OF MEETINGS. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at least 10
days and not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of such
meeting except in the situation in which a Holder attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting was not lawfully called or convened. At any meeting, any
business properly before
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the meeting may be considered whether or not stated in the notice of the
meeting. Any adjourned meeting may be held as adjourned without further notice.
9.4. RECORD DATE FOR MEETINGS, DISTRIBUTIONS, ETC. For the
purpose of determining the Holders who are entitled to notice of and to vote at
any meeting, or to participate in any distribution, or for the purpose of any
other action, the Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Holders or the payment of any
distribution or the taking of any other action, as the case may be, as a record
date for the determination of the Persons to be treated as Holders for such
purpose.
9.5. PROXIES, ETC. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote is to be taken. A
proxy may be revoked by a Holder at any time before it has been exercised by
placing on file with the Secretary, or with such other officer or agent of the
Trust as the Secretary may direct, a later dated proxy or written revocation.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of the Trust or of one or more Trustees or of one or more officers
of the Trust. Only Holders on the record date shall be entitled to vote. Each
such Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at any
meeting in person or by proxy in respect of such Interest, but if more than one
of them is present at such meeting in person or by proxy, and such joint owners
or their proxies so present disagree as to any vote to be cast, such vote shall
not be received in respect of such Interest. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger.
9.6. REPORTS. The Trustees shall cause to be prepared and
furnished to each Holder, at least annually as of the end of each Fiscal Year, a
report of operations containing a balance sheet and a statement of income of the
Trust prepared in conformity with generally accepted accounting principles and
an opinion of an independent public accountant on such financial statements. The
Trustees shall, in addition, furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income for the period from the
beginning of the then-current Fiscal Year to the end of such period.
9.7.INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Holders during normal business hours for any purpose not
harmful to the Trust.
9.8. HOLDER ACTION BY WRITTEN CONSENT. Any action which may be
taken by Holders may be taken without a meeting if Holders holding more than 50%
of all Interests entitled to vote (or such larger proportion thereof as shall be
required by any express provision of this Declaration) consent to the action in
writing and the written consents are filed with the records of the meetings of
Holders. Such consents shall be treated for all purposes as a vote taken at a
meeting of Holders. Each such written consent shall be executed by or on behalf
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of the Holder delivering such consent and shall bear the date of such execution.
No such written consent shall be effective to take the action referred to
therein unless, within one year of the earliest dated consent, written consents
executed by a sufficient number of Holders to take such action are filed with
the records of the meetings of Holders.
9.9. NOTICES. Any and all communications, including any
and all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its last
known address as recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
AMENDMENT; MERGERS; ETC.
10.1. DURATION. Subject to possible termination or dissolution
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
DATE OF
NAME ADDRESS BIRTH
Nicole Catherine Rumery 18 Rio Vista Street 12/21/91
North Billerica, MA 01862
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Merrick, NY 11566
Amanda Jehan Sher Coolidge 483 Pleasant Street, No. 9 08/16/89
Belmont, MA 02178
Emilie Blair Ruble 65 Duck Pond Road 02/24/89
Glen Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
Katherine Driscoll Cima 11 Beechwood Lane 04/05/92
Scarsdale, NY 10583
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10.2. TERMINATION.
(a) The Trust may be terminated (i) by the
affirmative vote of Holders of not less than two-thirds of all Interests at any
meeting of Holders or by an instrument in writing without a meeting, executed by
a majority of the Trustees and consented to by Holders of not less than
two-thirds of all Interests, or (ii) by the Trustees by written notice to the
Holders. Upon any such termination,
(i) the Trust shall carry on no business except for
the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust have been
wound up, including the power to fulfill or discharge the contracts of
the Trust, collect the assets of the Trust, sell, convey, assign,
exchange or otherwise dispose of all or any part of the Trust Property
to one or more Persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay the liabilities of the Trust,
and do all other acts appropriate to liquidate the business of the
Trust; provided that any sale, conveyance, assignment, exchange or
other disposition of all or substantially all the Trust Property shall
require approval of the principal terms of the transaction and the
nature and amount of the consideration by the vote of Holders holding
more than 50% of all Interests; and
(iii) after paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for their
protection, the Trustees shall distribute the remaining Trust Property,
in cash or in kind or partly each, among the Holders according to their
respective rights as set forth in the procedures established pursuant
to Section 8.2 hereof.
(b) Upon termination of the Trust and
distribution to the Holders as herein provided, a majority of the Trustees shall
execute and file with the records of the Trust an instrument in writing setting
forth the fact of such termination and distribution. Upon termination of the
Trust, the Trustees shall thereupon be discharged from all further liabilities
and duties hereunder, and the rights and interests of all Holders shall
thereupon cease.
10.3. DISSOLUTION. Upon the bankruptcy of any Holder, or upon
the Redemption of any Interest, the Trust shall be dissolved effective 120 days
after the event. However, the Holders (other than such bankrupt or redeeming
Holder) may, by a unanimous affirmative vote at any meeting of such Holders or
by an instrument in writing without a meeting executed by a majority of the
Trustees and consented to by all such Holders, agree to continue the business of
the Trust even if there has been such a dissolution.
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10.4. AMENDMENT PROCEDURE.
(a) This Declaration may be amended by the
vote of Holders of more than 50% of all Interests at any meeting of Holders or
by an instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by the Holders of more than 50% of all Interests.
Notwithstanding any other provision hereof, this Declaration may be amended by
an instrument in writing executed by a majority of the Trustees, and without the
vote or consent of Holders, for any one or more of the following purposes: (i)
to change the name of the Trust, (ii) to supply any omission, or to cure,
correct or supplement any ambiguous, defective or inconsistent provision hereof,
(iii) to conform this Declaration to the requirements of applicable federal law
or regulations or the requirements of the applicable provisions of the Code,
(iv) to change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to effect
such changes herein as the Trustees find to be necessary or appropriate (A) to
permit the filing of this Declaration under the law of such state or other
jurisdiction applicable to trusts or voluntary associations, (B) to permit the
Trust to elect to be treated as a "regulated investment company" under the
applicable provisions of the Code, or (C) to permit the transfer of Interests
(or to permit the transfer of any other beneficial interest in or share of the
Trust, however denominated), and (vi) in conjunction with any amendment
contemplated by the foregoing clause (iv) or the foregoing clause (v) to make
any and all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a majority of
the Trustees; provided, however, that unless effected in compliance with the
provisions of Section 10.4(b) hereof, no amendment otherwise authorized by this
sentence may be made which would reduce the amount payable with respect to any
Interest upon liquidation of the Trust and; provided, further, that the Trustees
shall not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section
10.4(a) hereof which would change any rights with respect to any Interest by
reducing the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or consent of Holders of two-thirds of all Interests.
(c) A certification in recordable form
executed by a majority of the Trustees setting forth an amendment and reciting
that it was duly adopted by the Holders or by the Trustees as aforesaid or a
copy of the Declaration, as amended, in recordable form, and executed by a
majority of the Trustees, shall be conclusive evidence of such amendment when
filed with the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
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10.5. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Holders called for such
purpose by the affirmative vote of Holders of not less than two-thirds of all
Interests, or by an instrument in writing without a meeting, consented to by
Holders of not less than two-thirds of all Interests, and any such merger,
consolidation, sale, lease or exchange shall be deemed for all purposes to have
been accomplished under and pursuant to the statutes of the State of New York.
10.6. INCORPORATION. Upon a Majority Interests Vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to carry on
any business in which the Trust directly or indirectly has any interest, and to
sell, convey and transfer the Trust Property to any such corporation, trust,
partnership, association or other organization in exchange for the equity
interests thereof or otherwise, and to lend money to, subscribe for the equity
interests of, and enter into any contract with any such corporation, trust,
partnership, association or other organization, or any corporation, trust,
partnership, association or other organization in which the Trust holds or is
about to acquire equity interests. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to one or more of such organizations or entities.
ARTICLE XI
MISCELLANEOUS
11.1. CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF
PROCESS. The Trust shall file, with the Department of State of the State of New
York, a certificate, in the name of the Trust and executed by an officer of the
Trust, designating the Secretary of State of the State of New York as an agent
upon whom process in any action or proceeding against the Trust may be served.
11.2. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed in accordance with the
law of the State of New York and reference shall be specifically made to the
trust law of the State of New York as to the construction of matters not
specifically covered herein or as to which an ambiguity exists.
11.3. COUNTERPARTS. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and
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such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or Holders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Holders, (d) the fact that
the number of Trustees or Holders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officer elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees.
11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of counsel, that
any of such provisions is in conflict with the 1940 Act, or with other
applicable law and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this
instrument as of the day and year first above written.
/s/PHILIP W. COOLIDGE
Philip W. Coolidge
As Trustee and not individually
/s/JAMES B. CRAVER
James B. Craver
As Trustee and not individually
/s/THOMAS M. LENZ
Thomas M. Lenz
As Trustee and not individually
WS5150A1.EDG
<PAGE>
AMENDMENT NO. 1 TO DECLARATION OF TRUST OF
SHORT TERM PORTFOLIO
DATED AS OF APRIL 10, 1997
The undersigned, being all the Trustees of Short Term Portfolio, a New
York trust (the "Trust"), acting pursuant to Section 10.4(a)(i) of the
Declaration of Trust dated as of June 15, 1993 (the "Declaration"), hereby
change the name of the Trust to "Emerging Markets Portfolio".
The undersigned have executed this amendment as of the year and date
first written above.
/s/H.B. ALVORD
H.B. Alvord
As Trustee and not Individually
/s/RICHARD L. CARPENTER
Richard L. Carpenter
As Trustee and not Individually
/s/CLIFFORD A. CLARK
Clifford A. Clark
As Trustee and not Individually
/s/DAVID M. SEITZMAN
David M. Seitzman
As Trustee and not Individually
WS5478
WS5267B
SHORT TERM PORTFOLIO
BY-LAWS
As Adopted August 15, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- MEETINGS OF HOLDERS . . . . . . . . . . . . . 1
-------------------
Section 1.1 Fixing Record Dates . . . . . . . 1
Section 1.2 Records at Holder Meetings . . . . . 1
Section 1.3 Inspectors of Election . . . . . . 1
Section 1.4 Proxies; Voting . . . . . . . . . 2
ARTICLE II -- TRUSTEES . . . . . . . . . . . . . . . . 2
--------
Section 2.1 Regular Meetings . . . . . . . . 2
Section 2.2 Special Meetings . . . . . . . . 2
Section 2.3 Notice . . . . . . . . . . . . 2
Section 2.4 Chairman; Records . . . . . . . . 2
ARTICLE III -- OFFICERS . . . . . . . . . . . . . . . . 3
--------
Section 3.1 Officers of the Trust . . . . . . . 3
Section 3.2 Election and Tenure . . . . . . . 3
Section 3.3 Removal of Officers . . . . . . . 3
Section 3.4 Bonds and Surety . . . . . . . . 3
Section 3.5 Chairman, President and Vice Presidents . 3
Section 3.6 Secretary . . . . . . . . . . . 4
Section 3.7 Treasurer . . . . . . . . . . . 4
Section 3.8 Other Officers and Duties . . . . . 4
ARTICLE IV -- MISCELLANEOUS . . . . . . . . . . . . . . . 5
-------------
Section 4.1 Depositories . . . . . . . . . . 5
Section 4.2 Execution of Papers . . . . . . . 5
Section 4.3 Seal . . . . . . . . . . . . 5
Section 4.4 Indemnification . . . . . . . . . 5
Section 4.5 Distribution Disbursing Agents and the
Like . .. . . . . . . . . . 5
ARTICLE V -- REGULATIONS; AMENDMENT OF BY-LAWS . . . . . . . . 6
---------------------------------
Section 5.1 Regulations . . . . . . . . . . 6
Section 5.2 Amendment and Repeal of By-Laws . . . 6
i
<PAGE>
WS5267B
BY-LAWS
OF
SHORT TERM PORTFOLIO
These By-Laws are made and adopted pursuant to Section 2.7 of
the Declaration of Trust establishing Short Term Portfolio (the "Trust"), dated
as of August 15, 1994, as from time to time amended (the "Declaration"). All
words and terms capitalized in these By-Laws shall have the meaning or meanings
set forth for such words or terms in the Declaration.
ARTICLE I
MEETINGS OF HOLDERS
Section 1.1. FIXING RECORD DATES. If the Trustees do not,
prior to any meeting of the Holders, fix a record date, then the date of mailing
notice of the meeting shall be the record date.
Section 1.2. RECORDS AT HOLDER MEETINGS. At each meeting of
the Holders there shall be open for inspection, by the Holders, Trustees and
officers, the minutes of the last previous meeting of Holders of the Trust and a
list of the Holders of the Trust, certified to be true and correct by the
Secretary or other proper agent of the Trust, as of the record date of the
meeting. Such list of Holders shall contain the name of each Holder in
alphabetical order and the address and Interest owned by such Holder on such
record date.
Section 1.3. INSPECTORS OF ELECTION. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman, if any, of any meeting of the Holders may, and on the
request of any Holder or his proxy shall, appoint Inspectors of Election. The
number of Inspectors of Election shall be either one or three. If appointed at
the meeting on the request of one or more Holders or proxies, a Majority
Interests Vote shall determine whether one or three Inspectors of Election are
to be appointed, but failure to allow such determination by the Holders shall
not affect the validity of the appointment of Inspectors of Election. In case
any individual appointed as an Inspector of Election fails to appear or fails or
refuses to so act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the individual
acting as chairman of the meeting. The Inspectors of Election, if any, shall
determine the Interest owned by each Holder, the Interests represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, shall determine the
results, and
<PAGE>
shall do such other acts as may be proper to conduct the election or vote with
fairness to all Holders. If there are three Inspectors of Election, the
decision, act or certificate of a majority is effective in all respects as the
decision, act or certificate of all. On request of the chairman, if any, of the
meeting, or of any Holder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.
Section 1.4. PROXIES; VOTING. No proxy shall be valid after
one year from the date of its execution, unless a longer period is expressly
stated in such proxy.
ARTICLE II
TRUSTEES
Section 2.1. REGULAR MEETINGS. The Trustees shall hold an
annual and more frequent regular meetings for the transaction of any business
which may come before such meeting. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the Trustees may
provide from time to time.
Section 2.2. SPECIAL MEETINGS. Special Meetings of the
Trustees shall be held upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees, at such time, on such day and at such place, as
shall be designated in the notice of the meeting.
Section 2.3. NOTICE. Notice of a meeting shall be given by
mail or by telegram (which term shall include a cablegram) or delivered
personally. If notice is given by mail, it shall be mailed not later than 48
hours preceding the meeting and if given by telegram, telecopier or personally,
such notice shall be sent or delivery made not later than 24 hours preceding the
meeting. Notice by telephone shall constitute personal delivery for these
purposes. Notice of a meeting of Trustees may be waived before or after any
meeting by signed written waiver. Neither the business to be transacted at, nor
the purpose of, any meeting of the Board of Trustees need be stated in the
notice or waiver of notice of such meeting, and no notice need be given of
action proposed to be taken by written consent. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting, at the
commencement of such meeting, to the transaction of any business on the ground
that the meeting has not been lawfully called or convened.
Section 2.4. CHAIRMAN; RECORDS. The Chairman, if any, shall
act as Chairman at all meetings of the Trustees; in his absence the President
shall act as chairman; and, in the absence of the Chairman of the Board and the
President, the Trustees present shall elect one of their number to act as
temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary.
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ARTICLE III
OFFICERS
Section 3.1. OFFICERS OF THE TRUST. The officers of the Trust
shall consist of a Chairman, if any, a President, a Secretary, a Treasurer and
such other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person. The Trustees may designate a Vice President as an Executive Vice
President and may designate the order in which the other Vice Presidents may
act. The Chairman shall be a Trustee, but no other officer of the Trust,
including the President, need be a Trustee.
Section 3.2. ELECTION AND TENURE. At the initial organization
meeting of the Trustees, the Trustees shall elect the Chairman, if any, the
President, the Secretary, the Treasurer and such other officers as the Trustees
shall deem necessary or appropriate in order to carry out the business of the
Trust. The officers shall hold office until their successors have been duly
elected and qualified. The Trustees may fill any vacancy in office or add any
additional officer at any time.
Section 3.3. REMOVAL OF OFFICERS. Any officer may be removed
at any time, with or without cause, by action of a majority of the Trustees.
This provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the Chairman, if any, the President or
the Secretary, and such resignation shall take effect immediately, or at a later
date according to the terms of such notice in writing.
Section 3.4. BONDS AND SURETY. Any officer may be required by
the Trustees to be bonded for the faithful performance of his duties in such
amount and with such sureties as the Trustees may determine.
Section 3.5. CHAIRMAN, PRESIDENT AND VICE PRESIDENTS. The
Chairman, if any, shall, if present, preside at all meetings of the Holders and
of the Trustees and shall exercise and perform such other powers and duties as
may be from time to time assigned to him by the Trustees. Subject to such
supervisory powers, if any, as may be given by the Trustees to the Chairman, if
any, the President shall be the chief executive officer of the Trust and,
subject to the control of the Trustees, shall have general supervision,
direction and control of the business of the Trust and of its employees and
shall exercise such general powers of management as are usually vested in the
office of President of a corporation. In the absence of the Chairman, if any,
the President shall preside at all meetings of the Holders and, in the absence
of the Chairman, the President shall preside at all meetings of the Trustees.
Subject to the direction of the Trustees, the President shall have the power, in
the name and on behalf of the Trust, to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and to
employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, the President shall have full authority and power to
attend, to act and to vote, on
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behalf of the Trust, at any meeting of any business organization in which the
Trust holds an interest, or to confer such powers upon any other person, by
executing any proxies duly authorizing such person. The President shall have
such further authorities and duties as the Trustees shall from time to time
determine. In the absence or disability of the President, the Vice Presidents in
order of their rank or the Vice President designated by the Trustees, shall
perform all of the duties of the President, and when so acting shall have all
the powers of and be subject to all of the restrictions upon the President.
Subject to the direction of the President, each Vice President shall have the
power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 3.6. SECRETARY. The Secretary shall keep the minutes
of all meetings of, and record all votes of, Holders, Trustees and the Executive
Committee, if any. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary. The Secretary shall be custodian of the seal of the Trust, if any,
and (and any other person so authorized by the Trustees) shall affix the seal
or, if permitted, a facsimile thereof, to any instrument executed by the Trust
which would be sealed by a New York corporation executing the same or a similar
instrument and shall attest the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a New York corporation, and shall have such other authorities and duties as
the Trustees shall from time to time determine.
Section 3.7. TREASURER. Except as otherwise directed by the
Trustees, the Treasurer shall be responsible for the general supervision of the
Trust's funds and property and for the general supervision of the Trust's
custodian, and shall have and exercise, under the supervision of the Trustees
and of the President, all powers and duties normally incident to his office. The
Treasurer may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order and shall deposit all funds of
the Trust as may be ordered by the Trustees or the President. The Treasurer
shall keep accurate account of the books of the Trust's transactions which shall
be the property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees or by any one or more Trustees. Unless the Trustees
shall otherwise determine, the Treasurer shall be the principal accounting
officer of the Trust and shall also be the principal financial officer of the
Trust. The Treasurer shall have such other duties and authorities as the
Trustees shall from time to time determine. Notwithstanding anything to the
contrary herein contained, the Trustees may authorize the Investment Manager and
Administrator to maintain bank accounts and deposit and disburse funds on behalf
of the Trust.
Section 3.8. OTHER OFFICERS AND DUTIES. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of the
Trust. Assistant officers shall act generally in the absence of the officer whom
they
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<PAGE>
assist and shall assist that officer in the duties of his office. Each officer,
employee and agent of the Trust shall have such other duties and authorities as
may be conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
MISCELLANEOUS
Section 4.1. DEPOSITORIES. The funds of the Trust shall be
deposited in such depositories as the Trustees shall designate and shall be
drawn out on checks, drafts or other orders signed by such officer, officers,
agent or agents (including the Investment Manager and Administrator) as the
Trustees may from time to time authorize.
Section 4.2. EXECUTION OF PAPERS. Except as the Trustees may
generally or in particular cases authorize, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts, and other obligations made, accepted or
endorsed by the Trust shall be executed by the President, any Vice President, or
the Treasurer, or by whomever else shall be designated for that purpose by the
Trustees, and need not bear the seal of the Trust.
Section 4.3. SEAL. The seal of the Trust, if any, may be
affixed to any document, and the seal and its attestation may be lithographed,
engraved or otherwise printed on any document with the same force and effect as
if it had been imprinted and attested manually in the same manner and with the
same effect as if done by a New York corporation.
Section 4.4. INDEMNIFICATION. Insofar as the conditional
advancing of indemnification monies under Section 5.4 of the Declaration for
actions based upon the 1940 Act may be concerned, such payments will be made
only on the following conditions: (i) the advances must be limited to amounts
used, or to be used, for the preparation or presentation of a defense to the
action, including costs connected with the preparation of a settlement; (ii)
advances may be made only upon receipt of a written promise by, or on behalf of,
the recipient to repay the amount of the advance which exceeds the amount to
which it is ultimately determined that he is entitled to receive from the Trust
by reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security which
assures that any repayment may be obtained by the Trust without delay or
litigation, which bond, insurance or other form of security must be provided by
the recipient of the advance, or (b) a majority of a quorum of the Trust's
disinterested, non-party Trustees, or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available facts, that
the recipient of the advance ultimately will be found entitled to
indemnification.
Section 4.5. DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
5
<PAGE>
ARTICLE V
REGULATIONS; AMENDMENT OF BY-LAWS
Section 5.1. REGULATIONS. The Trustees may make such
additional rules and regulations, not inconsistent with these By-Laws, as they
may deem expedient concerning the sale and purchase of Interests of the Trust.
Section 5.2. AMENDMENT AND REPEAL OF BY-LAWS. In accordance
with Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust.
WS5267B
6
WS5266B
EMERGING MARKETS PORTFOLIO
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
AGREEMENT, originally made on the 23rd day of August, 1994, as amended
and restated April 10, 1997, between EMERGING MARKETS PORTFOLIO, a New York
trust, (the "Portfolio"), and BROWN BROTHERS HARRIMAN & CO., a New York limited
partnership (the "Adviser"),
WHEREAS, the Portfolio is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Portfolio desires to retain the Adviser to render
investment advisory services, and the Adviser is willing to render such
services;
NOW, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Adviser to act as investment
adviser to the Portfolio for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Board of Trustees of the
Portfolio, the Adviser shall manage the investment operations of the Portfolio
and the composition of the Portfolio's portfolio of securities and investments,
including cash, the purchase, retention and disposition thereof and agreements
relating thereto, in accordance with the Portfolio's investment objective and
policies as stated in the Registration Statement on Form N-1A (as defined in
paragraph 3 of this Agreement) and subject to the following understandings:
(a) the Adviser shall furnish a continuous investment program for the
Portfolio and determine from time to time what investments or securities will be
purchased, retained, sold or lent by the Portfolio, and what portion of the
assets will be invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in the management of
the Portfolio as it uses in the administration of other accounts for which it
has investment responsibility as agent;
(c) the Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Portfolio's Declaration of
Trust and By-Laws and the Registration Statement on Form N-1A of the Portfolio
and with the instructions and directions of the Trustees of the Portfolio and
will conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations including, without limitation,
the regulations and rulings of the New York State Banking Department;
<PAGE>
(d) the Adviser shall determine the securities to be purchased, sold or
lent by the Portfolio and as agent for the Portfolio will effect portfolio
transactions pursuant to its determinations either directly with the issuer or
with any broker and/or dealer in such securities; in placing orders with brokers
and or dealers the Adviser intends to seek best price and execution for
purchases and sales; the Adviser shall determine whether or not the Portfolio
shall enter into repurchase or reverse repurchase agreements, contracts
providing for the making or acceptance of a cash settlement based upon changes
in the value of an index of securities, or put or call option contracts, with
respect to the Portfolio's portfolio.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as other customers, the
Adviser, may, to the extent permitted by applicable laws and regulations, but
shall not be obligated to, aggregate the securities to be so sold or purchased
in order to obtain the best execution and lower brokerage commissions, if any.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Adviser in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other customers;
(e) the Adviser shall maintain books and records with respect to the
Portfolio's securities transactions and shall render to the Portfolio's Trustees
such periodic and special reports as the Trustees may reasonably request; and
(f) the investment management services of the Adviser to the Portfolio
under this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services to others.
3. The Portfolio has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all future
amendments and supplements, if any:
(a) Declaration of Trust of the Portfolio, dated August 15, 1994 (such
Declaration of Trust, as presently in effect and as amended from time to time,
is herein called the "Declaration of Trust");
(b) By-Laws of the Portfolio (such By-Laws, as presently in effect
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees of the Portfolio
authorizing the appointment of the Adviser and approving the form of this
Agreement;
(d) Registration Statement under the 194O Act, as amended, on Form N-1A
(the "Registration Statement") as filed with the Securities and Exchange
Commission (the "Commission"); and
(e) Notification of Registration of the Portfolio under the 1940
Act on Form N-8A as filed with the Commission on
4. The Adviser shall keep the Portfolio's books and records required to
be maintained by it pursuant to paragraph 2(e). In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Adviser hereby agrees that
all records which it maintains for the Portfolio are property of the Portfolio
and
<PAGE>
further agrees to surrender promptly to the Portfolio any such records upon the
Portfolio's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records required to be
maintained by Rule 31a-1 under the 1940 Act.
5. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities and investments purchased for the Portfolio (including
taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Adviser will receive from the Portfolio as full compensation
therefor a fee at an annual rate equal to 0.90% of the portfolio's average daily
net assets. This fee will be computed based on net assets at 4:00 P.M. New York
time on each day the New York Stock Exchange is open for trading and will be
paid to the Adviser monthly during the succeeding calendar month.
7. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Portfolio in connection with the matters
to which this Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
8. This Agreement shall continue in effect for two years from the date
of its execution and thereafter, but only so long as its continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Portfolio at any time, without the payment of any penalty, by vote of a majority
of all the Trustees of the Portfolio or by ,"vote of a majority of the
outstanding voting securities" of the Portfolio on 60 days' written notice to
the Adviser, or by the Adviser at any time, without the payment of any penalty,
on 90 days' written notice to the Portfolio. This Agreement will automatically
and immediately terminate in the event of its "assignment".
9. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Portfolio from time to time, have no authority
to act for or represent the Portfolio in any way or otherwise be deemed an agent
of the Portfolio.
10. This Agreement may be amended by mutual consent, but the consent of
the Portfolio must be approved (a) by vote of a majority of those Trustees of
the Portfolio who are not parties to this Agreement or "interested persons" of
any such party, cast in person at a meeting called for the purpose of voting on
such amendment, and (b) by "vote of a majority of the outstanding voting
securities" of the Portfolio.
11. As used in this Agreement, the terms "assignment", "interested
persons" and "vote of a majority of the outstanding voting securities" shall
have the meanings assigned to them respectively in the 1940 Act.
<PAGE>
12. Notices of any kind to be given to the Adviser by the Portfolio
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 59 Wall Street, New York, New York 10005, Attention: Treasurer, or at
such other address or to such other individual as shall be specified by the
Adviser to the Portfolio. Notices of any kind to be given to the Portfolio by
the Adviser shall be in writing and shall be duly given if mailed or delivered
to the Portfolio at Emerging Markets Portfolio, Butterfield House, Fort Street,
P.O. Box 2330, George Town, Grand Cayman BWI, or at such other address or to
such other individual as shall be specified by the Portfolio to the Adviser.
13. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers or Partners designated below on the day and year
first above written.
EMERGING MARKETS PORTFOLIO
By:
BROWN BROTHERS HARRIMAN & CO.
By:
WS5266B
CUSTODIAN CONTRACT
Between
EMERGING MARKETS PORTFOLIO
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be
Held By It............................................... 1
2. Duties of the Custodian with Respect to Portfolio
Property Held By the Custodian in the United States...... 1
2.1 Holding Investments................................ 1
2.2 Delivery of Investments............................. 2
2.3 Registration of Investments......................... 4
2.4 Bank Accounts....................................... 4
2.5 Availability of Federal Funds....................... 4
2.6 Collection of Income .... :......................... 5
2.7 Payment of Portfolio Monies......................... 5
2.8 Appointment of Agents............................... 6
2.9 Deposit of Investments in a U.S. Securities
System.............................................. 7
2.10 Portfolio Investments Held in the Custodian's
Direct Paper System......................... 8
2.11 Segregated Account................................. 8
2.12 Ownership Certificates for Tax Purposes............ 9
2.13 Proxies............................................ 9
2.14 Communications Relating to Portfolio Investments... 9
2.15 Reports to Portfolio by Independent Public
Accountants........................................ 10
3. Duties of the Custodian with Respect to Portfolio
Property Held Outside of the United States............... 10
3.1 Appointment of Foreign Sub-Custodians...................... 10
3.2 Assets to be Held.......................................... 10
3.3 Foreign Securities Systems................................. 10
3.4 Agreements with Foreign Banking Institutions............... 11
3.5 Access of Independent Accountants of the
Portfolio.................................................. 11
3.6 Reports by Custodian....................................... 11
3.7 Transactions in Foreign Custody Account.................... 12
3.8 Liability of Foreign Sub-Custodians........................ 12
3.9 Liability of Custodian..................................... 12
3.10 Reimbursement for Advances................................. 13
3.11 Monitoring Responsibilities................................ 13
3.12 Branches of U.S. Banks..................................... 13
3.13
4. Payments for Repurchases and Sales of Interests..................14
5. Proper Instructions..............................................14
<PAGE>
TABLE OF CONTENTS
PAGE
6. Actions Permitted Without Express Authority..... 14
7. Evidence of Authority........................... 15
8. Duties of Custodian with Respect to the Books of
Account and Calculation of Net Asset Value and
Net Income...................................... 15
9. Records......................................... 15
10. Opinion of Portfolio's Independent Accountant... 16
11. Compensation of Custodian....................... 16
12. Responsibility of Custodian..................... 16
13. Tax Law......................................... 18
13.1 Tax Law of Cayman Islands.................. 18
13.2 Tax Law of Other Jurisdictions............. 18
14. Effective Period, Termination and Amendment..... 19
15. Successor Custodian............................. 19
16. Interpretive and Additional Provisions.......... 20
17. Massachusetts Law to Apply...................... 20
18. Prior Contracts................................. 20
19. Assignment...................................... 20
20. Confidentiality................................. 21
21. Notices......................................... 21
22. Shareholder Communications...................... 22
<PAGE>
CUSTODIAN CONTRACT
This Contract is between Emerging Markets Portfolio, a trust
organized and existing under the laws of the state of New York, having
its principal place of business at Butterfield House, P.O. Box 2330,
Grand Cayman, Cayman Islands, British West Indies (the "Portfolio), and
State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Custodian").
WITNESSETH:
WHEREAS, the Portfolio is a non-diversified open-end investment company
which has been organized as a trust under the laws of the state of New
York;
WHEREAS, the Portfolio desires to appoint the Custodian to act as
custodian of the assets of the Portfolio, and the Custodian desires to
accept such appointment;
WHEREAS, the Portfolio's assets are composed of money and property
contributed thereto by the holders of interests in the Portfolio
("Interests") entitled to ownership rights in the Portfolio;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
Pursuant to the authority contained in its Declaration of Trust, the
Portfolio hereby employs the Custodian as the custodian of the assets
of the Portfolio. The Portfolio agrees to deliver to the Custodian or a
sub-custodian all investments and cash, all payments of interest, all
payments of principal or capital distributions received by it with
respect to all investments, and the cash consideration received by it
for Interests as may be issued or sold from time to time. The Custodian
shall not be responsible for any property of the Portfolio not received
by it.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PORTFOLIO PROPERTY HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING INVESTMENTS. The Custodian shall hold and segregate for the
ac(ount of the Portfolio all non-cash property, to be held by it in the
United States, including all domestic investments owned by the
Portfolio, other than (a) investments which are maintained pursuant to
Section 2.9 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies (collectively referred to herein
as a "U.S. Securities Systemil) and (b) commercial paper of an issuer
for which the Custodian acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper System
of the Custodian (the "Direct Paper System") pursuant to Section 2.10.
2.2 DELIVERY OF INVESTMENTS. The Custodian shall release and deliver
domestic investments owned by the Portfolio held by the Custodian or in
a U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions (as defined below), which may
be continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such investments for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such investments entered into on behalf of the Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.9 hereof;
4)To the depository agent, against a receipt, in connection with
tender or other similar offers for portfolio investments of the Portfolio;
5)To the issuer thereof or its agent, against a receipt, when such
investments are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
6)To the issuer thereof, or its agent, against a receipt, for transfer
into the name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.8; or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of interests;
<PAGE>
provided that, in any such case, the new investments are to be
delivered to the Custodian;
7)Upon the sale of such investments for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for examination
in accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such investments prior to receiving
payment for such investments except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
investments of the issuer of such investments, or pursuant to
provisions for conversion contained in such investments, or pursuant to
any deposit agreement, against a receipt; provided that, in any such
case, the new investments and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar investments, the
surrender thereof in the exercise of such warrants, rights or similar
investments or the surrender of interim receipts or temporary
investments for definitive investments; provided that, in any such
case, the new investments and cash, if any, are concurrently delivered
to the Custodian or against a receipt;
10) For delivery in connection with any loans of investments made on
behalf of the Portfolio, BUT ONLV against receipt of adequate forms of
collateral as agreed upon from time to time by the Portfolio or its
delegate, which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities, except
that in connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of investments owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Portfolio requiring a pledge of assets of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Portfolio, the Custodian and a broker-dealer which is a
member of The National Association of Securities Dealers, Inc.
("NASDII) , relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio;
13) For delivery in accordance with the provisions of any agreement
among the Portfolio, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the
Portfolio; and
14) For any other proper corporate purpose, BUT ONLV upon receipt of
Proper Instructions from the Portfolio, specifying the investments to
be delivered, setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such investments shall
be made.
2.3 REGISTRATION OF INVESTMENTS. Domestic investments held by the Custodian
(ether than bearer investments) shall be registered in the name of the
Portfolio or in the name of any nominee of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively to
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.8. All investments accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Portfolio
directs the Custodian to maintain investments in "street name", the
Custodian shall utilize its best efforts only to timely collect income
due to the Portfolio on such investments and to notify the Portfolio on
a best efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange
offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Portfolio,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio. Funds held by the Custodian for the
Portfolio may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
ided, however, that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by the
Portfolio. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Portfolio and the Custodian, the Custodian shall, upon the receipt of
Proper Instructions from the Portfolio, make federal funds available to
the Portfolio as of specified times agreed upon from time to time by
the Portfolio and the Custodian in the amount of checks received in
payment for
4
<PAGE>
Interests which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States investments held hereunder to which the
Portfolio shall be entitled either by law or pursuant to custom in the
investments business, and shall collect on a timely basis all income
and other payments with respect to United States bearer investments if,
on the date of payment by the issuer, such investments are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
investments held hereunder. Income due the Portfolio on United States
investments loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Portfolio. The Custodian will have no duty
or responsibility in connection therewith, other than to provide the
Portfolio with such information or data as may be necessary to assist
the Portfolio in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions from
the Portfolio, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall pay out monies of the
Portfolio in the following cases only:
1) Upon the purchase of domestic investments, including options,
futures contracts or options on futures contracts, for the account of
the Portfolio but only (a) against the delivery of such investments,
including evidence of title to such options, futures contracts or
options on futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or abroad as
a custodian and has been designated by the Custodian as its agent for
this purpose) registered in the name of the Portfolio or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a U.S. Securities System, in accordance with the conditions set
forth in Section 2.9 hereof or (c) in the case of a purchase involving
the Direct Paper System, in accordance with the conditions set forth in
Section 2.10; or (d) in the case of repurchase agreements entered into
between the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of the
investments either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with such
investments or (ii) against delivery of the receipt evidencing purchase
on behalf of the Portfolio of investments owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase
such investments from the Portfolio; or (e) for transfer to a time
deposit account of the Portfolio in any bank, whether domestic or
foreign or any savings and loan; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the applicable bank or
savings and loan pursuant to Proper Instructions from the Portfolio as
defined in Article 5;
2) In connection with conversion, exchange or surrender of
investments owned by the Portfolio as set forth in Section 2.2 hereof;
3) For payment of the amount of dividends received in respect of
investments sold short;
4) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Portfolio, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made. In connection with the
following type of expenses, the Custodian shall make payments upon
instructions from the Portfolio from an account of the Portfolio
controlled from outside of the United States:
5) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for the
account of the Portfolio: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses thereof whether
or not such expenses are to be in whole or part capitalized or treated
as deferred expenses;
6) For the payment of any distributions by the Portfolio declared in
accordance with the Declaration of Trust.
2.8 APPOINTMENT OF AGENTS. Upon prior written notice to the Portfolio, the
Custodian may at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company to act as a
custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct.
6
<PAGE>
2.9 DEPOSIT OF INVESTMENTS IN A U.S. SECURITIES SYSTEM.
- -------------------------------------------------- The Custodian may deposit
and/or maintain domestic investments owned by the Portfolio in a U.S. Securities
System in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and only to the extent
applicable and subject to the following provisions:
1) The Custodian may keep domestic investments of the Portfolio in a
U.S. Securities System provided that such investments are represented
in an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to domestic investments of
the Portfolio which are maintained in a U.S. Securities System shall identify by
book-entry those investments belonging to the Portfolio;
3) The Custodian shall pay for domestic investments purchased for the
account of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that such investments have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer domestic investments sold for
the account of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such investments has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of domestic investments for the account
of the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Portfolio at its
request. The Custodian shall furnish the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Portfolio copies of
daily transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Portfolio with any report obtained
by the Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding domestic investments
deposited in the U.S. Securities System.
2.10 PORTFOLIO INVESTMENTS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain investments owned by the Portfolio in
the Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to investments in the Direct
Paper System will be effected in the absence of Proper
Instructions from the Portfolio;
2) The Custodian may keep investments of the Portfolio in the Direct
Paper System only if such investments are represented in an account of
the Custodian in the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to investments of the
Portfolio which are maintained in the Direct Paper System shall identify by
book-entry those investments belonging to the Portfolio;
4) The Custodian shall pay for investments purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of investments to the
Account of the Portfolio. The Custodian shall transfer investments sold
for the account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Portfolio confirmation of each
transfer to or from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Portfolio copies of
daily transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Portfolio with any report on its
system of internal accounting control as the Portfolio may reasonably
request from time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall establish and maintain a
segregated account or accounts for and on behalf of the Portfolio, into
which account or accounts shall be transferred cash and/or investments,
including investments maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the provisions
of any agreement among the Portfolio, the Custodian and a broker-dealer
which is a member of the NASD (or any Futures Commission Merchant
registered under the Commodity Exchange Act) , relating to compliance
with the rules of The Options
8
<PAGE>
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Commission or any registered contract market)
, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government investments in
connection with options purchased, sold or written by the Portfolio or
commodity futures contracts or options thereon purchased or sold by the
Portfolio or short-sales, (iii) for other proper corporate purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic investments of the Portfolio held by
it and in connection with transfers of such investments.
2.13 PROXIES. The Custodian shall, with respect to the domestic investments
held hereunder, cause to be promptly executed by the registered holder
of such investments, if the investments are registered otherwise than
in the name of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such proxies are to
be voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such
investments.
2.14 COMMUNICATIONS RELATED TO PORTFOLIO INVESTMENTS. Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to
the Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic investments and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the domestic investments being held for the
Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written information
received by the Custodian from issuers of the domestic investments
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio desires to take
action on behalf of the Portfolio with respect to any tender offer,
exchange offer or any other similar transaction, the Portfolio shall
notify the Custodian at least three business days prior to the date on
which the Custodian is required to take such action; however, the
Custodian will use its best efforts to take such action as promptly as
the Portfolio may request.
9
<PAGE>
2.15 REPORTS TO PORTFOLIO BY INDEPENDENT PUBLIC ACCOUNTANTS.
- ------------------------------------------------------
The Custodian shall provide the Portfolio, at such times as the
Portfolio may reasonably require, with reports by independent public accountants
on the accounting system, internal accounting control and procedures for
safeguarding investments, including futures contracts and options on futures
contracts, including domestic investments deposited and/or maintained in a U.S.
Securities System, relating to the services provided by the Custodian under this
Contract; such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Portfolio to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PORTFOLIO PROPERTY HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Portfolio hereby authorizes
and instructs the Custodian to employ as sub-custodians f or the Portf
olio securities and other assets maintained outside the United
States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign sub-custodians")
. Upon receipt of "Proper Instructions", as defined in Section 5 of
this Contract, together with a certified resolution of the Portfolio's
Board of Trustees, the Custodian and the Portfolio may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Portfolio may
instruct the Custodian -to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c) (1) of Rule 17f -5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Portfolio may
determine to be reasonably necessary to effect the Portfolio's foreign
securities transactions. The Custodian shall identify on its books as
belonging to the Portfolio, the foreign securities of the Portfolio
held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Portfolio, assets of the Portfolio
shall be maintained in a clearing agency which acts as a securities
depository or in a book-entry system for the central handling of
securities located outside the United States (each a "Foreign
Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof. (Foreign Securities Systems and U.S. Securities Systems
are collectively referred to herein as "Securities Systems") Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.4 hereof.
<PAGE>
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit I hereto and shall provide that: (a) the Portfolio's
assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership of the Portfolio's
assets will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the
Portfolio, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the custodian; and (e) assets of the Portfolio held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE PORTFOLIO. Upon request of the
Portfolio, the Custodian will use its best efforts to arrange for the
independent accountants of the Portfolio to be afforded access to the
books and records of any foreign banking institution employed as a
foreign sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Portfolio from
time to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio's securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Portfolio indicating, as
to securities acquired for the Portfolio, the identity of the entity
having physical possession of such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as
otherwise provided in paragraph (b) of this Section 3.7, the provision
of Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS
to the foreign securities of the Portfolio held outside the United
States by foreign sub-custodians. (b) Notwithstanding any provision of
this Contract to the contrary, settlement and payment for securities
received for the account of the Portfolio and delivery of securities
maintained for the account of the Portfolio may be effected in
accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3
<PAGE>
hereof, and the Portfolio agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Portfolio from and against any loss, damage,
cost, expense, liability or claim arising out of or in connection with
the institution's performance of such obligations. At the election of
the Portfolio, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolio has not been
made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Portfolio for any loss due to such delegation,
except such LOSS as may result from (a) political risk (including, but
not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency
of State Street London Ltd. not caused by political risk) due to Acts
of God, nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd.
have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Portfolio requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action, negligent failure
to act or willful misconduct, any property at any time held for the
account of the Portfolio shall be security therefor and should the
Portfolio fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio
assets to the extent necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually
to the Portfolio, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be similar
in kind and scope to that
<PAGE>
furnished to the Portfolio in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform the
Portfolio in the event that the Custodian learns of a material adverse
change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Portfolio or in the case of any
foreign sub-custodian not the subject of an exemptive order from the
Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders, equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders, equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S.
accounting principles).
3.12 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets is maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2 (a) (5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for the Portfolio in the United Kingdom shall be
maintained in an interest bearing account established for the Portfolio
with the Custodian's London branch, which account shall be subject to
the direction of the Custodian, State Street London Ltd. or both.
4. PAYMENTS FOR REPURCHASES AND INTERESTS
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust the Custodian shall, upon
receipt of instructions from the Portfolio, make funds available to the
Portfolio at an account of the Portfolio controlled from outside of the
United States for payment to holders of Interests who have delivered to
the Portfolio a request for repurchase of their Interests.
5. PROPER INSTRUCTIONS
Proper Instructions as used herein means a writing signed or initialled
on behalf of the Portfolio by one or more person or persons as the
Portfolio shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction
involved. Oral instructions will be considered Proper Instructions if
the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Portfolio shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Portfolio
accompanied by a detailed description of procedures approved by the
Portfolio, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that
the Portfolio and the Custodian are satisfied that such procedures
<PAGE>
afford adequate safeguards for the Portfolio's assets. For purposes of
this Section, Proper Instructions shall include instructions received
by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Portfolio:
1) make payments to others for minor transactional expenses of handling
investments or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to the
Portfolio;
2) surrender investments in temporary form for investments
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the investments and property of the Portfolio except as
otherwise directed by the Portfolio.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have been properly
executed by or on behalf of the Portfolio. The Custodian may receive
and accept a certified copy of an instruction of the Portfolio as
conclusive evidence (a) of the authority of any person to act in
accordance with such instruction or (b) of any determination or of any
action by the Portfolio pursuant to the Declaration of Trust as
described in such instruction, and such instruction may be considered
as in full force and effect until receipt by the Custodian of written
notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Portfolio to keep the books of
account of the Portfolio and/or compute the net asset value per share
of the outstanding Interests.
<PAGE>
9. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Portfolio. All such records shall be the
property of the Portfolio and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Portfolio.
10. OPINION OF PORTFOLIO'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Portfolio may
from time to time request, to obtain from year to year favorable
opinions from the Portfolio's independent accountants provided that the
books and records of the Portfolio shall be audited outside of the
United States.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Portfolio and the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
The Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it
or delivered by it pursuant to this Contract and shall be held harmless
in acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of reasonable
care in carrying out the provisions of this Contract. It shall be kept
indemnif ied by and shall be without liability to the Portfolio for any
action taken or omitted by it in good faith without negligence. The
Portfolio hereby agrees to indemnify and hold harmless the Custodian
from and against any and all costs, expenses, losses, damages, charges,
counsel fees, payments and liabilities which may be asserted against
the Custodian arising out of any failure of the Portfolio to comply
with the United States investments laws. It shall be entitled to rely
on and may act upon advice of counsel (who may be counsel for the
Portfolio) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract and, regardless of whether
assets are maintained in the custody of a foreign banking institution,
a foreign securities depository or a branch of a U.S. bank, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
16
<PAGE>
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian
or agent, the Custodian shall be without liability to the Portfolio for
any loss, liability, claim or expense resulting from or caused by; (i)
events or circumstances beyond the reasonable control of the Custodian
or any sub-custodian or Securities System or any agent or nominee of
any of the foregoing, including, without limitation, nationalization or
expropriation, imposition of currency controls or restrictions, the
interruption, suspension or restriction of trading on or the closure of
any securities markets, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions, work
stoppages, natural disasters or other similar events or acts; (ii)
errors by the Portfolio or the Investment Advisor in their instructions
to the Custodian provided such instructions have been given in
accordance with this Contract; (iii) the insolvency of or acts or
omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's
subcustodian or agent securities purchased or in the remittance of
payment made in connection with securities sold; (v) any delay or
failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian,
the Portfolio, the Custodian's subcustodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer
such securities including non-receipt of bonus, dividends and rights
and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to
any particular security or Securities System; and (vii) any provision
of any present or future law or regulation or order of the United
States of America, or any state thereof, or any other country, or
political subdivision thereof or of any court of competent
jurisdiction.
If the Portfolio requires the Custodian to take any action with respect
to investments, which action involves the payment of money or which
action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Portfolio being liable for the payment of
money or incurring liability of some other form, the Portfolio, as a
prerequisite to requiring the Custodian to take such action, shall
provide indemnity to the Custodian in an amount and form satisfactory
to it.
If the Portfolio requires the Custodian, its affiliates, subsidiaries
or agents, to advance cash or investments for any purpose (including
but not limited to securities settlements, foreign exchange contracts
and assumed settlement) for the benefit of the Portfolio or in the
event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract with respect to the
Portfolio, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Portfolio shall be
security therefor and should the Portfolio fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and
to dispose of the Portfolio's assets to the extent necessary to obtain
reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
13. TAX LAW
13.1 TAX LAW OF CAYMAN ISLANDS.
-------------------------
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Portfolio or the Custodian as
custodian of the Portfolio's assets by the tax law of Cayman Islands or any
state or political subdivision thereof. The Custodian shall be kept indemnified
by and be without liability to the Portfolio to the extent of the assets of the
Portfolio for any such obligations including taxes, withholding and reporting
requirements, claims for exemption or refund, additions for late payment,
interest, penalties and other expense (including legal expenses) that may be
assessed against the Portfolio or the Custodian as custodian of the Portfolio.
13.2 TAX LAW OF OTHER JURISDICTIONS. It shall be the responsibility of the
Portfolio (except taxes attributable to the domicile of the Custodian
in Massachusetts and in such case the Custodian shall notify the
Portfolio) to notify the Custodian of the obligations imposed on the
Portfolio by the tax law of jurisdictions other than those mentioned in
Section 13.1. The Custodian shall use its best efforts to assist the
Portfolio with
<PAGE>
respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Portfolio has provided such information.
Nevertheless, the Custodian shall be kept indemnified by and shall be
without liability to the Portfolio for any such obligations of which it
has not been notified in writing by the Portfolio, or for which it has
received directions to not withhold U.S. taxes, including taxes,
withholding and reporting requirements, claims for exemptions or
refund, additions for late payment, interest, penalties and other
expenses (including legal expenses) that may be assessed against the
Portfolio or the Custodian as custodian of the Portfolio.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in
writing delivered or mailed, postage prepaid to the other party such
termination to take effect, in the case of a termination by the
Portfolio, not sooner than thirty (30) days after the date of such
delivery or mailing, and, in the case of a termination by the
Custodian, not sooner than ninety (90) days after the date of such
delivery or mailings.
Upon termination of the Contract, the Portfolio shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its costs,
expenses and disbursements. The parties agree that a notification of
termination of the Portfolio shall serve as a notification of
termination of the Custodian.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Portfolio shall be appointed by the
Portfolio, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and
in the form for transfer, all investments of the Portfolio then held by
it hereunder and shall transfer to an account of the successor
custodian all of the investments of the Portfolio held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a instruction of
the Portfolio, deliver at the office of the Portfolio such investments,
funds and other properties in accordance with such instruction.
In the event that no written order designating a successor custodian or
certified copy of an instruction of the Portfolio shall have been
delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a bank doing business in
Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published
report, of not less than $100,000,000, all investments, funds and other
properties held by the Custodian on behalf of the Portfolio and all
instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of the Portfolio and
to transfer to an account of such successor custodian all of the
investments of the Portfolio held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that investments, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Portfolio to procure the certified copy of the
instruction referred to or of the Portfolio to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of such
investments, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
<PAGE>
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Portfolio, may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
18. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Portfolio and the Custodian relating to the
custody of the Portfolio's assets.
19. ASSIGNMENT
This Contract may not be assigned by the Custodian without the written
consent of the Portfolio.
20. CONFIDENTIALITY
None of the parties hereto shall, unless compelled to do so by any
court of competent jurisdiction either before or after the termination
of this Contract, disclose to any person not authorized by the relevant
party to receive the same any information relating to such party and to
the affairs of such party of which the party disclosing the same shall
have become possessed during the period of this Contract and each party
shall use its best endeavors to prevent any such disclosure as
aforesaid.
21. NOTICES
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as
set forth herein during normal business hours or delivered prepaid
registered mail or by telex, cable or telecopy to the parties at the
following addresses or such other addresses as may be notified by any
party from time to time.
TO THE PORTFOLIO: EMERGING MARKETS PORTFOLIO
Butterfield House
P.O. Box 2330
Grand Cayman, Cayman Islands British West Indies
Attn: Managing Director
TO THE CUSTODIAN:STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attention: Kevin F. Griffin
<PAGE>
TO THE ADVISOR:BROWN BROTHERS HARRIMAN & CO.
59 Wall Street
New York, New York 10005
Attention: Treasurer
Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting, in the case of cable twenty-four hours after dispatch and, in the case
of telex, immediately on dispatch and if delivered outside normal business hours
it shall be deemed to have been received at the next time after delivery when
normal business hours commence and in the case of cable, telex or telecopy on
the business day after the receipt thereof. Evidence that the notice was
properly addressed, stamped and put into the post shall be conclusive evidence
of posting.
22. SHAREHOLDER COMMUNICATIONS
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by
issuers of securities for the names, addresses and holdings of benef
icial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this
information. In order to comply with the rule, the Custodian needs the
Portfolio to indicate whether it authorizes the Custodian to provide
the Portfolio's name, address, and share position to requesting
companies whose securities the Portfolio owns. If the Portfolio tells
the Custodian "noll, the Custodian will not provide this information to
requesting companies. If the Portfolio tells the Custodian "yes" or
does not check either llyes" or "noll below, the Custodian is required
by the rule to treat the Portfolio as consenting to disclosure of this
information for all securities owned by the Portfolio or any funds or
accounts established by the Portfolio. For the Portfolio's protection,
the Rule prohibits the requesting company from using the Portfolio's
name and address for any purpose other than corporate communications.
Please indicate below whether the Portfolio consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian IS authorized to release the Portfolio's
name, address, and share positions.
NO [X] The Custodian is not authorized to release the
Portfolio's name, address, and share positions.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
SCHEDULE A
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Trustees of International Equity Portfolio
(the "Portfolioll) for use as sub-custodians for the Portfolio's securities and
other assets:
(Insert banks and securities depositories)
Certified:
Portfolio's Authorized officer
Date:
<PAGE>
EXHIBIT I
SUBCUSTODIAN AGREEMENT
AGREEMENT made this day of 19 between
State Street Bank and Trust Company, A massachusetts Trust Company (hereinafter
referred to as the "Custodian") , having its principal place of business at 225
Franklin Street, Boston, MA, and (hereinafter
organized
and having an office at
WHEREAS, Custodian has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, collective investment undertakings, investment
companies subject to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement Income Security
Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Account (the "Account") with the
Subcustodian to hold and maintain certain property for which Custodian is
responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Account and to hold and
maintain all Property in the Account in accordance with the terms and conditions
herein set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the Custodian and the Subcustodian agree as follows:
I. THE ACCOUNT
A. ESTABLISHMENT OF THE ACCOUNT. Custodian hereby requests that
Subcustodian establish for each client of the Custodian an Account which shall
be composed of:
1. A Custody Account for any and all Securities (as hereinafter defined)
from time to time received by Subcustodian therefor, and
2. A Deposit Account for any and all Cash (as hereinafter defined) from
time to time received by Subcustodian therefor.
B. USE OF THE ACCOUNT. The Account shall be used exclusively to hold,
acquire, transfer or otherwise care for, on behalf of Custodian as custodian and
the customers of Custodian and not for Custodian's own interest, Securities and
such Cash or cash equivalents as are transferred to Subcustodian or as are
received in payment of any transfer of, or as payment on, or interest on, or
dividend from, any such Securities (herein collectively called Cash") .
C. TRANSFER OF PROPERTY IN THE ACCOUNT. Beneficial ownership of the
Securities and Cash in the Account shall be freely transferable without payment
of money or value other than for safe custody and administration.
D. OWNERSHIP AND SEGREGATION OF PROPERTY IN THE ACCOUNT.
----------------------------------------------------
The ownership of the property in the Account, whether Securities, Cash or
both, and whether any such property is held by Subcustodian in an Eligible
Depository, shall be clearly recorded on Subcustodian's books as belonging to
Custodian on behalf of Custodian's customers, and not for Custodian's own
interest and, to the extent that Securities are physically held in the Account,
such Securities shall also be physically segregated from the general assets of
Subcustodian, the assets of Custodian in its individual capacity and the assets
of Subcustodian's other customers. In addition, Subcustodian shall maintain such
other records as may be necessary to
<PAGE>
identify the property hereunder as belonging to each Account.
E. REGISTRATION OF SECURITIES IN THE ACCOUNT. Securities which are
eligible for deposit in a depository as provided for in Paragraph III may be
maintained with the depository in an account for Subcustodian's customers.
Securities which are not held in a depository and that are ordinarily held in
registered form will be registered in the name of Subcustodian or in the name of
Subcustodian's nominee, unless alternate Instructions are furnished by
Custodian.
II. SERVICES TO BE PROVIDED BY THE SUBCUSTODIAN
The services Subcustodian will provide to Custodian and the manner in which
such services will be performed will be as set forth below in this Agreement.
A. SERVICES PERFORMED PURSUANT TO INSTRUCTIONS. All transactions involving
the Securities and Cash in the Account shall be executed solely in accordance
with Custodian's Instructions as that term is defined in Paragraph IV hereof,
except those described in paragraph B below.
B. SERVICES TO BE PERFORMED WITHOUT INSTRUCTIONS. Subcustodian will, unless
it receives Instructions from Custodian to the contrary:
1. COLLECT CASH. Promptly collect and receive all dividends, income,
principal, proceeds from transfer and other payments with respect to property
held in the Account, and present for payment all Securities held in the Account
which are called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon presentation, and
credit Cash receipts therefrom to the Deposit Account.
2.EXCHANGE SECURITIES. Promptly exchange Securities where the
exchange is purely ministerial including, without limitation, the exchange of
temporary Securities for those in definitive form and the exchange of warrants,
or other documents of entitlement to Securities, for the Securities themselves.
3. SALE OF RIGHTS AND FRACTIONAL INTERESTS. Whenever notification of a
rights entitlement or a fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and such rights entitlement
or fractional interest bears an expiration date, Subcustodian will promptly
endeavor to obtain Custodian's Instructions, but should these not be received in
time for Subcustodian to take timely action, Subcustodian is authorized to sell
such rights entitlement or fractional interest and to credit the Account.
4. EXECUTE CERTIFICATES. Execute in Custodian's name for the Account '
whenever Subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income from the
Securities held in the account.
5. PAY TAXES AND RECEIVE REFUNDS. To pay or cause to be paid f rom the
Account any and all taxes and levies in the nature of taxes imposed on the
property in the Account by any governmental authority, and to take all steps
necessary to obtain all tax exemptions, privileges or other benef its, including
reclaiming and recovering any foreign withholding tax, relating to the Account
and to execute any declaration, affidavits, or certificates of ownership which
may be necessary in connection therewith.
6. PREVENT LOSSES. Take such steps as may be reasonably necessary to secure
or otherwise prevent the loss of, entitlements attached to or otherwise relating
to property held in the Account.
<PAGE>
C. ADDITIONAL SERVICES.
1. TRANSMISSION OF NOTICES OF CORPORATE ACTION. By such means as will
permit Custodian to take timely action with respect thereto, Subcustodian will
promptly notify Custodian upon receiving notices or reports, or otherwise
becoming aware, of corporate action affecting Securities held in the Account
(including, but not limited to, calls for redemption, mergers, consolidations,
reorganizations, recapitalizations, tenderoffers, rights of f erings, exchanges,
subscriptions and other of f erings) and dividend, interest and other income
payments relating to such Securities.
2. COMMUNICATIONS REGARDING THE EXERCISE OF ENTITLEMENTS. Upon request
by Custodian, Subcustodian will promptly deliver, or cause any Eligible
Depository authorized and acting hereunder to deliver, to Custodian all notices,
proxies, proxy soliciting materials and other communications that call for
voting or the exercise of rights or other specific action (including material
relative to legal proceedings intended to be transmitted to security holders)
relating to Securities held in the Account to the extent received by
Subcustodian or said Eligible Depository, such proxies or any voting instruments
to be executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. MONITOR FINANCIAL SERVICE. In furtherance of its obligations under
this Agreement, Subcustodian will monitor a leading financial service with
respect to announcements and other information respecting property held in the
Account, including announcements and other information with respect to corporate
actions and dividend, interest and other income payments.
III. USE OF SECURITIES DEPOSITORY
Subcustodian may, with the prior written approval of Custodian, maintain all or
any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the central
system for handling of designated securities or equivalent book entries in , or
(b) a transnational system for the central handling of securities or equivalent
book entries (herein called "Eligible Depository"), provided however, that,
while so maintained, such Securities shall be subject only to the directions of
Subcustodian, and that Subcustodian duties, obligations and responsibilities
with regard to such Securities shall be the same as if such Securities were held
by Subcustodian on its premises.
IV. CLAIMS AGAINST PROPERTY IN THE ACCOUNT
The property in the account shall not be subject to any right, charge, security
interest, lien or claim of any kind (collectively "Charges") in favor of
Subcustodian or any Eligible Depository or any creditor of Subcustodian or of
any Eligible Depository except a claim for payment for such property's safe
custody or administration in accordance with the terms of this Agreement.
Subcustodian will immediately notify Custodian of any attempt by any party to
assert any Charge against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until Custodian has
had a reasonable time to respond to such notice.
V. SUBCUSTODIAN'S WARRANTY
Subcustodian represents and warrants that:
(A) It is a branch of a "qualified U.S. bank" or an "eligible foreign
custodian" as those terms are defined in Rule 17f-5 of the Investment Company
Act of 1940, a copy of which is attached hereto as Attachment A (the "Rule"),
and Subcustodian shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a substantial likelihood
that Subcustodian will cease to qualify under the Rule as currently in effect or
as hereafter amended, or
<PAGE>
(B) It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission which order permits Custodian to employ
Subcustodian notwithstanding the fact that Subcustodian fails to qualify under
the terms of the Rule, and Subcustodian shall immediately notify custodian, in
writing or by other authorized means, if for any reason it is no longer covered
by such exemptive order.
Upon receipt of any such notification required under (A) or (B) of this section,
Custodian may terminate this Agreement immediately without prior notice to
Subcustodian.
VI. DEFINITIONS
A. INSTRUCTIONS. The term "Instructions" means:
1. instructions in writing signed by authorized individuals designated as
such by Custodian;
2. telex or tested telex instructions of Custodian;
3. other forms of instructions in computer readable form as shall
customarily be used for thetransmission of like information, and
4. such other forms of communication as from time to time may be agreed
upon by Custodian and Subcustodian, which Subcustodian believes in good faith to
have been given by Custodian or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Custodian may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. Subcustodian shall act in
accordance with Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default, negligence,
fraud, bad faith, willful misconduct, or reckless disregard of duties on the
part of Subcustodian. Subcustodian in executing all Instructions will take
relevant action in accordance with accepted industry practice and local
settlement practice.
B. ACCOUNT. The term "Account" means collectively the Custody Account, and
the Deposit Account.
C. SECURITIES. The term "Securities" includes, without limitation, stocks,
shares, bonds, debentures, debt securities (convertible or non-convertible),
notes, or other obligations or securities and any certificates, receipts,
futures contracts, foreign exchange contracts, options, warrants, scrip or other
instruments representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or in any
property or assets.
VII. MISCELLANEOUS PROVISIONS
A. STATEMENTS REGARDING THE ACCOUNT. Subcustodian will supply Custodian
with such statements regarding the Account as Custodian may request, including
the identity and location of any Eligible Depository authorized and acting
hereunder. In addition, Subcustodian will supply Custodian an advice or
notification of any transfers of Securities to or from the Account indicating,
as to Securities acquired for the Account, if applicable, the Eligible
Depository having physical possession of such Securities.
B. EXAMINATION OF BOOKS AND RECORDS. Subcustodian agrees that its books and
records relating to the Account and Subcustodian's actions under this Agreement
shall be open to the physical, on-premises inspection and audit at reasonable
times by officers of, auditors employed by or other representatives of Custodian
including (to the extent permitted under
<PAGE>
the law of ) the independent public accountants for any customer of Custodian
whose property is being held hereunder and such books and records shall be
retained for such period as shall be agreed upon by Custodian and Subcustodian.
As Custodian may reasonably request from time to time, Subcustodian will furnish
its auditor's reports on its system of internal controls, and Subcustodian will
use its best efforts to obtain and furnish similar reports of any Eligible
Depository authorized and acting hereunder.
C. STANDARD OF CARE. In holding, maintaining, servicing and disposing of
Property under this Agreement, and in fulfilling any other obligations
hereunder, Subcustodian shall exercise the same standard of care that it
exercises over its own assets, ided that Subcustodian shall exercise at least
the degree of care and maintain adequate insurance as expected of a prudent
professional Subcustodian for hire and shall assume the burden of proving that
it has exercised such care in its maintenance of Property held by Subcustodian
in its Account. The maintenance of the Property in an Eligible Depository shall
not affect Subcustodian's standard of care, and Subcustodian will remain as
fully responsible for any loss or damage to such securities as if it had itself
retained physical possession of them. Subcustodian shall also indemnify and hold
harmless Custodian and each of Custodian's customers from and against any loss,
damage, cost, expense, liability or claim (including reasonable attorney's fees)
arising out of or in connection with the improper or negligent performance or
the nonperformance of the duties of Subcustodian.
Subcustodian shall be responsible for complying with all provisions
of the law of , or any other law,
applicable to Subcustodian in connection with its duties hereunder, including
(but not limited to) the payment of all transfer taxes or other taxes and
compliance with any currency restrictions and securities laws in connection with
its duties as Subcustodian.
D. LOSS OF CASH OR SECURITIES. Subcustodian agrees that, in the even of any
loss of Securities or Cash in the Account, Subcustodian will use its best
efforts to ascertain the circumstances relating to such loss and will promptly
report the same to Custodian and shall use every legal means available to it to
effect the quickest possible recovery.
E. COMPENSATION OF SUBCUSTODIAN. Custodian agrees to pay to Subcustodian
from time to time such compensation for its services and such out-of-pocket or
incidental expenses of Subcustodian pursuant to this Agreement as may be
mutually agreed upon in writing from time to time.
F. OPERATING REQUIREMENTS. The Subcustodian agrees to follow such Operating
Requirements as the Custodian may establish from time to time. A copy of the
current Operating Requirements is attached as Attachment B to this Agreement.
G. TERMINATION. This Agreement may be terminated by Subcustodian or
Custodian on 60 days' written notice to the other party, sent by registered
mail, provided that any such notice, whether given by Subcustodian or Custodian,
shall be followed within 60 days by
<PAGE>
Instructions specifying the names of the persons to whom Subcustodian shall
deliver the Securities in the Account and to whom the Cash in the account shall
be paid. If within 60 days following the giving of such notice of termination,
Subcustodian does not receive such Instructions, Subcustodian shall continue to
hold such Securities and Cash subject to this Agreement until such Instructions
are given. The obligations of the parties under this Agreement shall survive the
termination of this Agreement.
H. NOTICES. Unless otherwise specified in this Agreement, all notices and
communications with respect to matters contemplated by this Agreement shall be
in writing, and delivered by mail, postage prepaid, telex, SWIFT, or other
mutually agreec telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time designate by notice
duly given in accordance with this paragraph)
To Subcustodian:
To Custodian: State Street Bank and Trust Company
Securities Operations/Network Administration
P.O. Box 1631
Boston, MA 02105
I. CONFIDENTIALITY. Subcustodian and Custodian shall each use its best
efforts to maintain the confidentiality of the property in the Account and the
beneficial owners thereof, subject, however, to the provisions of any laws,
requiring disclosure. In addition, Subcustodian shall safeguard any test keys,
identification codes or other security devices which Custodian shall make
available to it. The Subcustodian further agrees it will not disclose the
existence of this Agreement or any current business relationship unless
compelled by applicable law or regulation or unless it has secured the
Custodian's written cotment.
J. ASSIGNMENT. This Agreement shall not be assignable by either party but
shall bind any successor in interest of Custodian and Subcustodian respectively.
K. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of To the extent inconsistent with this Agreement or
Custodian's Operating Requirements as attached hereto, Subcustodian's rules and
conditions regarding accounts generally or custody accounts specifically shall
not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:
Date:
<PAGE>
AGREED TO BY SUBCUSTODIAN
By:
Date:
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative as of
May , 1997.
EMERGING MARKETS PORTFOLIO
By:
Title: President
Executed in Hamilton, Bermuda
STATE STREET BANK AND TRUST COMPANY
By:
Title:
WS5221A
EMERGING MARKETS PORTFOLIO
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, dated April 10, 1997, between Emerging
Markets Portfolio, a New York trust (the "Trust"), and Brown Brothers Harriman
Trust Company (Cayman) Limited, a company incorporated in and under the laws of
the Cayman Islands (the "Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is a non-diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust has been organized for the purpose of investing its
funds in securities and has retained an investment adviser for this purpose and
desires to avail itself of the facilities available to the Administrator with
respect to the administration of the day to day affairs of the Trust, and the
Administrator is willing to furnish such administrative services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
Section 1. The Trust hereby appoints the Administrator to administer
all aspects of the operations of the Trust (except those subject to the
supervision of the investment adviser), subject to the overall supervision of
the Trustees of the Trust for the period and on the terms set forth in this
Agreement. The Administrator hereby accepts such appointment and agrees during
such period to render the services herein described and to assume the
obligations set forth herein, for the compensation herein provided.
Section 2. Subject to the supervision of the Trustees of the Trust, the
Administrator shall administer all aspects of the operations of the Trust
(except those subject to the supervision of the investment adviser) and, in
connection therewith, shall (i) furnish the Trust with adequate office
facilities, utilities, office equipment and related services; (ii) be
responsible for the financial and accounting records required to be maintained
(including those being maintained by the custodian) other than those being
maintained by the investment adviser; (iii) furnish the Trust with ordinary
clerical, bookkeeping and recordkeeping services at such office facilities; (iv)
arrange, but not pay for, the preparation of all required tax returns and
reports to its investors and the Securities and Exchange Commission and the
periodic updating of its registration statement; and (v) oversee the performance
of administrative and professional services to the Trust by others, including
the custodian.
In connection with the services rendered by the Administrator under
this Agreement, the Administrator assumes and will pay all expenses incurred by
the Administrator or by the
1
<PAGE>
Trust in connection with administering the ordinary course of business of the
Trust, other than those assumed by the Trust herein.
The Trust assumes and will pay the expenses described below:
(a) the fees and expenses of the investment adviser or expenses
otherwise incurred in connection with the management of the investment and
reinvestment of its assets,
(b) the fees and expenses of Trustees of the Trust who are not
affiliated persons of the Administrator, or of any entity with whom the
Administrator has subcontracted its performance under this Agreement (the
"Subadministrator") or any investment adviser,
(c) the fees and expenses of the custodian which relate to (i) the
custodial function and the recordkeeping connected therewith, (ii) the
maintenance of the required accounting records not being maintained by the
Administrator or the Subadministrator, (iii) the valuation of interests,
including the cost of any pricing service or services which may be retained
pursuant to the authorization of the Trustees of the Trust, and (iv) the
cashiering function in connection with the purchase and withdrawal of interests,
(d) the fees and expenses of any transfer agent, which relate to
the maintenance of each investor account,
(e) the charges and expenses of legal counsel and independent
accountants for the Trust,
(f) brokers' commissions and any issue or transfer taxes chargeable
to the Trust in connection with its securities transactions,
(g) all taxes and corporate fees payable by the Trust to federal,
state or other gov- ernmental agencies,
(h) the fees of any trade association of which the Trust may be a
member,
(i) the fees and expenses involved in registering and maintaining
registration of the Trust with the Securities and Exchange Commission, including
the preparation and printing of the Trust's registration statements for filing
under federal securities laws for such purposes,
(j) the cost of any liability insurance or fidelity bonds,
(k) allocable communications expenses with respect to investor services
and all expenses of investors' and Trustees' meetings and of preparing, printing
and mailing reports to investors in the amount necessary for distribution to
investors, and
2
<PAGE>
(l) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of business of the Trust.
Section 3. As full compensation for the services performed and the
facilities furnished by the Administrator, the Administrator shall receive a fee
from the Trust, computed daily and paid monthly, at an annual rate equal to
0.035% of the average daily net assets of the Trust.
Section 4. The Administrator assumes no responsibility under this
Agreement other than to render the services called for hereunder, and
specifically assumes no responsibilities for investment advice or the investment
or reinvestment of Trust assets.
Section 5. The Administrator shall not be liable for any error of
judgment or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, except a loss resulting from wilful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
Section 6. The Administrator may subcontract for the performance of its
obligations hereunder with any one or more persons; PROVIDED, HOWEVER, that the
Administrator shall not enter into any such subcontract unless the Trustees of
the Trust shall have found the subcontracting party to be qualified to perform
the obligations sought to be subcontracted; and PROVIDED, FURTHER, that unless
the Trust otherwise expressly agrees in writing, the Administrator shall be as
fully responsible to the Trust for the acts and omissions of any subcontractor
as it would be for its own acts or omissions. If permitted by the
subadministration agreement between the Administrator and the Subadministrator,
the Subadministrator may authorize and permit any of its trustees, officers and
employees who may be elected as officers of the Trust to serve in the capacities
in which they are elected and the Subadministrator will pay the salaries of all
personnel of the Trust who are affiliated with the Subadministrator.
Section 7. This Agreement shall become effective on the date determined
by mutual agreement of the parties. This Agreement shall continue in effect for
two years from the date of its effectiveness and thereafter, but only so long as
its continuance is specifically approved at least annually in the same manner as
an investment advisory contract under the 1940 Act; provided, however, that this
Agreement may be terminated by the Trust at any time, without the payment of any
penalty, by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Trust, upon
not less than 60 days' written notice to the Administrator, or by the
Administrator at any time, without the payment of any penalty, upon not less
than 90 days' written notice to the Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
3
<PAGE>
Section 8. Nothing in this Agreement shall limit or restrict the right
of any trustee, officer or employee of the Administrator who may also be an
officer or employee of the Trust to engage in any other business or to devote
his time and attention in part to the management or other aspects of any
business, whether of a similar or a dissimilar nature, nor limit or restrict the
right of the Administrator to engage in any other business or to render services
of any kind to any other corporation, firm, individual or association.
Section 9. During the term of this Agreement, the Trust agrees to
furnish the Administrator at its principal office all registration statements,
reports to investors, or other material prepared for distribution to investors,
which refer in any way to the Administrator, prior to use thereof and not to use
such material if the Administrator reasonably objects in writing within five
business days (or such other time as may be mutually agreed) after receipt
thereof. In the event of termination of this Agreement, the Trust will continue
to furnish to the Administrator copies of any of the above-mentioned materials
which refer in any way to the Administrator. The Trust shall furnish or
otherwise make available to the Administrator such other information relating to
the business affairs of the Trust as the Administrator at any time, or from time
to time, reasonably requests in order to discharge its obligations hereunder.
Section 10. This Agreement may be amended only by mutual written
consent.
Section 11. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually and the
Administrator agrees that neither investors nor the Trustees nor any officer,
employee, representative or agent of the Trust shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Trust, that
neither investors nor the Trustees, officers, employees, representatives or
agents of the Trust shall be personally liable hereunder, and that the
Administrator shall look solely to the property of the Trust for the
satisfaction of any claim hereunder.
Section 12. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Administrator at Butterfield House,
Fort Street, P.O. Box 2330, Georgetown, Grand Cayman, BWI, Attention: Managing
Director; or (2) to the Portfolio at Emerging Markets Portfolio, Butterfield
House, Fort Street, P.O. Box 2330, George Town, Grand Cayman, BWI.
Section 13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
EMERGING MARKETS PORTFOLIO
By:
BROWN BROTHERS HARRIMAN TRUST COMPANY
(CAYMAN) LIMITED
By:
WS5221A
5
April 10, 1997
Emerging Markets Portfolio
Butterfield House
Fort Street
P.O. Box 2330
George Town, Grand Cayman BWI
Dear Sirs:
This letter agreement (the "Agreement") confirms the agreement of the
undersigned, Brown Brothers Harriman Trust Company (Cayman) Limited
("BBH-Cayman"), to pay all of the operating expenses of Emerging Markets
Portfolio (the "Portfolio"), as described in the Registration Statement of the
Portfolio on Form N-1A as filed with the Securities and Exchange Commission, as
amended, other than fees paid under the Portfolio's Administration Agreement,
and other than expenses relating to the organization of the Portfolio. All of
the operating expenses paid by BBH-Cayman pursuant to this Agreement shall be
subject to reimbursement by the Portfolio. To accomplish such reimbursement, the
Portfolio hereby agrees to pay to BBH-Cayman an expense reimbursement fee from
the Portfolio estimated and accrued daily and paid monthly in an amount such
that immediately after any such payment the aggregate expenses of the Portfolio
would not on a per annum basis exceed 1.25% of such average daily net assets.
This Agreement shall be effective as of the date set forth above and
may be terminated by either party upon written notice to the other party.
If the foregoing correctly sets forth our agreement, kindly so confirm
by signing the enclosed counterpart of this letter in the space indicated for
signature on behalf of the Portfolio below.
Very truly yours,
BROWN BROTHERS HARRIMAN
TRUST COMPANY (CAYMAN) LIMITED
By:
Agreed:
EMERGING MARKETS PORTFOLIO
By: H.B. Alvord, Chairman
ws5481
Brown Brothers Harriman Trust Company (Cayman) Limited
Butterfield House, 4th Floor
Fort Street, P.O. Box 2330
George Town, Grand Cayman
Cayman Islands, BWI
May 19, 1997
Emerging Markets Portfolio
Butterfield House, 4th Floor
Fort Street, P.O. Box 2330
George Town, Grand Cayman
Cayman Islands, BWI
Ladies and Gentlemen:
With respect to our purchase from you of a beneficial interest in
Emerging Markets Portfolio (the "Portfolio"), at the purchase price of $100,000
(the "Initial Interest Amount"), we hereby advise you that we are purchasing the
Initial Interest Amount with no intention to dispose of it through withdrawal
from the Portfolio.
Very truly yours,
BROWN BROTHERS HARRIMAN TRUST
COMPANY (CAYMAN) LIMITED
By : /s/CHERI BAUMANN
Name: Cheri Baumann
Title: Vice President
WS5484
<PAGE>
Signature Financial Group (Cayman) Limited
P.O. Box 2494
Elizabeth Square, 2nd Floor
George Town, Grand Cayman
Cayman Island, BWI
May 19, 1997
Emerging Markets Portfolio
Butterfield House, 4th Floor
Fort Street, P.O. Box 2330
George Town, Grand Cayman
Cayman Island, BWI
Ladies and Gentlemen:
With respect to our purchase from you of a beneficial interest in
Emerging Markets Portfolio (the "Portfolio"), at the purchase price of $100 (the
"Initial Interest Amount"), we hereby advise you that we are purchasing the
Initial Interest Amount with no intention to dispose of it through withdrawal
from the Portfolio.
Very truly yours,
SIGNATURE FINANCIAL GROUP (CAYMAN)
LIMITED
By : /s/SUSAN JAKUBOSKI
Name: Susan Jakuboski
Title: Vice President
WS5484
