As filed with the Securities and Exchange Commission on October 30, 1998
File No. 811-8436
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
THE PREMIUM PORTFOLIOS*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ELIZABETHAN SQUARE, GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS, BWI
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(345) 945-1824
SUSAN JAKUBOSKI, ELIZABETHAN SQUARE, GEORGE TOWN,
GRAND CAYMAN, CAYMAN ISLANDS, BWI
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH
BINGHAM DANA LLP
150 FEDERAL STREET
BOSTON, MA 02110
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* Relates only to U.S. Fixed Income Portfolio.
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940. Beneficial interests in the
Registrant are not registered under the Securities Act of 1933, as amended (the
"1933 Act"), because such interests are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in the Registrant may be made only by
investment companies, common or commingled trust funds or similar organizations
or entities which 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.
U.S. Fixed Income Portfolio (the "Portfolio") is a series of The Premium
Portfolios (the "Trust"). Citibank, N.A. ("Citibank" or the "Manager") is the
investment adviser for the Portfolio. From time to time the Portfolio may
employ one or more subadvisers to perform the daily management of the
Portfolio's securities. Citibank will monitor and supervise the activities of
the subadvisers, and Citibank and the Portfolio may terminate the services of a
subadviser at any time.
The Trust is an open-end management investment company which was organized
as a trust under the laws of the State of New York on September 13, 1993.
Beneficial interests in the Portfolio are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the U.S. Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio may be made only by investment companies, common
or commingled trust funds or similar organizations or entities which 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 will commence operations on November 1, 1998.
BENEFICIAL INTERESTS IN THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY AND
INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
INVESTMENT OBJECTIVE AND POLICIES:
The investment objectives of the Portfolio are to generate a high level of
current income and preserve the value of the investment of its holders of
beneficial interests.
The Portfolio seeks its objectives by investing in a broad range of fixed
income securities, including preferred stock and debt issued by U.S. and
non-U.S. companies and debt of the U.S. Government and governments of other
countries. As a non-fundamental policy, under normal circumstances, at least
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65% of the Portfolio's total assets are invested in fixed income securities,
but the Portfolio expects that substantially all of its assets generally will
be invested in fixed income securities.
The Portfolio will invest in debt obligations of U.S. companies only if
they carry at least a Baa rating from Moody's Investors Service, Inc.
("Moody's") or a BBB rating from Standard & Poor's Ratings Group ("S&P"), or if
the Manager determines that they are of comparable quality. Securities rated
Baa or BBB have speculative characteristics, and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments on bonds rated Baa or BBB than is the case for
higher grade securities.
The Portfolio may invest up to 20% of its assets in non-U.S. securities,
including securities of issuers in developing countries. See "Risk
Considerations - Non-U.S. Securities."
The Portfolio is designed to provide a higher level of current income than
is generally available from shorter-term securities, but investors should be
willing to accept the greater price fluctuations associated with higher levels
of income. Under normal market conditions, the Portfolio's dollar weighted
average portfolio maturity will be from three to ten years.
U.S. GOVERNMENT SECURITIES. The Portfolio may invest in U.S. Government
securities, including (1) U.S. Treasury obligations, such as Treasury bills,
notes and bonds, which are backed by the full faith and credit of the United
States; and (2) obligations issued or guaranteed by U.S. Government agencies or
instrumentalities that are backed by the full faith and credit of the U.S.
Government. The Portfolio may also invest in other obligations issued by
agencies or instrumentalities of the U.S. Government, some of which are
supported by the right of the issuer to borrow from the U.S. Treasury and some
of which are backed only by the credit of the issuer itself.
ASSET-BACKED SECURITIES. The Portfolio may purchase mortgage-backed
securities issued or guaranteed as to payment of principal and interest by the
U.S. Government or one of its agencies and backed by the full faith and credit
of the U.S. Government, including direct pass-through certificates of GNMA. The
Portfolio may also invest in mortgage-backed securities for which principal and
interest payments are backed by the credit of particular agencies of the U.S.
Government. Mortgage-baked securities are generally backed or collateralized by
a pool of mortgages. These securities are sometimes called collateralized
mortgage obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment, because the underlying mortgages are refinanced to
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take advantage of the lower rates. Thus the prices of mortgage-backed
securities may not increase as much as prices of other debt obligations when
interest rates decline, and mortgage-backed securities may not be an effective
means of locking in a particular interest rate. In addition, any premium paid
for a mortgage-backed security may be lost when it is prepaid. When interest
rates go up, mortgage-backed securities experience lower rates of prepayment.
This has the effect of lengthening the expected maturity of a mortgage-backed
security. As a result, prices of mortgage-backed securities may decrease more
than prices of other debt obligations when interest rates go up.
The Portfolio may also invest in corporate asset-backed securities and
collateralized mortgage obligations that are rated no lower than Baa by Moody's
or BBB by S&P, or are judged by the Manager to be of comparable quality. These
securities are backed by pools of assets, including, among other things,
mortgage loans, automobile loans or credit card receivables. These securities
are not backed by the U.S. Government and have special risks, including
inherent difficulties in enforcing rights against the underlying assets.
Determinations of average maturity of asset-backed securities take into
account expectations of prepayments, which may change in different interest
rate environments. The Portfolio will not consider it a violation of policy if
its average maturity deviates from its normal range as a result of actual or
expected changes in prepayments.
ZERO-COUPON OBLIGATIONS. The Portfolio may invest up to 15% of its assets
in zero-coupon obligations, such as zero-coupon bonds issued by companies and
securities representing future principal and interest installments on debt
obligations of the U.S. Government and governments of other countries.
Zero-coupon obligations pay no current interest, and as a result their prices
tend to be more volatile than those of securities that offer regular payments
of interest. In order to pay cash distributions representing income on
zero-coupon obligations, the Portfolio may have to sell other securities on
unfavorable terms, and these sales may generate taxable gain for investors.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, the Portfolio may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower
yield than would be available from investments with a lower quality or longer
term.
OTHER PERMITTED INVESTMENTS. For more information regarding the
Portfolio's permitted investments and investment practices, see "Permitted
Investments and Investment Practices." The Portfolio will not necessarily
invest or engage in each of the investments and investment practices described
in "Permitted Investments and Investment Practices" but reserves the right to
do so.
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INVESTMENT RESTRICTIONS. Part B of this Registration Statement contains a
list of specific investment restrictions which govern the investment policies
of the Portfolio, including a limitation that the Portfolio may borrow money
from banks in an amount not to exceed 1/3 of the Portfolio's net assets for
extraordinary or emergency purposes (e.g., to meet redemption requests). Except
as otherwise indicated, the Portfolio's investment objectives and policies may
be changed without investor approval. If a percentage or rating restriction
(other than a restriction as to borrowing) is adhered to at the time an
investment is made, a later change in percentage or rating resulting from
changes in the Portfolio's securities will not be a violation of policy.
PORTFOLIO TURNOVER. Securities of the Portfolio will be sold whenever the
Manager believes it is appropriate to do so in light of the Portfolio's
investment objective, without regard to the length of time a particular
security may have been held. The turnover rate for the Portfolio is not
expected to exceed 250% for its fiscal year ending October 31, 1999. The amount
of brokerage commissions and realization of taxable capital gains will tend to
increase as the level of portfolio activity increases.
BROKERAGE TRANSACTIONS. In connection with the selection of brokers or
dealers for securities transactions for the Portfolio and the placing of such
orders, brokers or dealers may be selected who also provide brokerage and
research services to the Portfolio or the other accounts over which the Manager
or its affiliates exercise investment discretion. The Portfolio is authorized
to pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if the Portfolio determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer.
RISK CONSIDERATIONS:
The risks of investing in the Portfolio vary depending upon the nature of
the securities held, and the investment practices employed, on its behalf.
Certain of these risks are described below.
CHANGES IN NET ASSET VALUE. The Portfolio's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investor's shares may be worth more or less at redemption than at
the time of purchase.
INTEREST RATE RISK. The value of fixed income securities, including those
backed by the U.S. Government, generally goes down when interest rates go up
and goes up when interest rates go down. Furthermore, the value of fixed income
securities may vary based on anticipated or potential changes in interest
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rates. Changes in interest rates will generally cause bigger changes in the
prices of longer-term securities than in the prices of shorter-term securities.
CREDIT RISK. Prices of fixed income securities also fluctuate based on
changes in the actual and perceived creditworthiness of issuers. The values of
lower rated fixed income securities generally fluctuate more than those of
higher-rated securities. It is possible that some issuers will be unable to
make required payments on fixed income securities held by the Portfolio. As a
result, the Portfolio may not achieve the expected income from these
securities. Also, the inability (or perceived inability) of issuers to make
timely payments on securities generally will make the values of those
securities more volatile and could limit the Portfolio's ability to sell those
securities at the values at which the Portfolio carries them on its books.
Securities that are backed by the full faith and credit of the U.S. Government
are generally thought to have minimal credit risk.
NON-U.S. SECURITIES. Investments in non-U.S. securities involve risks
relating to political, social and economic developments abroad, as well as
risks resulting from the differences between the regulations to which U.S. and
non-U.S issuers and markets are subject. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of portfolio assets and political or social instability.
Enforcing legal rights may be difficult, costly and slow in non-U.S. countries,
and there may be special problems enforcing claims against non-U.S.
governments. In addition, non-U.S. companies may not be subject to accounting
standards or governmental supervision comparable to U.S. companies, and there
may be less public information about their operations. Non-U.S. markets may be
less liquid and more volatile than U.S. markets, and may offer less protection
to investors such as the Portfolio. Prices at which the Portfolio may acquire
securities may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Portfolio.
Because non-U.S. securities often are denominated in currencies other than
the U.S. dollar, changes in currency exchange rates will affect the Portfolio's
net asset value, the value of dividends and interest earned and gains and
losses realized on the sale of securities. In addition, some non-U.S. currency
values may be volatile and there is the possibility of governmental controls on
currency exchanges or governmental intervention in currency markets.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those attributable to U.S. investing. As a result, the operating expense
ratios of the Portfolio may be higher than those of investment companies
investing exclusively in U.S. securities.
The Portfolio may invest in securities of issuers in developing countries,
and all of these risks are increased for investments in issuers in developing
countries.
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INVESTMENT PRACTICES. Certain of the investment practices employed for the
Portfolio may entail certain risks. These risks are in addition to the risks
described above and are described in "Permitted Investments and Investment
Practices" below.
PERMITTED INVESTMENTS AND INVESTMENT PRACTICES:
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
in order to earn a return on temporarily available cash. Repurchase agreements
are transactions in which an institution sells the Portfolio a security at one
price, subject to the Portfolio's obligation to resell and the selling
institution's obligation to repurchase that security at a higher price normally
within a seven day period. There may be delays and risks of loss if the seller
is unable to meet its obligation to repurchase.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by the Portfolio and the agreement by the Portfolio to
repurchase the securities at an agreed-upon price, date and interest payment.
When the Portfolio enters into reverse repurchase transactions, securities of a
dollar amount equal in value to the securities subject to the agreement will be
maintained in a segregated account with the Portfolio's custodian. The
segregation of assets could impair the Portfolio's ability to meet its current
obligations or impede investment management if a large portion of the
Portfolio's assets are involved. Reverse repurchase agreements are considered
to be a form of borrowing.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, the Portfolio may lend
its portfolio securities to broker-dealers and other institutional borrowers.
Such loans must be callable at any time and continuously secured by collateral
(cash or U.S. Government securities) in an amount not less than the market
value, determined daily, of the securities loaned. It is intended that the
value of securities loaned by the Portfolio would not exceed 30% of the
Portfolio's total assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or a reverse repurchase agreement, the Portfolio could
experience delays in recovering either the securities or cash. To the extent
that, in the meantime, the value of the securities loaned or sold has increased
or the value of the securities purchased has decreased, the Portfolio could
experience a loss.
RULE 144A SECURITIES. The Portfolio may purchase restricted securities
that are not registered for sale to the general public. If it is determined
that there is a dealer or institutional market in the securities, the
securities will not be treated as illiquid for purposes of the Portfolio's
investment limitations. The Trustees will review these determinations. These
securities are known as "Rule 144A securities," because they are traded under
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Rule 144A among qualified institutional buyers. Institutional trading in Rule
144A securities is relatively new, and the liquidity of these investments could
be impaired if trading in Rule 144A securities does not develop or if qualified
institutional buyers become, for a time, uninterested in purchasing Rule 144A
securities.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Portfolio may invest up
to 15% of its net assets in securities for which there is no readily available
market. These illiquid securities may include privately placed restricted
securities for which no institutional market exists. The absence of a trading
market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Portfolio to sell them promptly at an acceptable price.
"WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, the Portfolio may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered to
the Portfolio at a future date beyond customary settlement time. Under normal
circumstances, the Portfolio takes delivery of the securities. In general, the
Portfolio does not pay for the securities until received and does not start
earning interest until the contractual settlement date. While awaiting delivery
of the securities, the Portfolio establishes a segregated account consisting of
cash, cash equivalents or high quality debt securities equal to the amount of
the Portfolio's commitments to purchase "when-issued" securities. An increase
in the percentage of the Portfolio's assets committed to the purchase of
securities on a "when-issued" basis may increase the volatility of its net
asset value.
CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for the Portfolio for the purchase or sale of non-U.S. currency
for hedging purposes against adverse rate changes or otherwise to achieve the
Portfolio's investment objectives. A currency exchange contract allows a
definite price in dollars to be fixed for securities of non-U.S. issuers that
have been purchased or sold (but not settled) for the Portfolio. Entering into
such exchange contracts may result in the loss of all or a portion of the
benefits which otherwise could have been obtained from favorable movements in
exchange rates. In addition, entering into such contracts means incurring
certain transaction costs and bearing the risk of incurring losses if rates do
not move in the direction anticipated.
FUTURES CONTRACTS. The Portfolio may use financial futures in order to
protect itself from fluctuations in interest rates (sometimes called "hedging")
without actually buying or selling securities, or to manage the effective
maturity in duration of fixed income securities in the Portfolio's investment
portfolio in an effort to reduce potential losses or enhance potential gain.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a security at a specified future time
and price, or for making payment of a cash settlement based on changes in the
value of a security, an index of securities or other assets. The futures
contracts that may be purchased by the Portfolio are standardized contracts
traded on commodities exchanges or boards of trade.
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Because the value of a futures contract changes based on the price of the
underlying security or other asset, futures contracts are considered to be
"derivatives." Futures contracts are a generally accepted part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. When the Portfolio purchases or sells a futures
contract, it is required to make an initial margin deposit. Although the amount
may vary, initial margin can be as low as 1% or less of the face amount of the
contract. Additional margin may be required as the contract fluctuates in
value. Since the amount of margin is relatively small compared to the value of
the securities covered by a futures contract, the potential for gain or loss on
a futures contract is much greater than the amount of the Portfolio's initial
margin deposit. The Portfolio does not currently intend to enter into a futures
contract if, as a result, the initial margin deposits on all of its futures
contracts would exceed approximately 5% of the Portfolio's net assets. Also,
the Portfolio intends to limit its futures contracts so that the value of the
securities covered by its futures contracts would not generally exceed 50% of
the Portfolio's other assets and to segregate sufficient assets to meet its
obligations under outstanding futures contracts.
The ability of the Portfolio to utilize futures contracts successfully
will depend on the Manager's ability to predict interest rate movements, which
cannot be assured. In addition to general risks associated with any investment,
the use of futures contracts entails the risk that, to the extent the Manager's
view as to stock price movements is incorrect, the use of futures contracts,
even for hedging purposes, could result in losses greater than if they had not
been used. This could happen, for example, if there is a poor correlation
between price movements of futures contracts and price movements in the
Portfolio's related portfolio position. Also, the futures markets may not be
liquid in all circumstances. As a result, in certain markets, the Portfolio
might not be able to close out a transaction without incurring substantial
losses, if at all. When futures contracts are used for hedging, even if they
are successful in minimizing the risk of loss due to a decline in the value of
the hedged position, at the same time they limit any potential gain which might
result from an increase in value of such position.
The use of futures contracts potentially exposes the Portfolio to the
effects of "leveraging," which occurs when futures are used so that the
Portfolio's exposure to the market is greater than it would have been if the
Portfolio had invested directly in the underlying securities. "Leveraging"
increases the Portfolio's potential for both gain and loss. As noted above, the
Portfolio intends to adhere to certain policies relating to the use of futures
contracts, which should have the effect of limiting the amount of leverage by
the Portfolio. The use of futures contracts may increase the amount of taxable
income of the Portfolio and may affect in other ways the amount, timing and
character of the Portfolio's income for tax purposes, as more fully discussed
in the section entitled "Tax Status" in Part B of this Registration Statement.
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DOLLAR ROLLS. The Portfolio may enter into "dollar rolls." A dollar roll
is a transaction pursuant to which the Portfolio sells mortgage-backed
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Portfolio foregoes
principal and interest paid on the mortgage-backed securities. The Portfolio is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale. A "covered
roll" is a specific type of dollar roll for which the Portfolio establishes a
segregated account with liquid high grade debt securities equal in value to the
securities subject to repurchase by the Portfolio. The Portfolio will invest
only in covered rolls.
SHORT SALES "AGAINST THE BOX." In a short sale, the Portfolio sells a
borrowed security and has a corresponding obligation to the lender to return
the identical security. The Portfolio may engage in short sales only if at the
time of the short sale the Portfolio owns or has the right to obtain, at no
additional cost, an equal amount of the security being sold short. This
investment technique is known as a short sale "against the box." The Portfolio
may make a short sale as a hedge, when it believes that the value of a security
owned by the Portfolio (or a security convertible or exchangeable for such
security) may decline. Not more than 40% of the Portfolio's total assets would
be involved in short sales "against the box."
Item 5. Management of the Portfolio.
TRUSTEES AND OFFICERS: The Portfolio is supervised by the Board of
Trustees of the Trust. A majority of the Trustees are not affiliated with the
Manager. More information on the Trustees and officers of the Portfolio appears
under "Management of the Trust" in Part B.
INVESTMENT MANAGER: Citibank offers a wide range of banking and investment
services to customers across the United States and throughout the world, and
has been managing money since 1822. Its portfolio managers are responsible for
investing in money market, equity and fixed income securities. Citibank and its
affiliates manage more than $290 billion in assets worldwide. Citibank is a
wholly-owned subsidiary of Citicorp, which is, in turn, a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the
merger of Citicorp and Travelers Group, Inc., which was completed on October 8,
1998. Citibank also serves as investment adviser to other registered investment
companies. Citibank's address is 153 East 53rd Street, New York, New York
10043.
Subject to policies set by the Trustees, Citibank is responsible for
overall management of the Portfolio's business affairs, and has a management
agreement ("Management Agreement") with respect to the Portfolio. Citibank also
provides certain administrative services to the Portfolio. These administrative
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services include providing general office facilities and supervising the
overall administration of the Portfolio. Pursuant to sub-administrative
services agreements with Citibank, Signature Financial Group (Cayman) Ltd.
("SFG") performs such sub-administrative duties for the Portfolio as from time
to time are agreed upon by Citibank and SFG. SFG's compensation as
sub-administrator is paid by Citibank.
Mark Lindbloom, a Vice President of Citibank and the portfolio manager for
the Portfolio since its inception, has been a portfolio manager for fixed
income securities since joining Citibank in 1986. Mr. Lindbloom has more than
12 years of investment management experience. Prior to joining Citibank, Mr.
Lindbloom was a Fixed Income Portfolio Manager with Brown Brothers Harriman &
Co. where he managed fixed income assets for discretionary institutional
portfolios.
The Portfolio currently does not employ an investment subadviser, but in
the future the Portfolio may do so. Citibank would be responsible for
recommending the hiring, termination or replacement of any subadviser and for
supervising and monitoring the subadviser's performance. Certain CitiFunds have
applied for exemptive relief from the Securities and Exchange Commission
("SEC") which would permit them to employ subadvisers without investor
approval. The requested exemptive relief also would permit the terms of
sub-advisory agreements to be changed and the employment of subadvisers to be
continued after events that would otherwise cause an automatic termination of a
sub-advisory agreement, in each case without investor approval if those changes
or continuation are approved by the fund's Board of Trustees. There is no
assurance that the SEC will grant the requested relief; however, if the
requested relief is granted, the Portfolio also would be permitted to employ
subadvisers without investor approval, subject to compliance with certain
conditions.
For its services under the Management Agreement, Citibank receives a fee,
which is accrued daily and paid monthly, at the annual rate of 0.45% of the
average daily net assets on an annualized basis of the Portfolio for the
Portfolio's then-current fiscal year.
Citibank may voluntarily agree to waive a portion of its investment
advisory fees. The Portfolio is newly organized and had no operations during
the fiscal year ended October 31, 1998.
Citibank and its affiliates may have deposit, loan and other relationships
with the issuers of securities purchased on behalf of the Portfolio, including
outstanding loans to such issuers which may be repaid in whole or in part with
the proceeds of securities so purchased. Citibank has informed the Trust that,
in making its investment decisions, it does not obtain or use material inside
information in the possession of any division or department of Citibank or in
the possession of any affiliate of Citibank.
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The Glass-Steagall Act prohibits certain financial institutions, such as
Citibank, from underwriting securities of open-end investment companies, such as
the Trust. Citibank believes that its services under the Management Agreement
and the activities performed by it or by its affiliates as Service Agents
(which are securities dealers or other industry professionals that have entered
into service agreements with CFBDS, Inc.) are not underwriting and are
consistent with the Glass-Steagall Act and other relevant federal and state
laws. However, there is no controlling precedent regarding the performance of
the combination of investment advisory, shareholder servicing and
administrative activities by banks. State laws on this issue may differ from
applicable federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either
federal or state statutes or regulations, or in their interpretations, could
prevent Citibank from continuing to perform these services. If Citibank were to
be prevented from acting as the Manager or a Service Agent, the Trust would
seek alternative means for obtaining these services. The Trust does not expect
that shareholders would suffer any adverse financial consequences as a result
of any such occurrence.
The Trust, on behalf of the Portfolio, has entered into a Custodian
Agreement with State Street Bank and Trust Company ("State Street") pursuant to
which State Street acts as custodian for the Portfolio. Securities may be held
by a sub-custodian bank approved by the Trustees. State Street Cayman Trust
Company, Ltd. ("State Street Cayman") provides fund accounting services for the
Portfolio. State Street Cayman also provides transfer agency services to the
Portfolio.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of State Street
Cayman is P.O. Box 2508 GT, Grand Cayman, Cayman Islands.
In addition to amounts payable under the Management Agreement, the
Portfolio is responsible for its own expenses, including, among other things,
the costs of securities transactions, the compensation of Trustees that are not
affiliated with Citibank or SFG, government fees, taxes, accounting and legal
fees, expenses of communicating with investors, interest expense, and insurance
premiums. The Portfolio is newly organized and had no operations during the
fiscal year ended October 31, 1998.
All fee waivers are voluntary and may be reduced or terminated at any
time.
Item 6. Capital Stock and Other Securities.
Investments in the Portfolio have no pre-emptive or conversion rights and
are fully paid and non-assessable, except as set forth below. The Trust is not
required to hold, and has no current intention of holding, annual meetings of
investors, but the Trust will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
<PAGE>
investor vote. Investors have under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of removing
one or more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified number of
investors. Upon liquidation or dissolution of the Portfolio, investors in the
Portfolio would be entitled to share pro rata in the net assets of the
Portfolio available for distribution to its investors.
The Trust reserves the right to create and issue a number of series, in
which case investors in each series would participate equally in the earnings,
dividends and assets of the particular series.
The Trust 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 in the Portfolio is entitled to a
vote in proportion to the amount of its beneficial interest 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.
The net asset value of the Portfolio (i.e., the value of its securities
and other assets less its liabilities) is determined each day on which the New
York Stock Exchange (the "Exchange") is open for trading ("Business Day") (and
on such other days as are deemed necessary in order to comply with Rule 22c-1
under the U.S. Investment Company Act of 1940, as amended (the "1940 Act")).
This determination is made once during each day as of the close of regular
trading on the Exchange. Values of the Portfolio's assets are determined on the
basis of their market or other fair value, as described in Item 19 of Part B.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the
Exchange, on each 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 interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. Thereafter, the investor's percentage of the aggregate beneficial
interests in the Portfolio is then re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the same 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 the
close of regular trading on the following Business Day of the Portfolio.
<PAGE>
Subject to an investor's right to make withdrawals as provided above, the
Portfolio does not make distributions to its investors.
The Trust has determined that the Portfolio is properly treated as a
partnership for U.S. federal and New York state income tax purposes.
Accordingly, the Portfolio is not subject to any U.S. federal or New York state
income taxes, but each investor in the Portfolio must take into account its
share of the Portfolio's ordinary income, expense, capital gains and losses,
credits and other items in determining its income tax liability. The
determination of such share is made in accordance with the governing
instruments of the Trust and the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
The Trust intends to conduct its activities and those of the Portfolio so
that they will not be deemed to be engaged in the conduct of a U.S. trade or
business for U.S. federal income tax purposes. Therefore, it is not anticipated
that an investor in the Portfolio, other than an investor which would be deemed
a "U.S. person" for U.S. federal income tax purposes, will be subject to U.S.
federal income taxation (other than a 30% withholding tax on dividends and
certain interest income) solely by reason of its investment in the Portfolio.
There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in the
Portfolio.
Item 7. Purchase of Securities.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, common or commingled trust funds or similar
organizations or entities which 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.
An investment in the Portfolio is made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. There is no minimum initial or subsequent investment
in the Portfolio. However, since 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., moneys credited to the
account of the Portfolio's custodian bank by a U.S. Federal Reserve Bank).
The Trust reserves the right to cease accepting investments for the
Portfolio at any time or to reject any investment order.
<PAGE>
The exclusive placement agent for the Portfolio is CFBDS, Inc. ("CFBDS").
The address of CFBDS is c/o SFG, Elizabethan Square, George Town, Grand Cayman,
Cayman Islands, BWI. CFBDS receives no compensation for serving as the
exclusive placement agent for the Portfolio.
Item 8. Redemption or Repurchase.
An investor in the Portfolio may withdraw all or any portion of its
investment at any time after a withdrawal request in proper form is received by
the Portfolio from the investor. The proceeds of a withdrawal will be paid by
the Portfolio in federal funds normally on the Business Day the withdrawal is
effected, but in any event within seven days. See "Purchase, Redemption and
Pricing of Securities" in Part B of this Registration Statement regarding the
Trust's right to pay the redemption price in kind with readily marketable
securities (instead of cash). Investments in the Portfolio may not be
transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the Exchange is closed (other than weekends or
holidays) or trading on the Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
Not applicable.
<PAGE>
PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History B-1
Investment Objectives and Policies B-1
Management of the Trust B-17
Control Persons and Principal Holders of Securities B-20
Investment Advisory and Other Services B-20
Brokerage Allocation and Other Practices B-22
Capital Stock and Other Securities B-23
Purchase, Redemption and Pricing of Securities B-24
Tax Status B-27
Underwriters B-29
Calculations of Performance Data B-29
Financial Statements B-30
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains information about the investment objectives and policies
of U.S. Fixed Income Portfolio (the "Portfolio"), a series of The Premium
Portfolios (the "Trust"). This Part B should be read in conjunction with Part
A.
<PAGE>
INVESTMENT OBJECTIVES
The investment objectives of the Portfolio are to generate a high level of
current income and preserve the value of the investment of its holders of
beneficial interests.
The investment objectives of the Portfolio may be changed without approval
by the Portfolio's investors. Of course, there can be no assurance that the
Portfolio will achieve its investment objectives.
INVESTMENT POLICIES
Part A contains a discussion of the various types of securities in which
the Portfolio may invest and the risks involved in such investments. The
following supplements the information contained in Part A concerning the
investment objectives, policies and techniques of the Portfolio.
U.S. GOVERNMENT SECURITIES
The Portfolio may invest in debt obligations that are backed, as to the
timely payment of interest and principal, by the full faith and credit of the
U.S. Government.
The debt obligations in which assets of the Portfolio are invested include
(1) U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance; U.S. Treasury bills (maturities of one year
or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by U.S. Government agencies, authorities or
instrumentalities.
When and if available, U.S. Government obligations may be purchased at a
discount from face value. However, its is not intended that such securities
will be held to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive.
Although U.S. Government obligations which are purchased for the Portfolio
may be backed, as to the timely payment of interest and principal, by the full
faith and credit of the U.S. Government, shares of the Portfolio are neither
insured nor guaranteed by the U.S. Government or its agencies, authorities or
instrumentalities.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by
securities in which the Portfolio may otherwise invest. Repurchase agreements
are agreements by which the Portfolio purchases a security and simultaneously
commits to resell that security to the seller (which is usually a member bank
of the U.S. Federal Reserve System or a member firm of the New York Stock
<PAGE>
Exchange (or a subsidiary thereof)) at an agreed-upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed-upon market rate of interest which
is unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the
underlying security, usually U.S. Government or Government agency issues. Under
the Investment Company Act of 1940, as amended (the "1940 Act"), repurchase
agreements may be considered to be loans by the buyer. The Portfolio's risk is
limited to the ability of the seller to pay the agreed-upon amount on the
delivery date. If the seller defaults, the underlying security constitutes
collateral for the seller's obligation to pay although the Portfolio may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements entered into
by the Portfolio are fully collateralized, with such collateral being marked to
market daily.
FUTURES CONTRACTS
A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an
index of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at
a specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for by
the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts have been
designed by exchanges which have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange.
While futures contracts based on securities do provide for the delivery
and acceptance of securities, such deliveries and acceptances are very seldom
made. Generally, a futures contract is terminated by entering into an
offsetting transaction. Brokerage fees will be incurred when the Portfolio
purchases or sells a futures contract. At the same time such a purchase or sale
is made, the Portfolio must provide cash or securities as a deposit ("initial
deposit") known as "margin." The initial deposit required will vary, but may be
as low as 1% or less of a contract's face value. Daily thereafter, the futures
contract is valued through a process known as "marking to market," and the
Portfolio may receive or be required to pay additional "variation margin" as
the futures contract becomes more or less valuable. At the time of delivery of
securities pursuant to such a contract, adjustments are made to recognize
<PAGE>
differences in value arising from the delivery of securities with a different
interest rate than the specific security that provides the standard for the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was entered into.
The Portfolio may purchase or sell futures contracts to attempt to protect
the Portfolio from fluctuations in interest rates, or to manage the effective
maturity or duration of the Portfolio's investment portfolio in an effort to
reduce potential losses or enhance potential gain, without actually buying or
selling debt securities. For example, if interest rates were expected to
increase, the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as if the Portfolio
sold bonds that it owned, or as if the Portfolio sold longer-term bonds and
purchased shorter-term bonds. If interest rates did increase, the value of the
Portfolio's debt securities would decline, but the value of the futures
contracts would increase, thereby keeping the net asset value of the Portfolio
from declining as much as it otherwise would have. Similar results could be
accomplished by selling bonds, or by selling bonds with longer maturities and
investing in bonds with shorter maturities. However, by using futures
contracts, the Portfolio avoids having to sell its securities.
Similarly, when it is expected that interest rates may decline, the
Portfolio might enter into futures contracts for the purchase of debt
securities. Such a purchase would be intended to have much the same effect as
if the Portfolio purchased bonds, or as if the Portfolio sold shorter-term
bonds and purchased longer-term bonds. If interest rates did decline, the value
of the futures contracts would increase.
Although the use of futures for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position (e.g., if the
Portfolio sells a futures contract to protect against losses in the securities
held by the Portfolio), at the same time the futures contract limits any
potential gain which might result from an increase in value of a hedged
position.
In addition, the ability effectively to hedge all or a portion of the
Portfolio's investments through transactions in futures contracts depends on
the degree to which movements in the value of the securities underlying such
contracts correlate with movements in the value of the Portfolio's securities.
If the security underlying a futures contract is different than the security
being hedged, they may not move to the same extent or in the same direction. In
that event, the Portfolio's hedging strategy might not be successful and the
Portfolio could sustain losses on these hedging transactions which would not be
offset by gains on the Portfolio's other investments or, alternatively, the
gains on the hedging transaction might not be sufficient to offset losses on
the Portfolio's other investments. It is also possible that there may be a
negative correlation between the security underlying a futures contract and the
securities being hedged, which could result in losses both on the hedging
transaction and the securities. In these and other instances, the Portfolio's
<PAGE>
overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where the Portfolio enters into futures
transactions other than for hedging purposes, the effectiveness of its strategy
may be affected by lack of correlation between changes in the value of the
futures contracts and changes in value of the securities which the Portfolio
would otherwise buy and sell.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, there is the potential that the liquidity of
the futures market may be lacking. Prior to expiration, a futures contract may
be terminated only by entering into a closing purchase or sale transaction,
which requires a secondary market on the contract market on which the futures
contract was originally entered into. While the Portfolio will establish a
futures position only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist for any
particular futures contract at any specific time. In that event, it may not be
possible to close out a position held by the Portfolio, which could require the
Portfolio to purchase or sell the instrument underlying the futures contract or
to meet ongoing variation margin requirements. The inability to close out
futures positions also could have an adverse impact on the ability effectively
to use futures transactions for hedging or other purposes.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract during
a single trading day and prohibit trading beyond such limits once they have
been reached. The trading of futures contracts also is subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Investments in futures contracts also entail the risk that if the
Manager's investment judgment about the general direction of interest rates or
stock prices is incorrect, the Portfolio's overall performance may be poorer
than if any such contract had not been entered into. For example, if the
Portfolio hedged against the possibility of an increase in interest rates which
would adversely affect the price of the Portfolio's bonds and interest rates
decrease instead, part or all of the benefit of the increased value of the
Portfolio's bonds which were hedged will be lost because the Portfolio will
have offsetting losses in its futures positions. Similarly, if the Portfolio
purchases futures contracts expecting a decrease in interest rates and interest
rates instead increased, the Portfolio will have losses in its futures
positions which will increase the amount of the losses on the securities in its
<PAGE>
portfolio which will also decline in value because of the increase in interest
rates. In addition, in such situations, if the Portfolio has insufficient cash,
the Portfolio may have to sell bonds from its investments to meet daily
variation margin requirements, possibly at a time when it may be
disadvantageous to do so.
Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Manager
does not believe that these trading and position limits would have an adverse
impact on the Portfolio's strategies involving futures.
CFTC regulations require compliance with certain limitations in order to
assure that the Portfolio is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Portfolio from
purchasing or selling futures contracts (other than for bona fide hedging
transactions) if, immediately thereafter, the sum of the amount of initial
margin required to establish the Portfolio's non-hedging futures positions
would exceed 5% of the Portfolio's net assets.
The Portfolio will comply with this CFTC requirement and currently intends
to adhere to the additional policies described below. First, an amount of cash
or cash equivalents will be maintained by the Portfolio in a segregated account
with the Portfolio's custodian so that the amount so segregated, plus the
initial margin held on deposit, will be approximately equal to the amount
necessary to satisfy the Portfolio's obligations under the futures contract.
The second is that the Portfolio will not enter into a futures contract if
immediately thereafter the amount of initial margin deposits on all the futures
contracts held by the Portfolio would exceed approximately 5% of the net assets
of the Portfolio. The third is that the aggregate market value of the futures
contracts held by the Portfolio not exceed approximately 50% of the market
value of the Portfolio's total assets other than its futures contracts. For
purposes of this third policy, "market value" of a futures contract is deemed
to be the amount obtained by multiplying the number of units covered by the
futures contract times the per unit price of the securities covered by that
contract.
The use of futures contracts may increase the amount of taxable income of
the Portfolio and may affect the amount, timing and character of the
Portfolio's income for tax purposes, as more fully discussed herein in the
section entitled "Tax Status."
WHEN-ISSUED SECURITIES
The Portfolio may purchase securities on a "when-issued" or on a "forward
delivery" basis. It is expected that, under normal circumstances, the Portfolio
would take delivery of such securities. When the Portfolio commits to purchase
a security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with SEC policies. Since those policies currently require
that an amount of the Portfolio's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Portfolio
expects always to have cash, cash equivalents or high quality debt securities
<PAGE>
sufficient to cover any commitments or to limit any potential risk. However,
even though the Portfolio does not intend to make such purchases for
speculative purposes and intends to adhere to the provisions of SEC policies,
purchases of securities on such bases may involve more risk than other types of
purchases. For example, the Portfolio may have to sell assets which have been
set aside in order to meet redemptions. Also, if the Manager determines it is
advisable as a matter of investment strategy to sell the "when-issued" or
"forward delivery" securities, the Portfolio would be required to meet its
obligations from the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of the
"when-issued" or "forward delivery" securities themselves (which may have a
value greater or less than the Portfolio's payment obligation).
SECURITIES OF NON-U.S. ISSUERS
The Portfolio may invest in securities of non-U.S. issuers. Investing in
securities of foreign issuers may involve significant risks not present in
domestic investments. For example, the value of such securities fluctuates
based on the relative strength of the U.S. dollar. In addition, there is
generally less publicly available information about foreign issuers,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to domestic issuers. Investments in securities of foreign issuers
also involve the risk of possible adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitation on the
removal of funds or other assets of the Portfolio, political or financial
instability or diplomatic and other developments which would affect such
investments. Further, economies of other countries or areas of the world may
differ favorably or unfavorably from the economy of the U.S.
It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the U.S.,
and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. securities trading practices, including
those involving securities settlement where the Portfolio's assets may be
released prior to receipt of payments, may expose the Portfolio to increased
risk in the event of a failed trade or the insolvency of a non-U.S.
broker-dealer. In addition, non-U.S. brokerage commissions are generally higher
than commissions on securities traded in the U.S. and may be non-negotiable. In
general, there is less overall governmental supervision and regulation of
non-U.S. securities exchanges, brokers and listed companies than in the U.S.
It is the Trust's policy to invest not more than 5% of the Portfolio's
assets in closed-end investment companies which primarily hold foreign
securities. Investments in closed-end investment companies which primarily hold
securities of non-U.S. issuers may entail the risk that the market value of
<PAGE>
such investments may be substantially less than their net asset value and that
there would be duplication of investment management and other fees and
expenses.
The Portfolio may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. issuers of the same
class that are not subject to such restrictions.
The Trust's policy is not to invest more than 50% of the Portfolio's
assets in the securities of foreign issuers. It is the intention of the Trust
to limit the Portfolio's investments in non-U.S. obligations to securities
rated A or better and securities which, in the opinion of the Manager, are of
comparable quality to such rated securities.
CURRENCY EXCHANGE TRANSACTIONS
Because the Portfolio may buy and sell securities denominated in
currencies other than the U.S. dollar, and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Portfolio may enter into
currency exchange transactions to convert United States currency to foreign
currency and foreign currency to United States currency, as well as convert
foreign currency to other foreign currencies. The Portfolio either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or uses forward contracts to purchase or
sell foreign currencies. The Portfolio may also enter into foreign currency
hedging transactions in an attempt to protect the value of its assets as
measured in U.S. dollars from unfavorable changes in currency exchange rates
and control regulations. (Although the Portfolio's assets are valued daily in
terms of U.S. dollars, the Trust does not intend to convert the Portfolio's
holdings of other currencies into U.S. dollars on a daily basis.) The Portfolio
does not currently intend to speculate in currency exchange rates or forward
contracts.
The Portfolio may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
currency exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement, and no fees or
commissions are charged at any stage for trades.
<PAGE>
When the Portfolio enters into a contract for the purchase or sale of a
security denominated in a non-U.S. currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of non-U.S.
currency involved in the underlying security transaction, the Portfolio may be
able to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
When the Manager believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the Portfolio may enter
into a forward contract to sell, for a fixed amount of U.S. dollars, the amount
of non-U.S. currency approximating the value of some or all of the Portfolio's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures. The projection of a short-term hedging strategy is highly
uncertain. The Portfolio does not enter into such forward contracts or maintain
a net exposure to such contracts where the consummation of the contracts
obligates the Portfolio to deliver an amount of non-U.S. currency in excess of
the value of the Portfolio's securities or other assets denominated in that
currency. Under normal circumstances, consideration of the prospect for
currency parties will be incorporated in the investment decisions made with
regard to overall diversification strategies. However, the Manager believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Portfolio will be
served.
The Portfolio generally would not enter into a forward contract with a
term greater than one year. At the maturity of a forward contract, the
Portfolio will either sell the security and make delivery of the non-U.S.
currency, or retain the security and terminate its contractual obligation to
deliver the non-U.S. currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the non-U.S. currency. If the Portfolio retains the security and
engages in an offsetting transaction, the Portfolio will incur a gain or a loss
(as described below) to the extent that there has been movement in forward
contract prices. If the Portfolio engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the non-U.S. currency.
Should forward prices decline during the period between the date the Portfolio
enters into a forward contract for the sale of the non-U.S. currency and the
date it enters into an offsetting contract for the purchase of such currency,
the Portfolio will realize a gain to the extent the selling price of the
currency exceeds the purchase price of the currency. Should forward prices
increase, the Portfolio will suffer a loss to the extent that the purchase
price of the currency exceeds the selling price of the currency.
<PAGE>
It is impossible to forecast with precision the market value of Portfolio
securities at the expiration of the contract. Accordingly, it may be necessary
for the Portfolio to purchase additional non-U.S. currency on the spot market
if the market value of the security is less than the amount of non-U.S.
currency the Portfolio is obligated to deliver and if a decision is made to
sell the security and make delivery of such currency. Conversely, it may be
necessary to sell on the spot market some of the non-U.S. currency received
upon the sale of the security if its market value exceeds the amount of such
currency the Portfolio is obligated to deliver.
The Portfolio may also purchase put options on a non-U.S. currency in
order to protect against currency rate fluctuations. If the Portfolio purchases
a put option on a non-U.S. currency and the value of the U.S. currency
declines, the Portfolio will have the right to sell the non-U.S. currency for a
fixed amount in U.S. dollars and will thereby offset, in whole or in part, the
adverse effect on the Portfolio which otherwise would have resulted.
Conversely, where a rise in the U.S. dollar value of another currency is
projected, and where the Portfolio anticipates investing in securities traded
in such currency, such Portfolio may purchase call options on the non-U.S.
currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to the Portfolio
from purchases of non-U.S. currency options will be reduced by the amount of
the premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, the Portfolio
could sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes in
such rates.
The Portfolio may write options on non-U.S. currencies for hedging
purposes or otherwise to achieve its investment objectives. For example, where
the Portfolio anticipates a decline in the value of the U.S. dollar value of a
non-U.S. security due to adverse fluctuations in exchange rates it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the diminution in value of the security held by the Portfolio
will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, the Portfolio could write a put option on the
relevant currency which, if rates move in the manner projected, will expire
unexercised and allow the Portfolio to hedge such increased cost up to the
amount of the premium. However, the writing of a currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
<PAGE>
exercised and the Portfolio would be required to purchase or sell the
underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on currencies, the Portfolio also may
be required to forgo all or a portion of the benefits which might otherwise
have been obtained from favorable movements in exchange rates.
Put and call options on non-U.S. currencies written by the Portfolio will
be covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount
sufficient to discharge the Portfolio's obligations with respect to the option,
by acquisition of the non-U.S. currency or of a right to acquire such currency
(in the case of a call option) or the acquisition of a right to dispose of the
currency (in the case of a put option), or in such other manner as may be in
accordance with the requirements of any exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.
The Portfolio's dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, the Portfolio is not required to enter
into such transactions and will not do so unless deemed appropriate by the
Manager. It should also be realized that these methods of protecting the value
of the Portfolio's securities against a decline in the value of a currency do
not eliminate fluctuations in the underlying prices of the securities.
Additionally, although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Portfolio has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of the Portfolio's
assets equal to the amount of the purchase be held aside or segregated to be
used to pay for the commitment, the Portfolio expects always to have cash, cash
equivalents or high quality debt securities available sufficient to cover any
commitments under these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
Portfolio, in accordance with applicable investment restrictions, may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If the Portfolio engages in a short sale, the collateral for the short
position is maintained for the Portfolio by the custodian or qualified
sub-custodian. While the short sale is open, an amount of securities equal in
kind and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities is maintained in a segregated
account for the Portfolio. These securities constitute the Portfolio's long
position.
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The Portfolio does not engage in short sales against the box for
investment purposes. The Portfolio may, however, make a short sale against the
box as a hedge, when it believes that the price of a security may decline,
causing a decline in the value of a security owned by the Portfolio (or a
security convertible or exchangeable for such security). In such case, any
future losses in the Portfolio's long position should be reduced by a gain in
the short position. Conversely, any gain in the long position should be reduced
by a loss in the short position. The extent to which such gains or losses are
reduced depends upon the amount of the security sold short relative to the
amount the Portfolio owns. There are certain additional transaction costs
associated with short sales against the box, but the Portfolio endeavors to
offset these costs with the income from the investment of the cash proceeds of
short sales.
The Portfolio does not expect that more than 40% of its total assets would
be involved in short sales against the box. The Portfolio does not currently
intend to engage in such sales.
CORPORATE ASSET-BACKED SECURITIES
Certain of the Portfolio's assets may be invested in corporate
asset-backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and
automobile loan receivables, representing the obligations of a number of
different parties.
Corporate asset-backed securities present certain risks. For instance, in
the case of credit card receivables, these securities may not have the benefit
of any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
<PAGE>
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. The
Portfolio will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in
such a security. It is intended that no more than 5% of the Portfolio's total
assets would be invested in corporate asset-backed securities.
COLLATERALIZED MORTGAGE OBLIGATIONS
A portion of the Portfolio's assets may be invested in collateralized
mortgage obligations ("CMOs"), which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by certificates issued by the Government National Mortgage
Association, the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation but also may be collateralized by whole loans or private
mortgage pass-through securities (such collateral collectively hereinafter
referred to as "Mortgage Assets"). The Portfolio may also invest a portion of
its assets in multi-class pass-through securities which are interests in a
trust composed of Mortgage Assets. CMOs (which include multi-class pass-through
securities) may be issued by agencies, authorities or instrumentalities of the
U.S. Government or by private originators of or investors in mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multi-class pass-through securities. In a CMO, a series of
bonds or certificates is usually issued in multiple classes with different
maturities. Each class of CMO, often referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any
has been paid. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semiannual basis. The principal of and interest on the
Mortgage Assets may be allocated among the several classes of a series of a CMO
in various ways. In a common structure, payments of principal, including any
principal prepayments, on the Mortgage Assets are applied to the classes of the
series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
<PAGE>
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, the Portfolio may lend its securities to broker-dealers and
other institutional borrowers. Such loans will usually be made only to member
banks of the U.S. Federal Reserve System and to member firms of the New York
Stock Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. Either party has the right to terminate a
loan at any time on customary industry settlement notice (which will not
usually exceed three business days). During the existence of a loan, the
Portfolio would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned and with respect to cash collateral
would also receive compensation based on investment of the collateral (subject
to a rebate payable to the borrower). Where the borrower provides the Portfolio
with collateral consisting of U.S. Treasury obligations, the borrower is also
obligated to pay the Portfolio a fee for use of the borrowed securities. The
Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower fail
financially. However, the loans would be made only to entities deemed by the
Manager to be of good standing, and when, in the judgment of the Portfolio, the
consideration which can be earned currently from loans of this type justifies
the attendant risk. In addition, the Portfolio could suffer loss if the
borrower terminates the loan and the Portfolio is forced to liquidate
investments in order to return the cash collateral to the buyer. If the Manager
determines to make loans, it is not intended that the value of the securities
loaned would exceed 30% of the value of the Portfolio's total assets.
RULE 144A SECURITIES
Consistent with applicable investment restrictions, the Portfolio may
purchase securities that are not registered ("restricted securities") under the
Securities Act of 1933 (the "Securities Act"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
However, the Portfolio will not invest more than 15% of its net assets in
illiquid investments, which includes securities for which there is no readily
available market, securities subject to contractual restrictions on resale and
restricted securities, unless the Board of Trustees of the Trust determines,
based on the trading markets for the specific restricted security, that it is
liquid. The Trustees have adopted guidelines and delegated to the Manager the
daily function of determining and monitoring liquidity of restricted
securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.
<PAGE>
Since it is not possible to predict with assurance exactly how the market
for restricted securities will develop, the Trustees will carefully monitor the
Portfolio's investments in these securities, focusing on such factors, among
others, as valuation, liquidity and availability of information.
MORTGAGE "DOLLAR ROLL" TRANSACTIONS
The Portfolio may enter into mortgage "dollar roll" transactions pursuant
to which it sells mortgage-backed securities for delivery in the future and
simultaneously contracts to repurchase substantially similar securities on a
specified future date. During the roll period, the Portfolio foregoes principal
and interest paid on the mortgage-backed securities. The Portfolio is
compensated for the lost principal and interest by the difference between the
current sales price and the lower price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. The Portfolio may also be compensated by receipt of a commitment
fee.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trust, on behalf of the Portfolio, has adopted the following policies
which may not be changed with respect to the Portfolio without approval by
holders of a majority of the outstanding voting securities of the Portfolio,
which as used in this Part B means the vote of the lesser of (i) 67% or more of
the outstanding voting securities of the Portfolio present at a meeting at
which the holders of more than 50% of the outstanding voting securities of the
Portfolio are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Portfolio. The term "voting securities" as
used in this paragraph has the same meaning as in the 1940 Act.
The Portfolio may not:
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed; or purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Portfolio, taken at market value. It is intended that the Portfolio would
borrow money only from banks and only to accommodate requests for the
repurchase of beneficial interests in the Portfolio while effecting an orderly
liquidation of portfolio securities.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of the
Portfolio's total assets (taken at market value), (b) through the use of
repurchase agreements or fixed time deposits or the purchase of short-term
obligations or (c) by purchasing all or a portion of an issue of debt
<PAGE>
securities of types commonly distributed privately to financial institutions.
The purchase of short-term commercial paper or a portion of an issue of debt
securities which is part of an issue to the public shall not be considered the
making of a loan.
(3) Purchase securities of any issuer if such purchase at the time thereof
would cause with respect to 75% of the total assets of the Portfolio more than
10% of the voting securities of such issuer to be held by the Portfolio;
provided that, for purposes of this restriction, the issuer of an option or
futures contract shall not be deemed to be the issuer of the security or
securities underlying such contract; and provided further that the Portfolio
may invest all or any portion of its assets in one or more investment companies
to the extent not prohibited by the 1940 Act, the rules and regulations
thereunder, and exemptive orders granted under such Act.
(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Portfolio's total assets more than 5% of the
Portfolio's assets (taken at market value) to be invested in the securities of
such issuer (other than securities or obligations issued or guaranteed by the
United States, any state or political subdivision thereof, or any political
subdivision of any such state, or any agency or instrumentality of the United
States or of any state or of any political subdivision of any state); provided
that, for purposes of this restriction, the issuer of an option or futures
contract shall not be deemed to be the issuer of the security or securities
underlying such contract; and provided further that the Portfolio may invest
all or any portion of its assets in or more investment companies, to the extent
not prohibited by the 1940 Act, the rules and regulations thereunder, and
exemptive orders granted under such Act.
(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Portfolio's 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 contracts shall
not be subject to this restriction.
(6) Underwrite securities issued by other persons, except that all or any
portion of the assets of the Portfolio may be invested in one or more
investment companies, to the extent not prohibited by the 1940 Act, the rules
and regulations thereunder, and exemptive orders granted under such Act, and
except insofar as the Portfolio may technically be deemed an underwriter under
the Securities Act in selling a security.
(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 in
the ordinary course of business (the foregoing shall not be deemed to preclude
the Portfolio from purchasing or selling futures contracts or options thereon,
and the Portfolio reserves the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Portfolio).
<PAGE>
(8) 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.
NON-FUNDAMENTAL RESTRICTIONS
The Portfolio does not as a matter of operating policy:
(i) purchase any securities for the Portfolio at any time at which
borrowings exceed 5% of the total assets of the Portfolio (taken at market
value), or
(ii) purchase securities issued by any registered investment company in
reliance on the provisions of Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940
Act and the rules and regulations thereunder except to the extent not
prohibited by the 1940 Act, rules and regulations thereunder and exemptive
orders granted thereunder.
These policies are not fundamental and may be changed by the Portfolio
without the approval of its holders of the beneficial interests.
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 securities or a later change in the
rating of the securities held for the Portfolio will not be considered a
violation of policy.
Item 14. Management of the Trust.
The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate that those Trustees and officers are
"interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated below, the address of each Trustee and officer is 21 Milk
Street, 5th Floor, Boston, Massachusetts. The address of the Trust is
Elizabethan Square, George Town, Grand Cayman, Cayman Islands, British West
Indies.
TRUSTEES
ELLIOTT J. BERV (aged 55) -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 15 Stowaway Drive, Cumberland
Foreside, Maine.
<PAGE>
PHILIP W. COOLIDGE* (aged 47) -- President of the Trust; Chief Executive
Officer and President, Signature Financial Group, Inc. and CFBDS, Inc.
MARK T. FINN (aged 55) -- President and Director, Delta Financial, Inc. (since
June 1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm) (since April 1990); Director, Vantage
Consulting Group, Inc. (since October 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
C. OSCAR MORONG, JR. (aged 63) -- Managing Director, Morong Capital Management
(since February 1993); Senior Vice President and Investment Manager, CREF
Investments, Teachers Insurance & Annuity Association (retired, January 1993);
Director, Indonesia Portfolio; Trustee, MAS Portfolios (since 1993). His
address is 1385 Outlook Drive, West, Mountainside, New Jersey.
WALTER E. ROBB, III (aged 72) -- President, Benchmark Consulting Group, Inc.
(since 1991); Principal, Robb Associates (Corporate Financial Advisors) (since
1978); President, Benchmark Advisors, Inc. (Corporate Financial Advisors)
(since 1989); Trustee of certain registered investment companies in the MFS
Family of Portfolios. His address is 35 Farm Road, Sherborn, Massachusetts.
E. KIRBY WARREN (aged 64) -- Professor of Management, Graduate School of
Business, Columbia University (since 1987). Samuel Bronfman Professor of
Democratic Business Enterprise (1978 to 1987). His address is Columbia
University, Graduate School of Business, 725 Uris Hall, New York, New York.
OFFICERS
PHILIP W. COOLIDGE* (aged 47) -- President of the Trust; Chief Executive
Officer and President, Signature Financial Group, Inc. and CFBDS, Inc.
CHRISTINE A. DRAPEAU* (aged 28) -- Assistant Secretary and Assistant Treasurer
of the Trust; Assistant Vice President, Signature Financial Group, Inc. (since
January 1996); Paralegal and Compliance Officer, various financial companies
(July 1992 to January 1996); Graduate Student, Bentley College (prior to
December 1994).
TAMIE EBANKS-CUNNINGHAM* (aged 25) -- Assistant Secretary of the Trust; Office
Manager, Signature Financial Group (Cayman) Ltd. (Since April 1995);
Administrator, Cayman Islands Primary School (prior to April 1995). Her address
is P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, B.W.I.
JOHN R. ELDER* (aged 50) -- Treasurer of the Trust; Vice President, Signature
Financial Group, Inc. (since April 1995); Treasurer, CFBDS, Inc. (since April
<PAGE>
1995); Treasurer, Phoenix Family of Mutual Portfolios (Phoenix Home Life Mutual
Insurance Company) (1983 to March 1995).
LINDA T. GIBSON* (aged 33) -- Secretary of the Trust; Vice President, Signature
Financial Group, Inc. (since May 1992); Assistant Secretary, CFBDS, Inc. (since
October 1992).
JOAN R. GULINELLO* (aged 43) -- Assistant Secretary and Assistant Treasurer of
the Trust; Vice President, Signature Financial Group, Inc. (since October
1993); Secretary, CFBDS, Inc. (since October 1995); Vice President and
Assistant General Counsel, Massachusetts Financial Services Company (prior to
October 1993).
JAMES E. HOOLAHAN* (aged 51) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Senior Vice President, Signature Financial
Group, Inc.
SUSAN JAKUBOSKI* (aged 34) -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust; Vice President, Signature Financial Group (Cayman) Ltd.
(since August 1994); Portfolio Compliance Administrator, Concord Financial
Group (November 1990 to August 1994). Her address is Suite 193, 12 Church St.,
Hamilton HM 11, Bermuda.
MOLLY S. MUGLER* (aged 47) -- Assistant Secretary and Assistant Treasurer of
the Trust; Vice President, Signature Financial Group, Inc.; Assistant
Secretary, CFBDS, Inc.
CLAIR TOMALIN* (aged 29) -- Assistant Secretary of the Trust; Office Manager,
Signature Financial Group (Europe) Limited (since 1993). Her address is 117
Charterhouse Street, London ECIM 6AA.
SHARON M. WHITSON* (aged 50) -- Assistant Secretary and Assistant Treasurer of
the Trust; Assistant Vice President, Signature Financial Group, Inc.
JULIE J. WYETZNER* (aged 39) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Vice President, Signature Financial Group,
Inc.
The Trustees and officers of the Trust also hold comparable positions with
certain other funds for which Signature Financial Group (Cayman) Ltd. or an
affiliate serves as the administrator.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its investors, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
<PAGE>
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
TRUSTEE COMPENSATION TABLE
Aggregate Total
Compensation Compensation
from the Portfolio from Trust and
Trustee (1) Complex (2)(3)
Elliott J. Berv $1,400 $57,000
Philip W. Coolidge $0 $0
Mark T. Finn $1,422 $54,000
C. Oscar Morong, Jr. $1,400 $70,000
Walter E. Robb, III $1,499 $56,000
E. Kirby Warren $1,499 $50,000
(1) Information is estimated for the fiscal year ending October 31, 1999.
(2) Messrs. Berv, Coolidge, Finn, Morong, Robb and Warren serve as Trustees of
31, 54, 30, 48, 34 and 44 funds or portfolios, respectively, in the family
of open-end registered investment companies advised or managed by Citibank.
(3) Information relates to the fiscal year ended October 31, 1998.
Item 15. Control Persons and Principal Holders of Securities.
The Portfolio is newly organized and has no holders of beneficial
interests as of the date of this registration statement.
Item 16. Investment Advisory and Other Services.
Citibank manages the assets of the Portfolio pursuant to a management
agreement relating to the Portfolio ("Management Agreement"). Subject to such
policies as the Board of Trustees may determine, Citibank manages the
securities of the Portfolio and makes investment decisions for the Portfolio.
Citibank furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio. The Management Agreement with the
<PAGE>
Trust provides that Citibank may delegate the daily management of the
securities of the Portfolio to one or more subadvisers. The Management
Agreement for the Portfolio will continue in effect until August 7, 2000, and
will continue in effect from year to year thereafter so long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Portfolio, and, in each case, by a majority of the Trustees of the Trust
who are not parties to the Management Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on the Management
Agreement
Citibank provides the Trust with general office facilities and supervises
the overall administration of the Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the Trust's independent contractors
and agents; the preparation and filing of all documents required for compliance
by the Trust with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust. Trustees, officers, and
investors in the Trust are or may be or may become interested in Citibank, as
directors, officers, employees, or otherwise and directors, officers and
employees of Citibank are or may become similarly interested in the Trust.
The Management Agreement provides that Citibank may render services to
others. The Management Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Trust when authorized
either by a vote of a majority of the outstanding voting securities of the
Portfolio or by a vote of a majority of the Board of Trustees of the Trust, or
by Citibank on not more than 60 days' nor less than 30 days' written notice,
and will automatically terminate in the event of its assignment. The Management
Agreement with the Trust provides that neither Citibank nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of security
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence or reckless disregard of its or their obligations and duties
under the Management Agreement.
Part A to this Registration Statement contains a description of the fees
payable to Citibank for services under the Management Agreement. Citibank may
reimburse the Portfolio or waive all or any portion of its management fee.
The Portfolio is newly organized and had no operations during the fiscal
year ended October 31, 1998.
Pursuant to a sub-administrative services agreement with Citibank,
Signature Financial Group (Cayman) Ltd. ("SFG") performs such
sub-administrative duties for the Trust as from time to time are agreed upon by
Citibank and SFG. For performing such sub-administrative services, SFG receives
compensation as from time to time is agreed upon by Citibank, not in excess of
the amount paid to Citibank for its services under the Management Agreement
with the Trust. All such compensation is paid by Citibank.
<PAGE>
The Trust, on behalf of the Portfolio, has entered into a Custodian
Agreement with State Street Bank and Trust Company ("State Street") pursuant to
which State Street acts as custodian for the Portfolio. The Trust, on behalf of
the Portfolio, also has entered into a Portfolio Accounting Agreement with
State Street Cayman Trust Company, Ltd. ("State Street Cayman") pursuant to
which State Street Cayman provides fund accounting services for the Portfolio.
State Street Cayman also provides transfer agency services to the Portfolio.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of State Street
Cayman is P.O. Box 2508 GT, Grand Cayman, British West Indies.
PricewaterhouseCoopers are the chartered accountants for the Trust,
providing audit services, and assistance and consultation with respect to the
preparation of filings with the SEC. The address of PricewaterhouseCoopers is
Suite 3000, Box 82, Royal Trust Towers, Toronto Dominion Center, Toronto,
Ontario, Canada M5K 1G8.
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, acts as counsel to
the Trust.
Item 17. Brokerage Allocation and Other Practices.
The Trust trades securities for the Portfolio if it believes that a
transaction net of costs (including custodian charges) will help achieve the
Portfolio's investment objectives. Changes in the Portfolio's investments are
made without regard to the length of time a security has been held, or whether
a sale would result in the recognition of a profit or loss. Therefore, the rate
of turnover is not a limiting factor when changes are appropriate. Specific
decisions to purchase or sell securities for the Portfolio are made by a
portfolio manager who is an employee of the Manager and who is appointed and
supervised by its senior officers. The portfolio manager may serve other
clients of the Manager in a similar capacity.
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or the other
accounts over which the Manager or its affiliates exercise investment
discretion. The Manager is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction for the Portfolio which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Manager determines in good faith that such amount of commission is
<PAGE>
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer. This determination may be viewed in terms of
either that particular transaction or the overall responsibilities which
Citibank or its affiliates have with respect to accounts over which they
exercise investment discretion.
The management fee that the Portfolio pays to Citibank will not be reduced
as a consequence of Citibank's receipt of brokerage and research services.
While such services are not expected to reduce the expenses of Citibank,
Citibank would, through the use of the services, avoid the additional expenses
which would be incurred if it should attempt to develop comparable information
through its own staff or obtain such services independently.
In certain instances there may be securities that are suitable as an
investment for the Portfolio as well as for one or more of the Manager's other
clients. Investment decisions for the Portfolio and for the Manager's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable
for the investment objectives of more than one client. When two or more clients
are simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect
the price of or the size of the position obtainable for the security for the
Portfolio. When purchases or sales of the same security for the Portfolio and
for other portfolios managed by the Manager occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.
The Portfolio is newly organized and had no operations during the fiscal
year ended October 31, 1998.
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Trust and to establish series, each of which shall
be a subtrust, the beneficial interests in which shall be separate and distinct
from the beneficial interests in any other series. The Portfolio is a series of
the Trust. Investors in the Portfolio 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 in the Portfolio are
entitled to share pro rata in the Portfolio's net assets available for
distribution to its investors. Interests in the Portfolio have no preference,
pre-emptive, conversion or similar rights and are fully paid and
non-assessable, except as set forth below. Interests in the Portfolio may not
be transferred.
<PAGE>
Each investor is entitled to a vote in proportion to its percentage of the
aggregate beneficial interests in the Portfolio. Investors in the Portfolio do
not have cumulative voting rights, and investors holding more than 50% of the
aggregate beneficial interests in the Trust may elect all of the Trustees if
they choose to do so and in such event the other investors in the Trust would
not be able to elect any Trustee. The Trust is not required to hold, and has no
current intention of holding, annual meetings of investors but the Trust 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.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by a vote of a majority, as
defined in the 1940 Act, of the holders of the Trust's outstanding voting
securities voting as a single class, or of the affected series of the Trust, as
the case may be, or if authorized by an instrument in writing without a
meeting, consented to by holders of not less than a majority of the interests
of the affected series. However, if the Trust or the affected series is the
surviving entity of the merger, consolidation or sale of assets, no vote of
interest holders is required. Any series of the Trust may be dissolved (i) by
the affirmative vote of not less than two-thirds of the outstanding beneficial
interests in such series at any meeting of holders of beneficial interests or
by an instrument in writing signed by a majority of the Trustees and consented
to by not less than two-thirds of the outstanding beneficial interests, (ii) by
the Trustees by written notice to holders of the beneficial interests in the
series or (iii) upon the bankruptcy or expulsion of a holder of a beneficial
interest in the series, unless the remaining holders of beneficial interests,
by majority vote, agree to continue the series. The Trust may be dissolved by
action of the Trustees upon the dissolution of the last remaining series.
The Portfolio is a series of the Trust, organized as a trust under the
laws of the State of New York. The Declaration of Trust provides that
obligations of the Trust are not binding upon the Trustees individually 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 or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his or her office.
Item 19. Purchase, Redemption and Pricing of Securities.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the Securities Act. Investments in the Portfolio may
only be made by investment companies, common or commingled trust funds or
similar organizations or entities which are "accredited investors" within the
meaning of Regulation D under the Securities 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 Securities Act.
<PAGE>
The net asset value of the Portfolio (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued)
is determined each day during which the New York Stock Exchange (the
"Exchange") is open for trading ("Business Day"). As of the date of this
Registration Statement, the Exchange is open for trading every weekday except
for the following holidays (or the days on which they are observed): New Year's
Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. This
determination of net asset value of the Portfolio is made once each day as of
the close of regular trading on the Exchange (normally 4:00 p.m. Eastern time).
As set forth in more detail below, purchases and withdrawals will be effected
at the time of determination of net asset value next following the receipt of
any purchase or withdrawal order.
For the purpose of calculating the Portfolio's net asset value, all assets
and liabilities initially expressed in non-U.S. currencies will be converted
into U.S. dollars at the prevailing market rates at the time of valuation, or
if trading in the currency is restricted, at rates believed to reflect the
currencies' fair value in U.S. dollars. Equity securities are valued at the
last sale price on the exchange on which they are primarily traded or on the
NASDAQ system for unlisted national market issues, or at the last quoted bid
price for securities in which there were no sales during the day or for
unlisted securities not reported on the NASDAQ system. Securities listed on a
foreign exchange are valued at the last quoted sale price available before the
time when net assets are valued. Bonds and other fixed income securities (other
than short-term obligations) are valued on the basis of valuations furnished by
a pricing service, use of which has been approved by the Board of Trustees of
the Trust. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures contracts are normally valued at the settlement price on the exchange
on which they are traded. Securities for which there are no such valuations are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of foreign securities occur between the
time when the exchange on which they are traded closes and the time when the
Portfolio's net asset value is calculated, such securities may be valued at
fair value in accordance with procedures established by and under the general
supervision of the Board of Trustees.
<PAGE>
Interest income on long-term obligations held for the Portfolio is
determined on the basis of interest accrued plus amortization of "original
issue discount" (generally, the difference between issue price and stated
redemption price at maturity) and premiums (generally, the excess of purchase
price over stated redemption price at maturity). Interest income on short-term
obligations is determined on the basis of interest accrued less amortization of
premium.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the
Exchange, on each 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 interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. Thereafter, the investor's percentage of the aggregate beneficial
interests in the Portfolio is re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the same 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 the
close of regular trading on the following Business Day of the Portfolio.
Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption price of beneficial interests in the Portfolio,
either totally or partially, by a distribution in kind of readily marketable
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the beneficial interests being sold. If a holder of beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trust may suspend the right of redemption or postpone the date of
payment for beneficial interests in the Portfolio more than seven days during
any period when (a) trading in the markets the Portfolio normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of the
SEC, exists making disposal of the Portfolio's investments or determination of
its net asset value not reasonably practicable; (b) the Exchange is closed
(other than customary weekend and holiday closings); or (c) the SEC has by
order permitted such suspension.
<PAGE>
Item 20. Tax Status.
The Trust is organized as a trust under New York law. The Trust has
determined that the Portfolio is properly treated as a partnership for U.S.
federal and New York State income tax purposes. Accordingly, under those tax
laws, the Portfolio is not subject to any income tax, but each investor in the
Portfolio must take into account its share of the Portfolio's ordinary income,
expense, capital gains and losses, credits, and other items in determining its
income tax liability. The determination of such share is made in accordance
with the governing instruments of the Trust and the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder.
The Portfolio's taxable year ends October 31. Although, as described
above, the Portfolio is not subject to U.S. federal income tax, it files
appropriate U.S. federal income tax returns.
The Trust believes that, in the case of an investor in the Portfolio that
seeks to qualify as a regulated investment company ("RIC") under the Code, the
investor should be treated for U.S. federal income tax purposes as an owner of
an undivided interest in the assets and operations of the Portfolio, and
accordingly should be deemed to own a proportionate share of each of the assets
of the Portfolio and be entitled to treat as earned by it the portion of the
Portfolio's gross income attributable to that share. The Trust also believes
that each such investor should be deemed to hold its proportionate share of the
Portfolio's assets for the period the Portfolio has held the assets or for the
period the investor has been a partner in the Portfolio, whichever is shorter.
Each investor should consult its tax advisers regarding whether, in light of
its particular tax status and any special tax rules applicable to it, this
approach applies to its investment in the Portfolio, or whether the Portfolio
should be treated, as to it, as a separate entity as to which the investor has
no direct interest in Portfolio assets or operations.
In order to enable an investor in the Portfolio that is otherwise eligible
to qualify as a RIC under the Code to so qualify, the Trust intends that the
Portfolio will satisfy the requirements of Subchapter M of the Code relating to
the nature of the Portfolio's gross income and the composition
(diversification) of the Portfolio's assets as if those requirements were
directly applicable to such Portfolio and will allocate and permit withdrawals
of its net investment income and any net realized capital gains in a manner
that will enable an investor that is a RIC to comply with the qualification
requirements imposed by Subchapter M of the Code.
The Trust will allocate at least annually among the Portfolio's investors
each investor's distributive share of the Portfolio's net investment income,
net realized capital gains, and any other items of income, gain, loss,
deduction, or credit in a manner intended to comply with the Code and
applicable U.S. Treasury regulations.
<PAGE>
To the extent the cash proceeds of any withdrawal or distribution exceed
an investor's adjusted tax basis in its partnership interest in the Portfolio,
the investor will generally realize gain for U.S. federal income tax purposes.
If, upon a complete withdrawal (i.e., a redemption of its entire interest in
the Portfolio), the investor's adjusted tax basis in its partnership interest
in the Portfolio exceeds the proceeds of the withdrawal, the investor will
generally realize a loss for federal income tax purposes. An investor's
adjusted tax basis in its partnership interest in the Portfolio will generally
be the aggregate price paid therefor, increased by the amounts of its
distributive shares of items of realized net income and gain (including income,
if any, exempt from U.S. Federal income tax), and reduced, but not below zero,
by the amounts of its distributive shares of items of net loss and the amounts
of any distributions received by the investor. This discussion does not address
any distributions by the Portfolio in kind (i.e., any distributions of readily
marketable securities or other non-cash property), which will be subject to
special tax rules and may have consequences different from those described in
this paragraph.
The Portfolio may be subject to foreign withholding and other taxes with
respect to income on certain securities of non-U.S. issuers. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax treaty.
The Trust does not anticipate that investors qualifying as RICs and investing
substantially all of their assets in the Portfolio will be able to pass through
to their shareholders any foreign tax credit for federal income tax purposes
with respect to the foreign withholding taxes paid by the Portfolio, if any.
Foreign exchange gains and losses realized by the Portfolio will generally be
treated as ordinary income and losses for federal income tax purposes. Certain
uses of foreign currency and foreign currency forward contracts and investments
in certain "passive foreign investment companies" may be limited in order to
enable an investor that is a RIC to avoid imposition of a tax. The Portfolio
may elect to mark to market any investments in "passive foreign investment
companies" on the last day of each year. This election may cause the Portfolio
to recognize income prior to the receipt of cash payments with respect to those
investments; in order to distribute this income and avoid a tax on any RICs
investing in the Portfolio, the Portfolio may be required to liquidate
portfolio securities that it might otherwise have continued to hold.
The Portfolio's investment in zero-coupon bonds will cause the Portfolio
to recognize income prior to the receipt of cash payments with respect to those
securities. In order to enable any investor which is a RIC to distribute this
income and avoid a tax, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss. The Portfolio's transactions in
options, foreign currency forward contracts, and futures contracts will be
subject to special tax rules that may affect the amount, timing, and character
of Portfolio income. For example, certain positions held for the Portfolio on
the last business day of each taxable year will be marked to market (i.e.,
treated as if sold) on that day, and any gain or loss associated with the
<PAGE>
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held for the Portfolio that substantially diminish its
risk of loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Portfolio losses and adjustments in the holding periods of Portfolio
securities. Certain tax elections exist for straddles that may alter the
effects of these rules. The Portfolio intends to limit its activities in
options, foreign currency forward contracts, and futures contracts to the
extent necessary to enable any investor which is a RIC to meet the requirements
of Subchapter M of the Code.
There are certain tax issues which will be relevant to only certain
investors, specifically, investors which are segregated asset accounts and
investors who contribute assets other than cash to the Portfolio. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such
investors are advised to consult their own tax advisers as to the tax
consequences of an investment in the Portfolio.
The Trust intends to conduct its activities and those of the Portfolio so
that they will not be deemed to be engaged in the conduct of a U.S. trade or
business for U.S. federal income tax purposes. Therefore, it is not anticipated
that an investor in the Portfolio, other than an investor which would be deemed
a "U.S. person" for U.S. federal income tax purposes, will be subject to U.S.
federal income taxation (other than a 30% withholding tax on dividends and
certain interest income) solely by reason of its investment in the Portfolio.
There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in the
Portfolio.
The above discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or non-U.S. tax laws that may
be applicable to certain investors. Investors should consult their own tax
advisers with respect to the special tax rules that may apply in their
particular situations, as well as the state, local, or foreign tax consequences
to them of investing in the Portfolio.
Item 21. Underwriters.
CFBDS, Inc., exclusive placement agent for the Portfolio, receives no
compensation for serving in this capacity. Investment companies, insurance
company separate accounts, common and commingled trust funds and similar
organizations and entities may continuously invest in the Portfolio.
Item 22. Calculations of Performance Data.
Not applicable.
<PAGE>
Item 23. Financial Statements.
The Portfolio is newly organized and had no operations during the fiscal
year ended October 31, 1998.
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
Not applicable.
(b) Exhibits
1(a) Declaration of Trust of The Premium Portfolios
1(b) Amendments to Declaration of Trust
2 By-laws of The Premium Portfolios
5 Management Agreement between U.S. Fixed Income
Portfolio and Citibank, N.A., as investment manager
and administrator
6(a) Placement Agency Agreement between the Registrant
and CFBDS, Inc. (formerly known as The Landmark
Funds Broker-Dealer Services, Inc.), as exclusive
placement agent
6(b) Letter Agreement adding certain series of the
Registrant to the Placement Agency Agreement
* 8(a) Custodian Contract between the Registrant and State
Street Bank and Trust Company, as custodian
8(b) Letter Agreement adding certain series of the
Registrant to the Custodian Contract
** 9(a) Sub-Administrative Services Agreement between
Citibank, N.A. and Signature Financial Group
(Cayman) Ltd., as sub-administrator
9(b) Letter Agreement adding certain series of the
Registrant to the Sub-Administrative Services
Agreement
<PAGE>
* 9(c) Accounting Services Agreement between The Premium
Portfolios and State Street Cayman Trust Company,
Ltd.
9(d) Letter Agreement adding certain series of the
Registrant to the Accounting Services Agreement
- --------------------
* Incorporated herein by reference to Amendment No. 4 to the
Registration Statement on Form N-1A of the Registrant
relating to its series Large Cap Growth Portfolio File No.
811-8436 and Growth & Income Portfolio File No. 811-8436,
filed October 31, 1997. (This Amendment also serves as
Amendment No. 3 to the Registration Statement on Form N-1A
for The Premium Portfolios as it relates to the Small Cap
Growth Portfolio, File No. 811-07269.)
** Incorporated herein by reference to Amendment No. 5 to the
Registration Statement on Form N-1A of the Registrant
relating to its series Large Cap Growth Portfolio File No.
811-8436 and Growth & Income Portfolio File No. 811-8436,
filed March 2, 1998. (This Amendment also serves as Amendment
No. 4 to the Registration Statement on Form N-1A for The
Premium Portfolios as it relates to the Small Cap Growth
Portfolio, File No. 811-07269.)
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
(1) (2)
Title of Class Number of Record Holders
Beneficial Interests (as of October 29, 1998)
U.S. Fixed Income Portfolio 0
Item 27. Indemnification.
Reference is hereby made to Article V of the Declaration of Trust,
filed as an exhibit hereto.
The Trustees and officers of the Trust and the personnel of the
Registrant's administrator are insured under an errors and omissions
<PAGE>
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.
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range
of banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, which is,
in turn, a wholly-owned subsidiary of Citigroup Inc. Citibank also serves as
investment adviser to the following registered investment companies (or series
thereof): Asset Allocation Portfolios (Large Cap Value Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate
Income Portfolio and Short-Term Portfolio), The Premium Portfolios (Growth &
Income Portfolio, Balanced Portfolio, Large Cap Growth Portfolio, International
Equity Portfolio, Government Income Portfolio and Small Cap Growth Portfolio),
Tax Free Reserves Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves
Portfolio, CitiFundsSM Multi-State Tax Free Trust (CitiFundsSM California Tax
Free Reserves, CitiFundsSM New York Tax Free Reserves and CitiFundsSM
Connecticut Tax Free Reserves), CitiFundsSM Tax Free Income Trust (CitiFundsSM
National Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio and CitiFundsSM California Tax Free Income Portfolio), CitiFundsSM
Institutional Trust (CitiFundsSM Institutional Cash Reserves) and Variable
Annuity Portfolios (CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and CitiFundsSM Small Cap
Growth VIP Portfolio). Citibank and its affiliates manage assets in excess of
$290 billion worldwide. The principal place of business of Citibank is located
at 399 Park Avenue, New York, New York 10043.
John S. Reed is the Chairman and a Director of Citibank. Victor J.
Menezes is the President and a Director of Citibank. William R. Rhodes and
H. Onno Ruding are Vice Chairmen and Directors of Citibank. The other
Directors of Citibank are Paul J. Collins, Vice Chairman of Citigroup Inc.
and Robert I. Lipp, Chairman and Chief Executive Officer of The Travelers
Insurance Group Inc. and of Travelers Property Casualty Corp.
Each of the individuals named above is also a Director of Citigroup
Inc. In addition, the following persons have the affiliations indicated:
Paul J. Collins Director, Kimberly-Clark Corporation
Robert I. Lipp Chairman, Chief Executive Officer and
President, TAP
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
Stockholder, Tampa Tank & Welding, Inc.
<PAGE>
William R. Rhodes Director, Private Export Funding
Corporation
H. Onno Ruding Supervisory Director, Amsterdamsch
Trustees Cantoor B.V.
Director, Pechiney S.A.
Advisory Director, Unilever NV and
Unilever PLC Director, Corning Incorporated
Item 29. Principal Underwriters.
(a) CFBDS, the Registrant's exclusive placement agent, is also the
distributor for CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Growth Portfolio, CitiFundsSM Intermediate Income
Portfolio, CitiFundsSM Short-Term U.S. Government Income Portfolio, CitiFundsSM
Large Cap Growth Portfolio, CitiFundsSM Cash Reserves, CitiFundsSM U.S.
Treasury Reserves, CitiFundsSM Premium U.S. Treasury Reserves, CitiFundsSM
Premium Liquid Reserves, CitiFundsSM Institutional U.S. Treasury Reserves,
CitiFundsSM Institutional Liquid Reserves, CitiFundsSM Institutional Cash
Reserves, CitiFundsSM Tax Free Reserves, CitiFundsSM Institutional Tax Free
Reserves, CitiFundsSM California Tax Free Reserves, CitiFundsSM New York Tax
Free Reserves, CitiFundsSM Connecticut Tax Free Reserves, CitiFundsSM Balanced
Portfolio, CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth & Income
Portfolio, CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National Tax
Free Income Portfolio, CitiFundsSM New York Tax Free Income Portfolio,
CitiFundsSM California Tax Free Income Portfolio, CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect Folio 200, CitiSelect
Folio 300, CitiSelect Folio 400, and CitiSelect Folio 500. CFBDS is also the
placement agent for Large Cap Value Portfolio, Small Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio,
Short-Term Portfolio, Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio, Balanced Portfolio,
Government Income Portfolio, Tax Free Reserves Portfolio, Cash Reserves
Portfolio and U.S. Treasury Reserves Portfolio.
(b) The information required by this Item 29 with respect to each
director and officer of CFBDS, Inc. is incorporated by reference to Schedule A
of Form BD filed by CFBDS, Inc. pursuant to the Securities and Exchange Act of
1934 (File No. 8-32417).
(c) Not applicable.
<PAGE>
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
State Street Bank and Trust Company 225 Franklin Street
(custodian) Boston, MA 02110
State Street Cayman Trust Company, Ltd. P.O. Box 25086T
(accounting services agent) Grand Cayman, Cayman Islands
Citibank, N.A. 153 East 53rd Street
(investment manager and administrator) New York, NY 10043
CFBDS, Inc. c/o Signature Financial Group
(placement agent) (Cayman) Ltd.
Elizabethan Square
George Town, Grand Cayman
Cayman Islands BWI
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to comply with the provisions of Section
16(c) of the Investment Company Act of 1940.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in Paget, Bermuda, on the 30th day of October, 1998.
THE PREMIUM PORTFOLIOS
By: Philip W. Coolidge
---------------------------
Philip W. Coolidge
President of
The Premium Portfolios
<PAGE>
EXHIBIT INDEX
Exhibit No.: Description:
1(a) Declaration of Trust of The Premium Portfolios
1(b) Amendments to Declaration of Trust
2 By-laws of The Premium Portfolios
5 Management Agreement between U.S. Fixed
Income Portfolio and Citibank, N.A., as
investment manager and administrator
6(a) Placement Agency Agreement between the Registrant and
CFBDS, Inc. (formerly known as The Landmark Funds
Broker-Dealer Services, Inc.), as exclusive placement
agent
6(b) Letter Agreement adding certain series of the
Registrant to the Placement Agency Agreement
8(b) Letter Agreement adding certain series of the
Registrant to the Custodian Contract
9(b) Letter Agreement adding certain series of the Registrant
to the Sub-Administrative Services Agreement
9(d) Letter Agreement adding certain series of the
Registrant to the Accounting Services
Agreement
Exhibit 1a
THE PREMIUM PORTFOLIOS
----------------------
DECLARATION OF TRUST
Dated as of September 13, 1993
<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 ....................................... 4
Section 2.3 Resignation, Removal and Retirement ..................... 4
Section 2.4 Vacancies ............................................... 4
Section 2.5 Meetings ................................................ 5
Section 2.6 Officers; Chairman of the Board ......................... 6
Section 2.7 By-Laws ................................................. 6
ARTICLE III--Powers of Trustees ........................................ 6
Section 3.1 General ................................................. 6
Section 3.2 Investments.............................................. 6
Section 3.3 Legal Title ............................................. 7
Section 3.4 Sale and Increases of Interests ......................... 7
Section 3.5 Decreases and Redemptions of Interests .................. 8
Section 3.6 Borrow Money ............................................ 8
Section 3.7 Delegation; Committees .................................. 8
Section 3.8 Collection and Payment .................................. 8
Section 3.9 Expenses ................................................ 8
Section 3.10 Miscellaneous Powers .................................... 9
Section 3.11 Further Powers .......................................... 9
ARTICLE IV--Investment Advisory, Administration and Placement
Agent Arrangements; Custodian ............................... 10
Section 4.1 Investment Advisory and Other Arrangements ............ 10
Section 4.2 Parties to Contract ..................................... 10
Section 4.3 Custodian ............................................... 10
Section 4.4 1940 Act Governance ..................................... 10
<PAGE>
ARTICLE V--Liabilitv of Holders; Limitations of Liability of Trustees,
Officers, etc. ............................................... 11
Section 5.1 Liability of Holders; Indemnification ................... 11
Section 5.2 Limitations of Liability of Trustees,Officers,
Employees, Agents, Independent Contractors
to Third Parties ........................................ 11
Section 5.3 Limitations of Liability of Trustees,Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. ................................. 11
Section 5.4 Mandatory Indemnification ............................... 12
Section 5.5 No Bond Required of Trustees ............................ 13
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc......................................... 13
Section 5.7 Reliance on Experts, etc. ............................... 13
Section 5.8 No Repeal or Modification ............................... 13
ARTICLE VI--Interests .................................................. 14
Section 6.1 Interests ............................................... 14
Section 6.2 Establishment and Designation of Series ................. 14
Section 6.3 Non-Transferability ..................................... 15
Section 6.4 Register of Interests ................................... 15
ARTICLE VII--Increases, Decreases And Redemptions of Interests .......... 15
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions ......................................... 16
Section 8.1 Book Capital Account Balances ........................... 16
Section 8.2 Allocations and Distributions to Holders ................ 16
Section 8.3 Power to Modify Foregoing Procedures .................... 16
ARTICLE IX--Holders .................................................... 17
Section 9.1 Rights of Holders ....................................... 17
Section 9.2 Meetings of Holders ..................................... 17
Section 9.3 Notice of Meetings ...................................... 18
Section 9.4 Record Date for Meetings, Distributions, etc. ........... 18
Section 9.5 Proxies, etc. ........................................... 18
Section 9.6 Reports ................................................. 18
Section 9.7 Inspection of Records ................................... 19
Section 9.8 Holder Action by Written Consent ........................ 19
Section 9.9 Notices ................................................. 19
ARTICLE X--Duration; Termination; Dissolution; Amendment; Mergers; Etc... 19
Section 10.1 Duration ................................................ 19
Section 10.2 Dissolution ............................................. 20
Section 10.3 Termination ............................................. 20
Section 10.4 Amendment Procedure ..................................... 21
Section 10.5 Merger, Consolidation and Sale of Assets ................ 22
Section 10.6 Incorporation ........................................... 22
ARTICLE XI--Miscellaneous ............................................... 23
Section 11.1 Certificate of Designation; Agent for Service of Process 23
Section 11.2 Governing Law ........................................... 23
Section 11.3 Counterparts ............................................ 23
Section 11.4 Reliance by Third Parties ............................... 23
Section 11.5 Provisions in Conflict with Law or Regulations .......... 23
<PAGE>
LM3063A
DECLARATION OF TRUST
OF
THE PREMIUM PORTFOLIOS
----------------------
This DECLARATION OF TRUST of The Premium Portfolios is made as of the 13th
day of September, 1993 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 master trust fund or "Trust" (as
defined in Section 1.2 hereof) under the law of the State of New York
consisting of one or more subtrusts or "Series" (as defined in Section 1.2
hereof) for the investment and reinvestment of assets contributed thereto; and
WHEREAS, it is proposed that the trust assets be composed of money and
other property contributed to the Series, such assets to be held and managed in
trust for the benefit of the holders of beneficial interests in such Series;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and other property contributed to the Trust and will manage and
dispose of the same for the benefit of such holders of beneficial interests and
subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the Trust shall be The Premium Portfolios 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
term "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 its holders of beneficial
interests.
1.2. Definitions. As used in this Declaration, the following terms shall
have the following meanings:
"Administrator" shall mean any party furnishing services to one or more
Series pursuant to any administration contract described in Section 4.1 hereof.
"Book Capital Account" shall mean, for any Holder (as hereinafter defined)
at any time, the Book Capital Account of the Holder at such time with respect
to the Holder's beneficial interest in the Trust Property (as hereinafter
defined) of any Series, determined in accordance with the method established by
the Trustees pursuant to Section 8.1 hereof. The Trust shall maintain separate
records of Book Capital Accounts for each such Series.
<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.
"Holder" shall mean the record holder of any Interest.
"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.
"Interested Person" shall have the meaning given it in the 1940 Act (as
hereinafter defined).
"Interest" shall mean the beneficial interest of a Holder in the Trust
Property of any Series, including all rights, powers and privileges accorded to
Holders by this Declaration, which interest may be expressed as a percentage,
determined by calculating for a particular Series, at such times and on such
basis as the Trustees shall from time to time determine, the ratio of each
Holder's Book Capital Account balance to the total of all Holders' Book Capital
Account balances. Reference herein to a specified percentage of, or fraction
of, Interests, means Holders whose combined Book Capital Account balances
represent such specified percentage or fraction of the combined Book Capital
Account balances of all, or a specified group of, Holders.
"Investment Adviser" shall mean any party furnishing services to one or
more Series of the Trust pursuant to any investment advisory contract described
in Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of Holders of
one or more Series as the context may require, of (A) 67% or more of the
Interests present or represented at such meeting, if Holders of more than 50%
of all Interests in such one or more Series are present or represented by
proxy, or (B) more than 50% of all Interests in such one or more Series,
whichever is less.
<PAGE>
"1940 Act" shall mean the United States Investment Company Act of 1940, as
amended~from time to time, and the rules and regulations thereunder.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an Interest of a Holder
the result of which is to reduce the Book Capital Account balance of that
Holder to zero, and the term "redeem" shall mean to effect a Redemption.
"Series" shall mean the subtrusts of the Trust as the same are established
and designated pursuant to Article VI hereof, each of which shall be a separate
subtrust.
"Trust" shall mean the master trust fund established hereby and shall
include each Series hereof.
"Trust Property" shall mean as of any particular time any and all assets
or other property, real or personal, tangible or intangible, which at such time
is owned or held by or for the account of any Series or for the account of the
Trustees, each component of which shall be allocated and belong to a specific
Series to the exclusion of all other Series.
"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.
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. 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.
<PAGE>
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 or Section 16(a) of the 1940 Act
and except as provided in Section 2.3 hereof, each Trustee shall hold office
during the lifetime of the Trust and until its termination as hereinafter
provided.
2.3. Resignation, Removal and Retirement. Any Trustee may resign his or
her trust (without need for prior or subsequent accounting) by an instrument in
writing executed by such Trustee and delivered or mailed to the Chairman, if
any, the President or the Secretary of the Trust and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed with or without cause 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 for failure to comply with such written
policies as may from time to time 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 a
majority 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 physically or mentally
incapacitated 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 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
<PAGE>
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. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation or removal of
a Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only when or after the expected vacancy occurs. Subject
to the foregoing sentence, as soon as any Trustee has accepted such appointment
in writing, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or CONVEYANCE, AND he or she shall
be deemed a Trustee hereunder. The power of appointment is subject to Section
16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary, an
Assistant Secretary or any two Trustees. Regular meetings of the Trustees may
be held without call or notice at a time and place fixed by the By-Laws or by
resolution of the Trustees. Notice of any other meeting shall be mailed or
otherwise given not less than 24 hours before the meeting but may be waived in
writing by any Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
in the situation in which a Trustee attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
was not lawfully called or convened. The Trustees may act with or without a
meeting. A quorum for all meetings of the Trustees shall be a majority of the
Trustees. Unless provided otherwise in this Declaration, any action of the
Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consent of a
majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or
without a meeting by written consent of a majority of the members.
Any notice, waiver or written consent hereunder may be provided and
delivered to the Trust or a Trustee by facsimile or other similar electronic
mechanism.
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.
<PAGE>
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 and each Series 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 and
any Series. 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.
The Trustees shall have full power and authority to do any and all acts
and to make and execute any and all contracts and instruments that they may
consider necessary or appropriate in connection with the management of the
Trust. The Trustees shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust.
3.2. Investments. The Trustees shall have the power with respect to the
Trust and each Series 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
<PAGE>
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 any state 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;
(c) definitively interpret the investment objectives, policies and
limitations of any Series.
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 any Series, or in the name or
nominee name of any other Person on behalf of the Trust or any Series, on such
terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each individual who may hereafter become a Trustee upon
his due election and qualification. Upon the resignation, removal or death of a
Trustee, such resigning, removed or deceased Trustee shall automatically cease
to have any right, title or interest in any Trust Property, and the right,
title and interest of such resigning, removed or deceased Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their discretion,
may, from time to time, without a vote of the Holders, permit any Institutional
Investor to purchase an Interest in a Series, or increase such 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. The Trustees, in their discretion, may
refuse to sell an Interest in a Series to any person without any cause or
reason therefor. A Holder which has redeemed its Interest in a Series may not
<PAGE>
be permitted to purchase an Interest in such Series 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 in a Series, or decrease
such 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 on behalf of any Series
to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets belonging
to such Series, as appropriate, 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 and any Series, to delegate from time to
time to such of their number or to officers, employees, agents or independent
contractors of the Trust or any Series the doing of such things and the
execution of such instruments in either the name of the Trust or any Series 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 on behalf of any Series; to prosecute, defend, compromise or
abandon any claims relating to the Trust or the Trust Property on behalf of any
Series; 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
from the Trust Property 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.
Permitted expenses of the Trust include, but are not limited to, interest
charges, taxes, brokerage fees and commissions; expenses of sales, increases,
decreases or redemptions of Interests; certain insurance premiums; applicable
fees, interest charges and expenses of third parties, including the Trust's
investment advisers, managers, administrators, placement agents, custodians
transfer agents and fund accountants; fees of pricing, interest, dividend,
credit and other reporting services; costs of membership in trade associations;
telecommunications expenses; costs of forming the Trust and its Series and
maintaining its and their existence; costs of preparing and printing the
registration statements and Holder reports of the Trust and each Series and
delivering them to Holders; expenses of meetings of Holders; costs of
maintaining books and accounts; costs of reproduction, stationery and supplies;
fees and expenses of the Trustees; compensation of the Trust's officers and
<PAGE>
employees and costs of other personnel performing services for the Trust or any
Series; costs of Trustee meetings; Commission registration fees and related
expenses; state or foreign securities laws registration fees and related
expenses; and for such nonrecurring items as may arise, including litigation to
which the Trust or a Series (or a Trustee or officer of the Trust acting as
such) is a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets belonging
to the appropriate Series, or in the case of an expense allocable to more than
one Series, on the assets of each such Series, prior to any rights or interests
of the Holders thereto, for the reimbursement to them of such expenses,
disbursements, losses and liabilities. 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 or any Series.
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 or any Series and terminate such
employees or contractual relationships as they consider appropriate; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) purchase, and pay for out of Trust Property insurance policies insuring the
Investment Adviser, Administrator, placement agent, Holders, Trustees,
officers, employees, agents or independent contractors of the Trust against all
claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not the
Trust would have the power to indemnify such Person against such liability; (d)
establish pension, profit-sharing and other retirement, incentive and benefit
plans for the Trustees, officers, employees or agents of the Trust or any
Series; (e) prosecute, defend and settle lawsuits in the name of the Trust or
any Series and pay settlements and judgments out of the Trust Property; (f) to
the extent permitted by law, indemnify any Person with whom the Trust has
dealings, including the Investment Adviser, Administrator, placement agent,
Holders, Trustees, officers, employees, agents or independent contractors of
the Trust, to such extent as the Trustees shall determine; (9) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
Fiscal Year of the Trust or any Series and the method by which its accounts
shall be kept; and (i) adopt a seal for the Trust or any Series, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust or such Series.
3.11. Further Powers. The Trustees shall have power to conduct the
business of the Trust or any Series 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 or any
Series although such things are not herein specifically mentioned. Any
<PAGE>
determination as to what is in the interests of the Trust or any Series which
is made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a grant of
power to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The Trustees may in their
discretion, from time to time, enter into investment advisory contracts,
administration contracts, placement agent agreements or other service
agreements whereby the other party to such contract or agreement shall
undertake to furnish with respect to one or more particular Series such
investment advisory, administration, placement agent and/or other services as
the Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole discretion
determine. Notwithstanding any provision of this Declaration, the Trustees may
authorize any Investment Adviser (subject to such general or specific
instructions as the Trustees may, from time to time, adopt) to employ one or
more subadvisers and to effect purchases, sales, loans or exchanges of Trust
Property on behalf of any Series or may authorize any officer, employee or
Trustee to effect such purchases, sales, loans or exchanges pursuant to
recommendations of any such Investment Adviser (all without any further action
by the Trustees).
4.2. Parties to Contract. Any contract of the character described in
Section 4.1 or Section 4.3 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 or
any Series 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. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 or Section
4.3 hereof or the By-Laws, 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.
4.3 Custodian. The Trustees shall at all times place and maintain the
securities and similar investments of the Trust on behalf of each Series in
custody meeting the requirements of Section 17(f) of the 1940 Act and the rules
thereunder. The Trustees, on behalf of the Trust or any Series, may enter into
an agreement with a custodian on terms and conditions acceptable to the
Trustees, providing for the custodian, among other things, (a) to hold the
<PAGE>
securities owned by the Trust on behalf of any Series and deliver the same upon
written order or oral order confirmed in writing, (b) to receive and receipt
for any moneys due to the Trust on behalf of any Series and deposit the same in
its own banking department or elsewhere, (c) to disburse such funds upon orders
or vouchers, and (d) to employ one or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in Section 4.1 hereof
shall be consistent with and subject to the applicable requirements of Section
15 of the 1940 Act and the rules and orders thereunder with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal. No amendment to a contract referred to in
Section 4.1 hereof shall be effective unless assented to in a manner consistent
with the requirements of Section 15 of the 1940 Act, and the rules and orders
thereunder.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Lability of Holders; Indemnification. Each Holder of an Interest in a
Series shall be jointly and severally liable with every other Holder of an
Interest in that Series (with rights of contribution inter se in proportion to
their respective Interests in the Series) for the liabilities and obligations
of that Series (and of no other Series) in the event that the Trust fails to
satisfy such liabilities and obligations from the assets of that Series;
provided, however, that, to the extent assets of that Series 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 of an Interest in that Series 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 of Interests in that Series, 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 of an Interest in a Series
shall remain jointly and severally liable to the creditors of that Series as a
legal matter. The liabilities of a particular Series and the right to
indemnification granted hereunder to Holders of Interests in such Series shall
not be enforceable against any other Series or Holders of Interests in any
other Series.
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
<PAGE>
or any Series shall be subject to any personal liability whatsoever to any
Person, other than the Trust or the Holders, in connection with Trust Property
or the affairs of the Trust; and all such Persons shall look solely to the
Trust Property for satisfaction of claims of any nature against a Trustee,
officer, employee, agent or independent contractor (except in the case of an
agent or independent contractor to the extent expressly provided by written
contract) of the Trust arising in connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers or Employees to Trust,
Holders, etc. No Trustee, officer or employee 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 or
employee 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, such liabilities and expenses being liabilities only of the
Series out of which such claim for indemnification arises; 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 (i) by the court or other body approving the
settlement or other disposition; or (ii) based upon a review of readily
available facts (as opposed to a full trial-type inquiry), by written opinion
from independent legal counsel approved by the Trustees; or (iii) by a majority
of the Trustees who are neither Interested Persons of the Trust nor parties to
the matter, based upon a review of readily available facts (as opposed to a
full trial-type inquiry). 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 rights of indemnification provided herein may be insured against by
policies maintained by the Trust. 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
<PAGE>
Trust in the event it is subsequently determined that such Person is not
entitled to such indemnification, and provided further that either (i) such
Person shall have provided appropriate security for such undertaking, or (ii)
the Trust is insured against losses arising out of any such advance payments,
or (iii) either a majority of the Trustees who are neither Interested Persons
of the Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation),
that there is reason to believe that such Person will not be disqualified from
indemnification under this Section 5.4.
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 or any Series 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 or any Series, and every other act or
thing whatsoever executed in connection with the Trust or any series 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 or any Series. Every written obligation, contract,
instrument, certificate or other interest or undertaking of the Trust or any
Series made or sold by any Trustee, officer or employee of the Trust or any
Series, in such capacity, shall contain an appropriate recital to the effect
that the Trustee, officer or employee of the Trust or any Series 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 or employee of the Trust or any Series. 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 or employees of the Trust and
any Series 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 or employee of the
Trust and any Series 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 or any Series (whether or not the Trust or any
Series would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust or any Series by
<PAGE>
any of its officers or employees or by any Investment Adviser or Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust or any Series,
regardless of whether such counsel or expert may also be a Trustee.
5.8. No Repeal or Modification. Any repeal or modification of this Article
V by the Holders, or adoption or modification of any other provision of this
Declaration or the By-Laws inconsistent with this Article V, shall be
prospective only, to the extent that such repeal or modification would, if
applied retrospectively, adversely affect any limitation on the liability of
any Person or indemnification available to any indemnified Person with respect
to any act or omission which occurred prior to such repeal, modification or
adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property shall
consist of non-transferable Interests. Interests may be sold only to
Institutional Investors, as may be approved by the Trustees, for cash or other
consideration acceptable to the Trustees, subject to the requirements of the
1940 Act. The Interests shall be personal property giving only the rights in
this Declaration specifically set forth. The value of an Interest shall be
equal to the Book Capital Account balance of the Holder of the Interest.
The Trustees shall have authority, from time to time, to establish Series,
each of which shall be a separate subtrust and the Interests in which shall be
separate and distinct from the Interests in any other Series. The Series shall
include, without limitation, those Series specifically established and
designated pursuant to Section 6.2 hereof, and such other Series as the
Trustees may deem necessary or desirable. The Trustees shall have exclusive
power without the requirement of Holder approval to establish and designate
such separate and distinct Series, and, subject to the provisions of this
Declaration and the 1940 Act, to fix and determine the rights of Holders of
Interests in such Series, including with respect to the price, terms and manner
of purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have separate
voting rights or no voting rights.
6.2. Establishment and Designation of Series. The establishment and
designation of any Series shall be effective upon the execution by the
Secretary or an Assistant Secretary of the Trust, pursuant to authorization by
a majority of the Trustees, of an instrument setting forth such establishment
and designation and the relative rights and preferences of the Interests in
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 resolution adopted by a
majority of their number, and evidenced by an instrument executed by the
Secretary or an Assistant Secretary of the Trust, abolish that Series and the
<PAGE>
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth above to
establish and designate further Series, the Trustees hereby establish and
designate the Series set forth on Schedule A hereto. The Interests in each of
these Series and any Interests in any further Series that may from time to time
be established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Series at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) Assets Belonging to Series. All consideration received by the
Trust for the issue or sale of Interests in 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 be held by the Trustees in a separate trust for the benefit of the
Holders of Interests in that Series and shall irrevocably belong to that Series
for all purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, 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, are herein referred TO AS "ASSETS
BELONGING TO" that Series. No Series shall have any right to or interest in the
assets belonging to any other Series, and no Holder shall have any right or
interest with respect to the assets belonging to any Series in which it does
not hold an Interest.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series. The liabilities, expenses, costs, charges and reserves so charged to a
Series are herein referred to as "liabilities belonging to" that Series. No
Series shall be liable for or charged with the liabilities belonging to any
other Series, and no Holder shall be subject to any liabilities belonging to
any Series in which it does not hold an Interest.
(c) Voting. On each matter submitted to a vote of the Holders, each
Holder shall be entitled to a vote proportionate to its Interest as recorded on
the books of the Trust. Each Series shall vote as a separate class except as to
voting for Trustees, as otherwise required by the 1940 Act, or if determined by
the Trustees to be a matter which affects all Series. As to any matter which
does not affect the interest of all Series, only the Holders in the one or more
affected Series shall be entitled to vote. On each matter submitted to a vote
of the Holders, a Holder may apportion its vote with respect to a proposal in
the same proportion as its own shareholders voted with respect to that
proposal.
<PAGE>
6.3. Non-Transferabilitv. A Holder may not transfer its Interest.
6.4. 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 in each Series. Such register shall be
conclusive as to the identity of the Holders. No Holder shall be entitled to
receive payment of any distribution, nor to have notice given to it as herein
provided, until it has given its address to such officer or agent of the Trust
as is keeping such register for entry thereon.
ARTICLE VII
Increases. Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this Declaration and to
such restrictions as may from time to time be adopted by the Trustees, each
Holder may vary its Interest in any Series at any time by increasing (through a
capital contribution) or decreasing (through a capital withdrawal) or by a
Redemption of its Interest. An increase in the Interest of a Holder in a Series
shall be reflected as an increase in the Book Capital Account balance of that
Holder in that Series and a decrease in the Interest of a Holder in a Series or
the Redemption of the Interest of that Holder shall be reflected as a decrease
in the Book Capital Account balance of that Holder in that Series. 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
Holders with respect to a particular Series shall be determined on such days
and at such time or times as the Trustees may determine. The Trustees shall
adopt resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations
pursuant to such resolutions may be delegated by the Trustees to the Investment
Adviser or Administrator, custodian, or such other Person as the Trustees may
determine. Upon the Redemption of an Interest, the Holder of that Interest
shall be entitled to receive the balance of its Book Capital Account. A Holder
may not transfer its Book Capital Account balance.
<PAGE>
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 with respect
to each Series (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 of
each Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
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
and net assets of the Trust and of each Series, the allocation of income of the
Trust and of each Series, 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 or a Series 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.
The Trust shall be entitled to treat a Holder of record as the holder in
fact and shall not be bound to recognize any equitable or other claim of
interest in such Holder's Interest on the part of any other entity except as
may be otherwise expressly provided by law.
In addition, the Holders shall have power to vote only with respect to (a)
the election of Trustees as provided in Article II, Section 2.4; (b) the
removal of Trustees as provided in Article II, Section 2.3; (c) any investment
advisory contract as provided in Article IV, Section 4.1; (d) any dissolution
of a Series as provided in Article X, Section 10.2; (e) the amendment of this
Declaration to the extent and as provided in Article X, Section 10.4; (f) any
merger, consolidation or sale of assets as provided in Article X, Section 10.5;
and (9) such additional matters relating to the Trust as may be required or
authorized by law, by this Declaration or the By-Laws or any registration
statement of the Trust filed with the Commission, or as the Trustees may
consider desirable.
<PAGE>
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 in one or more Series (if the meeting relates solely to such Series),
or not less than 10% of the Interests in the Trust (if the meeting relates to
the Trust and not solely to one or more particular Series), 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 at least one-third of the Interests in one
or more Series (if the meeting relates solely to such one or more Series) or
Holders of at least one-third of the Interests in the Trust (if the meeting
relates to the Trust and not solely to one or more particular Series), 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. 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 in a Series or the
Trust, as applicable, either in person or by proxy, at such meeting constitutes
the action of the Holders in such Series or the Trust, as applicable, unless a
greater number of affirmative votes is required by the 1940 Act, other
applicable law, this Declaration or the By-Laws, and except that a plurality of
the total Interests of the Holders present shall elect a Trustee. 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 of the Series or the Trust, as the case may be, at its
registered address, mailed at least 10 days and not more than 60 days before
the meeting. Notice of any meeting may be waived in writing by any Holder
either before or after such meeting. The attendance of a Holder at a meeting
shall constitute a waiver of notice of such meeting except in the situation in
which a Holder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting was not lawfully
called or convened. At any meeting, any business properly before the meeting
may be considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For the purpose of
determining the Holders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time fix a date, not more than 90 days
prior to the date of any meeting of Holders or the payment of any distribution
or the taking of any other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders of the Series or the
Trust, as the case may be, for such purpose.
<PAGE>
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 in the Series or the Trust, as
the case may be. 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, including proxies
received via telecopy, 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. As to each Series, the Trustees shall cause to be prepared
and furnished to each Holder thereof, 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 such Series 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, with respect to
each Series furnish to each Holder of such Series 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 on
behalf of the Trust or any Series by Holders and which has been approved by
vote at a meeting or by written consent of two-thirds of the Trustees then in
office 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 or of applicable law)
consent to the action in writing and the written consents are filed with the
records of the meetings of Holders. Any action which may be taken on behalf of
the Trust or any Series by Holders and which has not been so approved by
Trustees may be taken without a meeting if Holders holding 100% of all
Interests entitled to vote 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
<PAGE>
such written consent shall be executed by or on behalf of the Holder delivering
such consent and shall bear the date of such execution. No such written consent
shall be effective to take the action referred to therein unless, within one
year of the earliest dated consent, written consents executed by a sufficient
number of Holders to take such action are filed with the records of the
meetings of Holders.
9.9. Notices. Any and all communications, including any and all notices to
which any Holder may be entitled, shall be deemed duly served or given if
mailed, postage prepaid, addressed to a Holder at its last known address as
recorded on the register of the Trust or if delivered to a Holder by courier or
by facsimile or other similar electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or termination 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
---- ------- --------
Michelle Muriel Rumery 18 Rio Vista Street 07/11/93
North Billerica, MA 01862
Nicole Catherine Rumery 18 Rio Vista Street 12/21/91
North Billerica, MA 01862
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
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
Adriana L. Saldana 58 Newell Road 3/22/88
Newton, MA 02166
10.2. Dissolution. Any Series shall be dissolved (i) by the affirmative
vote of the Holders of not less than two-thirds of the Interests in the Series
at any meeting of the Holders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the Holders
of not less than two-thirds of such Interests, (ii) by the Trustees by written
<PAGE>
notice of dissolution to the Holders of the Interests in the Series, or (iii)
upon the bankruptcy or expulsion of a Holder of an Interest in the Series,
unless the remaining Holders of Interests in such Series, by majority vote,
agree to continue the Series. The Trust may be dissolved by action of the
Trustees upon the dissolution of the last remaining Series.
10.3. Termination.
(a) Upon an event of dissolution of the Trust or a Series, unless the
Trust or Series is continued in accordance with the proviso to Section 10.2
above, the Trust or Series, as applicable, shall be terminated in accordance
with the following provisions:
(i) the Trust or Series, as applicable, 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 or Series, as applicable, and all of the powers of the Trustees
under this Declaration shall continue until the affairs of the Trust
or Series have been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series, collect the assets of
the Trust of Series, sell, convey, assign, exchange or otherwise
dispose of all or any part of the Trust Property affected 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 or Series,
and do all other acts appropriate to liquidate the business of the
Trust or Series; provided that any sale, conveyance, assignment,
exchange or other disposition of all or substantially all the Trust
Property or substantially all of the assets belonging to a particular
Series, other than for cash, 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 the
total Interests in the Trust or Series, as applicable; and
(iii) after paying or adequately providing for the payment of all
liabilities of the Trust or of the Series being terminated, 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 of the Trust or Series, as
applicable, 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 or Series 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.
<PAGE>
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of Holders, amend or otherwise
supplement this Declaration by an instrument in writing executed by a majority
of the Trustees, provided that Holders shall have the right to vote on any
amendment (a) which would affect the voting rights of Holders granted in
Article IX, Section 9.1, (b) to this Section 10.4, (c) required to be approved
by Holders by law or by the Trust's registration statement filed with the
Commission, or (d) submitted to them by the Trustees. Any amendment submitted
to Holders which the Trustees determine would affect the Holders of certain but
not all Series shall be authorized by vote of the Holders of such Series
affected and no vote shall be required of Holders of a Series not affected. Any
amendment applicable to the Trust as a whole, unless otherwise required by law
or by this Declaration or the By-Laws, shall be authorized by vote of the
Holders of the Trust. Notwithstanding anything else herein, any amendment to
Article V which would have the effect of reducing the indemnification and other
rights provided thereby and any repeal or amendment of this sentence shall each
require the affirmative vote of the Holders of two-thirds of the Interests
entitled to vote thereon.
(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 any Series or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of Holders of two-thirds of all Interests which would be so affected by
such amendment.
(c) A certification in recordable form executed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by
the Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when filed with the records of the
Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees at any meeting of
Trustees or by an instrument executed by a majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust or any Series
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, or assets belonging to such Series, as applicable,
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
Majority Interests Vote of Interests in the Series affected by such action, or
by an instrument in writing without a meeting, consented to by Holders of not
less than a majority of the Interests in the Series affected by such action,
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the law of the
<PAGE>
State of New York, provided however that no such vote shall be required where
by reorganization, purchase of assets or otherwise, the Trust or any affected
Series is the surviving entity.
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. If
required by New York law, 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 or New
York as an agent upon whom process in any action or proceeding against the
Trust or any Series may be served.
11.2. Governing Law. This Declaration is executed by the Trustees and
delivered in the State of New York and with reference to the law thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed in accordance with the law of the
State of New York and reference shall be specifically made to the trust law of
the State of New York as to the construction of matters not specifically
covered herein or as to which an ambiguity exists.
11.3. Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
11.4. Reliance by Third Parties. Any certificate executed by an individual
who, according to the records of the Trust or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
<PAGE>
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.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust of The Premium Portfolios as of the day and year first above written.
Philip W. Coolidge
-------------------------------
Philip W. Coolidge
As Trustee and not individually
Elliott J. Berv
-------------------------------
Elliott J. Berv
As Trustee and not individually
Mark T. Finn
-------------------------------
Mark T. Finn
As Trustee and not individually
Walter E. Robb III
-------------------------------
Walter E. Robb III
As Trustee and not individually
LM3063
<PAGE>
SCHEDULE A
THE PREMIUM PORTFOLIOS
Initial Series
U.S. Government Income Portfolio
Global Governments Portfolio
Intermediate Income Portfolio
Long-Term U.S. Government Income Portfolio
International Equity Portfolio
Equity Portfolio
Balanced Portfolio
Exhibit 1(b)
THE PREMIUM PORTFOLIOS
Amendment of Declaration of Trust
The undersigned, being a majority of the Trustees of The Premium
Portfolios, a trust established pursuant to a Declaration of Trust dated as of
September 13, 1993 (the "Declaration of Trust"), hereby, pursuant to the last
paragraph of Section 10.4 of the Declaration of Trust, amend the Declaration of
Trust by deleting in its entirety paragraph (a) of such Section 10.4 and
substituting for such paragraph (a) the following:
"(a) The Trustees may, without any vote of Holders, amend or
otherwise supplement this Declaration by an instrument in writing
executed by a majority of the Trustees, provided that Holders shall have
the right to vote on any amendment (a) required to be approved by Holders
by law or by the Trust's registration statement filed with the Commission
or (b) submitted to them by the Trustees. Any amendment submitted to
Holders which the Trustees determine would affect the Holders of certain
but not all Series shall be authorized by vote of the Holders of such
Series affected and no vote shall be required of Holders of a Series not
affected."
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of February 3, 1994 at Nassau, The Bahamas.
Elliott J. Berv
Trustee
Philip Coolidge
Trustee
Walter E. Robb
Trustee
<PAGE>
THE PREMIUM PORTFOLIOS
Second Amendment of Declaration of Trust
The undersigned, being a majority of the Trustees of The Premium
Portfolios (the "Trust"), a trust established pursuant to a Declaration of
Trust, dated as of September 13, 1993, as amended and as further amended from
time to time (as so amended from time to time, the "Declaration of Trust"),
hereby, pursuant to Section 10.4(a) of the Declaration of Trust, amend the
Declaration of Trust, effective May 5, 1995, as follows:
(a) Section 1.2 of the Declaration of Trust is hereby amended by adding
the following definition in appropriate place in the alphabetical sequence
thereof:
"Emergency Meeting" shall mean a meeting of the Trustees or of a
committee of the Trustees (a) called by the Chairman, if any, the
President, the Secretary, an Assistant Secretary or any two Trustees, (b)
the notice of which is given or confirmed in writing and specifies that
the meeting is an "Emergency Meeting" and (c) except as provided in
clauses (a) and (b) of this definition, held in accordance with the
provisions set forth in Section 2.5 hereof.
(b) Article III of the Declaration of Trust is hereby amended by adding
the following new section after Section 3.11 thereof:
3.12. Limitation on Powers. Anything in this Declaration of Trust to
the contrary notwithstanding, (a) no Trustee shall be authorized or
empowered by the terms of this Declaration of Trust or otherwise to take
any action on behalf of the Trust in his or her capacity as Trustee while
physically present in the United States of America or any of its
territories or possessions or areas subject to its jurisdiction unless
such action is taken at an Emergency Meeting by the Trustees or by a
committee of the Trustees thereunto duly authorized, and (b) unless such
action is taken at an Emergency Meeting by the Trustees or by a committee
of the Trustees thereunto duly authorized, no action taken on behalf of
the Trust by a Trustee or by the Trustees or any committee thereof while
physically present in the United States of America or any of its
territories or possessions or areas subject to its jurisdiction shall be
a valid exercise of such Trustee's or Trustees' authority and any such
action shall be considered null and void.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed and delivered at Hamilton, Bermuda, on May 5, 1995.
Elliott J. Berv
Elliott J. Berv, Trustee
Philip W. Coolidge
Philip W. Coolidge, Trustee
Mark T. Finn
Mark T. Finn, Trustee
Walter E. Robb
Walter E. Robb, Trustee
<PAGE>
THE PREMIUM PORTFOLIOS
AMENDMENT TO
DECLARATION OF TRUST
The undersigned, constituting a majority of the Trustees of The Premium
Portfolios (the "Trust"), a trust organized under the laws of the State of New
York, pursuant to a Declaration of Trust dated September 13, 1993, as amended
(the "Declaration"), subject to approval by a majority of the investors in
Equity Portfolio and Small Cap Equity Portfolio, each a series of the Trust, do
hereby amend Sections 1.2, 3.2 and 5.1 of the Declaration as follows:
By deleting the definition of "Institutional Investor(s)" contained in
Section 1.2 of the Declaration and replacing it with the following:
"Institutional Investor(s)" shall mean, when used with respect to
each Series of the Trust other than the Series designated as Balanced
Portfolio, Government Income Portfolio, International Equity Portfolio
and Emerging Asian Markets Equity Portfolio, 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 or partnership or a grantor trust beneficially
owned by any individual, S corporation or partnership, unless, in the
case of a partnership or a grantor trust beneficially owned by a
partnership, the interests in the partnership are held by entities that
otherwise meet the definition of Institutional Investor. When used with
respect to those Series of the Trust designated as Balanced Portfolio,
Government Income Portfolio, International Equity Portfolio and Emerging
Asian Markets Equity Portfolio, 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.
By adding the following paragraph (d) immediately after paragraph (c) of
Section 3.2:
(d) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without
any requirement of approval by investors to either invest all or a portion
of the Trust Property of each Series of the Trust (other than the Series
designated as Balanced Portfolio, Government Income Portfolio,
<PAGE>
International Equity Portfolio and Emerging Asian Markets Equity
Portfolio), or sell all or a portion of such Trust Property and invest the
proceeds of such sales, in one or more investment companies to the extent
not prohibited by the 1940 Act and exemptive orders granted under such
Act.
By deleting Section 5.1 of the Declaration in its entirety and replacing
it with the following:
5.1. Liability of Holders; Indemnification. (a) As to the Series of
the Trust designated as Balanced Portfolio, Government Income Portfolio,
International Equity Portfolio and Emerging Asian Markets Equity
Portfolio, each Holder of an Interest in such Series shall be jointly and
severally liable with every other Holder of an Interest in that Series
(with rights of contribution inter se in proportion to their respective
Interests in the Series) for the liabilities and obligations of that
Series (and of no other Series) in the event that the Trust fails to
satisfy such liabilities and obligations from the assets of that Series.
To the extent assets of a Series named in the preceding sentence are
available in the Trust, the Trust shall indemnify and hold each Holder of
an Interest in that Series harmless from and against any claim or
liability to which such Holder may become subject by reason of being or
having been a Holder of an Interest in that Series 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
of Interests in that Series, is greater than such Holder's proportionate
share of such claim or liability, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability.
(b) Notwithstanding any other provision of this Declaration, each
Holder of an Interest in a Series of the Trust other than Balanced
Portfolio, Government Income Portfolio, International Equity Portfolio
and Emerging Asian Markets Equity Portfolio shall not be subject to any
personal liability whatsoever to any Person in connection with the Trust
Property or the acts, obligations or affairs of the Trust with respect to
that Series; and if any such Holder is made a party to any suit or
proceeding to enforce any such liability, such Holder shall not, on
account thereof, be held to any personal liability. To the extent assets
of a Series enumerated in the preceding sentence are available in the
Trust, the Trust shall indemnify and hold each Holder of an Interest in
that Series harmless from and against any claim or liability to which
such Holder may become subject by reason of being or having been a Holder
of an Interest in that Series, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability.
<PAGE>
(c) 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. The liabilities of a particular Series
and the right to indemnification granted hereunder to Holders of
Interests in such Series shall not be enforceable against any other
Series or Holders of Interests in any other Series.
IN WITNESS WHEREOF, the undersigned have executed this instrument at
Tucker's Town, Bermuda as of the 8th day of August, 1997.
Elliott J. Berv Mark T. Finn
Elliott J. Berv Mark T. Finn
As Trustee and Not Individually As Trustee and Not Individually
Philip W. Coolidge Walter E. Robb, III
Philip W. Coolidge Walter E. Robb, III
As Trustee and Not Individually As Trustee and Not Individually
<PAGE>
THE PREMIUM PORTFOLIOS
AMENDED AND RESTATED
ESTABLISHMENT AND DESIGNATION OF SERIES OF
BENEFICIAL INTERESTS (WITHOUT PAR VALUE)
Pursuant to Section 6.2 of the Declaration of Trust, dated September 13,
1993, as amended (the "Declaration of Trust"), of The Premium Portfolios (the
"Trust"), the undersigned, being a majority of the Trustees of the Trust, do
hereby amend and restate the Trust's existing Establishment and Designation of
Series of Beneficial Interests (without par value) in order to establish four
series of Interests (as defined in the Declaration of Trust). No changes to the
special and relative rights of the existing series are intended by this
amendment and restatement.
1. The series shall be as follows:
The new series shall be designated as:
"High Yield Portfolio;"
"U.S. Fixed Income Portfolio;"
"Foreign Fixed Income Portfolio;" and
"S&P 500 Index Portfolio."
The remaining series are as follows:
Large Cap Growth Portfolio;
Small Cap Growth Portfolio;
Balanced Portfolio; Government
Income Portfolio; International Equity Portfolio;
Emerging Asian Markets Equity Portfolio; and
Growth & Income Portfolio.
2. Each series shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Investment Company Act of 1940, as amended, to the extent pertaining
to the offering of Interests of such series. Each Interest of each series shall
have such redemption, voting and liquidation rights and shall represent such
proportionate ownership in the series as provided generally in the Declaration
of Trust. The proceeds of sales of Interests of each series, together with any
income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such series, unless otherwise required by law.
<PAGE>
3. Investors in each series shall vote separately as a class on any matter
to the extent required by, and any matter shall have been deemed effectively
acted upon with respect to such series as provided in, Rule 18f-2, as from time
to time in effect, under the Investment Company Act of 1940, as amended, or any
successor rule, and the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated to each series as
set forth in Section 6.2 of the Declaration of Trust.
5. Subject to the provisions of Section 6.2 and Article X of the Declaration of
Trust, the Trustees (including any successor Trustees) shall have the right at
any time and from time to time to change the designation of any series now or
hereafter created, or to otherwise change the special and relative rights of
any series.
IN WITNESS WHEREOF, the undersigned have executed this instrument at Paget,
Bermuda as of the 7th day of August, 1998.
Elliott J. Berv Mark T. Finn
Elliott J. Berv Mark T. Finn
As Trustee and Not Individually As Trustee and Not Individually
Philip W. Coolidge C. Oscar Morong, Jr.
Philip W. Coolidge C. OSCAR MORONG, JR.
As Trustee and Not Individually As Trustee and Not Individually
Walter E. Robb, III
Walter E. Robb, III
As Trustee and Not Individually
THE PREMIUM PORTFOLIOS
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing THE PREMIUM PORTFOLIOS, dated September 13,
1993, as from time to time amended (hereinafter called the "Declaration"). All
words and terms capitalized in these By-Laws shall have the meaning or meanings
set forth FOR SUCH WORDS OR terms in the Declaration.
ARTICLE I
Holders Meeting
1.1 Chairman. The Chairman, if any, shall act as chairman at all
meetings of the Holders; in his absence, the President shall act as chairman;
and in the absence of the Chairman and the President, the Trustee or Trustees
present at each meeting may elect a temporary chairman for the meeting, who may
be one of themselves.
1.2 Proxies; Voting. Holders may vote either in person or by duly
executed proxy and each Holder of record shall be entitled to a vote
proportionate to its interest in the Series or the Trust, as the case may be
(each Holder's proportionate interest, an "Interest"). No proxy shall be valid
after eleven (11) months from the date of its execution, unless a longer period
is expressly stated in such proxy.
1.3 Fixing Record Dates. For the purpose of determining the Holders
who are entitled to notice of or to vote or act at a meeting, including any
adjournment thereof, or who are entitled to participate in any distributions,
or for any other proper purpose, the Trustees may from time to time fix a
record date in the manner provided in Section 9.4 of the Declaration. If the
Trustees do not, prior to any meeting of Holders, so fix a record date, then
the date of mailing notice of the meeting shall be the record date.
1.4 Inspectors of Election. In advance of any meeting of 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 Holders may, and on the request of any
Holder or his proxy shall, appoint Inspectors of Election of the meeting. The
number of Inspectors shall be either one or three. If appointed at the meeting
on the request of one or more Holders or proxies, a majority of Interests
present shall determine whether one or three Inspectors are to be appointed,
but failure to allow such determination by the Holders shall not affect the
validity of the appointment of Inspectors of Election. In case any person
appointed as Inspector fails to appear or fails or refuses to act, the vacancy
may be filled by appointment made by the Trustees in advance of the convening
of the meeting or at the meeting by the person acting as Chairman. The
<PAGE>
Inspectors of Election shall determine the proportion of Interests represented
at the meeting, the existence of a quorum, the authenticity, validity and
effect of proxies, shall receive votes, ballots or consents, shall hear and
determine all challenges and questions in any way arising in connection with
the right to vote, shall count and tabulate all votes or consents, determine
the results, and do such other acts as may be proper to conduct the election or
vote with fairness to all Holders. If there are three 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.
1.5 Records at Holder Meetings. At each meeting of the Holders there
shall be open for inspection the minutes of the last previous meeting of
Holders of the Trust and a list of the Holders of the Trust, certified to be
true and correct by the Secretary or other proper agent of the Trust, as of the
record date of the meeting. Such list of Holders shall contain the name of each
Holder in alphabetical order and the address and the proportion of Interests
owned by such Holder. Holders shall have the right to inspect books and records
of the Trust during normal business hours and for any purpose not harmful to
the Trust.
1.6 Series Holders Meetings. Whenever a matter is required to be
voted by Holders of the Trust in the aggregate under Section 9.1 and 9.2 of the
Declaration, the Trust may either hold a meeting of Holders of all series to
vote on such matter, or hold separate meetings of Holders of each of the
individual series to vote on such matter provided that (i) such separate
meetings shall be held within one year of each other, (ii) a quorum of the
individual series entitled to vote in person or by proxy shall be present at
each such separate meeting, and (iii) a quorum shall be present in the
aggregate at such separate meetings, and the votes of Holders at all such
separate meetings shall be aggregated in order to determine if sufficient votes
have been cast for such matter to be voted.
When separate meetings are held for Holders of each of the individual
series to vote on a matter required to be voted on by Holders of the Trust in
the aggregate, the record date of each separate meeting shall be determined in
the manner described above in Section 1.3.
ARTICLE II
Trustees
2.1 Annual and Regular Meetings. The Trustees shall hold an annual
meeting for the election of officers and the transaction of other business
which may come before such meeting. Regular meetings of the Trustees may be
held without call or notice at such place or places and times as the Trustees
may by resolution provide from time to time.
<PAGE>
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.
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 or personally, such telegram shall be sent or delivery
made not later than 48 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
unanimous written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting, at the commencement of such
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
2.4 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 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 unanimous
written consent of the Trustees, shall be recorded by the Secretary.
ARTICLE III
Officers
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,
except that the same person may not be both President and Secretary. 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
and the President shall be Trustees, but no other officer of the Trust need be
a Trustee.
3.2 Election and Tenure. At the initial organization meeting and
thereafter at each annual meeting of the Trustees, the Trustees shall elect the
Chairman, if any, President, Secretary, Treasurer and such other officers as
the Trustees shall deem necessary or appropriate in order to carry out the
business of the Trust. Such officers shall hold office until the next annual
meeting of the Trustees and until their successors have been duly elected and
qualified. The Trustees may fill any vacancy in office or add any additional
officers at any time.
<PAGE>
3.3 Removal of Officers. Any officer may be removed at any time, with
or without cause, by action of a majority of the Trustees. This provision shall
not prevent the making of a contract of employment for a definite term with any
officer and shall have no effect upon any cause of action which any officer may
have as a result of removal in breach of a contract of employment. Any officer
may resign at any time by notice in writing signed by such officer and
delivered or mailed to the Chairman, if any, President, or Secretary, and such
resignation shall take effect immediately, or at a later date according to the
terms of such notice in writing.
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.
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 the Trustees. The President shall
be, ex officio, a member of all standing committees. Subject to direction of
the Trustees, the Chairman, if any, and the President shall each have 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 Chairman, if any, and the President shall each
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust at any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice Presidents in order of their rank or the
Vice President designated by the Trustees, shall perform all of the duties of
President, and when so acting shall have all the powers of and be subject to
all of the restrictions upon the President. Subject to the direction of the
President, each Vice President shall have the power in the name and on behalf
of the Trust to execute any and all loan documents, contracts, agreements,
deeds, mortgages and other instruments in writing, and, in addition, shall have
such other duties and powers as shall be designated from time to time by the
Trustees or by the President.
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. He shall be custodian of the seal of the Trust, if any, and he (and any
other person so authorized by the Trustees) shall affix the seal or, if
<PAGE>
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 business corporation, and shall have such other authorities and
duties as the Trustees shall from time to time determine.
3.7 Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and
shall have and exercise under the supervision of the Trustees and of the
President all powers and duties normally incident to his office. He may endorse
for deposit or collection all notes, checks and other instruments payable to
the Trust or to its order. He shall deposit all funds of the Trust as may be
ordered by the Trustees or the President. He shall keep accurate account of the
books of the Trust's transactions which shall be the property of the Trust, and
which together with all other property of the Trust in his possession, shall be
subject at all times to the inspection and control of the Trustees. Unless the
Trustees shall otherwise determine, the Treasurer shall be the principal
accounting officer of the Trust and shall also be the principal financial
officer of the Trust. He shall have such other duties and authorities as the
Trustees shall from time to time determine. Notwithstanding anything to the
contrary herein contained, the Trustees may authorize any adviser,
administrator or manager to maintain bank accounts and deposit and disburse
funds on behalf of the Trust.
3.8 Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Miscellaneous
4.1 Depositories. In accordance with Section 4.3 of the Declaration,
the funds of the Trust shall be deposited in such depositories as the Trustees
shall designate and shall be drawn out on checks, drafts or other orders signed
by such officer, officers, agent or agents (including any adviser,
administrator or manager), as the Trustees may from time to time authorize.
4.2 Signatures. All contracts and other instruments shall be executed
on behalf of the Trust by such officer, officers, agent or agents, as provided
in these By-Laws or as the Trustees may from time to time by resolution
provide.
<PAGE>
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 business corporation.
4.4 Indemnification. Insofar as the conditional advancing of
indemnification monies under Section 5.4 of the Declaration of Trust, for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must
be limited to amounts used, or to be used, for the preparation or presentation
of a defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise
by, or on behalf of, the recipient to repay that amount of the advance which
exceeds that amount to which it is ultimately determined that he is entitled to
receive from the Trust by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent
form of security which assures that any repayments may be obtained by the Trust
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Trust's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
ARTICLE V
Interest Non-Transferability
5.1 Non-Transferability of Interests. Interests shall not be
transferable. Except as otherwise provided by law, the Trust shall be entitled
to recognize the exclusive right of a person in whose name any Interests stand
on the record of Holders as the owner of such Interests for all purposes,
including, without limitation, the rights to receive distributions, and to vote
as such owner, and the Trust shall not be bound to recognize any equitable or
legal claim to or interest in any such Interests on the part of any other
person.
5.2 Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue of Interests of the Trust. They may appoint, or authorize
any officer or officers to appoint, one or more registrars.
5.3 Registrars and the Like. As provided in Section 2.6 of the
Declaration, the Trustees shall have authority to employ and compensate such
registrars with respect to the Interests of the Trust as the Trustees shall
deem necessary or desirable. In addition, the Trustees shall have power to
employ and compensate such distribution disbursing agents, warrant agents and
agents for the reinvestment of distributions as they shall deem necessary or
desirable. Any of such agents shall have such power and authority as is
delegated to any of them by the Trustee.
<PAGE>
ARTICLE VI
Amendment of By-Laws
6.1 Amendment and Repeal of By-Laws. In accordance with Section 2.7
of the Declaration, the Trustees shall have the power to alter, amend or repeal
the By-Laws or adopt new By-Laws al any lime. Action by the Trustees with
respect to the By-Laws shall be taken by an al affirmative vote of a majority
of the Trustees. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions in the Declaration.
The Declaration establishing The Premium Portfolios provides that the
name The Premium Portfolios refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
officer, employee or agent of The Premium Portfolios 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 said The Premium Portfolios but the Trust Property only shall be
liable.
Exhibit 5
MANAGEMENT AGREEMENT
THE PREMIUM PORTFOLIOS
U.S. Fixed Income Portfolio
MANAGEMENT AGREEMENT, dated as of November 1, 1998, by and between The
Premium Portfolios, a New York trust (the "Trust"), and Citibank, N.A., a
national banking association ("Citibank" or the "Manager").
W I T N E S S E T H:
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Trust wishes to engage Citibank to provide certain investment
advisory and administrative services for the series of the Trust designated as
U.S. Fixed Income Portfolio (the "Portfolio"), and Citibank is willing to
provide such investment advisory and administrative services for the Portfolio
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of Citibank. (a) Citibank shall act as the manager for the
Portfolio and as such shall furnish continuously an investment program and
shall determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Portfolio shall be held
uninvested, subject always to the restrictions of the Trust's Declaration of
Trust, dated September 13, 1993, and By-laws, as each may be amended from time
to time (respectively, the "Declaration" and the "By-Laws"), the provisions of
the 1940 Act, and the then-current Registration Statement of the Trust with
respect to the Portfolio. The Manager shall also make recommendations as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Portfolio's portfolio securities shall be
exercised. Should the Board of Trustees of the Trust at any time, however, make
<PAGE>
any definite determination as to investment policy applicable to the Portfolio
and notify the Manager thereof in writing, the Manager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Manager shall
take, on behalf of the Portfolio, all actions which it deems necessary to
implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of securities for the
Portfolio's account with the brokers or dealers selected by it, and to that end
the Manager is authorized as the agent of the Trust to give instructions to the
custodian or any subcustodian of the Portfolio as to deliveries of securities
and payments of cash for the account of the Portfolio. In connection with the
selection of such brokers or dealers and the placing of such orders, brokers or
dealers may be selected who also provide brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Portfolio and/or the other accounts over which the Manager or its
affiliates exercise investment discretion. The Manager is authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Manager determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Manager and its affiliates have with respect to
accounts over which they exercise investment discretion. In making purchases or
sales of securities or other property for the account of the Portfolio, the
Manager may deal with itself or with the Trustees of the Trust or the Trust's
underwriter or distributor, to the extent such actions are permitted by the
1940 Act. In providing the services and assuming the obligations set forth
herein, the Manager may employ at its own expense, or may request that the
Trust employ at the Portfolio's expense, one or more subadvisers; provided that
in each case the Manager shall supervise the activities of each subadviser. Any
agreement between the Manager and a subadviser shall be subject to the renewal,
termination and amendment provisions applicable to this Agreement. Any
agreement by the Trust on behalf of the Portfolio and a subadviser may be
terminated by the Manager at any time on not more than 60 days' nor less than
30 days' written notice to the Trust and the subadviser.
(b) Subject to the direction and control of the Board of Trustees of the
Trust, Citibank shall perform such administrative and management services as
<PAGE>
may from time to time be reasonably requested by the Trust, which shall include
without limitation: (i) providing office space, equipment and clerical
personnel necessary for maintaining the organization of the Trust and for
performing the administrative and management functions herein set forth; (ii)
supervising the overall administration of the Trust, including negotiation of
contracts and fees with and the monitoring of performance and billings of the
Trust's transfer agent, custodian and other independent contractors or agents;
(iii) preparing and, if applicable, filing all documents required for
compliance by the Trust with applicable laws and regulations, including
registration statements, semi-annual and annual reports to investors, proxy
statements and tax returns; (iv) preparation of agendas and supporting
documents for and minutes of meetings of Trustees, committees of Trustees and
investors; and (v) arranging for maintenance of books and records of the Trust.
Notwithstanding the foregoing, Citibank shall not be deemed to have assumed any
duties with respect to, and shall not be responsible for, the distribution of
beneficial interests in the Portfolio, nor shall Citibank be deemed to have
assumed or have any responsibility with respect to functions specifically
assumed by any transfer agent, fund accounting agent or custodian of the Trust
or the Portfolio. In providing administrative and management services as set
forth herein, Citibank may, at its own expense, employ one or more
subadministrators; provided that Citibank shall remain fully responsible for
the performance of all administrative and management duties set forth herein
and shall supervise the activities of each subadministrator.
2. Allocation of Charges and Expenses. Citibank shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section 1 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the
Portfolio all of its own expenses allocable to the Portfolio including, without
limitation, organization costs of the Portfolio; compensation of Trustees who
are not "affiliated persons" of Citibank; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, registrar or dividend disbursing agent of the
Trust; expenses of issuing and redeeming beneficial interests and servicing
investor accounts; expenses of preparing, typesetting, printing and mailing
investor reports, notices, proxy statements and reports to governmental
officers and commissions and to investors in the Portfolio; expenses connected
with the execution, recording and settlement of security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
<PAGE>
required books and accounts; expenses of calculating the net asset value of the
Portfolio (including but not limited to the fees of independent pricing
services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; and such nonrecurring
or extraordinary expenses as may arise, including those relating to actions,
suits or proceedings to which the Trust on behalf of the Portfolio may be a
party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.
3. Compensation of Citibank. For the services to be rendered and the
facilities to be provided by Citibank hereunder, the Trust shall pay to
Citibank from the assets of the Portfolio a management fee computed daily and
paid monthly at an annual rate equal to 0.45% of the Portfolio's average daily
net assets for the Portfolio's then-current fiscal year. If Citibank provides
services hereunder for less than the whole of any period specified in this
Section 3, the compensation to Citibank shall be accordingly adjusted and
prorated.
4. Covenants of Citibank. Citibank agrees that it will not deal with
itself, or with the Trustees of the Trust or the Trust's principal underwriter
or distributor, if any, as principals in making purchases or sales of
securities or other property for the account of the Portfolio, except as
permitted by the 1940 Act, will not take a long or short position in beneficial
interests of the Portfolio except as permitted by the Declaration, and will
comply with all other provisions of the Declaration and By-Laws and the
then-current Registration Statement applicable to the Portfolio relative to
Citibank and its directors and officers.
5. Limitation of Liability of Citibank. Citibank shall not be liable for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of securities
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Section 5,
the term "Citibank" shall include directors, officers and employees of Citibank
as well as Citibank itself.
<PAGE>
6. Activities of Citibank. The services of Citibank to the Portfolio are
not to be deemed to be exclusive, Citibank being free to render investment
advisory, administrative and/or other services to others. It is understood that
Trustees, officers, and shareholders of the Trust are or may be or may become
interested in Citibank, as directors, officers, employees, or otherwise and
that directors, officers and employees of Citibank are or may become similarly
interested in the Trust and that Citibank may be or may become interested in
the Trust as an investor or otherwise.
7. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until August 7, 2000, on which date it will terminate unless its continuance
after August 7, 2000 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Trust who are not "interested
persons" of the Trust or of Citibank at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust or by "vote of a majority of the outstanding voting securities" of the
Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by the "vote of a majority of the outstanding voting
securities" of the Portfolio, or by Citibank, in each case on not more than 60
days' nor less than 30 days' written notice to the other party. This Agreement
shall automatically terminate in the event of its "assignment."
This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; that any
liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the Portfolio; and that no other series of the Trust shall be liable with
respect to this Agreement or in connection with the transactions contemplated
herein.
<PAGE>
The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees, officers or holders of
beneficial interests in the Trust individually.
8. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
THE PREMIUM PORTFOLIOS CITIBANK, N.A.
By: Philip W. Coolidge By: Lawrence Keblusek
Title: President Title: U.S. C.I.O.
Exhibit 6(a)
PLACEMENT AGENCY AGREEMENT
September 13, 1993
The Landmark Funds Broker-Dealer Services, Inc.
c/o Signature Financial Group (Cayman), Ltd.
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, THE PREMIUM PORTFOLIOS (the "Portfolio"), an
open-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), organized as a New
York trust, has agreed that The Landmark Funds Broker-Dealer Services, Inc.
("LFBDS") shall be the exclusive placement agent (the "Placement Agent") of
beneficial interests of the Portfolio and of each of its series ("Portfolio
Interests").
SERVICES AS PLACEMENT AGENT.
1.1 LFBDS will act as exclusive Placement Agent of the Portfolio Interests
covered by each registration statement then in effect under the 1940 Act.
In acting as Placement Agent under this Placement Agent Agreement, neither
LFBDS nor its employees nor any agents thereof shall make any offer or
sale of Portfolio Interests in a manner which would require the Interests
to be registered under the Securities Act of 1933, as amended (the "1933
Act").
1.2 All activities by LFBDS and its agents and employees as Placement Agent of
Portfolio Interests shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations
adopted pursuant to the 1940 Act by the Securities and Exchange Commission
(the "Commission").
1.3 LFBDS shall perform such specified activities and conduct all of its
activities as Placement Agent of Portfolio Interests, including any
activities described herein, as set forth in the Operating Policies and
Procedures (the "Operating Procedures") of the Portfolio (in such form as
may be approved from time to time by the Portfolio's Board of Trustees).
To the extent that any provision of this Agreement shall conflict with any
provision of the Operating Procedures, the applicable provision of the
Operating Procedures shall be deemed to govern.
1.4 Nothing herein shall be construed to require the Portfolio to accept any
offer to purchase any Portfolio Interests, all of which shall be subject
to approval by the Portfolio's Board of Trustees.
<PAGE>
1.5 The Portfolio shall furnish from time to time for use in connection with
the sale of Portfolio Interests such information with respect to the
Portfolio and Portfolio Interests as LFBDS may reasonably request. The
Portfolio shall also furnish LFBDS upon request with: (a) unaudited
semiannual statements of the Portfolio's books and accounts prepared by
the Portfolio, and (b) from time to time such additional information
regarding the Portfolio's financial or regulatory condition as LFBDS may
reasonably request.
1.6 The Portfolio represents to LFBDS that all registration statements filed
by the Portfolio with the Commission under the 1940 Act with respect to
Portfolio Interests have been prepared in conformity with the requirements
of such statute and the rules and regulations of the Commission
thereunder. As used in this Agreement the term "registration statement"
shall mean any registration statement filed with the Commission as
modified by any amendments thereto that at any time shall have been filed
with the Commission by or on behalf of the Portfolio or by the Portfolio
on behalf of any series thereof. The Portfolio represents and warrants to
LFBDS that any registration statement will contain all statements required
to be stated therein in conformity with both such statute and the rules
and regulations of the Commission; that all statements of fact contained
in any registration statement will be true and correct in all material
respects at the time of filing of such registration statements or
amendments thereto; and that no registration statement will include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading to a purchaser of Portfolio Interests. The Portfolio may
but shall not be obligated to propose from time to time such amendment to
any registration statement as in the light of future developments may, in
the opinion of the Portfolio's counsel, be necessary or advisable. If the
Portfolio shall not propose such amendment and/or supplement within
fifteen days after receipt by the Portfolio of a written request from
LFBDS to do so, LFBDS may, at its option, terminate this Agreement. The
Portfolio shall not file any amendment to any registration statement
without giving LFBDS reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way limit
the Portfolio's right to file at any time such amendment to any
registration statement as the Portfolio may deem advisable, such right
being in all respects absolute and unconditional.
1.7 The Portfolio agrees to indemnify, defend and hold LFBDS, its several
officers and directors, and any person who controls LFBDS within the
meaning of Section 15 of the 1933 Act or Section 20 of the Securities and
Exchange Act of 1934 (the "1934 Act") (for purposes of this paragraph 1.7,
collectively, "Covered Persons") free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person
may incur under the 1933 Act, the 1934 Act, common law or otherwise,
arising out of or based on any untrue statement of a material fact
contained in any registration statement, private placement memorandum or
<PAGE>
other offering material ("Offering Material") or arising out of or based
on any omission to state a material fact required to be stated in any
Offering Material or necessary to make the statements in any Offering
Material not misleading; provided, however, that the Portfolio's agreement
to indemnify Covered Persons shall not be deemed to cover any claims,
demands, liabilities or expenses arising out of any financial and other
statements as arc furnished in writing to the Portfolio by LFBDS in its
capacity as Placement Agent for use in the answers to any items of any
registration statement or in any statements made in any Offering Material,
or arising out of or based on any omission or alleged omission to state a
material fact in connection with the giving of such information required
to be stated in such answers or necessary to make the answers not
misleading; and further provided that the Portfolio's agreement to
indemnify LFBDS and the Portfolio's representations and warranties herein
before set forth in paragraph 1.6 shall not be deemed to cover any
liability to the Portfolio or its investors to which a Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of a
Covered Person's reckless disregard of its obligations and duties under
this Agreement. The Portfolio shall be notified of any action brought
against a Covered Person, such notification to be given by letter or by
telegram addressed to the Portfolio, c/o Roger P. Joseph, Esq., gingham,
Dana & Gould, 15() Federal Street, Boston, Massachusetts 02110, with a
copy to Philip W. Coolidge, 6 St. James Avenue, 9th floor. Boston,
Massachusetts 02116 promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered
Person. The failure to so notify the Portfolio of any such action shall
not relieve the Portfolio from any liability except to the extent that the
Portfolio shall have been prejudiced by such failure, or from any
liability that the Portfolio may have to the Covered Person against whom
such action is brought by reason of any such untrue statement or omission,
otherwise than on account of the Portfolio's indemnity agreement contained
in this paragraph. The Portfolio will be entitled to assume the defense of
any suit brought to enforce any such claim, demand or liability, but in
such case such defense shall be conducted by counsel of good standing
chosen by the Portfolio and approved by LFBDS, which approval shall not be
unreasonably withheld. In the event the Portfolio elects to assume the
defense of any such suit and retain counsel of good standing approved by
LFBDS, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case
the Portfolio does not elect to assume the defense of any such suit, or in
case LFBDS reasonably does not approve of counsel chosen by the Portfolio,
the Portfolio will reimburse the Covered Person named as defendant in such
suit, for the fees and expenses of any counsel retained by LFBDS or such
Covered Person. The Portfolio's indemnification agreement contained in
this paragraph and the Portfolio's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of Covered Persons, and shall
survive the delivery of any Portfolio Interests. This agreement of
indemnity will inure exclusively to Covered Persons and their successors.
The Portfolio agrees to notify LFBDS promptly of the commencement of any
<PAGE>
litigation or proceedings against the Portfolio or any of its officers or
Trustees in connection with the issue and sale of any Portfolio Interests.
1.8 LFBDS agrees to indemnify, defend and hold the Portfolio, its several
officers and trustees, and any person who controls the Portfolio within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
(for purposes of this paragraph 1.8, collectively, "Covered Persons") free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the costs of investigating or defending such claims,
demands, liabilities and any counsel fees incurred in connection
therewith) that Covered Persons may incur under the 1933 Act, the 1934
Act, or common law or otherwise, but only to the extent that such
liability or expense incurred by a Covered Person resulting from such
claims or demands shall arise out of or be based on any untrue statement
of a material fact contained in information furnished in writing by LFBDS
in its capacity as Placement Agent to the Portfolio for use in the answers
to any of the items of any registration statement or in any statements in
any Offering Material or shall arise out of or be based on any omission to
state a material fact in connection with such information furnished in
writing by LFBDS to the Portfolio required to be stated in such answers or
necessary to make such information not misleading. LFBDS shall be notified
of any action brought against a Covered Person, such notification to be
given by letter or telegram addressed to LFBDS at 6 St. James Avenue,
Boston, Massachusetts 02116, Attention: Philip W. Coolidge, promptly after
the summons or other first legal process shall have been duly and
completely served upon such Covered Person. LFBDS shall have the right of
first control of the defense of the action with counsel of its own
choosing satisfactory to the Portfolio if such action is based solely on
such alleged misstatement or omission on LFBDS's part, and in any other
event each Covered Person shall have the right to participate IN the
defense or preparation of the defense of any such action. The failure to
so notify LFBDS of any such action shall not relieve LFBDS from any
liability except to the extent that LFBDS shall have been prejudiced by
such failure, or from any liability that LFBDS may have to Covered Persons
by reason of any such untrue or alleged untrue statement, or omission or
alleged omission, otherwise than on account of LFBDS's indemnity agreement
contained in this paragraph.
1.9 No Portfolio Interests shall be offered by either LFBDS or the Portfolio
under any of the provisions of this Agreement and no orders for the
purchase or sale of Portfolio interests hereunder shall be accepted by the
Portfolio if and so long as the effectiveness of the registration
statement or any necessary amendments thereto shall be suspended under any
of the provisions of the 1940 Act; provided, however, that nothing
contained in this paragraph shall in any way restrict or have an
application to or bearing on the Portfolio's obligation to redeem
Portfolio Interests from any investor in accordance with the provisions of
the Portfolio's registration statement or Declaration of Trust, as amended
from time to time.
<PAGE>
1.10 The Portfolio agrees to advise LFBDS as soon as reasonably practical by a
notice in writing delivered to LFBDS or its counsel:
(a) of any request by the Commission for amendments to the registration
statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement then in effect
or the initiation by service of process on the Portfolio of any proceeding
for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement then in effect or that
requires the making of a change in such registration statement in order to
make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to any
registration statement that may from time to time be filed with the
Commission.
For purposes of this paragraph 1.10, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.11 LFBDS agrees on behalf of itself and its employees to treat confidentially
and as proprietary information of the Portfolio all records and other
information not otherwise publicly available relative to the Portfolio and
its prior, present or potential investors and not to use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Portfolio, which approval shall not be unreasonably
withheld and may not be withheld where LFBDS may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so
requested by the Portfolio.
1.12 In addition to LFBDS's duties as Placement Agent, the Portfolio
understands that LFBDS may, in its discretion, perform additional
functions in connection with transactions in Portfolio Interests.
The processing of Portfolio Interest transactions may include, but is not
limited to, compilation of all transactions from LFBDS's various offices;
creation of a transaction tape and timely delivery of it to the Portfolio or
its designated agent for processing; reconciliation of all transactions
delivered to the Portfolio or its designated agent and the recording and
reporting of these transactions executed by the Portfolio or its designated
agent in customer statements; rendering of periodic customer statements; and
the reporting of IRS Form 1099 information at year end if required.
LFBDS may also provide other investor services, such as communicating with
Portfolio investors and other functions in administering customer accounts for
Portfolio investors.
<PAGE>
LFBDS understands that these services may result in cost savings to the
Portfolio or to the Portfolio's investment manager and neither the Portfolio
nor the Portfolio's investment manager will compensate LFBDS for all or a
portion of the costs incurred in performing functions in connection with
transactions in Portfolio Interests. Nothing herein is intended, nor shall be
construed, as requiring LFBDS to perform any of the foregoing functions.
2. TERM.
This Agreement shall become effective on the date first above written and,
unless sooner terminated as provided herein, shall continue until September
13,1994 and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually
by (i) the Portfolio's Board of Trustees or (ii) by a vote of a majority (as
defined in the 1940 Act) of the Portfolio's outstanding voting securities,
provided that in either event the continuance is also approved by the majority
of the Portfolio's Trustees who are not interested persons (as defined in the
1940 Act) of the Portfolio and who have no direct or indirect financial
interest in this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable without
penalty, on not less than 60 days' notice, by the Portfolio's Board of
Trustees, by vote of a majority (as defined in the 1940 Act) of the Portfolio's
outstanding voting securities, or by LFBDS. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act and
the rules thereunder).
3. REPRESENTATIONS AND WARRANTIES.
LFBDS and the Portfolio each hereby represents and warrants to the other that
it has all requisite authority to enter into, execute, deliver and perform its
obligations under this Agreement and that, with respect to it, this Agreement
is legal, valid and binding, and enforceable in accordance with its terms.
4. CONCERNING APPLICABLE PROVISIONS OF LAW, ETC.
This Agreement shall be subject to all applicable provisions of law, including
the applicable provisions of the 1940 Act and to the extent that any provisions
herein contained conflict with any such applicable provisions of law, the
latter shall control.
This Agreement is executed and delivered at a location or locations outside the
United States, and the laws of the Commonwealth of Massachusetts shall, except
to the extent that any applicable provisions of Federal Law shall be
controlling, govern the construction, validity and effect of this Agreement,
without reference to principles of conflicts of law.
If the contract set forth herein is acceptable to you, please so indicate by
executing the enclosed copy of this Agreement and returning the same to the
undersigned, whereupon this Agreement shall constitute a binding contract
between the parties hereto effective at the closing of business on the date
hereof.
<PAGE>
The undersigned Trustee or officer of the Trust has executed this Agreement not
individually, but as Trustee or officer under the Trust's Declaration of Trust,
dated September 13, 1993, as amended, and the obligations of this Agreement are
not binding upon any of the Trustees or officers of the Trust individually.
Yours very truly,
THE PREMIUM PORTFOLIOS
By: James B. Craver
-----------------------
Accepted:
THE LANDMARK FUNDS BROKER-DEALER SERVICES, INC.
By: James B. Craver
----------------------
<PAGE>
The Premium Portfolios
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
December 31, 1997
The Landmark Funds Broker-Dealer Services, Inc.
c/o Signature Financial Group (Cayman), Ltd.
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
Re: The Premium Portfolios - Placement
Agency Agreement
Ladies and Gentlemen:
This letter serves as notice that Growth & Income Portfolio (the "Fund")
is added to the list of series of The Premium Portfolios (the "Trust") to which
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS") renders services as
placement agent pursuant to the terms of the Placement Agency Agreement dated
as of September 13, 1993 (the "Agreement") between the Trust and LFBDS.
Please sign below to acknowledge your receipt of this notice adding the
Fund as beneficiary under the Agreement.
THE PREMIUM PORTFOLIOS
By: Philip Coolidge
Title: President
Acknowledgment:
THE LANDMARK FUNDS BROKER-DEALER SERVICES, INC.
By: Philip Coolidge
Title: CEO
Exhibit 6(b)
The Premium Portfolios
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
November 1, 1998
CFBDS, Inc.
c/o Signature Financial Group (Cayman), Ltd.
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
Re: The Premium Portfolios - Placement
Agency Agreement
Ladies and Gentlemen:
This letter serves as notice that High Yield Portfolio, U.S. Fixed Income
Portfolio, Foreign Fixed Income Portfolio and S&P 500 Index Portfolio
(collectively, the "Portfolios") are added to the list of series of The Premium
Portfolios (the "Trust") to which CFBDS, Inc. ("CFBDS") renders services as
placement agent pursuant to the terms of the Placement Agency Agreement dated
as of September 13, 1993 (the "Agreement") between the Trust and CFBDS.
Please sign below to acknowledge your receipt of this notice adding the
Portfolios as beneficiaries under the Agreement.
THE PREMIUM PORTFOLIOS
By: Philip W. Coolidge
Title: President
Acknowledgment:
CFBDS, INC.
By: Philip W. Coolidge
Title: C.E.O.
Exhibit 8(b)
The Premium Portfolios
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
November 1, 1998
State Street Bank and Trust Company
225 Franklin Street Boston,
Massachusetts 02110
Re: The Premium Portfolios - Custodian Contract
Ladies and Gentlemen:
Pursuant to Section 17 of the Custodian Contract dated as of September 1,
1997 (the "Contract"), between The Premium Portfolios (the "Trust") and State
Street Bank and Trust Company (the "Custodian"), we hereby request that High
Yield Portfolio, U.S. Fixed Income Portfolio, Foreign Fixed Income Portfolio
and S&P 500 Index Portfolio (collectively, the "Portfolios") be added to the
list of series of the Trust to which the Custodian renders services as
custodian under the terms of the Contract.
Please sign below to evidence your agreement to provide such services to
the Portfolios and to add the Portfolios as beneficiaries under the Contract.
THE PREMIUM PORTFOLIOS
By: Philip W. Coolidge
Title: President
Agreed:
STATE STREET BANK AND TRUST COMPANY
By: Ronald E. Logue
Title: Executive Vice President
Exhibit 9(b)
Citibank, N.A.
425 Park Avenue, 22nd Floor
New York, New York 10043
November 1, 1998
Signature Financial Group (Cayman) Ltd.
Elizabethan Square, 2nd Floor
George Town, Grand Cayman, BWI
Re: The Premium Portfolios - Sub-Administrative Services
Agreement
Ladies and Gentlemen:
This letter serves as notice that High Yield Portfolio, U.S. Fixed Income
Portfolio, Foreign Fixed Income Portfolio and S&P 500 Index Portfolio
(collectively, the "Portfolios") are added to the list of series of The Premium
Portfolios to which Signature Financial Group (Cayman) Ltd. ("SFG") renders
services as sub-administrator pursuant to the terms of the Sub-Administrative
Services Agreement dated as of December 31, 1997 (the "Agreement") between
Citibank, N.A. and SFG.
Please sign below to acknowledge your receipt of this notice adding the
Portfolios as beneficiaries under the Agreement.
CITIBANK, N.A.
By: Robert P. Wallace
Title: Vice President
Acknowledgment:
SIGNATURE FINANCIAL
GROUP (CAYMAN) LTD.
By: Philip W. Coolidge
Title: C.E.O.
Exhibit 9(d)
The Premium Portfolios
c/o Signature Financial Group (Cayman) Ltd.
Elizabethan Square, 2nd Floor
George Town, Grand Cayman
Cayman Islands, BWI
November 1, 1998
State Street Cayman Trust Company, Ltd.
P.O. Box 2508 GT
Grand Cayman,
Cayman Islands Attention: Jacqueline Henning
Re: The Premium Portfolios - Accounting Services Agreement
Ladies and Gentlemen:
Pursuant to Section 7.1 of the Accounting Services Agreement dated as of
September 1, 1997 (the "Agreement"), between The Premium Portfolios (the
"Trust") and State Street Cayman Trust Company, Ltd. (the "Accounting Agent"),
we hereby request that High Yield Portfolio, U.S. Fixed Income Portfolio,
Foreign Fixed Income Portfolio and S&P 500 Index Portfolio (collectively, the
"Portfolios") be added to the list of series of the Trust on behalf of which
the Accounting Agent performs certain accounting and recordkeeping duties
pursuant to the terms of the Agreement.
Please sign below to evidence your agreement to perform such duties on
behalf of the Portfolios and to add the Portfolios as beneficiaries under the
Agreement.
THE PREMIUM PORTFOLIOS
By: Philip W. Coolidge
Title: President
Agreed: State Street Cayman Trust Company, Ltd.
By: Jacqueline Henning
Title: For State Street Cayman Trust Company Ltd.
cc: Mike Larkin State Street Funds Services Toronto Inc.
